China Information Security Technology, Inc. Announces Fourth Quarter and Full Year 2009 Results

- 2009 Revenue Increased 18.4% YoY to $101.0 million

- 2009 Gross Margin Increased 434 basis points YoY to 50.2%

- 2009 Operating Margin Increased 384 basis points YoY to 31.8%

- 2009 Non-GAAP Net Income Increased 20.5% YoY to $32.2 million, or $0.66 per diluted share

- Cash Flow from Operations increased 152.4% YoY to $11.5 million

SHENZHEN, China, March 5 /PRNewswire-Asia-FirstCall/ -- China Information Security Technology, Inc. (Nasdaq: CPBY) ("China Information Security," "CIST" or the "Company"), a leading total solutions provider of digital information security technology (DIST), geographic information systems (GIS) and digital hospital information systems (DHIS) in China, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2009.

Fourth Quarter 2009 Financial Highlights

-- Revenues were $31.5 million, an increase of 14.4% from 4Q08

-- Gross margin was 50.0%, an increase of 1054 basis points from 4Q08

-- Operating margin was 25.8%, an increase of 595 basis points from 4Q08

-- Non-GAAP Net Income increased 51% from 4Q08 to $9.5 million, or $0.19

per diluted share

-- Cash Flow from Operations increased 452.5% from 4Q08 to $3.2 million

Fiscal Year 2009 Financial Highlights

-- Revenues were $101.0 million, an increase 18.4% from fiscal year 2008

-- Gross margin was 50.2%, an increase of 434 basis points from fiscal

year 2008

-- Operating margin was 31.8%, an increase of 384 basis points from fiscal

year 2008

-- Non-GAAP Net Income increased 20.5% from fiscal year 2008 to $32.2

million, or $0.66 per diluted share

-- Cash Flow from Operations increased 152.4% from fiscal year 2008 to

$11.5 million

-- Value of backlog is $41.2 million as of December 31, 2009, a new record

high

"We are pleased to announce strong fourth quarter and full year 2009 results, and we have an optimistic outlook for 2010," commented Mr. Jiang Huai Lin, Chairman and CEO of China Information Security Technology. "We set another record for new contract wins as a result of robust demand for our products and solutions. Our strong customer recognition and branding in the industry have been recognized in each of our core business segments, and we're confident in our ability to achieve our 2010 financial goals."

"Our growth strategy remains focused on deepening our penetration in Guangdong, Fujian, Guangxi, Hainan and Zhejiang province and taking advantage of our success in the region to further expand nationally. We currently have established offices and representatives in Guangzhou, Beijing, Zhejiang, Changsha, Nanning, Nanchang, Wuhan, Xi'an, as well as in Shanghai and Chongqing. We expect to further strengthen our leading position in the industry by leveraging our strong R&D capabilities and standard setting position in the GIS sector, and our outstanding record of execution for mission-critical government IT projects."

"During the quarter, we completed the acquisition of Huipu Electronic (Shenzhen) Co., Ltd., a display technology developer and manufacturer and our long-term partner on various system integration projects. We believe that Huipu's market leading position and distribution network have allowed us to further expand our presence to 32 provinces and regions in China. Moving forward, we plan to strengthen our industry competitiveness and create value added synergies by expanding and integrating Huipu's high-end hardware capabilities, expertise and established brand name with our core software products."

"Our industry is in a growth stage and we believe there are many opportunities to capture. We have built strong barriers to entry around our business and retain a strong and loyal customer base. With our long-term oriented management team and vast market potential, we aim to sustain the growth of our Company while creating value to our shareholders."

Fourth Quarter 2009 Financial Results

Revenues

Total revenues were $31.5 million in 4Q09, an increase of 14.4%, or $4.0 million over 4Q08. The increase was attributable to an increase in the Company's software sales of 70.9% to $18.7 million, and system integration services increased 84.4% to $4.6 million, as compared to the fourth quarter of 2008. Software and system integration sales constituted 59.3% and 39.7% of the Company's total revenue. The increase in system integration revenues were skewed due to the temporary delay of some projects in 4Q08.

Sales of hardware products included $4.68 million contributed by Huipu in November and December of 2009. Despite this, sales of hardware products decreased by 32.3%, for fourth quarter of 2009 from the same period of 2008.

These changes are reflective of the Company's increased focus on high value-added offerings surrounding its core competency, which warrant higher gross margin.

Gross Profit and Gross Margin

Gross profit was $15.8 million in 4Q09, an increase of 44.9%, or $4.89 million, from 4Q08. Gross margin was 50.0% in 4Q09, an improvement of 1054 basis points from 4Q08. The increase in gross margin from the same period one year ago was primarily due to a shift in product mix in favor of software business, which generates higher gross margin than the other two segments.

Administrative Expenses

Administrative expenses were $5.7 million in 4Q09, an increase of 44.2%, or $1.7 million in 4Q08. As a percentage of revenue, administrative expenses went from 14.3% of revenue in the fourth quarter of 2008 to 18.0% in the current period, reflecting our efforts in enhancing managerial capabilities which lead to higher compensation to staff and increased head count. Such investment shall yield managerial efficiency in the long run.

Income from Operations

Income from operations was $8.1 million in 4Q09, an increase of 48.8%, or $2.67 million in 4Q08. The operating margin improved by 595 basis points from 19.8% in the fourth quarter of 2008 to 25.8% in 4Q09. The operating margin increase was primarily due to widened gross margin, partially offset by the increase in administrative expense ratio.

Net Income Attributable to the Company

As a result of the foregoing factors, net income contributable to the Company was $8.8 million in 4Q09, an increase of 72.0%, or $3.7 million in 4Q08.

Fiscal Year 2009 Financial Results

Revenues

Revenue was $101.0 million, compared to $85.30 million for the year ended December 31, 2008, an increase of $15.7 million, or 18.4%. The increase in revenues during 2009 was attributable to an increase in software sales of 82.6% to $63.83 million, as compared to $34.96 million for the year ended December 31, 2008. Software sales constituted 63.2% of the Company's total revenue.

Sales of hardware products included $4.68 million contributed by Huipu in November and December of 2009. Sales of hardware products and system integration services decreased by 37.4% and 1.6%, respectively, for the year ended December 31, 2009, as compared to the year 2008.

These changes are reflective of the Company's increased focus on high value-added offerings surrounding its core competency, which warrant higher gross margin.

For the year ended December 31, 2009, approximately $54.20 million of the Company's revenues were generated by its DIST segment, $36.83 million of revenues were generated by its GIS segment, and $9.97 million was generated by its DHIS segment. This compares with $50.97 million by DIST, $34.28 million by GIS and $50,801 by DHIS for the year ended December 31, 2008. The increase in DIST and GIS segments were 6.3% and 7.4% year-over-year due to growth in the GIS market exceeding that of DIST. The DHIS segment was started in November 2008, so the Company's full-year comparison is skewed by the difference in time periods that contributed to the consolidated results.

Gross Profit and Gross Margin

Gross profit increased by 29.6% from $39.1 in fiscal year 2008 to $50.7 in fiscal year 2009. Gross margin was 50.2% for the year ended December 31, 2009, an increase of 434 basis points, from 45.8% in 2008. The increase in gross margin from the same period one year ago was primarily due to a shift in product mix in favor of software business, which generates higher gross margin than the other two segments.

Income from Operations

Income from operations increased $8.3 million, or 34.6%, to $32.2 million in 2009, from $23.9 million in 2008. The operating margin improved by 384 basis points from 28.0% in 2008 to 31.8% in 2009. The operating margin increase was primarily due to widened gross margin and partially offset by the Company's administrative expense ratio as a result of enhancing managerial capabilities.

Net Income Attributable to the Company

As a result of the foregoing factors, net income contributable to the Company increased $6.3 million, or 26.5%, to $30.1 million in 2009, from $23.8 million in 2008. Fully diluted net income per share was $0.62 in 2009, as compared to $0.51 in 2008.

Cash and Cash Equivalents

As of December 31, 2009, the Company had $19.34 million in cash and cash equivalents, restricted cash and short-term investments, as compared to $15.4 million as of December 31, 2008. During 2009, accounts receivable increased by $28.9 million to $71.8 million. Meanwhile, during 2009, cash provided by operating activities was $11.5 million, an increase of 152% from 2008. Working capital decreased by $8.8 million to $50.4 million, from $59.2 million in 2008.

Recent Developments [Post - Dec. 31, 2009]

-- January 26, 2010 - CIST ranked 13th on the 2010 Forbes China list of

200 small-to-medium sized Chinese corporations with the most potential

-- January 20, 2010 - CIST's proprietary GIS software, GeoGlobe 3.0

selected as a "Recommended Software of 2009" by the China Software

Industry Association

-- January 13, 2010 - CIST completed its previously announced registered

direct offering, raising an aggregate amount of approximately $10.16

million

2010 Outlook

For fiscal year 2010, the Company reaffirms its guidance with projected revenue to be $133-138 million and adjusted net income to be $33.5 - 37.5 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.

* Table 1

Q4 2009 and Full Year 2009 Reconciliation of Operating, Net

Income and EPS to Exclude SBC and Amortization of Intangible Assets

3 Mos. 3 Mos. 12 Mos. 12 Mos.

Ended Ended Ended Ended

31-Dec-09 31-Dec-08 31-Dec-09 31-Dec-08

Operating income 8,135,886 3,762,349 32,156,443 23,882,882

Stock based compensation

("SBC") 1,269,510 600,042 1,453,110 1,604,741

Amortization 480,651 543,014 1,786,201 1,354,567

Change in fair value of

contingent consideration* (1,108,759) -- (1,108,759) --

Operating income (without

SBC, amortization and

change in fair value of

contingent

consideration) 8,777,288 4,905,405 34,286,995 26,842,190

Net income Attributable

to the Company 8,813,708 5,123,378 30,094,571 23,786,976

Stock based compensation

("SBC") 1,269,510 600,042 1,453,110 1,604,741

Amortization 480,651 543,014 1,786,201 1,354,567

Change in fair value of

contingent consideration* (1,108,759) 0 (1,108,759) --

Net income (without

SBC, amortization and

change in fair value of

contingent

consideration) 9,455,110 6,266,434 32,225,123 26,746,284

Weighted Average Number of

Shares Outstanding

49,388,270 46,738,491 48,676,391 46,398,600

Basic

49,388,270 47,296,857 48,676,391 46,852,827

Diluted

Earnings Per Share (without

SBC and Amortization)

Basic $0.19 $0.13 $0.66 $0.58

Diluted $0.19 $0.13 $0.66 $0.57

* Represents a gain from the change of fair value of the contingent

consideration for the acquisition of Huipu as at 2009/12/31, according

to FASB ASC 805 - Business Combinations

Conference Call

China Information Security Technology will host a corresponding conference call and live webcast at 8:00 am Eastern Standard Time (9:00 pm, Beijing time) on Friday, March 5, 2010.

The dial-in details for the live conference call are as follows:

- U.S. Toll Free Number: +1-866-519-4004

- International Dial-in Number: +65-6735-7955

- Mainland China Toll Free Number: 10-800-819-0121

10-400-620-8038

- Hong Kong Toll Free Number: 80-093-0346

Conference ID: 60234059

A live and archived webcast of the conference call will be available on the Investor Relations section of China Information Security's website at http://www.chinacpby.com .

A telephone replay of the call will be available from March 5, 2010 through March 12, 2010.

The dial-in details for the replay are as follows:

- U.S. Toll Free Number: +1-866-214-5335

- International Dial-in Number: +61-2-8235-5000

Conference ID: 60234059

About China Information Security Technology, Inc.

China Information Security Technology, Inc., together with its subsidiaries, is a total solution provider of digital security, geographic information, and hospital information systems in the People's Republic of China. Headquartered in Shenzhen, China, the Company's total solutions include specialized software, hardware, systems integration, and related services organized into three business segments - Digital Information Security Technology ("DIST"), Geographic Information Systems ("GIS"), and Digital Hospital Information System ("DHIS"). To learn more about the Company, please visit its 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 acquisition of Huipu Electronic (Shenzhen) Co., Ltd.; the ability of the Company to attain a leading position in the industry and create value added synergies by expanding and integrating Huipu's high-end hardware capabilities, expertise and established brand name with the Company's core software products; the general ability of the Company to achieve its commercial objectives, including the Company's plan to sustain the growth while creating shareholder value; 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.

For further information, please contact

China Information Security Technology, Inc.

Iris Yan

Tel: +86-755-8370-4767

Email: ir@chinacpby.com

Web: http://www.chinacpby.com

Christensen

Kathy Li

Tel: +1-480-614-3036

Email: kli@christensenir.com

Roger Hu

Tel: +86-158-1049-5326

Email: rhu@christensenir.com

CHINA INFORMATION SECURITY TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2009 AND 2008

2009 2,008

ASSETS

CURRENT ASSETS

Cash and cash equivalents $ 13,478,633.00 $ 9,565,252.00

Restricted cash 5,859,910.00 --

Short-term investments -- 5,835,838.00

Accounts receivable:

Billed, net of allowance for

doubtful accounts of $1,151,000

and $399,800, respectively 23,907,035.00 17,141,594.00

Unbilled 47,851,638.00 25,715,514.00

Bills receivable -- 4,481,340.00

Advances to suppliers 6,924,036.00 8,469,976.00

Amount due from related parties,

net of allowance for doubtful

accounts of $0 and $73,000,

respectively 129,937.00 131,594.00

Inventories, net of provision of

$184,000 and $49,000,respectively 10,936,004.00 7,107,537.00

Other receivables and prepaid

expenses 15,405,089.00 6,251,484.00

Deferred tax assets 1,719,327.00 --

TOTAL CURRENT ASSETS 126,211,608.00 84,700,129.00

Deposit for software purchase 1,426,452.00 --

Long-term investments 2,862,016.00 3,078,405.00

Property, plant and equipment,

net 53,586,514.00 23,555,603.00

Land use rights, net 1,907,611.00 --

Intangible assets, net 13,556,141.00 13,115,151.00

Goodwill 50,609,866.00 24,018,894.00

Deferred tax assets 668,730.00

TOTAL ASSETS $ 250,828,938.00 $ 148,468,182.00

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Short-term bank loans $ 15,927,780.00 $ 6,327,992.00

Accounts payable 20,159,317.00 7,206,154.00

Bills payable 12,658,029.00 3,501,574.00

Advances from customers 3,950,744.00 2,476,335.00

Amount due to related parties 583,736.00 486,136.00

Accrued payroll and benefits 3,142,240.00 1,319,386.00

Other payables and accrued

expenses 14,252,918.00 2,553,019.00

Contingent consideration, current

portion 1,857,994.00 --

Income tax payable 3,290,245.00 1,592,459.00

TOTAL CURRENT LIABILITIES 75,823,003.00 25,463,055.00

Long-term bank loans 1,907,100.00 --

Contingent consideration, net of

current portion 2,635,397.00 --

Deferred tax liabilities 2,564,604.00 --

TOTAL LIABILITIES 82,930,104.00 25,463,055.00

EQUITY

Common stock, par $0.01;

authorized capital 200,000,000

shares; shares issued and

outstanding 2009: 49,905,141 and

48,797,211 shares, respectively;

2008: 47,462,404 shares 233,548.00 209,121

Treasury stock, 6,000 shares, at

cost (11,468.00) --

Additional paid-in capital 78,495,062.00 64,127,339.00

Reserve 8,345,371.00 4,964,597.00

Retained earnings 60,462,275.00 33,748,480.00

Accumulated other comprehensive

income 5,016,575.00 4,644,693.00

Total equity of the Company 152,541,363.00 107,694,230.00

Non-controlling interest 15,357,471.00 15,310,897.00

Total equity 167,898,834.00 123,005,127.00

TOTAL LIABILITIES AND EQUITY $ 250,828,938.00 $ 148,468,182.00

CHINA INFORMATION SECURITY TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007

2009 2008 2007

Revenue - Products $ 16,784,910 $ 26,822,325 $ 2,007,800

Revenue - Software 63,827,233 34,958,401 13,131,578

Revenue - System integration 19,017,962 19,328,312 15,194,314

Revenue - Others 1,365,989 4,192,146 9,017

TOTAL REVENUE 100,996,094 85,301,184 30,342,709

Cost - Products sold 13,560,279 25,049,072 1,669,410

Cost - Software sold 22,229,542 5,628,436 2,233,493

Cost - System integration 14,251,391 12,196,185 8,470,467

Cost - Others 303,215 3,348,627 --

TOTAL COST 50,344,427 46,222,320 12,373,370

GROSS PROFIT 50,651,667 39,078,864 17,969,339

Administrative expenses 12,653,175 10,158,863 3,288,657

Research and development

expenses 2,705,669 2,596,430 797,580

Management fee -- -- 92,160

Selling expenses 3,136,380 2,440,689 480,465

INCOME FROM OPERATIONS 32,156,443 23,882,882 13,310,477

Subsidy income 833,429 738,482 53,289

Other income, net 1,153,288 200,439 26,146

Interest income 270,666 214,850 138,840

Interest expense (388,686) (179,130) --

INCOME FROM CONTINUING

OPERATIONS BEFORE INCOME 34,025,140 24,857,523 13,528,752

Income tax expense (3,887,495) (1,547,509) (107,300)

INCOME FROM CONTINUING

OPERATIONS 30,137,645 23,310,014 13,421,452

INCOME FROM DISCONTINUED

OPERATIONS NET OF AMOUNT -- 718,159 --

NET INCOME 30,137,645 24,028,173 13,421,452

Less: Net income attributable

to the non-controlling (43,076) (241,197) (90,000)

NET INCOME ATTRIBUTABLE TO

THE COMPANY $ 30,094,569 $ 23,786,976 $ 13,331,452

Basic 48,676,391 46,398,600 39,718,967

Diluted 48,676,391 46,852,827 40,152,855

EARNINGS PER SHARE

Basic - From continuing

operations $ 0.62 $ 0.50 $ 0.34

Basic - From discontinued

operations -- 0.01 --

$ 0.62 $ 0.51 $ 0.34

Diluted - From continuing

operations $ 0.62 $ 0.49 $ 0.33

Diluted - From discontinued

operations -- 0.02 --

$ 0.62 $ 0.51 $ 0.33

CHINA INFORMATION SECURITY TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007

2009 2008 2007

OPERATING ACTIVITIES

Net income $ 30,137,645 $ 24,028,173 $ 13,421,452

Adjustments to reconcile

net income to net cash

provided by operating

activities:

Operating cash flows from

discontinued operations -- (718,153) --

Provision for losses on

accounts receivable 2,765,837 472,750 --

Depreciation 4,069,363 2,991,266 1,274,768

Amortization of intangible

assets 1,786,201 1,354,567 168,747

Stock-based compensation 1,453,110 1,604,741 677,891

Loss on disposal of

property and equipment, net 62,803 2,533 --

Provision for obsolete

inventories 183,714 -- --

Change in fair value of

contingent consideration (1,108,759) -- --

Deferred income tax

benefits (1,268,670) -- --

Impairment of long-term

investment 233,211 -- --

Changes in operating assets

and liabilities, net of

effects of business

acquisitions -- -- --

Increase in restricted cash (5,856,949) -- --

Increase in accounts

receivable (24,850,334) (30,169,244) (4,115,867)

Decrease in receivables

from and advances to iASPEC

prior to VIE consolidation -- -- (10,660,988)

Decrease in advances to

suppliers 3,001,469 -- --

Increase (decrease) in

other receivables and

prepaid expenses (13,366,450) (553,400) 592,182

Increase in amount due from

related parties 132,774 372,391 --

Increase in inventories (1,219,083) (472,829) (1,399,838)

Increase in accounts

payable 11,068,019 4,633,198 903,475

Increase (decrease) in

advances from customers 1,416,715 (801,288) 54,830

Increase in other payables

and accrued expenses and

other liabilities 1,149,194 896,447 643,953

Increase in income tax

payable 1,687,973 906,825 46,586

Net cash provided by

operating activities 11,477,783 4,547,977 1,607,191

INVESTING ACTIVITIES

Deposit for business

acquisition of Bocom -- -- (9,000,000)

Cash acquired in VIE

consolidation -- -- 4,731,140

Cash acquired in ISS

acquisition -- -- 326,831

Cash acquired in Bocom

acquisition -- 713,876 --

Cash acquired in Geo

acquisition -- 2,443,677 --

Cash acquired in Zhongtian

acquisition -- 233,243 --

Cash acquired in HPC

acquisition 2,508,394 -- --

Consideration paid for

acquisition of ISS -- -- (7,051,469)

Consideration paid for

acquisition of Geo -- (7,049,073) --

Consideration paid for

acquisition of Zhongtian -- (9,852,455) --

Consideration paid for

acquisition of HPC (8,000,000) -- --

Purchase of Equity Linked

Notes -- -- (22,654,230)

Proceeds from sale of

short-term investments 5,864,400 -- --

Purchase of short-term

investments -- (5,655,605) --

Proceeds from sale of

marketable securities -- 14,966,752 7,687,478

Refund of investment in

former Joint Venture 4,398,300 -- --

Investing cash flows from

discontinued operations -- (8,576,575) --

Proceeds from sales of

property and equipment 78,238 1,146,671 --

Advances to third parties -- -- 332,479

Advances from related

parties -- -- 115,312

Purchases of property and

equipment (16,872,380) (8,928,057) (6,452,450)

Capitalized and purchased

software development costs (1,215,649) (487,541) --

Deposit for software

purchase (1,425,577) -- --

Net cash used in investing

activities (14,664,274) (21,045,087) (31,964,909)

FINANCING ACTIVITIES

Borrowings under short-term

loans 19,952,949 6,314,410 --

Repayment of long-term

loans (351,984) (1,086,312) --

Purchase of treasury stock (11,468) -- --

Repayment of short-term

loans (12,475,839) -- --

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

Net cash provided by

financing activities 7,113,658 5,228,098 49,535,182

Effect of exchange rate

changes on cash and cash

equivalents (13,786) 1,079,082 405,402

NET INCREASE (DECREASE) IN

CASH AND CASH EQUIVALENTS 3,913,381 (10,189,930) 19,582,866

CASH AND CASH EQUIVALENTS,

BEGINNING 9,565,252 19,755,182 172,316

CASH AND CASH EQUIVALENTS,

ENDING $ 13,478,633 $ 9,565,252 $ 19,755,182

Supplemental disclosure of

cash flow information:

Cash paid during the period

Income taxes $ 3,464,474 $ 650,648 $ 24,574

Interest $ 379,101 $ 158,650 $ --

Supplemental disclosure of

non-cash investing and

financing activities:

Property and equipment

transfers from inventory $ -- $ 78,784 $ --

Selected information by segment is presented in the following tables for

2009, 2008 and 2007.

Revenues(1) 2009 2008 2007

DIST Segment $ 54,197,481 $ 50,968,985 $ 21,529,388

GIS Segment 36,826,430 34,281,398 8,813,321

DHIS Segment 9,972,183 50,801 --

$ 100,996,094 $ 85,301,184 $ 30,342,709

Percentage to Revenue

DIST Segment 53.6% 59.75% 70.9%

GIS Segment 36.4% 40.18% 29.1%

DHIS Segment 10% 0.07% --

(1) Revenues by operating segments exclude intercompany transactions.