China Public Security Announces Strong Fourth Quarter and Fiscal Year 2007 Results and Revises its Guidance for 2008

SHENZHEN, China , April 1, 2008 /Xinhua-PRNewswire-FirstCall/ -- China Public Security Technology, Inc., (OTC Bulletin Board: CPBY) ('' China Public Security'' or the ''Company''), a leading provider of public security information technology...


Net income, excluding stock based compensation of $0.7 million, grew 135%, to $3.6 million in the fourth quarter of 2007, or $0.09 per basic and diluted share, compared to $1.5 million during the same period of 2006.

Full Year 2007 Results

Total revenues for 2007 were $37.5 million, up 182% from $13.3 million in 2006. Gross profit for 2007 was $18.2 million, an increase of 112% from $8.6 million in 2006. Gross margin was 48.6% in 2007, compared to 64.8% in 2006. Operating income for 2007 was $13.2 million, up 98% from $6.7 million in 2006 (and if stock based compensation of $677,891 in 2007 were excluded, operating income was $13.9 million or 37.1% of sales).* Operating margin was 35.3% in 2007, compared to 50.3% in 2006. The lower margin in 2007 was primarily due to higher costs for procured hardware and other subcontracting costs related to the implementation of several large-scale system integration projects compared to pure software development projects which were the Company's main business in 2006. Net income for 2007 grew 135% from 2006 to $13.3 million, or $0.34 per basic share, or $0.33 per diluted share (and if stock based compensation of $677,891 in 2007 were excluded, net income was $14.0 million or $0.35 per basic and diluted share).*

For 2007, cash flow from operations totaled $1.6 million. Cash used in investing activities totaled $32.0 million, including $15.0 million (net) in short term investments and $16.1 million in cash paid for the acquisitions of Bocom Technology and ISDT. Cash provided by financing activities totaled $49.5 million in 2007, largely as a result of the proceeds from two private placements.

Financial Condition

As of December 31, 2007 , the Company had $19.8 million in cash and cash equivalents, marketable securities of $15.0 million, total current assets of $54.0 million and total assets of $88.9 million. The Company's stockholders' equity increased to $74.0 million, from $1.6 million as of December 31, 2006 , as a result of shares issued for acquisition of Fortune Fame, net income earned during the year, as well as the private placements.

Recent Developments

(1) Acquisition of Bocom Multimedia Display Company Limited (''Bocom Multimedia'')

On February 1, 2008 , the Company and its subsidiaries completed the acquisition of 100% of the issued and outstanding capital stock of Bocom Multimedia and its subsidiary, Bocom Technology, for approximately $18.0 million. Bocom Technology provides advanced large screen multimedia display technology.

(2) Acquisition of Wuhan Wuda Geoinformatics Co., Ltd. (''Geo'')

On February 15, 2008 , the Company approved the entry of iASPEC into a series of agreements to acquire 57% of the shares of Geo, a leading provider of GIS software products and integrated solutions in China , for an aggregate purchase price of RMB49.5 million (approximately US$6.8 million) in cash. The transactions are expected to close on or before April 1, 2008 , after which, iASPEC will become Geo's controlling shareholder, and Wuhan University, Geo's founder, will be the second largest shareholder through direct and indirect investments.

(3) Name Changes

On February 19, 2008 , the Company announced its intent to change its corporate name to China Information Security Technology, Inc., to reflect the Company's national scope of operations and planned expansion into high-growth enterprise class markets. In keeping with this plan, Public Security Technology (PRC) Co., Ltd., the Company's subsidiary, has changed its name to Information Security Technology ( China ) Co., Ltd. and iASPEC, the Company's VIE, has changed its name to iASPEC Software Co., Ltd. The Company expects that its name change will be effective in April 2008 .

(4) Independent Director

Effective April 1, 2008 , the Company has retained an Independent Member, Sean Shao , for its Board of Directors who will lead as Chairman of the Audit Committee.

Outlook for 2008