China Information Security Announces Strong First Quarter 2008 Results

SHENZHEN, China , May 13 /Xinhua-PRNewswire-FirstCall/ -- China Information Security Technology, Inc. (OTC Bulletin Board: CIFS) ("China Information Security," "CIST" or the "Company"), a leading provider of Information Security and 3S (Geographic...

(2) Completed Geo Acquisition

On April 1, 2008 , iASPEC closed the acquisition of 57% of the total equity interest in Wuda Geoinformatics Co., Ltd. ("Geo"), a leading provider of GIS software products and integrated solutions in China .

(3) Reincorporation

In April 2008 , China Public Security Technology ("CPST") merged into China Information Security Technology, Inc., a Nevada corporation, with CIST being the surviving corporation. The symbol for CIST's common stock on the OTC Bulletin Board has been changed to "CIFS.OB".

(4) iASPEC's Establishment of Two New Subsidiaries

On April 11, 2008 , iASPEC established two subsidiaries in Shenzhen , PRC, Shenzhen iASPEC Information Security Technology, Co., Ltd. and Shenzhen iASPEC Intelligent Systems, Co., Ltd., each with registered paid-in capital of RMB5,000,000 (approximately $712,000). The two new subsidiaries are to be engaged in the provision of computer networks and intelligence control and security surveillance systems, as well as in the sale of computer hardware and software.

Outlook for 2008

The Company plans to leverage its strength and brand recognition in Guangdong Province in order to win business across China . The Company intends to manage its national operations from six centers located in Guangzhou , Beijing , Shanghai , Wuhan , Chongqing and Xi'an .

Management expects that the acquisitions of ISDT, Bocom Technology, and Geo will also accelerate the Company's geographic expansion, enhance its technological capabilities or competitive advantages, provide licensing and recurring revenue opportunities, and serve to fulfill its planned expansion into civil-use GIS markets. Furthermore, the Company expects to capitalize on its strong R&D capability and outstanding contract win ratio, to seize contract opportunities during Phase II of China's "Golden Shield Project" nationwide.

"The market for security information technology continues to increase at a very rapid rate," said Mr. Lin. "With our technological capabilities, diverse and growing range of products, high barriers to entry and dedicated employees, we believe that we are well positioned to execute on our business plan and to create long term value for our stockholders."

Fiscal Year 2008 Guidance

The Company is maintaining its 2008 financial guidance for pro forma revenues of $85 million, and pro forma net income of $27 million, which excludes any non-cash charges as a result of employee stock option grants in 2007 and 2008 and amortization of intangible assets associated with the recent acquisitions of ISDT, Bocom Technology and Geo.

Non-GAAP Financial Measures

The Company uses non-GAAP financial measures in this press release due to the inclusion of financial information of iASPEC which is considered to be the Company's "Predecessor" for these purposes. Effective as of July 1, 2007 , iASPEC became the Company's variable interest entity, or VIE, whose operation results began to be reflected in the financial data starting from July 1, 2007 . Therefore, the accompanying financial data for the three months ended March 31, 2008 , reflect the results of operations of CIST, its subsidiaries and its VIE, while the financial data for the three months ended March 31, 2007 only reflects the results of operations of CIST and its subsidiaries. We have provided non-GAAP financial measures through the reallocation of net related party revenues from iASPEC before it became a consolidated entity, which is not in accordance with US GAAP. The reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is provided in the following section. The Company's management believes that these non-GAAP financial measures are necessary because the abnormally high financial ratios calculated using GAAP would be misleading to investors and would not reflect the substance of the Company's performance.

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