China Information Security Technology, Inc. Announces First

China Information Security Technology, Inc. Announces First Quarter 2010 Results

Income Tax Expense

Income tax expense was $1.17 million in 1Q10, up from $0.59 million for the same period in 2009. The increase was mainly due to the combined effects from an increase in assessable profits during the current period and the increase in tax rate as a result of China's tax rate unification program.

Net Income Attributable to the Company

As a result of the foregoing factors, net income contributable to the Company was $6.3 million in 1Q10, an increase of 67.2%, or $2.5 million in 1Q09.

Cash and Cash Equivalents

As of March 31, 2010, the Company had $17.3 million in cash and cash equivalents, restricted cash and short-term investments as compared to $19.3 million in the same period one year ago.

    Recent Developments
    -- April 06, 2010 - China Information Security Technology Selected by the
       State Grid Corporation of China as Sole Domestic GIS Platform Software
       Provider for Smart Grid
    -- April 20, 2010 - China Information Security Technology Wins One-Third
       Market Share in the Initial Roll-out of National Standards for Police-
       use GIS across China
    -- April 21, 2010 - China Information Security Technology Inc. Engages BDO
       Limited as New Independent Registered Public Accounting Firm

2010 Outlook

For fiscal year 2010, the Company raises its guidance with projected revenue to $141-146 million and adjusted net income to $35.5-39.5 million, excluding any non-cash expenses as a result of employee stock awards, amortization of intangible assets associated with acquisitions, and changes in fair value of contingent considerations.

About Non-GAAP Financial Measures

This press release contains non-GAAP financial measures for earnings that exclude non-cash charges. China Information Security believes that these non- GAAP financial measures are useful to investors because they exclude non-cash charges that China Information Security's management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential operating activities of China Information Security. Accordingly, management excludes the expense arising from certain non-cash charges when making operational decisions. China Information Security believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand China Information Security's financial performance in comparison to historical periods. In addition, it allows investors to evaluate China Information Security's performance using the same methodology and information as that used by China Security's management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, China Information Security's management compensates for these limitations by providing the relevant disclosure of the items excluded.

The following table provides the non-GAAP financial measure and the related GAAP measure and provides a reconciliation of the non-GAAP measure to the equivalent GAAP measure.



             Q1 2010 Reconciliation of Operating, Net Income and EPS
               to Exclude SBC and Amortization of Intangible Assets

                                          3 Mos. Ended         3 Mos. Ended
                                            31-Mar-10            31-Mar-09

    Operating income                        6,563,429            4,169,349
    Stock based compensation ("SBC")               --              183,600
    Amortization                              499,657              428,006
    Change in fair value of
     contingent consideration *              (795,097)                  --
    Operating income (without SBC,
     amortization and
                                            6,267,989            4,780,955
    Change in fair value of
     contingent consideration)

    Net income Attributable to
     the Company                            6,281,108            3,756,993
    Stock based compensation ("SBC")               --              183,600
    Amortization                              499,657              428,006
    Change in fair value of
     contingent consideration *              (795,097)                  --
    Net income (without SBC,
     amortization and

    Change in fair value of
     contingent consideration)              5,985,668            4,368,599

    Weighted Average Number of
     Shares Outstanding
    Basic                                  51,213,463           47,520,030
    Diluted                                51,213,463           47,520,030

    Earnings Per Share (without SBC
     and Amortization)
    Basic                                       $0.12                $0.09
    Diluted                                        $0.12                                $0.09


        *  Represents  a  gain  from  the  change  of  fair  value  of  the  contingent
        consideration  for  the  acquisition  of  Huipu  as  at  2010/03/31,  according  to
        FASB  ASC  805  -  Business  Combinations

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