SHENZHEN, China, March 16 /PRNewswire-Asia/ --
-- 2008 Revenue Climbs 127.4% year over year to $85.3 Million
-- 2008 GAAP Net income was $23.8 million, or $0.51 per basic and diluted
share
-- 2008 Non-GAAP Net income was $26.7 million, or $0.58 per basic and $0.57
per diluted share
China Information Security Technology, Inc., (Nasdaq: CPBY) (“China Information Security,” “CIST” or the “Company”), a leading application software developer, systems integrator and full-service Geographic Information Systems (“GIS”) solutions provider to public security and civil-use markets in China, today reported strong financial results for the fourth quarter and for the year ended December 31, 2008.
Fourth Quarter 2008 Highlights
On GAAP basis:
-- Revenues increased to $19.0 million, from $11.7 million
-- Gross profit rose to $8.8 million, from $5.3 million
-- Operating income increased to $3.8 million, from $2.7 million
-- Net income was $5.12 million, or $0.11 per basic and diluted share
On a non-GAAP basis*:
-- Revenues increased 62.8% period over period to $19.0 million
-- Gross profit increased 70.2% to $8.8 million
-- Operating income increased 41.6% to $4.9 million, with a 25.8%
operating margin*
-- Net income grew 68.9% to $6.3 million or $0.13 per basic and diluted
share*
* Includes the consolidation of iASPEC and excludes Stock Based Compensation (“SBC”) and Amortization of Intangible Assets. See Table 1 for a reconciliation of Net Income and EPS to exclude SBC and Amortization of Intangible Assets.
“We are pleased to announce significant growth during the last quarter of 2008, in our top line and bottom line performance,” said Mr. Jiang Huai Lin, Chairman and CEO of the Company. “We successfully secured a series of contracts in the quarter and also won significant recognition from various government organizations, which has helped to further strengthen our brand recognition and expansion opportunities. We successfully met our guidance for 2008 of $85 million in revenue and exceeded our $0.56 earnings per share goals, excluding stock-based compensation and amortization of intangible assets. Although China’s economy has slowed and capital market conditions remain challenging due to the current unprecedented economic crisis, management is confident that 2009 will be another fruitful year for China Information Security. We expect that the selection of our PGIS technology for use in standardizing PGIS technologies nationally, China’s massive stimulus plan and construction for the 2011 26th World University Games in Shenzhen will be some of our key growth drivers this year.”
During the quarter, the Company achieved the following milestones:
-- Successfully expanded its presence to 26 provinces and provincial
cities across China
-- Signed new contracts in the fourth quarter valued at $28.2 million,
including: a Remote Sensing contract in Guangdong Province valued at
$2.9 million; and a PGIS contract from the Industry and Commerce
Administrative Bureau of Hainan Province valued at $2.73 million
-- Ranked by Deloitte as one of the top 50 fastest growing high-technology
enterprises in China for 2008
-- Closed the acquisition of Shenzhen Zhongtian Technology Development Co.,
Ltd., launching the Company in the Digital Hospital Industry
-- Strengthened its management team with the appointment of Ms. Wendy Wang
as Chief Financial Officer
-- Ranked for the "Deloitte Technology Fast 500 Asia Pacific 2008 Award"
-- Achieved an estimated $30.68 million in backlog contracts, consisting
of $22.09 million related to contracts that were incomplete as of
December 31, 2008, and $8.59 million related to newly signed, but not
yet implemented contracts
Fourth Quarter 2008 Results
On a non-GAAP basis*:
Revenue is generated from our integrated hardware and software products and through related after-sales services. In the fourth quarter of 2008 we experienced solid growth in revenues. Revenue for the fourth quarter of 2008 increased $7.33 million, or 62.8%, to $19.0 million, as compared to $11.7 million for the same period of 2007. The increase in our revenues was mainly due to our expansion in the market, the development of our new product lines and our procurement of several large-scale system integration projects in the fourth quarter of 2008. In February and November of 2008, respectively, Bocom and Zhongtian became our wholly owned subsidiaries and Geo became the subsidiary of our VIE, iASPEC. For the fourth quarter of 2008, these companies collectively contributed $6.74 million.
Gross profit increased $3.6 million to $8.8 million, for the fourth quarter of 2008, from $5.2 million in 2007. Gross profit as a percentage of revenue was 46.6% for the fourth quarter of 2008.
Administrative expenses increased to $3.7 million in the fourth quarter of 2008, from $1.9 million in the same period last year. The increase was mainly attributable to an increase in administrative staff and increased administrative costs such as salary, office operation expenses and legal and audit fees in connection with the expansion of the Company’s operations during the 2008 period. As a percentage of revenue, administrative expenses increased to 19.6% for the three months ended December 31, 2008, from 16.6% for the same period in 2007.
For the fourth quarter of 2008, research and development expenses increased to $0.62 million, from $0.46 million for the same period of 2007, a $0.16 million, or 34% increase, from period to period. Increases related to iASPEC and IST reflect our efforts to address the increasingly sophisticated needs of our customers for the support of existing and emerging hardware, software, database and networking platforms, and for the development and introduction of enhancements to our existing products and new products on a timely basis in order to keep pace with technological developments. We capitalize incurred costs to finished products after technological feasibility is established.
Selling expenses increased $0.6 million, or 443%, to $0.7 million for the fourth quarter of 2008, from $0.1 million in the same period of 2007. The increase was mainly due to the consolidation of Bocom, Geo and Zhongtian, which collectively contributed $0.5 million to our selling expenses in the fourth quarter of 2008. As a percentage of revenue, our selling expenses increased to 3.9% for the fourth quarter of 2008, from 1.2% in the fourth quarter of 2007. We believe such increase was generally in line with the increase in our revenue.
Operating income for the fourth quarter of 2008, increased to $4.9 million, up 41.6% from $3.5 million for the same period in 2007.* Operating income as a percentage of revenue decreased to 25.8% during the fourth quarter of 2008, from 29.7% for the same period in 2007. This decrease was due to the lower margins reported by recent acquisitions, as well as the significantly higher costs for procured hardware and other subcontracting costs related to the implementation of several large-scale systems integration projects.
The company’s subsidiaries, IST, ISS, Bocom, Zhongtian, and our VIE, iASPEC (exclusive of Geo), are all governed by the Income Tax Laws of the PRC and are subject to the PRC’s enterprises income tax, or EIT, at a rate of 18% of assessable profits in 2008. Geo is subject to EIT at a rate of 15% of assessable profits as a High-Tech Enterprise. However, after offsetting accumulated losses from prior years, Geo had no assessable profit subject to EIT for the year 2008. In addition, IST is a Foreign Investment Enterprise or FIE engaged in the advanced technology industry which entitles it to a
two-year exemption from EIT followed by a 50% tax exemption for the next three years. Income tax expenses for the three months ended December 31, 2008 and 2007, was $0.64 million and $0.07 million, respectively.
Net income increased 68.9% to $6.3 million in the fourth quarter of 2008, or $0.13 per basic and diluted share, compared to $3.7 million during the same period of 2007, or $0.09 per basic and diluted share.*
*Includes the consolidation of iASPEC and excludes Stock Based Compensation (“SBC”) and Amortization of Intangible Assets. See Table 1 for a reconciliation of Net Income and EPS to exclude SBC and Amortization of Intangible Assets.
Full Year 2008 Financial Results
On a non-GAAP basis*:
For the year ended December 31, 2008, revenue increased to $85.3 million, up 127.5%, from $37.5 million for prior year. Gross profit for 2008 was $39.1 million, an increase of 108.0% from $18.8 million in 2007. Gross profit as a percentage of revenue decreased to 45.8% for the year ended December 31, 2008, from 50.1% for the twelve months ended December 31, 2007. Operating income for 2008 was $26.8 million, up 90.5% from $14.1 million in 2007. Operating margin was 31.4% in 2008, compared to 37.6% in 2007. The lower margin in 2008 was primarily due to lower margins reported by recent acquisitions and higher costs for procured hardware and other subcontracting costs related to the implementation of several large-scale system integration projects. Net income increased to $26.7 million, or $0.57 per fully diluted share, up 88.6% from $14.2 million for 2007, or $0.35 per basic and diluted share.*
*Includes the consolidation of iASPEC and excludes Stock Based Compensation (“SBC”) and Amortization of Intangible Assets. See Table 1 for a reconciliation of Net Income and EPS to exclude SBC and Amortization of Intangible Assets.
Financial Condition
As of December 31, 2008, the Company had $15.4 million in cash and cash equivalents and short-term investments. Shareholders’ equity increased to $109.1 million, up from $74.0 million on December 31, 2007. For 2008, cash flow provided by operations totaled $4.5 million due to an increase in working capital required to finance steady growth. Cash used in investing activities totaled $21.0 million. Cash provided by financing activities totaled $5.2 million in 2008 largely due to short-term bank loan.
Recent Developments
-- CIST’s PGIS product was named as a "Shenzhen Innovative Product"
-- The Company won contracts for the Command System and Remote Data Backup
System for the Shenzhen General Station of Exit and Entry Frontier
Inspection, the First Responder Coordination Platform for the Shenzhen
Transportation Bureau, and the Shenzhen Traffic Police GIS System, with
a combined contract value of $5.7 million
-- China’s Ministry of Public Security selected the Company’s core
police-use GIS ("PGIS") technology for use in standardizing PGIS
technologies nationally
-- The Company has entered into a non-binding letter of intent to acquire
Huipu Electronic (Shenzhen) Co., Ltd. ("Huipu"), a leading developer
and manufacturer of customized LCD/LED multi-screen display systems in
China and the holder of numerous technology patents, trademarks,
certifications and licenses
-- The Company’s GeoGlobe Software successfully passed appraisal by
China’s National Bureau of Mapping and Surveying
Business Outlook
Management continues to expect that the acquisitions of ISS, Bocom Technology, Geo and Zhongtian Technology will accelerate the Company’s geographical 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 research and development capabilities and outstanding contract win ratio, to seize contract opportunities nationwide during Phase II of China’s “Golden Shield Project.” The Company’s success in winning follow-on orders for Intelligent Border Control products should serve as a live demonstration model for other port cities in China and also in the civil-use sector. Similarly, management believes that the Company’s recent win of the Phase II Shenzhen Residence Card Management project will serve as a model for large-scale rollouts, positioning the Company for other follow-on opportunities, should the residence card program be extended to other cities in China.
The Company’s core PGIS technology has been selected for use in the standardization of PGIS systems nationwide. The Company believes that this selection will significantly enhance its competitive position in its industry as its copyrighted technology will be recommended for use in future installed systems. Management expects that the PGIS standardization will enhance its visibility in its industry and be one of the key drivers to achieve its 2009 objectives.
Because of the end markets it serves, the Company expects to maintain a healthy growth rate through 2009, despite the current economic slowdown worldwide. In November, China’s State Economic Council unveiled a stimulus plan of approximately $586 billion for infrastructure projects aimed at boosting domestic demand. CIST’s products match public infrastructure needs, enhance security efforts by improving emergency response for police, fire and ambulance services, and are generally essential to a city’s continued growth and prosperity. The Company believes that the central government’s desire for a harmonious society remains a strategic priority that will support increased investment in its served markets. As a result, management does not expect that current infrastructure and emergency response coordination initiatives will experience significant impact from the current economic turmoil. In addition, Shenzhen City, the Company’s home market, is scheduled to begin work on infrastructure and security related projects for the 2011 World University Olympic Games.
At the same time, the Company is expanding into a largely under-penetrated new vertical -- the Digital Hospital industry. In 1995, the Chinese government launched the Golden Health Project to promote the application of information and communication technology to healthcare, providing sizable market opportunities for digital hospital solutions. The Company expects that Zhongtian Technology will enable it to successfully perform and maintain contracts, such as its contract to construct the digital hospital and medical information systems for three Shenzhen City hospitals. Additionally, Zhongtian Technology’s Medical Case Statistics Software can also be used to provide public health authorities with an integrated command and decision system for public health and disease control. The software can provide city governments with an additional layer of security through providing real-time disease and control statistical information.
“We closed 2008 with a strong sales and profit performance and achieved several major milestones in our corporate development,” added Mr. Lin. “For 2009, we remain optimistic that China Information Security will maintain a healthy growth rate. We have a strong foundation to weather this challenging economic environment, maintain a strong cash position, adequate liquidity, a healthy balance sheet and a fundamental business strategy that remains intact due to strong government support of our industry.”
Year 2009 Guidance
The Company has targeted revenue for 2009 of $107.5 million, an increase of 26% from the $85.3 million reported for the year 2008. Pro-forma net income is estimated at $32.9 million for 2009, representing a 23.2% increase from the non-GAAP net income of $26.7 million for 2008. Pro-forma earnings per share is estimated at $0.70 for 2009, up 22.8% from the Company’s earnings per share of $0.57 for 2008. The pro-forma net income and earnings per share estimates for 2009 and results for 2008 exclude any non-cash expenses as a result of employee stock awards in 2008 and 2009 and amortization of intangible assets associated with recent acquisitions.
* Table 1
Q4 2008 and Full Year 2008 Reconciliation of Operating, Net Income and EPS
to Exclude SBC and Amortization of Intangible Assets
3 Mos. Ended 12 Mos. Ended
December 31, December 31,
2008 2008
Operating income 3,762,349 23,882,882
Stock based compensation ("SBC") 600,042 1,604,741
Amortization 543,014 1,354,567
Operating income (without SBC and
Amortization) 4,905,405 26,842,190
Net income 5,123,378 23,786,976
Stock based compensation ("SBC") 600,042 1,604,741
Amortization 543,014 1,354,567
Net income (without SBC and Amortization) 6,266,434 26,746,284
Weighted Average Number of Shares
Outstanding
Basic 46,738,491 46,398,600
Diluted 47,296,857 46,852,827
Earnings Per Share (without SBC and
Amortization)
Basic $0.13 $0.58
Diluted $0.13 $0.57
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 twelve months ended December 31, 2008, reflect the results of operations of CIST, its subsidiaries and its VIE, while the financial data for the twelve months ended December 31, 2007 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.
Conference Call Information
Management will conduct a conference call at 8:30 am EST on Monday,
March 16, 2009 to discuss its fourth quarter and full year 2008 results. To participate in the live conference call, please dial the call-in number five to ten minutes prior to the scheduled conference call time:
Date: Monday, March 16, 2009
Time: 8:30 am ET
Conference Call-In #: 888-419-5570
International Callers: 617-896-9871
Conference Passcode #: 816 494 20
Webcast Link:
http://www.visualwebcaster.com/event.asp?id=56629&pw=CIST
For those unable to participate in the call at this time, please call:
Replay Call-In #: 888-286-8010
International Callers: 617-801-6888
Replay Passcode: 90769290
Replay Expires on: Monday, March 30, 2009
About China Information Security Technology, Inc.
Through its wholly-owned Chinese subsidiary, China Information Security Technology, Inc. (“CIST” or the “Company”) headquartered in Shenzhen, China, is a leading application software developer, systems integrator and
full-service Geographic Information Systems (“GIS”) solutions provider to the public security and civil-use markets in China, aiming to use information technology to improve public safety and information management. Its main business lines range from digital information security, to Geographic Information Systems (GIS), and digital hospital information systems. The Company provides a broad portfolio of fully integrated solutions and services, including its First Responder Coordination Platform, Intelligent Border Control System, Residence Card Information Management System, Police- and Civil-use GIS products, and Digital Hospital Information System to serve the growing demand for digital hospital and electronic medical record systems in China. Its commitment to leading-edge technology and quality assurance has won the Company numerous government and enterprise contracts throughout China. To learn more about the Company, please visit the corporate website at http://www.chinacpby.com .
Safe Harbor Statement
This press release may contain certain “forward-looking statements” relating to the business of China Information Security Technology, Inc., and its subsidiary companies. All statements, other than statements of historical fact included herein are “forward-looking statements” including statements regarding: the significance of the Company’s contract wins, its acquisition of Information Security Software, Shenzhen Bocom Multimedia Display Technology Co., Ltd., Wuda Geoinformatics Co., Ltd., Shenzhen Zhongtian Technology Development Company Ltd., its intent to acquire Huipu Electronic (Shenzhen) Co., Ltd. and its expansion into other sectors and other regions in China; the general ability of the Company to achieve its commercial objectives, in spite of the current global economic downturn and credit crisis; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as “believes,” “expects” or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company’s periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
-- FINANCIAL TABLES FOLLOW --
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2008 AND 2007
2008 2007
Revenue - Products $ 26,822,325 $ 2,007,800
Revenue - Software 34,958,401 13,131,578
Revenue - System integration 19,328,312 15,194,314
Revenue - Others 4,192,146 9,017
TOTAL REVENUE 85,301,184 30,342,709
Cost - Products sold 25,049,072 1,669,410
Cost - Software sold 5,628,436 2,233,493
Cost - System integration 12,196,185 8,470,467
Cost - Others 3,348,627 --
TOTAL COST 46,222,320 12,373,370
GROSS PROFIT 39,078,864 17,969,339
Administrative expenses (10,158,863) (3,288,657)
Research and development expenses (2,596,430) (797,580)
Management fee -- (92,160)
Selling expenses (2,440,689) (480,465)
INCOME FROM OPERATIONS 23,882,882 13,310,477
Other income, net 938,921 79,435
Interest income 214,850 138,840
Interest expense (179,130) --
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST 24,857,523 13,528,752
Income tax expense (1,547,509) (107,300)
Minority interest (241,197) (90,000)
INCOME FROM CONTINUING OPERATIONS 23,068,817 13,331,452
INCOME FROM DISCONTINUED OPERATIONS
(NET OF TAX OF $0) 718,159 --
NET INCOME 23,786,976 13,331,452
Foreign currency translation gain 4,580,443 1,467,800
COMPREHENSIVE INCOME $ 28,367,419 $ 14,799,252
Basic 46,398,600 39,718,967
Diluted 46,852,827 40,152,855
EARNINGS PER SHARE
Basic - From continuing operations $ 0.50 $ 0.34
Basic - From discontinued operations 0.01 --
$ 0.51 $ 0.34
Diluted - From- continuing operations $ 0.49 $ 0.33
Diluted - From discontinued operations 0.02 --
$ 0.51 $ 0.33
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2008 AND 2007
ASSETS
CURRENT ASSETS
2008 2007
Cash and cash equivalents $9,565,252 $19,755,182
Short-term investments 5,835,838 14,966,752
Accounts receivable, net of allowance for
doubtful accounts of $399,800 and
$0, respectively 42,857,108 11,721,306
Bills receivable 4,481,340 --
Advances to suppliers 8,469,976 1,791,440
Amount due from related parties, net of
allowance for doubtful accounts of
$72,948 and $0, respectively 131,594 --
Inventories 7,107,537 4,779,930
Other receivables and prepaid expenses 6,251,484 974,475
TOTAL CURRENT ASSETS 84,700,129 53,989,085
Deposit for business acquisition -- 8,989,022
Long-term investments 3,078,405 --
Property and equipment, net 23,555,603 13,826,896
Intangible assets, net 13,115,151 4,894,397
Goodwill 24,018,894 7,154,395
TOTAL ASSETS $148,468,182 $88,853,795
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Short-term bank loans $6,327,992 $--
Accounts payable 10,707,728 3,079,304
Advances from customers 2,476,335 394,383
Amount due to related parties 486,136 --
Accrued payroll and benefits 1,319,386 386,699
Other payables and accrued expenses 2,553,019 600,784
Income tax payable 1,592,459 326,026
TOTAL CURRENT LIABILITIES 25,463,055 4,787,196
MINORITY INTEREST 13,907,347 10,060,657
STOCKHOLDERS’ EQUITY
Common stocks, par $0.01; authorized capital,
200,000,000 shares;
Shares issued and outstanding (2008:
47,462,404; 2007:45,639,396 shares) 209,121 190,891
Additional paid-in capital 64,127,339 57,421,150
Reserve 4,964,597 1,755,552
Retained earnings 33,748,480 13,170,549
Accumulated other comprehensive income 6,048,243 1,467,800
TOTAL STOCKHOLDERS’ EQUITY 109,097,780 74,005,942
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $148,468,182 $88,853,795
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2008 AND 2007
2008 2007
OPERATING ACTIVITIES
Net income $23,786,976 $13,331,452
Adjustments to reconcile net income to net cash
provided by operating activities:
Operating cash flows from discontinued operations (718,153) --
Depreciation 2,991,266 1,274,768
Amortization of intangible assets 1,354,567 168,747
Stock-based compensation 1,604,741 677,891
Minority interest 241,197 90,000
Gain on disposition of property and equipment 2,533 --
Provisions for losses on accounts receivable 472,750 --
Changes in operating assets and liabilities, net of
effects of business acquisitions
Increase in inventories (472,829) (1,399,838)
Increase in accounts receivable (30,169,244) (4,115,867)
(Increase) decrease in other receivables,
advances to suppliers and prepaid expenses (553,400) 592,182
Decrease in receivables from and advances to iASPEC
prior to VIE consolidation -- (10,660,988)
Increase in amount due from related parties (109,422) --
Increase in amount due to related parties 481,813 --
Increase in accounts payable 4,633,198 903,475
(Decrease)increase in advances from customers (801,288) 54,830
Increase in other payables and accrued expenses 896,447 643,953
Increase in income tax payable 906,825 46,586
Net cash provided by operating activities 4,547,977 1,607,191
INVESTING ACTIVITIES
Increase in cash from VIE consolidation -- 4,731,140
Cash acquired from ISSI -- 326,831
Cash acquired in Geo acquisition 2,443,677 --
Cash acquired in Bocom acquisition 713,876 --
Cash acquired in Kwongtai and Zhongtian acquisition 233,243 --
Consideration paid for acquisition of ISSI -- (7,051,469)
Consideration paid for acquisition of Geo (7,049,073) --
Consideration paid for acquisition of Kwongtai
and Zhongtian (9,852,455) --
Purchase of Equity Linked Notes -- (22,654,230)
Proceeds from sale of marketable securities 14,966,752 7,687,478
Purchased short-term investments (5,655,605) --
Proceeds from sales of property and equipment 1,146,671 --
Advances to third parties -- 332,479
Advances from related parties -- 115,312
Purchases of property and equipment (8,928,057) (6,452,450)
Capitalized and purchased software
development costs (487,541) --
Deposit for acquisition of Bocom -- (9,000,000)
Investing cash flows from discontinued operations (8,576,575) --
Net cash used in investing activities (21,045,087) (31,964,909)
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2008 AND 2007
FINANCING ACTIVITIES
Advances repaid to a third party company -- (200,000)
Amount repaid to a stockholder -- (82,304)
Cash received from private placement of common stock -- 49,817,486
Borrowings under short-term loans 6,314,410 --
Repayment of bank loan (1,086,312) --
Net cash provided by financing activities 5,228,098 49,535,182
Effect of exchange rate changes on cash and cash
equivalent 1,079,082 405,402
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (10,189,930) 19,582,866
CASH AND CASH EQUIVALENTS, BEGINNING 19,755,182 172,316
CASH AND CASH EQUIVALENTS, ENDING $9,565,252 $19,755,182
Supplemental disclosure of cash flow information:
Cash paid during the year
Income taxes, net of refund $650,648 $24,574
Interest paid $158,650 $--
Supplemental disclosure of non-cash investing and financing activities:
Acquired businesses
-- In 2007, 883,333 shares of common stock were issued in satisfaction of
the equity portion of the purchase price of approximately $ 7,067,000
of ISS.
-- In 2008, 1,125,000 shares of common stock were issued and a further
1,280,807 were reserved for issuance for the equity portion of the
purchase price of approximately $ 5,120,000 of Bocom and Zhongtian.
Property and equipment transfers from inventory $78,784 $--
Revenues by segment for the three and twelve months ended December 31,
2008 and 2007 are as follows:
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
December December December December
31, 2008 31, 2007 31, 2008 31, 2007
Revenues (1)
Information Security
Segment $7,970,843 $2,390,674 $29,606,186 $7,639,627
GIS Segment 6,224,842 7,006,625 34,209,156 20,355,694
Product Sales Segment 4,812,676 2,347,388 21,485,842 2,347,388
$19,008,361 $11,744,687 $85,301,184 $30,342,709
Percentage to revenue
Information Security
Segment 42% 20% 35% 25%
GIS Segment 33% 60% 40% 67%
Product Sales Segment 25% 20% 25% 8%
(1) Revenues by operating segments exclude intercompany transactions.
For more information, please contact:
Company Contact:
Ms. Iris Yan
Investor Relations Manager
China Information Security Technology, Inc.
Tel: +86-135-1085-5460
Email: irisyan@chinacpby.com
Web: http://www.chinacpby.com
Investor Relations Contact:
Mr. Crocker Coulson, President
CCG Investor Relations
Tel: +1-646-213-1915 (NY office) or
Mr. Gary Chin,
Tel: +1-646-213-1909
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com