<html>
<head>
<title>China Information Security Technology, Inc.: Form S-1 - Prepared By TNT
Filings Inc. </title>
</head>

<body>
<div style="border-top-style: solid; border-top-width: 1; padding-top: 1">
  <hr noShade SIZE="5" color="#000000">
</div>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0" style="border-collapse: collapse" bordercolor="#111111">
<TR vAlign=bottom>
<TD align='center'><FONT face="Times New Roman, Times, Serif" size=2>As filed with the Securities and Exchange Commission on May 13, 2008</FONT></TD
></TR>
<TR vAlign=bottom>
<TD align='right' style="border-bottom-style: double; border-bottom-width: 3"><FONT face="Times New Roman, Times, Serif" size=2><B>Registration No. 333-</B></FONT></TD
></TR>
<TR vAlign=top>
<TD align='center' style="border-top-style: solid; border-top-width: 1">
</TD></TR></TABLE>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td align="center"><B><FONT face="Times New Roman, Times, Serif" size=5>SECURITIES AND EXCHANGE COMMISSION<br>
    </FONT><FONT face="Times New Roman, Times, Serif" size=2>WASHINGTON, D.C. 20549</FONT></B></td>
  </tr>
  <tr>
    <td><hr align="center" width="200" size="1" color="#000000"></td>
  </tr>
  <tr>
    <td align="center"><FONT face="Times New Roman, Times, Serif" size=5><B>FORM S-1</B></FONT></td>
  </tr>
  <tr>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2><B>REGISTRATION STATEMENT UNDER<BR>
    THE SECURITIES ACT OF 1933</B></FONT></td>
  </tr>
   <tr>
     <td align="center"><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
   </tr>
   <tr>
    <td align="center"><b><FONT face="Times New Roman, Times, Serif" size=5>CHINA INFORMATION SECURITY TECHNOLOGY, INC.<BR></FONT>
    </b><FONT face="Times New Roman, Times, Serif" size=2><B>(Name of small business issuer in its charter)</B></FONT></td>
  </tr>
   <tr>
     <td align="center">&nbsp;</td>
   </tr>
</table>
<table width="100%"  border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr align="center">
    <td width="328"><font size="2" face="Times New Roman, Times, serif">Nevada</font></td>
    <td width="329"><font size="2" face="Times New Roman, Times, serif">7373</font></td>
    <td width="329"><font size="2" face="Times New Roman, Times, serif">98-0575209</font></td>
  </tr>
  <tr align="center">
    <td width="328" valign="top"><font size="2" face="Times New Roman, Times, serif"><B>(State or other jurisdiction of incorporation <br>
    or organization)</B></font></td>
    <td width="329" valign="top"><font size="2" face="Times New Roman, Times, serif"><B>(Primary Standard Industrial Classification <br>
    Code Number)</B></font></td>
    <td valign="top" width="329"><font size="2" face="Times New Roman, Times, serif"><B>(I.R.S. Employer<BR>
    Identification No.)</B></font></td>
  </tr>
  <tr align="center">
    <td width="328"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="329"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="329"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
</table>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2>21<SUP>st</SUP> Floor, Everbright Bank Building, <BR>
      Zhuzilin, Futian District, Shenzhen, Guangdong, 518040 <BR>
    People&#146;s Republic of China<br>
    (+86) 755 -8370-8333 <br>
    <B>(Address and telephone number of principal executive offices)</B></FONT></td>
  </tr>
  <tr>
    <td><hr align="center" width="200" size="1" color="#000000"></td>
  </tr>
  <tr>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td align="center"><font size="2" face="Times New Roman, Times, serif"><B>Louis A. Bevilacqua, Esq.<br>
    Thomas M. Shoesmith, Esq.<br>
    Joseph R. Tiano, Jr., Esq.<br>
    </B>Thelen Reid Brown Raysman &amp; Steiner LLP<br>
701 8th Street, N.W.<br>
Washington, D.C. 20001<br>
(202) 508-4000</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2><B>(Names, addresses and telephone numbers of agents for service)</B></FONT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><hr align="center" width="200" size="1" color="#000000"></td>
  </tr>
</table>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Approximate date of commencement of proposed sale to public</B>: From time to time after the effective date of this registration statement, as determined by market
conditions and other factors.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>If any of the securities being registered on this form are to be offered on a delayed or continuous
basis pursuant to Rule&nbsp;415 under the Securities Act of 1933, check the following box. <font face="Wingdings">x</font> </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under
the Securities Act, check the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering. <font face="Wingdings">o</font> </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. <font face="Wingdings">o</font></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement the same offering. <font face="Wingdings">o</font></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>If delivery of the prospectus is expected to be made pursuant to Rule&nbsp;434, please check the following
box. <font face="Wingdings">o</font></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>CALCULATION OF REGISTRATION FEE</FONT></P>
<TABLE width="100%" border="0" cellPadding="0" cellSpacing="0" style="border-collapse: collapse" bordercolor="#111111" height="100">
  <TR align="center">
    <TD vAlign=bottom height="45" style="font-size: 10pt"><font size="2" face="Times New Roman, Times, serif"><I>Title of each class of securities to be <br>
      registered</I></font></TD>
    <TD width=14% vAlign=bottom height="45" style="font-size: 10pt"><font size="2" face="Times New Roman, Times, serif"><I>Amount to be <br>
      registered</I> <SUP>(1)(3)</SUP></font></TD>
    <TD width=17% vAlign=bottom height="45" style="font-size: 10pt"><font size="2" face="Times New Roman, Times, serif"><I>Proposed maximum offering <br>
      price per share </I></font></TD>
    <TD width=17% vAlign=bottom height="45" style="font-size: 10pt"><font size="2" face="Times New Roman, Times, serif"><I>Proposed maximum <br>
      aggregate offering price)</I></font></TD>
    <TD width=14% vAlign=bottom height="45" style="font-size: 10pt"><font size="2" face="Times New Roman, Times, serif"><I>Amount of<BR>
      registration fee</I></font></TD>
  </TR>
  <TR>
    <TD vAlign=bottom bgcolor="#E9F1F8" height="17" style="font-size: 10pt"><font size="2" face="Times New Roman, Times, serif">Common stock, $0.01 par value </font></TD>
    <TD align="center" bgcolor="#E9F1F8" height="17" style="font-size: 10pt" valign="bottom"><font size="2" face="Times New Roman, Times, serif">1,070,000</font></TD>
    <TD align="center" bgcolor="#E9F1F8" height="17" style="font-size: 10pt" valign="bottom"><font size="2" face="Times New Roman, Times, serif">$6.85<SUP> (2)</SUP></font></TD>
    <TD align="center" bgcolor="#E9F1F8" height="17" style="font-size: 10pt" valign="bottom"><font size="2" face="Times New Roman, Times, serif">$7,329,500<SUP> (2)</SUP></font></TD>
    <TD align="center" bgcolor="#E9F1F8" height="17" style="font-size: 10pt" valign="bottom"><font size="2" face="Times New Roman, Times, serif">$288</font></TD>
  </TR>
  <TR>
    <TD vAlign=bottom height="19" style="font-size: 10pt"><font size="2" face="Times New Roman, Times, serif">Common stock, $0.01 par value</font></TD>
    <TD align="center" height="19" style="font-size: 10pt" valign="bottom"><FONT size="2" face="Times New Roman, Times, serif" style="TEXT-DECORATION: none">400,</FONT><font face="Times New Roman, Times, serif" size="2">000</font> <font size="2" face="Times New Roman, Times, serif"><SUP>(4)</SUP></font></TD>
    <TD align="center" height="19" style="font-size: 10pt" valign="bottom"><font size="2" face="Times New Roman, Times, serif">
    $9.60 <SUP>(5)</SUP></font></TD>
    <TD align="center" height="19" style="font-size: 10pt" valign="bottom"><font size="2" face="Times New Roman, Times, serif">$3,840<FONT style="TEXT-DECORATION: none">,000</FONT></font> <font size="2" face="Times New Roman, Times, serif"><SUP>(5)</SUP></font></TD>
    <TD align="center" height="19" style="font-size: 10pt" valign="bottom"><font size="2" face="Times New Roman, Times, serif">
    $151</font></TD>
  </TR>
  <TR>
    <TD vAlign=bottom bgcolor="#E9F1F8" height="19" style="font-size: 10pt">
    <font face="Times New Roman, Times, serif" size="2">Total</font></TD>
    <TD align="center" bgcolor="#E9F1F8" height="19" style="font-size: 10pt" valign="bottom"><FONT size="2" face="Times New Roman, Times, serif" style="TEXT-DECORATION: none">
    1,470,000</FONT></TD>
    <TD align="center" bgcolor="#E9F1F8" height="19" style="font-size: 10pt" valign="bottom">
    <font face="Times New Roman, Times, serif" size="2">&#150;</font></TD>
    <TD align="center" bgcolor="#E9F1F8" height="19" style="font-size: 10pt" valign="bottom"><font size="2" face="Times New Roman, Times, serif">$11<FONT style="TEXT-DECORATION: none">,169,500</FONT></font> <font size="2" face="Times New Roman, Times, serif"><SUP>(5)</SUP></font></TD>
    <TD align="center" bgcolor="#E9F1F8" height="19" style="font-size: 10pt" valign="bottom"><font size="2" face="Times New Roman, Times, serif">
    $439</font></TD>
  </TR>
  </TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0" style="border-collapse: collapse" bordercolor="#111111">

<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(1)</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In accordance with Rule&nbsp;416(a), the Registrant is also registering hereunder an indeterminate
  number of shares that may be issued and resold resulting from stock splits, stock dividends or similar
  transactions.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(2)</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Estimated pursuant to Rule 457(c) of the Securities Act of 1933 solely for the purpose of computing
  the amount of the registration fee based on the average of the bid and asked prices reported on the
  OTC Bulletin Board maintained by the National Association of Securities Dealers, Inc. on May 9, 2008.
</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(3)</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Represents shares of the Registrant&#146;s common stock being registered for resale that have been
  issued to the selling stockholders named in this registration statement.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(4)</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Represents shares of common stock issuable upon exercise of five-year warrants to purchase shares of
  common stock held by the selling stockholders named in this registration statement. </FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(5)</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Calculated in accordance with Rule 457(g) based upon the price at which the warrants may be exercised.
</FONT></div></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>The registrant hereby amends this registration statement on such date or dates as may be necessary
to delay its effective date until the registrant shall file a further amendment which specifically
states that this registration statement shall hereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act of 1933 or until the registration statement shall become effective on such
date as the Commission, acting pursuant to such Section&nbsp;8(a), may determine.</B></FONT></P>
<hr noShade SIZE="5" color="#000000">
<P align="justify"></P>
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2> <B><I>PROSPECTUS</I></B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><I>Subject to completion, dated May [__], 2008</I></B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><IMG height=106 src="image002.gif" width=200></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>1,470,000 Shares of Common Stock</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <FONT face="Times New Roman, Times, Serif" size=2>This prospectus relates to 1,470,000 shares of common stock of China Information Security Technology,
Inc., that may be sold from time to time by the selling stockholders named in this prospectus, which
includes: </FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=72></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp; 1,070,000 shares of common stock; and </FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=72></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;400,000 shares of common stock issuable upon exercise
of five-year warrants.</FONT></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <FONT face="Times New Roman, Times, Serif" size=2>We will not receive any proceeds from the sales by the selling stockholders, but we will receive funds

from the exercise of warrants held by the selling stockholders, if exercised for cash.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <FONT face="Times New Roman, Times, Serif" size=2>Our common stock is quoted on the OTC Bulletin Board maintained by the National Association of Securities
Dealers, Inc. under the symbol &#147;CIFS.OB&#148;&nbsp;The closing bid price for our common stock
on May 9, 2008 was $6.85 per share, as reported on the OTC Bulletin Board.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <FONT face="Times New Roman, Times, Serif" size=2>Any participating broker-dealers and any selling stockholders who are affiliates of broker-dealers
are &#147;underwriters&#148; within the meaning of the Securities Act of 1933, as amended, or the
Securities Act, and any commissions or discounts given to any such broker-dealer or affiliate of
a broker-dealer may be regarded as underwriting commissions or discounts under the Securities Act.
The selling stockholders have informed us that they do not have any agreement or understanding, directly
or indirectly, with any person to distribute their common stock. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <FONT face="Times New Roman, Times, Serif" size=2><B>Investing in our common stock involves a high degree of risk. See &#147;Risk Factors&#148; beginning
on page 10 to read about factors you should consider before buying shares of our common stock.</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <FONT face="Times New Roman, Times, Serif" size=2><B>Neither the Securities and Exchange Commission nor any state securities commission has approved or
disapproved of these securities or determined if this prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>The date of this Prospectus is________, 2008.</FONT></P>
<p align="justify"><font size="2"><b><font face="Times New Roman, Times, serif">The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with |the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted. </font></b></font></p>
<P align=center><FONT face="Times New Roman, Times, serif" size=2></FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2><B>TABLE OF CONTENTS</B></FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><a href="#a1"><FONT face="Times New Roman, Times, serif" size=2>PROSPECTUS SUMMARY</FONT></a></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="right"><font size="2" face="Times New Roman, Times, serif">4</font></td>
  </tr>
  <tr>
    <td><a href="#a2"><FONT face="Times New Roman, Times, serif" size=2>RISK FACTORS</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">10</font></td>
  </tr>
  <tr>
    <td><a href="#a3"><FONT face="Times New Roman, Times, serif" size=2>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">20</font></td>
  </tr>
  <tr>
    <td><a href="#a4"><FONT face="Times New Roman, Times, serif" size=2>USE OF PROCEEDS</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">21</font></td>
  </tr>
  <tr>
    <td><a href="#a5"><FONT face="Times New Roman, Times, serif" size=2>DIVIDEND POLICY</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">21</font></td>
  </tr>
  <tr>
    <td><a href="#a6"><FONT face="Times New Roman, Times, serif" size=2>MARKET FOR OUR COMMON STOCK</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">21</font></td>
  </tr>
  <tr>
    <td><FONT face="Times New Roman, Times, serif" size=2><a href="#a7">DILUTION</a></FONT></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font face="Times New Roman, Times, serif" size="2">22</font></td>
  </tr>
  <tr>
    <td><a href="#a8"><FONT face="Times New Roman, Times, serif" size=2>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF <br>
    OPERATIONS</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right" valign="bottom"><font size="2" face="Times New Roman, Times, serif">22</font></td>
  </tr>
  <tr>
    <td><a href="#a9"><FONT face="Times New Roman, Times, serif" size=2>BUSINESS</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">38</font></td>
  </tr>
  <tr>
    <td><a href="#a10"><FONT face="Times New Roman, Times, serif" size=2>MANAGEMENT</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">47</font></td>
  </tr>
  <tr>
    <td><a href="#a11"><FONT face="Times New Roman, Times, serif" size=2>EXECUTIVE COMPENSATION</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">50</font></td>
  </tr>
  <tr>
    <td><a href="#a12"><FONT face="Times New Roman, Times, serif" size=2>TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">52</font></td>
  </tr>
  <tr>
    <td><a href="#a13"><FONT face="Times New Roman, Times, serif" size=2>CHANGE IN ACCOUNTANTS</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">55</font></td>
  </tr>
  <tr>
    <td><a href="#a14"><FONT face="Times New Roman, Times, serif" size=2>SELLING STOCKHOLDERS</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">55</font></td>
  </tr>
  <tr>
    <td><a href="#a15"><FONT face="Times New Roman, Times, serif" size=2>PLAN OF DISTRIBUTION</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">59</font></td>
  </tr>
  <tr>
    <td><a href="#a16"><FONT face="Times New Roman, Times, serif" size=2>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">60</font></td>
  </tr>
  <tr>
    <td><a href="#a17"><FONT face="Times New Roman, Times, serif" size=2>DESCRIPTION OF CAPITAL STOCK</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">62</font></td>
  </tr>
  <tr>
    <td><a href="#a18"><FONT face="Times New Roman, Times, serif" size=2>SHARES ELIGIBLE FOR FUTURE SALE</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">63</font></td>
  </tr>
  <tr>
    <td><a href="#a19"><FONT face="Times New Roman, Times, serif" size=2>WHERE YOU CAN FIND MORE INFORMATION</FONT></a></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">64</font></td>
  </tr>
</table>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>3</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a1"></a>PROSPECTUS SUMMARY</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>This summary highlights some information from this prospectus, and it may not contain all of the information
that is important to you. You should read the following summary together with the more detailed information
regarding our company and the common stock being sold in this offering, including &#147;Risk Factors&#148;
and our consolidated financial statements and related notes, included elsewhere in, or incorporated
by reference into, this prospectus.</I></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>The Company</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Our Business</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>China Information Security Technology, Inc. is a holding company that owns all of the issued and outstanding
capital stock of China Public Security Holdings Limited, a British Virgin Islands holding company,
or CPSH. We operate through CPSH&#146;s wholly-owned operating Chinese subsidiary,&nbsp;Information
Security Technology (China) Co., Ltd. (formerly, Public Security Technology (PRC) Co., Ltd.), or
IST, and through IST&#146;s commercial arrangement with iASPEC Software Co., Ltd. (formerly, Shenzhen
iASPEC Software Engineering Co., Ltd.), or iASPEC, our variable interest entity, or VIE. We recently
acquired Fortune Fame International Investment Limited, a Hong Kong company, or Fortune Fame, and
its wholly-owned subsidiary, Information Security Development Technology (Shenzhen) Company Ltd.,
a PRC company, or ISDT, and Bocom Multimedia Display Company Limited, or Bocom Multimedia, and its
operating PRC subsidiary Shenzhen Bocom Multimedia Display Technology Co. Ltd, or Bocom Technology.
Through IST, ISDT and Bocom Technology we are a China based company providing integrated solutions
for the public security sector in China, specializing in providing public security information communication
applications and Geographic Information Systems, or GIS, software services.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our customers are mostly public sector entities that use our products and services to improve the service
quality and management level of civil and medical emergencies, traffic control, fire control, medical
rescue and border control. Our customers include the Guangdong Public Security Department, the Shenzhen
Border Check Station, the Shenzhen Public Security Bureau, the Shenzhen Traffic Police Bureau, the
Shenzhen Fire Department and the Dongfang Public Security Bureau of Hainan Province. In the future,
we expect to expand the application of our products and services in the public security sector and
to other sectors in China as well. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We generate revenues through the sale of our integrated hardware and software products and through
the provision of related support services, including our Certification Authority, or CA, application
platform through ISDT, our new PRC subsidiary. In fiscal years ended December 31, 2007 and 2006,
68% and 55% of our revenues, respectively, were generated under our exclusive commercial
arrangement with iASPEC. Fulfillment of certain Police-Use GIS, or PGIS, contracts with PRC Government
customers is restricted to entities possessing the necessary government licenses and approvals which
IST does not have. The commercial arrangement with iASPEC anticipates that iASPEC will fulfill all
obligations for PGIS contracts, IST will receive 100% of the net received profit of iASPEC, net of
an annual fee of $180,000, and IST will reimburse iASPEC for all net losses incurred by iASPEC. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Our Industry</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Over the past two decades, the PRC government has encouraged the development and use of new technologies

for information and communication (or ICTs) and their application in all spheres of government,
industry,
education and culture. The term &#147;Informatization&#148; or &#147;<I>xinxihua</I>&#148; has been coined in China to describe the overall process of ICT application in China and has
in recent years become a key component of central and many local economic development strategies.
As a part of the Informatization process, the PRC government has launched a series of online programs
to accelerate its pace of implementing and using information technology to improve China&#146;s current
government information management systems, and help promote China&#146;s economic development. The
Informatization process has led to a growth in the use of information technology, such as e-Government
platforms and GIS, for public security. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>With the urbanization and fast economic growth along the coastal areas of China, the demands for information
technology by government agencies has greatly increased, especially in the areas of urban planning,
travel and land management. PRC government agencies face challenges, such as financial constraints
and public safety, and must find ways to better manage resources and serve their citizens. For example,
police departments explore methods to better protect the public by more effectively and efficiently
analyzing crime patterns within specific geographic areas. Likewise, government authorities look
to improve security by assessing threats across their geographic areas and departments and plan appropriate
emergency responses. Our software services and operations have been concentrated in and are used
by the public security sector (such as by the Police, Fire Department and Healthcare Emergency Services).
The use of security information technology in the private sector is still developing in China and presents a growth opportunity for us. In the future, we plan to target the telecommunications, logistics and insurance
sectors as areas for business development within the private sector. </FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>4</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Our Competitive Strengths</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our services are designed to provide our customers with integrated and innovative public safety and
security solutions. Key advantages of our solutions include: </FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Growing Portfolio of Software&nbsp;and Services</I> <I>&nbsp;&#150; </I>We offer our customers location-based public security solutions through our&nbsp;growing portfolio
  of software and services offerings. Government agencies use our core products to incorporate location-based
  data into their decision-making processes to drive more effective results. Through our platforms,
  our customers can develop unique location-based applications, which can be extended across their
  agencies to support a variety of needs and generate more valuable intelligence. As a complement to
  these offerings, we offer related services, such as application development and systems integration,
  which help our customers quickly implement and customize our solutions. </FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Successful Implementation of High Profile Contracts</I> <I>&nbsp;&#150; </I>Our management team has a proven track record of successful implementation of high profile government
  contracts in China. During&nbsp;2007, we procured or completed several large-scale system integration
  contracts relating to our First Responder Coordination System, our Intelligent Border Control System
  and our Residence Card Management System. We have successfully implemented our Consolidated Command
  System, or Three-in-One System, which combines the functions of the police emergency system, the
  fire emergency system, and the traffic control emergency system, in Shenzhen City, Guangdong and
  in Dongbang City, Hainan. In April we were granted our third contract for its implementation in the
  Shantou Special Economic Zone in Shantou, Guandong. We won a contract for the implementation of our
  Intelligent Border Control System at the Shenzhen Bay Port and the Futian Bay Port, the former of
  which received official recognition in July 2007, when China&#146;s President Hu Jintao inspected
  the system and became the first passenger to use the crossing. </FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>High Barriers to Entry</I> <I>&nbsp;&#150; </I>Our high qualifications, our successful contractual implementation record, the high cost of switching
  to other providers provides us with a &#147;first mover&#148; advantage in the PRC market and poses
  high barriers to entry for our potential competitors. We have a proven track record of contract implementation
  and our commercial partner, iASPEC holds the Computer System Integration Level 1 license from the
  PRC Ministry of Information and the Information System Security Service qualification from Guangdong
  Province. In addition, after investing in our systems, our existing customers have a strong incentive
  to purchase follow-on phases with us in order to expedite implementation and save costs.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Scalability of Platform</I> <I>&nbsp;&#150; </I>We have digitized detailed proprietary information systems data related to Shenzhen City and Guangdong
  Province that can be leveraged for future civil-use applications in logistics, insurance, and location
  based services across industries.</FONT></div></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I><B>Our Growth Strategy</B></I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our objective is to be the leading provider of integrated solutions for public security information
technology and GIS software service operations in China. Our intelligence solutions can help organizations
make more insightful decisions and improve the efficiency of their internal processes. Five key elements
of our strategy are as follows:</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Expand geographic footprint to cover all major China markets</I> &nbsp;- Based on our successful track record and reputation, management sees significant opportunities
  to grow revenues from existing clients by winning follow-on contracts for subsequent phases of project
  implementation, capitalizing on our first mover advantage and related high cost of switching to other
  vendors. We plan to manage our national operations under six areas with centers located in Guangzhou,
  Beijing, Shanghai, Wuhan, Chongqing and Xi&#146;an. So far we have set up offices in Guangzhou and
  Beijing, and representatives in Changsha, capital city of Hunan Province, and Nanning, capital city
  of Guangxi Province.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Strengthen R&amp;D capability to enhance and expand core products and further penetrate customer base</I> &nbsp;&#150; We expect to provide additional value-added services and add-ins to our current platform
  through continuous research and development, to enhance our product and service offerings and to
  maintain our leadership position in our core areas of focus.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Continue to dominate rapidly growing public security technology market and expand beyond Guangdong</I> &nbsp;&#150; We plan to leverage our strong brand recognition and maintain a high contract bid/win
  ratio and follow on orders with our: 1) First Responder Coordination Platform, 2) Intelligent Border
  Control &amp; Security Surveillance and 3) Residence Card Information Management System product lines.</FONT></div></TD></TR></TABLE>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>5</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=24>&nbsp;</TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Pursue strategic acquisitions to support strong internal growth</I> &nbsp;&#150; We expect that acquisitions will enable our geographic expansion, enhance our technological
  capabilities or competitive advantages, provide licensing and recurring revenue opportunities and
  propel our expansion into high growth enterprise class markets.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Leverage existing capabilities</I> &nbsp;&#150; We plan to leverage our PGIS strength and our recent acquisition of Wuda Geoinformatics
  to target planned expansion into Civil-use GIS, enterprise class information security markets and
  other government sectors. We also plan to continue providing our superior E-Government Platform and
  to maintain strong relationships with our current clients. Geo was founded in 1999 by Wuhan University,
  a leading university in Asia for GIS-related studies. Geo develops and sells GIS software, contracts
  surveying and mapping projects, produces space measurement data and provides technical consulting
  and supervision services for GIS projects.</FONT></div></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We expect to execute these five elements of our growth strategy through a combination of investments
in internal initiatives. Internal initiatives will focus typically on expanding capacity and enhancing
our technology and services capabilities. We may also attempt to grow through acquisitions.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Risk Factors</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our ability to successfully operate our business and achieve our goals and strategies is subject to
numerous risks as discussed more fully in the section captioned &#147;Risk Factors,&#148; including,
for example, risks related to:</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our ability to develop new products and service offerings could have an adverse effect on our future
  growth;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our ability to keep pace with the rapid technological changes in our industry could reduce demand for
  our products and services which would adversely affect our revenues;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our ability to increase our customer base beyond our government customers in Guangdong and Hainan Provinces;
  and</FONT></div></TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>Our ability to conduct our business activities in China.</FONT></TD>
</TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Any of the above risks could materially and negatively affect our business, financial position and
results of operations. An investment in our common stock involves risks. You should read and consider
the information set forth in &#147;Risk Factors&#148; and all other information set forth in this
prospectus before investing in our common stock.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>Use of Non-GAAP Financial Measures</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We use financial measures that are not in accordance with generally accepted accounting principles,
or non-GAAP financial measures, in the sections of this prospectus captioned &#147;Description of
Business&#148; and &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results
of Operations&#148;. All of the non-GAAP financial measures used by us in this prospectus relate
to the inclusion of financial information of iASPEC, which for accounting purposes is treated as
our predecessor company, and is referred to in our financial statements herein as Predecessor. Although
CPSH was formed on January 17, 2006, it had no significant operations in the period from January
17, 2006 through September 30, 2006. Accordingly the accompanying financial statements for the period
from January 1, 2006 through September 30, 2006, the Predecessor Period, reflect the results of operations
of iASPEC. Effective as of July 1 2007, iASPEC became a VIE. Therefore, the accompanying financial
data for the period from January 1, 2007 through December 31, 2007, the Successor Period, reflect
the results of operations of CPSH for the period from January 1,2007 through December 31, 2007 and
the results of operations of iASPEC from July 1 2007 through December 31, 2007, which are referred
to in our financial statements as the Successor. Accordingly, the results of operations of the Predecessor
and the Successor are not comparable in all respects. 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 this non-GAAP financial measure
to the most directly comparable GAAP measure is provided in the aforementioned sections where non-GAAP
financial measures are present in this prospectus in the columns captioned &#147;Successor&#148;.
Management believes that these non-GAAP financial measures are necessary because the abnormally high
financial ratios calculated using GAAP financial measures would be misleading to investors and would
not reflect the substance of the Company&#146;s performance.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>Corporate Information</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We were originally organized under the laws of the State of Florida, on September 19, 1979, under the
name Mark Thomas Publishing Inc. and on April 29, 2003 we changed our name to Irish Mag, Inc. and on January
26, 2007, to China Public Security Technology, Inc. Effective as of April 7, 2008 we reincorporated
to the State of Nevada and changed our name to China Information Security Technology, Inc., to more
accurately reflect our business and commercial objectives.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>6</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following chart reflects our organizational structure as of the date of this prospectus.</FONT></P>
<P align="center"><img border="0" src="cistr1.jpg" width="650" height="618"></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our corporate headquarters are located at 21<SUP>st</SUP> Floor, Everbright Bank Building, Zhuzilin, Futian District, Shenzhen, Guangdong, 518040, People&#146;s
Republic of China. Our telephone number is (+86) 755 -8370-8333. We maintain a website at <u>www.chinacpby.com</u>
that contains information about our subsidiaries CPSH and IST, but that information is not a part
of this prospectus.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>Use of Certain Defined Terms and Treatment of Stock Split</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Except as otherwise indicated by the context, references in this report to:</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&#147;CIST&#148; &#147;we,&#148; &#147;us,&#148; or &#147;our,&#148; &#147;Successor&#148; and the
&#147;Company&#148; are references to the combined business of China Information Security Technology,
  Inc. and its wholly-owned subsidiary, China Public Security Holdings Limited, a British Virgin Islands
  company, or CPSH, along with CPSH&#146;s wholly-owned subsidiaries: Information Security Technology
  (China) Co., Ltd., a PRC company (formerly, Public Security Technology (PRC) Co., Ltd.), or IST;
  Public Security Technology (China) Company Limited, a Hong Kong company; Fortune Fame International
  Investment Limited, a Hong Kong company, or Fortune Fame, and its wholly-owned subsidiary, Information
  Security Development Technology (Shenzhen) Company Ltd., a PRC company, or ISDT; and Bocom Multimedia
  Display Company Limited, or Bocom Multimedia, and its operating PRC subsidiary Shenzhen Bocom Multimedia Display Technology Co. Ltd, or Bocom Technology; </FONT></div></TD></TR></TABLE>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>7</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=24>&nbsp;</TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#147;iASPEC&#148; refers to iASPEC Software Co., Ltd. (formerly, Shenzhen iASPEC Software Engineering
Co., Ltd.), to whose operations we succeeded on October 9, 2006; and its 57% majority owned subsidiary
Wuhan Wuda Geoinformatics Co., Ltd., or Geo.</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#147;China&#148; and &#147;PRC&#148; are references to the People&#146;s Republic of China and references
to &#147;Hong Kong&#148; are to the Hong Kong Special Administrative Region of China;</FONT></TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#147;RMB&#148; are to Renminbi, the legal currency of China;</FONT></TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#147;U.S. dollar,&#148; &#147;$&#148; and &#147;US$&#148; are to the legal currency of the United States; and</FONT></TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#147;Securities Act&#148; are references to the Securities Act of 1933, as amended and references to &#147;Exchange Act&#148; are references to the Securities Exchange Act of 1934, as amended.</FONT></TD>
</TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On October 2, 2006, we effected a 4.44444444-to-1 forward split of the outstanding shares of our common
stock held as of September 1, 2006. All share numbers contained in this report are adjusted to reflect
this forward split. </FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>The Offering</B></FONT></P>
<TABLE width="100%" border="0" cellPadding="0" cellSpacing="0">
  <TR>
    <TD width="48%" vAlign=top><font size="2" face="Times New Roman, Times, serif">Common stock offered by selling stockholders</font></TD>
    <TD width="3%" vAlign=top>&nbsp;</TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">1,470,000 shares representing
    3.14% of our outstanding common stock, par value $0.01.</font></TD>
  </TR>
  <TR>
    <TD colspan="3" vAlign=top><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">Common stock outstanding before the offering (presuming all outstanding warrants are exercised)</font></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">47,605,028</font></TD>
  </TR>
  <TR>
    <TD colspan="3" vAlign=top><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">Common stock outstanding after the offering (presuming all warrants outstanding are exercised)</font></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">47,605,028</font></TD>
  </TR>
  <TR>
    <TD colspan="3" vAlign=top><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">Proceeds to us</font></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">We will not receive proceeds from the resale of the shares by the Selling Stockholders.</font></TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(1) Based on 46,764,396 shares of common stock outstanding and warrants to purchase 840,632 shares
of common stock outstanding at the filing of this Registration Statement.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>8</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>Summary Consolidated Financial Information</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following tables set forth key components of our results of operations for the periods indicated,
both in dollars and as a percentage of sales revenue and key components of our revenue for the periods
indicated in dollars. The financial data for the period from January 1, 2006 through December 31,
2006, the Predecessor Period, reflect the results of operations of iASPEC. Effective as of July 1,
2007, iASPEC became our VIE. Therefore, the accompanying financial data for the period from January
1, 2007 through December 31, 2007, the Successor Period, reflect the results of operations of CPSH
for the period from January 1, 2007 through December 31, 2007 and the results of operations of iASPEC
from July 1, 2007 through December 31, 2007, which are referred to in our financial statements as
the Successor. Accordingly, the results of operations of the Predecessor and the Successor are not
comparable in all respects. 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. In addition, we have combined the Predecessor Period from January 1 through
October 8, 2006 and the Successor Period from January 17, 2006 through December 31, 2006 for the
purpose of the fiscal 2006 analysis. This combination is not in accordance with US GAAP and the periods
presented may not be comparable due to our reverse acquisition by CPSH in 2006. This information
should be read in conjunction with &#147;Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations&#148; and our consolidated financial statements and related notes appearing
elsewhere in this prospectus.</FONT></P>
<font FACE="Times New Roman" SIZE="2">
<i><b>
<p>For the Three- Month Periods Ended March 31, 2008 and 2007 (Unaudited)</p>
</b></i>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b><u>NON-GAAP</u></b></font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>THREE MONTHS</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>THREE MONTHS</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>REALLOCATION</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>THREE MONTHS</b></font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>ENDED</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>ENDED</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>OF</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>ENDED</b></font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>MARCH 31,</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>MARCH 31,</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>RELATED PARTY</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>MARCH 31,</b></font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>2008</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>2007</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>REVENUE</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>2007</b></font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">REVENUE - THIRD PARTIES</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">$ 14,404,426</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4"><font SIZE="2" FACE="Times New Roman">
    $ </font>1,213,318</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4"><font SIZE="2" FACE="Times New Roman">
    $ </font>3,932,251</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4"><font SIZE="2" FACE="Times New Roman">
    $ </font>5,145,569</font></td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">REVENUE - RELATED PARTY</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">
    <p style="margin-right: 4">-</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">
    <p style="margin-right: 4">1,818,823</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(1,818,823)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">
    <p style="margin-right: 4">-</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">TOTAL REVENUE</font></td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">14,404,426</font></td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">3,032,141</font></td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">5,145,569</font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">COST OF REVENUE</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(8,352,264)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(210,712)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(1,771,527)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(1,982,239)</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">GROSS PROFIT</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">6,052,162</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">2,821,429</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">3,163,330</font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">ADMINISTRATIVE EXPENSES</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">(1,752,735)</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">(219,294)</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">(282,794)</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">(502,088)</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">RESEARCH AND DEVELOPMENT EXPENSES</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">(147,003)</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">-</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">-</font></td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">FEE TO iASPEC UNDER THE TURNKEY AGREEMENT</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">-</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">(45,000)</font></td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2">(45,000)</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">SELLING EXPENSES</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">(417,703)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">(68,669)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">(59,107)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">(127,776)</font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">INCOME FROM OPERATIONS</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">3,734,721</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">2,488,466</font></td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">2,488,466</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">OTHER INCOME, NET</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">69,401</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">7,525</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">7,525</font></td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">INTEREST INCOME</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">26,603</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">20,304</font></td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">20,304</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">MINORITY INTEREST</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">(45,000)</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">-</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">-</font></td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">INCOME TAX EXPENSE</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(206,745)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(377,444)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(377,444)</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">NET INCOME</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4"><font SIZE="2" FACE="Times New Roman">
    $ </font>3,578,980</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4"><font SIZE="2" FACE="Times New Roman">
    $ </font>2,138,851</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4"><font SIZE="2" FACE="Times New Roman">
    $ </font>2,138,851</font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">WEIGHTED AVERAGE NUMBER OF SHARES</font></td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">BASIC</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">45,985,550</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">36,446,205</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">N/A</font></td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">DILUTED</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <font SIZE="2">
    <p style="margin-right: 4">46,720,415</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <font SIZE="2">
    <p style="margin-right: 4">36,760,592</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <font SIZE="2">
    <p style="margin-right: 4">N/A</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">EARNINGS PER SHARE</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">BASIC</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <font SIZE="2">
    <p style="margin-right: 4">$ 0.08</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <font SIZE="2">
    <p style="margin-right: 4">$ 0.06</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <font SIZE="2">
    <p style="margin-right: 4">N/A</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">DILUTED</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">$ 0.08</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">$ 0.06</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">N/A</font></td>
  </tr>
</table>

</font>

<P align="center" dir="ltr"><FONT face="Times New Roman, Times, serif" size=2>9</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<p><font size="2"><B><font face="Times New Roman, Times, serif">The Fiscal Years Ended December 31, 2007 and 2006</font></B></font></p>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH valign="top">&nbsp;</TH>
    <TH COLSPAN=8 valign="top">
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">2007</FONT></TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">2006</FONT></TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"><u>Successor</u><br>
      Year <br>
      ended <br>
      December 31</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Reallocation<br>
      of <br>
      Related Party<br>
      Revenue </FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"><u>Non-GAAP</u><br>
      Year <br>
      ended <br>
      December 31</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"><u>Predecessor</u><br>
      January 1 <br>
      through <br>
      October
      8 </FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"><u>Successor</u><br>
      January 17<br>
      through <br>
      December 31</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> Reallocation<br>
      of <br>
      Related Party<br>
      Revenue </FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"><u>Combined</u><br>
      Non-GAAP<br>
      Year ended<br>
      December 31</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Revenue &ndash; Third Parties</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 24,800,750</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 12,713,673</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 37,514,423</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 9,644,332</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 989,755</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 2,677,498</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 13,311,585</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Revenue &ndash; Related Party</FONT></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">5,541,959</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(5,541,959</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">1,185,449</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(1,185,449</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Cost of revenue</FONT></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(12,714,170</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(6,558,443</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(19,272,613</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(3,739,518</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(89,934</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(858,149</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(4,687,601</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Gross profit</FONT></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">17,628,539</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">18,241,810</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">5,904,814</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">2,085,270</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">8,623,984</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Administrative expenses</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(3,321,333</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(526,659</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(3,847,992</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(931,108</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(99,024</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(633,900</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(1,664,032</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Research and development <br>
      expenses</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(424,104</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(424,104</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Fee to iASPEC under the <br>
      Turnkey Agreement</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(92,160</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(92,160</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(45,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(45,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Selling expenses</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(480,465</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(152,315</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(632,780</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(157,855</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(60,013</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(217,868</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Income from operations</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">13,310,477</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">13,244,774</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">4,815,851</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">1,881,233</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">6,697,084</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Other income</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">79,435</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">65,703</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">145,138</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">6,584</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">1,305</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">7,889</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Interest income</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">138,840</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">138,840</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">6,912</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">1,514</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">8,426</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Minority interest</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(90,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(90,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Income taxes</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(107,300</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(107,300</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(749,381</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(289,403</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(1,038,784</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Net income</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 13,331,452</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 13,331,452</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 4,079,966</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 1,594,649</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 5,674,615</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Weighted average number of
      shares</FONT></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Basic</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">39,718,967</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">26,958,104</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Diluted</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">40,152,855</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">26,958,104</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Earnings per share</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Basic</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 0.34</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#E9F1F8">
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 0.06</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Diluted</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 0.33</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 0.06</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a2"></a>RISK FACTORS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>The shares of our common stock being offered for resale by the selling stockholders are highly speculative
in nature, involve a high degree of risk and should be purchased only by persons who can afford to
lose the entire amount invested in the common stock. Before purchasing any of the shares of common
stock, you should carefully consider the following factors relating to our business and prospects.
If any of the following risks actually occurs, our business, financial condition or operating results
will suffer, the trading price of our common stock could decline, and you may lose all or part of
your investment.</I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>RISKS RELATED TO OUR BUSINESS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>If we are unable to develop competitive new products and service offerings our future results of operations
could be adversely affected.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our future revenue stream depends to a large degree on our ability to utilize our technology in a way
that will allow us to offer new types of software applications and services to a broader client base.
We will be required to make investments in research and development in order to continue to develop
new software applications and related service offerings, enhance our existing software applications
and related service offerings and achieve market acceptance of our software applications and service
offerings. We may incur problems in the future in innovating and introducing new software applications
and service offerings. Our development-stage software applications may not be successfully completed
or, if developed, may not achieve significant customer acceptance. If we are unable to successfully define, develop and introduce competitive new software applications, and enhance existing
software applications, our future results of operations would be adversely affected. Development
schedules for software applications are difficult to predict. The timely availability of new applications
and their acceptance by customers are important to our future success. A delay in new the development
of new applications could have a significant impact on its results of operations.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>10</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>A significant portion of our sales are derived from a limited number of customers, and results from
operations could be adversely affected and stockholder value harmed if we lose any of these customers.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Historically, a significant portion of our revenues have been derived from a limited number of customers.
For the years ended December 31, 2007 and 2006, 59.3% and 31.9% of our revenues, respectively, were
derived from our five largest customers. The loss of any of these significant customers would adversely
affect our revenues and stockholder value.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>We depend heavily on key personnel, and turnover of key employees and senior management could harm
our business.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our future business and results of operations depend in significant part upon the continued contributions
of our key technical and senior management personnel, including Jiang Huai Lin, our Chairman and
Chief Executive Officer, and Zhi Xiong Huang, one of our directors. They also depend in significant
part upon our ability to attract and retain additional qualified management, technical, marketing
and sales and support personnel for our operations. If we lose a key employee or if a key employee
fails to perform in his or her current position, or if we are not able to attract and retain skilled
employees as needed, our business could suffer. Significant turnover in our senior management could
significantly deplete our institutional knowledge held by our existing senior management team. We
depend on the skills and abilities of these key employees in managing the technical, marketing and
sales aspects of our business, any part of which could be harmed by further turnover.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Investor confidence and the market price of our shares may be adversely impacted if we are unable to
correct a material weakness or significant deficiency in our internal controls over our financial
reporting identified by our management.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>During its assessment of the effectiveness of our internal control over financial reporting as of December&nbsp;31,
2007, our management concluded that there was a significant deficiency relating to our cash management
procedures as of December 31, 2007, primarily due to our management&#146;s deposit of the proceeds
from the sale of our shares to the investors in the October 2007 private placement into ELNs. Although
he did not have any potential for personal gain from this investment, in order to protect the interest
of outside shareholders, Mr. Lin, our Chief Executive Officer and controlling shareholder, guaranteed
us against any losses from the investment. We liquidated our investment in the ELNs on March 25,
2008, and to honor his guarantee, Mr. Lin delivered the proceeds from the sale of his shares in a
March 2008 private sale to us. As a result of Mr. Lin&#146;s actions, the transactions did not have
any impact on our operating results or financial condition for fiscal year 2007 and will not have
such impact in fiscal year 2008. All of our cash is currently invested in interest bearing bank accounts.
In addition, management and our Board of Directors have reviewed our cash management practices and
have now put in place strict controls to ensure that going forward, our cash will only be invested
in straight interest bearing instruments that ensure the liquidity of these funds and the preservation
of capital. Although we have taken steps to remediate this deficiency, our failure to fully remediate
it could result in losses in the future.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>We may be exposed to potential risks relating to our internal controls over financial reporting and
our ability to have the</I></B> &nbsp;<B><I> operating effectiveness&nbsp;of our internal controls attested to by our independent auditors.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As directed by Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404, the SEC adopted rules requiring
public companies to include a report of management on their internal controls over financial reporting
in their annual reports, including Form 10-KSB. We are subject to this requirement commencing with
our fiscal year ending December 31, 2007 and a report of our management is included under Item 9A
of this Annual Report on Form 10-KSB. In addition, SOX 404 requires the independent registered public
accounting firm auditing a company&#146;s financial statements to also attest to and report on the
operating effectiveness of such company&#146;s internal controls. However, this annual report does
not include an attestation report because under current law, we will not be subject to these requirements
until our annual report for the fiscal year ending December 31, 2008 if we are deemed to be an accelerated
filer, or December 31, 2009 if we are not deemed to be an accelerated filer. We can provide no assurance
that we will comply with all of the requirements imposed thereby. There can be no assurance that
we will receive a positive attestation from our independent registered public accountants. In the
event we identify significant deficiencies or material weaknesses in our internal controls that we
cannot remediate in a timely manner or we are unable to receive a positive attestation from our independent
registered public accountants with respect to our internal controls, investors and others may lose
confidence in the reliability of our financial statements.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>11</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Our holding company structure may limit the payment of dividends.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We have no direct business operations, other than our ownership of our subsidiaries. While we have
no current intention of paying dividends, should we decide in the future to do so, as a holding company,
our ability to pay dividends and meet other obligations depends upon the receipt of dividends or
other payments from our operating subsidiaries and other holdings and investments. In addition, our
operating subsidiaries, from time to time, may be subject to restrictions on their ability to make
distributions to us, including as a result of restrictive covenants in loan agreements, restrictions
on the conversion of local currency into U.S. dollars or other hard currency and other regulatory
restrictions as discussed below. If future dividends are paid in RMB, fluctuations in the exchange
rate for the conversion of RMB into U.S. dollars may reduce the amount received by U.S. stockholders
upon conversion of the dividend payment into U.S. dollars.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Chinese regulations currently permit the payment of dividends only out of accumulated profits as determined
in accordance with Chinese accounting standards and regulations. Our subsidiaries in China are also
required to set aside a portion of their after tax profits according to Chinese accounting standards
and regulations to fund certain reserve funds. Currently, our subsidiaries in China are the only
sources of revenues or investment holdings for the payment of dividends. If they do not accumulate
sufficient profits under Chinese accounting standards and regulations to first fund certain reserve
funds as required by Chinese accounting standards, we will be unable to pay any dividends.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>RISKS RELATING TO THE INDUSTRY IN WHICH WE OPERATE</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>If we are unable to keep pace with the rapid technological changes in our industry, demand for our
products and services could decline which would adversely affect our revenue.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our industry is characterized by extremely rapid technological change, evolving industry standards
and changing customer demands. These conditions require continuous expenditures on product research
and development to enhance existing products, create new products and avoid product obsolescence.
We believe that the timely development of new products and continuing enhancements to existing products
is essential to maintain our competitive position in the marketplace. Our future success depends
in part upon customer and market acceptance of our products and initiatives, which is uncertain.
Any failure to achieve increased acceptance of these and other new product offerings could have a
material adverse effect on our business and results of operations.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Unfavorable economic conditions may affect the level of technology spending by our customers which
could cause the demand for our products and services to decrease. </I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The revenue growth and profitability of our business depend on the overall demand for software products
and related services, particularly within the private sector. Our strategy involves a sale of our
products and services primarily to customers in the private sector, so our business depends on the
overall economy and the economic and business conditions within this market. Any future stock market
decline or broad economic slowdown will affect the demand for our software products and related services
and decrease technology spending of many of our customers and potential customers. These events could
have a material effect on us in the future, including, without limitation, on our future revenue
and earnings.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Our software products may contain defects or errors, which could decrease sales, injure our reputation
or delay shipments of our products.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The software products that we develop are complex and must meet the stringent technical requirements
of our customers. In addition, to keep pace with the rapid technological change in our industry and
to avoid the obsolescence of our software products, we must quickly develop new products and enhancements
to existing products. Because of this complexity and rapid development cycle, we cannot assure that
our software products are free of errors, especially in newly released software products and new
versions of existing software products. If our software is not free of errors, this could result
in litigation, fewer sales, increased product returns, damage to our reputation and an increase in
service and warranty costs, which would adversely affect our business.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Our technology may become obsolete which could materially adversely affect our ability to sell our
products and services.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>If our technology, products and services become obsolete, our business operations would be materially
adversely affected. The market in which we compete is characterized by rapid technological change,
evolving industry standards, introductions of new products, and changes in customer demands that
can render existing products obsolete and unmarketable. Our current products will require continuous
upgrading or our technology will become obsolete. Our future success will depend upon our ability
to address the increasingly sophisticated needs of our customers by supporting existing and emerging
hardware, software, database, and networking platforms and by developing and introducing enhancements
to our existing products and new products on a timely basis that keep pace with technological developments, evolving industry standards, and changing customer requirements. Research
and development expenses were $424,104 for the year ended December 31, 2007. We had no research and
development expenses during the periods from January 17, 2006 though December 31, 2006. Costs incurred
to produce our products after technological feasibility is established, were capitalized and amounted
to $102,953 in the period from January 1, 2006 through December 31, 2006.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>12</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>We face the risk of systems interruptions and capacity constraints, possibly resulting in adverse publicity,
revenue loss and erosion of customer trust.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The satisfactory performance, reliability and availability of our network infrastructure are critical
to our reputation and our ability to attract and retain customers and to maintain adequate customer
service levels. We may experience temporary service interruptions for a variety of reasons, including
telecommunications or power failures, fire, water damage, vandalism, computer bugs or viruses or
hardware failures. We may not be able to correct a problem in a timely manner. Any service interruption
that results in the unavailability of our system or reduces its capacity could result in real or
perceived public safety issues that may affect customer confidence in our services and result in
negative publicity that could cause us to lose customer accounts or fail to obtain new accounts.
Any inability to scale our systems may cause unanticipated system disruptions, slower response times,
degradation in levels of customer service, or impaired quality and speed of transaction processing.
We are not certain that we will be able to project the rate or timing of increases, if any, in the
use of our services to permit us to upgrade and expand our systems effectively or to integrate smoothly
any newly developed or purchased modules with our existing systems.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>If we are not able to adequately secure and protect our patent, trademark and other proprietary rights
our business may be materially affected.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Under the Management Service Agreement, we license 16 copyrighted software applications from iASPEC
on an exclusive basis. To protect the intellectual property underlying these applications and our
other intellectual property, we rely on a combination of copyright, trademark, and trade secret laws.
We also rely on non-disclosure agreements and other confidentiality procedures and contractual provisions
to protect our intellectual property rights. Some of these technologies, other than the iASPEC copyrighted
software applications, are very important to our business and are not protected by copyrights or
patents. It may be possible for unauthorized third parties to copy or reverse engineer our products,
or otherwise obtain and use information that we regard as proprietary. Further, third parties could
challenge the scope or enforceability of our copyrights. In certain foreign countries, including
China where we operate, the laws do not protect our proprietary rights to the same extent as the
laws of the United States. Any misappropriation of our intellectual property could have a material
adverse effect on our business and results of operations, and we cannot assure you that the measures
we take to protect our proprietary rights are adequate. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Claims that we infringe the proprietary rights of third parties could result in significant expenses
or restrictions on our ability to sell our products and services.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Third parties may claim that our products or services infringe their proprietary rights. Any infringement
claim, with or without merit, would be time-consuming and expensive to litigate or settle and could
divert our management&#146;s attention from our core business. In the event of a successful infringement
claim against us, we may have to pay significant damages, incur substantial legal fees, develop costly
non-infringing technology, or enter into license agreements that require us to pay substantial royalties
and that may not be available on terms acceptable to us, if at all.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>RISKS RELATING TO OUR COMMERCIAL RELATIONSHIP WITH IASPEC</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Jiang Huai Lin&#146;s association with iASPEC could pose a conflict of interest which may result in
iASPEC decisions that are adverse to our business.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Jiang Huai Lin, our president and Chief Executive Officer and the beneficial owner of 51% of our common
stock also beneficially owns 76% of iASPEC, from whom we derived 68% of our revenue in the fiscal
year ended December 31, 2007, and 55% of our revenue in the fiscal year ended December 31, 2006,
pursuant to existing commercial arrangements. As a result, conflicts of interest may arise from time
to time and these conflicts may result in management decisions that could negatively affect our operations
and potentially result in the loss of opportunities.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>If iASPEC or its shareholders violate our contractual arrangements with it, our business could be disrupted
and we may have to resort to litigation to enforce our rights which may be time consuming and expensive.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our operations are currently dependent upon our commercial relationship with iASPEC. During the fiscal
years ended December 31, 2007 and 2006 we derived 68% and 55% of our revenues, respectively, from
the provision of services to iASPEC customers. A significant portion of these revenues have not yet
been collected. Amounts owed by iASPEC under the Management Service Agreement for each quarter will
be due and payable no later than the last day of the month following the end of each such quarter.
If iASPEC or its shareholders are unwilling or unable to perform their obligations under our commercial arrangements with it, including payment of revenues under the Management
Service Agreement as they become due each quarter, we will not be able to conduct our operations
in the manner currently planned. In addition, iASPEC may seek to renew these agreements on terms
that are disadvantageous to us. Although we have entered into a series of agreements that provide
us with substantial ability to control iASPEC, we may not succeed in enforcing our rights under them.
If we are unable to renew these agreements on favorable terms, or to enter into similar agreements
with other parties, our business may not be able to operate or expand, and our operating expenses
may significantly increase.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>13</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Uncertainties in the PRC legal system may impede our ability to enforce the commercial agreements that
we have entered into with iASPEC or any arbitral award thereunder and any&nbsp;inability to enforce
these agreements could materially and adversely affect our business and operation.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>While disputes under the Management Service Agreement and the Option Agreement with iASPEC are subject
to binding arbitration before the Shenzhen Branch of the China International Economic and Trade Arbitration
Commission, or CIETAC, in accordance with CIETAC Arbitration Rules, the agreements are governed by
PRC law and an arbitration award may be challenged in accordance with PRC law. For example, a claim
that the enforcement of an award in our favor will be detrimental to the public interest, or that
an issue does not fall within the scope of the arbitration would require us to engage in administrative
and judicial proceedings to defend an award. China&#146;s legal system is a civil law system based
on written statutes and unlike common law systems, it is a system in which decided legal cases have
little value as precedent. As a result, China&#146;s administrative and judicial authorities have
significant discretion in interpreting and implementing statutory and contractual terms, and it may
be more difficult to evaluate the outcome of administrative and judicial proceedings and the level
of legal protection available than in more developed legal systems. These uncertainties may impede
our ability to enforce the terms of the Management Service Agreement, the Option Agreement and the
other contracts that we may enter into with iASPEC. Any&nbsp;inability to enforce the Management
Service Agreement and Option Agreement or an award thereunder could materially and adversely affect
our business and operation.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>If iASPEC fails to comply with the confidentiality requirements of certain of its customer contracts,
then iASPEC could be subject to sanctions and could lose its business license which in turn would
significantly disrupt or shut down our operations.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The business and operations of iASPEC, the owner and licensor to us of the copyrighted software applications
and other intellectual property that are essential to the operation of our business, is subject to
Chinese contractual obligations and laws and regulations that restrict its use of security information
and other information that it obtains from its customers in the public security sector. For some
of its contracts with government agencies, iASPEC has agreed to keep confidential all technical and
commercial secrets obtained during the performance of services under the contract. iASPEC or its
shareholders could violate these contractual obligations and laws and regulations by inadvertently
or intentionally disclosing confidential information or by otherwise failing to operate its business
in a manner that complies with these contractual and legal obligations. A violation of these agreements
could result in the significant disruption or shut down of our business or adversely affect our reputation
in the market. If iASPEC or its shareholders violate these contractual and legal obligations, we
may have to resort to litigation to enforce our rights under our contractual obligations with iASPEC.
This litigation could result in the disruption of our business, diversion of our resources and the
incurrence of substantial costs. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>A majority of the share capital of iASPEC is held by our major shareholder, who may cause these agreements
to be amended in a manner that is adverse to us.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our major shareholder, Jiang Huai Lin, controls iASPEC. As a result, Mr. Lin may be able to cause our
commercial arrangements with iASPEC to be amended in a manner that will be adverse to our company,
or may be able to cause these agreements not to be renewed, even if their renewal would be beneficial
for us. Although we have entered into an agreement that prevents the amendment of these agreements
without the approval of the members of our Board other than Mr. Lin, we can provide no assurances
that these agreements will not be amended in the future to contain terms that might differ from the
terms that are currently in place. These differences may be adverse to our interests.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Our arrangements with iASPEC and its shareholders may be subject to a transfer pricing adjustment by
the PRC tax authorities which could have an adverse effect on our income and expenses.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We could face material and adverse tax consequences if the PRC tax authorities determine that our contracts
with iASPEC and its shareholders were not entered into based on arm&#146;s length negotiations. Although
our contractual arrangements are similar to other companies conducting similar operations in China,
if the PRC tax authorities determine that these contracts were not entered into on an arm&#146;s
length basis, they may adjust our income and expenses for PRC tax purposes in the form of a transfer
pricing adjustment. Such an adjustment&nbsp;may&nbsp;require that we pay&nbsp;additional PRC taxes
plus applicable penalties and interest, if any. </FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>14</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>The shares purchased by the investors in our recent private placement transaction are subject to redemption
in the event that the PRC government takes action that unwinds our restructuring transaction. Any
such redemption would materially and adversely affect our liquidity and capital resources since we
would have to return the funds raised in the private placement.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>If any PRC governmental agency takes action that materially and adversely affects the transactions
contemplated by the restructuring agreement and we are unable to reverse the adverse governmental
action or otherwise address the material adverse effect to the reasonable satisfaction of the investors
in the private placement transaction that closed on January 31, 2006 and February 5, 2006, within
60 days of the occurrence of such governmental action, then if asked, we are obligated, as liquidated
damages, to redeem the shares purchased by such investors, within 30 days of their demand, for an
amount equal to the investor&#146;s entire investment amount without interest. If the PRC government
takes action that triggers this redemption right, then our liquidity and capital resources would
be materially adversely affected as we would be required to return the funds raised in the private
placements. If we are required to return such funds we may required to sell assets or to seek financing
on terms that are not favorable, if available at all, and our financial condition could be thereby
materially and adversely affected.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>The exercise of our option to purchase part or all of the equity interests in or assets of iASPEC under
the Option Agreement might be subject to approval by the PRC government. Our failure to obtain this
approval may impair our ability to substantially control iASPEC and could result in actions by iASPEC
that conflict with our interests.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our Option Agreement with iASPEC gives our Chinese operating subsidiary, IST, the option to purchase
all or part of the equity interests in or assets of iASPEC, however, the option may not be exercised
by IST if the exercise would violate any applicable laws and regulations in China or cause any license
or permit held by, and necessary for the operation of iASPEC, to be cancelled or invalidated. Under
the laws of China, if a foreign entity, through a foreign investment company that it invests in,
acquires a domestic related company, China&#146;s regulations regarding Mergers and Acquisitions
would technically apply to the transaction. Application of these regulations requires an examination
and approval of the transaction by China&#146;s Ministry of Commerce, or MOFCOM, or its local counterparts.
Also, an appraisal of the equity or assets to be acquired is mandatory. However, our local PRC counsel
has advised us that Shenzhen and other local counterparts of MOFCOM hold the view that such a transaction
would not require their approval. Therefore, we do not believe at this time that an approval and
an appraisal are required for IST to exercise its option to acquire iASPEC in Shenzhen. In light
of the different views on this issue, however, it is possible that the central MOFCOM office in Beijing
will issue a standardized opinion imposing the approval and appraisal requirement. If we are not
able to purchase the equity or assets of iASPEC, then we will lose a substantial portion of our ability
to control iASPEC and our ability to ensure that iASPEC will act in our interests.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Our right to elect a majority of the members on iASPEC&#146;s Board of Directors and other provisions
of the Management Service Agreement may be viewed by iASPEC&#146;s customers as a change in control
of iASPEC, which could subject iASPEC to sanctions and loss of its business license, which in turn
would significantly disrupt or possibly terminate our operations.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our new commercial arrangement with iASPEC gives us the right to designate two Chinese citizens to
serve as senior managers of iASPEC, serve on iASPEC&#146;s Board of Directors and assist in managing
the business and operations of iASPEC. In addition, iASPEC will require the affirmative vote of the
majority of the our Board of Directors, as well as at least one non-insider director, for completing
certain material actions with respect to iASPEC, including, but not limited to: (a) the nomination,
appointment, election or replacement of any board members; (b) the distribution of any dividend or
profits; (c) any merger, division, change of corporate form, dissolution or liquidation; (d) any
reimbursement of net losses or other payments or transfers of funds from IST to iASPEC; (e) the formation
or disposition of a subsidiary or the acquisition or disposition of any interest in any other entity;
and (f) the encumbrance of any assets under any lien not in the ordinary course of business. However,
fulfillment of certain PGIS contracts with PRC Government customers is restricted to entities, such
as iASPEC, that possess the necessary PRC government licenses and approvals, and any change in control
may be viewed under PRC law as creating a new entity. If iASPEC&#146;s government customers view
these Management Service Agreement provisions as a change in control of iASPEC or as evidence of
iASPEC&#146;s failure to operate its business in a manner that complies with its contractual obligations
or with related laws and regulations. Such a perception could result in the cancellation or invalidation
of iASPEC&#146;s licenses and permits. A loss by iASPEC of its licenses and permits could result
in the significant disruption or possible termination of our business or adversely affect our reputation in the market.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>RISKS RELATED TO DOING BUSINESS IN CHINA</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Changes in China&#146;s political or economic situation could harm us and our operational results.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Economic reforms adopted by the Chinese government have had a positive effect on the economic development
of the country, but the government could change these economic reforms or any of the legal systems
at any time. This could either benefit or damage our operations and profitability. Some of the things
that could have this effect are:</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>15</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>Level of government involvement in the economy;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>Control of foreign exchange;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>Methods of allocating resources;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>Balance of payments position;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>International trade restrictions; and</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>International conflict.</FONT></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Chinese economy differs from the economies of most countries belonging to the Organization for
Economic Cooperation and Development, or OECD, in many ways. As a result of these differences, we
may not develop in the same way or at the same rate as might be expected if the Chinese economy were
similar to those of the OECD member countries.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Our business is largely subject to the uncertain legal environment in China and your legal protection
could be limited.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Chinese legal system is a civil law system based on written statutes. Unlike common law systems,
it is a system in which precedents set in earlier legal cases are not generally used. The overall
effect of legislation enacted over the past 20 years has been to enhance the protections afforded
to foreign invested enterprises in China. However, these laws, regulations and legal requirements
are relatively recent and are evolving rapidly, and their interpretation and enforcement involve
uncertainties. These uncertainties could limit the legal protections available to foreign investors,
such as the right of foreign invested enterprises to hold licenses and permits such as requisite
business licenses. In addition, all of our executive officers and our directors are residents of
China and not of the U.S., and substantially all the assets of these persons are located outside
the U.S. As a result, it could be difficult for investors to effect service of process in the U.S.,
or to enforce a judgment obtained in the U.S. against us or any of these persons.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>The Chinese government exerts substantial influence over the manner in which we must conduct our business
activities which could have an adverse effect on our ability to operate in China.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>China only recently has permitted provincial and local economic autonomy and private economic activities.
The Chinese government has exercised and continues to exercise substantial control over virtually
every sector of the Chinese economy through regulation and state ownership. Our ability to operate
in China may be harmed by changes in its laws and regulations, including those relating to taxation,
import and export tariffs, environmental regulations, land use rights, property and other matters.
We believe that our operations in China are in material compliance with all applicable legal and
regulatory requirements. However, the central or local governments of these jurisdictions may impose
new, stricter regulations or interpretations of existing regulations that would require additional
expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Accordingly, government actions in the future, including any decision not to continue to support recent
economic reforms and to return to a more centrally planned economy or regional or local variations
in the implementation of economic policies, could have a significant effect on economic conditions
in China or particular regions thereof, and could require us to divest ourselves of any interest
we then hold in Chinese properties or joint ventures.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Future inflation in China may inhibit our ability to conduct business in China.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation.
During the past ten years, the rate of inflation in China has been as high as 20.7% and as low as
-2.2%. These factors have led to the adoption by the Chinese government, from time to time, of various
corrective measures designed to restrict the availability of credit or regulate growth and contain
inflation. High inflation may in the future cause the Chinese government to impose controls on credit
and/or prices, or to take other action, which could inhibit economic activity in China, and thereby
harm the market for our products.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Any recurrence of severe acute respiratory syndrome, or SARS, or another widespread public health problem,
could harm our operations.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>A renewed outbreak of SARS or another widespread public health problem in China, where our operations
are conducted, could have a negative effect on our operations.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our operations may be impacted by a number of health-related factors, including the following:</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>quarantines or closures of some of our offices which would severely disrupt our operations,</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>the sickness or death of our key officers and employees, and</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>a general slowdown in the Chinese economy.</FONT></TD></TR></TABLE>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>16</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Any of the foregoing events or other unforeseen consequences of public health problems could damage
our operations.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The majority of our revenues will be settled in RMB, and any future restrictions on currency exchanges
may limit our ability to use revenue generated in RMB to fund any future business activities outside
China or to make dividend or other payments in U.S. dollars. Although the Chinese government introduced
regulations in 1996 to allow greater convertibility of the RMB for current account transactions,
significant restrictions still remain, including primarily the restriction that foreign-invested
enterprises may only buy, sell or remit foreign currencies after providing valid commercial documents,
at those banks in China authorized to conduct foreign exchange business. In addition, conversion
of RMB for capital account items, including direct investment and loans, is subject to governmental
approval in China, and companies are required to open and maintain separate foreign exchange accounts
for capital account items. We cannot be certain that the Chinese regulatory authorities will not
impose more stringent restrictions on the convertibility of the RMB.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies
by PRC residents may subject our PRC resident stockholders to personal liability, limit our ability
to acquire PRC companies or to inject capital into our PRC subsidiaries, limit our PRC subsidiaries&#146;
ability to distribute profits to us or otherwise materially adversely affect us.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In October 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued the Notice on Relevant
Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose
Companies by Residents Inside China, generally referred to as Circular 75, which required PRC residents
to register with the competent local SAFE branch before establishing or acquiring control over an
offshore special purpose company, or SPV, for the purpose of engaging in an equity financing outside
of China on the strength of domestic PRC assets originally held by those residents. Internal implementing
guidelines issued by SAFE, which became public in June 2007 (known as Notice 106), expanded the reach
of Circular 75 by (1) purporting to cover the establishment or acquisition of control by PRC residents
of offshore entities which merely acquire &#147;control&#148; over domestic companies or assets,
even in the absence of legal ownership; (2) adding requirements relating to the source of the PRC
resident&#146;s funds used to establish or acquire the offshore entity; (3) covering the use of existing
offshore entities for offshore financings; (4) purporting to cover situations in which an offshore
SPV establishes a new subsidiary in China or acquires an unrelated company or unrelated assets in
China; and (5) making the domestic affiliate of the SPV responsible for the accuracy of certain documents
which must be filed in connection with any such registration, notably, the business plan which describes
the overseas financing and the use of proceeds. Amendments to registrations made under Circular 75
are required in connection with any increase or decrease of capital, transfer of shares, mergers
and acquisitions, equity investment or creation of any security interest in any assets located in
China to guarantee offshore obligations, and Notice 106 makes the offshore SPV jointly responsible
for these filings. In the case of an SPV which was established, and which acquired a related domestic
company or assets, before the implementation date of Circular 75, a retroactive SAFE registration
was required to have been completed before March 31, 2006; this date was subsequently extended indefinitely
by Notice 106, which also required that the registrant establish that all foreign exchange transactions
undertaken by the SPV and its affiliates were in compliance with applicable laws and regulations.
Failure to comply with the requirements of Circular 75, as applied by SAFE in accordance with Notice
106, may result in fines and other penalties under PRC laws for evasion of applicable foreign exchange
restrictions. Any such failure could also result in the SPV&#146;s affiliates being impeded or prevented
from distributing their profits and the proceeds from any reduction in capital, share transfer or
liquidation to the SPV, or from engaging in other transfers of funds into or out of China.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We believe that our stockholders, who are PRC residents as defined in Circular 75, have registered
with the relevant branch of SAFE, as currently required, in connection with their equity interests
in us and our acquisitions of equity interests in our PRC subsidiaries. However, we cannot provide
any assurances that their existing registrations have fully complied with, and they have made all
necessary amendments to their registration to fully comply with, all applicable registrations or
approvals required by Circular 75. Moreover, because of uncertainty over how Circular 75 will be
interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it
will affect our business operations or future strategies. For example, our present and prospective
PRC subsidiaries&#146; ability to conduct foreign exchange activities, such as the remittance of
dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular
75 by our PRC resident beneficial holders. In addition, such PRC residents may not always be able
to complete the necessary registration procedures required by Circular 75. We also have little control
over either our present or prospective direct or indirect stockholders or the outcome of such registration
procedures. A failure by our PRC resident beneficial holders or future PRC resident stockholders
to comply with Circular 75, if SAFE requires it, could subject these PRC resident beneficial holders
to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our
subsidiaries&#146; ability to make distributions or pay dividends or affect our ownership structure,
which could adversely affect our business and prospects.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>17</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>If the China Securities Regulatory Commission, or CSRC, or another PRC regulatory agency, determines
that CSRC approval is required in connection with this offering, this offering may be delayed or
cancelled, or we may become subject to penalties.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On August 8, 2006, six PRC regulatory agencies, including the CSRC, promulgated the Regulation on Mergers
and Acquisitions of Domestic Companies by Foreign Investors, which became effective on September
8, 2006. This new regulation, among other things, has certain provisions that require SPVs formed
for the purpose of acquiring PRC domestic companies and controlled by PRC individuals, to obtain
the approval of the CSRC prior to publicly listing their securities on an overseas stock market.
However, the new regulation does not expressly provide that approval from the CSRC is required for
the offshore listing of an SPV which acquires, directly or indirectly, an equity interest or shares
of domestic PRC entities held by domestic companies or individuals by cash payment, nor does it expressly
provide that approval from CSRC is not required for the offshore listing of an SPV which has fully
completed its acquisition of an equity interest in domestic PRC equity prior to September 8, 2006.
On September 21, 2006, the CSRC published on its official website a notice specifying the documents
and materials that are required to be submitted for obtaining CSRC approval. It is not clear whether
the provisions in the new regulation regarding the offshore listing and trading of the securities
of an SPV applies to an offshore company such as us which has acquired equity interests in of PRC
domestic entities for cash and has completed the acquisition of the equity interest of PRC domestic
entities prior to the effective date of the new regulation. Since the new regulation has only recently
been adopted, there remains some uncertainty as to how this regulation will be interpreted or implemented.
If the CSRC or another PRC regulatory agency subsequently determines that the CSRC&#146;s approval
is required for this offering, we may face sanctions by the CSRC or another PRC regulatory agency.
If this happens, these regulatory agencies may impose fines and penalties on our operations in the
PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds
from this offering into the PRC, restrict or prohibit payment or remittance of dividends to us or
take other actions that could have a material adverse effect on our business, financial condition,
results of operations, reputation and prospects, as well as the trading price of our shares. The
CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable
for us, to delay or cancel this offering before settlement and delivery of the shares being offered by us.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>We may be unable to complete a business combination transaction efficiently or on favorable terms due
to complicated merger and acquisition regulations which became effective on September&nbsp;8, 2006.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On August 9, 2006, six PRC regulatory agencies, including the CSRC, promulgated the Regulation on Mergers
and Acquisitions of Domestic Companies by Foreign Investors, which became effective on September
8, 2006. This new regulation, among other things, governs the approval process by which a PRC company
may participate in an acquisition of assets or equity interests. Depending on the structure of the
transaction, the new regulation will require the PRC parties to make a series of applications and
supplemental applications to the government agencies. In some instances, the application process
may require the presentation of economic data concerning a transaction, including appraisals of the
target business and evaluations of the acquirer, which are designed to allow the government to assess
the transaction. Government approvals will have expiration dates by which a transaction must be completed
and reported to the government agencies. Compliance with the new regulations is likely to be more
time consuming and expensive than in the past and the government can now exert more control over
the combination of two businesses. Accordingly, due to the new regulation, our ability to engage
in business combination transactions has become significantly more complicated, time consuming and
expensive, and we may not be able to negotiate a transaction that is acceptable to our stockholders
or sufficiently protect their interests in a transaction.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The new regulation allows PRC government agencies to assess the economic terms of a business combination
transaction. Parties to a business combination transaction may have to submit to the Ministry of
Commerce and other relevant government agencies an appraisal report, an evaluation report and the
acquisition agreement, all of which form part of the application for approval, depending on the structure
of the transaction. The regulations also prohibit a transaction at an acquisition price obviously
lower than the appraised value of the PRC business or assets and in certain transaction structures,
require that consideration must be paid within defined periods, generally not in excess of a year.
The regulation also limits our ability to negotiate various terms of the acquisition, including aspects
of the initial consideration, contingent consideration, holdback provisions, indemnification provisions
and provisions relating to the assumption and allocation of assets and liabilities. Transaction structures
involving trusts, nominees and similar entities are prohibited. Therefore, such regulation may impede
our ability to negotiate and complete a business combination transaction on financial terms that
satisfy our investors and protect our stockholders&#146; economic interests.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>The value of our securities will be affected by the foreign exchange rate between U.S. dollars and
RMB.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The value of our common stock will be affected by the foreign exchange rate between U.S. dollars and
RMB, and between those currencies and other currencies in which our sales may be denominated. For
example, to the extent that we need to convert U.S. dollars into RMB for our operational needs and should the RMB appreciate against
the U.S. dollar at that time, our financial position, the business of the company, and the price
of our common stock may be harmed. Conversely, if we decide to convert our RMB into U.S. dollars
for the purpose of declaring dividends on our common stock or for other business purposes and the
U.S. dollar appreciates against the RMB, the U.S. dollar equivalent of our earnings from our subsidiaries
in China would be reduced.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>18</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>The discontinuation of any preferential tax treatments or other incentives currently available to us
in the PRC could materially and adversely affect our business, financial condition and results of
operations.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our subsidiary IST is a sino-foreign joint venture enterprise and has enjoyed certain special or preferential
tax treatments regarding foreign enterprise income tax in accordance with the &#147;Income Tax Law
of the PRC for Enterprises with Foreign Investment and Foreign Enterprises&#148; and its implementing
rules. Accordingly, IST expects to receive a full exemption from the foreign enterprise income tax
or EIT for 2007 and 2008, and a further 7.5% tax exemption for 2009, 2010 and 2011. However, on March
16, 2007, the PRC&#146;s National People&#146;s Congress passed a new corporate income tax law, which
will be effective on January 1, 2008. This new corporate income tax unifies the corporate income
tax rate, cost deduction and tax incentive policies for both domestic and foreign-invested enterprises.
According to the new corporate income tax law, the applicable corporate income tax rate of our operating
subsidiary will be moved up to a rate of 25% over a five-year grandfather period. We expect the measures
to implement this grandfather period to be enacted by the PRC government in the coming months and
we will make an assessment of what the impact of the new unified tax law is expected to be in the
grandfather period. The discontinuation of any such special or preferential tax treatment or other
incentives could have an adverse affect our business, financial condition and results of operations.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that
we violated the Foreign Corrupt Practices Act could have a material adverse effect on our business.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper
payments or offers of payments to foreign governments and their officials and political parties by
U.S. persons and issuers as defined by the statute, for the purpose of obtaining or retaining business.
We have operations, agreements with third parties and we make sales in China. Our activities in China
create the risk of unauthorized payments or offers of payments by the employees, consultants, sales
agents or distributors of our Company, even though they may not always be subject to our control.
It is our policy to implement safeguards to discourage these practices by our employees. However,
our existing safeguards and any future improvements may prove to be less than effective, and the
employees, consultants, sales agents or distributors of our Company may engage in conduct for which
we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions,
and we may be subject to other liabilities, which could negatively affect our business, operating
results and financial condition. In addition, the U.S. government may seek to hold our Company liable
for successor liability FCPA violations committed by companies in which we invest or that we acquire.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>RISKS RELATED TO THE MARKET FOR OUR STOCK</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Our common stock is quoted on the OTC Bulletin Board which may have an unfavorable impact on our stock
price and liquidity.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our common stock is quoted on the OTC Bulletin Board Electronic maintained by the National Association
of Securities Dealers, Inc.. The OTC Bulletin Board is a significantly more limited market than the
New York Stock Exchange or Nasdaq system. The quotation of our shares on the OTC Bulletin Board may
result in a less liquid market available for existing and potential stockholders to trade shares
of our common stock, could depress the trading price of our common stock and could have a long-term
adverse impact on our ability to raise capital in the future.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>We are subject to penny stock regulations and restrictions which may affect our ability to sell our
securities on the secondary market.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The SEC has adopted regulations which generally define so-called &#147;penny stocks&#148; to be an
equity security that has a market price less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exemptions. Trading in our common stock is volatile and since
January 1, 2007, our stock price has fluctuated from a low of $3.98 to a high of $10.80. Our stock
price is currently trading under $5.00 per share which designates it as a &#147;penny stock.&#148;
As a &#147;penny stock&#148;, our common stock may become subject to Rule 15g-9 under the Exchange
Act of 1934, or the &#147;Penny Stock Rule.&#148; This rule imposes additional sales practice requirements
on broker-dealers that sell such securities to persons other than established customers and &#147;accredited
investors&#148; (generally, individuals with a net worth in excess of $1,000,000 or annual incomes
exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9,
a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser&#146;s written consent to the transaction prior to sale. As a result,
this rule may affect the ability of broker-dealers to sell our securities and may affect the ability
of purchasers to sell any of our securities in the secondary market.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>19</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any
transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny
stock market. Disclosure is also required to be made about sales commissions payable to both the
broker-dealer and the registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stock.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule.
In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject
to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person
from participating in a distribution of penny stock, if the SEC finds that such a restriction would
be in the public interest.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Market volatility may affect our stock price, and the value of our common stock may experience sudden
decreases.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>There has been, and will likely continue to be, significant volatility in the market price of securities

of technology companies, including ours. These fluctuations can be unrelated to the operating performance
of these companies. Factors such as the following could cause the market price of our common stock
to fluctuate substantially:</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>announcements of new products by us or our competitors;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>litigation involving us;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>quarterly fluctuations in our financial results or other software companies&#146; financial results;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>shortfalls in our actual financial results compared to our guidance or results previously forecasted
  by stock market analysts;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>acquisitions or strategic alliances by us or our competitors;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>any stock repurchase program;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>the gain or loss of a significant customer; and</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>general conditions in the software industry and conditions in the financial markets.</FONT></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>A decline in the market price of our common stock may adversely impact our ability to attract and retain
employees. In addition, stockholders may initiate securities class action lawsuits if the market
price of our stock drops significantly, which may cause us to incur substantial costs and could divert
the time and attention of our management.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Our controlling stockholder holds a significant percentage of our outstanding voting securities, which
could hinder our ability to engage in significant corporate transactions without his approval.</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Mr. Jiang Huai Lin, our Chairman, President and Chief Executive Officer, beneficially owns 51% of our
outstanding voting securities. As a result, he possesses significant influence, giving him the ability,
among other things, to elect a majority of our Board of Directors and to authorize or prevent proposed
significant corporate transactions. His ownership and control may also have the effect of delaying
or preventing a future change in control, impeding a merger, consolidation, takeover or other business
combination or discourage a potential acquirer from making a tender offer.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a3"></a>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>This prospectus contains forward-looking statements and information relating to us that are based on
the beliefs of our management as well as assumptions made by, and information currently available
to, our management. When used in this prospectus, the words &#147;anticipate&#148;, &#147;believe&#148;,
&#147;estimate&#148;, &#147;expect&#148;, &#147;intend&#148;, &#147;plan&#148; and similar expressions,
as they relate to us or our management, are intended to identify forward-looking statements. These
statements reflect management&#146;s current view of us concerning future events and are subject
to certain risks, uncertainties and assumptions, including among many others: our potential inability
to raise additional capital, the possibility that third parties hold proprietary rights that preclude
us from marketing our products, the emergence of additional competing technologies, changes in domestic
and foreign laws, regulations and taxes, changes in economic conditions, uncertainties related to
China&#146;s legal system and economic, political and social events in China, a general economic
downturn, a downturn in the securities markets, Securities and Exchange Commission regulations which
affect trading in the securities of &#147;penny stocks,&#148; and other risks and uncertainties.
Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in this prospectus as anticipated, estimated or expected.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>20</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a4"></a>USE OF PROCEEDS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We will not receive any proceeds from the sales by the selling stockholders, but we will receive funds

from the exercise of warrants held by the selling stockholders, if exercised for cash.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a5"></a>DIVIDEND POLICY</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We have never declared or paid cash dividends. Any future decisions regarding dividends will be made
by our board of directors. We currently intend to retain and use any future earnings for the development
and expansion of our business and do not anticipate paying any cash dividends in the foreseeable
future. </FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a6"></a>MARKET FOR OUR COMMON STOCK</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Market Information </I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our common stock is quoted under the symbol &#147;CIFS.OB&#148; on the Electronic Bulletin Board maintained
by the National Association of Securities Dealers, Inc. Our CUSIP number is 16944F 101. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following table sets forth, for the periods indicated, the high and low bid prices of our common
stock. These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and may not represent actual transactions. These prices are adjusted to reflect the 4.44444444 for
1 forward split of our common stock that we effected on October 2, 2006. </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
    <td COLSPAN=5 align="center" valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Bid Prices <sup>(1)</sup></FONT></td>
    <TH>&nbsp;</TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="9" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
    <td COLSPAN=2 align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>High</FONT></td>
    <td align="center"><font size="2">&nbsp;</font></td>
    <td COLSPAN=2 align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Low</FONT></td>
    <TH>&nbsp;</TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="9" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD width="10%" ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT><strong><em><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year Ended December 31, 2008</FONT></em></strong></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=10% ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="9" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1<sup>st</sup> Quarter</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 8.50</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.10</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2<sup>nd</sup> Quarter (to May 9, 2008)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7.00</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.80</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="9" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><strong><em><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year Ended December 31, 2007</FONT></em></strong></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="9" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1<sup>st</sup> Quarter</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 9.50</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3.98</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2<sup>nd</sup> Quarter</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 8.00</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.00</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3<sup>rd</sup> Quarter</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 9.00</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.11</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4<sup>th</sup> Quarter</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.75</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7.05</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="2" ALIGN=LEFT><FONT face="Times New Roman, Times, Serif" size=2>________________________</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(1)&nbsp;&nbsp;&nbsp;The above tables set forth the range of high and low closing bid prices per share
of our common stock as reported by Quotemedia.com for the periods indicated.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Reports to Stockholders</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We plan to furnish our stockholders with an annual report for each fiscal year ending December 31 containing
financial statements audited by our independent registered public accounting firm. Additionally,
we may, in our sole discretion, issue unaudited quarterly or other interim reports to our stockholders
when we deem appropriate. We intend to maintain compliance with the periodic reporting requirements
of the Securities Exchange Act of 1934.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Holders </I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On May 9, 2008, there were approximately 84 stockholders of record of our common stock.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a7"></a>DILUTION</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our net tangible book value per share as of December 31, 2007 was $1.81 per share of
common stock. Net tangible book value is determined by dividing our tangible book value (total assets
less intangible assets including know-how, trademarks and copyrights and less total liabilities)
by the number of outstanding shares of our capital stock. Since this offering is being made solely
by the selling stockholders and none of the proceeds will be paid to us, our net tangible book value
will be unaffected by this offering.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>21</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a8"></a>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION<BR>AND RESULTS OF OPERATIONS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Overview</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We are a holding company that only operates through our Chinese subsidiaries, IST, ISDT,
Bocom Technology and our VIE,
iASPEC. Through the subcontracting services provided for in our Management Services Agreement with
iASPEC, we are a provider of integrated solutions for the public security sector in China, specializing
in providing public security Informatization and GIS software services. Our customers are mostly
public sector entities that use our products and services to improve the service quality and management
level of civil and medical emergencies, traffic control, fire control, medical rescue and border
control. Our typical customers include some of the most important public security departments in
Guangdong Province and Hainan Province, including the Ministry of Public Security&#146;s Shenzhen
City Immigration Border Check Station, the Shantou City Public Security Bureau, the Shantou City
Public Security Bureau, the Shenzhen City Traffic Police Bureau, the Shenzhen City Public Security
Bureau, the Fo Shan City Police Bureau, the Shenzhen Fire Department, the Guangdong Province Department
of Public Security and the Zhuhai Public Security Bureau. In the future we expect to expand the application
of our products and services in the public security sector and to other sectors in China as well. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Principal Factors Affecting Our Financial Performance</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Demand for Software Products and Services</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The revenue growth and profitability of our business depend on the overall market demand for software
products and related services. Our products and services in the public security sector are considerably
mature. However, if we fail to quickly expand our market share in the public security sector, our
financial results could be adversely affected. Under the Management Service Agreement, we license
16 copyrighted software applications from iASPEC on an exclusive basis. To protect the intellectual
property underlying these applications and our other intellectual property, we rely on a combination
of copyright, trademark, and trade secret laws worldwide. We also rely on non-disclosure agreements
and other confidentiality procedures and contractual provisions under the laws of various jurisdictions
to protect our intellectual property rights. Some of these technologies, other than the iASPEC copyrighted
software applications, are very important to our business and are not protected by copyrights or
patents. It may be possible for unauthorized third parties to copy or reverse engineer our products,
or otherwise obtain and use information that we regard as proprietary. Further, third parties could
challenge the scope or enforceability of our copyrights. In certain foreign countries, including
China where we operate, the laws do not protect our proprietary rights to the same extent as the
laws of the United States. Any misappropriation of our intellectual property could have a material
adverse effect on our business and results of operations. See our Risk Factors under the headings
&#147;Risks Related to our Business&#148; and &#147;Risks Related to Doing Business in China&#148;
to read about significant risk factors related to our intellectual property and our ability to protect them under PRC law.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Taxation</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our subsidiaries, IST and ISDT, and our VIE, iASPEC, are all governed by the Income Tax Laws of the
PRC and are subject to the PRC&#146;s enterprises income tax, or EIT, at a rate of 15% of assessable
profits. 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 7.5% tax exemption for
the next 3 years. On August 10, 2007, IST was granted the EIT exemption by PRC tax authorities, retroactive
to as of January 1, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On March 16, 2007, the National People&#146;s Congress of the PRC passed the new EIT Law, which will
take effect as of January 1, 2008. Under the new EIT Law, an enterprise established outside of the
PRC with &#147;de facto management bodies&#148; within the PRC is considered a resident enterprise
and will normally be subject to the enterprise income tax at the rate of 25% on its global income.
The new EIT Law, however, does not define the term &#147;de facto management bodies.&#148; If the
PRC tax authorities subsequently determine that we should be classified as a resident enterprise,
then our global income will be subject to PRC income tax at a tax rate of 25%. In addition, under
the new EIT Law, dividends from our PRC subsidiaries to us will be subject to a withholding tax.
The rate of the withholding tax has not yet been finalized, pending promulgation of implementing
regulations. Furthermore, the ultimate tax rate will be determined by treaty between the PRC and
the tax residence of the holder of the PRC subsidiary. We are actively monitoring the proposed withholding
tax and are evaluating appropriate organizational changes to minimize the corresponding tax impact.
The new EIT Law imposes a unified income tax rate of 25% on all domestic-invested enterprises and
FIEs, such as our PRC operating subsidiaries, unless they qualify under certain limited exceptions,
but the EIT Law permits companies to continue to enjoy their existing preferential tax treatments
until such treatments expire in accordance with their current terms. We expect details of the transitional
arrangement for the five-year period from January 1, 2008 to December 31, 2012 applicable to enterprises
approved for establishment prior to March 16, 2007 to be set out in more detailed implementing rules
to be adopted in the future. Any increase in our effective tax rate as a result of the above may adversely affect our operating results. However, details
regarding implementation of this new law are expected to be provided in the form of one or more implementing
regulations to be promulgated by the PRC government, and the timing of the issuance of such implementing
regulations is currently unclear.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>22</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Results of Operations</B></FONT></P>
<P align="justify"><font size="2"><B><I><font face="Times New Roman, Times, serif">For the Three- Month Periods Ended March 31, 2008 and 2007 (Unaudited)</font></I></B> <font face="Times New Roman, Times, serif">&nbsp;</font></font></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following tables set forth key components of our results of operations for the periods indicated,
both in dollars and as a percentage of sales revenue and key components of our revenue for the periods
indicated in dollars. The financial data for the three months ended March 31, 2008 reflect the operating
results of the Company, its subsidiaries, and its VIE, iASPEC, while the financial data for the same
period in 2007 reflect the operating results of the Company and its subsidiaries. The non-GAAP financial
data for the three months ended March 31, 2007 reallocates related party revenue from iASPEC.</FONT></P>
<font FACE="Times New Roman" SIZE="2">
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b><u>NON-GAAP</u></b></font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>THREE MONTHS</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>THREE MONTHS</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>REALLOCATION</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>THREE MONTHS</b></font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>ENDED</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>ENDED</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>OF</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>ENDED</b></font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>MARCH 31,</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>MARCH 31,</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>RELATED PARTY</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>MARCH 31,</b></font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>2008</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>2007</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>REVENUE</b></font></td>
    <td WIDTH="15%" align="right"><font SIZE="2"><b>2007</b></font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">REVENUE - THIRD PARTIES</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">$ 14,404,426</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4"><font SIZE="2" FACE="Times New Roman">
    $ </font>1,213,318</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4"><font SIZE="2" FACE="Times New Roman">
    $ </font>3,932,251</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4"><font SIZE="2" FACE="Times New Roman">
    $ </font>5,145,569</font></td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">REVENUE - RELATED PARTY</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">
    <p style="margin-right: 4">-</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">
    <p style="margin-right: 4">1,818,823</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(1,818,823)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">
    <p style="margin-right: 4">-</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">TOTAL REVENUE</font></td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">14,404,426</font></td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">3,032,141</font></td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">5,145,569</font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">COST OF REVENUE</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(8,352,264)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(210,712)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(1,771,527)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(1,982,239)</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">GROSS PROFIT</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">6,052,162</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">2,821,429</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">3,163,330</font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">ADMINISTRATIVE EXPENSES</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">(1,752,735)</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">(219,294)</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">(282,794)</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">(502,088)</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">RESEARCH AND DEVELOPMENT EXPENSES</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">(147,003)</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">-</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">-</font></td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">FEE TO iASPEC UNDER THE TURNKEY AGREEMENT</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">-</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">(45,000)</font></td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2">(45,000)</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">SELLING EXPENSES</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">(417,703)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">(68,669)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">(59,107)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E9F1F8">
    <font SIZE="2">(127,776)</font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">INCOME FROM OPERATIONS</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">3,734,721</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">2,488,466</font></td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">2,488,466</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">OTHER INCOME, NET</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">69,401</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">7,525</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">7,525</font></td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">INTEREST INCOME</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">26,603</font></td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">20,304</font></td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right"><font SIZE="2">
    <p style="margin-right: 4">20,304</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">MINORITY INTEREST</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">(45,000)</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">-</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font SIZE="2">
    <p style="margin-right: 4">-</font></td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">INCOME TAX EXPENSE</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(206,745)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(377,444)</font></td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">(377,444)</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">NET INCOME</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4"><font SIZE="2" FACE="Times New Roman">
    $ </font>3,578,980</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4"><font SIZE="2" FACE="Times New Roman">
    $ </font>2,138,851</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4"><font SIZE="2" FACE="Times New Roman">
    $ </font>2,138,851</font></td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">WEIGHTED AVERAGE NUMBER OF SHARES</font></td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">BASIC</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">45,985,550</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">36,446,205</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">N/A</font></td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">DILUTED</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <font SIZE="2">
    <p style="margin-right: 4">46,720,415</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <font SIZE="2">
    <p style="margin-right: 4">36,760,592</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <font SIZE="2">
    <p style="margin-right: 4">N/A</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">EARNINGS PER SHARE</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right">
    <p style="margin-right: 4">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%"><font SIZE="2">BASIC</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <font SIZE="2">
    <p style="margin-right: 4">$ 0.08</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <font SIZE="2">
    <p style="margin-right: 4">$ 0.06</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000">
    <font SIZE="2">
    <p style="margin-right: 4">N/A</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" bgcolor="#E9F1F8"><font SIZE="2">DILUTED</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">$ 0.08</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">$ 0.06</font></td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <p style="margin-right: 4">&nbsp;</td>
    <td WIDTH="15%" align="right" style="border-bottom: 3px double #000000" bgcolor="#E9F1F8">
    <font SIZE="2">
    <p style="margin-right: 4">N/A</font></td>
  </tr>
</table>

</font>

<P align=center dir="ltr"><FONT face="Times New Roman, Times, serif" size=2>23</FONT></P>
<hr color="#000000" size="5"><p style="page-break-before: always">
<font FACE="Times New Roman" SIZE="2">
<p>AS A PERCENTAGE OF REVENUE </p>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="55%">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2"><b><u>
    NON-GAAP</u></b></font></td>
  </tr>
  <tr>
    <td WIDTH="55%">&nbsp;</td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2"><b>THREE
    MONTHS</b></font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2"><b>THREE
    MONTHS</b></font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2"><b>THREE
    MONTHS</b></font></td>
  </tr>
  <tr>
    <td WIDTH="55%">&nbsp;</td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2"><b>ENDED</b></font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2"><b>ENDED</b></font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2"><b>ENDED</b></font></td>
  </tr>
  <tr>
    <td WIDTH="55%">&nbsp;</td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2"><b>MARCH
    31,</b></font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2"><b>MARCH
    31,</b></font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2"><b>MARCH
    31,</b></font></td>
  </tr>
  <tr>
    <td WIDTH="55%">&nbsp;</td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2"><b>2008</b></font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2"><b>2007</b></font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2"><b>2007</b></font></td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">REVENUE - THIRD
    PARTIES</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">100%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">40.0%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">100%</font></td>
  </tr>
  <tr>
    <td WIDTH="55%">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%"><font FACE="Times New Roman" SIZE="2">REVENUE - RELATED
    PARTY</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">0.0%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">60.0%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">0.0%</font></td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">COST OF REVENUE</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">58.0%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">6.9%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">38.5%</font></td>
  </tr>
  <tr>
    <td WIDTH="55%">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%"><font FACE="Times New Roman" SIZE="2">GROSS PROFIT</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">42.0%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">93.1%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">61.5%</font></td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">ADMINISTRATIVE
    EXPENSES</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">12.2%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">7.2%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">9.8%</font></td>
  </tr>
  <tr>
    <td WIDTH="55%">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%"><font FACE="Times New Roman" SIZE="2">RESEARCH AND
    DEVELOPMENT EXPENSES</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">1.0%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">0.0%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">0.0%</font></td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">FEE TO iASPEC UNDER
    THE TURNKEY AGREEMENT</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">0.0%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">1.5%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">0.9%</font></td>
  </tr>
  <tr>
    <td WIDTH="55%">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%"><font FACE="Times New Roman" SIZE="2">SELLING EXPENSES</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">2.9%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">2.3%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">2.5%</font></td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">INCOME FROM OPERATIONS</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">25.9%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">82.1%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">48.4%</font></td>
  </tr>
  <tr>
    <td WIDTH="55%">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%"><font FACE="Times New Roman" SIZE="2">OTHER INCOME</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">0.5%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">0.2%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">0.1%</font></td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">INTEREST INCOME</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">0.2%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">0.7%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">0.4%</font></td>
  </tr>
  <tr>
    <td WIDTH="55%">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%"><font FACE="Times New Roman" SIZE="2">MINORITY INTEREST</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">0.3%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">0.0%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">0.0%</font></td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">INCOME TAX EXPENSE</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">1.4%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">12.4%</font></td>
    <td WIDTH="15%" align="right" bgcolor="#E9F1F8"><font FACE="Times New Roman" SIZE="2">7.3%</font></td>
  </tr>
  <tr>
    <td WIDTH="55%">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
    <td WIDTH="15%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%"><font FACE="Times New Roman" SIZE="2">NET INCOME</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">24.8%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">70.5%</font></td>
    <td WIDTH="15%" align="right"><font FACE="Times New Roman" SIZE="2">41.6%</font></td>
  </tr>
</table>
<i>
<p><u>Revenue</u></i><u> </u></p>
<p ALIGN="JUSTIFY">For the three months ended March 31, 2008, revenue was $14.4
million, compared to $5.1 million for the same period in 2007, an increase of
$9.3 million, or 180%. After ISDT and Bocom Technology became our wholly-owned
subsidiaries, we consolidated the financial results of these companies starting
from November 1, 2007 and February 1, 2008, which contributed $3.0 million and
$0.8 million, respectively to our revenue for the three months ended March 31,
2008. Our expansion in the market, the development of our new product lines and
our procurement of several large-scale systems integration projects also
contributed this increase, as well as our expansion to markets outside Shenzhen
City and our newly signed contracts with fourteen provinces and provincial
cities in China. </p>
<i>
<p><u>Cost of Revenue</u></i><u> </u></p>
<p ALIGN="JUSTIFY">Our cost of revenue increased $6.4 million, or 321%, to $8.4
million, for the three months ended March 31, 2008, from $2.0 million for the
same period in 2007. The consolidation of ISDT and Bocom Technology contributed
$2.0 million and $0.4 million respectively to the increase in the cost of
revenue. The increase was generally in line with the revenue increase. As a
percentage of revenue, our cost of revenue was 58% for the three months ended
March 31, 2008, as compared to 38.5% for the same period in 2007. During the
first quarter of 2008, revenue from large-scale systems integration projects,
such as large-scale hardware projects, comprised a higher proportion of total
revenue. The cost of hardware is greater for procured hardware used in these
large-scale projects, which lead to an increase in our cost of revenue. </p>
<p align="center">24</p>
<hr color="#000000" size="5"><p style="page-break-before: always"><i>
<p><u>Gross Profit</u></i><u> </u></p>
<p ALIGN="JUSTIFY">For the three months ended March 31, 2008, our gross profit
increased to $6.1 million from $3.2 million for the same period in 2007, a $2.9
million, or 91% increase. For the three months ended March 31, 2008, our gross
profit as a percentage of revenue decreased to 42%, from 61.5% for the same
period in 2007. This 19.5% decrease in gross profit was due to significantly
higher costs for procured hardware and other subcontracting costs related to the
implementation of several large-scale systems integration projects. </p>
<i>
<p><u>Administrative Expenses</u></i><u> </u></p>
<p ALIGN="JUSTIFY">Administrative expenses consist primarily of compensation and
benefits to our general management, finance and administrative staff,
professional advisor fees, audit fees and other expenses incurred in connection
with general operations. For the three months ended March 31, 2008, our
administrative expenses increased to $1.8 million, from $0.5 million for the
three months ended March 31, 2007, a $1.3 million, or 249% increase, from period
to period. The increase in administrative expenses was mainly attributable to an
increase in our administrative staff and increased administrative costs such as
salary, office operation expenses and legal and audit fees due to the expansion
of our operations. In addition, $0.4 million of stock-based compensation was
charged to administrative expenses in connection with our 2007 Equity Incentive
Plan. As a percentage of revenue, administrative expenses increased to 12.2% for
the three months ended March 31, 2008, from 9.8% for the same period in 2007. We
believe such increase was generally in line with the increase in our revenue.
</p>
<i>
<p><u>Research and Development Expenses </u></p>
</i>
<p ALIGN="JUSTIFY">Research and development expenses consist primarily of
personnel-related expenses as well as costs associated with new software product
development and enhancement. Research and development expenses were $0.15
million for the three months ended March 31, 2008, while we had no research and
development expenses for the same period in 2007. The expenses 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 costs that are incurred to produce finished products
after technological feasibility is established. </p>
<i>
<p><u>Selling Expenses</u></i><u> </u></p>
<p ALIGN="JUSTIFY">For the three months ended March 31, 2008, our selling
expenses increased to $0.4 million, from $0.1 million for the same period in
2007, a $0.3 million, or 227% increase, from period to period. The consolidation
of Bocom Technology starting from February 1, 2008, contributed $0.13 million of
this increase. As a percentage of revenue, our selling expense for the three
months ended March 31, 2008 and 2007 remained stable, mainly due to management&#146;s
implementation of more stringent cost controls. </p>
<i>
<p><u>Income from Operations </u></p>
</i>
<p ALIGN="JUSTIFY">Income from operations increased $1.2 million, or 50%, to
$3.7 million for the three months ended March 31, 2008, from $2.5 million for
the same period in 2007. Income from operations as a percentage of revenue
decreased to 25.9% during the three months ended March 31, 2008, from 48.4% for
the same period in 2007. The decrease was due to higher costs for procured
hardware and other subcontracting costs related to the implementation of several
large-scale systems integration projects, and the increase in expenses due to
our expansion in operations described above. </p>
<i>
<p><u>Minority Interest </u></p>
</i>
<p>Minority Interest represents the $45,000 fee retained by iASPEC for the three
months ended March 31, 2008 under the MSA. </p>
<i>
<p><u>Income Tax Expense </u></p>
</i>
<p ALIGN="JUSTIFY">Our subsidiaries, IST, ISDT and Bocom Technology, and our
VIE, iASPEC are subject to the PRC EIT at a rate of 18% of assessable profits in 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 expense for
the three months ended March 31, 2008 was $0.2 million. For the same period in
2007, we accrued $0.4 million of income tax expense for IST before we were
granted the EIT exemption by PRC tax authorities on August 10, 2007, retroactive
to as of January 1, 2007. </p>
<p align="center">25</p>

</font>

<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I><U>Net Income</U></I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As a result of the factors described above, net income increased $1.5 million, or 67%, to $3.6 million
during the three months ended March 31, 2008, from $2.1 million for the same period in 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Results of Operations for Fiscal Years Ended December 31, 2007 and 2006</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following tables set forth key components of our results of operations for the periods indicated,
both in dollars and as a percentage of sales revenue and key components of our revenue for the periods
indicated in dollars. The financial data for the period from January 1, 2006 through October 8, 2006
(the Predecessor Period) reflect the results of operations of iASPEC (our Predecessor). The financial
data for the period from January 17, 2006 through December 31, 2006, and the year ended December
31, 2007 (the Successor Period) reflect the results of operations of the Company and its subsidiaries
in 2006, and the result of operations of the Company , its subsidiaries and iASPEC from July 1, 2007,
the date iASPEC became our VIE, respectively.</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH valign="top">&nbsp;</TH>
    <TH COLSPAN=8 valign="top">
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">2007</FONT></TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH COLSPAN=2 valign="top">
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">2006</FONT></TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH valign="top">&nbsp;</TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"><u>Successor</u><br>
      Year <br>
      ended <br>
      December 31</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Reallocation<br>
      of <br>
      Related Party<br>
      Revenue </FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"><u>Non-GAAP</u><br>
      Year <br>
      ended <br>
      December 31</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"><u>Predecessor</u><br>
      January 1 <br>
      through <br>
      October 8 </FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"><u>Successor</u><br>
      January 17 <br>
      through <br>
      December 31</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> Reallocation<br>
      of <br>
      Related Party<br>
      Revenue </FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"><u>Combined</u><br>
      Non-GAAP <br>
      Year ended <br>
      December 31</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Revenue &ndash; Third Parties</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 24,800,750</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 12,713,673</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 37,514,423</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 9,644,332</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 989,755</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 2,677,498</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 13,311,585</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Revenue &ndash; Related Party</FONT></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">5,541,959</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(5,541,959</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">1,185,449</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(1,185,449</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Cost of revenue</FONT></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(12,714,170</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(6,558,443</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(19,272,613</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(3,739,518</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(89,934</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(858,149</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(4,687,601</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Gross profit</FONT></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">17,628,539</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">18,241,810</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">5,904,814</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">2,085,270</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">8,623,984</FONT></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Administrative expenses</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(3,321,333</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(526,659</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(3,847,992</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(931,108</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(99,024</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(633,900</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(1,664,032</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Research and development expenses</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(424,104</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(424,104</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Fee to iASPEC under the <br>
      Turnkey
      Agreement</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(92,160</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(92,160</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(45,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(45,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Selling expenses</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(480,465</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(152,315</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(632,780</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(157,855</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(60,013</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(217,868</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Income from operations</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">13,310,477</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">13,244,774</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">4,815,851</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">1,881,233</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">6,697,084</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Other income</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">79,435</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">65,703</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">145,138</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">6,584</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">1,305</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">7,889</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Interest income</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">138,840</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">138,840</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">6,912</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">1,514</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">8,426</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Minority interest</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(90,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(90,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Income taxes</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(107,300</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(107,300</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(749,381</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(289,403</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(1,038,784</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Net income</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 13,331,452</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 13,331,452</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 4,079,966</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 1,594,649</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 5,674,615</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Weighted average number of shares</FONT></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Basic</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">39,718,967</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">26,958,104</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Diluted</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">40,152,855</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">26,958,104</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Earnings per share</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Basic</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 0.34</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#E9F1F8">
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#E9F1F8">
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 0.06</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Diluted</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 0.33</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 0.06</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">N/A</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>26</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<TABLE CELLPADDING=0 CELLSPACING=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <td colspan="9"><strong><font size="2" face="Times New Roman">AS A PERCENTAGE OF REVENUE</font></strong></td>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH><font size="2"></font></TH>
    <TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007</FONT></TH>
    <TH><font size="2"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH><font size="2"></font></TH>
    <TH COLSPAN=2 align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>Successor</u></FONT></TH>
    <TH align="right"><font size="2"></font></TH>
    <TH COLSPAN=2 align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>Non-GAAP</u></FONT></TH>
    <TH align="right"><font size="2"></font></TH>
    <TH COLSPAN=2 align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>Combined</u></FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
    <TH COLSPAN=2 align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Year <br>
      ended <br>
    December 31</FONT></TH>
    <TH align="right"><font size="2"></font></TH>
    <TH COLSPAN=2 align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Year <br>
      ended <br>
    December 31</FONT></TH>
    <TH align="right"><font size="2"></font></TH>
    <TH COLSPAN=2 align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Non-GAAP<br>
      Year<br>
      ended<br>
    December 31</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenue-third parties</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>81.7</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>100.0</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>100.0</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenue-related party</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18.3</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of revenue</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41.9</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>51.4</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35.2</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross profit</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>58.1</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>48.6</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>64.8</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Administrative expenses</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.9</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.3</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.5</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research and development expenses</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.4</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fee to iASPEC under the Turnkey Agreement</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.3</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.2</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.3</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling expenses</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.6</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.7</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.6</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income from operations</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43.9</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35.3</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50.3</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other income</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.3</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.4</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.1</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest income</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.5</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.4</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.1</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minority interest</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.3</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.2</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income taxes</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.4</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.3</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.8</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43.9</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35.5</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>42.6</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I><U>Revenue</U></I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our revenue is generated from software products and software operating services. In 2007 we experienced
solid growth in revenues. Revenue for the year ended December 31, 2007 increased $24.2 million, or
182%, to $37.5 million, as compared to $13.3 million for 2006. The increase in our revenue 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 2007. Our significant projects included the
Residency ID Card Project for Shenzhen City Public Security Bureau and the Shenzhen City Immigration
Border Check Station Project. After iASPEC became our VIE and ISDT became our wholly owned subsidiary,
we consolidated the financial results of these two companies starting from July 1, 2007 and November
1, 2007, respectively, which contributed $15.2 million and $2.3 million to revenue in 2007, respectively.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I><U>Cost of Revenue</U></I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our cost of revenues increased $14.6 million, or 311%, to $19.3 million, for the fiscal year ended
December 31, 2007, from $4.7 million in 2006. The increase was generally in line with the revenue
increase. As a percentage of revenue, our cost of revenue increased to 51.4% during the year ended
December 31, 2007, from 35.2% in 2006. We were engaged in several large-scale system integration
projects in 2007. Those large-scale projects involved higher costs for procured hardware and other
subcontracting costs. The cost for accomplishing those projects is much higher than pure software
development services and, therefore, led to an increase in our cost of revenues. Such increase was
mainly attributable to the increase of revenue.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I><U>Gross Profit</U></I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our gross profit increased $9.6 million, to $18.2 million for the year ended December 31, 2007, from
$8.6 million in 2006. Gross profit as a percentage of revenue was 48.6% for the year ended December
31, 2007, a decrease of 16.2%, from 64.8% in 2006. This 16.2% decrease in gross profit was mainly
due to significantly higher costs for procured hardware and other subcontracting costs related to
the implementation of several large-scale system integration projects. Another factor was the increasing
proportion of hardware sales with higher costs after the November 1, 2007 effective date of our acquisition
of ISDT.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I><U>Administrative Expenses</U></I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Administrative expenses consist primarily of compensation and benefits to our general management, finance
and administrative staff, professional advisor fees,&nbsp;audit fees and other expenses incurred
in connection with general operations. We expect the dollar amount of our general and administrative
expenses will increase as our business grows and we continue to incur increased costs for being a
public reporting company.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our administrative expenses increased $2.2 million, or 131%, to $3.8 million for the year ended December
31, 2007, from $1.7 million in 2006. Such increase in administrative expenses was mainly attributable
to an increase in our administrative staffs and increased administrative costs in connection with
the expansion of our operations. The number of our employees increased from 180 in 2006, to 460 in
2007. We believe such increase was generally in line with the increase in our revenue. In addition,
we issued 70,000 bonus shares to our senior management and a consulting service company on November
27, 2007, and we also granted to certain employees options on November 30, 2007 to purchase 490,000
shares of our common stock. These had resulted in a total of $677,891 stock-based compensation cost
charged into administrative expenses. As a percentage of revenue, administrative expenses
decreased to 10.3% for the year ended December 31, 2007 from 12.5% in 2006. This
percentage decrease was primarily attributable to the increase in sales revenues
and management&#146;s </FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>27</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I><U>Research and development expenses</U></I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Research and development expenses consist primarily of personnel-related expenses incurred, as well
as, costs associated with new software product development and enhancement. We had no research and
development expenses during the year ended December 31, 2006. The costs that are incurred to produce
finished products after technological feasibility is established is capitalized. We incurred additional
research and development expenses in 2007 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 employed 340 employees
in our software development department as of December 31, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I><U>Selling Expenses</U></I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Selling Expenses consist primarily of compensation and benefits to our sales and marketing staffs,
business travels after-sale support, transportation costs and other sales related costs. Our selling
expenses increased $0.4 million, or 190%, to $0.6 million for the year ended December 31, 2007, from
$0.2 million in 2006. The increase is mainly attributable to more marketing fees incurred in securing
sales contracts during 2007. As a percentage of revenue, our selling expenses increased to 1.7% for
the year ended December 31, 2007, from 1.6% in 2006. We believe such increase was generally in line
with the increase in our revenue.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I><U>Income from operations</U></I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Income from operations increased $6.5 million, or 98%, to $13.2 million for the year ended December
31, 2007, from $6.7 million in 2006. Income from operations as a percentage of revenue decreased
to 35.3% during the year ended December 31, 2007, from 50.3% in 2006. The decrease was due to higher
costs for procured hardware and other subcontracting costs related to the implementation of several
large-scale system integration projects, and the increase in expenses due to our expansion in operations
during 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I><U>Interest income</U></I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Interest income increased $130,414, or 1548%, to $138,840 for the year ended December 31, 2007, from
$8,426 in 2006. As a percentage of revenue, our interest income increased to 0.4% for the year ended
December 31, 2007, from 0.1% in 2006. Such increase was mainly attributable to the increased cash
balances from our fundraising activities during 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I><U>Minority Interest</U></I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Minority Interest consists primarily of the shareholder&#146;s equity of iASPEC as of June 30, 2007,
when it became our VIE, amounting to approximately $10 million, together with the $90,000 fee retained
by iASPEC under the MSA for the six months ended December 31, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I><U>Provision for Income Taxes</U></I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our subsidiaries, IST and ISDT, and our VIE, iASPEC are subject to EIT at a rate of 15% of assessable
profits. 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 7.5% tax exemption for
the next 3 years. On August 10, 2007, IST was granted the EIT exemption by PRC tax authorities, retroactive
to as of January 1, 2007. Income tax expense for the year ended December 31, 2007 was $0.1 million
and represents taxes on iASPEC&#146;s income not attributable to the Company under the MSA. Income
tax expenses were $1.0 million for the year ended December 31, 2006.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I><U>Net Income</U></I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Net income increased $7.7 million, or 135%, to $13.3 million during the year ended December 31, 2007,
from $5.7 million in 2006. Such increase was primarily attributable to the increase in revenue and
other factors described above.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Liquidity and Capital Resources&nbsp;</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Cash Flow and Working Capital</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As of March 31, 2008, we had cash and cash equivalents of $23,624,772.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On February 6, 2007, we completed a private placement of 7,868,422 shares of our common stock to two
accredited investors. As a result of the private placement we raised $14.9 million in gross proceeds, which left
us with $13.3 million net proceeds after the deduction of offering expenses in the amount of $1.6
million.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>28</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On October 25, 2007, we completed another private placement of 5,000,000 shares of our common stock
to certain accredited investors, pursuant to the October Purchase Agreement. As a result of the private
placement we raised $40 million in gross proceeds, which left us with $36.5 million net proceeds,
after the deduction of offering expenses. Under the terms of the October Purchase Agreement, we are
obligated to use the net proceeds from the sale of the shares thereunder for general corporate purposes,
including working capital, for the expansion of current business and for potential acquisitions,
and not for the satisfaction of any portion of our debt (other than payment of trade payables and
accrued expenses in the ordinary course of our business and consistent with prior practices), or
to redeem any of our common stock or common stock equivalents.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On November 7, 2007, we acquired 100% of the equity interests of Fortune Fame, a Hong Kong company,
and its operating PRC subsidiary, Shenzhen Information Security Development Technology Company Ltd
for approximately $7.1 million in cash and 883,333 shares of our common stock.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On December 7, 2007, we entered into an agreement to acquire 100% of the equity interests of Bocom
Multimedia and its operating PRC subsidiary, Bocom Technology. The agreement with Bocom Multimedia
provides for $9 million in cash and the issuance of 1,125,000 shares of our common stock. As of December
31, 2007, we had paid $9 million as a good faith deposit for this acquisition.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On February 15, 2008, our Board of Directors approved our VIE, iASPEC&#146;s entry into a share purchase
and increased capital agreement, dated as of February 16, 2008, for the purchase of approximately
57% of Geo for RMB49,500,000 (approximately $7,049,000), which is reflected in deposit for business
acquisition in our condensed consolidated financial statements at March 31, 2008.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We believe that our currently available working capital, after receiving the aggregate proceeds of
our capital raising activities, should be adequate to sustain our operations at our current levels
through at least the next twelve months.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following table provides the statements of net cash flows for the three months ended March 31,
2008 compared to March 31, 2007 (Unaudited):</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <td style="font-size: 10pt"><font size="2" face="Times New Roman">Cash Flow</font></td>
    <TH COLSPAN=2 style="font-size: 10pt">&nbsp;</TH>
    <TH style="font-size: 10pt">&nbsp;</TH>
    <TH COLSPAN=2 style="font-size: 10pt">&nbsp;</TH>
    <TH style="font-size: 10pt">&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="7" ALIGN=LEFT style="font-size: 10pt">
    <font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TH style="font-size: 10pt">&nbsp;</TH>
    <TH COLSPAN=2 align="right" style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> THREE MONTHS<br>
      ENDED<br>
      MARCH 31,<br>
      2008</FONT></TH>
    <TH align="right" style="font-size: 10pt">&nbsp;</TH>
    <TH COLSPAN=2 align="right" style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THREE MONTHS<br>
      ENDED<br>
      MARCH 31,<br>
      2007</FONT></TH>
    <TH style="font-size: 10pt">&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="7" ALIGN=LEFT style="font-size: 10pt">
    <font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net Cash Used In Operating Activities</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (4,914,136</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (4,684,091</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="7" ALIGN=LEFT style="font-size: 10pt">
    <font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net Cash Provided by (Used in) Investing Activities</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,366,762</FONT></TD>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,815,710</FONT></TD>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="7" ALIGN=LEFT style="font-size: 10pt">
    <font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net Cash Provided by Financing Activities</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,111,211</FONT></TD>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="7" ALIGN=LEFT style="font-size: 10pt">
    <font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net Increase in Cash and Cash Equivalents</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,452,626</FONT></TD>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,611,410</FONT></TD>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="7" ALIGN=LEFT style="font-size: 10pt">
    <font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effect of Exchange Rate Change on Cash</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>416,964</FONT></TD>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,962</FONT></TD>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="7" ALIGN=LEFT style="font-size: 10pt">
    <font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash and Cash Equivalents, Beginning</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,755,182</FONT></TD>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>172,316</FONT></TD>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="7" ALIGN=LEFT style="font-size: 10pt">
    <font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT bgcolor="#E9F1F8" style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash and Cash Equivalents, Ending</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23,624,772</FONT></TD>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,794,688</FONT></TD>
    <TD ALIGN=LEFT style="font-size: 10pt"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Operating Activities</I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>For the three months ended March 31, 2008 and 2007, net cash used in our operating activities was $4.9
million and $4.7 million, respectively. The increase in cash used in operating activities during
the three months ended March 31, 2008 was mainly due to the increase in accounts receivable and advances
to suppliers as a result of the steady growth of our business operations. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Net cash&nbsp;provided by operating activities was $1.6 million for the year ended December 31, 2007,
which is a decrease of $5.6 million from the $7.2 million net cash provided by operating activities
in 2006. The decrease in cash provided by operations during the year ended December 31, 2007 was
mainly due to the increase in accounts receivable and the decrease in related party payables as a result of consolidating iASPEC effective in the latter half
of 2007.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>29</FONT></P>
<HR noShade SIZE=5 color="#000000"><P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Investing Activities</I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>For the three months ended March 31, 2008, net cash provided by investing activities was $7.7 million
(excluding the $0.7 million of cash acquired from Bocom Technology), which is an increase of $11.5
million, from $3.8 million net cash used in investing activities for the same period in 2007. The
increase in cash provided by investing activities during the three months ended March 31, 2008 was
mainly due to the 15.0 million in cash collected from the sale of our investment in marketable securities
and from the honor of a guarantee by our Chief Executive Officer and controlling shareholder, Mr.
Jiang Huai Lin in connection with this investment, offset by the deposit of $6.9 million in connection
with the acquisition for Geo.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On November 9, 2007, we invested in three equity-linked notes, or ELNs, for HKD176,814,000 (approximately
$22,654,000). The ELNs were linked to three different equity securities traded on the Hong Kong Stock
Exchange. Our Chief Executive Officer and controlling shareholder, Mr. Jiang Huai Lin, provided a
guarantee against any losses sustained as a result of the our investment in the ELNs. On December
28, 2007, the maturity date of the ELNs, one of the ELNs was redeemed by the issuer for cash of HKD
60,000,000 (approximately $7,687,000) and with a gain of HKD906,000 (approximately $116,000). The
other two ELNs were redeemed by the issuer&#146;s surrender of the underlying equity securities to
us. On March 25, 2008, when we sold the remaining equity securities, the market value of the underlying
securities was HKD85,009,123 (approximately $10,897,000). To honor&nbsp;his guarantee, on March 28,
2008, Mr. Lin consummated a private sale to certain accredited investors of 1,070,000 restricted
shares of our Common Stock owned by him, for an aggregate purchase price of $4.28 million, or $4.00
per share, and delivered the proceeds from the sale of his shares to us. Mr. Lin will not receive
any shares of our common stock, other security or other consideration for this capital contribution
and has waived any and all rights that he may have to make a claim against us for any such shares,
securities or other consideration in the future. In connection with this private sale transaction,
we entered into a registration rights agreement with the purchasers of Mr. Lin&#146;s shares, pursuant
to which, among other things, we agreed to register within a predefined period, shares of its common
stock transferred to them by Mr. Lin. There are no liquidated damages associated with the failure
to timely register these shares. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As a result of Mr. Lin&#146;s actions, the transactions did not have any impact on our operating results
or financial condition for the first fiscal quarter of 2008 and will not have such impact for the
remainder of fiscal year 2008. All of our cash is currently invested in interest bearing bank accounts.
In addition, management and our Board of Directors have reviewed our cash management practices and
have now put in place strict controls to ensure that going forward, our cash will only be invested
in straight interest bearing instruments that ensure the liquidity of these funds and the preservation
of capital.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Net cash used in investing activities in the year ended December 31, 2007 was $32 million, which is
an increase of $26.5 million from net cash used in investing activities of $5.5 million in 2006.
Our increase in net cash used in investing activities was primarily attributable to our investment
in ELNs discussed above, and following investing activities: to leverage our business, we paid $9
million as a good faith deposit for the acquisition of Bosom Multimedia and paid $7.1 million for
the acquisition of Fortune Fame; and we purchased our new office building in the Futian District,
as well as computer software and motor vehicles.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Financing Activities</I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Net cash provided by financing activities for the three months ended March 31, 2008 and 2007 are $0
million and $13.1, respectively. For the three months ended March 31, 2007, net cash provided by
financing activities was mainly attributable to the net proceeds of $13.3 million raised in the private
placement with Pinnacle during January and February 2007. No financing activity occurred during the
first quarter of 2008.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Net cash provided by financing activities in the year ended December 31, 2007 totaled $49.5 million,
as compared to $1.0 million used in 2006. The significant increase in cash provided by financing
activities was primarily attributable to the net proceeds of $49.8 million raised in our two private
placements during the 2007 period.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Obligations Under Material Contracts</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>During the first half of 2007, our wholly-owned subsidiary, IST, was a party to the Turnkey Agreement
with iASPEC, pursuant to which IST was exclusively engaged as a subcontractor providing iASPEC&#146;s
customers with certain outsourcing services (to the extent that those services did not violate any
special governmental permits held by iASPEC and did not involve the transfer of any sensitive confidential
governmental or other data), and IST was obligated under the terms of the Turnkey Agreement to pay
for its own costs in providing these services and to pay iASPEC $180,000 per year throughout the
term of the agreement.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>30</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>IST, iASPEC and iASPEC&#146;s shareholders, Mr. Lin and Mr. Jin Zhu Cai, terminated the Turnkey Agreement,
effective as of July 1, 2007, and replaced it on the same day with the Management Services Agreement.
Pursuant to the terms of the Management Services Agreement, iASPEC granted IST an exclusive, royalty-free,
transferable, worldwide, license to use and install for a ten-year term, certain iASPEC software,
along with copies of source and object code relating to such software, in any manner permitted by
applicable laws, and IST licensed back to iASPEC a royalty-free, limited, non-exclusive license to
the Software, without right of sub-license, for the sole purpose of permitting iASPEC to carry out
its business as presently conducted. IST also has the right to designate two Chinese citizens to
serve as senior managers of iASPEC, to serve as a majority on iASPEC&#146;s Board of Directors and
assist in managing the business and operations of iASPEC. In addition, both iASPEC and IST will require
the affirmative vote of the majority of our Board of Directors, as well as at least one non-insider
director, for certain material actions with respect to iASPEC, including, but not limited to: (a)
the nomination, appointment, election or replacement of any board members; (b) the distribution of
any dividend or profits; (c) any merger, division, change of corporate form, dissolution or liquidation;
(d) any reimbursement of net losses or other payments or transfers of funds from IST to iASPEC; (e)
the formation or disposition of a subsidiary or the acquisition or disposition of any interest in
any other entity; and (f) the encumbrance of any assets under any lien not in the ordinary course of business.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Under the Management Services Agreement, IST receives 100% of the net received profit of iASPEC, and
reimburses iASPEC for all net losses incurred by iASPEC, as such terms are defined in the Management
Services Agreement, and iASPEC is permitted to retain $180,000 per year out of net received profits.
The Management Services Agreement also provides that IST may advance to iASPEC, at its sole discretion,
amounts to be credited against IST&#146;s future obligations to iASPEC. Any such advances are treated
as prepayments and not as loans and iASPEC has no obligation to repay any such advances except by
crediting the amount of such advances against IST&#146;s obligation to reimburse net losses, or by
adding the amount thereof to net received profit when and as requested by IST. The parties to the
Management Services Agreement also agreed to the calculation of a true-up amount, consisting of the
cumulative net profit or net losses of iASPEC from October 9, 2006, when iASPEC commenced its contractual
relationship with IST, through the date of the Management Services Agreement, and iASPEC will pay
such true-up amount to IST if there is a net received profit, while IST is obligated to reimburse
such true-up amount to iASPEC if it is there is a net loss. The true-up amount has been calculated
to be $7,005,183, and was repaid by iASPEC to IST before December 31, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In connection with the MSA, IST also entered into an Option Agreement with iASPEC and its shareholders,
effective as of July 1, 2007, pursuant to which the iASPEC shareholders granted the Company or its
designee(s) an exclusive, irrevocable option to purchase, from time to time, all or a part of iASPEC&#146;s
shares or iASPEC&#146;s assets from the iASPEC shareholders. However, according to the Option Agreement,
the option may not be exercised by IST if the exercise would violate any applicable laws and regulations
in China or cause any license or permit held by, and necessary for the operation of iASPEC, to be
cancelled or invalidated. Under the terms of the Option Agreement, the option is immediately exercisable
at an exercise price of $1,800,000 in the aggregate, subject to regulatory approval. In addition,
iASPEC and the iASPEC shareholders agreed to use their best efforts to acquire all necessary government
approvals and other consents to complete a share purchase under the Option Agreement. The Option
Agreement may be rescinded by the Company upon 30days&#146; notice and will terminate on the date
that the Company purchases all remaining shares or assets of the Company pursuant to the terms of
the Option Agreement. If any of the parties breaches the Option Agreement and fails to remedy the
breach, the breaching party will pay a penalty of RMB5,000,000 (approximately $683,600) to the non-breaching
party or parties, and compensate the non-breaching party or parties for any losses caused by the
breach. For more details regarding the MSA and Option Agreement, see our Current Report on Form 8-K
filed with the SEC on August 6, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Seasonality of our Sales</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our operating results and operating cash flows historically have not been subject to seasonal variations.
This pattern may change, however, as a result of new market opportunities or new product introductions.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Inflation</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Inflation does not materially affect our business or the results of our operations.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Critical Accounting Policies</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires our management to make assumptions, estimates and judgments that affect
the amounts reported in the financial statements, including the notes thereto, and related disclosures
of commitments and contingencies, if any. We consider our critical accounting policies to be those
that require the more significant judgments and estimates in the preparation of financial statements,
including the following:</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Basis of Consolidation
  -</I> Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The consolidated financial statements include the accounts
  of us, our subsidiaries and our VIE for which we are the primary beneficiary. All significant intercompany
  accounts and transactions have been eliminated in consolidation.</FONT></div></TD>
</TR></TABLE>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>31</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=24>&nbsp;</TD>
<TD vAlign=top><div align="justify">&nbsp;</div></TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Concentration of Risks
  -</I> Only entities that possess the necessary government licenses and approvals may obtain
  certain PGIS contracts with PRC Government customers and, because IST is considered a foreign owned
  entity in the PRC, it cannot possess these licenses and approvals. Instead IST relies exclusively
  on iASPEC to solicit, obtain and fulfill PGIS contracts. Through June 30, 2007, this was accomplished
  under the Turnkey Agreement and many of the expenses of IST were incurred and paid by iASPEC. In
  accordance with SEC Staff Accounting Bulletin 55, all of the costs associated with the operations
  of IST have been reflected in its financial statements. Accordingly, through June 30, 2007 substantially
  all costs incurred and paid for by iASPEC have been allocated to IST. Management believes that this
  method of allocation is reasonable. Therefore amounts reported by IST under the Turnkey Agreement,
  included in the consolidated financial statements as Revenue &#150; related party, reflect contract
  amounts net of costs incurred by iASPEC.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Goodwill
  -</I> Goodwill represents the excess of the purchase price over the net of the fair value
  of the identifiable tangible and intangible assets acquired and the fair value of liabilities assumed
  upon the acquisition of Fortune Fame International Investment Limited (Note 4) In accordance with
  Statement of Financial Accounting Standards (&#147;SFAS&#148;) No. 142, Goodwill and Other Intangible
  Assets, our management evaluates the carrying value of goodwill annually or when a possible impairment
  is indicated. We perform our impairment annually during the fourth quarter of the fiscal year and
  determined that there was no impairment of goodwill as of December 31, 2007.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Revenue Recognition
  -</I> Revenues from products are recognized only when persuasive evidence of an arrangement
  exists, delivery has occurred or services have been rendered, the price to the customer is fixed
  or determinable, and collectability is reasonably assured. Generally, revenue is recognized (1)&nbsp;upon
  shipment for equipment and software, (2)&nbsp;as work is performed for professional services and
  (3)&nbsp;in equal periodic amounts over the term of the contract for software and hardware maintenance.
  Our revenue recognition policies are in accordance with SEC Staff Accounting Bulletin No. 104, &#147;<I> Revenue Recognition</I> ,&#148; and AICPA Statement of Position No. 97-2, &#147;<I> Software Revenue Recognition</I> &#148;.</FONT></div></TD>
</TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The majority of revenues are generated from fixed-price contracts, which provide for licenses to software
  products, and services to customize such software to meet customers&#146; use. Generally, when the
  services are determined to be essential to the functionality of the delivered software, revenue is
  recognized using the percentage of completion method of accounting in accordance with SOP 97-2 and
  81-1 &#147;Accounting for Long-term Construction Type Contracts&#148;. The percentage of completion
  for each contract is estimated based on the ratio of direct labor hours incurred to total estimated
  direct labor hours.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Foreign Currency Translation
  -</I> The functional currency of our wholly- owned PRC subsidiaries, IST, ISDT and our
  VIE, iASPEC is the Chinese Renminbi Yuan, (&#147;RMB&#148;). RMB is not freely convertible into foreign
  currencies. Our PRC subsidiaries&#146; financial statements are maintained in the functional currency.
  Monetary assets and liabilities denominated in currencies other than the functional currency are
  translated into the functional currency at rates of exchange prevailing at the balance sheet date.
  Transactions denominated in currencies other than the functional currency are translated into the
  functional currency at the exchange rates prevailing at the dates of the transactions. Exchange gains
  or losses arising from foreign currency transactions are included in the determination of net income
  for the respective periods.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On October 9, 2006, in connection with the Acquisition, we adopted the United States dollar as its
  reporting currency. The financial statements for the Predecessor Period have been recast using a
  method consistent with SFAS No. 52,<I> &#147;Foreign Currency Translation&#148;</I> &nbsp;to reflect the United States dollar as if the United States dollar had been used for the Predecessor

Period.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Accordingly, for financial reporting purposes, our financial statements, which are prepared using the
  functional currency, have been translated into United States dollars. Assets and liabilities are
  translated at exchange rates at the balance sheet dates and revenue and expenses are translated at
  the average exchange rates, and stockholders&#146; equity is translated at historical exchange rates.
  Any resulting translation adjustments are not included in determining net income but are included
  in foreign exchange adjustment to other comprehensive income, a component of stockholders&#146; equity.</FONT></div></TD></TR></TABLE>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>32</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=24>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>The exchange rates adopted are as follows:</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2> December 31,<br>
      2007 </FONT></TH>
    <TH><font size="2"></font></TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31,<br>
      2006 </FONT></TH>
    <TH>&nbsp;</TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD width="8%" ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year end exchange rate</FONT></TD>
    <TD WIDTH=12% ALIGN=center bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.3141</FONT></TD>
    <TD WIDTH=10% ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=12% ALIGN=center bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.8050</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=8% ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Average yearly exchange rate</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.6172</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.8050</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=24>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>No representation is made that the RMB amounts could have been, or could be, converted into United

States dollars at the rates used in translation.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Income Taxes
  -</I> Income tax expense is based on reported income before income taxes. Deferred income
  taxes reflect the effect of temporary differences between assets and liabilities that are recognized
  for financial reporting purposes and the amounts that are recognized for income tax purposes. In
  accordance with SFAS No. 109<I> , &#147;Accounting for Income Taxes,&#148;</I> &nbsp;these deferred taxes are measured by applying currently enacted tax laws.</FONT></div></TD>
</TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Earnings per Share
  -</I> Basic earnings per share is computed by dividing income available to common shareholders
  by the weighted-average number of common shares outstanding during the period. Diluted earnings per
  share reflects the potential dilution that could occur if securities or other contracts to issue
  common stock were exercised or converted into common stock, or resulted in the issuance of common
  stock that shared in the earnings of the entity. For the year ended December 31, 2007, dilutive securities
  represent outstanding warrants to acquire 840,632 shares of common stock. There were no outstanding
  dilutive securities during 2006.</FONT></div></TD>
</TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Recent Accounting Pronouncements</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In December 2007, the FASB issued SFAS No. 141 (R), &#147;Business Combinations&#148;, which becomes
effective for fiscal periods beginning after December&nbsp;15, 2008. SFAS No. 141 (R)&nbsp;requires
all business combinations completed after the effective date to be accounted for by applying the
acquisition method (previously referred to as the purchase method). Companies applying this method
will have to identify the acquirer, determine the acquisition date and purchase price and recognize
at their acquisition date fair values of the identifiable assets acquired, liabilities assumed, and
any non-controlling interests in the acquiree. In the case of a bargain purchase the acquirer is
required to reevaluate the measurements of the recognized assets and liabilities at the acquisition
date and recognize a gain on that date if an excess remains. We do not expect the adoption of this
statement to have a material impact on our financial statements.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In December 2007, the FASB issued SFAS No. 160, &#147;Non-controlling Interests in Consolidated Financial
Statements, an Amendment of ARB 51&#148; (&#147;SFAS 160&#148;) which becomes effective for fiscal
periods beginning after December&nbsp;15, 2008. This statement amends ARB 51 to establish accounting
and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation
of a subsidiary. The statement requires consolidated net income to be reported at amounts that include
the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure
on the face of the consolidated statement of income, of the amounts of consolidated net income attributable
to the parent and to the non-controlling interest. In addition this statement establishes a single
method of accounting for changes in a parent&#146;s ownership interest in a subsidiary that do not
result in deconsolidation and requires that a parent recognize a gain or loss in net income when
a subsidiary is deconsolidated. We do not expect the adoption of this statement to have a material
impact on our financial statements.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (&#147;SFAS 157&#148;).
This statement does not require any new fair value measurements but provides guidance on how to measure
fair value and clarifies the definition of fair value under accounting principles generally accepted
in the United States of America. This statement also requires new disclosures about the extent to
which fair value measurements in financial statements are based on quoted market prices, market-corroborated
inputs, or unobservable inputs that are based on management&#146;s judgments and estimates. The statement
is effective for fiscal years beginning after November 15, 2008. for non-financial assets and liabilities,
and is effective for fiscal year beginning after November 15, 2007 for financial assets and liabilities.
The statement will be applied prospectively by us for any fair value measurements that arise after
the date of adoption.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In February 2007, the FASB issued SFAS No. 159, &#147;The Fair Value Option for Financial Assets and
Financial Liabilities&#151;Including an Amendment of FASB Statement No. 115&#148; (&#147;SFAS No.
159&#148;). SFAS No. 159 allows companies the choice to measure many financial instruments and certain
other items at fair value. This gives a company the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without having to apply complex
hedge accounting provisions. SFAS No. 159 is effective for fiscal years beginning after November&nbsp;15,
2007. Management is currently evaluating the impact this standard may have on our consolidated operating
results and financial position upon adoption.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>33</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Off-Balance Sheet Arrangements</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We do not have any off-balance arrangements.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>CORPORATE STRUCTURE AND HISTORY</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Background and Recent Developments</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We were originally organized under the laws of the State of Florida, on September 19, 1979, under the
name Mark Thomas Publishing Inc. and on April 29, 2003 we changed our name to Irish Mag, Inc., and
on January 26, 2007 we changed our name to China Public Security Technology, Inc. From our inception
through October 6, 2006, we provided consulting services in the offset printing industry, targeting
individual retail consumers as well as small to mid-size companies. However, as a result of the reverse
merger transaction discussed below, we are now a provider of integrated solutions for the public
security sector in China, specializing in providing public security information communication applications
and GIS software services. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On April 2, 2007, we entered into an agreement and plan of&nbsp;merger with China Information Security
Technology, Inc., or CIST, our wholly-owned subsidiary Nevada subsidiary, pursuant to which we merged
with and into CIST, with CIST being the surviving entity. As a result of the reincorporation, effective
as of April 7, 2008, our name has been changed to China Information Security Technology, Inc&nbsp;and
our legal domicile is now Nevada.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Reverse Merger Transaction</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Between October 6, 2006 and January 31, 2007, our shareholders approved a series of transactions whereby
we purchased all the issued and outstanding stock of CPSH from our current Chairman and Executive
Officer Jiang Huai Lin, for 25,500,000 shares of our common stock in the aggregate. As a result of
these transactions CPSH and its wholly-owned subsidiary, IST, became our wholly-owned subsidiaries,
and Mr. Lin became the beneficial owner of 25,500,000 shares of our common stock in the aggregate,
which, at January 31, 2007, constituted 80.8% of our issued and outstanding common stock. Mr. Lin
has since transferred 1,182,065 of these shares and now holds&nbsp;21,717,935 of these shares directly
and 2,600,000 of these shares indirectly through Total Device Management Limited, an entity controlled
by Mr. Lin. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>January Private Placement</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On January 16, 2007, we entered into a securities purchase agreement, or January Purchase Agreement,
with two accredited Investors, or the January Investors, led by Pinnacle China Fund, L.P., pursuant
to which, as amended, we agreed to issue and sell to the January Investors up to 7,868,422 shares
of our common stock equaling 19.96% of our issued and outstanding capital stock, for a purchase price,
in the aggregate, of up to $14,950,001.80 or $1.90 per share, half of which was issued for one-half
of the aggregate purchase price on January 31, 2007, and the remaining half of which was issued for
the balance of the aggregate purchase price on February 6, 2007. We additionally represented and
warranted in the January Purchase Agreement that, except for one contract, Shenzhen iASPEC Software
Engineering Company Limited, or iASPEC, a company also controlled by our controlling stockholder,
Mr. Jiang Huai Lin, would not require a certain governmental permit to perform under the Amended
and Restated Turnkey Agreement, or Amended Turnkey Agreement, dated January 31, 2007, as amended,
between iASPEC and our indirect Chinese Subsidiary, Information Security Technology (China) Co.,
Ltd. (formerly, Bo Hai Wen Technology (Shenzhen) Company Limited), and that IST&#146;s performance
of the services under the agreement does not conflict with or violate any laws or regulations of
the People&#146;s Republic of China, or the PRC. In addition, the parties provided for a payment
of liquidated damages to each of the January Investors, equal to the amount of each Investor&#146;s
pro rata share of the purchase price, if (a) any government agency of the PRC takes any action that
materially or adversely affects the restructuring of our arrangements with iASPEC effected simultaneously
with the closing of the January Purchase Agreement and (b) we cannot undo such government action
or otherwise address such material adverse effect to the reasonable satisfaction of the January Investors
within 60 days of such occurrence.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Roth Capital Partners, LLC acted as our placement agent, or Placement Agent, in connection with the
offering of the shares to the January Investors under the January Purchase Agreement. As compensation
for its services, the Placement Agent received a cash fee equal to $1,046,500, representing 7% of
the gross proceeds received from the sale of the shares, of which a 20% cash fee was payable by us
directly to Oppenheimer &amp; Co., Inc., for its services as a finder, or Finder, in connection with
the offering. The Placement Agent will also receive warrants to purchase 550,789 shares of our common
stock, representing 7% of the gross proceeds received from the sale of the shares divided by the
per share price of the shares, 20% of which was also payable by us directly to the Finder. The Placement
Agent and Finder warrants have a term of five years, were exercisable immediately on issuance and
have an exercise price equaling up to 120% of the per share purchase price of the shares purchased
by the January Investors. In addition, we reimbursed the Placement Agent for reasonable out-of-pocket expenses incurred in connection
with the offering and for all road show related expenses.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>34</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Management Service Agreement</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>From October 9, 2006 through June 30, 2007, we operated under a Business Turnkey Agreement, or Turnkey
Agreement, with iASPEC, pursuant to which iASPEC exclusively engaged IST as its subcontractor to
provide iASPEC with outsourcing services (to the extent that those services do not violate any special
governmental permits held by iASPEC and do not involve the improper transfer of any sensitive confidential
governmental or other data). The Turnkey Agreement also provided for a revenue sharing arrangement
between iASPEC and IST where IST was entitled to between 90% and 100% of the revenues actually received
by iASPEC from servicing contracts involving any iASPEC business, but was obligated to pay for its
own costs in providing these services and to pay iASPEC $180,000 per year throughout the term of
the agreement. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Effective July 1, 2007, iASPEC and iASPEC&#146;s shareholders, Mr. Lin and Mr. Jin Zhu Cai agreed to
terminate the Turnkey Agreement and replaced it on the same day with a management service agreement,
or Management Service Agreement. Pursuant to the terms of the Management Service Agreement, iASPEC
granted IST an exclusive, royalty-free, transferable, worldwide, license to use and install for a
ten-year term, certain iASPEC software, along with copies of source and object code relating to such
software, in any manner permitted by applicable laws, and IST licensed back to iASPEC a royalty-free,
limited, non-exclusive license to the Software, without right of sub-license, for the sole purpose
of permitting iASPEC to carry out its business as presently conducted. IST will also have the right
to designate two Chinese citizens to serve as senior managers of iASPEC, to serve on iASPEC&#146;s
Board of Directors and assist in managing the business and operations of iASPEC. In addition, both
iASPEC and IST will require the affirmative vote of the majority of our Board of Directors, as well
as at least one non-insider director, for certain material actions with respect to iASPEC, including,
but not limited to: (a) the nomination, appointment, election or replacement of any board members;
(b) the distribution of any dividend or profits; (c) any merger, division, change of corporate form,
dissolution or liquidation; (d) any reimbursement of net losses or other payments or transfers of
funds from IST to iASPEC; (e) the formation or disposition of a subsidiary or the acquisition or
disposition of any interest in any other entity; and (f) the encumbrance of any assets under any
lien not in the ordinary course of business. Furthermore, under the Management Service Agreement,
IST will receive 100% of the net received profit of iASPEC and will reimburse iASPEC for all net
losses incurred by iASPEC. The net profit of iASPEC will be paid to IST, and the net losses of iASPEC
will be reimbursed by IST, no later than the last day of the month following the end of each calendar
quarter, commencing on July 1, 2007. IST is also obligated to pay iASPEC $180,000 per year, no later
than the last day of the month following the end of each calendar year, commencing on July 1, 2007,
and this amount may be retained by iASPEC out of any net received profit due and payable to IST as
of such payment date. IST may also advance to iASPEC, at its sole discretion, amounts to be credited
against IST&#146;s future obligations to iASPEC, but any such advances will be treated as prepayments
and not as loans. iASPEC will have no obligation to repay any such advances except by crediting the
amount of such advances against IST&#146;s obligation to reimburse net losses, or by adding the amount
thereof to net profit when and as requested by IST. If iASPEC or any of the iASPEC shareholders materially
breaches the Management Service Agreement and fails to remedy the breach within 60 days&#146; notice
from IST of such breach, they will be jointly and severally obligated to pay to IST liquidated damages
in an amount equal to the higher of (a) eight times the annualized revenues of IST for the last completed fiscal quarter, or (b) US$50 million.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Management Service Agreement contains a true-up provision which required iASPEC and IST, on or
before September 30, 2007, to calculate all prior amounts owed to IST under the Turnkey Agreement,
and required iASPEC to pay such amounts. The parties were required to calculate the cumulative net
profit of iASPEC from October 9, 2006, when iASPEC commenced its contractual relationship with IST,
through the commencement date of the Management Service Agreement, and iASPEC was required to pay
the amount due to IST, if there was a net received profit, while IST was obligated to reimburse any
amount to iASPEC if there was a net loss. &#147;Net Received Profit&#148; means the Net Received
Profit of iASPEC, calculated as follows: accrued accounts receivable plus net turnover (revenue),
minus cost of sales, minus operating expenses, and minus accrued but not collected accounts receivable,
but only if the result is a positive number. &#147;Net Losses&#148; means the net losses of iASPEC,
calculated as follows: accrued accounts receivable plus net turnover (revenue), minus cost of sales,
minus operating expenses, and minus accrued but not collected accounts receivable, but only if the
result is a negative number. The calculated true-up amount of $7,005,183 was paid by iASPEC to IST
as of December 31, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In connection with the Management Service Agreement, IST also entered into a purchase option agreement,
or Option Agreement, with iASPEC and its shareholders, effective as of July 1, 2007, pursuant to
which the iASPEC shareholders granted IST, or its designee(s), an exclusive, irrevocable option to
purchase from the iASPEC shareholders, from time to time, all or a part of iASPEC&#146;s shares,
pursuant to an equity transfer agreement, or all or a part of iASPEC&#146;s assets, pursuant to an
asset purchase and transfer agreement. However, according to the Option Agreement, the option may
not be exercised by IST if the exercise would violate any applicable laws and regulations in China or cause any license or permit held by, and necessary for the operation of iASPEC, to be cancelled
or invalidated. Under the terms of the Option Agreement, the option is immediately exercisable at
an exercise price of $1,800,000, in the aggregate, subject to regulatory approval. In addition, iASPEC
and the iASPEC shareholders agreed to use their best efforts to acquire all necessary government
approvals and other consents to complete a share purchase under the Option Agreement. The Option
Agreement may be rescinded by IST upon 30 days&#146; notice and will terminate on the date that we
purchase all remaining shares or assets of iASPEC pursuant to the terms of the Option Agreement.
If any of the parties breaches the Option Agreement and fails to remedy the breach, the breaching
party will pay a penalty of RMB5,000,000 (approximately $683,600) to the non-breaching party or parties,
and compensate the non-breaching party or parties for any losses caused by the breach.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>35</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As a result of the restructuring of its relationship with iASPEC, iASPEC has become a variable interest

entity of our Company. A variable interest represents a contractual or ownership interest in another

entity that causes the holder to absorb the changes in fair value of the other entity&#146;s net

assets. Potential variable interests include: holding economic interests, voting rights, or obligations

to an entity; issuing guarantees on behalf of an entity; transferring assets to an entity; managing

the assets of an entity; leasing assets from an entity; and providing financing to an entity. In

such cases FASB Interpretation 46(R), which interprets Accounting Research Bulletin (ARB) 51,<I>&nbsp;Consolidated Financial Statements</I> , requires consolidation of such entity by the enterprise that controls the economic risks and rewards
of the entity, regardless of ownership. While we have held an economic interest in iASPEC since October
9, 2006, the Management Service Agreement and the Option Agreement have now given us control over
the business and operations of iASPEC. As a result, iASPEC&#146;s financial data is subject to consolidation
with our financial data in accordance with the provisions of FASB Interpretation 46(R), commencing
July 1, 2007. For more details regarding the Management Service Agreement and Option Agreement, see
our Current Report on Form 8-K filed with the SEC on August 6, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>October Private Placement</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On October 25, 2007, we entered into a securities purchase agreement, or the October Purchase Agreement,
with certain accredited investors, or Investors. Under the October Purchase Agreement, we agreed
to issue and sell to the Investors up to 5,000,000 shares of our common stock, representing approximately
11% of our issued and outstanding capital stock on a fully-diluted basis as of and immediately after
consummation of the transactions contemplated by the October Purchase Agreement, for an aggregate
purchase price of up to $40,000,000, or $8.00 per share. On October 29, 2007, the 5,000,000 shares
were issued and we received cash proceeds of $36,506,275.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Pursuant to the October Purchase Agreement, we also entered into (i) a registration rights agreement
(the &#147;Registration Rights Agreement&#148;) with the Investors, pursuant to which, among other
things, we agreed to register the shares of its common stock issued to the Investors within a pre-defined
period and (ii) a closing escrow agreement (the &#147;Escrow Agreement&#148;) with the Investors
and our U.S. legal counsel, as escrow agent, pursuant to which the Investors agreed to deposit the
Purchase Price into escrow to be released upon the occurrence of the events set forth in the Escrow
Agreement. The funds were released in escrow on October 30, 2007, the closing date, and the registration
statement covering these shares was declared effective on February 6, 2008. We also agreed to use
our reasonable best efforts to have our common stock listed and traded on any one of the New York
Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Capital
Market by June 30, 2008.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In connection with the October Purchase Agreement, we issued warrants to Roth Capital Partners, LLC
and Brean Murray, Carret &amp; Co., LLC for the purchase of 300,000 and 100,000 shares of our common
stock, respectively. The warrants are for a term of 5 years, have an exercise price of $9.60 per
share, and include registration rights to register the shares issuable upon exercise of such warrants.
For more details regarding the October Purchase Agreement and the Registration Rights Agreement,
see our Registration Statement on Form S-1, filed with the SEC on February 6, 2008.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Acquisition of Fortune Fame</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On November 7, 2007, we acquired 100% of the equity interests of Fortune Fame, and its operating PRC
subsidiary, ISDT, for which we paid approximately $7.1 million in cash and issued 883,333 shares
of its common stock. Of the 883,333 shares of common stock, 383,333 shares were issued to Cheer Crown
International Investment Limited, or Cheer Crown, and 500,000 shares were issued to Mr. Gao, the
Chairman of ISDT&#146;s Board of Directors. Under the terms of the acquisition agreement, Mr. Gao,
agreed to continue on as the Chairman of ISDT. Mr. Gao also agreed that he will return 250,000 shares
of our common stock if Fortune Fame does not meet certain net income targets in 2008, and 250,000
shares if Fortune Fame does not meet certain net income targets in 2009.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Acquisition of Bocom Multimedia</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On December 9, 2007, we entered into a Share Purchase Agreement (the &#147;Bocom Purchase Agreement&#148;),
with Bocom Venture Inc. (&#147;Bocom Venture&#148;), a British Virgin Islands company, for the acquisition of
100% of the issued and outstanding capital stock of Bocom Multimedia and its wholly-owned Chinese
subsidiary, Bocom Technology, for a purchase price of approximately $18,000,000. We paid approximately
$9,000,000 of the purchase price in cash which is included in deposit for business acquisition as
of December 31, 2007. The remaining $9,000,000 of the purchase price is payable on or before May
1, 2008 in 1,125,000 shares of our common stock. On February 1, 2008, we completed our acquisition
of Bocom Multimedia, and effective immediately, Bocom Multimedia and its subsidiary, Bocom Technology,
became our indirect wholly-owned subsidiary.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>36</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Bocom Multimedia was formed in Hong Kong on August 10, 2007, and is a leading provider of large screen
digital light processing and integrated solutions in China. Their products have been widely applied
in the fields of public security, communication and multimedia in China. Bocom Multimedia has successfully
completed over 100 digital light processing project installations for police bureaus and municipal
governments in more than ten provinces in China, including Beijing, Shanghai, Chongqing, Sichuan,
Hunan, Guangdong and Fujian.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following chart reflects our organizational structure as of the date of this prospectus.</FONT></P>
<P align="center"><img border="0" src="cistr1b.jpg" width="650" height="618"></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our corporate headquarters are located at 21<SUP>st</SUP> &nbsp;Floor, Everbright Bank Building, Zhuzilin, Futian District, Shenzhen, Guangdong, 518040, People&#146;s
Republic of China. Our telephone number is (+86) 755 -8370-8333. We maintain a website at<U> www.chinacpby.com</U> &nbsp;that contains information about our subsidiaries CPSH and Public Security, but that information
is not a part of this prospectus.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Recent Developments</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Acquisition of Geo</I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On February 15, 2008, we approved the entry of our variable interest entity, iASPEC into (1) a share
purchase and increased capital agreement, or the Geo Agreement, dated as of February 16, 2008, by and among iASPEC,
Wuhan Wuda Venture Capital Co., Ltd., or Wuhan Venture, Song Ai Hong and Wuhan Wuda Geoinformatics
Co., Ltd., or Geo, for the purchase of 46% of Geo for a purchase price of approximately $4,819,000,
and to inject an additional approximately $1,388,900 to increase the registered capital of Geo to
approximately $8,333,000 in the aggregate, and (2) a share purchase agreement, or the Li Agreement,
dated as of February 16, 2008, between iASPEC and Li Wei, for the purchase of 2.4% of Geo, for a
purchase price of approximately $666,700. After giving effect to the transactions contemplated by
the Geo Agreement and the Li Agreement, iASPEC paid approximately $6,875,000 for a 57% equity interest
in Wuhan (based on a registered capital of RMB60,000,000). The transaction was consummated on April 1, 2008.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>37</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Geo was founded in 1999 by Wuhan University, a leading university in Asia for GIS-related studies.
Geo develops and sells GIS software, contracts surveying and mapping projects, produces space measurement
data and provides technical consulting and supervision services for GIS projects. In addition to
its research and development capabilities, Geo provides us with direct access to numerous permits
and mapping data that further enhance our technological capabilities, lower project construction
costs and enable us to price our products and services more competitively. Our ownership of the data
also provide licensing and recurring domestic and international revenue opportunities for us.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As a result of our acquisition of Geo, we are the only company in China with both the Level A Certificate
of Surveying &amp; Mapping and the Computer Information System Integration Level One Qualification
under its umbrella. We believe that these qualifications serve to enhance our technological capabilities
in the GIS sector and gives us additional market presence in other government sectors such as land
and resource planning and civil-use GIS.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Establishment of Board Committees</I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On April 8, 2008, the Board of Directors of the Company established an Audit Committee, a Compensation
Committee, and a Governance and Nominating Committee and appointed the Company&#146;s independent
directors, Yun Sen Huang, Qiang Lin, and Sean Shao to each committee. Mr. Shao was appointed as the
Chair of the Audit Committee, Mr. Huang was appointed as the Chair of the Compensation Committee
and Mr. Lin was appointed as the Chair of the Governance and Nominating Committee. The Board of Directors
of the Company also determined that Mr. Shao possesses accounting or related financial management
experience that qualifies him as financially sophisticated within the meaning of Rule 4350(d)(2)(A)
of the Marketplace Rules of The Nasdaq Stock Market, Inc. and that he is an &#147;audit committee
financial expert&#148; as defined by the rules and regulations of the Securities and Exchange Commission. </FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a9"></a>BUSINESS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Overview of Our Business</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We are a holding company that owns all of the issued and outstanding capital stock of CPSH. CPSH is
also a holding company. We operate through our wholly-owned operating Chinese subsidiary,
IST, ISDT, Bocom Technology and through IST&#146;s commercial arrangement with iASPEC, our VIE. Through IST, we are a China
based company providing integrated solutions for the public security sector in China, specializing
in providing public security information communication applications and GIS software services.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our customers are mostly public sector entities that use our products and services to improve the service
quality and management level of civil and medical emergencies, traffic control, fire control, medical
rescue and border control. Our customers include the Guangdong Public Security Department, the Shenzhen
Border Check Station, the Shenzhen Public Security Bureau, the Shenzhen Traffic Police Bureau, the
Shenzhen Fire Department and the Shantou City Public Security Bureau. In the future we expect to
expand the application of our products and services in the public security sector and to other sectors
in China as well. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We generate revenues through the sale of our integrated hardware and software products and through
the provision of related support services. In fiscal years 2007 and 2006, 68% and 55% of our revenues,
respectively, were generated under our exclusive commercial arrangement with iASPEC. However, fulfillment
of certain PGIS contracts with PRC Government customers is restricted to entities possessing the
necessary government licenses and approvals which IST does not have. The Management Service Agreement
anticipates that iASPEC will fulfill all obligations for PGIS contracts, IST will receive 100% of
the net received profit of iASPEC, net of an annual fee of $180,000, and IST will reimburse iASPEC
for all net losses incurred by iASPEC.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Fortune Fame had no substantive business operations since its formation in July 2007 until it acquired
ISDT on October 26, 2007. ISDT provides a leading CA, an application platform and e-Government solution
technology, and is an exclusive CA application provider for the Shenzhen municipality in the PRC.
The CA certification allows ISDT to issue digital&nbsp;certificates that contain a public key that
can be used by the public to encrypt messages and protect the identity of the user. The CA&nbsp;also certifies that the public key contained in the certificate belongs
to the person, organization, server or other entity noted in the certificate. CAs are currently used
in China&#146;s e-Government industry and can be successfully integrated with our e-Government platforms
and solutions to enhance customers&#146; applications.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>38</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Our Industry</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Informatization</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Over the past two decades, the PRC government has encouraged the development and use of new technologies

for information and communication (or ICTs) and their application in all spheres of government,
industry,
education and culture. The term &#147;Informatization&#148; or &#147;<I> xinxihua</I> &#148; has been coined in China to describe the overall process of ICT application in China and has
in recent years become a linchpin of central and many local economic development strategies.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As a part of the Informatization process, the PRC government has launched a series of online programs
to accelerate its pace of implementing and using information technology to improve China&#146;s current
government information management systems, and help promote China&#146;s economic development. The
Informatization process has led to a growth in the use of information technology, such as e-Government
platforms and GIS, for public security. An example of this has been the Government Online Project
or GOP. The Government Online Project is a three-stage initiative: Stage One focused upon connecting
800-1,000 government offices and agencies to the Internet; Stage Two focused on having government
offices and agencies move their information systems into compatible electronic form; and Stage Three
focused on making government offices and agencies paperless. The purpose of the GOP is to create
a centrally accessible administrative system that collects and transports data to and from users;<I>&nbsp;users</I> &nbsp;being the public and the enterprise system, as well as government departments.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On January 22, 1999, the GOP was formally launched by China Telecom and the State Economic and Trade
Commission&#146;s (SETCs) Economic Information Center along with the Information Offices of more
than 40 central government departments. The project interconnects government offices of every province,
autonomous region and municipality. The network will promote the establishment of formal government
websites to provide information and services and then (in theory) also facilitate collaboration between
the government and the nation&#146;s growing number of IT enterprises. By developing the basic infrastructure
and encouraging government agencies at all levels to incorporate Internet technologies, the government
hopes to set the tone for online development and, ultimately, e-commerce. Our First Responder Coordination
Platform, Intelligent Border Control and Security Surveillance System, Residence Card Information
Management System are a part of the information technology implementation program of the public security
sector in China.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>GIS Industry</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The GIS field is a rapidly growing field that incorporates geographical features with data in order
to assess real world problems. In the strictest sense, a GIS is a computer system capable of capturing,
storing, analyzing, and displaying geographically referenced information; that is, data identified
according to location. The term GIS also includes the procedures, operating personnel, and spatial
data that go into the system.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The power of a GIS comes from the ability to relate different information in a spatial context and
reach a conclusion about this relationship. Most of the information we have about our world contains
a location reference, placing that information at some point on the globe. However, GIS can be used
to emphasize objects on a map, their absolute location on the Earth&#146;s surface and their spatial
relationships, in a series of attribute tables&#151;the &#147;information&#148; part of a GIS. For
example, while a computer-aided mapping system may represent a road simply as a line, a GIS may also
recognize that road as the boundary between wetland and urban development between two census statistical
areas. A GIS, therefore, can reveal important new information (such as whether features intersect
or whether they are adjacent) that leads to better decision making or solutions.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Data Capture and Integration &#150;</I> &nbsp;In order to utilize a GIS, data must be directly entered into (or captured by) a GIS in digital
form, that is, in a form the computer can recognize. A GIS can also convert existing digital information,
which may not yet be in map form, into forms it can recognize and use. Map data may also be created
by (1) digitizing maps by hand-tracing with a computer mouse on the screen or on a digitizing tablet
to collect the coordinates of features, (2) using electronic scanners to convert maps to digits,
or (3) uploading coordinates from Global Positioning System or GPS receivers into a GIS. Once a time-consuming
process, the data capture process is now made easier by the development in the GIS industry of software
tools to automatically extract features from satellite images or aerial photographs and create databases
in map form for use in a GIS. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Information Retrieval and Data Output &#150;</I> &nbsp;With a GIS you can &#147;point&#148; at a location, object, or area on the screen and retrieve
recorded information about it from off-screen files. For example, using scanned aerial photographs
as a visual guide, you can ask a GIS about the location of a fire, analyze the area around the fire
and determine conditions of adjacency (what is next to it), containment (what is enclosed by it) and proximity (how close is something
to it). </FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>39</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Another critical component of a GIS is its ability to produce graphics on the screen or on paper to
convey the results of analyses to the people who make decisions about resources. Wall maps, Internet-ready
maps, interactive maps and other graphics can be generated, allowing decision makers to visualize
and thereby understand the results of analyses or simulations of potential events.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Components of GIS</I></FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><I>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Hardware</I> &nbsp;&#150; Hardware comprises the equipment needed to support the many activities ranging from data
  collection to data analysis. A central piece of the equipment is a workstation, which runs the GIS
  software and is the attachment point for the equipment. Data collection efforts can also require
  the use of a digitizer for conversion of hard copy data to digital data and a GPS data logger to
  collect the field. The use of handheld field technology is also becoming an important tool in GIS.
  With the advent of web-enabled GIS, web servers have become an important piece of equipment for GIS.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><I>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Software</I> &nbsp;&#150; Different software packages are important for GIS. Central to this is the GIS application
  package. Such software is essential for creating, editing and adding spatial and attributed data,
  therefore these packages contain a myriad of functions inherent to them. Extensions or add-ons are
  software that extends capabilities of the GIS software package. Component GIS software is the opposite
  of application software. Component GIS seeks to build software applications that meet a specific
  purpose and thus are limited in their spatial analysis capabilities. Utilities are stand-alone programs
  that perform a specific function. For example, a file format utility that converts from one type
  of GIS file to another. There is also web-GIS software that helps serve data through Internet browsers.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><I>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Data</I> &nbsp;&#150; Data is the core of any GIS. There are two primary types of data that are used in GIS,
  a geodatabase and attribute data. A geodatabase is a database that is in some way referenced to locations
  on the earth. Geodatabases are grouped into two different types: vector and raster. A vector image
  is stored as geometric objects, such as lines and arcs, which are drawn between specific coordinates.
  If you magnify a vector image you see the lines more accurately, and the line edges stay smooth.
  A raster image is made up from pixels, like the picture obtained from a scanner, or the screen image
  on a computer monitor, and has a finite amount of detail which is dependent upon the image size and
  resolution. However, the closer you look at a raster image the coarser it appears and you don&#146;t
  see any extra detail. Vector drawings are utilized in GIS and other applications where accuracy is
  important. Coupled with this data is usually data known as attribute data. Attribute data are data
  that relate to a specific, precisely defined location. The data are often statistical but may be
  text, images or multi-media. These are linked in the GIS to spatial data that define the location.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><I>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>People</I> &nbsp;- Well-trained people knowledgeable in spatial analysis and skilled in using GIS software are
  essential to the GIS process.</FONT></div></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Public Sector Use of GIS</I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>GIS can be used by the public sector in the following ways:</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><I>&#149; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Pubic Safety and Emergency Response Planning</I> &nbsp;&#150; GIS technology gives public safety personnel the ability to manage and analyze large
  amounts of location-based information. Data (including files from legacy systems) can be stored in
  a geodatabase and used to visualize spatial relationships and reveal trends critical to public safety
  response and planning. Computer-generated maps can be shared across a network or the Internet with
  multiple agencies to coordinate efforts and maximize resources.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><I>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Law Enforcement</I> &nbsp;&#150; GIS software uses geography and computer-generated maps as an interface for integrating
  and accessing massive amounts of location-based information. GIS allows law enforcement and criminal
  justice personnel to effectively plan for emergency response, determine mitigation priorities, analyze
  historical events, and predict future events. GIS can also be used to get critical information to
  emergency responders upon dispatch or while en route to an incident to assist in tactical planning
  and response. While law enforcement agencies collect vast amounts of data, only a very small part
  of this information can be absorbed from spreadsheets and database files. GIS provides a visual,
  spatial means of displaying data, allowing law enforcement agencies to integrate and leverage their
  data for more informed decision making.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><I>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Public Works and Development</I> &nbsp;&#150; Use of GIS software in public works improves efficiency and productivity to better serve
  citizens. For example, GIS applications are in demand in connection with the construction of the
  Pan Asia Railway and development of the Meigong River and Tumen River in the Northwest of China.
  Such public works systems could use GIS to connect all divisions in a public works department from
  engineering to accounting, which streamlines work flows, asset management, operations, and planning.
  Using a GIS throughout the department allows all sections to share and easily access geographic data. GIS promotes data integrity
  and facilitates better communication and decision making throughout the organization.</FONT></div></TD></TR></TABLE>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>40</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=24>&nbsp;</TD>
<TD vAlign=top><div align="justify">&nbsp;</div></TD></TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><I>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Economic Development</I> &nbsp;&#150; GIS may be used to foster economic development. Agencies could work to advance the quality
  of life and strengthen the economic base of their region by retaining and growing existing businesses
  and attracting new investment. </FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><I>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Urban Planning and Site Selection</I> &nbsp;&#150; Information regarding a proposed site for parcel zoning, transportation planning, waste
  disposal or other use may be combined and manipulated in a GIS to address planning and natural resource
  issues (such as the location of a water well near a proposed waste disposal site) to guarantee the
  quality of life for everyone in livable communities. Planning agencies have realized the power of
  enterprise GIS to identify problems, respond to them efficiently, and share the results with the
  public.</FONT></div></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Public Security Information Technology in China</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>With the urbanization and fast economic growth along the coastal areas of China, the demands for information
technology by government agencies has greatly increased, especially in the areas of urban planning,
travel and land management. PRC government agencies face challenges, such as financial constraints
and public safety, and must find ways to better manage resources and serve their citizens. For example,
police departments explore methods to better protect the public by more effectively and efficiently
analyzing crime patterns within specific geographic areas. Likewise, government authorities look
to improve security by assessing threats across their geographic areas and departments and plan appropriate
emergency responses. Our software services and operations have been concentrated in and are used
by the public security sector (such as by the Police, Fire Department and Healthcare Emergency Services).
The use of security information technology in the private sector is still developing in China and
presents a growth opportunity for us. In the future, we plan to target the telecommunications, logistics
and insurance sectors as areas for business development within the private sector.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Our Products and Services</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We offer the following four products and services:</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(1)&nbsp;&nbsp;&nbsp;&nbsp; Public Security Information Technology</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; * First
Responder Coordination Platform</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;* Intelligent
Border Control and Security Surveillance Systems</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; * Residence
Card Information Management System</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(2)&nbsp;&nbsp;&nbsp;&nbsp; Geographic Information Systems (GIS)</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E-Government Platform and Software Sales and Maintenance</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Public Security Information Technology</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><U>First Responder Coordination Platform</U></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The First Responder Coordination Platform is a software program which integrates the contact numbers
for general police, fire, traffic and other related government organizations into one contact number
and enables these agencies to consolidate and improve their public emergency response. Through this
platform, our public security customers are able to command and coordinate joint responses to provide
the public with immediate, efficient and reliable assistance.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The PRC government, through its &#147;Police Force Technology Reinforcement&#148; initiative, has mandated
the adoption of the first responder system to consolidate and improve public emergency response.
Approximately 660 cities across China are expected to initiate the deployment of their coordinated
emergency response platforms, creating significant opportunities for us.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><U>Intelligent Border Control and Security Surveillance Systems</U></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our Intelligent Border Control product is used by the Ministry of Public Security for effective border
control management. The Intelligent Border Control System stores biometric information, such as finger-prints
and facial features from passengers in a database and integrates it with infrared and license plate
recognition technologies to enable the automation of border control checkpoints for faster and more
accurate processing of passengers, while at the same time helping to safeguard borders from stowaways, and greatly improving overall efficiency
and the effectiveness of border control management.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>41</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Compared with traditional surveillance systems, the Intelligent Security Surveillance System adopts
technologies such as biometric recognition, proactive detective and intelligent video analysis, and
integrates with facial recognition, GIS, data storage and analysis, to manage and control surveillance
through a consolidated software platform. This product can be used in city-wide surveillance by the
police department, as well as mass scale applications such as in subways, airports and terminals.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The rapid development of China in recent years has also led to growing passenger traffic across its
borders, which reached 318 million people in 2006. Shenzhen has 11 out of 64 Exit and Entry Frontier
Stations controlled by the Ministry of Public Security in China, through which 167 million passengers
crossed in 2006. The total market opportunity for the Intelligent Border Control System is currently
estimated at $300 million. To address the increasing requirement and faster and more accurate checkpoint
processing of passenger traffic, Exit and Entry Frontier Stations throughout China are in the process
of implementing their own intelligent border control systems. These systems can also be used to strengthen
port control and surveillance in China&#146;s 288 air, sea and land ports and have many alternative
private sector applications, including the management and control of stadium attendance, parking
lot traffic, work attendance and toll road traffic.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><U>Residence Card Information Management System</U></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>This system is designed to apply the latest information technology to automate the Shenzhen Residence
Card System, and will integrate with police GIS systems. Through an integrated information transfer
platform, the system will facilitate several social programs, including social welfare management,
education management, and house rental service management. Various government and functional departments
can access information regarding the immigrant population in the system to improve work efficacy
and increase managing capability. In the near future, the system may be expanded to be compatible
with other applications, such as medical, personal credit history, and driving records. If successful,
the system may be extended to 660 cities across China. According to national statistics, there are
over 150 million internal immigrants in China. In many mid-to-large cities, the population of recent
immigrants from rural areas exceeds the resident population. As key pilot projects for the Ministry
of China Public Security, our Residence Card information Management System will be first deployed in Shenzhen.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>GIS Software Services and Operations</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We provide system management and support services in connection with our Police-Use Geographical Information
Services or PGIS Platform. The PGIS platform is a GIS that was developed by iASPEC and licensed exclusively
to us, for use in creating, editing and adding data to our customers&#146; systems. The PGIS platform
allows us to provide our law enforcement customers with different services, including specialized
mapping services, positioning services, messaging services and services which monitor access to their
GIS by users of different levels. We offer the PGIS platform with a full complement of services,
including providing basic map image data from the GIS and specific data in connection with that map
image (such as a bus stop), a consolidation of both basic data and specific data services for data
inquiry services, and application system services, which is the application of consolidated services
to a specific service requirement, such as the position of a police officer in the field.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We also provide application interface services which ensure that our PGIS platform is equipped to interact
with other programs to the benefit of our customers. The data from different law enforcement command
systems can be integrated with our PGIS platform to provide our law enforcement customers with more
robust communication and location information. Typically, our platforms are integrated with the City
Emergency Commanding System, the Police Resource Consolidated Management System, the Residence Management
System, the Internet Surveillance System, the Traffic Commanding System, the Criminal Investigation
System and the City Surveillance System.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Software Sales and Support Services</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As a result of our commercial arrangement with iASPEC and our 16 exclusive licenses to iASPEC&#146;s
16 copyrighted applications, we have inherited iASPEC&#146;s prior service line involving software
sales and distribution and support services. Our Software Sales and Support Services include the
following four categories of services:</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Software Operation &#150; Application software development, including consolidating the software development
  and pure application software development of different IT projects. Currently our customers for this
  service mainly include government agencies which outsource software development to us.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>System integration &#150; We build integrated systems with necessary hardware equipment purchased by
  iASPEC on behalf of our customers. The system integration project sometimes includes application
  software development, the revenue of which is incorporated into our Software Operation services.</FONT></div></TD></TR></TABLE>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>42</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Consulting &#150; We provide IT consulting services related to the development of IT systems. For example,
  if a customer needs to build an IT system, we fully investigate the customer&#146;s requirements
  and then submit relevant solutions.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Software Sales and Distribution &#150; Through our exclusive software license from iASPEC, we are entitled
  to sell and provide relevant software services to our customers. Also, as a distributor for some
  specialized software developers, we sell software products to the end-users, which may occur during
  the delivery of Software Operation, System Integration or Consulting services.</FONT></div></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Product Warranty</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our Company usually offers a one-year service warranty for our system integration services. The warranty
includes support services, minimal updates and system maintenance. In our experience the cost of
providing this warranty has been immaterial. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We also offer warranties for our hardware sales, but the suppliers of such hardware provide the final
warranty services.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Our Intellectual Property</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We currently have the following registered and copyrighted software products, as well as numerous software
licenses from iASPEC under our Management Service Agreement with iASPEC: </FONT></P>
<table width="100%" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> Registration Code </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> Year <br>
      Issued </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> Name </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> Version </font></td>
  </tr>
  <tr>
    <td valign="top"><HR NOSHADE COLOR=#000000 SIZE=1></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><HR NOSHADE COLOR=#000000 SIZE=1></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><HR NOSHADE COLOR=#000000 SIZE=1></td>
    <td width="2%" valign="top">&nbsp;</td>
    <td valign="top"><HR NOSHADE COLOR=#000000 SIZE=1></td>
  </tr>
  <tr valign="bottom">
    <td width="15%" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> SHEN DGY-2007-0862 </font></td>
    <td width="2%" bgcolor="#E9F1F8">&nbsp;</td>
    <td width="8%" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2007 </font></td>
    <td width="2%" bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> IST Workflow Software </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td width="8%" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> V1.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="7"><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> SHEN DGY-2007-0861 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> 2007 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> IST Search Engine Software </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> V1.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="7"><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> SHEN DGY-2007-0361 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2007 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> IST Short-message Service Platform Software </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> V1.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="7"><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> 2004SR09334 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> 2004 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> iASPEC Case Tracking Management System </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> V 2.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2004SR09335 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2004 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> iASPEC Application Envelope System </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> V 2.1 </font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> 2004SR09336 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> 2004 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> iASPEC Quality System Document Management System </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> V 2.2 </font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2004SR09337 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2004 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> iASPEC e-Logistics Support Management System </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> V 2.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> 2004SR09338 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> 2004 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> iASPEC Secured and Audited Message Switching System </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> V 2.5 </font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2004SR09084 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2004 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> iASPEC Project e-Time Tracker Management System </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> V 2.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> 2004SR09085 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> 2004 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> iASPEC Application e-Monitor System </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> V 3.3 </font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2004SR09086 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2004 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> iASPEC Remote Administered Distributed Application Architecture System </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> V 2.1.3 </font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> 2004SR09087 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> 2004 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> iASPEC Community and Establishment Management System </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> V 1.1 </font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2004SR09088 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2004 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> iASPEC Document and Work Flow Management System </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> V 3.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> 2004SR09089 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> 2004 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> iASPEC e-Community Management and Service System </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> V 1.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2006SR11589 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2006 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> iASPEC Content Management System </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> V 1.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> 2006SR11590 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> 2006 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> iASPEC Three In One Police Computer Assistant Dispense System </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> V 1.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2006SR11591 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2006 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> iASPEC Police Force General Management System </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> V 1.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> 2006SR11592 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> 2006 </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> iASPEC General Office Automatization System </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> V 1.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2006SR11593 </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 2006&nbsp; </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> iASPEC Police Geographic Information System </font></td>
    <td bgcolor="#E9F1F8">&nbsp;</td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> V 1.0 </font></td>
  </tr>
</table>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our newly acquired subsidiaries, ISDT and Bocom Technology, have the following copyrighted software
products:</FONT></P>
<table width="100%" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> Registration Code </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> Year <br>
      Issued </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> Name </font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman"> Version </font></td>
  </tr>
  <tr>
    <td valign="top"><HR NOSHADE COLOR=#000000 SIZE=1></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><HR NOSHADE COLOR=#000000 SIZE=1></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><HR NOSHADE COLOR=#000000 SIZE=1></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><HR NOSHADE COLOR=#000000 SIZE=1></td>
  </tr>
  <tr valign="bottom" bgcolor="#E9F1F8">
    <td width="15%"><font size="2" face="Times New Roman"> SHEN DGY-2007-0857 </font></td>
    <td width="2%"><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td width="8%"><font size="2" face="Times New Roman"> 2007 </font></td>
    <td width="2%"><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> Bocom Multimedia Display Server Software </font></td>
    <td width="2%"><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td width="8%"><font size="2" face="Times New Roman"> V 4.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="7"><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> SHEN DGY-2007-0858 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> 2007 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> Bocom Multimedia Screen Printing Software </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> V 4.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="7"><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#E9F1F8">
    <td><font size="2" face="Times New Roman"> SHEN DGY-2007-0859 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> 2007 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> Bocom Multimedia Device Server Software </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> V 4.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="7"><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> SHEN DGY-2007-0860 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> 2007 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> Bocom Multimedia Customer End Software </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> V 4.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="7"><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#E9F1F8">
    <td><font size="2" face="Times New Roman"> SHEN DGY-2007-0761 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> 2007 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> ISDT Supplier Management Software </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> V 1.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="7"><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> 2007SR09783 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> 2006 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> ISDT GPS Terminal Security Management Software (XAGPS) </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> V 1.0 </font></td>
  </tr>
  <tr valign="bottom" bgcolor="#E9F1F8">
    <td><font size="2" face="Times New Roman"> SHEN DGY-2007-0337 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> 2007 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> ISDT GPS Terminal Security Management Software </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> V 1.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="7"><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman"> SHEN DGY-2007-0759 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> 2007 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> ISDT General Office Automatization System </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> V 1.0 </font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="7"><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#E9F1F8">
    <td><font size="2" face="Times New Roman"> SHEN DGY-2007-0759 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> 2007 </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> ISDT Content Management Software </font></td>
    <td><font size="2" face="Times New Roman">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman"> V 1.0 </font></td>
  </tr>
</table>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>43</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>All copyrighted software applications are effective 5 years from the date of registration. We expect
to renew all copyrighted software applications prior to their respective expiration date.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In addition, Bocom Multimedia owns the following patents in China:</FONT></P>
<table width="100%" cellpadding="0" cellspacing="0">
  <tr>
    <td valign="top"><font size="2" face="Times New Roman"> Patent No. </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> Effective <br>
      Date </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> Description </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> Duration </font></td>
  </tr>
  <tr>
    <td width="18%" valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> ZL 2006 2 0014548.2 </font></td>
    <td width="2%" valign="top" bgcolor="#E9F1F8">&nbsp;</td>
    <td width="8%" valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 11/14/2007 </font></td>
    <td width="2%" valign="top" bgcolor="#E9F1F8">&nbsp;</td>
    <td valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> Fiber Signal Access Device of Large Screen Display </font></td>
    <td width="2%" valign="top" bgcolor="#E9F1F8">&nbsp;</td>
    <td width="8%" valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 10 years </font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman"> ZL 2006 2 0014546.3 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> 9/12/2007 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> General Cable &nbsp;Signal Access Device of Large Screen Display </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> 10 years </font></td>
  </tr>
  <tr>
    <td valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> ZL 2006 2 0014549.7 </font></td>
    <td valign="top" bgcolor="#E9F1F8">&nbsp;</td>
    <td valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 9/12/2007 </font></td>
    <td valign="top" bgcolor="#E9F1F8">&nbsp;</td>
    <td valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> Bus Signal Access Device of Large Screen Display </font></td>
    <td valign="top" bgcolor="#E9F1F8">&nbsp;</td>
    <td valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 10 years </font></td>
  </tr>
</table>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We protect our know-how and technologies through confidentiality provisions in the employment contracts
we enter into with our employees. In addition, our engineers are generally divided into different
project groups, each of which generally handles only a portion of the project. As a result, no one
engineer generally has access to the entire design process and documentation for a particular product.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Sales and Marketing</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We develop new business by identifying and contacting potential new customers and through referrals,
or as a result of new customers contacting us because of our reputation in the industry. We strengthen
our market presence through various types of marketing campaigns, such as participating in exhibitions,
trade fairs and seminars, and presenting solutions to prospective customers. We participate in several
domestic and international trade fairs such as the China High-Tech Fair in Shenzhen and the e-Gov
China Fair in Beijing. We also participate in seminars held by ESRI, IBM etc. each year, to raise
our recognition and promote our products. These trade fairs not only promote our reputation, but
also our brand name. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our main marketing and business development focus is on public security information technology and
GIS software services and operations, and software sales and distribution. We have a good reputation
and brand recognition in this market. We expect to expand in the market and obtain more market shares
through our mature products and quality services.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Our Major Customers</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our VIE, iASPEC serves 46 customers located in the Guangdong Province and Hainan Province in China.
iASPEC has begun to explore markets outside of Guangdong and Hainan Province in China. We do not
have any customers outside of China. Our largest client, Shenzhen General Station of Exit and Entry
Frontier Inspection of the PRC, accounted for 26% of our sales in 2007, and our five largest customers
accounted for 59% of our revenue in 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following table provides information on our major customers in 2007 and 2006. For 2006, revenues
were generated by our Predecessor company, iASPEC, during the Predecessor Period from January 1,
2006 to October 8, 2006 and by us directly through our turnkey arrangement with iASPEC or directly
with clients during the Successor Period from January 17, 2006 to December 31, 2006. For 2007, revenues
were generated by us through our turnkey arrangement with iASPEC for the period from January 1, 2007
to June 30, 2007 and by us through our VIE, iASPEC, during the period from July 1, 2007 to December
31, 2007. We have combined the Predecessor Period from January 1 through October 8, 2006 and the
Successor Period from January 17 through December 31, 2006 for purposes of the following 2006 analysis.
This is not in accordance with US GAAP and the periods presented are not comparable due to our reverse
acquisition by CPSH. We have also combined the results of operations of CPSH for the period from
January 1, 2007 through December 31, 2007 and the results of iASPEC&#146;s operations from January
1, 2007 through June 30, 2007 for purposes of the following 2007 analysis, which is not in accordance
with US GAAP since iASPEC&#146;s results were not consolidated into CPSH until July 1, 2007 when it became the VIE.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>44</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH COLSPAN=10><font size="2" face="Times New Roman">2007</font></TH>
    <TH><font size="2" face="Times New Roman"></font></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH COLSPAN=10><HR align="center" width="50" SIZE=1 NOSHADE COLOR=#000000></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH align="left" valign="bottom"><font size="2" face="Times New Roman">No.</font></TH>
    <TH align="left" valign="bottom">&nbsp;</TH>
    <TH align="left" valign="bottom"><FONT FACE="Times New Roman" SIZE=2>Name</FONT></TH>
    <TH valign="bottom"><font size="2" face="Times New Roman"></font></TH>
    <TH valign="bottom"><font size="2" face="Times New Roman"></font></TH>
    <TH COLSPAN=2 valign="bottom"><FONT FACE="Times New Roman" SIZE=2> Revenues<br>
      (in thousands of<br>
      US dollars) </FONT></TH>
    <TH valign="bottom"><font size="2" face="Times New Roman"></font></TH>
    <TH COLSPAN=2 valign="bottom"><font size="2" face="Times New Roman">Percentage of <br>
      Total Sales </font></TH>
    <TH><font size="2" face="Times New Roman"></font></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><HR align="left" width="40" SIZE=1 NOSHADE COLOR=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD WIDTH=4% ALIGN=left valign="top"><font size="2" face="Times New Roman">1</font></TD>
    <TD WIDTH=3% ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shenzhen General Station Of Exit And Entry Frontier Inspection Of The P.R.C.</FONT></TD>
    <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=13% ALIGN=RIGHT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,756</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=13% ALIGN=RIGHT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=left><font size="2" face="Times New Roman">2</font></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shenzhen City Police Department</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6, 498</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=left><font size="2" face="Times New Roman">3</font></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shantou City Police Department</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,171</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=left><font size="2" face="Times New Roman">4</font></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shenzhen City Futian District Information Center</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>834</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=left><font size="2" face="Times New Roman">5</font></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Guangzhou Jieqing Computer Co.,Ltd.</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>739</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=center><font size="2" face="Times New Roman">&nbsp;</font></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><strong>TOTAL</strong></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><strong>$</strong></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 17,998</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>59</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH COLSPAN=10><font size="2" face="Times New Roman">2006</font></TH>
    <TH><font size="2" face="Times New Roman"></font></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH COLSPAN=10><HR align="center" width="50" SIZE=1 NOSHADE COLOR=#000000></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH align="left" valign="bottom"><font size="2" face="Times New Roman">No.</font></TH>
    <TH align="left" valign="bottom">&nbsp;</TH>
    <TH align="left" valign="bottom"><FONT FACE="Times New Roman" SIZE=2>Name</FONT></TH>
    <TH valign="bottom"><font size="2" face="Times New Roman"></font></TH>
    <TH valign="bottom"><font size="2" face="Times New Roman"></font></TH>
    <TH COLSPAN=2 valign="bottom"><FONT FACE="Times New Roman" SIZE=2> Revenues<br>
      (in thousands of<br>
      US dollars) </FONT></TH>
    <TH valign="bottom"><font size="2" face="Times New Roman"></font></TH>
    <TH COLSPAN=2 valign="bottom"><font size="2" face="Times New Roman">Percentage of <br>
      Total Sales </font></TH>
    <TH><font size="2" face="Times New Roman"></font></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><HR align="left" width="40" SIZE=1 NOSHADE COLOR=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD WIDTH=4% ALIGN=left valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman">1</font></TD>
    <TD WIDTH=3% ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shenzhen City Police Department</FONT></TD>
    <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=13% ALIGN=RIGHT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,621</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=13% ALIGN=RIGHT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13.8</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=left><font size="2" face="Times New Roman">2</font></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shenzhen City Fire Department</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>835</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.1</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=left><font size="2" face="Times New Roman">3</font></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shenzhen Immigration Bureau of China</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>791</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.7</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=left><font size="2" face="Times New Roman">4</font></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shenzhen City Nanshan District Police Department</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>299</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.5</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=left><font size="2" face="Times New Roman">5</font></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shenzhen City Traffic Police Department</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>207</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.8</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=center><font size="2" face="Times New Roman">&nbsp;</font></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><strong>TOTAL</strong></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><strong>$</strong></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><strong> 3,753</strong></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31.9</FONT></strong></TD>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></strong></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Our Competition</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The markets for public security Information Technology and GIS in China have developed in recent years,
and currently there are only a few software developers engaged in these fields, especially in the
PGIS area, where we do not currently face any direct competition. However, there are many potential
competitors in this area who could enter the market without significant barriers to entry.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We believe that Beijing Founder Digital Company Limited and Zheng Xian Technology (Shenzhen) Company
Limited pose a threat as potential market entrants in the public security Informatization and GIS
areas. However, we believe that we will be able to effectively compete with these software development
companies should they enter the market for our product and service offerings in the future. There
are barriers to accessing the PGIS market which give us a competitive advantage over our potential
competitors. Our pioneering PGIS platform and our ongoing customer relationships have enabled us
to develop a reputation in the industry. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our services are designed to provide our customers with integrated and innovative public safety and
security solutions. Key advantages of our solutions include:</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><I>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Growing Portfolio of Software and Services &#150;</I> &nbsp;We offer our customers location-based public security solutions through our growing portfolio
  of software and services offerings. Government agencies use our core products to incorporate location-based
  data into their decision-making processes to drive more effective results. Through our platforms,
  our customers can develop unique location-based applications, which can be extended across their
  agencies to support a variety of needs and generate more valuable intelligence. As a complement to
  these offerings, we offer related services, such as application development and systems integration,
  which help our customers quickly implement and customize our solutions.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><I>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Successful Implementation of High Profile Contracts &#150;</I> &nbsp;Our management team has a proven track record of successful implementation of high profile government
  contracts in China. During 2007, we procured or completed several large-scale system integration
  contracts relating to our First Responder Coordination System, our Intelligent Border Control System
  and our Residence Card Management System. We have successfully implemented our First Responder Coordination
  Platform,&nbsp;which combines the functions of the police emergency system, the fire emergency system,
  and the traffic control emergency system, in Shenzhen City, Guangdong and in Dongbang City, Hainan.
  In April we were granted our third contract for its implementation in the Shantou Special Economic
  Zone of Guangdong Province. We won a contract for the implementation of our Intelligent Border Control
  System at the Shenzhen Bay Port and the Futian Port, the former of which received official recognition
  in July 2007, when China&#146;s President Hu Jintao inspected the system and became the first passenger to use the crossing.</FONT></div></TD></TR></TABLE>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>45</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=54>&nbsp;</TD>
<TD vAlign=top>&nbsp;</TD></TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><I>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>High Barriers to Entry &#150;</I> &nbsp;Our high qualifications, our successful contractual implementation record, the high cost of
  switching to other providers provides us with a &#147;first mover&#148; advantage in the PRC market
  and poses high barriers to entry for our potential competitors. We have a proven track record of
  contract implementation and our commercial partner, iASPEC holds the Computer Information System
  Integration Level 1 Qualification from the PRC Ministry of Information and the Computer Information
  System Security Service qualification from Guangdong Province. In addition, after investing in our
  systems, our existing customers have a strong incentive to purchase follow-on phases with us in order
  to expedite implementation and save costs.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><I>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>Scalability of Platform &#150;</I> &nbsp;We have digitized detailed proprietary information systems data related to Shenzhen City and
  Guangdong Province that can be leveraged for future civil-use applications in logistics, insurance,
  and location based services across industries.</FONT></div></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Regulation </B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We are subject to the PRC&#146;s foreign currency regulations. The PRC government has control over
RMB reserves through, among other things, direct regulation of the conversion of RMB into other foreign
currencies. Although foreign currencies which are required for &#147;current account&#148; transactions
can be bought freely at authorized Chinese banks, the proper procedural requirements prescribed by
Chinese law must be met. At the same time, Chinese companies are also required to sell their foreign
exchange earnings to authorized Chinese banks and the purchase of foreign currencies for capital
account transactions still requires prior approval of the Chinese government.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our Chinese subsidiary Information Security Technology (China) Co., Ltd. (&#147;IST&#148;), is a Shenzhen
City Software Enterprise, holds ISO 9001:2000 Certification and Maturity Level 2 of Capability Maturity
Model Integration. However, fulfillment of certain PGIS contracts with PRC Government customers is
restricted to entities possessing the necessary government licenses and approvals which IST does
not have. Through our exclusive commercial arrangements with iASPEC we benefit from the following
governmental licenses and permits previously awarded and currently held by iASPEC: </FONT></P>
<table width="100%" cellpadding="0" cellspacing="0">
  <tr>
    <td valign="top"><font size="2" face="Times New Roman"> Name </font></td>
    <td width="3%" valign="top">&nbsp;</td>
    <td width="40%" valign="top"><font size="2" face="Times New Roman"> Duration </font></td>
  </tr>
  <tr>
    <td valign="top"><HR align="left" width="40" SIZE=1 NOSHADE COLOR=#000000></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><HR align="left" width="60" SIZE=1 NOSHADE COLOR=#000000></td>
  </tr>
  <tr bgcolor="#E9F1F8">
    <td valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> Computer System Integration Level One Qualification from PRC <br>
      Ministry of Information</font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> June 11, 2007 &ndash; June 10, 2010 </font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman"> State Secret related Computer Information System Integration <br>
      Certificate </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> April 26, 2004 - April 25, 2008 </font></td>
  </tr>
  <tr bgcolor="#E9F1F8">
    <td valign="top"><font size="2" face="Times New Roman"> Guangdong Province Computer Information System Security <br>
      Service Qualification </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> July 22, 2004 - July 22, 2008 </font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman"> Shenzhen City Key Software Enterprise </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> March 28, 2007 - March 27, 2008 </font></td>
  </tr>
  <tr bgcolor="#E9F1F8">
    <td valign="top"><font size="2" face="Times New Roman"> Shenzhen City High Technology Enterprise </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> December 31, 2001 - June 24, 2008 </font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman"> Guangdong Province Security Technology Surveillance System <br>
      Design, Implementation and Repair Qualification </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> October 31, 2007 &ndash; October 30, 2009 </font></td>
  </tr>
  <tr bgcolor="#E9F1F8">
    <td valign="top"><font size="2" face="Times New Roman"> Maturity Level 3 of Capability Maturity Model Integration </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> September 2007 (Authorized Date) </font></td>
  </tr>
</table>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In addition, Bocom Multimedia holds the following certifications and qualifications:</FONT></P>
<table width="100%" cellpadding="0" cellspacing="0">
  <tr>
    <td valign="top"><font size="2" face="Times New Roman"> Holder </font></td>
    <td valign="top"><font size="2" face="Times New Roman"> Name </font></td>
    <td valign="top"><font size="2" face="Times New Roman"> Duration </font></td>
  </tr>
  <tr>
    <td valign="top"><HR align="left" width="40" SIZE=1 NOSHADE COLOR=#000000></td>
    <td valign="top"><HR align="left" width="40" SIZE=1 NOSHADE COLOR=#000000></td>
    <td valign="top"><HR align="left" width="60" SIZE=1 NOSHADE COLOR=#000000></td>
  </tr>
  <tr bgcolor="#E9F1F8">
    <td width="27%" valign="top"><font size="2" face="Times New Roman"> Bocom Multimedia </font></td>
    <td width="38%" valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> ISO 9001:2000 Certification from <br>
    Universal Certification Service Co., Ltd. </font></td>
    <td width="35%" valign="top"><font size="2" face="Times New Roman"> November 08, 2004 &ndash; September 26, 2010 </font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman"> Bocom Multimedia </font></td>
    <td valign="top"><font size="2" face="Times New Roman"> Certificate for China Compulsory Product <br>
      Certification </font></td>
    <td valign="top"><font size="2" face="Times New Roman"> August 14, 2007 (Authorized Date) </font></td>
  </tr>
</table>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Our Employees</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As of December 31, 2007, we had approximately 460 full-time employees. The following table illustrates
the allocation of these employees among the various job functions conducted at our company. </FONT></P>
<table width="100%" cellpadding="0" cellspacing="0">
  <tr>
    <td width="10%" valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> Department </font></td>
    <td width="20%" align="center" valign="top"><font size="2" face="Times New Roman"> Number of Employees </font></td>
    <td width="10%" valign="top">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top"><HR align="left" width="70" SIZE=1 NOSHADE COLOR=#000000></td>
    <td align="center" valign="top"><HR align="center" width="130" SIZE=1 NOSHADE COLOR=#000000></td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> Software Development </font></td>
    <td align="center" valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 340 </font></td>
    <td width="10%" valign="top">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> Sales &amp; Marketing </font></td>
    <td align="center" valign="top"><font size="2" face="Times New Roman"> 50 </font></td>
    <td valign="top">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> Admin &amp; Human Resources </font></td>
    <td align="center" valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 25 </font></td>
    <td valign="top">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> Accounting </font></td>
    <td align="center" valign="top"><font size="2" face="Times New Roman"> 20 </font></td>
    <td valign="top">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> Corporate Finance </font></td>
    <td align="center" valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 15 </font></td>
    <td valign="top">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman"> Management </font></td>
    <td align="center" valign="top"><font size="2" face="Times New Roman"> 10 </font></td>
    <td valign="top">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> Total </font></td>
    <td align="center" valign="top" bgcolor="#E9F1F8"><font size="2" face="Times New Roman"> 460 </font></td>
    <td valign="top">&nbsp;&nbsp;</td>
  </tr>
</table>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>46</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We believe that our relationship with our employees is good. The remuneration payable to employees
includes basic salaries and allowances. We also provide training for our staff from time to time
to enhance their technical knowledge. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We have not experienced any significant problems or disruption to our operations due to labor disputes,
nor have we experienced any difficulties in recruitment and retention of experienced staff.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our Chinese subsidiaries have trade unions which protect employees&#146; rights, aim to assist in the
fulfillment of our economic objectives, encourage employee participation in management decisions
and assist in mediating disputes between us and union members.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As required by applicable Chinese law, we have entered into employment contracts with all of our officers,
managers and employees.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our employees in China participate in a state pension scheme organized by Chinese municipal and provincial
governments. We are required to contribute to the scheme at rates ranging from 13% to 18% of the
average monthly salary. As of the date of this report, we have complied with the regulation and have
paid the state pension plan as required by law.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In addition, we are required by Chinese law to cover employees in China with various types of social
insurance. We have purchased social insurance for all of our employees.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>With the expansion of our business operations and several anticipated acquisitions, we expect that
the number of our employees will increase in the next 12 months.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Our Properties and Facilities</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>All land in China is owned by the state or collectives. Individuals and companies are permitted to
acquire rights to use land or land use rights for specific purposes. In the case of land used for
industrial purposes, the land use rights are granted for a period of 50 years. This period may be
renewed at the expiration of the initial and any subsequent terms according to the relevant Chinese
laws. Granted land use rights are transferable and may be used as security for borrowings and other
obligations.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Prior to June 2007, our subsidiary IST occupied space in offices pursuant to a six month rental agreement.
In June 2007, we moved into our new executive offices located on the 21st Floor of the Everbright
Bank Bldg., Zhuzilin, Futian District, Shenzhen, China, for which IST currently has land use rights.
Our new executive offices, consist of approximately 1,200 square meters, all of which are dedicated
to administrative office space. We have fully paid the land use fees. Our other property primarily
consists of computer equipment, servers, licensed software, some furniture and fixtures. There is
no lien on any of our property and we currently do not have any intention to make large scale improvements
or developments with respect to these properties. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We believe that all our properties have been adequately maintained, are generally in good condition,
and are suitable and adequate for our business.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a10"></a>MANAGEMENT</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Directors, Executive Officers and Significant Employees</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following sets forth the name and position of each of our current executive officers and directors.</FONT></P>
<table width="100%" cellpadding="0" cellspacing="0">
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"><strong> Name </strong></font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"><strong> Age </strong></font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"><strong> Position </strong></font></td>
  </tr>
  <tr valign="bottom">
    <td width="20%" bgcolor="#E9F1F8"><font size="2" face="Times New Roman, Times, serif"> Jiang Huai Lin </font></td>
    <td width="8%" bgcolor="#E9F1F8"><font size="2" face="Times New Roman, Times, serif"> 38 </font></td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman, Times, serif"> President, Chief Executive Officer, and Chairman of the Board </font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman, Times, serif"> Zhi Xiong Huang </font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> 38 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> Director and Chief Operating Officer </font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman, Times, serif"> Zhaoyang Chen </font></td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman, Times, serif"> 43 </font></td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman, Times, serif"> Chief Financial Officer </font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman, Times, serif"> Yun Sen Huang </font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> 61 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> Director </font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman, Times, serif"> Qiang Lin </font></td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman, Times, serif"> 61 </font></td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman, Times, serif"> Director </font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="2" face="Times New Roman, Times, serif"> Yi Gang Shen </font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> 34 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> Chief Technology Officer </font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman, Times, serif"> Sean Shao </font></td>
    <td bgcolor="#E9F1F8"><font face="Times New Roman, Times, serif" size="2">51</font></td>
    <td bgcolor="#E9F1F8"><font size="2" face="Times New Roman, Times, serif"> Director </font></td>
  </tr>
</table>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>47</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>MR. &nbsp;JIANG HUAI LIN</B> &nbsp;has been a member of our Board of Directors since September 6, 2006 and he became our President
and Chief Executive Officer on October 3, 2006. Mr. Lin has also served as the Chairman and Chief
Executive Officer of our subsidiary, IST, since its incorporation in January 2006. During the period
from September 2000 to June 2004, Mr. Lin served as the President and Chief Executive Officer of
Hong Kong United Development Group, a consolidated enterprise engaging in investment, high technology
and education. Before that, during the period from February 1995 through August 2000, Mr. Lin was
a Director and the General Manager of Fujian Wild Wolf Electronics Limited, a company engaged in
the business of manufacturing electrical consumer products. Mr. Lin holds a Bachelor&#146;s degree
in Industrial Accounting from Xiamen University.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>MR. ZHI XIONGHUANG</B> &nbsp;was appointed as our Chief Operating Officer on May 10, 2007 and has served as a member on our
Board of Directors since November 28, 2006. Mr. Huang has also served as the Vice-President of our
subsidiary IST since its incorporation in January 2006. Since September 2002, he has also been a
Vice President of iASPEC, where he supervises iASPEC&#146;s research and development activities and
consults on various types of sophisticated, technical issues. Between July 2001 and March 2002, Mr.
Huang served as the General Manager of product development of Shenzhen Runsheng Information Systems
Company Ltd. and was responsible for overseeing general operations. He holds a B.S. in computer science
from Hehai University in China and has over fifteen years&#146; experience in information systems.
Mr. Huang is currently a Director of the Shenzhen Computer Association and is an Expert with the
Shenzhen Expert Association, a nonprofit organization.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>MR. ZHAOYANG CHEN</B> &nbsp;was appointed as our Chief Financial Officer on December 13, 2007. Mr. Chen has had over 15
years&#146; experience in the field of financial management and investments and has served as our
Vice President of Investments since April 2007. Prior to joining the Company, Mr. Chen served from
July 2004 to March 2007 as the General Manager of the Gaoying Group (Hong Kong), where he was responsible
for overall operations and several acquisition projects. Prior to that Mr. Chen served from September
1999 to June 2004 as the Assistant General Manager of the Shenzhen Zheng Jia Investment Company,
where he was responsible for corporate finance management and project investments. Mr. Chen has also
served as the General Manager of Risk Control for the Shenzhen Zhong Cheng Enterprises Group and
as the Chief Financial Officer and Director of Guizhou Fu Bao Co., Ltd. during its application for
A Share listing in China. Mr. Chen holds a Bachelor&#146;s degree in Accounting from the Hangzhou
Dianzi University. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>MR. YUN SEN HUANG</B> &nbsp;has been a member of our Board of Directors since August 10, 2007. Mr. Huang has been a Professor
in the School of Information Engineering at Shenzhen University since September 1984. He has been
involved in many computer application projects, and has received many awards, including a First Grade
Award of Technology Advancement from Sichuan Province, a Second Grade Award of Technology Advancement
from Guangdong Province, and a Third Grade Award of Technology Advancement from the Chemical Ministry.
Mr. Huang has published eight books in the field of Networks and Multimedia Applications. In addition,
Mr. Huang was a founder of the International Software Development (Shenzhen) Co., Ltd, a co-partnership
company incorporated by IBM, East Asia Bank, and Shenzhen SDC Company, and its Chairman between 2001-2006.
Currently, Mr. Huang is a Director of the Shenzhen Computer Academy, a Vice Director of the Guangdong
Province Computer Academy, as well as, Executive Director of the China University Computer Basic
Education Committee. Mr. Huang holds a Bachelor&#146;s Degree of Electronics Engineering from Tsinghua
University. There is no relationship between Mr. Huang and our Chief Operating Officer, Zhi Xiong Huang.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>MR. QIANG LIN</B> &nbsp;has been a member of our Board of Directors since August 10, 2007. Mr. Lin has been a Professor
in the School of Information Engineering at Shenzhen University since September 2002. From July 1997
to September 2002, Mr. Lin served as the Director of Computer Science and Technology Department at
Shenzhen University. Mr. Lin has been engaged in teaching and research in the Computer Applications
field for many years. Presently, he is a postgraduate advisor and teacher and focuses his research
in the fields of Computer Networks, Information Systems, Databases, and ERP systems. Mr. Lin has
published many research papers in China&#146;s<I>&nbsp;Computer Science</I> . He is also the editor-in-chief of<I>&nbsp;Electrical Business Foundation</I> . Mr. Lin has significant research experience in information systems, electronic business, logistics,
and image disposal and has successfully developed many computer application systems as a project
principal. He has been awarded with a First Grade Award of Software Development from the Chinese
Chemical Ministry and a Third Grade Award of Science and Technology Development by Guangdong Province.
Mr. Lin holds a Master Degree of Computing Mathematics from Zhongshan University<I> .</I> &nbsp;There is no relationship between Mr. Lin and our Chief Executive Officer, Jiang Huai Lin.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>MR. YI GANG SHEN</B> &nbsp;was appointed as our Chief Technology Officer on May 10, 2007. Prior to this, Mr. Shen served
as the Director of the R&amp;D Center of Shenzhen iASPEC Software Engineering Co., Ltd. from February
2006 to May 2007. From March 2003 to January 2006, Mr. Shen served as the Director of product and
business development of Li Ming Network Co., Ltd., and from June 2000 to February 2003, Mr. Shen
served as the Project Manager of &#147;TOM.COM&#148;, a company listed on the Hong Kong GEM. Mr.
Shen has over ten years of IT experience in different areas such as e-government and financing. Mr.
Shen graduated from Lanzhou University of China where he earned a Bachelor&#146;s Degree in Electronics and Information Science and holds the Senior Project Manager
certificate awarded by China&#146;s Ministry of Information Industry.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>48</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>MR. SEAN SHAO </B>has been a member of our Board of Directors since April 1, 2008. Mr. Shao has been serving as Chief
Financial Officer of Trina Solar Limited since August 2006, where he assisted it in listing on the
NYSE in December 2006. Previously he was the Chief Financial Officer of ChinaEdu Corporation, a Chinese
educational service provider, from September 2005 to August 2006 and was the Chief Financial Officer
of Watchdata Technologies Ltd., a Chinese security software company, from August 2004 to September
2005. He was previously a senior manager at Deloitte Touche Tohmatsu CPA Ltd., Beijing from October
1998 to July 2004 and an assistant manager at Deloitte &amp; Touche Toronto from December 1994 to
November 1997. Mr. Shao received his Master&#146;s degree in Health Care Administration from the
University of California at Los Angeles in 1988 and his Bachelor&#146;s degree in Art from East China
Normal University in 1982. Mr. Shao is an associate member of the American Institute of Certified
Public Accountants.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>There are no agreements or understandings for any of our executive officers or directors to resign
at the request of another person and no officer or director is acting on behalf of nor will any of
them act at the direction of any other person.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Family Relationships</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>There are no family relationships among our directors or officers. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Involvement in Certain Legal Proceedings</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>To the best of our knowledge, except as set forth in our discussion below in &#147;Certain Relationships
and Related Transactions,&#148; none of our directors, director nominees or executive officers has
been involved in any transactions with us or any of our directors, executive officers, affiliates
or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
None of the directors, director designees or executive officers to our knowledge has been convicted
in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party
to any judicial or administrative proceeding during the past five years that resulted in a judgment,
decree or final order enjoining the person from future violations of, or prohibiting activities subject
to, federal or state securities laws, or a finding of any violation of federal or state securities
laws, except for matters that were dismissed without sanction or settlement.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Promoters and Certain Control Persons</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We did not have any promoters at any time during the past five fiscal years.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Compliance with Section 16(a) of the Exchange Act</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially
own more than ten percent of our equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater than ten percent shareholders
are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based
on its review of the copies of such forms received by us all such filing requirements applicable
to its officers and directors were complied with during the fiscal year ended December 31, 2007. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Code of Ethics</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On December 25, 2007, our Board of Directors amended and restated its current code of ethics, or Code
of Ethics, so that it conforms to the rules and regulations of The Nasdaq Stock Market, Inc. The
Code of Ethics applies to all of our directors, officers and employees, including our principal executive
officer, principal financial officer, and principal accounting officer. Our Code of Ethics will serve
as our Company&#146;s &#147;code of ethics,&#148; as defined in Item 406(b) of Regulation S-K.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our Code of Ethics addresses, among other things, honesty and ethical conduct, conflicts of interest,
compliance with laws, regulations and policies, confidentiality, and reporting of violations of the
code. A copy of the Code of Ethics is attached to this report as Exhibit 14 and is incorporated herein
by reference. Our Code of Ethics will also be posted on the corporate governance page of our website
at<U>&nbsp;www.chinacpby.com</U> &nbsp;as soon as practicable.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Material Changes to Director Nomination Procedures &nbsp;</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We currently do not have standing audit, nominating or compensation committees. Currently, our entire
board of directors is responsible for the functions that would otherwise be handled by these committees.
We intend, however, to establish an audit committee, a nominating committee and a compensation committee of the board of
directors during the second quarter of 2008. We envision that the audit committee will be primarily
responsible for reviewing the services performed by our independent auditors, evaluating our accounting
policies and our system of internal controls. The nominating committee would be primarily responsible
for nominating directors and setting policies and procedures for the nomination of directors. The
nominating committee would also be responsible for overseeing the creation and implementation of
our corporate governance policies and procedures. The compensation committee will be primarily responsible
for reviewing and approving our salary and benefit policies (including stock options), including
compensation of executive officers. </FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>49</FONT></P>
<HR noShade SIZE=5 color="#000000">

<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Shareholder Communications</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Shareholders who wish to communicate with the Board may write to it at our address given above. These
communications will be reviewed by one or more employees of the Company designated by the Board,
who will determine whether they should be presented to the Board. The purpose of this screening is
to allow the Board to avoid having to consider irrelevant or inappropriate communications.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a11"></a>EXECUTIVE COMPENSATION&nbsp;</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Summary Compensation Table</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following table sets forth information concerning all cash and non-cash compensation awarded to,
earned by or paid to the following persons for services rendered in all capacities during the noted
periods: Jiang Huai Lin, our Chief Executive Officer, Mr. Zhi Xiong Huang, our Chief Operating Officer,
and Mr. Zhaoyang Chen, our Chief Financial Officer. No other executive officers received total annual
salary and bonus compensation in excess of $100,000.</FONT></P>
<TABLE width="100%" border=0 cellPadding=0 cellSpacing=0>
     <TR valign="bottom">
      <TD dir=ltr><FONT face="Times New Roman" style="font-size: 9pt"><B>Name and<br>
        Principal Position</B></FONT></TD>
      <TD width="9%"
    align=center dir=ltr><FONT face="Times New Roman" style="font-size: 9pt"><B>Year</B></FONT></TD>
      <TD width="9%"
    align=center dir=ltr><FONT face="Times New Roman" style="font-size: 9pt"><B>Salary($)</B></FONT></TD>
      <TD width="9%"
    align=center dir=ltr><FONT face="Times New Roman" style="font-size: 9pt"><B>Bonus($)</B></FONT></TD>
      <TD width="9%"
    align=center dir=ltr><FONT face="Times New Roman" style="font-size: 9pt"><B>Stock<br>
        Awards <br>
        ($)</B></FONT></TD>
      <TD width="9%"
    align=center dir=ltr><FONT face="Times New Roman" style="font-size: 9pt"><B>Option<br>
        Awards <br>
        (No.of <br>
        shares)</B></FONT></TD>
      <TD width="10%"
    align=center dir=ltr><FONT face="Times New Roman" style="font-size: 9pt"><B>Non-Equity<br>
        Incentive <br>
        Plan Compensation<br>
        Earnings <br>
        ($)</B></FONT></TD>
      <TD width="10%"
    align=center dir=ltr><FONT face="Times New Roman" style="font-size: 9pt"><B>Non-qualified<br>
        Deferred<br>
        Compensation<br>
        Earnings <br>
        ($)</B></FONT></TD>
      <TD width="10%"
    align=center dir=ltr><FONT face="Times New Roman" style="font-size: 9pt"><B>All Other<br>
        Compensation<br>
      ($)</B></FONT></TD>
      <TD width="10%"
    align=center dir=ltr><FONT face="Times New Roman" style="font-size: 9pt"><B>Total<br>
      ($)</B></FONT></TD>
    </TR>
    <TR>
      <TD colspan="10" dir=ltr>
      <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
    </TR>
    <TR bgcolor="#E9F1F8">
      <TD dir=ltr><FONT face="Times New Roman" style="font-size: 9pt">Jiang Huai Lin,<br>
        Chairman, CEO,<br>
        and President <SUP>(1)</SUP></FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt">2006</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt">15,550</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt">45,000<B><SUP>(2)</SUP></B></FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt">60,550</FONT></TD>
    </TR>
    <TR>
      <TD dir=ltr><font style="font-size: 9pt">&nbsp;</font></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt">2007</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt">45,949</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt">261,000 <SUP>(3)</SUP></FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt">108,000<B><SUP>(2)</SUP></B></FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt">414,949</FONT></TD>
    </TR>
    <TR>
      <TD colspan="10" dir=ltr>
      <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
    </TR>
    <TR bgcolor="#E9F1F8">
      <TD dir=ltr><FONT face="Times New Roman" style="font-size: 9pt">Zhi Xiong Huang,<br>
        Director and Chief<br>
        Operating <br>
        Officer <SUP>(4)</SUP></FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt">2006</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    </TR>
    <TR>
      <TD dir=ltr><font style="font-size: 9pt">&nbsp;</font></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt"> 2007</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt"> 27,359</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt"> 174,000 <SUP>(5)</SUP></FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
      <TD
    align=right valign="bottom" dir=ltr>
      <FONT face="Times New Roman" style="font-size: 9pt"> 201,359</FONT></TD>
    </TR>

</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><U>Narrative to Summary Compensation Table</U></FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><SUP>(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On September 6, 2006, Mr. Lin became our Chairman and on October 3, 2006 he became our President and
  Chief Executive Officer. Prior to that, Mr. Lin was (and continues to be) the Chairman and Chief
  Executive Officer of our subsidiary, IST. The annual, long term and other compensation shown in this
  table includes the amount Mr. Lin received from IST during the applicable periods. </FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><SUP>(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>This amount constitutes amounts due to iASPEC under a license agreement between iASPEC and IST. Mr.
  Lin controls 60% of the equity interests of iASPEC.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><SUP>(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Represents the Fair Market Value of 30,000 shares of our common stock, par value $0.01, awarded to
  Mr. Lin on November 27, 2007, pursuant to the Plan.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><SUP>(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Mr. Huang became our Chief Operating Officer on May 10, 2007 and has served on our Board of Directors
  since November 28, 2006. Mr. Huang has also served as the Vice-President of our subsidiary, IST since
  its incorporation in January 2006. </FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><SUP>(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Represents the Fair Market Value of 20,000 shares of our common stock, par value $0.01, awarded to
  Mr. Huang on November 27, 2007, pursuant to the Plan.</FONT></div></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Outstanding Equity Awards at Fiscal Year End</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Other than as set forth below, none of our executive officers received unexercised options, stock that
has not vested or </FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>50</FONT></P>
<HR noShade SIZE=5 color="#000000">
<P style="PAGE-BREAK-BEFORE: always"><page>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>equity incentive plan awards that remained outstanding as of the end of the fiscal year ended December
31, 2007. </FONT></P>
<table width="100%" cellpadding="0" cellspacing="0">
  <tr>
    <td valign="top" nowrap><font face="Times New Roman" style="font-size: 9pt"> Name </font></td>
    <td colspan="5" align="center" valign="top" nowrap>
    <font face="Times New Roman" style="font-size: 9pt"> Option Awards </font></td>
    <td colspan="4" align="center" valign="top" nowrap>
    <font face="Times New Roman" style="font-size: 9pt"> Stock Awards </font></td>
  </tr>
  <tr valign="bottom">
    <td nowrap><font face="Times New Roman" style="font-size: 9pt">&nbsp;</font></td>
    <td nowrap><font face="Times New Roman" style="font-size: 9pt"> Number of <br>
      Securities <br>
      Underlying <br>
      Unexercised <br>
      Options (#) <br>
    Exercisable </font></td>
    <td nowrap><font face="Times New Roman" style="font-size: 9pt"> Number of <br>
      Securities <br>
      Underlying <br>
      Unexercised <br>
      Options <br>
    Unexercisable<sup>(1)</sup></font></td>
    <td nowrap><font face="Times New Roman" style="font-size: 9pt"> Equity <br>
      Incentive <br>
      Plan Awards: <br>
      Number of <br>
      Securities <br>
      Underlying <br>
      Unexercised <br>
      Unearned <br>
    Options (#) </font></td>
    <td nowrap><font face="Times New Roman" style="font-size: 9pt"> Option <br>
      Exercise <br>
    Price ($) </font></td>
    <td nowrap><font face="Times New Roman" style="font-size: 9pt"> Option <br>
      Expiration<br>
    Date </font></td>
    <td nowrap><font face="Times New Roman" style="font-size: 9pt"> Number of <br>
      Shares or <br>
      Units of <br>
      Stock That <br>
      Have Not <br>
    Vested (#) </font></td>
    <td nowrap><font face="Times New Roman" style="font-size: 9pt"> Market <br>
      Value of <br>
      Shares or <br>
      Units of <br>
      Stock That <br>
      Have Not <br>
    Vested ($) </font></td>
    <td nowrap><font face="Times New Roman" style="font-size: 9pt"> Equity <br>
      Incentive <br>
      Plan <br>
      Awards: <br>
      Number of <br>
      Unearned Shares,<br>
      Units or Other <br>
      Rights That <br>
      Have Not <br>
    Vested (#) </font></td>
    <td nowrap><font face="Times New Roman" style="font-size: 9pt"> Equity <br>
      Incentive <br>
      Plan Awards: <br>
      Market or <br>
      Payout Value <br>
      of Unearned <br>
      Shares, Units <br>
      or Other Rights <br>
      That Have <br>
    Not Vested ($) </font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#E9F1F8"><font face="Times New Roman" style="font-size: 9pt"> Zhaoyang Chen,<br>
      Chief Financial<br>
      Officer </font></td>
    <td width="10%" bgcolor="#E9F1F8">
    <font face="Times New Roman" style="font-size: 9pt"> 0 </font></td>
    <td width="10%" bgcolor="#E9F1F8">
    <font face="Times New Roman" style="font-size: 9pt"> 20,000 </font></td>
    <td width="10%" bgcolor="#E9F1F8">
    <font face="Times New Roman" style="font-size: 9pt"> 0 </font></td>
    <td width="10%" bgcolor="#E9F1F8">
    <font face="Times New Roman" style="font-size: 9pt"> 9.48 </font></td>
    <td width="10%" bgcolor="#E9F1F8">
    <font face="Times New Roman" style="font-size: 9pt"> 12/5/2011 </font></td>
    <td width="10%" bgcolor="#E9F1F8">
    <font face="Times New Roman" style="font-size: 9pt"> N/A </font></td>
    <td width="10%" bgcolor="#E9F1F8">
    <font face="Times New Roman" style="font-size: 9pt"> N/A </font></td>
    <td width="10%" bgcolor="#E9F1F8">
    <font face="Times New Roman" style="font-size: 9pt"> N/A </font></td>
    <td width="10%" bgcolor="#E9F1F8">
    <font face="Times New Roman" style="font-size: 9pt"> N/A </font></td>
  </tr>
</table>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><U>Narrative to outstanding equity awards table</U> &nbsp;</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><SUP>(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>Represents options to purchase 20,000 shares of&nbsp;our&nbsp;common stock, par value $0.01,&nbsp;which
were granted to Mr. Chen, pursuant to the Plan. The options had an exercise price of $9.48 per share,
were to vest on December 5, 2008 and&nbsp;to expire on December 5, 2011. However, on March 3, 2008,
our Board of Directors voided and canceled the grant of the options to Mr. Chen, effective as of
the date of the grant.</FONT></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We use the Black-Scholes option pricing model to measure the fair value of stock options, granted in
2007. The determination of the fair value of stock-based compensation awards on the date of grant
using an option-pricing model is affected by our stock price as well as assumptions regarding a number
of complex and subjective variables, including the expected volatility of our stock price over the
term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest
rate and expected dividends.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Additional Narrative Disclosure</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>All our employees, including Messrs Lin, Huang and Chen, have executed our form of employment agreement
and non-disclosure agreement . Mr. Lin earns RMB 29,167 per month (approximately $3,829) for his
services as our Chief Executive Officer and as IST&#146;s Chief Executive Officer, Mr. Huang earns
RMB17,367 per month (approximately $2,280) for his services as our Chief Operating Officer and as
IST&#146;s Vice President and Mr. Chen earns RMB 21,011 per month (approximately $2,758) for his
services as our Chief Financial Officer. No other benefits have been granted by us to officers at
this time. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Compensation of Directors</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following table sets forth information concerning all cash and non-cash compensation awarded to,
earned by or paid to our directors for services rendered during our last completed fiscal year.</FONT></P>
<TABLE width="100%" border=0 cellPadding=0 cellSpacing=0>

    <TR valign="bottom">
      <TD nowrap><FONT face="Times New Roman" size=2><B> Name</B></FONT></TD>
      <TD align=center nowrap><FONT face="Times New Roman" size=2><B> Fees<br>
        </B></FONT><FONT
      face="Times New Roman" size=2><B> Earned or<br>
        </B></FONT><FONT
      face="Times New Roman" size=2><B> Paid in<br>
        </B></FONT><FONT
      face="Times New Roman" size=2><B> Cash<br>
      </B></FONT><FONT
      face="Times New Roman" size=2><B> ($)</B></FONT></TD>
      <TD align=center nowrap><FONT face="Times New Roman" size=2><B> Stock<br>
        </B></FONT><FONT
      face="Times New Roman" size=2><B> Awards<br>
      </B></FONT><FONT
      face="Times New Roman" size=2><B> ($)</B></FONT></TD>
      <TD align=center nowrap><FONT face="Times New Roman" size=2><B> Option<br>
        </B></FONT><FONT
      face="Times New Roman" size=2><B> Awards<br>
      </B></FONT><FONT
      face="Times New Roman" size=2><B> ($)</B></FONT></TD>
      <TD align=center nowrap><FONT face="Times New Roman" size=2><B> Non-Equity<br>
        </B></FONT><FONT
      face="Times New Roman" size=2><B> Incentive Plan<br>
        </B></FONT><FONT
      face="Times New Roman" size=2><B> Compensation<br>
      </B></FONT><FONT
      face="Times New Roman" size=2><B> ($)</B></FONT></TD>
      <TD align=center nowrap><FONT face="Times New Roman" size=2><B> Change in Pension<br>
        </B></FONT><FONT
      face="Times New Roman" size=2><B> Value and<br>
        </B></FONT><FONT
      face="Times New Roman" size=2><B> Nonqualified<br>
        </B></FONT><FONT
      face="Times New Roman" size=2><B> Deferred<br>
        </B></FONT><FONT
      face="Times New Roman" size=2><B> Compensation<br>
      </B></FONT><FONT face="Times New Roman" size=2><B> Earnings ($) </B></FONT></TD>
      <TD align=center nowrap><FONT face="Times New Roman" size=2><B> All Other<br>
        </B></FONT><FONT
      face="Times New Roman" size=2><B> Compensation<br>
      </B></FONT><FONT
      face="Times New Roman" size=2><B> ($)</B></FONT></TD>
      <TD
    align=center nowrap><FONT face="Times New Roman" size=2><B> Total</B></FONT><FONT face="Times New Roman" size=2><B> <br>
      ($)</B></FONT></TD>
    </TR>
    <TR>
      <TD bgColor=#e9f1f8><FONT face="Times New Roman" size=2> Jiang Huai Lin</FONT></TD>
      <TD width="12%"
    align=center bgColor=#e9f1f8><FONT size=2>15,754</FONT></TD>
      <TD width="12%"
    align=center bgColor=#e9f1f8><FONT face="Times New Roman"
      size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD width="12%"
    align=center bgColor=#e9f1f8><FONT face="Times New Roman"
      size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD width="12%"
    align=center bgColor=#e9f1f8><FONT face="Times New Roman"
      size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD width="12%"
    align=center bgColor=#e9f1f8><FONT face="Times New Roman"
      size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD width="12%"
    align=center bgColor=#e9f1f8><FONT face="Times New Roman"
      size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD width="12%"
    align=center bgColor=#e9f1f8><FONT size=2>15,754</FONT></TD>
    </TR>
    <TR>
      <TD><FONT face="Times New Roman" size=2> Zhi Xiong Huang</FONT></TD>
      <TD align=center><FONT size=2>12,603</FONT></TD>
      <TD align=center><FONT face="Times New Roman" size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD align=center><FONT face="Times New Roman" size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD align=center><FONT face="Times New Roman" size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD align=center><FONT face="Times New Roman" size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD align=center><FONT face="Times New Roman" size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD
    align=center><FONT size=2>12,603</FONT></TD>
    </TR>
    <TR>
      <TD bgColor=#e9f1f8><FONT face="Times New Roman" size=2> Qiang Lin</FONT></TD>
      <TD
    align=center bgColor=#e9f1f8><FONT size=2>5,004</FONT></TD>
      <TD
    align=center bgColor=#e9f1f8><FONT face="Times New Roman"
      size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD
    align=center bgColor=#e9f1f8><FONT face="Times New Roman"
      size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD
    align=center bgColor=#e9f1f8><FONT face="Times New Roman"
      size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD
    align=center bgColor=#e9f1f8><FONT face="Times New Roman"
      size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD
    align=center bgColor=#e9f1f8><FONT face="Times New Roman"
      size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD
    align=center bgColor=#e9f1f8><FONT size=2>5,004</FONT></TD>
    </TR>
    <TR>
      <TD><FONT face="Times New Roman" size=2> Yun Sen Huang</FONT></TD>
      <TD align=center><FONT size=2>5,004</FONT></TD>
      <TD align=center><FONT face="Times New Roman" size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD align=center><FONT face="Times New Roman" size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD align=center><FONT face="Times New Roman" size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD align=center><FONT face="Times New Roman" size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD align=center><FONT face="Times New Roman" size=2>&nbsp; </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
      <TD
    align=center><FONT
size=2>5,004</FONT></TD>
    </TR>
  </TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><U>Narrative to Director Compensation Table</U></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>51</FONT></P>
<HR noShade color="#000000" SIZE=5>
<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Mr. Jiang Huai Lin earns RMB 10,000 per month (approximately $1,313) for his services as the Chairman
of our Board of Directors, Mr. Zhi Xiong Huang earns RMB 8,000 per month (approximately $1,050),
Mr. Qiang Lin earns RMB 3,000 per month (approximately $417), and Mr. Yun Sen Huang earns RMB 3,000
per month (approximately $417) as compensation for their services as independent directors, and are
reimbursed for pre-approved reasonable business-related expenses incurred in good faith in the performance
of their duties for our Company.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Effective as of April 1, 2008, we entered into our form of Independent Director Agreement and form of
Indemnification Agreement with our new independent director, Sean Shao. Under the terms of the Independent
Director Agreement, we agreed to pay Mr. Shao an annual salary of $18,000as compensation for the
services to be provided by him as a director. Under the terms of the Indemnification Agreement we&nbsp;agreed
to indemnify Mr. Shao against expenses, judgments, fines, penalties or other amounts actually and
reasonably incurred by Mr. Shao in connection with any proceeding if Mr. Shao acted in good faith
and in the best interests of the Company. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Other than as set forth herein, there have been no fees earned or paid in cash for services to our
directors. No stock or stock options or other equity incentives were awarded to our directors for
their services as directors during the fiscal year ended December 31, 2007.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a12" id="a12"></a>TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Certain Relationships and Transactions with Related Persons</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following discloses transactions with related persons entered into over the past two years.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On October 20, 2006, our subsidiary, IST, iASPEC, and iASPEC&#146;s shareholders, Mr. Lin and Mr. Jin
Zhu Cai, entered into a software license agreement, or Software License Agreement. Under the terms
of the Software License Agreement, IST was granted an exclusive license to use various different
software that was developed by iASPEC and necessary to operate the business of servicing iASPEC customers
through a Business Turnkey Agreement, or Turnkey Agreement, with iASPEC. In consideration for the
license, IST transferred to Mr. Lin 16,898,714 shares of our common stock valued at $0.58. The closing
of the transactions contemplated by the Software License Agreement occurred on November 13, 2006.
The shares transferred to Mr. Lin under the Software License Agreement constituted 53.5% of our issued
and outstanding common stock on that date.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>From October 9, 2006 through June 30, 2007, we operated under the Turnkey Agreement with iASPEC, pursuant
to which iASPEC exclusively engaged IST as its subcontractor to provide iASPEC with outsourcing services
(to the extent that those services do not violate any special governmental permits held by iASPEC
and do not involve the improper transfer of any sensitive confidential governmental or other data).
The Turnkey Agreement also provided for a revenue sharing arrangement between iASPEC and IST where
IST was entitled to between 90% and 100% of the revenues actually received by iASPEC from servicing
contracts involving any iASPEC business, but was obligated to pay for its own costs in providing
these services and to pay iASPEC $180,000 per year throughout the term of the agreement. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On November 9, 2006, we consummated the transactions contemplated by a stock purchase agreement, dated
October 16, 2006, between our subsidiary IST and Mr. Lin. Pursuant to the stock purchase agreement,
Mr. Lin acquired 8,601,286 shares of our common stock, representing 58.91% of our issued and outstanding
common stock at the time of the acquisition. In consideration for those shares, Mr. Lin and Mr. Jin
Zhu Cai caused iASPEC to transfer to IST, RMB 14,000,000 in cash (approximately $1,750,000) and all
of the accounts receivable of iASPEC as of August 31, 2006, which were valued by the parties at RMB
27,286,172 (approximately $3,410,771). No provision for doubtful accounts was made for the accounts
receivable balance. At the closing of the stock purchase agreement, Mr. Lin became our controlling
shareholder.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On January 31, 2007, our Board of Directors recommended and our stockholders approved the rescission
and simultaneous restructuring of the arrangements provided for by the CPSH transaction, the IST
transactions and the software license agreement, pursuant to a rescission, termination and share
exchange agreement among ourselves, IST, CPSH, iASPEC and iASPEC&#146;s shareholders, including Mr.
Lin. Pursuant to this restructuring agreement, the parties agreed: (1) to rescind the CPSH transaction
whereby we returned the CPSH shares to Mr. Lin in exchange for his return of the US$50,000 purchase
price; (2) to terminate the software license agreement and return the 16,898,714 shares of our common
stock to us; (3) to terminate the stock purchase agreement, return to iASPEC the payments and rights
received by IST and return the 8,601,286 shares of our common stock to us; and (4) that Mr. Lin will
exchange all the issued and outstanding stock of CPSH for 25,500,00 shares of our common stock, the
sum of the shares Mr. Lin personally received pursuant to the software license agreement and the
stock purchase agreement. As a result of the transactions effected under the restructuring agreement,
Mr. Lin became the beneficial owner of 25,500,000 shares of our common stock in the aggregate, which,
at January 31, 2007, constituted 80.8% of our issued and outstanding common stock. Mr. Lin has since transferred 1,182,065 of these shares and now holds 21,717,935
of these shares directly and 2,600,000 of these shares indirectly through Total Device Management
Limited, an entity controlled by Mr. Lin.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>52</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Prior to being subject to the Sarbanes-Oxley Act of 2002, in July 2006, IST advanced funds to Hong
Kong United Development Group Limited, a company that is 51% controlled by Mr. Lin, for use as working
capital. At December 31, 2006 the balance owed by Hong Kong United Development Group Limited was
$115,312, however, this balance was fully paid on April 6, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Effective July 1, 2007, IST, iASPEC and iASPEC&#146;s shareholders, Mr. Lin and Mr. Jin Zhu Cai agreed
to terminate the Turnkey Agreement and replaced it on the same day with the Management Service Agreement,
effective as of July 1, 2007. Pursuant to the terms of the Management Service Agreement, iASPEC granted
IST an exclusive, royalty-free, transferable, worldwide, license to use and install for a ten-year
term, certain iASPEC software, along with copies of source and object code relating to such software,
in any manner permitted by applicable laws, and IST licensed back to iASPEC a royalty-free, limited,
non-exclusive license to the Software, without right of sub-license, for the sole purpose of permitting
iASPEC to carry out its business as presently conducted. IST will also have the right to designate
two Chinese citizens to serve as senior managers of iASPEC, to serve on iASPEC&#146;s board of directors
and assist in managing the business and operations of iASPEC. In addition, both iASPEC and IST will
require the affirmative vote of the majority of our board of directors, as well as at least one non-insider
director, for certain material actions with respect to iASPEC, including, but not limited to: (a)
the nomination, appointment, election or replacement of any board members; (b) the distribution of
any dividend or profits; (c) any merger, division, change of corporate form, dissolution or liquidation;
(d) any reimbursement of net losses or other payments or transfers of funds from IST to iASPEC; (e)
the formation or disposition of a subsidiary or the acquisition or disposition of any interest in
any other entity; and (f) the encumbrance of any assets under any lien not in the ordinary course
of business. Furthermore, under the Management Service Agreement, IST will receive 100% of the net
received profit of iASPEC and will reimburse iASPEC for all net losses incurred by iASPEC. The net
profit of iASPEC will be paid to IST, and the net losses of iASPEC will be reimbursed by IST, no
later than the last day of the month following the end of each calendar quarter, commencing on July
1, 2007. IST is also obligated to pay iASPEC $180,000 per year, no later than the last day of the
month following the end of each calendar year, commencing on July 1, 2007, and this amount may be
retained by iASPEC out of any net received profit due and payable to IST as of such payment date.
IST may also advance to iASPEC, at its sole discretion, amounts to be credited against IST&#146;s
future obligations to iASPEC, but any such advances will be treated as prepayments and not as loans.
iASPEC will have no obligation to repay any such advances except by crediting the amount of such
advances against IST&#146;s obligation to reimburse net losses, or by adding the amount thereof to
net profit when and as requested by IST. If iASPEC or any of the iASPEC shareholders materially breaches
the Management Service Agreement and fails to remedy the breach within 60 days&#146; notice from
IST of such breach, they will be jointly and severally obligated to pay to IST liquidated damages
in an amount equal to the higher of (a) eight times the annualized revenues of IST for the last completed fiscal quarter, or (b) US$50 million.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Management Service Agreement contains a true-up provision which required iASPEC and IST to calculate
all prior amounts owed to IST under the Turnkey Agreement, and required iASPEC to pay such amounts.
The parties were required to calculate the cumulative net profit of iASPEC from October 9, 2006,
when iASPEC commenced its contractual relationship with IST, through the commencement date of the
Management Service Agreement, and iASPEC was required to pay the amount due to IST, if there is a
net received profit, while IST was obligated to reimburse any amount to iASPEC if it is there is
a net loss. &#147;Net Received Profit&#148; means the Net Received Profit of iASPEC, calculated as
follows: accrued accounts receivable plus net turnover (revenue), minus cost of sales, minus operating
expenses, and minus accrued but not collected accounts receivable, but only if the result is a positive
number. &#147;Net Losses&#148; means the net losses of iASPEC, calculated as follows: accrued accounts
receivable plus net turnover (revenue), minus cost of sales, minus operating expenses, and minus
accrued but not collected accounts receivable, but only if the result is a negative number. As of
December 31, 2007, iASPEC had repaid the entire calculated true-up amount of $7,005,183 to IST.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In connection with the Management Service Agreement IST also entered into an Option Agreement, with
iASPEC and its shareholders, effective as of July 1, 2007, pursuant to which the iASPEC shareholders
granted IST, or its designee(s), an exclusive, irrevocable option to purchase from the iASPEC shareholders,
from time to time, all or a part of iASPEC&#146;s shares, pursuant to an equity transfer agreement,
or all or a part of iASPEC&#146;s assets, pursuant to an asset purchase and transfer agreement. However,
according to the Option Agreement, the option may not be exercised by IST if the exercise would violate
any applicable laws and regulations in China or cause any license or permit held by, and necessary
for the operation of iASPEC, to be cancelled or invalidated. Under the terms of the Option Agreement,
the option is immediately exercisable at an exercise price of $1,800,000, in the aggregate, subject
to regulatory approval. In addition, iASPEC and the iASPEC shareholders agreed to use their best
efforts to acquire all necessary government approvals and other consents to complete a share purchase
under the Option Agreement. The Option Agreement may be rescinded by IST upon 30 days&#146; notice
and will terminate on the date that we purchase all remaining shares or assets of iASPEC pursuant to the terms of the Option Agreement. If any of the parties
breaches the Option Agreement and fails to remedy the breach, the breaching party will pay a penalty
of RMB5,000,000 (approximately $683,600) to the non-breaching party or parties, and compensate the
non-breaching party or parties for any losses caused by the breach.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>53</FONT></P>
<HR noShade color="#000000" SIZE=5>
<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As a result of the restructuring of its relationship with iASPEC, iASPEC has become a variable interest

entity of our Company. A variable interest represents a contractual or ownership interest in another

entity that causes the holder to absorb the changes in fair value of the other entity&#146;s net

assets. Potential variable interests include: holding economic interests, voting rights, or obligations

to an entity; issuing guarantees on behalf of an entity; transferring assets to an entity; managing

the assets of an entity; leasing assets from an entity; and providing financing to an entity. In

such cases FASB Interpretation 46(R), which interprets Accounting Research Bulletin (ARB) 51,<I>&nbsp;Consolidated Financial Statements</I> , requires consolidation of such entity by the enterprise that controls the economic risks and rewards
of the entity, regardless of ownership. While we have held an economic interest in iASPEC since October
9, 2006, the Management Service Agreement and the Option Agreement have now given us control over
the business and operations of iASPEC. As a result, iASPEC&#146;s financial data is subject to consolidation
with our financial data in accordance with the provisions of FASB Interpretation 46(R), on July 1,
2007. For more details regarding the Management Service Agreement and Option Agreement, see our Current
Report on Form 8-K filed with the SEC on August 6, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On March 28, 2008, Mr. Lin, consummated a private sale to certain accredited investors of 1,070,000
restricted shares of our Common Stock owned by him, for an aggregate purchase price of $4.28 million
or $4.00 per share. Mr. Lin delivered the proceeds from the sale of his shares to honor the guarantee
that he had provided that we would not suffer any loss incurred from our investment in ELNs. See<I>&nbsp;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operation &#150;
Liquidity and Capital Resources &#150; Investing Activities</I> . In connection with this private sale transaction, we entered into a registration rights agreement
with the purchasers of Mr. Lin&#146;s shares, pursuant to which, among other things, we agreed to
register within a predefined period, shares of our common stock transferred to them by Mr. Lin. Mr.
Lin will not receive any shares of our common stock, other securities or other consideration for
this capital contribution and has waived any and all rights that he may have to make a claim against
us for any such shares, securities or other consideration in the future. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>From time to time Mr. Lin has advanced us various amounts for our working capital. As of December 31,
2007, we owed Mr. Lin $0.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As of December 31, 2006 related party receivables and amount due from a director consist of the following:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH>&nbsp;</TH>
    <TH colspan="2" align="right" nowrap><b><font size="2" face="Times New Roman, Times, serif">December 31, <br>
      2006 </font></b></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Due from related company<br>
      Shenzhen iASPEC Software Engineering Co. Ltd. (the Predecessor) </FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Revenues under the Turnkey Agreement</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,185,449</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Fee payable under the Turnkey Agreement</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(45,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Other advances</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>154,710</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,295,159</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Hong Kong United Development Group Limited<sup>(1)</sup></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>115,312</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Total</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,410,471</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Due to a director</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Due to Mr. Lin</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> (82,304</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD COLSPAN=3></TD>
  </TR>
</TABLE>
<P align="justify">____________<br>
  <FONT face="Times New Roman, Times, Serif" size=2><SUP>&nbsp;(1)</SUP> &nbsp;&nbsp;Hong Kong United Development Group Limited is 51% controlled by Mr. Lin. The amount represents
  advances from our Company as working capital and was unsecured, interest free and was repaid in full
  on April 6, 2007.</FONT>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>At December 31, 2007, the balances with iASPEC were eliminated in consolidation since iASPEC was our
VIE.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Amounts earned under the Turnkey Agreement during the year ended December 31, 2007 and from January
17, 2006 through December 31, 2006 are as follows:</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>54</FONT></P>
<HR noShade color="#000000" SIZE=5>
<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH>&nbsp;</TH>
    <td colspan="2" align="center" nowrap><b><font size="2" face="Times New Roman, Times, serif"> Year <br>
      ended <br>
      December 31,<br>
      2007 </font></b></td>
    <TH nowrap><font size="2"></font></TH>
    <td colspan="2" align="center" nowrap><b><font size="2" face="Times New Roman, Times, serif"> January 17 <br>
      through <br>
      December 31, <br>
      2006 </font></b></td>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Revenues, per contracts <sup>(1)</sup></FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 12,713,673</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2,677,498</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Cost of sales incurred by iASPEC</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(6,558,443</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(858,149</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Expenses paid by iASPEC on behalf of IST</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(613,271</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(633,900</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" color=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" color=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Net</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 5,541,959</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,185,449</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" color=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" color=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="8" ALIGN=LEFT><font size="1">&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Annual fee (prorated) payable to iASPEC under the Turnkey Agreement</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 90,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 45,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" color=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" color=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><SUP>(1)</SUP> &nbsp;The revenue transmitted from iASPEC represents revenue from the exclusive subcontracting activities
generated under the Turnkey Agreement, dated October 9, 2006 which was amended and restated on January
31, 2007. The Turnkey Agreement was terminated and replaced as of July 1, 2007, by the Management
Service Agreement.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Director Independence</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Board of Directors is currently composed of 4 members, Mr. Jiang Huai Lin, Mr. Zhi Xiong Huang,
Mr. Qiang Lin and Mr. Yun Sen Huang. Each of Mr. Qiang Lin and Mr. Yun Sen Huang serve on our Board
of Directors as an &#147;independent director&#148; as defined by Rule 4200(a)(15) of the Marketplace
Rules of The Nasdaq Stock Market, Inc., or the Nasdaq Marketplace Rules. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Mr. Sean Shao has agreed to serve as our third independent director, effective as of April 1, 2008
and to serve as the head of our audit committee as soon as one is established.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Mr. Shao has been serving as Chief Financial Officer of Trina Solar Limited since August 2006, where
he assisted it in listing on the NYSE in December 2006. Previously he was the Chief Financial Officer
of ChinaEdu Corporation, a Chinese educational service provider, from September 2005 to August 2006
and was the Chief Financial Officer of Watchdata Technologies Ltd., a Chinese security software company,
from August 2004 to September 2005. He was previously a senior manager at Deloitte Touche Tohmatsu
CPA Ltd., Beijing from October 1998 to July 2004 and an assistant manager at Deloitte &amp; Touche
Toronto from December 1994 to November 1997. Mr. Shao received his Master&#146;s degree in Health
Care Administration from the University of California at Los Angeles in 1988 and his Bachelor&#146;s
degree in Art from East China Normal University in 1982. Mr. Shao is an associate member of the American
Institute of Certified Public Accountants.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a13" id="a13"></a>CHANGE IN ACCOUNTANTS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On January 25, 2007, our Board of Directors elected to terminate our relationship with our independent
registered public accounting firm, Randall N. Drake, C.P.A., P.A., or Drake. Additionally, concurrent
with this decision, our Board appointed the independent registered public accounting firm of GHP
Horwath, P.C., or Horwath, as our new auditor, effective December 31, 2006.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>No accountant&#146;s report issued by Drake on the financial statements for either of the past two
(2) years contained an adverse opinion or a disclaimer of opinion or was qualified or modified as
to uncertainty, audit scope or accounting principles, except for a going concern opinion expressing
substantial doubt about the ability of us to continue as a going concern.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Drake had been appointed on August 5, 2004 and during the period that Drake served as our independent
registered public accounting firm and through the date of dismissal, we have not had any disagreements
with Drake on any matter of accounting principles or practices, financial disclosure, or auditing
scope or procedure. There were no reportable events, as described in Item 304(a)(1)(iv) of Regulation
S-K, during our two most recent fiscal years (ended December 31, 2007 and 2006) and from January
1, 2008 to date.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a14" id="a14"></a>SELLING STOCKHOLDERS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>This prospectus relates to the resale by the selling stockholders named below from time to time of
up to a total of 1,470,000 shares of our common stock that were issued to selling stockholders pursuant
to transactions described below which are exempt from registration under the Securities Act. All
of the common stock offered by this prospectus is being offered by the selling stockholders for their
own accounts. </FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>55</FONT></P>
<HR noShade color="#000000" SIZE=5>
<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>January Private Placement</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On January 16, 2007, we entered into a securities purchase agreement, or January Purchase Agreement,
with two accredited Investors, or the January Investors, led by Pinnacle China Fund, L.P., pursuant
to which, as amended, we agreed to issue and sell to the January Investors up to 7,868,422 shares
of our common stock equaling 19.96% of our issued and outstanding capital stock, for a purchase price,
in the aggregate, of up to $14,950,001.80 or $1.90 per share, half of which was issued for one-half
of the aggregate purchase price on January 31, 2007, and the remaining half of which was issued for
the balance of the aggregate purchase price on February 6, 2007. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Roth Capital Partners, LLC, or Roth, acted as our placement agent in connection with the offering of
the shares to the January Investors under the January Purchase Agreement. As compensation for its
services, the Placement Agent received a cash fee equal to $1,046,500, representing 7% of the gross
proceeds received from the sale of the shares, of which a 20% cash fee was payable by us directly
to Oppenheimer &amp; Co., Inc., or Opco, for its services as a finder in connection with the offering.
Roth also received warrants to purchase 550,789 shares of our common stock, representing 7% of the
gross proceeds received from the sale of the shares divided by the per share price of the shares,
20%, or 110,157 of which was payable by us directly to Opco. The Roth and Opco warrants have a term
of five years, were exercisable immediately on issuance and have an exercise price equaling up to
120% of the per share purchase price of the shares purchased by the January Investors, or $2.85 per
share. In addition, we reimbursed the Placement Agent for reasonable out-of-pocket expenses incurred
in connection with the offering and for all road show related expenses. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>October Private Placement</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On October 25, 2007, we entered into a securities purchase agreement, or October Purchase Agreement,
with certain accredited investors, led by certain funds managed by Clinton Group, Inc. and Sansar
Capital Management, LLC, pursuant to which on October 29, 2007, we issued and sold to the investors
5,000,000 shares of our common stock equaling 11% of the issued and outstanding capital stock of
the Company on a fully-diluted basis as of and immediately after consummation of the transactions
contemplated by the October Purchase Agreement, for a purchase price, in the aggregate, of $40,000,000
or $8.00per share. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Roth and
Brean Murray, Carret &amp; Co., LLC, or Brean Murray, acted as our co-lead placement
agents in connection with the offering of the shares.&nbsp; As compensation for
their services, Roth and Brean Murray received cash fees equal to $2,400,000 and
$800,000, respectively, representing 6% and 2% of the gross proceeds received
from the sale of the Shares.&nbsp; In addition, Roth and Brean Murray received
warrants for the purchase of 300,000 and 100,000 shares of our common stock,
respectively, representing 6% and 2% of the gross proceeds received from the
sale of the Shares divided by the per share price of the Shares.&nbsp; The
warrants have a term of five years, are exercisable immediately and have an
exercise price of $9.60, or 120% of the per share purchase price of the Shares,
and include registration rights to register shares issuable upon exercise of
such warrants.&nbsp;&nbsp; The registration statement covering the 400,000
warrants issued to Roth and Brean Murray in the October Private Placement has
been subsequently withdrawn due to the eligibility of all shares thereunder,
other than the warrant shares, to be sold under Rule 144.&nbsp; These 400,000
warrant shares are being included in this registration statement. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Lin Private Sale</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On March 26, 2008, our Chief Executive Officer, Jiang Huai Lin, entered into and consummated a purchase,
agreement with certain accredited investors pursuant to which he agreed to transfer and sell to the
investors, 1,070,000 shares of our common stock owned by him, for an aggregate purchase price of
$4,280,000, or $4.00 per share. We were a party to the purchase agreement for the purpose of providing
certain representations and warranties about our Company and the shares.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Mr. Lin delivered the proceeds from the sale of the shares to us, to cover approximately $4.1 million
in losses realized by us in connection with our investment in certain equity-linked notes (&#147;ELNs&#148;).
We liquidated the ELNs on March 25, 2007,&nbsp;our cash has been deposited in straight interest bearing
accounts and no additional losses will accrue in connection with the investment. In addition, the
investment loss did not impact our 2007 operating results and will not impact our 2008 operating
results. Mr. Lin will not receive any shares of our common stock, other securities or other consideration
for this capital contribution to us and he has waived any and all rights that he may have to make
a claim against us for any such shares, securities or other consideration in the future. Roth Capital
Partners, LLC, or Roth, acted as placement agents in connection with the offering of the Shares and received $10,700 as compensation
for their services. </FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>56</FONT></P>
<HR noShade color="#000000" SIZE=5>
<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As a condition&nbsp;to the purchase agreement, we agreed to enter into a registration rights agreement
with the investors, pursuant to which, among other things, we agreed to register the shares within
a pre-defined period. There&nbsp;are no liquidated damages associated with our failure to timely
register the shares. The shares are covered by this registration statement.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The foregoing securities were issued to the Investors pursuant to the exemption from registration provided
by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public
offering and&nbsp;Rule 506 of Regulation D promulgated thereunder. The stockholders who received
the securities agreed that (a) they had access to all of the Company&#146;s information pertaining
to the investment and were provided with the opportunity to ask questions and receive answers regarding
the offering, (b) they were acquiring the securities for their own account for investment and not
for the account of any other person and not with a view to or for any distribution within the meaning
of the Securities Act and (c) they would not sell or otherwise transfer the purchased shares unless
in compliance with state and federal securities laws. Each of the stockholders represented that they
are accredited investors as defined in Rule 501(a) under the Securities Act and that there was no
general solicitation or advertising in connection with the offer and sale of the Shares.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><I>Selling Stockholders</I></B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following table sets forth certain information regarding the selling stockholders and the shares
offered by them under this prospectus. Beneficial ownership is determined in accordance with the
rules of the SEC. In computing the number of shares beneficially owned by a selling stockholder and
the percentage of ownership of that selling stockholder, shares of common stock underlying shares
of convertible preferred stock, options or warrants held by that selling stockholder that are convertible
or exercisable, as the case may be, within 60&nbsp;days of the filing of this Registration Statement
are included. Those shares, however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other selling stockholder. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Except as specifically set forth in the footnotes to the table, none of the selling stockholders has
held a position as an officer or director of our Company, nor has any selling stockholder had any
material relationship of any kind with us or any of our affiliates. All information with respect
to share ownership has been furnished by the selling stockholders. The shares being offered are being
registered to permit public secondary trading of the shares and each selling stockholder may offer
all or part of the shares owned for resale from time to time. In addition, none of the selling stockholders
has any family relationships with our officers, directors or controlling stockholders. Furthermore,
except as specifically set forth in the footnote to the table below, no selling stockholder is a
registered broker-dealer or an affiliate of a registered broker-dealer.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The term &#147;selling stockholders&#148; also includes any transferees, pledges, donees, or other
successors in interest to the selling stockholders named in the table below. To our knowledge, subject
to applicable community property laws, each person named in the table has sole voting and investment
power with respect to the shares of common stock set forth opposite such person&#146;s name. We will
file a supplement to this prospectus to name successors to any named selling stockholders who are
able to use this prospectus to resell the securities registered hereby. </FONT></P>
<table width="100%" cellpadding="0" cellspacing="0">
  <tr>
    <td align="left" valign="bottom"><b><font size="2" face="Times New Roman, Times, serif">Name and Address </font></b></td>
    <td align="center" valign="bottom" nowrap><b><font size="2" face="Times New Roman, Times, serif">Beneficial <br>
      Ownership <br>
      Before the<br>
      Offering <sup>(1)</sup> </font></b></td>
    <td align="center" valign="bottom" nowrap><font size="2">&nbsp;</font></td>
    <td align="center" valign="bottom" nowrap><b><font size="2" face="Times New Roman, Times, serif">Shares of <br>
      Common<br>
      Stock Being<br>
      Offered </font></b></td>
    <td align="center" valign="bottom" nowrap><font size="2">&nbsp;</font></td>
    <td align="center" valign="bottom" nowrap><b><font size="2" face="Times New Roman, Times, serif">Beneficial <br>
      Ownership <br>
      After the <br>
      Offering <sup>(2)</sup> </font></b></td>
    <td align="center" valign="bottom" nowrap><font size="2">&nbsp;</font></td>
    <td align="center" valign="bottom" nowrap><b><font size="2" face="Times New Roman, Times, serif">Percentage <br>
      of Common<br>
      Stock <br>
      Owned After <br>
      Offering <sup>(3)</sup> </font></b></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
  </tr>
  <tr bgcolor="#e9f1f8">
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Vision Opportunity China LP <sup>(4)</sup> <br>
      c/o Vision Capital Advisors <br>
      20 West 55th St, 5th Floor<br>
      New York, NY 10019 </font></td>
    <td width="12%" align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 760,000 </font></td>
    <td width="2%" valign="top">&nbsp;</td>
    <td width="12%" align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 760,000 </font></td>
    <td width="2%" valign="top">&nbsp;</td>
    <td width="12%" align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td width="2%" valign="top">&nbsp;</td>
    <td width="12%" align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">* </font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Heller Capital Investments, LLC <sup>(5)</sup> <br>
      700 East Palisade Avenue, 1st Floor<br>
      Englewood Cliffs, NJ 07632 </font></td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">271,900 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 160,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">111,900 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">* </font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
  </tr>
  <tr bgcolor="#e9f1f8">
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> CGM as c/f Ronald I. Heller IRA <sup>(6)</sup> <br>
      c/o: Heller Capital Investments, LLC<br>
      700 East Palisade Avenue, 1st Floor <br>
      Englewood Cliffs, NJ 07632 </font></td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 100,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 100,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">* </font></td>
  </tr>
</table>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>57</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<table width="100%" cellpadding="0" cellspacing="0">
  <tr>
    <td align="left" valign="bottom"><b><font size="2" face="Times New Roman, Times, serif">Name and Address </font></b></td>
    <td width="12%" align="center" valign="bottom" nowrap><b><font size="2" face="Times New Roman, Times, serif">Beneficial <br>
      Ownership <br>
      Before the<br>
      Offering <sup>(1)</sup> </font></b></td>
    <td width="2%" align="center" valign="bottom" nowrap><font size="2">&nbsp;</font></td>
    <td width="12%" align="center" valign="bottom" nowrap><b><font size="2" face="Times New Roman, Times, serif">Shares of <br>
      Common<br>
      Stock Being<br>
      Offered </font></b></td>
    <td width="2%" align="center" valign="bottom" nowrap><font size="2">&nbsp;</font></td>
    <td width="12%" align="center" valign="bottom" nowrap><b><font size="2" face="Times New Roman, Times, serif">Beneficial <br>
      Ownership <br>
      After the <br>
      Offering <sup>(2)</sup> </font></b></td>
    <td width="2%" align="center" valign="bottom" nowrap><font size="2">&nbsp;</font></td>
    <td width="12%" align="center" valign="bottom" nowrap><b><font size="2" face="Times New Roman, Times, serif">Percentage <br>
      of Common<br>
      Stock <br>
      Owned After <br>
      Offering <sup>(3)</sup> </font></b></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
  </tr>
  <tr bgcolor="#e9f1f8">
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Straus Partners, L.P. <sup>(7)</sup> <br>
      c/o Straus Asset Management <br>
      320 Park Avenue, 10th Floor<br>
      New York, NY 10022 </font></td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">311,200 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 23,700 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">287,500 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">* </font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Straus-GEPT Partners, L.P. <sup>(7)</sup> <br>
      c/o Straus Asset Management <br>
      320 Park Avenue, 10th Floor <br>
      New York, NY 10022 </font></td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">238,800 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 26,300 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">212,500 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">* </font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
  </tr>
  <tr bgcolor="#e9f1f8">
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Roth Capital Partners, LLC <sup>(8)</sup> <br>
      24 Corporate Plaza <br>
      Newport Beach, CA 92660 </font></td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">740,632 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">
    300,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">
    <font face="Times New Roman, Times, serif" size="2">440,632 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">* </font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Brean Murray, Carret &amp; Co., LLC <sup>(9)</sup> <br>
      570 Lexington Avenue<br>
      New York, NY 10022.6822 </font></td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">100,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 100,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif">* </font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
  <TD colspan="2" vAlign=top>____________</TD>
  </TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2><SUP>&nbsp;(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting
  or investment power with respect to securities. Each of the beneficial owners listed above has direct
  ownership of and sole voting power and investment power with respect to the shares of our common
  stock. </FONT></div></TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2><SUP>(2)</SUP></FONT></TD>
  <TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Assumes that all securities offered are sold. </FONT></div></TD>
</TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2><SUP>(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>A total of 46,764,396 shares of our common stock are considered to be outstanding pursuant to SEC Rule
    13d-3(d)(1). For each beneficial owner above, any options exercisable within 60 days have been included
    in the denominator.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2><SUP>(4)</SUP></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Adam Benowitz has voting and investment power over the shares held by Vision Opportunity China LP.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2><SUP>(5)</SUP></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Mr. Ronald I. Heller is the Chief Investment Officer of Heller Capital Investments, LLC and has voting
    and investment power over the securities held by Heller Capital Investments, LLC.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2><SUP>
(6)</SUP></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Mr. Ronald I. Heller is the Chief Investment Officer of Heller Capital Investments, LLC and has voting
    and investment power over the securities held by CGM as c/f Ronald I. Heller IRA.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2><SUP>(7)</SUP></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Melville Straus has voting and investment power over securities held by Straus Partners, L.P. and Straus-GEPT
  Partners, L.P.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2><SUP>(8)</SUP></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Represents (i) 440,632 shares of common stock issuable upon&nbsp;the exercise of&nbsp;a five-year&nbsp;warrant
  to purchase our common stock&nbsp;at an exercise price of $2.28,&nbsp;issued to Roth Capital Partners,
  LLC, or Roth,&nbsp;in connection with our private placement which closed in January and February
  of 2007, and registered under&nbsp;our registration statement filed with the SEC on September 14,
  2007;&nbsp;and (ii) 300,000 shares of common stock issuable upon&nbsp;the exercise of a&nbsp;five-year&nbsp;warrant
  to purchase our common stock&nbsp;at an exercise price of $9.60, issued to Roth, in connection&nbsp;with
  our private placement which closed in October 2007. Byron Roth, the chief executive officer, and
  Gordon Roth, the chief financial officer, share voting and investment power over the securities held
  by Roth Capital Partners, LLC. </FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2><SUP>&nbsp;(9)</SUP></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Represents 100,000 shares of common stock issuable upon exercise of a warrant to purchase our common
  stock held by Brean Murray, Carret &amp; Co., LLC with an exercise price of $9.60 per share and exercisable
  during a period beginning on October 29, 2007 and expiring October 28, 2012. William J. McCluskey
  is the President and Chief Executive Officer of Brean Murray, Carret &amp; Co., LLC and has voting
  and investment power over the securities held by Brean Murray, Carret &amp; Co., LLC.</FONT></div></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We will not receive any proceeds from the sales by the selling stockholders, but we will receive funds
from the exercise of warrants held by the selling stockholders, if exercised for cash. We have agreed
to bear expenses incurred by the selling stockholders that relate to the registration of the shares
being offered and sold by the selling stockholders, including the SEC registration fee and legal,
accounting, printing and other expenses of this offering.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>58</FONT></P>
<HR noShade color="#000000" SIZE=5>
<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a15" id="a15"></a>PLAN OF DISTRIBUTION</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The selling stockholders may from time to time sell, transfer or otherwise dispose of any or all of
their shares of common stock or interests in shares of common stock on any stock exchange, market
or trading facility on which the shares are traded or in private transactions. These dispositions
may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The selling stockholders may use any one or more of the following methods when disposing of shares
or interests therein:</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>block trades in which the broker-dealer will attempt to sell the shares as agent, but may position
and resell a portion of the block as principal to facilitate the transaction;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
  <TD vAlign=top></TD>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top></TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
  <TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>purchases by a broker-dealer as principal and resale by the broker-dealer for its account;</FONT></div></TD>
</TR>
<TR>
  <TD vAlign=top></TD>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top></TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
  <TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>an exchange distribution in accordance with the rules of the applicable exchange;</FONT></div></TD>
</TR>
<TR>
  <TD vAlign=top></TD>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top></TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
  <TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>privately negotiated transactions;</FONT></div></TD>
</TR>
<TR>
  <TD vAlign=top></TD>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>short sales effected after the date the registration statement of which this prospectus is a part is
  declared effective by the SEC;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>through the writing or settlement of options or other hedging transactions, whether through an options
  exchange or otherwise;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>broker-dealers may agree with the selling stockholders to sell a specified number of such shares at
  a stipulated price per share; and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
  <TD vAlign=top></TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>a combination of any such methods of sale.</FONT></TD>
</TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The selling stockholders may, from time to time, pledge or grant a security interest in some or all
of the shares of common stock owned by them and, if they default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell the shares of common stock, from
time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act amending the list of selling stockholders to
include the pledgee, transferee or other successors in interest as selling stockholders under this
prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances,
in which case the transferees, pledgees or other successors in interest will be the selling beneficial
owners for purposes of this prospectus.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In connection with the sale of our common stock or interests therein, the selling stockholders may
enter into hedging transactions with broker-dealers or other financial institutions, which may in
turn engage in short sales of the common stock in the course of hedging the positions they assume.
The selling stockholders may also sell shares of our common stock short and deliver these securities
to close out their short positions, or loan or pledge the common stock to broker-dealers that in
turn may sell these securities. The selling stockholders may also enter into option or other transactions
with broker-dealers or other financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution of shares offered
by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant
to this prospectus (as supplemented or amended to reflect such transaction).</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them
will be the purchase price of the common stock less discounts or commissions, if any. Each of the
selling stockholders reserves the right to accept and, together with their agents from time to time,
to reject, in whole or in part, any proposed purchase of common stock to be made directly or through
agents. We will not receive any of the proceeds from this offering.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to participate
in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or,
if any broker-dealer acts as agent for the purchase of shares, from the purchaser) in amounts to
be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>59</FONT></P>
<HR noShade color="#000000" SIZE=5>
<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The selling stockholders also may resell all or a portion of the shares in open market transactions
in reliance upon Rule 144 under the Securities Act, provided that they meet the criteria and conform
to the requirements of that rule.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Any broker-dealers or agents that participate in the sale of the common stock or interests therein
and any selling stockholders who are affiliates of broker-dealers are &#147;underwriters&#148; within
the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit
they earn on any resale of the shares may be underwriting discounts and commissions under the Securities
Act. Selling stockholders who are &#147;underwriters&#148; within the meaning of Section 2(11) of
the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.
We know of no existing arrangements between any of the selling stockholders and any other stockholder,
broker, dealer, underwriter, or agent relating to the sale or distribution of the shares, nor can
we presently estimate the amount, if any, of such compensation. See &#147;Selling Stockholders&#148;
for description of any material relationship that a stockholder has with us and the description of
such relationship.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>To the extent required, the shares of our common stock to be sold, the names of the selling stockholders,
the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter,
any applicable commissions or discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration
statement that includes this prospectus.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In order to comply with the securities laws of some states, if applicable, the common stock may be
sold in these jurisdictions only through registered or licensed brokers or dealers. In addition,
in some states the common stock may not be sold unless it has been registered or qualified for sale
or an exemption from registration or qualification requirements is available and is complied with.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the
Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders
and their affiliates. In addition, we will make copies of this prospectus (as it may be supplemented
or amended from time to time) available to the selling stockholders for the purpose of satisfying
the prospectus delivery requirements of the Securities Act. The selling stockholders may indemnify
any broker-dealer that participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We have agreed with the selling stockholders to keep the registration statement of which this prospectus
constitutes a part effective until the earlier of (1) such time as all of the shares covered by this
prospectus have been disposed of pursuant to and in accordance with the registration statement or
(2) the date on which the shares may be sold pursuant to Rule 144(k) of the Securities Act.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a16" id="a16"></a>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Security Ownership of Certain Beneficial Owners and Management</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following table sets forth information regarding beneficial ownership of our common stock as of
March 28, 2008 (i) by each person who is known by us to beneficially own more than 5% of our common
stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors
as a group.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Unless otherwise specified, the address of each of the persons set forth below is in care of China
Public Security Technology, Inc., 21<SUP>&nbsp;st</SUP> &nbsp;Floor, Everbright Bank Building, Zhuzilin, Shenzhen, China 518040.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>60</FONT></P>
<HR noShade color="#000000" SIZE=5>
<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<table width="100%" cellpadding="0" cellspacing="0">
  <tr align="center" valign="bottom">
    <td><b><font size="1" face="Times New Roman, Times, serif"> Name &amp; Address of <br>
      Beneficial Owner </font></b></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="center"><b><font size="1" face="Times New Roman, Times, serif"> Office, if Any </font></b></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="center"><b><font size="1" face="Times New Roman, Times, serif"> Title of Class </font></b></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="center" nowrap><b><font size="1" face="Times New Roman, Times, serif"> Amount &amp; Nature<br>
      of Beneficial<br>
      Ownership <sup>(1)</sup> </font></b></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="center" nowrap><b><font size="1" face="Times New Roman, Times, serif"> Percent of Class<sup>(2)</sup> </font></b></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><hr size="1" color=#000000></td>
    <td>&nbsp;</td>
    <td align="center"><hr size="1" color=#000000></td>
    <td>&nbsp;</td>
    <td align="center"><hr size="1" color=#000000></td>
    <td>&nbsp;</td>
    <td align="center"><hr size="1" color=#000000></td>
    <td>&nbsp;</td>
    <td align="center"><hr size="1" color=#000000></td>
  </tr>
  <tr align="center" bgcolor="#e9f1f8">
    <td colspan="9" valign="top"><font size="2" face="Times New Roman, Times, serif"><b> Officers and Directors </b></font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Jiang Huai Lin </font></td>
    <td width="2%" valign="top">&nbsp;</td>
    <td width="11%" align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> CEO and Chairman </font></td>
    <td width="2%" valign="top">&nbsp;</td>
    <td width="26%" align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Common Stock $0.01 par value </font></td>
    <td width="2%" valign="top">&nbsp;</td>
    <td width="11%" align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 23,277,935<sup>(3)</sup> </font></td>
    <td width="2%" valign="top">&nbsp;</td>
    <td width="10%" align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 49.77% </font></td>
  </tr>
  <tr bgcolor="#e9f1f8">
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Zhaoyang Chen </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> CFO </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Common Stock $0.01 par value </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 0 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> * </font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Zhi Xiong Huang </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> COO and Director </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Common Stock $0.01 par value </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 20,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> * </font></td>
  </tr>
  <tr bgcolor="#e9f1f8">
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Yun Sen Huang </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Director </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Common Stock $0.01 par value </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 0 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> * </font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Qiang Lin </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Director </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Common Stock $0.01 par value </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 0 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> * </font></td>
  </tr>
  <tr bgcolor="#e9f1f8">
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Yi Gang Shen </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> CTO </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Common Stock $0.01 par value </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 0 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> * </font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> All officers and directors as a group (6 <br>
      persons named above) </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Common Stock $0.01 par value </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 23,297,935<sup>(3)</sup> </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 49.81% </font></td>
  </tr>
  <tr align="center" bgcolor="#e9f1f8">
    <td colspan="9" valign="top"><font size="2" face="Times New Roman, Times, serif"><b> 5% Securities Holder </b></font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Jiang Huai Lin </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Common Stock $0.01 par value </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 23,277,935<sup>(3)</sup> </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 49.77% </font></td>
  </tr>
  <tr bgcolor="#e9f1f8">
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Total Devices Management, Ltd. </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Common Stock $0.01 par value </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 2,600,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 5.56% </font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Pinnacle China Fund, LP <sup>(4)</sup> <br>
      4965 Preston Park Blvd.<br>
      Suite 240 <br>
      Plano, TX 75093 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Common Stock $0.01 par value </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 3,934,211 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 8.41% </font></td>
  </tr>
  <tr bgcolor="#e9f1f8">
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> The Pinnacle Fund, L.P. <sup>(5)</sup> <br>
      4965 Preston Park Blvd. <br>
      Suite 240 Plano, <br>
      TX 75093 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Common Stock $0.01 par value </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 3,934,211 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 8.41% </font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif"> Jeffrey L. Feinberg <sup>(6)</sup> <br>
      2775 Via de la Valle, Suite 204 Del <br>
      Mar, California 92014 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap><font size="2" face="Times New Roman, Times, serif"> Common Stock $0.01 par value </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 2,628,893 </font></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="2" face="Times New Roman, Times, serif"> 5.62% </font></td>
  </tr>
  <tr>
    <td valign="top"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;* Less than 1%.</FONT></td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap>&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top" nowrap>&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td align="center" valign="top">&nbsp;</td>
  </tr>
</table>

<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><SUP>(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission
and generally includes voting or investment power with respect to securities. Each of the beneficial
owners listed above has direct ownership of and sole voting power and investment power with respect
to the shares of our common stock. </FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><SUP>(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>A total of 46,764,396&nbsp;shares of our Common Stock are considered to be outstanding pursuant to
SEC Rule 13d-3(d)(1). For each Beneficial Owner above, any options exercisable within 60 days have
been included in the denominator.</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0" style="border-collapse: collapse" bordercolor="#111111">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><SUP>(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>Includes 2,600,000 shares of our common stock held by Mr. Lin indirectly through Total Devices Management<B>,</B> Ltd., an entity that is wholly-owned by Mr. Lin. All 23,277,935 shares held by Mr. Lin are subject
to the terms and conditions of a Lockup Agreement, dated January 31, 2007, between our Company and
Mr. Lin. The lockup period is scheduled to terminate in September 2008.</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0" style="border-collapse: collapse" bordercolor="#111111">

<TR>
<TD vAlign=top width=35><FONT face="Times New Roman, Times, Serif" size=2><SUP>(4) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top width="951"><FONT face="Times New Roman, Times, Serif" size=2>Barry M. Kitt exercises investment discretion and control over the shares our Common Stock held by
Pinnacle China Fund, L.P., or Pinnacle China. Mr. Kitt may be deemed to be the beneficial owner of
the shares of Common Stock beneficially owned by Pinnacle China. Mr. Kitt hereby disclaims beneficial
ownership of the shares of Common Stock reported herein to the extent of his direct or indirect pecuniary
interest therein, and nothing herein shall be deemed to be an admission that Mr. Kitt is the beneficial
owner of the shares of Common Stock reported herein for purposes of Section 16 of the Exchange Act
or for any other purpose.</FONT></TD></TR>
<TR>
<TD width="35" vAlign=top></TD>
<TD vAlign=top width="951">&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><SUP>(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>Barry M. Kitt exercises investment discretion and control over the shares of our Common Stock held
by The Pinnacle Fund, L.P., or Pinnacle. Mr. Kitt may be deemed to be the beneficial owner of the
shares of Common Stock beneficially owned by Pinnacle. Mr. Kitt hereby disclaims beneficial ownership
of the shares of Common Stock reported herein to the extent of his direct or indirect pecuniary interest
therein, and nothing herein shall be deemed to be an admission that Mr. Kitt is the beneficial owner
of the shares of Common Stock reported herein for purposes of Section 16 of the Exchange Act or for
any other purpose.</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0" style="border-collapse: collapse" bordercolor="#111111">

<TR>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2><SUP>(6)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>The securities reported as held by Mr. Feinberg represent shares of Common Stock held by JLF Partners
I, L.P., JLF Partners II, L.P., JLF Off Shore Fund, Ltd. and JLF Concentrated Partners, LP, to which&nbsp;JLF
Asset Management LLC serves as the management company and/or investment manager. Mr. Feinberg is
the managing member of&nbsp;JLF Asset Management, LLC, and therefore may be deemed to be the beneficial
owner of the shares of Common Stock beneficially owned by JLF Asset Management.</FONT></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Changes in Control</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We do not currently have any arrangements which if consummated may result in a change of control of
our Company. </FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>61</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a17" id="a17"></a>DESCRIPTION OF CAPITAL STOCK</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Common and Preferred Stock</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We are authorized to issue up to 75,000,000 shares of common stock, par value $0.01 per share. On October
2, 2006, we effected a 4.44444444-to-1 forward split of the outstanding shares of our common stock
held as of September 1, 2006. As of May 9, 2008, we have 46,764,396 shares of common stock issued
and outstanding. We do not have any authorized preferred stock.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Each outstanding share of common stock entitles the holder thereof to one vote per share on all matters.
Our bylaws provide that the persons receiving the greatest number of votes shall be the directors.
Stockholders do not have preemptive rights to purchase shares in any future issuance of our common
stock. Upon our liquidation, dissolution or winding up, and after payment of creditors and preferred
stockholders, if any, our assets will be divided pro-rata on a share-for-share basis among the holders
of the shares of common stock.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The holders of shares of our common stock are entitled to dividends out of funds legally available
when and as declared by our board of directors. Should we decide in the future to pay dividends,
as a holding&nbsp;company, our ability to do so and meet other obligations depends upon the receipt
of dividends or other payments&nbsp;from our operating subsidiaries and other holdings and&nbsp;investments.
In addition, our operating subsidiaries, from time to time, may be subject to restrictions on their
ability to make distributions to us, including as a result of restrictive covenants in loan agreements,
restrictions on the conversion of local currency into U.S. dollars or other hard currency and other
regulatory restrictions. In the event of our liquidation, dissolution or winding up, holders of our
common stock are entitled to receive, ratably, the net assets available to stockholders after payment
of all creditors.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>All of the issued and outstanding shares of our common stock are duly authorized, validly issued,&nbsp;fully
paid and non-assessable. To the extent that additional shares of our common stock are issued, the
relative interests of existing stockholders will be diluted.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our independent stock transfer agent is Island Stock Transfer, Inc., 100 2<SUP>nd</SUP> Avenue South, Suite 104N, St. Petersburg, Florida 33701. Their telephone number is (727) 289-0010.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Warrants</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In connection with our private placement which closed on January 31, 2007 and February 6, 2007, Roth
Capital Partners, LLC, and Oppenheimer &amp; Co., Inc., our placement agent and finder, respectively,
received, as partial compensation, warrants to purchase an aggregate of 550,789 shares of our common
stock. The warrants have a term of five years, are immediately exercisable at $2.28 per share, subject
to the usual adjustments for certain corporate events. First Asia Finance Group Limited, who provided
consulting services in connection with the private placement also received a five-year warrant to
purchase an aggregate of 236,052 shares of our common stock. Their warrant is exercisable immediately
at $2.28 per share, subject to the usual adjustments for certain corporate events. First Asia also
has demand registration and piggyback registration rights in connection with its warrant. The shares
underlying the Roth, Oppenheimer and First Asia warrants were registered on the registration statement
that was effective as of September 14, 2007 and all but the 440,632 warrants held by Roth have been exercised. </FONT></P>
<P align="justify"><font face="Times New Roman, Times, Serif" size="2">In
connection with our private placement which closed on October 29, 2007, Roth and
Brean Murray, our co-lead placement agents, received, as partial compensation,
warrants to purchase 300,000 and 100,000 shares of our common stock,
respectively.&nbsp; The warrants have a term of five years and are immediately
exercisable at $9.60 per share, subject to the usual adjustments for certain
corporate events.&nbsp;&nbsp; The shares underlying the Roth and Brean Murray
warrants were registered on the registration statement that was effective as of
February 6, 2008, but none of the warrants have been exercised.&nbsp; The
registration statement covering the 400,000 warrants issued to Roth and Brean
Murray in the October Private Placement has been subsequently withdrawn due to
the eligibility of all shares thereunder, other than the warrant shares, to be
sold under Rule 144.&nbsp; These 400,000 warrant shares are being included in
this registration statement. </font></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a18" id="a18"></a>SHARES ELIGIBLE FOR FUTURE SALE</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As of May 9, 2008, we had 46,764,396 shares of common stock outstanding.</FONT></P>

<P align=center><FONT face="Times New Roman, Times, serif" size=2>62</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Shares Covered by this Prospectus</B></FONT></P>

<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>All of the 1,470,000 shares being registered in this offering may be sold without restriction under
the Securities Act, so long as the registration statement of which this prospectus is a part is,
and remains, effective.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Rule&nbsp;144</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The SEC has recently adopted amendments to Rule 144 which will become effective on February 15, 2008
and will apply to securities acquired both before and after that date. Under these amendments, a
person who has beneficially owned restricted shares of our common stock or warrants for at least
six months would be entitled to sell their securities provided that (1) such person is not deemed
to have been one of our affiliates at the time of, or at any time during the three months preceding,
a sale, (2) we are subject to the Exchange Act reporting requirements for at least 90 days before
the sale and (3) if the sale occurs prior to satisfaction of a one-year holding period, we provide
current information at the time of sale.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Persons who have beneficially owned restricted shares of our common stock or warrants for at least
six months but who are our affiliates at the time of, or at any time during the three months preceding,
a sale, would be subject to additional restrictions, by which such person would be entitled to sell
within any three-month period only a number of securities that does not exceed the greater of:</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>1% of the number of shares of common stock then outstanding, which as of May 9, 2008 would equal 467,643
shares; or</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>the average weekly trading volume of our common stock during the four calendar weeks preceding the
filing of a notice on Form&nbsp;144 with respect to such sale.</FONT></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><I>provided, </I>in each case, that we are subject to the Exchange Act periodic reporting requirements for at least
three months before the sale.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>However, since we anticipate that our shares will be quoted on the OTC Bulletin Board, which is not
an &#147;automated quotation system,&#148; our stockholders will not be able to rely on the market-based
volume limitation described in the second bullet above. If, in the future, our securities are listed
on an exchange or quoted on NASDAQ, then our stockholders would be able to rely on the market-based
volume limitation. Unless and until our stock is so listed or quoted, our stockholders can only rely
on the percentage based volume limitation described in the first bullet above.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Such sales by affiliates must also comply with the manner of sale, current public information and notice
provisions of Rule 144. All but the 1,470,000 of our issued and outstanding shares covered in this
prospectus may currently be sold in reliance on Rule 144. The selling stockholders will not be governed
by the foregoing restrictions when selling their shares pursuant to this prospectus. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Restrictions on the Use of Rule 144 by Shell Companies or Former Shall Companies</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Historically, the SEC staff has taken the position that Rule 144 is not available for the resale of
securities initially issued by companies that are, or previously were, blank check companies, like
us. The SEC has codified and expanded this position in the amendments discussed above by prohibiting
the use of Rule 144 for resale of securities issued by any shell companies (other than business combination
related shell companies) or any issuer that has been at any time previously a shell company. The
SEC has provided an important exception to this prohibition, however, if the following conditions
are met:</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>the issuer of the securities that was formerly a shell company has ceased to be a shell company;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>the issuer of the securities has filed all Exchange Act reports and material required to be filed,
as applicable, during the preceding 12 months (or such shorter period that the issuer was required
to file such reports and materials), other than Current Reports on Form 8-K; and</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>the least one year has elapsed from the time that the issuer filed current comprehensive disclosure
with the SEC reflecting its status as an entity that is not a shell company.</FONT></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As a result, it is likely that pursuant to Rule 144, our stockholders, who were stockholders of ours
prior to the reverse acquisition of CPSH that concluded on January 31, 2007, were able to sell their
shares of our common stock from and after January 31, 2008 (the one year anniversary of our reverse
acquisition of CPSH) without registration.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Lock-Up Agreements</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our controlling stockholder entered into a lock-up agreement with us in connection with the private
placement that we completed on January 31, 2007. Under this agreement, subject to exceptions, he
may not, directly or indirectly, offer, sell, contract to sell, pledge or otherwise dispose of or hedge any common stock or securities convertible
into or exchangeable for shares of common stock, or publicly announce the intention to do any of
the foregoing for a period of one year following the effectiveness of the registration statement
filed in connection with the private placement. The lock-up agreement will expire on September 15,
2008.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>63</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>INTEREST OF NAMED EXPERTS AND COUNSEL</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The validity of the common stock offered by this prospectus will be passed upon for us by Thelen Reid
Brown Raysman &amp; Steiner, LLP.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our consolidated financial statements (Successor), iASPEC&#146;s financial statements (Predecessor)
and Bocom Technology&#146;s financial statements have been audited by GHP Horwath, P.C., an independent
registered public accounting firm, for the periods and to the extent set forth in their reports appearing
herein and elsewhere in this prospectus. Their report regarding our Company describes how we succeeded
to the business operations of the Predecessor on October 9, 2006, and as a result, the financial
statements of the Successor and the Predecessor are not comparable in all respects. Such financial
statements have been so included in reliance upon the reports of such firm given upon the firm&#146;s
authority as an expert in auditing and accounting.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus
or having given an opinion upon the validity of the securities being registered or upon other legal
matters in connection with the registration or offering of the common stock was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial interest, direct
or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected
with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter,
voting trustee, director, officer or employee. </FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION </B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>FOR SECURITIES ACT LIABILITIES</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our Bylaws provide for the indemnification of our directors and officers, past, present and future,
under certain circumstances, against attorney&#146;s fees, judgments, fines and other expenses incurred
by them in any litigation to which they become a party arising from their association with or activities
on behalf of us. We will also bear expenses of such litigation for any of our directors, officers,
employees or agents upon such persons promise to repay us therefor if it is ultimately determined
that any such person shall not have been entitled to indemnification. This indemnification policy
could result in substantial expenditure by us, which we may be unable to recoup.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Insofar as indemnification by us for liabilities arising under the Securities Exchange Act of 1934

may be permitted to our directors, officers and&nbsp;controlling persons pursuant to provisions
of
the Articles of Incorporation and Bylaws, or otherwise, we have been advised that in the opinion

of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In
the
event that a claim for indemnification by such director, officer or controlling person of us
in the
successful defense of any action, suit or proceeding is asserted by such director, officer
or controlling
person in connection with the securities being offered, we will, unless in the opinion
of our counsel
the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction
the question whether such indemnification by us is against public policy as expressed
in the Act
and will be governed by the final adjudication of such issue.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>At the present time, there is no pending litigation or proceeding involving a director, officer, employee
or other agent of ours in which indemnification would be required or permitted. We are not aware
of any threatened litigation or proceeding which may result in a claim for such indemnification.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a19" id="a19"></a>WHERE YOU CAN FIND MORE INFORMATION</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We have filed with the Securities and Exchange Commission, or SEC, a registration statement on Form&nbsp;SB-2
under the Securities Act with respect to the common stock offered in this offering. This prospectus
does not contain all of the information set forth in the registration statement. For further information
with respect to us and the common stock offered in this offering, we refer you to the registration
statement and to the attached exhibits. With respect to each such document filed as an exhibit to
the registration statement, we refer you to the exhibit for a more complete description of the matters
involved.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>You may inspect our registration statement and the attached exhibits and schedules without charge at
the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549.
You may obtain copies of all or any part of our registration statement from the SEC upon payment
of prescribed fees. You may obtain information on the operation of the public reference room by calling
the SEC at 1-800-SEC-0330.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>64</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our SEC filings, including the registration statement and the exhibits filed with the registration
statement, are also available from the SEC&#146;s website at www.sec.gov, which contains reports,
proxy and information statements and other information regarding issuers that file electronically
with the SEC.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=2>65</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>CHINA INFORMATION SECURITY TECHNOLOGY, INC.</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>Index to Financial Statements</B></FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH width="96%"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH align="center"><p><font size="2" face="Times New Roman, Times, serif"><b> Page</b></font></p></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><b><FONT FACE="Times New Roman" SIZE=2><a href="#f1">CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED<br>
      MARCH 31, 2008 AND MARCH 31, 2007 (UNAUDITED)</a></FONT></b></TD>
    <TD ALIGN=RIGHT><b><FONT FACE="Times New Roman" SIZE=2>F-2</FONT></b></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><a href="#f2">Condensed Consolidated Balance Sheet (Unaudited) as of March 31, 2008 and December 31, 2007</a></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>F-3</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><a href="#f3">Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2008 and 2007</a></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>F-4</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><a href="#f4">Condensed Consolidated Statement of Stockholders&rsquo; Equity for the Period Ended March 31, 2008 (Unaudited)</a></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>F-5</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><a href="#f5">Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007 (Unaudited)</a></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>F-6</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><a href="#f6">Notes to Condensed Consolidated Financial Statements</a></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>F-7</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><a href="#f7"><b><FONT FACE="Times New Roman" SIZE=2>CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2007, THE PERIOD
      FROM JANUARY 1, 2006 </FONT></b></a></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><a href="#f7"><b><FONT FACE="Times New Roman" SIZE=2>TO OCTOBER 8, 2006 AND THE PERIOD FROM JANUARY 17, 2006 TO DECEMBER 31, 2006</FONT></b></a></TD>
    <TD ALIGN=RIGHT><b><FONT FACE="Times New Roman" SIZE=2>F-16</FONT></b></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><a href="#f8">Report of GHP Horwath, P.C.</a></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>F-17</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><a href="#f9">Consolidated Statements of Operations for the Year Ended December 31, 2007, the period from January 1, 2006 to<br>
      October 8, 2006 and the period from January 17, 2006 To December 31, 2006</a></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>F-18</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><a href="#f10">Consolidated Balance Sheet as of December 31, 2007</a></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>F-19</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><a href="#f11">Consolidated Statements of Stockholders&rsquo; Equity for the Year Ended December 31, 2007, the period from January 1, 2006 to<br>
      October 8, 2006 and the period from January 17, 2006 To December 31, 2006</a></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>F-20</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><a href="#f12">Consolidated Statements of Cash Flows for the Year Ended December 31, 2007, the period from January 1, 2006 to<br>
      October 8, 2006 and the period from January 17, 2006 To December 31, 2006</a></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>F-21</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><a href="#f13">Notes to Consolidated Financial Statements</a></FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>F-23</FONT></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-1 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>CHINA INFORMATION SECURITY TECHNOLOGY, INC.<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B><a name="f1" id="f1"></a>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>THREE MONTHS ENDED MARCH 31, 2008 AND 2007<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>(UNAUDITED)</B></FONT></P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-2 </FONT></P>
<HR noShade color="#000000" SIZE=5>
<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>CHINA INFORMATION SECURITY TECHNOLOGY, INC.<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B><a name="f2" id="f2"></a>CONDENSED CONSOLIDATED BALANCE SHEETS</B></FONT></P>
<font FACE="Times New Roman" SIZE="2">
<b>
<p align="center">MARCH 31, 2008 AND DECEMBER 31, 2007</b> </p>
</font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 12.4pt">
      <td width="57%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" align="center" style="text-align:center; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">NOTES</font></b></td>
      <td colspan="2" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <b><font size="2" style="color: black">MARCH 31,</font></b></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right;
  word-break:break-all; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">DECEMBER 31,</font></b></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">&nbsp;</font></b></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font style="color:black"><font size="2">&nbsp;</font><b><font size="2">2008</font></b></font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font style="color:black"><font size="2">&nbsp;</font><b><font size="2">2007</font></b></font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font style="color:black"><font size="2">&nbsp;</font><b><font size="2">(UNAUDITED)</font></b></font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      &nbsp;</td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      &nbsp;</td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      &nbsp;</td>
      <td colspan="2" valign="bottom" style="padding: 0in; background: #E9F1F8">
      &nbsp;</td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8">
      &nbsp;</td>
      <td colspan="2" valign="bottom" style="padding: 0in; background: #E9F1F8">
      &nbsp;</td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">ASSETS</font></b></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">&nbsp;</font></b></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">CURRENT ASSETS</font></b></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Cash and cash equivalents</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">23,624,772</font></td>
      <td width="3%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">19,755,182</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Investment in marketable securities</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" align="center" style="text-align:center; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">5</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">-</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">14,966,752</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Accounts receivable</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">6</font></td>
      <td width="3%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">21,142,354</font></td>
      <td width="3%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">11,721,306</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Notes receivable</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">49,842</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Advances to suppliers</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">4,984,145</font></td>
      <td width="3%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">1,791,440</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Inventories</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" align="center" style="text-align:center; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">8</font></td>
      <td width="3%" valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">6,951,380</font></td>
      <td width="3%" valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">4,779,930</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Other receivables</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">1,330,867</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">974,475</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">TOTAL CURRENT ASSETS</font></b></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="border: medium none; padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">58,083,360</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="border: medium none; padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">53,989,085</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Deposits for business acquisitions</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">15(a)</font></td>
      <td width="3%" valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">7,049,073</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">8,989,022</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Property and equipment</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" align="center" style="text-align:center; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">9</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">14,075,360</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">13,826,896</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Intangible assets</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">10</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">9,305,274</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">4,894,397</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Goodwill</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" align="center" style="text-align:center; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">4</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">18,701,923</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">7,154,395</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">TOTAL ASSETS</font></b></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">$</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">107,214,990</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">$</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">88,853,795</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">LIABILITIES AND STOCKHOLDERS' EQUITY</font></b></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">CURRENT LIABILITIES</font></b></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Accounts payable</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">$</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">3,987,497</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">$</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">3,079,304</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Advances from customers</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">1,460,301</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">394,383</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Income tax payable</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-top: 0; margin-bottom: 0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">724,797</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">326,026</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Other payables and accrued expenses</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">1,625,030</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">987,483</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Acquisition consideration payable</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" align="center" style="text-align:center; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">4</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">9,000,000</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">TOTAL CURRENT LIABILITIES</font></b></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">16,797,625</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">4,787,196</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">MINORITY INTEREST</font></b></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">10,105,657</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">10,060,657</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">STOCKHOLDERS' EQUITY</font></b></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #FFFFFF; ">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #FFFFFF; " align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td colspan="3" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td colspan="3" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Common stock, par $0.01;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td colspan="3" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Authorized capital, 75,000,000 shares;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p style="margin-left: 7.7pt">
      <font size="2" style="color: black">Shares issued and outstanding (March 31, 2008 and&nbsp;
      December 31, 2007: 45,639,396 shares)</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      &nbsp;</td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      &nbsp;</td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p align="right">
      <font size="2" style="color: black">190,891</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      &nbsp;</td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      &nbsp;</td>
      <td valign="bottom" style="padding: 0in" bgcolor="#E9F1F8" align="right">
      <p align="right">
      <font size="2" style="color: black">190,891</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Additional paid-in capital</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-top:0; margin-bottom:0" align="center">
      <font size="2" style="color: black">&nbsp;12</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">57,805,115</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="center" style="text-align: center; text-indent: -2.8pt; margin-left: 0in; margin-right: -.2pt; margin-top: 0; margin-bottom: 0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">57,421,150</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Reserve</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">1,755,552</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="center" style="text-align: center; text-indent: -2.8pt; margin-left: 0in; margin-right: -.2pt; margin-top: 0; margin-bottom: 0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">1,755,552</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Retained earnings</font></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">16,749,529</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="center" style="text-align: center; text-indent: -2.8pt; margin-left: 0in; margin-right: -.2pt; margin-top: 0; margin-bottom: 0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">13,170,549</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">Accumulated other comprehensive income</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">3,810,621</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="center" style="text-align: center; text-indent: -2.8pt; margin-left: 0in; margin-right: -.2pt; margin-top: 0; margin-bottom: 0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">1,467,800</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">TOTAL STOCKHOLDERS' EQUITY</font></b></td>
      <td width="10%" valign="bottom" style="padding: 0in" bgcolor="#FFFFFF">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">80,311,708</font></td>
      <td valign="bottom" style="padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="center" style="text-align: center; text-indent: -2.8pt; margin-left: 0in; margin-right: -.2pt; margin-top: 0; margin-bottom: 0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#FFFFFF" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">74,005,942</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="center" style="text-align: center; text-indent: -2.8pt; margin-left: 0in; margin-right: -.2pt; margin-top: 0; margin-bottom: 0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border: medium none; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td colspan="2" valign="bottom" style="padding: 0in; background: #E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0"><b>
      <font size="2" style="color: black">TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY</font></b></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">$</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">107,214,990</font></td>
      <td valign="bottom" style="padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">$</font></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in; background: #E9F1F8" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-top:0; margin-bottom:0">
      <font size="2" style="color: black">88,853,795</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2">
<p align="center">The accompanying notes are an integral part of these condensed
consolidated financial statements. </p>
<p align="center">F-3</p>
<hr color="#000000" size="5"><p style="page-break-before: always"><b>
<p align="center">CHINA INFORMATION SECURITY TECHNOLOGY, INC. <br>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME <br>
(UNAUDITED) </p>
<p align="center">THREE MONTHS ENDED MARCH 31, 2008 AND 2007 </p>
</b></font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      &nbsp;</td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p align="center"><b>
      <font size="2" style="color: black">NOTES</font></b></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      &nbsp;</td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p align="right">
      <b><font size="2" style="color: black">MARCH 31,</font></b></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      &nbsp;</td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      &nbsp;</td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p align="right">
      <b><font size="2" style="color: black">MARCH 31,</font></b></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      &nbsp;</td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      &nbsp;</td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      &nbsp;</td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p align="right">
      <b><font size="2" style="color: black">2008</font></b></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      &nbsp;</td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      &nbsp;</td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p align="right">
      <b><font size="2" style="color: black">2007</font></b></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Revenue - third parties</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">14,404,426</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">1,213,318</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Revenue - related party</font></td>
      <td width="10%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">7</font></td>
      <td width="3%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">1,818,823</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><b><font size="2" style="color: black">TOTAL REVENUE</font></b></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">14,404,426</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">3,032,141</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Cost of revenue</font></td>
      <td width="10%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(8,352,264)</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(210,712)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><b><font size="2" style="color: black">GROSS PROFIT</font></b></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">6,052,162</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">2,821,429</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Administrative expenses</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(1,752,735)</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(219,294)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Research and development expenses</font></td>
      <td width="10%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(147,003)</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Fee to iASPEC under the Turnkey
      Agreement</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">7</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(45,000)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Selling expenses</font></td>
      <td width="10%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(417,703)</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(68,669)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><b><font size="2" style="color: black">INCOME FROM OPERATIONS</font></b></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">3,734,721</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">2,488,466</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Other income, net</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">69,401</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">7,525</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Interest income</font></td>
      <td width="10%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">26,603</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">20,304</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 24.75pt">
      <td colspan="2" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <b><font size="2" style="color: black">INCOME BEFORE TAXES AND MINORITY INTEREST</font></b></p>
      </td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">3,830,725</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">2,516,295</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Minority interest</font></td>
      <td width="10%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(45,000)</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Income tax expense</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">11</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(206,745)</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(377,444)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><b><font size="2" style="color: black">NET INCOME</font></b></td>
      <td width="10%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">3,578,980</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">2,138,851</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Foreign currency translation gain</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">13</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">2,342,821</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">11,318</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><b><font size="2" style="color: black">COMPREHENSIVE INCOME</font></b></td>
      <td width="10%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">5,921,801</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">2,150,169</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><b><font size="2" style="color: black">WEIGHTED AVERAGE NUMBER OF
      SHARES</font></b></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Basic</font></td>
      <td width="10%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-bottom:1px solid #000000; padding:0in; " bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-right: 4"><font size="2">
      45,985,550</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-bottom:1px solid #000000; padding:0in; " bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">36,446,205</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Diluted</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-bottom:1px solid #000000; background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="margin-right: 4"><font size="2">
      46,720,415</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-bottom:1px solid #000000; background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">36,760,592</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><b><font size="2" style="color: black">EARNINGS PER SHARE</font></b></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Basic</font></td>
      <td width="10%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">0.08</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">0.06</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="57%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Diluted</font></td>
      <td width="10%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">0.08</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">0.06</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2">
<p align="center">The accompanying notes are an integral part of these condensed
consolidated financial statements. </p>
<p align="center">F-4</p>
<hr color="#000000" size="5"><p style="page-break-before: always"><b>
<p align="center">CHINA INFORMATION SECURITY TECHNOLOGY, INC. <br>
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY <br>
(UNAUDITED) </p>
<p align="center">THREE MONTHS ENDED MARCH 31, 2008 </p>
</b></font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 14.2pt">
      <td width="30%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" style="margin-left:12.1pt;text-indent:-12.1pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">Accumulated</font></b></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 14.2pt">
      <td width="30%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" style="margin-left:12.1pt;text-indent:-12.1pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">Common stock</font></b></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">Additional</font></b></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">other</font></b></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 14.2pt">
      <td width="30%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" style="margin-left:12.1pt;text-indent:-12.1pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">par value $0.01</font></b></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">paid-in</font></b></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">Retained</font></b></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">comprehensive</font></b></td>
      <td valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 14.2pt">
      <td width="30%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" style="margin-left:12.1pt;text-indent:-12.1pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">Shares</font></b></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">Amount</font></b></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">capital</font></b></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">Reserve</font></b></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">earnings</font></b></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">income</font></b></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2" style="color: black">Total</font></b></td>
    </tr>
    <tr style="height: 14.2pt">
      <td width="30%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:12.1pt;text-indent:-12.1pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 14.2pt">
      <td width="30%" valign="bottom" style="padding:0in;
  " bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:12.1pt;text-indent:-12.1pt"><b>
      <font size="2" style="color: black">BALANCE AS AT JANUARY 1, 2008</font></b></p>
      </td>
      <td width="10%" valign="bottom" style="padding:0in;
  " bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">45,639,396</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  " bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$ 190,891</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  " bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$ 57,421,150</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  " bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$ 1,755,552</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  " bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$ 13,170,549</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  " bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$ 1,467,800</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  " bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$ 74,005,942</font></td>
    </tr>
    <tr style="height: 14.2pt">
      <td width="30%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" style="margin-left:12.1pt;text-indent:-12.1pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 14.2pt">
      <td width="30%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" style="margin-left:12.1pt;text-indent:-12.1pt">
      <font size="2" style="color: black">Stock-based compensation (Note
      12)</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">383,965</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">383,965</font></td>
    </tr>
    <tr style="height: 14.2pt">
      <td width="30%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:12.1pt;text-indent:-12.1pt">
      <font size="2" style="color: black">Net income from the period</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">-</font><font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-&nbsp;</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all">
      <font size="2" style="color: black">3,578,980</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-&nbsp;</font></td>
      <td width="10%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all">
      <font size="2" style="color: black">3,578,980</font></td>
    </tr>
    <tr style="height: 14.2pt">
      <td width="30%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" style="margin-left:12.1pt;text-indent:-12.1pt">
      <font size="2" style="color: black">Foreign currency translation
      gain</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">-&nbsp;</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all">
      <font size="2" style="color: black">2,342,821</font></td>
      <td width="10%" valign="bottom" style="padding:0in;
  ">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all">
      <font size="2" style="color: black">2,342,821</font></td>
    </tr>
    <tr style="height: 14.2pt">
      <td width="30%" valign="bottom" style="padding:0in;
  " bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:12.1pt;text-indent:-12.1pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 14.2pt">
      <td width="30%" valign="bottom" style="padding:0in;
  " bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:12.1pt;text-indent:-12.1pt"><b>
      <font size="2" style="color: black">BALANCE AS AT MARCH 31, 2008</font></b></p>
      </td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">45,639,396</font></td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$ 190,891</font></td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$ 57,805,115</font></td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$ 1,755,552</font></td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$ 16,749,529</font></td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$ 3,810,621</font></td>
      <td width="10%" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$ 80,311,708</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2">
<p align="center">The accompanying notes are an integral part of these condensed
consolidated financial statements. </p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center">F-5</p>
<hr color="#000000" size="5"><p style="page-break-before: always">
<p ALIGN="center"><b>CHINA INFORMATION SECURITY TECHNOLOGY, INC. <br>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS <br>
(UNAUDITED) </b></p>
<p ALIGN="center"><b>THREE MONTHS ENDED MARCH 31, 2008 AND 2007 </p>
</b></font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 12.4pt">
      <td width="64%" valign="bottom" style="padding: 0in" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="3" valign="bottom" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all; margin-right:4">
      <b><font size="2" style="color: black">MARCH 31,</font></b></td>
      <td colspan="3" valign="bottom" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all; margin-right:4">
      <b><font size="2" style="color: black">MARCH 31,</font></b></td>
    </tr>
    <tr style="height: 12.4pt" style="height: 12.4pt !msorm">
      <td width="64%" valign="bottom" style="0in 0in 0in 0in !msorm:''; padding: 0in" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="3" valign="bottom" style="0in 0in 0in 0in !msorm:''; padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all; margin-right:4">
      <b><font size="2" style="color: black">2008</font></b></td>
      <td colspan="3" valign="bottom" style="0in 0in 0in 0in !msorm:''; padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all; margin-right:4">
      <b><font size="2" style="color: black">2007</font></b></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="19">
      &nbsp;</td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="19">
      &nbsp;</td>
      <td colspan="2" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="19">
      &nbsp;</td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="19">
      &nbsp;</td>
      <td colspan="2" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="19">
      &nbsp;</td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><b><font size="2" style="color: black">OPERATING ACTIVITIES</font></b></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Net income</font></td>
      <td width="3%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">3,578,980</font></td>
      <td width="3%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">2,138,851</font></td>
    </tr>
    <tr style="height: 11.35pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Adjustments to reconcile
      net income to net cash used in operations:</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Depreciation</font></td>
      <td width="3%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">657,678</font></td>
      <td width="3%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">31,657</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Amortization of intangible
      assets</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">217,854</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Stock-based compensation
      (Note 12)</font></td>
      <td width="3%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">383,965</font></td>
      <td width="3%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Minority interest</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">45,000</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 24.75pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Changes in operating assets
      and liabilities, net of effects of business acquisition:</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Increase&nbsp;in inventories</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(590,698)</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Increase in accounts
      receivable</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(5,648,740)</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(12,596)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Increase in related party
      receivable</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(1,774,640)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Increase in prepaid related
      party expenses</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(5,386,997)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2">In</font><font size="2" style="color: black">crease
      in other receivables and deposits</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(2,738,826)</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Decrease in accounts
      payable</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(303,819)</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Decrease in advances from
      customers</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(1,024,711)</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Increase (decrease) in
      other payables and accrued expenses</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">439,039</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(23,974)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal"><font size="2" style="color: black">Increase in income tax
      payable</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">70,142</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">343,608</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal"><b><font size="2" style="color: black">Net cash used in
      operating activities</font></b></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(4,914,136)</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(4,684,091)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><b><font size="2" style="color: black">INVESTING ACTIVITIES</font></b></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Cash
      acquired in Bocom acquisition
      (Note 4)</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">713,793</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 10.3pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Deposits paid for
      acquisition of Geo (Note 15(a))</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(6,909,279)</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Repayments from third parties</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">332,479</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Advances to
      related parties</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(250,001)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Decrease in amount due from
      a director</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(251,365)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Purchase of property and
      equipment</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(337,212)</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(3,646,823)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Capitalized software
      development costs</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(67,292)</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal"><font size="2" style="color: black">Proceeds from sale of
      marketable securities (Note 5)</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">14,966,752</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:1.0pt solid black; border-bottom:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:1.0pt solid black; border-bottom:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:1.0pt solid black; border-bottom:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:1.0pt solid black; border-bottom:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal"><b><font size="2" style="color: black">Net cash provided by
      (used in) investing activities</font></b></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">8,366,762</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(3,815,710)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><b><font size="2" style="color: black">FINANCING ACTIVITIES</font></b></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Advances  repaid to a third party company</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(200,000)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal"><font size="2" style="color: black">Proceeds from first private
      placement</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">13,311,211</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:1.0pt solid black; border-bottom:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:1.0pt solid black; border-bottom:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:1.0pt solid black; border-bottom:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:1.0pt solid black; border-bottom:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal"><b><font size="2" style="color: black">Net cash provided by
      financing activities</font></b></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">13,111,211</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><b><font size="2" style="color: black">NET INCREASE IN CASH AND
      CASH EQUIVALENTS</font></b></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">3,452,626</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">4,611,410</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal"><b><font size="2" style="color: black">EFFECT OF EXCHANGE RATE
      CHANGES ON CASH</font></b></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">416,964</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">10,962</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal"><b><font size="2" style="color: black">CASH AND CASH
      EQUIVALENTS, BEGINNING</font></b></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">19,755,182</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">172,316</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="17">
      <p class="MsoNormal"><b><font size="2" style="color: black">CASH AND CASH
      EQUIVALENTS, ENDING</font></b></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="17">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="18">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="18">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">23,624,772</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="17">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="18">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" height="18">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">4,794,688</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="16">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal"><font size="2" style="color: black">Supplemental disclosure of
      cash flow information</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8" height="15">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="64%" valign="top" style="padding: 0in" height="18">
      <p class="MsoNormal"><font size="2" style="color: black">Income taxes paid</font></td>
      <td valign="top" style="padding: 0in" height="18">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3px double windowtext; padding: 0in" height="18">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3px double windowtext; padding: 0in" height="18">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">136,805</font></td>
      <td valign="top" style="padding: 0in" height="18">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3px double windowtext; padding: 0in" height="18">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3px double windowtext; padding: 0in" height="18">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">33,836</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2">
<p align="left">1,125,000 shares of common stock were issued for the purchase
price of Bocom Multimedia acquisition, approximately $9,000,000, on April 1,
2008. (Note 4)</p>
<p align="center">The accompanying notes are an integral part of these condensed
consolidated financial statements. </p>
<p align="center">F-6</p>
<hr color="#000000" size="5"><p style="page-break-before: always"><b>
<p ALIGN="center">CHINA INFORMATION SECURITY TECHNOLOGY, INC. <br>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS </p>
<p ALIGN="center">THREE MONTHS ENDED MARCH 31, 2008 AND 2007 <br>
(UNAUDITED) </p>
<p align="justify">1. ORGANIZATION AND BASIS OF PRESENTATION </p>
</b>
<p ALIGN="JUSTIFY">China Information Security Technology Inc., and its
subsidiaries, (the &quot;Company&quot;) (formerly China Public Security Technology Inc.) is a provider of integrated solutions for the public
security sector in the People's Republic of China (&quot;PRC&quot;), specializing in
providing public security information technology and Geographic Information
Systems (&quot;GIS&quot;) software operating services, as well as the sale of computer
hardware and software, and the provision of Certificate Authority, or CA, an
application platform and e-Government solution technology. These services are
provided through the Company&#146;s wholly-owned PRC subsidiaries, Information
Security Technology (PRC) Co., Ltd (&quot;IST&quot;), Information Security Development
Technology (Shenzhen) Co., Ltd (&quot;ISDT&quot;), and Shenzhen Bocom Multimedia Display Technology
Co., Ltd (&quot;Bocom Technology&quot;), and through the Company&#146;s variable interest
entity (&quot;VIE&quot;), iASPEC Software Co., Ltd (&quot;iASPEC&quot;). </p>
<p ALIGN="JUSTIFY">The accompanying financial statements, as of March 31, 2008
and for the three months ended March 31, 2008 and 2007, have been prepared by
the Company without audit. Pursuant to the rules and regulations of the
Securities and Exchange Commission (the &quot;SEC&quot;), certain information and footnote
disclosures normally included in the financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
(&quot;US GAAP&quot;) have been condensed or omitted pursuant to such rules and
regulations. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's audited
annual financial statements for the year ended December 31, 2007, which are
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2007, filed with the SEC on March 31, 2007. Amounts as of December 31, 2007
are derived from these audited consolidated financial statements. </p>
<p ALIGN="JUSTIFY">In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the Company's
financial position as of March 31, 2008, results of operations and cash flows
for the three months ended March 31, 2008 and 2007 have been made. The results
of operations for the three months ended March 31, 2008 are not necessarily
indicative of the operating results for the full year. </p>
<p align="justify"><u>Agreement and Plan of Merger </u></p>
<p align="justify">On April 2, 2008, the Company entered into an Agreement and
Plan of Merger (the &quot;Merger Agreement&quot;) with China Information Security
Technology, Inc. (&quot;CIST&quot;), a Nevada corporation and wholly-owned subsidiary of
the Company. Pursuant to the Merger Agreement, the Company agreed to merge with
and into CIST, with CIST being the surviving entity (the &quot;Reincorporation
Merger&quot;). The Reincorporation Merger became effective on April 7, 2008 (the
&quot;Effective Time&quot;). </p>
<p align="justify">Pursuant to the terms of the Merger Agreement, (i) the
Company merged into CIST, with CIST being the surviving corporation, and the
Company thereby changed its name to China Information Security Technology, Inc.;
(ii) from and after the Effective Time, CIST possesses all of the rights,
privileges, powers, and franchises of the Company, and the Company's debts and
liabilities became the debts and liabilities of CIST; (iii) the Company's
existing Board of Directors and officers became the Board of Directors and
officers of CIST; and (iv) the Articles of Incorporation and Bylaws of CIST now
govern the Surviving Corporation. </p>
<p align="justify">The Reincorporation Merger did not result in any change in
headquarters, business, jobs, management, location of any  offices or
facilities, number of employees, assets, liabilities or net worth (other than as
a result of the costs incident to the Reincorporation Merger, which are
immaterial). Management, including all directors and officers, remain the same
in connection with the Reincorporation Merger. </p>
<p align="justify">As a result of the Reincorporation Merger, each outstanding
share of the Company's common stock, par value $0.01 per share, was
automatically converted into one share of CIST's common stock, par value $0.01
per share. </p>
<p align="center">F-7</p>
<hr color="#000000" size="5"><p style="page-break-before: always"><b>
<p align="justify">1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED) </p>
</b>
<p align="justify"><u>Business Turnkey Agreement </u></p>
<p ALIGN="JUSTIFY">On October 9, 2006, IST, entered into a Business Turnkey
Agreement, as amended (the &quot;Turnkey Agreement&quot;) with iASPEC, a PRC company
controlled by Mr. Lin, the Company&#146;s Chairman and Chief Executive Officer.
iASPEC is a software development company that provides public security
information technology, Police-Use Geographic Information Systems (&quot;PGIS&quot;) and
Civil-Use Geographic Information Systems (&quot;CGIS&quot;) operating services to
government and private customers in the PRC. Under the Turnkey Agreement, IST
was to pay an annual fee of $180,000 to iASPEC and was to perform all services
necessary for iASPEC to fulfill its customer contracts in exchange for 100% or
90% of the revenue from such contracts, depending on the contract. In addition,
under the Turnkey Agreement, iASPEC granted IST an exclusive, royalty-free,
transferable, worldwide perpetual license to use and install iASPEC&#146;s
proprietary software. No other tangible assets or liabilities were transferred
to IST under the Turnkey Agreement. </p>
<p align="justify">Effective July 1, 2007, IST, iASPEC and iASPEC&#146;s shareholders
terminated the Turnkey Agreement and replaced it with a Management Service
Agreement (&quot;MSA&quot;). </p>
<p align="justify"><u>Management Service Agreement </u></p>
<p ALIGN="JUSTIFY">Pursuant to the terms of the MSA, iASPEC granted IST a
ten-year, exclusive, royalty-free, transferable worldwide license to use and
install certain iASPEC software, along with copies of source and object codes
relating to such software. In addition, IST licensed back to iASPEC a
royalty-free, limited, non-exclusive license to the software, without right of
sub-license, for the sole purpose of permitting iASPEC to carry out its business
as presently conducted. IST has the right to designate two Chinese citizens to
serve as senior managers of iASPEC, to serve as a majority on iASPEC&#146;s Board of
Directors, and to assist in managing the business and operations of iASPEC. In
addition, both iASPEC and IST will require the affirmative vote of a majority of
the Company&#146;s Board of Directors, including at least one non-insider director,
for certain material actions, as defined, with respect to iASPEC. </p>
<p ALIGN="JUSTIFY">Under the MSA, IST receives 100% of the net received profit
of iASPEC, and reimburses iASPEC for all net losses incurred by iASPEC, as such
terms are defined in the MSA, and iASPEC is permitted to retain $180,000 per
year out of the net received profits. The MSA also provides that IST may advance
to iASPEC, at its sole discretion, amounts to be credited against IST&#146;s future
obligations to iASPEC. Any such advances are treated as prepayments and not as
loans and iASPEC has no obligation to repay any such advances except by
crediting the amount of such advances against IST&#146;s obligation to reimburse net
losses, or by adding the amount thereof to net received profit when and as
requested by IST. The parties to the MSA also agreed to the calculation of a
true-up amount, consisting of the cumulative net profit or net losses of iASPEC
from October 9, 2006 to June 30, 2007, when iASPEC commenced its contractual
relationship with IST, through the date of the MSA. The calculated true-up
amount was paid by iASPEC to IST in 2007. </p>
<p ALIGN="JUSTIFY">In connection with the MSA, IST also entered into an
immediately exercisable purchase option agreement (&quot;Option Agreement&quot;) with
iASPEC and its shareholders, pursuant to which the iASPEC shareholders granted
the Company or its designee(s) an exclusive, irrevocable option to purchase,
from time to time, all or a part of iASPEC&#146;s shares or iASPEC&#146;s assets from the
iASPEC shareholders for $1,800,000 in the aggregate. The option may not be
exercised if the exercise would violate any applicable laws and regulations in
China or cause any license or permit held by, and necessary for the operation of
iASPEC, to be cancelled or invalidated. </p>
<p align="justify">The substance of the MSA and the Option Agreement is to: </p>
<ul>
  <li>
  <p align="justify" style="margin-top: 0; margin-bottom: 12">Allow the Company
  to utilize the business licenses, contacts, permits and other resources of
  iASPEC in order for the Company to be able to expand its operations and
  business model; </li>
  <li>
  <p align="justify" style="margin-top: 0; margin-bottom: 12">Provide the
  Company with effective control over all of iASPEC's operations; </li>
  <li>
  <p align="justify" style="margin-top: 0; margin-bottom: 12">Allow the
  shareholders of iASPEC an opportunity to monetize a portion of their
  investment through the $1.8 million purchase option. </li>
</ul>
<p ALIGN="JUSTIFY">The Company adopted Financial Accounting Standards Board (&quot;FASB&quot;)
Interpretation No. (&quot;FIN&quot;) 46R, &quot;<i>Consolidation and Variable Interest
Entities&quot; </i>(&quot;VIEs&quot;), (&quot;FIN 46R&quot;), an interpretation of Accounting Research
Bulletin No. 51, &quot;<i>Consolidated Financial Statements.</i>&quot; FIN 46R requires a
VIE to be consolidated by a company if that company is subject to a majority of
the risk of loss for the VIE or is entitled to receive a majority of the VIE&#146;s
residual returns. As a result of the MSA and the Option Agreement, on July 1,
2007 iASPEC became a VIE of the Company and iASPEC&#146;s results are consolidated in
the Company&#146;s financial statements. While the Company has held an economic
interest in iASPEC since October 9, 2006, the MSA and the Option Agreement have
given the Company control over the business and operations of iASPEC, and the
Company became the primary beneficiary of iASPEC. To comply with PRC laws and
regulations that restrict foreign ownership of companies that provide public
security information technology and Geographic Information Systems software
operating services to certain government and other customers, the Company
operates the restricted aspect of its business through iASPEC. </p>
<p align="center">F-8</p>
<hr color="#000000" size="5"><p style="page-break-before: always"><b>
<p align="justify">2. VARIABLE INTEREST ENTITY </p>
</b>
<p ALIGN="JUSTIFY">During the three months ended March 31, 2008, all but $45,000
of iASPEC&#146;s net income was allocated to the Company. The $45,000 was attributed
to the minority interest in the Consolidated Statements of Income and
Comprehensive Income, resulting in minority interest of $10,105,657 as of March
31, 2008. </p>
<p ALIGN="JUSTIFY">As of March 31, 2008, the consolidation of iASPEC resulted in an increase in assets
of approximately $13,526,000, an increase in liabilities (consisting primarily
of accounts payable) of approximately $3,420,000, and an increase in minority
interest of $10,106,000, and an increase in net income
of approximately $2,496,000 for the three months ended March 31, 2008. </p>
<b>
<p align="justify">3. USE OF ESTIMATES </p>
</b>
<p ALIGN="JUSTIFY">The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenue and expenses
during the reporting period. Management makes these estimates using the best
information available at the time the estimates are made; however actual results
could differ from those estimates. </p>
<b>
<p align="justify">4. BUSINESS ACQUISITION </p>
</b>
<p ALIGN="JUSTIFY">On February 1, 2008, the Company and its wholly-owned
subsidiary, China Public Security Holdings Limited, a British Virgin Islands
company, acquired 100% of the equity interests of Bocom Multimedia Display Co.,
Ltd, a Hong Kong company (&quot;Bocom Multimedia&quot;), and its wholly-owned Chinese
subsidiary, Shenzhen Bocom Multimedia Display Technology Co., Ltd (&quot;Bocom
Technology&quot;), for approximately $18,044,000. Approximately $9,044,000 of the
purchase price had been paid in cash as a deposit for a business acquisition in
2007 and the balance of the purchase price of $9,000,000 which is included in
acquisition consideration payable at March 31, 2008, was paid on April 1, 2008
through the issuance of 1,125,000 shares of the Company&#146;s common stock. </p>
<p ALIGN="JUSTIFY">Under the terms of the acquisition agreement, 300,000 shares
of the Company&#146;s common stock are to be returned if Bocom Technology does not
meet certain net income targets in 2008, and an additional 300,000 shares are to
be returned if Bocom Technology does not meet certain net income targets in
2009. </p>
<p ALIGN="JUSTIFY">Bocom Technology is a leading provider of advanced multimedia
display and control technology, and the products have been widely applied in the
fields of public security, communication and multimedia in China. The
acquisition enhances the Company&#146;s PGIS product line by providing full turnkey
solutions to customers. </p>
</font>
<p>&nbsp;</p>
<font FACE="Times New Roman" SIZE="2">
<p align="center">F-9</p>
<hr color="#000000" size="5"><p style="page-break-before: always"><b>
<p>4. BUSINESS ACQUISITION (CONTINUED) </p>
</b>
<p>The following represents the preliminary purchase price allocation at the
date of the acquisition: </p>
</font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 11.15pt">
      <td width="85%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal"><font size="2" style="color: black">Cash and
      cash equivalents</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">713,793</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="top" style="padding: 0in">
      <p class="MsoNormal"><font size="2" style="color: black">Accounts
      receivable</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">2,851,883</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal"><font size="2" style="color: black">Advances to
      suppliers</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">475,120</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="top" style="padding: 0in">
      <p class="MsoNormal"><font size="2" style="color: black">Inventory</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">1,332,661</font></td>
    </tr>
    <tr style="height: 11.15pt">
      <td width="85%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal"><font size="2" style="color: black">Other
      current assets</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">431,</font><font size="2">912</font></td>
    </tr>
    <tr style="height: 11.15pt">
      <td width="85%" valign="top" style="padding: 0in">
      <p class="MsoNormal"><font size="2" style="color: black">Property
      and equipment</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">49,611</font></td>
    </tr>
    <tr style="height: 11.15pt">
      <td width="85%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal"><font size="2" style="color: black">Intangible assets</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">4,207,282</font></td>
    </tr>
    <tr style="height: 11.15pt">
      <td width="85%" valign="top" style="padding: 0in">
      <p class="MsoNormal"><font size="2" style="color: black">Goodwill </font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">11,547,528</font></td>
    </tr>
    <tr style="height: 11.15pt">
      <td width="85%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal"><font size="2" style="color: black">Current
      liabilities</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(3,565,363)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="top" style="padding: 0in">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 11.15pt">
      <td width="85%" valign="top" style="padding: 0in">
      <p class="MsoNormal"><font size="2" style="color: black">Total
      purchase price</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">18,044,427</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2">
<p ALIGN="JUSTIFY">The operating results of Bocom Technology have been included
in the condensed consolidated financial statements from February 1, 2008,
the acquisition date. Intangible assets include technology and a trademark with
estimated useful lives of 10 and 20 years respectively. Goodwill  is not expected to be deductible for tax purposes. The following
tables show supplemental information of the results of operations on an unaudited pro forma basis for the three months ended March 31, 2008 and 2007, as
if the acquisition of Bocom Technology had been completed at the beginning of
the respective periods. </p>
</font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:26.4pt; margin-right:4">
      <font size="2" style="color: black">For the three months ended March 31, 2008</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="center" style="margin-left:7.7pt;text-align:center; margin-right:4">
      <font size="2" style="color: black">Pro</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">Forma</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 10.3pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Revenue</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="margin-left:1.1pt;text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">14,432,919</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 10.3pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Income from operations</font></td>
      <td width="3%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="center" style="margin-left:1.1pt;text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">3,591,611</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 10.3pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Net income</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="margin-left:1.1pt;text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">3,435,870</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Weighted Average Number of Shares</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Basic</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="margin-left:1.1pt;text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">46,764,396</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Diluted</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="center" style="margin-left:1.1pt;text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">47,103,657</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Earnings per share</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Basic</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">0.07</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Diluted</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">0.07</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 13.05pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:26.4pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;For the three months ended March 31, 2007
      </font> </td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="center" style="margin-left:7.7pt;text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;Pro</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="center" style="margin-left:7.7pt;text-align:center; margin-right:4">
      <font size="2" style="color: black">Forma</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Revenue</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">3,363,338</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 10.3pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Income from operations</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="center" style="margin-left:1.1pt;text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">2,283,933</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 10.3pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Net income</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="margin-left:1.1pt;text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">1,936,089</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Weighted Average Number of Shares</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Basic</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="margin-left:1.1pt;text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">37,571,205</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Diluted</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="center" style="margin-left:1.1pt;text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">37,885,592</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Earnings per share</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Basic</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">0.05</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Diluted</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="center" style="text-align:center; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">0.05</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2">
<p align="center">F-10</p>
<hr color="#000000" size="5"><p style="page-break-before: always"><b>
<p align="justify">5. INVESTMENT IN MARKETABLE SECURITIES </p>
</b>
<p ALIGN="JUSTIFY">On November 9, 2007, the Company invested in three
equity-linked notes (&quot;ELNs&quot;), for HKD176,814,000 (approximately $22,654,000).
The ELNs were linked to three different equity securities traded on the Hong
Kong Stock Exchange. Mr. Lin provided a guarantee (&quot;Lin Guarantee&quot;) against any
losses sustained as a result of the Company&#146;s investment in the ELNs. </p>
<p ALIGN="JUSTIFY">On December 28, 2007, the maturity date of the ELNs, one of
the ELNs was redeemed by the issuer for cash of HKD60,000,000 (approximately
$7,687,000) and with a gain of HKD906,000 (approximately $116,000). The other
two ELNs were redeemed by the issuer&#146;s surrender of the underlying equity
securities to the Company. On March 25, 2008, when the Company sold the
remaining equity securities, the market value of the underlying securities was
HKD85,009,123 (approximately $10,897,000). To honor  the Lin Guarantee, Mr.
Lin paid the Company approximately $4,080,000. As a result, the Company recorded
no gain or loss on the investments in the ELNs. Mr. Lin paid the Lin Guarantee
from the proceeds of a private sale to certain accredited investors, of
1,070,000 shares of the Company&#146;s common stock owned by him. Mr. Lin will not
receive any shares of the Company's common stock, other security or other consideration
for this capital contribution and has waived any and all rights that he may have
to make a claim against the Company for any such shares, securities or other
consideration in the future. In connection with this private sale transaction,
the Company entered into a registration rights agreement with the purchasers of
Mr. Lin&#146;s shares, pursuant to which, among other things, the Company agreed to
register within a predefined period, shares of its common stock transferred to
them by Mr. Lin. There are no liquidated damages associated with the Company&#146;s
failure to timely register these shares. Although the Company has not suffered
any losses on the investment by the Company in the ELNs, the investment in the
ELNs could result in a claim being alleged against the Company. </p>
<b>
<p align="justify">6. ACCOUNTS RECEIVABLE </p>
</b>
<p ALIGN="JUSTIFY">As of March 31, 2008, the Company&#146;s top five customers
accounted for 35.9% of accounts receivable, two of which accounted for 12.1% and
11.1% respectively. No other customer accounted for greater than 10% of accounts
receivable at March 31, 2008. As of December 31, 2007, the Company&#146;s top five
customers accounted for 40.5% of accounts receivable, two of which accounted for
20% and 10% respectively. No other customer accounted for greater than 10% of
accounts receivable at December 31, 2007. The top five customers accounted for
24.7% and 49.2% of the revenue from third parties for the three months ended March
31, 2008 and 2007, respectively. </p>
<p ALIGN="JUSTIFY">No customer accounted for greater than 10% of third parties
revenue for the three months ended March 31, 2008. For the same period in 2007,
three customers accounted for 14.9%, 11% and 10.2% of third parties revenue,
respectively, and no other customers accounted for greater than 10% of third
parties revenue. </p>
<b>
<p align="justify">7. RELATED PARTY BALANCES AND TRANSACTIONS </p>
</b>
<p align="justify">Revenue - related party </p>
<p ALIGN="JUSTIFY">Effective July 1, 2007, when iASPEC became the Company&#146;s VIE,
the results of iASPEC&#146;s operations have been consolidated. Prior to July 1,
2007, revenue earned from iASPEC under the Turnkey Agreement was recorded as
related party revenue in the Company&#146;s financial statements. </p>
<p align="justify">Amounts earned from iASPEC under the Turnkey Agreement during
the three months ended March 31, 2007 were as follows: </p>
</font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 12.4pt">
      <td width="76%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Revenue, per contracts&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">3,932,251</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="76%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="76%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Cost of sales incurred by iASPEC&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(1,771,527)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="76%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Expenses paid by iASPEC on behalf of IST</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(341,901)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="76%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Net</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">1,818,823</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="76%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="76%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Fee payable to iASPEC under the Turnkey Agreement&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">45,000</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2">
<p align="center">F-11</p>
<hr color="#000000" size="5"><p style="page-break-before: always"><b>
<p align="justify">8. INVENTORIES </p>
</b>
<p align="justify">As of March 31, 2008 and December 31, 2007, inventories
consist of: </p>
</font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 24.65pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all; margin-right:4">
      <b><font size="2" style="color: black">March 31,<br>
      2008</font></b></p>
      </td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all; margin-right:4">
      <b><font size="2" style="color: black">December 31,<br>
      2007</font></b></p>
      </td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid white; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Raw materials</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">36,034</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid white; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Work in process</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">1,104,561</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid white; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Finished goods</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">105,785</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">402,940</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid white; padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt;text-align:justify;text-justify:
  inter-ideograph"><font size="2" style="color: black">Installations in process</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">5,705,000</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid white; padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">4,376,990</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Total</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:3px double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:3px double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">6,951,380</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:3px double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:3px double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">4,779,930</font></td>
    </tr>
    </table>
  <font FACE="Times New Roman" SIZE="2"><b>
<p>9. PROPERTY AND EQUIPMENT </p>
</b>
<p>As of March 31, 2008 and December 31, 2007, property and equipment consists
of: </p>
</font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 24.65pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all; margin-right:4">
      <b><font size="2" style="color: black">March 31,<br>
      2008</font></b></p>
      </td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all; margin-right:4">
      <b><font size="2" style="color: black">December 31,<br>
      2007</font></b></p>
      </td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Office equipment</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">122,889</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">116,299</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Electronics equipment</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">8,646,094</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">8,237,963</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Motor vehicles</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">743,603</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">566,375</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Purchased software</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">3,256,314</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">3,126,357</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Office building</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">5,237,230</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">5,027,304</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Leasehold improvements</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">169,435</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Total</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">18,175,565</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">17,074,298</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Less: accumulated depreciation</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(4,100,205)</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(3,247,402)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">14,075,360</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 2.25pt double black; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">13,826,896</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2">
<p align="justify">Depreciation expense for the three months ended March 31,
2008 and 2007 was $657,678 and $31,657, respectively. </p>
<b>
<p align="justify">10. INTANGIBLE ASSETS </p>
</b>
<p align="justify">As of March 31, 2008 and December 31, 2007, intangible assets
consist of: </p>
</font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 24.65pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all">
      <b><font size="2" style="color: black">March 31,<br>
      2008</font></b></p>
      </td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal"><font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all">
      <b><font size="2" style="color: black">December 31,<br>
      2007</font></b></p>
      </td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4"><b>
      <font size="2" style="color: black">&nbsp;</font></b></td>
      <td width="3%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Software development costs</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">1,138,962</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">983,270</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Trademark</font></td>
      <td width="3%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">1,950,956</font></td>
      <td width="3%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Technology</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">6,980,576</font></td>
      <td width="3%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid windowtext; padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid windowtext; padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">4,432,398</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Total</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">10,070,494</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">5,415,668</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Less: accumulated amortization</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(765,220)</font></td>
      <td valign="top" style="padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid windowtext; padding: 0in" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid windowtext; padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(521,271)</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">9,305,274</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.5pt double windowtext; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.5pt double windowtext; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">4,894,397</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2">
<p align="justify">Amortization expense for the three months ended March 31,
2008 and 2007 was $217,854 and $0, respectively. </p>
<p align="justify">Estimated future amortization of intangible assets as of
March 31, 2008 is as follows: </p>
</font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 12.4pt">
      <td width="85%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">2008 (remaining nine months)</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">401,992</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">2009</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">636,261</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">2010</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">582,489</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">2011</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">482,640</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">2012</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">449,357</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Thereafter</font></td>
      <td valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">6,752,535</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Total</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">9,305,274</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2">
<p align="center">F-12</p>
<hr color="#000000" size="5"><p style="page-break-before: always"><b>
<p align="justify">11. INCOME TAX EXPENSE </p>
</b>
<p align="justify">Pre-tax income for the three months ended March 31, 2008 and
2007 was taxable in the following jurisdictions: </p>
</font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 50.6pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all; margin-right:4">
      <b><font size="2" style="color: black">Three Months<br>
      Ended <br>
      March 31, <br>
      2008</font></b></p>
      </td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all; margin-right:4">
      <b><font size="2" style="color: black">Three Months<br>
      Ended <br>
      March 31, <br>
      2007</font></b></p>
      </td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4"><b>
      <font size="2" style="color: black">&nbsp;</font></b></td>
      <td width="3%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">PRC</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">4,719,521</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">2,497,104</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Others</font></td>
      <td width="3%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(888,796)</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid black; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">19,191</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border:medium none; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt; margin-right:4">
      <font size="2" style="color: black">Income before taxes and minority interest</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">3,830,725</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">2,516,295</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2">
<p align="justify">It is management's intention to reinvest all the income
attributable to the Company earned by its operations outside the United States
of America (the &quot;U.S.&quot;). Accordingly, no U.S. corporate income taxes are
provided in these condensed consolidated financial statements. </p>
<p align="justify">Under the current laws of the BVI, dividends and capital
gains arising from the Company's investments in the BVI are not subject to
income taxes and no withholding tax is imposed on payments of dividends by the
Company. </p>
<p align="justify">The reconciliation of income taxes expense for income tax
computed at the PRC federal statutory tax rate applicable to enterprises
operating in the Shenzhen Special Economic Zone is as follows:</font></p>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 48.2pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all; margin-right:4">
      <b><font size="2" style="color: black">Three Months<br>
      Ended <br>
      March 31, <br>
      2008</font></b></p>
      </td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all; margin-right:4">
      <b><font size="2" style="color: black">Three Months<br>
      Ended <br>
      March 31, <br>
      2007</font></b></p>
      </td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4"><b>
      <font size="2" style="color: black">&nbsp;</font></b></td>
      <td width="3%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">PRC federal statutory tax rate</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      &nbsp;</td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">18%</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      &nbsp;</td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">15%</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Computed expected income tax expense</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">849,514</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">377,444</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Tax exemption&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">(677,844)</font></td>
      <td width="3%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Tax on non-deductible expenses</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">35,075</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Income tax expense</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">206,745</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-right: 4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right; margin-right:4">
      <font size="2" style="color: black">377,444</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2">
<p align="justify">IST, ISDT, iASPEC, and Bocom Technology are all governed by
the Income Tax Laws of the PRC and are subject to the PRC enterprise income tax
(&quot;EIT&quot;) at 15% in 2007. The China Unified Corporate Income Tax Law (the &quot;Unified
Tax Law&quot;) was released on March 6, 2007 and became effective on January 1, 2008,
resulting in an increase in the PRC federal statutory tax rate to 25%. The
Unified Tax Law is to be phased in over five years. Companies that were subject to an income tax of 15% in 2007 will pay 18% in 2008, 20% in
2009, 22% in 2010, 24% in 2011 and 25% from 2012. As a wholly-owned foreign
investment enterprise, IST is entitled to enjoy a two-year tax exemption,
followed by a 50% exemption for three years thereafter by PRC tax authorities
beginning August 10, 2007 and retroactive to January 1, 2007. Under the Unified Tax
Law, companies that were previously exempt from taxes or that had concessional
rates are to retain their preferences until the original expiration date. The
Unified Tax Law does not impact IST&#146;s income tax qualification to enjoy a tax
exemption in fiscal year 2008 and IST will continue to qualify for a 50% tax
exemption for the three years thereafter. EIT exemptions claimed by IST may
become payable if IST were to dissolve within the next 10 years. However,
management believes that the PRC tax authorities will not request payment of any
such amounts. </p>
<p align="justify">The Company adopted the provisions of FASB Interpretation No.
48,<i> Accounting for Uncertainty in Income Taxes &#150; an Interpretation of FASB
Statement No. 109,</i> or FIN 48, on January 1, 2007, and did not have any
unrecognized tax benefits. There was no effect on the Company&#146;s financial
condition or results of operations as a result of implementing FIN 48. </p>
<p align="justify">The Company&#146;s policy is to recognize interest and penalties
accrued on any unrecognized tax benefits as a component of income tax expense.
As of the date of adoption of FIN 48, the Company did not have any accrued
interest or penalty associated with any unrecognized tax benefits, nor was any
interest expense recognized for the three months ended March 31, 2008 and 2007.
</p>
<p align="center">F-13</p>
<hr color="#000000" size="5"><p style="page-break-before: always"><b>
<p align="justify">12. STOCK-BASED COMPENSATION </p>
</b>
<p ALIGN="JUSTIFY">Effective June 13, 2007, the Board of Directors of the
Company adopted the China Information Security Technology, Inc. 2007 Equity
Incentive Plan (&quot;The Plan&quot;). The Plan provides for grants of stock options,
stock appreciation rights, performance units, restricted stock, restricted stock
units and performance shares. A total of 8,000,000 shares of the Company&#146;s
common stock may be issued pursuant to Awards granted under the Plan. </p>
<p ALIGN="JUSTIFY">On November 30, 2007,  the Company issued options to certain employees to purchase
490,000 shares of the Company&#146;s common stock, with an exercise
price of $9.48 per share, which options were to vest on December 5, 2008 and to
expire on December 5, 2011. </p>
<p ALIGN="JUSTIFY">On March 3, 2008, the Company's Board of Directors voided and
canceled the grant of the stock options, and on March 20, 2008 approved the
grant of 400,000 shares of common stock to the employees. The fair value of the
Company&#146;s common stock based on quoted market prices on March 20, 2008 was $4.30
per share. Since the cancellation and grant of the replacement award occurred
concurrently, they will be treated as a modification of the terms of the
cancelled award in accordance with SFAS 123R. These newly granted shares are
vested quarterly at 25% over one year after the grant. </p>
<p ALIGN="JUSTIFY">The Company uses Black-Scholes option pricing model to
measure the fair value of stock options granted. The determination of the fair
value of stock-based compensation awards on the date of grant using an
option-pricing model is affected by the Company&#146;s stock price as well as
assumptions regarding a number of complex and subjective variables, including
the expected volatility of the Company&#146;s stock price over the term of the
awards, actual and projected employee stock option exercise behaviors, risk-free
interest rate and expected dividends. </p>
<p ALIGN="JUSTIFY">Expected term represents the weighted average period of time
that stock-based awards are expected to be outstanding, giving consideration to
employees&#146; expected exercise and post-vesting employment termination behavior.
Expected volatilities are based on historical volatilities of the Company&#146;s
ordinary shares. Risk-free interest rate is based on U.S. T-bill with maturity
terms similar to the expected term on the stock-based awards. The Company does
not anticipate paying any cash dividends in the foreseeable future. Forfeitures
are estimated at the time of grant and revised in subsequent periods if actual
forfeitures differ from those estimates. The Company uses historical data to
estimate pre-vesting option forfeitures and record stock-based compensation
expense only for those awards that are expected to vest. </p>
<p ALIGN="JUSTIFY">During the three months ended March 31, 2008, the Company
recognized $383,965 of compensation expense related to the stock option and
restricted stock plans. As of March 31,
2008, after the cancellation of the stock options, there is approximately
$1,216,000 of unrecognized expense related to the grant of the non-vested
shares. A summary of the status of the Company&#146;s non-vested stock options and
shares during the three months ended March 31, 2008 is presented as below: </p>
</font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr>
      <td width="67%" valign="top" style="padding:0in; ">
      &nbsp;</td>
      <td colspan="2" valign="top" style="padding:0in; ">
      &nbsp;</td>
      <td valign="top" style="padding:0in; ">
      &nbsp;</td>
      <td colspan="2" valign="top" style="padding:0in; ">
      <p align="right"><font size="2"><b>Per Share</b></font></td>
    </tr>
    <tr>
      <td width="67%" valign="top" style="padding:0in; ">
      <p class="MsoNormal" style="margin-left:7.7pt"><b>
      <font size="2" style="color: black">Non-vested Options</font></b></td>
      <td colspan="2" valign="top" style="padding:0in; ">
      <p class="MsoNormal" align="right" style="text-align: right; margin-left: 7.7pt; margin-right: 4; margin-top: 0in; margin-bottom: .0001pt">
      <b><font size="2" style="color: black">Shares</font></b></td>
      <td valign="top" style="padding:0in; ">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <b><font size="2" style="color: black">&nbsp;</font></b></td>
      <td colspan="2" valign="top" style="padding:0in; ">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; ">
      <b><font size="2" style="color: black">Fair Value</font></b></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Non-vested at January 1, 2008</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align: right; margin-left: 7.7pt; margin-right: 4; margin-top: 0in; margin-bottom: .0001pt">
      <font size="2" style="color: black">490,000</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; ">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; ">
      <font size="2" style="color: black">3.41</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Cancelled and modified </font> </td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align: right; word-break: break-all; margin-left: 7.7pt; margin-top: 0in; margin-bottom: .0001pt">
      <font size="2" style="color: black">&nbsp; (490,000)</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; ">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; ">
      <font size="2" style="color: black">&nbsp;3.94</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Non-vested at March 31, 2008</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.5pt double windowtext; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align: right; margin-left: 7.7pt; margin-right: 4; margin-top: 0in; margin-bottom: .0001pt">
      <font size="2" style="color: black">-</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; ">
      <font size="2" style="color: black">$</font></td>
      <td width="12%" valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.5pt double windowtext; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align: right; margin-left: 7.7pt; ">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="border: medium none; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align: right; margin-left: 7.7pt; margin-right: 4; margin-top: 0in; margin-bottom: .0001pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="top" style="padding: 0in">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; ">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="top" style="border: medium none; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align: right; margin-left: 7.7pt; ">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr>
      <td width="67%" valign="top" style="padding:0in; ">
      &nbsp;</td>
      <td colspan="2" valign="top" style="padding:0in; ">
      &nbsp;</td>
      <td valign="top" style="padding:0in; ">
      &nbsp;</td>
      <td colspan="2" valign="top" style="padding:0in; ">
      <p align="right"><font size="2"><b>Per Share</b></font></td>
    </tr>
    <tr>
      <td width="67%" valign="top" style="padding:0in; ">
      <p class="MsoNormal" style="margin-left:7.7pt"><b>
      <font size="2" style="color: black">Non-vested Shares</font></b></td>
      <td colspan="2" valign="top" style="padding:0in; ">
      <p class="MsoNormal" align="right" style="text-align: right; margin-left: 7.7pt; margin-right: 4; margin-top: 0in; margin-bottom: .0001pt">
      <b><font size="2" style="color: black">Shares</font></b></td>
      <td valign="top" style="padding:0in; ">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <b><font size="2" style="color: black">&nbsp;</font></b></td>
      <td colspan="2" valign="top" style="padding:0in; ">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; ">
      <b><font size="2" style="color: black">Fair Value</font></b></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Non-vested at January 1, 2008</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align: right; margin-left: 7.7pt; margin-right: 4; margin-top: 0in; margin-bottom: .0001pt">
      <font size="2" style="color: black">-</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; ">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; ">
      <font size="2" style="color: black">-</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="67%" valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Granted and non-vested at March 31, 2008</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.5pt double windowtext; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align: right; margin-left: 7.7pt; margin-right: 4; margin-top: 0in; margin-bottom: .0001pt">
      <font size="2" style="color: black">400,000</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; margin-right:4">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td valign="top" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; ">
      <font size="2" style="color: black">$</font></td>
      <td valign="top" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.5pt double windowtext; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="margin-left:7.7pt;text-align:right; ">
      <font size="2" style="color: black">4.30</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2"><b>
<p align="justify">13. FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS </p>
</b>
<p ALIGN="JUSTIFY">The financial statements of IST, ISDT, iASPEC and Bocom
Technology are measured using the local currency (Chinese Renminbi Yuan) as the
functional currency. The assets and liabilities are translated using the
exchange rate in effect at the balance sheet date, and the results of operations
of are translated at the average exchange rates during the period. Translation
adjustments are included in comprehensive income in the accompanying statements
of income and comprehensive income. During the three months ended March 31, 2008
and 2007, the Company recorded translation gains of $2,342,821 and $11,318,
respectively, as a component of accumulated other comprehensive income. </p>
<p align="center">F-14</p>
<hr color="#000000" size="5"><p style="page-break-before: always"><b>
<p align="justify">14. COMMITMENTS AND CONTINGENCIES </p>
</b>
<p ALIGN="JUSTIFY">The Company&#146;s subsidiaries, ISDT and Bocom Technology lease
offices and factory space in Shenzhen and Dongguan in the PRC under three lease
agreements that will expire in May 2008, September 2008 and
October 2010, respectively. Rental expense for the three months ended March 31,
2008 and 2007 was approximately $56,000 and $12,000, respectively. </p>
<p align="justify">Future minimum lease payments under these lease agreements as
of March 31, 2008 are as follows: </p>
</font>
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" width="100%">
    <tr style="height: 18.7pt">
      <td width="85%" valign="bottom" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Year ending December 31,</font></td>
      <td colspan="2" valign="bottom" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right;word-break:break-all">
      <b><font size="2" style="color: black">Lease payments</font></b></td>
    </tr>
    <tr style="height: 14.05pt">
      <td width="85%" valign="bottom" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td colspan="2" valign="bottom" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align: right; word-break: break-all">
      <b><font size="2" style="color: black">&nbsp;</font></b></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">2008 (remaining nine months)</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal"><font size="2" style="color: black">$</font></td>
      <td width="12%" valign="bottom" style="padding: 0in" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">141,100</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="bottom" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">2009</font></td>
      <td width="3%" valign="bottom" style="padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">144,800</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">2010</font></td>
      <td width="3%" valign="bottom" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" bgcolor="#E9F1F8">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">68,900</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="bottom" style="padding: 0in">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="3%" valign="bottom" style="border: medium none; padding: 0in" align="right">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
      <td width="12%" valign="bottom" style="border: medium none; padding: 0in">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">&nbsp;</font></td>
    </tr>
    <tr style="height: 12.4pt">
      <td width="85%" valign="bottom" style="background-position: 0% 0%; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" style="margin-left:7.7pt">
      <font size="2" style="color: black">Total</font></td>
      <td valign="bottom" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll" align="right">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">$</font></td>
      <td valign="bottom" style="background-position: 0% 0%; border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double black; padding:0in; background-image:url('../../jobs%20for%20billing/cist10q/none'); background-repeat:repeat; background-attachment:scroll">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2" style="color: black">354,800</font></td>
    </tr>
  </table>
  <font FACE="Times New Roman" SIZE="2"><b>
<p align="justify">15. SUBSEQUENT EVENTS </p>
</b>
<p align="justify">(a) Acquisition of Wuhan Wuda Geoinformatics Co., Ltd. </p>
<p ALIGN="JUSTIFY">On February 15, 2008, the Company approved iASPEC&#146;s entry
into a share purchase and increased capital agreement (the &quot;Purchase Agreement
of Geo&quot;), dated as of February 16, 2008, for the purchase of approximately 57%
of Wuhan Wuda Geoinformatics Co., Ltd. (&quot;Geo&quot;), a leading provider of GIS
software products and integrated solutions in China, for RMB49,500,000
(approximately $7,049,000). </p>
<p align="justify">As of March 31, 2008, included in deposit for business
acquisition was $7,049,000 in connection with the acquisition, which was
completed on April 1, 2008. </p>
<p align="justify">(b) iASPEC&#146;s establishment of two new subsidiaries </p>
<p ALIGN="JUSTIFY">On April 11, 2008, iASPEC established two subsidiaries in
Shenzhen, PRC: Shenzhen iASPEC Information Security Technology Co., Ltd. and
Shenzhen iASPEC Intelligent System Co., Ltd., each with a 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. </p>
</font>
<p>&nbsp;</p>
<font FACE="Times New Roman" SIZE="2">
<p align="center">F-15</p>

</font>

<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="f7"></a>
</B></FONT></P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>CHINA INFORMATION SECURITY TECHNOLOGY, INC.<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>PERIOD FROM JANUARY 1, 2006 TO </B><B>OCTOBER 8, 2006<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>PERIOD FROM JANUARY 17, 2006 TO DECEMBER 31, 2006<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>YEAR ENDED DECEMBER 31, 2007</B></FONT></P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-16</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B><a name="f8"></a>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Board of Directors and Stockholders<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>China Public Security Technology, Inc. and Subsidiaries</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We have audited the accompanying consolidated balance sheets of China Public Security Technology, Inc.
and subsidiaries (Successor) (Note 1) as of December&nbsp;31, 2007 and 2006, and the related consolidated
statements of income and comprehensive income, stockholders&#146; equity and cash flows for the year
ended December 31, 2007 and the period from January 17, 2006 to December 31, 2006 (Successor Period);
and we have audited the statements of income and comprehensive income, stockholders&#146; equity
and cash flows of Shenzhen iASPEC Software Engineering Company Limited (Predecessor) (Note 1) for
the period from January 1, 2006 to October 8, 2006 (Predecessor Period). These financial statements
are the responsibility of the Company&#146;s management. Our responsibility is to express an opinion
on these financial statements and schedule based on our audits.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of China Public Security Technology, Inc. and its subsidiaries
at December&nbsp;31, 2007 and 2006, and the consolidated results of their operations and cash flows
for the year ended 2007, for the Successor Period in 2006, and the results of operations and cash
flows of Shenzhen iASPEC Software Engineering Company Limited for the Predecessor Period, in conformity
with accounting principles generally accepted in the United States of America.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As discussed in Note 1 to the consolidated financial statements, China Public Security Technology,
Inc. succeeded to the business operations of the Predecessor on October 8, 2006. As a result, the
financial statements of the Successor and the Predecessor are not comparable in all respects. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>/s/ GHP HORWATH, P.C.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>GHP Horwath, P.C.<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>Denver, Colorado<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>March 28, 2008</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-17 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>CHINA PUBLIC SECURITY TECHNOLOGY, INC.<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B><a name="f9"></a>CONSOLIDATED BALANCE SHEETS<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>DECEMBER 31, 2007 AND 2006</B></FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
    <td align="center"><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES</FONT></strong></td>
    <td align="center">&nbsp;</td>
    <td COLSPAN=2 align="center"><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007</FONT></strong></td>
    <td align="center">&nbsp;</td>
    <td COLSPAN=2 align="center"><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT></strong></td>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><strong>ASSETS</strong></FONT></TD>
    <TD WIDTH=6% ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=10% ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CURRENT ASSETS</FONT></strong></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash and cash equivalents</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 19,755,182</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 172,316</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investment in marketable securities</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,966,752</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounts receivable</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,721,306</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Advances receivable</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>332,479</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Advances to suppliers</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,791,440</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amount due from related parties</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,410,471</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,779,930</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>243,948</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other receivables</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>974,475</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TOTAL CURRENT ASSETS</FONT></strong></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>53,989,085</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,159,214</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deposit for business acquisition</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,989,022</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property and equipment</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,826,896</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49,826</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Intangible assets</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,894,397</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Goodwill</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,154,395</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TOTAL ASSETS</FONT></strong></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 88,853,795</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,209,040</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR   COLOR=#000000 SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR   COLOR=#000000 SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</FONT></strong></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CURRENT LIABILITIES</FONT></strong></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounts payable</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3, 079,304 </FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Advances payable</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>200,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Advances from customers</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>394,383</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax payable</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>326,026</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>215,255</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amount due to a director</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>82,304</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other payables and accrued expenses</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>987,483</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>66,832</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TOTAL CURRENT LIABILITIES</FONT></strong></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,787,196</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>564,391</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR   COLOR=#000000 SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR   COLOR=#000000 SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MINORITY INTEREST</FONT></strong></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,060,657</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>STOCKHOLDERS&#146; EQUITY</FONT></strong></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Common stock, par $0.01;</FONT></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Authorized capital, 75,000,000 shares;</FONT></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shares issued and outstanding (2007:45,639,396,<br>
&nbsp;&nbsp;&nbsp;&nbsp;2006: 31,550,298 shares)</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>190,891</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Additional paid-in capital</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>57,421,150</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reserve</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,755,552</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>159,465</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Retained earnings</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,170,549</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,435,184</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accumulated other comprehensive income</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,467,800</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8"><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TOTAL STOCKHOLDERS&#146; EQUITY</FONT></strong></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>74,005,942</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,644,649</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TOTAL LIABILITIES AND STOCKHOLDERS&#146; EQUITY</FONT></strong></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 88,853,795</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,209,040</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR   COLOR=#000000 SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR   COLOR=#000000 SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>The accompanying notes are an integral part of these consolidated financial statements.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-18 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>CHINA PUBLIC SECURITY TECHNOLOGY, INC.<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B><a name="f10"></a>CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>YEAR ENDED DECEMBER 31, 2007<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>PERIOD FROM JANUARY 17, 2006 TO DECEMBER 31 2006<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>PERIOD FROM JANUARY 1, 2006 TO OCTOBER 8, 2006</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The consolidated statements of income and comprehensive income for the period from January 1 to October
8, 2006 reflect operations of the Predecessor Company. (See Note 1 to the consolidated financial
statements)</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td COLSPAN=5 align="center"><strong><font size="2" face="Times New Roman"><u>SUCCESSOR</u></font></strong></td>
    <td align="right">&nbsp;</td>
    <td COLSPAN=2 align="right"><strong><font size="2" face="Times New Roman"><u>PREDECESSOR</u></font></strong></td>
    <td>&nbsp;</td>
  </TR>
  <TR VALIGN=Bottom>
    <td>&nbsp;</td>
    <td align="center"><strong><FONT FACE="Times New Roman" SIZE=2>NOTES</FONT></strong></td>
    <td align="right">&nbsp;</td>
    <td COLSPAN=2 align="right" nowrap><strong><FONT FACE="Times New Roman" SIZE=2> YEAR ENDED<br>
      DECEMBER 31,<br>
    2007</FONT></strong></td>
    <td align="right">&nbsp;</td>
    <td COLSPAN=2 align="right" nowrap><strong><FONT FACE="Times New Roman" SIZE=2> JANUARY 17<br>
      THROUGH<br>
      DECEMBER 31,<br>
    2006</FONT></strong></td>
    <td align="right">&nbsp;</td>
    <td COLSPAN=2 align="right"><strong><FONT FACE="Times New Roman" SIZE=2> JANUARY 1<br>
      THROUGH<br>
      OCTOBER 8,<br>
      2006</FONT></strong></td>
    <td>&nbsp;</td>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenue - third parties</FONT></TD>
    <TD WIDTH=5% ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=14% ALIGN=RIGHT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 24,800,750</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=14% ALIGN=RIGHT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 989,755</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 9,644,332</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenue - related party</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,541,959</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,185,449</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TOTAL REVENUE</FONT></strong></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30,342,709</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,175,204</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,644,332</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of revenue</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(12,714,170</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(89,934</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,739,518</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>GROSS PROFIT</FONT></strong></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17,628,539</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,085,270</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,904,814</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Administrative expenses</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,321,333</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(99,024</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(931,108</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research and development expenses</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(424,104</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fee to iASPEC under the Turnkey Agreement</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(92,160</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(45,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling expenses</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(480,465</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(60,013</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(157,855</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INCOME FROM OPERATIONS</FONT></strong></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,310,477</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,881,233</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,815,851</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other income, net</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>79,435</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,305</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,584</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest income</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>138,840</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,514</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,912</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INCOME BEFORE TAXES AND MINORITY INTEREST</FONT></strong></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,528,752</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,884,052</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,829,347</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minority interest</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(90,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income taxes</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(107,300</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(289,403</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(749,381</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NET INCOME</FONT></strong></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,331,452</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,594,649</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,079,966</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Foreign currency translation gain</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,467,800</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>268,305</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>COMPREHENSIVE INCOME</FONT></strong></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 14,799,252</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,594,649</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,348,271</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR   COLOR=#000000 SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR   COLOR=#000000 SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR   COLOR=#000000 SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WEIGHTED AVERAGE NUMBER OF SHARES</FONT></strong></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39,718,967</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26,958,104</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>N/A</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diluted</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40,152,855</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26,958,104</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>N/A</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>EARNINGS PER SHARE</FONT></strong></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="12" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.34</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.06</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>N/A</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diluted</FONT></TD>
    <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.33</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.06</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>N/A</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>The accompanying notes are an integral part of these consolidated financial statements.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-19 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>CHINA PUBLIC SECURITY TECHNOLOGY, INC.</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="f11"></a>CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146; EQUITY</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>YEAR ENDED DECEMBER 31, 2007<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>PERIOD FROM JANUARY 17, 2006 TO DECEMBER 31 2006<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>PERIOD FROM JANUARY 1, 2006 TO OCTOBER 8, 2006</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The consolidated statements of stockholder&#146;s equity for the period from January 1 to October 8,
2006 reflect operations of the Predecessor Company. (See Note 1 to the consolidated financial statements)</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <td><font style="font-size: 9pt">&nbsp;</font></td>
    <td COLSPAN=5 align="center"><strong>
    <font face="Times New Roman, Times, serif" style="font-size: 9pt"> Common stock <br>
      par value $0.12</font></strong></td>
    <td align="center"><font style="font-size: 9pt">&nbsp;</font></td>
    <td COLSPAN=2 rowspan="2" align="center"><strong>
    <FONT FACE="Times New Roman, Times, serif" style="font-size: 9pt">Additional<br>
      paid-in <br>
      capital </FONT></strong></td>
    <td align="center"><font style="font-size: 9pt">&nbsp;</font></td>
    <td COLSPAN=2 rowspan="2" align="center"><strong>
    <FONT FACE="Times New Roman, Times, serif" style="font-size: 9pt">Reserve</FONT></strong></td>
    <td align="center"><font style="font-size: 9pt">&nbsp;</font></td>
    <td COLSPAN=2 rowspan="2" align="center"><strong>
    <FONT FACE="Times New Roman, Times, serif" style="font-size: 9pt">Retained <br>
      earnings <br>
      (deficit)</FONT></strong></td>
    <td align="center"><font style="font-size: 9pt">&nbsp;</font></td>
    <td COLSPAN=2 rowspan="2" align="center"><strong>
    <FONT FACE="Times New Roman, Times, serif" style="font-size: 9pt">Accumulated <br>
      other <br>
      comprehensive<br>
      income </FONT></strong></td>
    <td align="center"><font style="font-size: 9pt">&nbsp;</font></td>
    <td COLSPAN=2 rowspan="2" align="center"><strong>
    <FONT FACE="Times New Roman, Times, serif" style="font-size: 9pt">Total</FONT></strong></td>
    <td align="center"><font style="font-size: 9pt">&nbsp;</font></td>
  </TR>
  <TR VALIGN=Bottom>
    <td><font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></td>
    <td COLSPAN=2 align="center"><strong>
    <FONT FACE="Times New Roman" style="font-size: 9pt">Shares</FONT></strong></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></td>
    <td COLSPAN=2 align="center"><strong>
    <FONT FACE="Times New Roman" style="font-size: 9pt">Amount</FONT></strong></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;</font></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;</font></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;</font></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;</font></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;</font></td>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><strong>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">THE PREDECESSOR:</FONT></strong></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=3% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=1% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Balance as at January 1, 2006</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">30,000,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 3,642,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 665,548</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> &#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 846,926</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> &#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 5,514,474</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Net income for the period from January 1, 2006<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;through October 8, 2006</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">4,079,966</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">4,079,966</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Foreign currency translation adjustments</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">268,305</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">268,305</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT bgcolor="#E9F1F8">
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Transfer to reserve</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">774,551</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(774,551</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD COLSPAN=20><HR COLOR=#000000 SIZE=1></TD>
    <TD><font style="font-size: 9pt">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><strong>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">BALANCE AS AT OCTOBER 8, 2006</FONT></strong></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">30,000,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 3,642,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 665,548</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 774,551</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 4,152,341</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 268,305</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 9,502,745</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD COLSPAN=20><HR COLOR=#000000 SIZE=2></TD>
    <TD><font style="font-size: 9pt">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
  </TR>
</TABLE>
<br>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <td><font style="font-size: 9pt">&nbsp;</font></td>
    <td COLSPAN=5 align="center"><strong>
    <font face="Times New Roman, Times, serif" style="font-size: 9pt"> Common stock <br>
      par value $0.01</font></strong></td>
    <td align="center"><font style="font-size: 9pt">&nbsp;</font></td>
    <td COLSPAN=2 rowspan="2" align="center"><strong>
    <FONT FACE="Times New Roman, Times, serif" style="font-size: 9pt">Additional<br>
      paid-in <br>
      capital </FONT></strong></td>
    <td align="center"><font style="font-size: 9pt">&nbsp;</font></td>
    <td COLSPAN=2 rowspan="2" align="center"><strong>
    <FONT FACE="Times New Roman, Times, serif" style="font-size: 9pt">Reserve</FONT></strong></td>
    <td align="center"><font style="font-size: 9pt">&nbsp;</font></td>
    <td COLSPAN=2 rowspan="2" align="center"><strong>
    <FONT FACE="Times New Roman, Times, serif" style="font-size: 9pt">Retained <br>
      earnings</FONT></strong></td>
    <td align="center"><font style="font-size: 9pt">&nbsp;</font></td>
    <td COLSPAN=2 rowspan="2" align="center"><strong>
    <FONT FACE="Times New Roman, Times, serif" style="font-size: 9pt">Accumulated <br>
      other <br>
      comprehensive<br>
      income </FONT></strong></td>
    <td align="center"><font style="font-size: 9pt">&nbsp;</font></td>
    <td COLSPAN=2 rowspan="2" align="center"><strong>
    <FONT FACE="Times New Roman, Times, serif" style="font-size: 9pt">Total</FONT></strong></td>
    <td align="center"><font style="font-size: 9pt">&nbsp;</font></td>
  </TR>
  <TR VALIGN=Bottom>
    <td><font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></td>
    <td COLSPAN=2 align="center"><strong>
    <FONT FACE="Times New Roman" style="font-size: 9pt">Shares</FONT></strong></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></td>
    <td COLSPAN=2 align="center"><strong>
    <FONT FACE="Times New Roman" style="font-size: 9pt">Amount</FONT></strong></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;</font></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;</font></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;</font></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;</font></td>
    <td align="center"><font face="Times New Roman" style="font-size: 9pt">&nbsp;</font></td>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT><strong>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">THE SUCCESSOR:</FONT></strong></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=2% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=1% ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Capital contribution on January 17, 2006</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">25,500,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 50,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> &#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> &#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> &#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> &#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 50,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Common stock issued for acquisition of <br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Irish Mag Inc.</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">6,050,298</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Net income from January 17, 2006 through <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;    December 31,</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">2006</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">1,594,649</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">1,594,649</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Transfer to reserve</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">159,465</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(159,465</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD colspan="20" ALIGN=RIGHT><HR COLOR=#000000 SIZE=1></TD>
    <TD ALIGN=LEFT><font style="font-size: 9pt">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><strong>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">BALANCE AS AT DECEMBER 31, 2006</FONT></strong></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">31,550,298</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 50,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> &#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 159,465</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 1,435,184</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> &#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 1,644,649</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD COLSPAN=3><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD COLSPAN=3><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD COLSPAN=3><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD COLSPAN=3><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD COLSPAN=3><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD COLSPAN=3><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD COLSPAN=3><font style="font-size: 9pt">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Issuance of common stock in private <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;    placements</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">12,868,422</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">128,684</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">49,688,802</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">49,817,486</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Common stock issued upon the cashless<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;      exercise of&nbsp;warrants</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">267,343</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">2,674</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(2,674</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Common stock issued for acquisition of <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;    ISDT (Note 4)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">883,333</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">8,833</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">7,057,831</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">7,066,664</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Stock-based compensation (Note 12)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">70,000</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">700</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">677,191</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">677,891</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Net income from the year</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">13,331,452</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">13,331,452</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Foreign currency translation gain</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">1,467,800</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">1,467,800</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">Transfer to reserve</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">1,596,087</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">(1,596,087</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">)</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&#151;</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD COLSPAN=21><HR COLOR=#000000 SIZE=1></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="22" ALIGN=LEFT>
    <font face="Times New Roman" style="font-size: 9pt">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><strong>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">BALANCE AS AT DECEMBER 31, 2007</FONT></strong></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">45,639,396</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 190,891</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 57,421,150</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 1,755,552</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 13,170,549</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 1,467,800</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">$</FONT></TD>
    <TD ALIGN=RIGHT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt"> 74,005,942</FONT></TD>
    <TD ALIGN=LEFT>
    <FONT FACE="Times New Roman, Times, Serif" style="font-size: 9pt">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><font style="font-size: 9pt">&nbsp;</font></TD>
    <TD COLSPAN=21><HR COLOR=#000000 SIZE=2></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>The accompanying notes are an integral part of these consolidated financial statements.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-20 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;<B>CHINA PUBLIC SECURITY TECHNOLOGY, INC.</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="f12"></a>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>YEAR ENDED DECEMBER 31, 2007<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>PERIOD FROM JANUARY 17, 2006 TO DECEMBER 31 2006<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>PERIOD FROM JANUARY 1, 2006 TO OCTOBER 8, 2006</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The consolidated statements of cash flows for the period from January 1 to October 8, 2006 reflect
operations of the Predecessor Company. (See Note 1 to the consolidated financial statements)</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH colspan="5"><font size="2" face="Times New Roman, Times, serif">SUCCESSOR</font></TH>
    <TH>&nbsp;</TH>
    <TH colspan="2"><font size="2" face="Times New Roman, Times, serif">PREDECESSOR</font></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2" nowrap><FONT FACE="Times New Roman" SIZE=2> YEAR ENDED<br>
      DECEMBER 31<br>
    2007 </FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2" nowrap><FONT FACE="Times New Roman" SIZE=2> JANUARY 17,<br>
      THROUGH <br>
      DECEMBER 31,<br>
    2006 </FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2" nowrap><FONT FACE="Times New Roman" SIZE=2>JANUARY 1,<br>
      THROUGH <br>
      OCTOBER 8,<br>
    2006 </FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><b>OPERATING ACTIVITIES</b></FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Net income</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 13,331,452</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,594,649</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 4,079,966</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Adjustments to reconcile net income to net cash<br>
&nbsp;&nbsp;&nbsp;provided from operation</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Depreciation</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,274,768</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,131</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>422,946</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Amortization of intangible assets</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>168,747</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>105,630</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Stock-based compensation</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>677,891</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Minority interest</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>90,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Changes in operating assets and liabilities, net of<br>
&nbsp;&nbsp;&nbsp;effects of business acquisition and VIE<br>
&nbsp;&nbsp;&nbsp;consolidation:</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>(Increase) decrease &nbsp;in inventories</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,399,838</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>203,236</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Increase in trade receivables</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(4,115,867</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Decrease (increase) in other receivables and deposits</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>592,182</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(243,948</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,516,215</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Increase in receivables from and advances to iASPEC<br>
&nbsp;&nbsp;prior to VIE consolidation (Note 6) </FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(10,660,988</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,295,159</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Increase in trade payables</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>903,475</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>150,266</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Increase in advance from customer</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>54,830</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Increase in other payables</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>201,253</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Increase (decrease) in accrued expenses</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>442,700</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>66,832</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(11,332</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Increase in tax payable</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>46,586</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>215,255</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>354,520</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><b><FONT FACE="Times New Roman" SIZE=2>Net cash provided by operating activities</FONT></b></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,607,191</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>338,760</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>6,821,447</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD colspan="9" ALIGN=LEFT bgcolor="#e9f1f8"><b><FONT FACE="Times New Roman" SIZE=2>INVESTING ACTIVITIES</FONT></b></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Increase in cash from VIE consolidation (Note 3)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4,731,140</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Cash acquired from Fortune Fame &amp; ISDT (Note 4)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>326,831</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Deposits paid for business acquisition of Bocom<br>
&nbsp;&nbsp;&nbsp;Multimedia (Note 14) </FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(9,000,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Consideration paid for business acquisition of</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(7,051,469</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Fortune Fame (Note 4)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Repayments from (advances to) third parties</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>332,479</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(332,479</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Repayments from (advances to) related parties</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>115,312</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(115,312</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,563,806</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Purchase of plant and equipment</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(6,452,450</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(50,957</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(3,329,474</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Capitalized software development cost</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(102,953</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Purchase of Equity Linked Notes ( Note 5)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(22,654,230</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Collection of cash from matured Equity Linked Notes &nbsp;(Note 5)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>7,687,478</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Net cash used in investing activities</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(31,964,909</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(498,748</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(4,996,233</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><b><FONT FACE="Times New Roman" SIZE=2>FINANCING ACTIVITIES</FONT></b></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Advances received from (repaid to) a third party company</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(200,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>200,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Amount received from (repaid to) a stockholder</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(82,304</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>82,304</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Short term loan</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>632,591</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Proceeds from first private placement</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>13,311,211</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Proceeds from second private placement</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>36,506,275</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Capital contribution</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>50,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><b><FONT FACE="Times New Roman" SIZE=2>Net cash provided by financing activities</FONT></b></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 49,535,182</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 332,304</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 632,591</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<p>&nbsp;</p>
<table cellpadding=0 cellspacing=0 border=0 width=100%>
  <tr valign=Bottom>
    <th>&nbsp;</th>
    <th colspan="5"><font size="2" face="Times New Roman, Times, serif">SUCCESSOR</font></th>
    <th>&nbsp;</th>
    <th colspan="2"><font size="2" face="Times New Roman, Times, serif">PREDECESSOR</font></th>
    <th>&nbsp;</th>
  </tr>
  <tr valign=Bottom>
    <th><font face="Times New Roman" size=1></font></th>
    <th colspan="2" nowrap><font face="Times New Roman" size=2> YEAR ENDED<br>
      DECEMBER 31<br>
      2007 </font></th>
    <th><font face="Times New Roman" size=1></font></th>
    <th colspan="2" nowrap><font face="Times New Roman" size=2> JANUARY 17,<br>
      THROUGH <br>
      DECEMBER 31,<br>
      2006 </font></th>
    <th><font face="Times New Roman" size=1></font></th>
    <th colspan="2" nowrap><font face="Times New Roman" size=2>JANUARY 1,<br>
      THROUGH <br>
      OCTOBER 8,<br>
      2006 </font></th>
    <th><font face="Times New Roman" size=1></font></th>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2><b>OPERATING ACTIVITIES</b></font></td>
    <td width=1% align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td width=10% align=RIGHT><font face="Times New Roman" size=2></font></td>
    <td width=3% align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td width=1% align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td width=10% align=RIGHT><font face="Times New Roman" size=2></font></td>
    <td width=3% align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td width=1% align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td width=10% align=RIGHT><font face="Times New Roman" size=2></font></td>
    <td width=1% align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Net income</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2> 13,331,452</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2> 1,594,649</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2> 4,079,966</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Adjustments to reconcile net income to net cash<br>
&nbsp;&nbsp;&nbsp;provided from operation</font></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Depreciation</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>1,274,768</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>1,131</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>422,946</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Amortization of intangible assets</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>168,747</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>105,630</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Stock-based compensation</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>677,891</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Minority interest</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>90,000</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Changes in operating assets and liabilities, net of<br>
&nbsp;&nbsp;&nbsp;effects of business acquisition and VIE<br>
&nbsp;&nbsp;&nbsp;consolidation:</font></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>(Increase) decrease &nbsp;in inventories</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(1,399,838</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>203,236</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Increase in trade receivables</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(4,115,867</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Decrease (increase) in other receivables and deposits</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>592,182</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(243,948</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>1,516,215</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Increase in receivables from and advances to iASPEC<br>
&nbsp;&nbsp;prior to VIE consolidation (Note 6) </font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(10,660,988</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(1,295,159</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Increase in trade payables</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>903,475</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>150,266</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Increase in advance from customer</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>54,830</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Increase in other payables</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>201,253</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Increase (decrease) in accrued expenses</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>442,700</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>66,832</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(11,332</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Increase in tax payable</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>46,586</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>215,255</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>354,520</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td colspan="10" align=LEFT><font size="2" face="Times New Roman">&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><b><font face="Times New Roman" size=2>Net cash provided by operating activities</font></b></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>1,607,191</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>338,760</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>6,821,447</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td colspan="10" align=LEFT><font size="2" face="Times New Roman">&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><b><font face="Times New Roman" size=2>INVESTING ACTIVITIES</font></b></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Increase in cash from VIE consolidation (Note 3)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>4,731,140</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Cash acquired from Fortune Fame &amp; ISDT (Note 4)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>326,831</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Deposits paid for business acquisition of Bocom<br>
&nbsp;&nbsp;&nbsp;Multimedia (Note 14) </font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(9,000,000</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Consideration paid for business acquisition of</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(7,051,469</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;&nbsp;&nbsp;Fortune Fame (Note 4)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Repayments from (advances to) third parties</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>332,479</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(332,479</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Repayments from (advances to) related parties</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>115,312</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(115,312</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(1,563,806</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Purchase of plant and equipment</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(6,452,450</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(50,957</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(3,329,474</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Capitalized software development cost</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(102,953</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Purchase of Equity Linked Notes ( Note 5)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(22,654,230</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Collection of cash from matured Equity Linked Notes &nbsp;(Note 5)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>7,687,478</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td colspan="10" align=LEFT><font size="2" face="Times New Roman">&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><strong><font face="Times New Roman" size=2>Net cash used in investing activities</font></strong></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(31,964,909</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(498,748</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(4,996,233</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
  </tr>
  <tr valign=Bottom>
    <td colspan="10" align=LEFT><font size="2" face="Times New Roman">&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><b><font face="Times New Roman" size=2>FINANCING ACTIVITIES</font></b></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Advances received from (repaid to) a third party company</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(200,000</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>200,000</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Amount received from (repaid to) a stockholder</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>(82,304</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>82,304</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Short term loan</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>632,591</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Proceeds from first private placement</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>13,311,211</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><font face="Times New Roman" size=2>Proceeds from second private placement</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>36,506,275</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman" size=2>Capital contribution</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>50,000</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td colspan="10" align=LEFT><font size="2" face="Times New Roman">&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#e9f1f8">
    <td align=LEFT><b><font face="Times New Roman" size=2>Net cash provided by financing activities</font></b></td>
    <td align=RIGHT><font face="Times New Roman" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2> 49,535,182</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2> 332,304</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman" size=2> 632,591</font></td>
    <td align=LEFT><font face="Times New Roman" size=2>&nbsp;</font></td>
  </tr>
</table>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-21 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH colspan="5"><font size="2" face="Times New Roman, Times, serif">SUCCESSOR</font></TH>
    <TH>&nbsp;</TH>
    <TH colspan="2"><font size="2" face="Times New Roman, Times, serif">PREDECESSOR</font></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2" nowrap><FONT FACE="Times New Roman" SIZE=2> YEAR ENDED<br>
      DECEMBER 31<br>
    2007 </FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2" nowrap><FONT FACE="Times New Roman" SIZE=2> JANUARY 17,<br>
      THROUGH <br>
      DECEMBER 31,<br>
    2006 </FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2" nowrap><FONT FACE="Times New Roman" SIZE=2>JANUARY 1,<br>
      THROUGH <br>
      OCTOBER 8,<br>
    2006 </FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD WIDTH=53% ALIGN=LEFT><strong><FONT FACE="Times New Roman" SIZE=2>NET INCREASE IN CASH AND CASH EQUIVALENTS</FONT></strong></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 19,177,464</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 172,316</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2,457,805</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman" SIZE=2>EFFECT OF EXCHANGE RATE ON CASH</FONT></strong></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>405,402</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>65,740</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman" SIZE=2>CASH AND CASH EQUIVALENTS, BEGINNING</FONT></strong></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>172,316</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>57,758</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><strong><FONT FACE="Times New Roman" SIZE=2>CASH AND CASH EQUIVALENTS, ENDING</FONT></strong></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 19,755,182</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 172,316</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2,581,303</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><font size="2" face="Times New Roman">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Supplemental disclosure of cash flow information<br>
      Income taxes paid</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 24,574</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 74,148</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 508,712</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>The accompanying notes are an integral part of these consolidated financial statements.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-22 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>CHINA PUBLIC SECURITY TECHNOLOGY, INC.</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="f13"></a>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>1. ORGANIZATION AND PRINCIPAL ACTIVITIES</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>China Public Security Technology Inc., and its subsidiaries, (the &#147;Company&#148; or the &#147;Successor&#148;)
(formerly Irish Mag. Inc) is a provider of integrated solutions for the public security sector in
the People&#146;s Republic of China (&#147;PRC&#148;), specializing in providing public security
information technology and Geographic Information Systems (&#147;GIS&#148;) software operating services,
as well as the sale of computer hardware and software, and the provision of Certificate Authority,
or CA, an application platform and e-Government solution technology. These services are provided
through the Company&#146;s wholly-owned subsidiaries, Information Security Technology (PRC) Co.,
Ltd (&#147;IST&#148;) (formerly Public Security Technology (PRC) Co. Ltd.) and Fortune Fame International
Investment Limited, and its variable interest entity (&#147;VIE&#148;), iASEPC Software Company Limited.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><U>Reverse Merger Transaction</U></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Prior to October 9, 2006, the Company was a privately owned entity formed as a British Virgin Islands
holding company, China Public Security Holdings (&#147;CPSH&#148;). Between October 6, 2006 and January
31, 2007, the Company consummated a series of transactions whereby CPSH and Irish Mag. a public shell
company, entered into a reverse merger whereby Irish Mag. acquired all the outstanding common stock
of CPSH (the &#147;Acquisition&#148;) from the current Chairman and Executive Officer, Jiang Huai
Lin (&#147;Mr. Lin&#148;), for 25,500,000 shares of common stock. For accounting purposes, the Acquisition
of CPSH by Irish Mag. was recorded as a reverse acquisition of a public shell and a recapitalization
of CPSH based on factors demonstrating that CPSH represents the accounting acquirer. The Acquisition
is equivalent to the issuance of stock by CPSH for the net monetary assets (which were not significant)
of Irish Mag. The shareholder of CPSH received approximately 81% of the post-Acquisition common stock
of Irish Mag. In addition, post-Acquisition management personnel and the board of directors of the
Company now consist of individuals previously holding such positions with CPSH. The historical shareholders&#146;
equity of CPSH prior to the Acquisition has been retroactively restated (a recapitalization) for
the equivalent number of shares received in the Acquisition. The restated consolidated retained earnings
of CPSH have been carried forward after the Acquisition. Immediately prior to the Acquisition, Irish
Mag. was essentially a shell company. Irish Mag changed its name to China Public Security Technology,
Inc. (the &#147;Company&#148;) in January 2007. Prior to the Acquisition, Irish Mag had 1,350,000
shares of common stock outstanding. On October 2, 2006, Irish Mag. effected a forward stock split
of 4.44444444:1, which increased the issued share capital to 6,000,000 shares of common stock. Share
and per share amounts have been retroactively restated to reflect the forward stock splits.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>October 24, 2006, the Company issued an additional 50,298 shares to the former majority shareholder
of Irish Mag. in connection with the Acquisition.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><U>Business Turnkey Agreement</U></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On October 9, 2006, IST, entered into a Business Turnkey Agreement, as amended (the &#147;Turnkey Agreement&#148;)
with iASPEC Software Company Limited, (formerly Shenzhen iASPEC Software Engineering Company Limited)
(&#147;iASPEC&#148; or the &#147;Predecessor&#148;) , a PRC company controlled by Mr. Lin. iASPEC
is a software development company that provides public security information technology, Police-Use
Geographic Information Systems (&#147;PGIS&#148;) and Civil-Use Geographic Information Systems (&#147;CGIS&#148;)
operating services to government and private customers in the PRC. Under the Turnkey Agreement, IST
was to pay an annual fee of $180,000 to iASPEC and was to perform all services necessary for iASPEC
to fulfill its customer contracts in exchange for 100% or 90% of the revenues from such contracts,
depending on the contract. In addition, under the Turnkey Agreement, iASPEC granted IST an exclusive,
royalty-free, transferable, worldwide perpetual license to use and install iASPEC&#146;s proprietary
software. No other tangible assets or liabilities were transferred to IST under the Turnkey Agreement.
Accordingly, IST essentially succeeded to the business operations of iASPEC and iASPEC is considered
the Predecessor to IST.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Effective July 1, 2007, IST, iASPEC and iASPEC&#146;s shareholders, Mr. Lin and Mr. Jin Zhu Cai, terminated
the Turnkey Agreement, and replaced it with a Management Service Agreement (&#147;MSA&#148;).</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-23 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>1. &nbsp;ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><U>Management Service Agreement</U></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Pursuant to the terms of the MSA, iASPEC granted IST a ten-year, exclusive, royalty-free, transferable

worldwide license to use and install certain iASPEC software, along with copies of source and object

codes relating to such software. In addition, IST licensed back to iASPEC a royalty-free, limited,

non-exclusive license to the software, without right of sub-license, for the sole purpose of permitting

iASPEC to carry out its business as presently conducted. IST has the right to designate two Chinese

citizens to serve as senior managers of iASPEC, to serve as a majority on iASPEC&#146;s Board of

Directors, and to assist in managing the business and operations of iASPEC. In addition, both iASPEC

and IST will require the affirmative vote of a majority of the Company&#146;s Board of Directors,

including at least one non-insider director, for certain material actions, as defined, with respect
to iASPEC.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Under the MSA, IST receives 100% of the net received profit of iASPEC, and reimburses iASPEC for all
net losses incurred by iASPEC, as such terms are defined in the MSA, and iASPEC is permitted to retain
$180,000 per year out of the net received profits. The MSA also provides that IST may advance to
iASPEC, at its sole discretion, amounts to be credited against IST&#146;s future obligations to iASPEC.
Any such advances are treated as prepayments and not as loans and iASPEC has no obligation to repay
any such advances except by crediting the amount of such advances against IST&#146;s obligation to
reimburse net losses, or by adding the amount thereof to net received profit when and as requested
by IST. The parties to the MSA also agreed to the calculation of a true-up amount, consisting of
the cumulative net profit or net losses of iASPEC from October 9, 2006 to June 30, 2007, when iASPEC
commenced its contractual relationship with IST, through the date of the MSA. The calculated true-up
amount of $7,005,183 was paid by iASPEC to IST as of December 31, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In connection with the MSA, IST also entered into an immediately exercisable purchase option agreement

(&#147;Option Agreement&#148;) with iASPEC and its shareholders, pursuant to which the iASPEC shareholders

granted the Company or its designee(s) an exclusive, irrevocable option to purchase, from time
to
time, all or a part of iASPEC&#146;s shares or iASPEC&#146;s assets from the iASPEC shareholders

for $1,800,000 in the aggregate. The option may not be exercised if the exercise would violate
any
applicable laws and regulations in China or cause any license or permit held by, and necessary
for
the operation of iASPEC, to be cancelled or invalidated.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The substance of the MSA and the Option Agreement is to:</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Allow the Company to utilize the business licenses, contacts, permits and other resources of iASPEC

in order for the Company to be able to expand its operations and business model;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Provide the Company with effective control over all of iASPEC&#146;s operations;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=27></TD>
<TD vAlign=top width=27><FONT face="Times New Roman, Times, Serif" size=2>&#149;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Allow the shareholders of iASPEC an opportunity to monetize a portion of their investment through the

$1.8 million purchase option.</FONT></div></TD></TR></TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company has adopted Financial Accounting Standards Board (&#147;FASB&#148;) Interpretation No.
(&#147;FIN&#148;) 46R, &#147;<I> Consolidation and Variable Interest Entities&#148;</I> &nbsp;(&#147;VIEs&#148;), (&#147;FIN 46R&#148;), an interpretation of Accounting Research Bulletin
No. 51, &#147;<I> Consolidated Financial Statements</I> &#148;. FIN 46R requires a VIE to be consolidated by a company if that company is subject to a majority
of the risk of loss for the VIE or is entitled to receive a majority of the VIE&#146;s residual returns.
As a result of the MSA and the Option Agreement, on July 1, 2007 iASPEC&nbsp;became a VIE of the
Company and iASPEC&#146;s results are consolidated in the Company&#146;s financial statements. To
comply with PRC laws and regulations that restrict foreign ownership of companies that provide public
security information technology and Geographic Information Systems software operating services to
certain government and other customers, the Company operates the restricted aspect of its business
through iASPEC. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The financial statements for the period from January 1, 2006 through October 8, 2006 (the &#147;Predecessor
Period&#148;) reflect the results of operations of iASPEC (the &#147;Predecessor&#148;). The financial
statements for the period from January 17, 2006 through December 31, 2006 and for the year ended
December 31, 2007 (the &#147;Successor Period&#148;) reflect the results of operations of the Company
and its subsidiaries (the &#147;Successor&#148;), and its VIE from July 1, 2007, the date upon which
the Company became the primary beneficiary. Accordingly, the results of operations of the Predecessor
and the Successor are not comparable in all aspects.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-24 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(a) Basis of Consolidation</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The consolidated financial statements of the Company have been prepared in accordance with U.S. generally
accepted accounting principles. The consolidated financial statements include the accounts of the
Company, its subsidiaries and its VIE for which the Company is the primary beneficiary. All significant
intercompany accounts and transactions have been eliminated in consolidation.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(b) Use of Estimates</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The preparation of financial statements in conformity with U.S. generally accepted accounting principles

requires management to make estimates and assumptions that affect the reported amounts of assets

and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements, and the reported amounts of revenue and expenses during the reporting period. Management

makes these estimates using the best information available at the time the estimates are made;
however
actual results could differ from those estimates.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(c) Concentration of Risks</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Only entities that possess the necessary government licenses and approvals may obtain certain PGIS
contracts with PRC Government customers and, because IST is considered a foreign owned entity in
the PRC, it cannot possess these licenses and approvals. Instead IST relies exclusively on iASPEC
to solicit, obtain and fulfill PGIS contracts. Through June 30, 2007 this was accomplished under
the Turnkey Agreement and many of the expenses of IST were incurred and paid by iASPEC. In accordance
with SEC Staff Accounting Bulletin 55, all of the costs associated with the operations of IST have
been reflected in its financial statements. Accordingly, through June 30, 2007 substantially all
costs incurred and paid for by iASPEC have been allocated to IST. Management believes that this method
of allocation is reasonable. Therefore amounts reported by IST under the Turnkey Agreement, included
in the consolidated financial statements as Revenue &#150; related party, reflect contract amounts
net of costs incurred by iASPEC.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(d) Economic and Political Risks</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s majority operations are conducted in the PRC. Accordingly, the Company&#146;s business,
financial condition and results of operations may be influenced by the political, economic and legal
environment in the PRC, and by the general state of the PRC economy. The Company&#146;s operations
in the PRC are subject to special considerations and significant risks not typically associated with
companies in North America and Western Europe. These include risks associated with, among others,
the political, economic and legal environment and foreign currency exchange. The Company&#146;s results
may be adversely affected by changes in the political and social conditions in the PRC, and by changes
in governmental policies with respect to laws and regulations, anti-inflationary measures, currency
conversion, remittances abroad, and rates and methods of taxation.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(e) Cash and Cash Equivalents</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company considers all highly liquid investments purchased and cash deposits with financial institutions
with original maturities of three months or less to be cash equivalents.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company maintains its cash accounts at credit worthy financial institutions and closely monitors
the movements of its cash positions.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(f) Investment in marketable securities</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s investments in marketable securities are accounted for as either available-for-sale
or trading securities. Investments accounted for as available for sale are stated at fair market
value, with unrealized gains and losses (net of deferred income tax assets (liabilities)) reported
as a component of stockholders&#146; equity. Investments accounted for as trading securities are
stated at fair market value with unrealized holding gains and losses reported in income. The cost
of securities sold is determined based on the specific identification method for purposes of recording
realized gains and losses. At December 31, 2007 investments in marketable securities consist of investments
in marketable equity securities of two companies listed on the Hong Kong Stock Exchange. (Note 5)</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-25 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>2. &nbsp;SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(g) Accounts Receivable and Concentration of Risk</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>During the normal course of business, the Company extends unsecured credit to its customers. The Company
regularly evaluates and monitors the creditworthiness of each customer on a case-by-case basis. The
Company includes any account balances that are determined to be uncollectible in an allowance for
doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written
off against the allowance. Based on the information available to management, the Company believes
that no allowance for doubtful accounts was necessary as of December 31, 2007 and 2006.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Accounts receivable include $6.4&nbsp;million of unbilled accounts receivable at December&nbsp;31,
2007. Unbilled accounts receivable consist of estimated future billings for work performed but not
yet invoiced to the customer. Unbilled accounts receivable are generally invoiced within the following
month.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s top five customers accounted for 40.5% of accounts receivable as of December 31,
2007, among which two customers accounted for 20% and 10% of accounts receivable and no other customer
were greater than 10% of accounts receivable. As of December 31, 2006, no customer accounted for
greater than 10% of accounts receivable. The top five customers accounted for 59.3% of the revenue
from third parties for the year ended December 31, 2007. No provision for doubtful accounts was required
as of December 31, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>For the year ended December 31, 2007, specifically two customers accounted for 21% and 26% of third
party revenues and no other customer contributed greater than 10% of the revenues. During the period
from January 17, 2006 through December 31, 2006 and the period from January 1, 2006 through October
8, 2006, no customer accounted for greater than 10% of third party revenues.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(h) Advances to Suppliers</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Advances to suppliers represents cash deposits for the purchase of inventory items from suppliers.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(i) Advances from Customers</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Advances from customers represents cash received from customers as advance payments for the purchase
of the Company&#146;s products.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(j) Fair Value of Financial Instruments</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Management has estimated that the carrying amounts of non-related party financial instruments approximate
their fair values due to their short-term maturities. The fair value of the amount due from (to)
shareholders is not practicable to estimate due to the related party nature of the underlying transactions.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(k) Inventories</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Inventories are valued at the lower of cost or net realizable value. Net realizable value is the estimated
selling price in the ordinary course of business less the estimated cost of completion and the estimated
costs necessary to make the sale.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company performs an analysis of slow-moving or obsolete inventory periodically and any necessary
valuation reserves, which could potentially be significant, are included in the period in which the
evaluations are completed. As of December 31, 2007, management determined that no allowance was necessary.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>During the years ended December 31, 2007 and 2006, approximately 32% and 41%, respectively, of total
inventory purchases were from five unrelated suppliers. One supplier accounted for more than 10%
of total inventory purchases for these two year/period.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-26 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>2. &nbsp;SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(l) Property and Equipment</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided over
the assets&#146; estimated useful lives, using the straight-line method. Estimated useful lives of
property and equipment are as follows:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD WIDTH=5% ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Office equipment</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=31% ALIGN=right><FONT FACE="Times New Roman" SIZE=2>5 years</FONT></TD>
    <TD WIDTH=6% ALIGN=LEFT bgcolor="#FFFFFF"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Electronics equipment</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman" SIZE=2>5 years</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Motor vehicles</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman" SIZE=2>5 years</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#FFFFFF"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Purchased software</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman" SIZE=2>3-5 years</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Office building</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman" SIZE=2>20-50 years</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#FFFFFF"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Maintenance and repairs costs are expensed as incurred, whereas significant renewals and betterments
are capitalized.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(m) Intangible assets</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Intangible assets represent technology-based intangible assets acquired in connection with the acquisition
of Fortune Fame International Investment Limited (Note 4) and software development costs capitalized
by iASPEC (Note 3).</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Intangible assets are being amortized using the straight-line method over the following estimated useful
lives:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD WIDTH=7% ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>Software development costs</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=21% ALIGN=LEFT bgcolor="#e9f1f8"><div align="right"><FONT FACE="Times New Roman" SIZE=2>5 years</FONT></div></TD>
    <TD WIDTH=7% ALIGN=LEFT bgcolor="#FFFFFF"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Technology</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman" SIZE=2>10 years</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(o) Goodwill</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Goodwill represents the excess of the purchase price over the net of the fair value of the identifiable
tangible and intangible assets acquired and the fair value of liabilities assumed upon the acquisition
of Fortune Fame International Investment Limited (Note 4). In accordance with Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No. 142,<I>&nbsp;Goodwill and Other Intangible Assets</I> , management of the Company evaluates the carrying value of goodwill annually or when a possible impairment
is indicated. The Company performs its impairment annually during the fourth quarter of the fiscal
year and determined that there was no impairment of goodwill as of December 31, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(p)&nbsp;Accounting for the Impairment of Long-Lived Assets</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably
possible that these assets could become impaired as a result of technology or other industry changes.
Determination of recoverability of assets to be held and used is determined by comparing the carrying
amount of an asset to future net undiscounted cash flows to be generated by the assets. If such assets
are considered to be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of
are reported at the lower of the carrying amount or fair value less costs to sell.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>There were no impairments of long-lived assets as of December 31, 2007 and 2006.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(q) Revenue Recognition</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Revenues from products are recognized only when persuasive evidence of an arrangement exists, delivery
has occurred or services have been rendered, the price to the customer is fixed or determinable,
and collectability is reasonably assured. Generally, revenue is recognized (1)&nbsp;upon shipment
for equipment and software, (2)&nbsp;as work is performed for professional services and (3)&nbsp;in
equal periodic amounts over the term of the contract for software and hardware maintenance. The Company&#146;s
revenue recognition policies are in accordance with SEC Staff Accounting Bulletin No. 104, &#147;<I> Revenue Recognition</I> ,&#148; and AICPA Statement of Position No. 97-2, &#147;<I> Software Revenue Recognition</I> &#148;.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-27 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>2. &nbsp;SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(q) Revenue Recognition (Continued)</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The majority of revenues are generated from fixed-price contracts, which provide for licenses to software
products, and services to customize such software to meet customers&#146; use. Generally, when the
services are determined to be essential to the functionality of the delivered software, revenue is
recognized using the percentage of completion method of accounting in accordance with SOP 97-2 and
81-1<I>&nbsp;&#147;Accounting for Long-term Construction Type Contracts&#148;</I> . The percentage of completion for each contract is estimated based on the ratio of direct labor hours
incurred to total estimated direct labor hours. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(r) Retirement Plan</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Retirement benefits in the form of contributions under a defined contribution retirement plan to the
relevant authorities are charged to the statements of income as incurred. Retirement benefit expenses
for the year ended December 31, 2007, the Successor period from January 17, 2006 through December
31, 2006, and the Predecessor period from January 1, 2006 through October 8, 2006 were $117,753,
$3,870, and $54,209, respectively.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(s) Stock-based compensation</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of
Financial Accounting Standards (&#147;SFAS&#148;) No. 123 (revised 2004), &#147;Share-Based Payment&#148;
(&#147;SFAS 123R&#148;), which revises SFAS No. 123, &#147;Accounting-Based Compensation&#148; (&#147;SFAS
123&#148;). Under the fair value recognition provisions of SFAS 123R, the Company is required to
measure the cost of employee services received in exchange for stock-based compensation measured
at the grant date fair value of the award by using the Black-Scholes option pricing model. The Company
recognizes the compensation costs, net of a forfeiture rate, on a straight-line basis over the requisite
service period of the award, which is the vesting term. The provisions of SFAS 123R apply only to
the awards granted or modified after the date of adoption. The unrecognized expense of awards not
yet vested at the date of adoption, determined under the original provisions of SFAS 123, is recognized
in net profit in the periods after adoption. During the year ended December 31, 2007, the Company
has recognized $677,891 of compensation expenses under the Plan. As of December 31, 2007, there was
$1,600,396 of unrecognized compensation expense related to the non-vested options.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;(t) Foreign Currency Translation</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The functional currency of the Company&#146;s wholly- owned PRC subsidiaries and its VIE is the Chinese
Renminbi Yuan, (&#147;RMB&#148;). RMB is not freely convertible into foreign currencies. The Company&#146;s
PRC subsidiaries&#146; and its VIE&#146;s financial statements are maintained in the functional currency.
Monetary assets and liabilities denominated in currencies other than the functional currency are
translated into the functional currency at rates of exchange prevailing at the balance sheet date.
Transactions denominated in currencies other than the functional currency are translated into the
functional currency at the exchange rates prevailing at the dates of the transactions. Exchange gains
or losses arising from foreign currency transactions are included in the determination of net income
for the respective periods.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On October 9, 2006, in connection with the Acquisition, the Company adopted the United States dollar
as its reporting currency. The financial statements for the Predecessor Period have been recast using
a method consistent with SFAS No. 52,<I> &#147;Foreign Currency Translation&#148;</I> &nbsp;to reflect the United States dollar as if the United States dollar had been used for the Predecessor

Period.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Accordingly, for financial reporting purposes, the financial statements of the Company, which are prepared
using the functional currency, have been translated into United States dollars. Assets and liabilities
are translated at exchange rates at the balance sheet dates and revenue and expenses are translated
at the average exchange rates, and stockholders&#146; equity is translated at historical exchange
rates. Any resulting translation adjustments are not included in determining net income but are included
in foreign exchange adjustment to other comprehensive income, a component of stockholders&#146; equity.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-28 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>2. &nbsp;SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;(t) Foreign Currency Translation (Continued)</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The exchange rates adopted are as follows:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH nowrap><FONT FACE="Times New Roman" SIZE=2> December 31<br>
      2007 </FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH nowrap><FONT FACE="Times New Roman" SIZE=2>December 31,<br>
      2006 </FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Year end exchange rate</FONT></TD>
    <TD WIDTH=10% ALIGN=right><FONT FACE="Times New Roman" SIZE=2>7.3141</FONT></TD>
    <TD WIDTH=3% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=10% ALIGN=right><FONT FACE="Times New Roman" SIZE=2>7.8050</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Average yearly exchange rate</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman" SIZE=2>7.6172</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman" SIZE=2>7.8050</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>No representation is made that the RMB amounts could have been, or could be, converted into United

States dollars at the rates used in translation.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(u) Accounting for Computer Software to Be Sold, Leased or Otherwise Marketed</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company accounts for software development costs in accordance with SFAS No. 86,<I> &#147;Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed</I> &#148;. Costs related to establishing the technological feasibility of a software product are expensed
as incurred as a part of research and development expenses. There were no research and development
expenses during the periods from January 17, 2006 to December 31, 2006 and January 1, 2006 through
October 8, 2006. Costs that are incurred to produce the finished product after technological feasibility
is established are capitalized and amortized over the estimated economic life of 5 years. The Company
performs periodic reviews to ensure that unamortized program costs remain recoverable from future
revenue. Software development costs of $102,953 were capitalized as during the period from January
1, 2006 through October 8, 2006. No software development costs were capitalized during the year ended
December 31, 2007 or the period from January 17, 2006 through December 31, 2006. During the year
ended December 31, 2007 and the period from January 1, 2006 through October 8, 2006, amortization
expense of approximately $111,900 and $61,000, respectively was charged to income.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(v) Income Taxes</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Income tax expense is based on reported income before income taxes. Deferred income taxes reflect the
effect of temporary differences between assets and liabilities that are recognized for financial
reporting purposes and the amounts that are recognized for income tax purposes. In accordance with
SFAS No. 109<I> , &#147;Accounting for Income Taxes,&#148;</I> &nbsp;these deferred taxes are measured by applying currently enacted tax laws.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On March 16, 2007, the National People&#146;s Congress of the PRC passed the new EIT Law, which will
take effect as of January 1, 2008. Under the new EIT Law, an enterprise established outside of the
PRC with &#147;de facto management bodies&#148; within the PRC is considered a resident enterprise
and will normally be subject to the enterprise income tax at the rate of 25% on its global income.
The new EIT Law, however, does not define the term &#147;de facto management bodies.&#148; If the
PRC tax authorities subsequently determine that the Company should be classified as a resident enterprise,
then its global income will be subject to PRC income tax at a tax rate of 25.0%. In addition, under
the new EIT Law, dividends from its PRC subsidiaries to it will be subject to a withholding tax.
The rate of the withholding tax has not yet been finalized, pending promulgation of implementing
regulations. Furthermore, the ultimate tax rate will be determined by treaty between the PRC and
the tax residence of the holder of the PRC subsidiary. The Company is actively monitoring the proposed
withholding tax and is evaluating appropriate organizational changes to minimize the corresponding
tax impact. The new EIT Law imposes a unified income tax rate of 25.0% on all domestic-invested enterprises
and FIEs, such as its PRC operating subsidiaries, unless they qualify under certain limited exceptions,
but the EIT Law permits companies to continue to enjoy their existing preferential tax treatments
until such treatments expire in accordance with their current terms. The Company expect details of
the transitional arrangement for the five-year period from January 1, 2008 to December 31, 2012 applicable
to enterprises approved for establishment prior to March 16, 2007 to be set out in more detailed
implementing rules to be adopted in the future.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(w) Earnings per Share</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average
number of common shares outstanding during the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock were exercised or
converted into common stock, or resulted in the issuance of common stock that shared in the earnings
of the entity. For the year ended December 31, 2007, dilutive securities represent outstanding warrants
to acquire 840,632 shares of common stock. There were no outstanding dilutive securities during 2006.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-29 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>2. &nbsp;SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;(x) Segment reporting</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company operates and manages its business as a single segment. As the Company primarily generates
its revenues from customers in the PRC, no geographical segments are presented.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(y) Sales, use and other Value Added Tax</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Revenue is recorded net of applicable state, use and other Value Added Tax.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(z) Recent Accounting Pronouncements</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In December 2007, the FASB issued SFAS No. 141 (R),<I> &#147;Business Combinations&#148;</I>, which becomes effective for fiscal periods beginning after December&nbsp;15, 2008. SFAS No. 141 (R)&nbsp;requires
all business combinations completed after the effective date to be accounted for by applying the
acquisition method (previously referred to as the purchase method). Companies applying this method
will have to identify the acquirer, determine the acquisition date and purchase price and recognize
at their acquisition date fair values of the identifiable assets acquired, liabilities assumed, and
any non-controlling interests in the acquiree. In the case of a bargain purchase the acquirer is
required to reevaluate the measurements of the recognized assets and liabilities at the acquisition
date and recognize a gain on that date if an excess remains. The Company does not expect the adoption
of this statement to have a material impact on its financial statements.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In December 2007, the FASB issued SFAS No. 160, &#147;<I>Non-controlling Interests in Consolidated Financial Statements, an Amendment of ARB 51</I> &#148; (&#147;SFAS 160&#148;) which becomes effective for fiscal periods beginning after December&nbsp;15,
2008. This statement amends ARB 51 to establish accounting and reporting standards for the non-controlling
interest in a subsidiary and for the deconsolidation of a subsidiary. The statement requires consolidated
net income to be reported at amounts that include the amounts attributable to both the parent and
the non-controlling interest. It also requires disclosure on the face of the consolidated statement
of income, of the amounts of consolidated net income attributable to the parent and to the non-controlling
interest. In addition this statement establishes a single method of accounting for changes in a parent&#146;s
ownership interest in a subsidiary that do not result in deconsolidation and requires that a parent
recognize a gain or loss in net income when a subsidiary is deconsolidated. The Company does not
expect the adoption of this statement to have a material impact on its financial statements.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;In September 2006, the FASB issued SFAS No. 157,<I> Fair Value Measurements</I> (&#147;SFAS 157&#148;). This statement does not require any new fair value measurements but provides
guidance on how to measure fair value and clarifies the definition of fair value under accounting
principles generally accepted in the United States of America. This statement also requires new disclosures
about the extent to which fair value measurements in financial statements are based on quoted market
prices, market-corroborated inputs, or unobservable inputs that are based on management&#146;s judgments
and estimates. The statement is effective for fiscal years beginning after November 15, 2008 for
non-financial assets and liabilities, and is effective for fiscal year beginning after November 15,
2007 for financial assets and liabilities. The statement will be applied prospectively by the Company
for any fair value measurements that arise after the date of adoption.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In February 2007, the FASB issued SFAS No. 159, &#147;<I>The Fair Value Option for Financial Assets and Financial Liabilities&#151;Including an Amendment of
FASB Statement No. 115</I> &#148; (&#147;SFAS No. 159&#148;). SFAS No. 159 allows companies the choice to measure many financial
instruments and certain other items at fair value. This gives a company the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and liabilities differently without
having to apply complex hedge accounting provisions. SFAS No. 159 is effective for fiscal years beginning
after November&nbsp;15, 2007. Management is currently evaluating the impact this standard may have
on the Company&#146;s consolidated operating results and financial position upon adoption.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-30 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>3. VARIABLE INTEREST ENTITY</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As a result of the MSA, iASPEC became the Company&#146;s VIE, effective as of July 1, 2007. While the
Company has held an economic interest in iASPEC since October 9, 2006, the MSA and the Option Agreement
have given the Company control over the business and operations of iASPEC, and the Company became
the primary beneficiary of iASPEC. The consolidated financial statements for the year ended December
31, 2007, include the results of operations of iASPEC from July 1, 2007, even though the Company
does not own any of iASPEC&#146;s equity.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>iASPEC&#146;s assets and liabilities as of July 1, 2007 were as follows:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH nowrap><FONT FACE="Times New Roman" SIZE=2>July 1, 2007</FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#FFFFFF">
    <TD colspan="5" ALIGN=LEFT><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9f1f8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Cash and cash equivalents</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 4,731,140</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Accounts receivable</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,837,210</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Inventory</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3,066,853</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Other current assets</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,296,535</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Property and equipment</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>7,844,889</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Intangible assets</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>609,540</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Accounts payable</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(2,067,458</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Amount due to related parties</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(11,941,282</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Other current liabilities</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(406,770</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#FFFFFF">
    <TD colspan="5" ALIGN=LEFT><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;Net assets</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 9,970,657</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR COLOR=#000000 SIZE=2></TD>
    <TD></TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As of July 1, 2007, minority interest consisted of 100% of the equity of iASPEC owned by Mr. Lin and
Mr. Jin Zhu Cai. During the six months ended December 31, 2007, all but $90,000 of iASPEC&#146;s
net income was allocated to the Company. The $90,000 was attributed to the minority interest in the
Consolidated Statements of Income and Comprehensive Income, resulting in minority interest of $10,060,657
as of December 31, 2007. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>iASPEC&#146;s net assets as of December 31, 2007 were approximately $13,171,000, and the consolidation
of iASPEC resulted in an increase in assets of approximately $29,905,000, an increase in liabilities
(consisting primarily of accounts payable) of approximately $3,567,000, and an increase of net income
of approximately $5,501,000.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>4. BUSINESS ACQUISITION</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On November 7, 2007, the Company acquired 100% of the equity interests of Fortune Fame International
Investment Limited, (&#147; Fortune Fame&#148;), and its operating PRC subsidiary, Shenzhen Information
Security Development Technology Company Ltd. (&#147;ISDT&#148;), for which the Company paid approximately
$7.1 million in cash and issued 883,333 shares of its common stock. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Of the 883,333 shares of common stock, 383,333 shares were issued to Cheer Crown International Investment
Limited (&#147;Cheer Crown&#148;) and 500,000 shares were issued to Mr. Gao, the Chairman of Fortune
Fame&#146;s Board of Directors. Under the terms of the acquisition agreement, Mr. Gao, agreed to
continue on as the Chairman of Fortune Fame. Mr. Gao also agreed that he will return 250,000 shares
of the Company&#146;s common stock if Fortune Fame does not meet certain net income targets in 2008,
and 250,000 shares if Fortune Fame does not meet certain net income targets in 2009.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Fortune Fame had no substantive business operations since its formation in July 2007 until it acquired
ISDT on October 26, 2007. ISDT provides a leading CA, an application platform and e-Government solution
technology, and is an exclusive CA application provider for the Shenzhen municipality in the PRC.
The CA certification allows ISDT to issue digital&nbsp;certificates that contain a public key that
can be used by the public to encrypt messages and protect the identity of the user. The CA&nbsp;also
certifies that the public key contained in the certificate belongs to the person, organization, server
or other entity noted in the certificate. CAs are currently used in China&#146;s e-Government industry
and can be successfully integrated with the Company&#146;s platforms and solutions to enhance customers&#146;
applications.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-31 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>4. BUSINESS ACQUISITION (CONTINUED)</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following represents the purchase price allocation at the date of the acquisition:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Cash and cash equivalents</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 326,831</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Accounts receivable</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,369,257</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Advances to suppliers</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>530,286</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Inventory</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>151,516</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Other current assets</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>257,526</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Property and equipment</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>223,845</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Goodwill</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>7,154,395</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Intangible assets</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4,334,381</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Current liabilities</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(229,904</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Total purchase price</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 14,118,133</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD>
    <TD></TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following tables show supplemental information of the results of operations on a pro forma basis
for the years ended December 31, 2007 and the Successor Period from January 17, 2006 through December
31, 2006, as if the acquisition of ISDT had been completed at the beginning of the respective periods.</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <td align="left"><font size="2" face="Times New Roman, Times, serif"> For the year ended December 31, 2007<br>
      (Unaudited) </font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td colspan="4" align="center"><font size="2" face="Times New Roman, Times, serif">Historical</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
  </TR>
  <TR VALIGN=Bottom>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td colspan="5"><HR NOSHADE COLOR=#000000 SIZE=1></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
  </TR>
  <TR VALIGN=Bottom>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td align="center"><font size="2" face="Times New Roman, Times, serif">CIST</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td align="center"><font size="2" face="Times New Roman, Times, serif">ISDT </font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td align="center"><font size="2" face="Times New Roman, Times, serif"> Pro Forma<br>
      Adjustments</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td align="center"><font size="2" face="Times New Roman, Times, serif"> Pro <br>
      Forma </font></td>
    <td><font size="2">&nbsp;</font></td>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH>&nbsp;</TH>
    <TH colspan="2"><FONT FACE="Times New Roman" SIZE=1></FONT>
        <HR NOSHADE COLOR=#000000 SIZE=1>
    </TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2"><FONT FACE="Times New Roman" SIZE=1></FONT>
        <HR NOSHADE COLOR=#000000 SIZE=1>
    </TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2"><FONT FACE="Times New Roman" SIZE=1></FONT>
        <HR NOSHADE COLOR=#000000 SIZE=1>
    </TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2"><FONT FACE="Times New Roman" SIZE=1></FONT>
        <HR NOSHADE COLOR=#000000 SIZE=1>
    </TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Revenues</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 30,342,709</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 7,139,215</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> (314,073</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>a</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 37,167,851</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Income from operations</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 13,310,477</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,239,981</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> (338,463</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>b</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 14,211,995</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Net income</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 13,331,452</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,053,977</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> (338,463</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>b</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 14,046,966</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Weighted Average Number of Shares<br>
    &nbsp;&nbsp;Outstanding    </FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Basic</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>39,718,967</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>752,648</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>c</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>40,471,615</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Diluted</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>40,152,855</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>752,648</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>c</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>40,905,503</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Earnings per share</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Basic</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman" SIZE=2>0.34</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>0.35</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Diluted</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman" SIZE=2>0.33</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>0.34</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<br>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <td align="left"><font size="2" face="Times New Roman, Times, serif"> For the period from January 17,
      2006 through <br>
      December 31, 2006
    (Unaudited) </font></td>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <td colspan="4" align="center"><font size="2" face="Times New Roman, Times, serif">Historical</font></td>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <TH align="left"><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <TH colspan="5"><HR NOSHADE COLOR=#000000 SIZE=1></TH>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <TH align="left"><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <td align="center"><font size="2" face="Times New Roman, Times, serif">CIST</font></td>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <td align="center"><font size="2" face="Times New Roman, Times, serif">ISDT </font></td>
    <TH><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <td align="center"><font size="2" face="Times New Roman, Times, serif"> Pro Forma<br>
      Adjustments</font></td>
    <TH><font size="2"></font></TH>
    <TH align="left"><font size="2"></font></TH>
    <TH><font size="2"></font></TH>
    <td align="center"><font size="2" face="Times New Roman, Times, serif"> Pro <br>
      Forma </font></td>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH>&nbsp;</TH>
    <TH colspan="2"><FONT FACE="Times New Roman" SIZE=1></FONT>
        <HR NOSHADE COLOR=#000000 SIZE=1>
    </TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2"><FONT FACE="Times New Roman" SIZE=1></FONT>
        <HR NOSHADE COLOR=#000000 SIZE=1>
    </TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2"><FONT FACE="Times New Roman" SIZE=1></FONT>
        <HR NOSHADE COLOR=#000000 SIZE=1>
    </TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH align="left"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2"><FONT FACE="Times New Roman" SIZE=1></FONT>
        <HR NOSHADE COLOR=#000000 SIZE=1>
    </TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Revenues</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2> 2,175,204</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2> 1,521,792</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD WIDTH=9% ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=2% ALIGN=left><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>3,696,996</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Income from operations</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,882,747</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 304,858</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> (406,156</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman" SIZE=2>b</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,781,449</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Net income</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2> 1,594,649</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2> 260,783</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2> (406,156</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman" SIZE=2>b</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2> 1,449,276</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Weighted Average Number of Shares<br>
    &nbsp;&nbsp;Outstanding    </FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=left>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Basic</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>26,958,104</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>883,333</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=left><FONT FACE="Times New Roman" SIZE=2>c</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=right bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>27,841,437</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Diluted</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>26,958,104</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>883,333</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=left><FONT FACE="Times New Roman" SIZE=2>c</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=right><FONT FACE="Times New Roman" SIZE=2>27,841,437</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Earnings per share</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=right bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=left>&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=right bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Basic</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman" SIZE=2>0.06</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=left><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman" SIZE=2>0.05</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Diluted</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=right bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>0.06</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
    <TD ALIGN=left><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=right bgcolor="#e9f1f8"><FONT FACE="Times New Roman" SIZE=2>0.05</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#e9f1f8">&nbsp;</TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>a. The pro forma adjustments represent the sales from ISDT to iASPEC before the acquisition dates.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>b. The pro forma adjustments represent the amortization of the intangible assets arising upon the acquisition
of ISDT.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>c. The pro forma adjustments represent the weighted average number of shares impact assuming that the
ISDT acquisition occurred at the beginning of the years.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-32 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>5. INVESTMENT IN MARKETABLE ASSETS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On November 9, 2007, the Company invested in three equity-linked notes (&#147;ELNs&#148;), for HKD176,814,000
(approximately $22,654,000), The ELNs were linked to three different equity securities traded on
the Hong Kong Stock Exchange. Mr. Lin provided a guarantee (&#147;Lin Guarantee&#148;) against any
losses sustained as a result of the Company&#146;s investment in the ELNs.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On December 28, 2007, the maturity date of the ELNs, one of the ELNs was redeemed by the issuer for
cash of HKD 60,000,000 (approximately $7,687,000) and with a gain of HKD906,000 (approximately $116,000).
The other two ELNs were redeemed by the issuer&#146;s surrender of the underlying equity securities
to the Company. On December 31, 2007, the market value of the underlying securities was HKD112, 637,334
(approximately $14,441,000). On March 25, 2008, the Company sold the remaining equity securities
for HKD85,009,123 (approximately $10,897,000). In addition, Mr. Lin paid the Company approximately
$4,080,000 in connection with the Lin Guarantee. As a result, the Company recorded no gain or loss
on the investments in the ELNs. Mr. Lin paid the Lin Guarantee from the proceeds of a private sale
to certain accredited investors, of 1,070,000 shares of the Company&#146;s common stock owned by
him. Mr. Lin will not receive any shares of our common stock, other security or other consideration
for this capital contribution and has waived any and all rights that he may have to make a claim
against us for any such shares, securities or other consideration in the future. In connection with
this private sale transaction, the Company entered into a registration rights agreement with the
purchasers of Mr. Lin&#146;s shares, pursuant to which, among other things, the Company agreed to
register within a predefined period, shares of its common stock transferred to them by Mr. Lin. There
are no liquidated damages associated with the Company&#146;s failure to timely register these shares.
Although the Company has not suffered any losses on the investment by the Company in the ELNs, the
investment in the ELNs could result in a claim being alleged against the Company.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>6. RELATED PARTY BALANCES AND TRANSACTIONS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(a) Related party balances</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As of December 31, 2006, related party receivables and amount due to a director consist of:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH align="left">&nbsp;</TH>
    <TH align="left"><FONT FACE="Times New Roman" SIZE=1>Due from related companies </FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2"><div align="right"><FONT FACE="Times New Roman" SIZE=2>2006</FONT></div></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Shenzhen iASPEC Software Engineering Co. Ltd. (The Predecessor)</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Revenues under the Turnkey Agreement</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,185,449</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Fee payable under the Turnkey Agreement</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(45,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Other advances</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>154,710</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,295,159</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Hong Kong United Development Group Limited</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>115,312</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,410,471</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Due to a director<br>
    &nbsp;&nbsp;Mr. Lin</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 82,304</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD>
    <TD></TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Hong Kong United Development Group Limited is 51% controlled by Mr. Lin. The amount as of December
31, 2006 represented advances to the company as working capital and was unsecured, interest free,
and was repaid in full during the year ended December 31, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The amount due to Mr. Lin represents advances to the Company as working capital. The amount was unsecured,
non-interest bearing and was repaid in full in during the year ended December 31, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As iASPEC is consolidated effective July 1, 2007, amount due from iASPEC has been eliminated in consolidation.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-33 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>6. &nbsp;RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(b) Revenue - related party</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Prior to July 1, 2007, revenues earned from iASPEC under the Turnkey Agreement were recorded as related
party revenues in the Company&#146;s financial statements.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Amounts earned from iASPEC under the Turnkey Agreement (prior to the consolidation of iASPEC), during
the six months ended June 30, 2007 and the period from January 17, 2006 through December 31, 2006
and are as follows: </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH align="right" nowrap><FONT FACE="Times New Roman" SIZE=2>SIX <br>
      MONTHS<br>
      ENDED<br>
      JUNE 30,<br>
      2007</FONT></TH>
    <TH nowrap><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
    <TH nowrap><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
    <TH align="right" nowrap><FONT FACE="Times New Roman" SIZE=2> JANUARY 17<br>
      THROUGH<br>
      DECEMBER 31,<br>
      2006</FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Revenues, per contracts</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 12,713,673</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2,677,498</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Cost of sales incurred by iASPEC</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(6,558,443</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(858,149</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Expenses paid by iASPEC on behalf of IST</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(613,271</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(633,900</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Net</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 5,541,959</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,185,449</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD>
    <TD></TD>
  </TR>
  <TR>
    <TD COLSPAN=9><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Fee payable to iASPEC under the Turnkey Agreement</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 90,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 45,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD>
    <TD></TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>During the six months ended June 30, 2007 (prior to consolidation), the Company advanced iASPEC approximately
$5,200,000 for the establishment of representative offices and branches, and for the development
of marketing networks under the Turnkey Agreement. Additionally, at June 30, 2007, iASPEC owed the
Company approximately $5,500,000 from the net amounts earned under the Turnkey Agreement, as shown
above, and such amount had been paid by iASPEC to IST before December 31, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>&nbsp;7. INVENTORIES</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As of December 31, 2007 and 2006, inventories consist of:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH colspan="2" align="right"><FONT FACE="Times New Roman" SIZE=2>2007</FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
    <TH colspan="2" align="right"><FONT FACE="Times New Roman" SIZE=2>2006</FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR>
    <TD COLSPAN=9><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Finished goods</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 402,940</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 243,948</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Installations in process</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4,376,990</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=9><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Inventories</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 4,779,930</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 243,948</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD>
    <TD></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-34 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>8. PROPERTY AND EQUIPMENT</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As of December 31, 2007 and 2006, property and equipment consists of:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH align="right"><FONT FACE="Times New Roman" SIZE=2>2007</FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
    <TH align="right"><FONT FACE="Times New Roman" SIZE=2>2006</FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR>
    <TD COLSPAN=9><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Office equipment</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 116,299</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 12,830</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Electronics equipment</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>8,237,963</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>38,127</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Motor vehicles</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>566,375</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Purchased software</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3,126,357</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Office building</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,027,304</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;Total</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>17,074,298</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>50,957</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
    <TD></TD>
  </TR>
  <TR>
    <TD COLSPAN=9><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Less: accumulated depreciation</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(3,247,402</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,131</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 13,826,896</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 49,826</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD>
    <TD></TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Depreciation expense for the year ended December 31, 2007 and the periods from January 17, 2006 through
December 31, 2006 and January 1, 2006 through October 8, 2006 was $1,274,768, $1,131 and $422,946,
respectively.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>9. INTANGIBLE ASSETS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As of December 31, 2007 intangible assets consist of:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <TH align="right"><FONT FACE="Times New Roman" SIZE=2>2007</FONT></TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Software development costs</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 983,270</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Technology</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4,432,398</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Total</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,415,668</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="6" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Less: accumulated amortization</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(521,271</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="6" ALIGN=LEFT><font size="1" face="Times New Roman">&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Intangible assets, net</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 4,894,397</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD>
    <TD></TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Estimated future amortization of intangible assets as of December 31, 2007 is as follows:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>2008</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 639,894</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>2009</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>622,684</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>2010</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>571,058</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>2011</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>475,194</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>2012</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>443,240</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Thereafter</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,142,326</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Total</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 4,894,397</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD>
    <TD></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-35 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>10. INCOME TAXES</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Pre-tax income for the year ended December 31, 2007 and the periods from January 17, 2006 through December
31, 2006 and January 1, 2006 through October 8, 2006 was taxable in the following jurisdictions:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH>&nbsp;</TH>
    <td colspan="5" align="center"><b><font size="2" face="Times New Roman, Times, serif">SUCCESSOR</font></b></td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><b><FONT FACE="Times New Roman, Times, serif" SIZE=2>PREDECESSOR </FONT></b></td>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <td colspan="2" align="right" nowrap><b><FONT FACE="Times New Roman, Times, serif" SIZE=2> YEAR ENDED<br>
      DECEMBER 31,<br>
    2007 </FONT></b></td>
    <td align="right">&nbsp;</td>
    <td colspan="2" align="right" nowrap><b><FONT FACE="Times New Roman, Times, serif" SIZE=2> JANUARY 17<br>
      THROUGH<br>
      DECEMBER 31,<br>
    2006 </FONT></b></td>
    <td align="right">&nbsp;</td>
    <td colspan="2" align="right" nowrap><b><FONT FACE="Times New Roman, Times, serif" SIZE=2>
      JANUARY 1 <br>
      THROUGH <br>
      OCTOBER 8, <br>
    2006 </FONT></b></td>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="11" ALIGN=LEFT><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>PRC</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 15,288,111</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,884,052</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 4,829,347</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Others</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,759,360</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="11" ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Total net income (loss) before income taxes</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 13,528,751</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,884,052</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 4,829,347</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" color=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" color=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" color=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>It is management&#146;s intention to reinvest all the income attributable to the Company earned by
its operations outside the United States of America (the &#147;U.S.&#148;). Accordingly, no U.S.
corporate income taxes are provided in these consolidated financial statements.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Under the current laws of the BVI, dividends and capital gains arising from the Company&#146;s investments

in the BVI are not subject to income taxes and no withholding tax is imposed on payments of dividends

by the Company.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The reconciliation of income taxes for income tax computed at the PRC federal statutory tax rate applicable
to enterprises operating in the Shenzhen Special Economic Zone, to income tax expense is as follows:
</FONT></P>
<TABLE WIDTH=100% BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH>&nbsp;</TH>
    <td colspan="5" align="center"><b><font size="2" face="Times New Roman, Times, serif">SUCCESSOR</font></b></td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><b><FONT FACE="Times New Roman, Times, serif" SIZE=2>PREDECESSOR </FONT></b></td>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
    <td colspan="2" align="right"><b><FONT FACE="Times New Roman, Times, serif" SIZE=2> YEAR ENDED<br>
      DECEMBER 31,<br>
      2007 </FONT></b></td>
    <td align="right">&nbsp;</td>
    <td colspan="2" align="right"><b><FONT FACE="Times New Roman, Times, serif" SIZE=2> JANUARY 17<br>
      THROUGH<br>
      DECEMBER 31,<br>
      2006 </FONT></b></td>
    <td align="right">&nbsp;</td>
    <td colspan="2" align="right"><b><FONT FACE="Times New Roman, Times, serif" SIZE=2>
      JANUARY 1 <br>
      THROUGH <br>
      OCTOBER 8, <br>
      2006 </FONT></b></td>
    <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="11" ALIGN=LEFT><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>PRC federal statutory tax rate</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD width="12%" ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>15</FONT></TD>
    <TD width="3%" ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>%</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD width="12%" ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>15</FONT></TD>
    <TD width="3%" ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>%</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD width="12%" ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>15</FONT></TD>
    <TD width="1%" ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>%</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="11" ALIGN=LEFT><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Computed expected income tax expense</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2,293,216</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 282,607</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 724,402</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Tax exemption</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(2,191,770</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Other differences</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,854</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>6,796</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>24,979</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="11" ALIGN=LEFT><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#e9f1f8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Income taxes</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 107,300</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 289,403</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 749,381</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" color=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" color=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" color=#000000></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>IST, ISDT and iASPEC, are all governed by the Income Tax Laws of the PRC and are subject to the PRC&#146;s
enterprise income tax (&#147;EIT&#148;). The statutory rate is 33%. However, since these entities
are located in the Shenzhen Economic Special Zone, they are entitled to a permanent preferential
income tax rate of 15% of assessable profits. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>As a wholly owned foreign investment enterprise, IST is entitled to enjoy a two year tax exemption,
followed by a 7.5% tax exemption for three years thereafter. On August 10, 2007, IST was granted
EIT exemption by PRC tax authorities, retroactive to January 1 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On March 16, 2007, the 10th People&#146;s Congress of China&nbsp;passed the China Unified Corporate
Income Tax Law (the &#147;Unified Tax Law&#148;), effective on January 1, 2008, which establishes
a single unified 25% income tax rate for most companies, with a preferential income tax rate of 15%&nbsp;to
be applicable to enterprises in the Shenzhen Special Economic Zone. In January 2008, the&nbsp;government
announced that the new law would be phased in over five years. Companies that are currently subject
to an income tax of 15% will pay 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% from
2012. Companies that are exempt from taxes or have concessional rates will retain their preferences
until the original expiration date. Management believes that the Unified Tax Law will not impact IST&#146;s income tax qualification to enjoy a tax exemption in fiscal year 2007. In addition, notwithstanding
the implementation of the Unified Tax Law, management believes that IST will continue to enjoy a
two-year tax exemption, followed by a 7.5% tax exemption for the three years thereafter. Management
also believes that iASPEC and ISDT will benefit from the transition period from 2008 to 2012.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-36 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>10. INCOME TAXES (CONTINUED)</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>EIT exemptions claimed by IST may become payable if IST were to dissolve within the next 10 years.
However, management believes that the PRC tax authorities will not request payment of any such amounts.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In June 2006, the FASB issued Interpretation No. 48 &#147;<I>Accounting for Uncertainty in Income Taxes</I>&#148; (&#147;FIN 48&#148;). This interpretation clarifies the accounting for uncertainty in income
taxes recognized in an enterprise&#146;s financial statements in accordance with SFAS 109. This interpretation
prescribes a recognition threshold and measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return. The interpretation
also provides guidance for de-recognition of tax positions, financial statement classification, interest
and penalties, accounting in interim periods, disclosure, and transition. This interpretation is
effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have
a material effect on the Company&#146;s financial position or results of operations.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s policy is to recognize interest and penalties accrued on any unrecognized tax benefits
as a component of income tax expense. As of the date of adoption of FIN 48, the Company did not have
any accrued interest or penalty associated with any unrecognized tax benefits, nor was any interest
expense recognized for the year ended December 31, 2007 and the periods from January 17, 2006 through
December 31, 2006 and January 1, 2006 through October 8, 2006.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>11. RESERVE AND DISTRIBUTION OF PROFIT</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In accordance with relevant PRC regulations and the Articles of Association of IST, and ISDT appropriations
of net income, as reflected in their PRC statutory financial statements, are to be allocated to statutory
reserve, as determined by resolution of the Board of Directors. For the years ended December 31,
2007 and 2006, $1,596,087 and $159,465, respectively, were appropriated.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>12. STOCKHOLDERS&#146; EQUITY</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(a)&nbsp;&nbsp;&nbsp; Equity transactions</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On January 16, 2007, the Company entered into a Securities Purchase Agreement (&#147;SPA I&#148;) with
2 investors, pursuant to which the Company issued an aggregate of 7,868,422 shares of common stock
and received net proceeds of $13,311,211. The Company also paid fees in connection with SPA I consisting
of cash of approximately $670,000 and warrants to purchase 786,841 shares of common stock for $2.28
per share. The warrants have a term of five years, are exercisable immediately on issuance and have
an exercise price of $2.28 per share.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In October and November 2007, the Company issued 267,343 shares of common stock in connection with
the cashless exercise of 346,209 warrants issued in connection with SPA I.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On October 30, 2007, the Company completed a second Securities Purchase Agreement (&#147;SPA II&#148;)
with certain accredited investors (collectively, the &#147;Investors&#148;). Under SPA II, the Company
issued 5,000,000 shares of the Company&#146;s common stock, and received net proceeds of $36,506,275.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Pursuant to the SPA II, the Company also entered into (i) a registration rights agreement (the &#147;Registration
Rights Agreement&#148;) with the Investors, pursuant to which, among other things, the Company agreed
to register the shares of its common stock issued to the Investors within a pre-defined period and
(ii) a closing escrow agreement (the &#147;Escrow Agreement&#148;) with the Investors and the Company&#146;s
U.S. legal counsel, as escrow agent, pursuant to which the Investors agreed to deposit the Purchase
Price into escrow to be released upon the occurrence of the events set forth in the Escrow Agreement.
The funds were released from in escrow on October 30, 2007, the closing date, and the registration
statement covering these shares was declared effective on February 6, 2008. The Company also agreed
to use its reasonable best efforts to have its common stock listed and traded on any one of the New
York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Capital
Market by June 30, 2008.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-37 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>12. STOCKHOLDERS&#146; EQUITY (CONTINUED)</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(a)&nbsp;&nbsp;&nbsp; Equity transactions (Continued)</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In connection with SPA II, the Company issued warrants to purchase 400,000 shares of the Company&#146;s
common stock. The warrants have a term of 5 years, are currently exercisable, have an exercise price
of $9.60 per share, and include registration rights to register the shares underlying the warrants.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On November 7, 2007, the Company issued 883,333 shares of common stock in connection with the acquisition
of Fortune Fame.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(b)&nbsp;&nbsp;&nbsp; Equity Incentive Plan</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Effective June 13, 2007, the Board of Directors of the Company adopted the China Public Security Technology,
Inc. 2007 Equity Incentive Plan. The Plan provides for grants of stock options, stock appreciation
rights, performance units, restricted stock, restricted stock units and performance shares. A total
of 8,000,000 shares of the Company&#146;s common stock may be issued pursuant to Awards granted under
the Plan.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On November 27, 2007, the Company issued 70,000 shares of common stock to the Company&#146;s senior
management and an external consultant firm as bonus awards. Stock-based compensation of $609,000
is included in administrative expenses for the year ended December 31, 2007.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following table summarizes the changes of the company&#146;s restricted stock awards during the
year ended December 31, 2007:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
    <td COLSPAN=2 align="right" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shares</FONT></td>
    <td align="right">&nbsp;</td>
    <td COLSPAN=2 align="right" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Grant Date Fair <br>
    Value</FONT></td>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Granted &amp; vested</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>70,000</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.70</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On November 30, 2007, the Company&#146;s Board of Directors authorized the grant of options to certain
employees to purchase 490,000 shares of the Company&#146;s common stock, par value $0.01, subject
to ratification of the Plan by our stockholders. The options had an exercise price of $9.48 per share,
were to vest on December 5, 2008 and to expire on December 5, 2011. On March 3, 2008, the Company&#146;s
Board of Directors voided and canceled the grant of the stock options to the Employees, and on March
20, 2008 approved the grant of 400,000 shares stock awards to the Employees, at price of $4.30 per
share. These newly granted shares will be vested quarterly at 1/4 over one year after the grant.
Since the cancellation and grant of the replacement award occurred concurrently, they will be treated
as a modification of the terms of the cancelled award in accordance with SFAS 123R. During the year
ended December 31, 2007, the Company recognized $68,891 of compensation expense related to stock
options granted. At December 31, 2007, there is approximately $1,600,000 of unrecognized expense
related to the Company&#146;s stock-based compensation plans.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company uses Black-Scholes option pricing model to measure the fair value of stock options, granted
in 2007. The determination of the fair value of stock-based compensation awards on the date of grant
using an option-pricing model is affected by the Company&#146;s stock price as well as assumptions
regarding a number of complex and subjective variables, including the expected volatility of the
Company&#146;s stock price over the term of the awards, actual and projected employee stock option
exercise behaviors, risk-free interest rate and expected dividends.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The assumptions used to value stock-based compensation awards for the periods presented are as follows:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
    <td COLSPAN=2 align="right" nowrap><font size="2" face="Times New Roman"><strong>December 31,<br>
    2007</strong></font></td>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected term (in years)</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.0-2.0</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Volatility</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>102</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risk-free interest rate</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.0<FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected dividend</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-38 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>12. STOCKHOLDERS&#146; EQUITY (CONTINUED)</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(b)&nbsp;&nbsp;&nbsp; Equity Incentive Plans (Continued)</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Expected term represents the weighted average period of time that stock-based awards are expected to
be outstanding, giving consideration to employees&#146; expected exercise and post-vesting employment
termination behavior. Expected volatilities are based on historical volatilities of the Company&#146;s
ordinary shares. Risk-free interest rate is based on US T-bill with maturity terms similar to the
expected term on the stock-based awards. The Company does not anticipate paying any cash dividends
in the foreseeable future. Forfeitures are estimated at the time of grant and revised in subsequent
periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate
pre-vesting option forfeitures and record stock-based compensation expense only for those awards
that are expected to vest.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>A summary of option activities under the plan as of December 31, 2007 is presented as follows:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <td align="left"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock Options</FONT></td>
    <td COLSPAN=2 align="right" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shares</FONT></td>
    <td align="right" nowrap>&nbsp;</td>
    <td COLSPAN=2 align="right" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exercise <br>
    Price</FONT></td>
    <td align="right" nowrap>&nbsp;</td>
    <td COLSPAN=2 align="right" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Remaining<br>
      Contractual Term<br>
    (in years)</FONT></td>
    <td align="right" nowrap>&nbsp;</td>
    <td COLSPAN=2 align="right" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Aggregate<br>
      Intrinsic Value<br>
    at&nbsp;Reporting Date</FONT></td>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Outstanding at January 1, 2007</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Granted</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>490,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.48</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.0-4.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Outstanding at December 31, 2007</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>490,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.48</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.0-4.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>N/A</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exercisable at December 31, 2007</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>N/A</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The trading price of the Company&#146;s shares at December 31, 2007 was $8.50 per share. Therefore,
no intrinsic value reported.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>A summary of the status of the Company&#146;s non-vested stock options during the year ended December
31, 2007 is presented below:</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <td>&nbsp;</td>
    <td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-vested Options</FONT></td>
    <td COLSPAN=2 align="right" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shares</FONT></td>
    <td align="right">&nbsp;</td>
    <td COLSPAN=2 align="right" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Weighted-Average<br>
      Grant Date Fair Value</FONT></td>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD width="1%" ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-vested at January 1, 2007</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Granted</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>490,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.41</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" color="#000000"></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#E9F1F8">
    <TD ALIGN=LEFT bgcolor="#E9F1F8">&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-vested at December 31, 2007</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>490,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3.41</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>13. COMMITMENTS AND CONTINGENCIES</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>ISDT leases offices in Shenzhen, PRC, under a lease agreement that will expire on May 27, 2008. Rent
expense for the year ended December 31, 2007 was approximately $46,302. As of December 31, 2007,
future minimum lease payments under this office lease are approximately $39,800.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>14. SUBSEQUENT EVENTS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;Acquisition of Bocom Multimedia Display Company Limited</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On December 9, 2007, the Company entered into a Share Purchase Agreement (the &#147;Purchase Agreement
of Bocom&#148;), with Bocom Venture Inc. (&#147;Bocom Venture&#148;), a British Virgin Islands company,
for the acquisition of Bocom Multimedia Display Company Limited, a Hong Kong company, and its wholly-owned
Chinese subsidiary, Shenzhen Bocom Multimedia Display Technology Co. Ltd. (collectively, &#147;Bocom
Multimedia&#148;), for a purchase price of approximately $18,000,000.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company paid approximately $9,000,000 of the purchase price in cash which is included in deposit
for business acquisition as of December 31, 2007. The remaining $9,000,000 of the purchase price
was payable on or before May 1, 2008 in 1,125,000 shares of the Company&#146;s common stock. On February
1, 2008, the Company completed the acquisition of 100% of the issued and outstanding capital stock of Bocom Multimedia.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-39 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;Acquisition of Wuhan Wuda Geoinformatics Co., Ltd.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On February 15, 2008, the Company approved iASPEC&#146;s entry into a share purchase and increased
capital agreement (the &#147;Purchase Agreement of Wuhan&#148;), dated as of February 16, 2008, for
the purchase of approximately 57% of Wuhan Wuda Geoinformatics Co., Ltd. (&#147;Wuhan Geo&#148;)
for approximately $6,875,000, This transaction is expected to close on or about April 1, 2008 (the
&#147;Closing&#148;). As of March 21, 2008, approximately $6,875,000&shy;&shy; had been deposited
in connection with the purchase.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>F-40 </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>CHINA INFORMATION SECURITY TECHNOLOGY, INC.</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>1,470,000 shares of common stock</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>PROSPECTUS</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>________,&nbsp; 2008</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>II-1</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>PART&nbsp;II<BR>INFORMATION NOT REQUIRED IN THE PROSPECTUS</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Item 24. &nbsp;Indemnification of Directors and Officers</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Our bylaws provide for the indemnification of our directors and officers, past, present and future,
under certain circumstance, against attorney&#146;s fees, judgments, fines and other expenses incurred
by them in any litigation to which they become a party arising from their association with or activities
on behalf of us. We will also bear expenses of such litigation for any of our directors, officers,
employees or agents upon such persons promise to repay us therefor if it is ultimately determined
that any such person shall not have been entitled to indemnification. This indemnification policy
could result in substantial expenditure by us, which we may be unable to recoup. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Insofar as indemnification by us for liabilities arising under the Securities Exchange Act of 1934

may be permitted to our directors, officers and&nbsp;controlling persons pursuant to provisions
of
the Articles of Incorporation and Bylaws, or otherwise, we have been advised that in the opinion

of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In
the
event that a claim for indemnification by such director, officer or controlling person of us
in the
successful defense of any action, suit or proceeding is asserted by such director, officer
or controlling
person in connection with the securities being offered, we will, unless in the opinion
of our counsel
the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction
the question whether such indemnification by us is against public policy as expressed
in the Act
and will be governed by the final adjudication of such issue.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>At the present time, there is no pending litigation or proceeding involving a director, officer, employee
or other agent of ours in which indemnification would be required or permitted. We are not aware
of any threatened litigation or proceeding which may result in a claim for such indemnification. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Item 25. &nbsp;Other Expenses of Issuance and Distribution</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following table sets forth the costs and expenses, other than underwriting discounts and commissions,
payable by us in connection with the sale of common stock being registered. All amounts, other than
the SEC registration fee, are estimates. We will pay all these expenses.</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
    <td COLSPAN=2 align="center" nowrap><strong><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amount&nbsp;to&nbsp;be<br>
    Paid </FONT></strong></td>
    <TH>&nbsp;</TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" color="#000000"></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=20% ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SEC Registration Fee</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=10% ALIGN=RIGHT bgcolor="#E9F1F8">
    <font face="Times New Roman, Times, Serif" size="2">439</font></TD>
    <TD WIDTH=1% ALIGN=LEFT bgcolor="#E9F1F8">&nbsp;</TD>
    <TD WIDTH=20% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Printing Fees and Expenses</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,000</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Legal Fees and Expenses</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>100,000</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounting Fees and Expenses</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,500</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Blue Sky Fees and Expenses</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,000</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Transfer Agent and Registrar Fees</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,000</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Miscellaneous</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT bgcolor="#E9F1F8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,000</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#E9F1F8">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" color="#000000"></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 118,939</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" color="#000000"></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;<B>Item 26. Recent Sales of Unregistered Securities</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Between October 6, 2006 and January 31, 2007, our shareholders approved a series of transactions whereby
we purchased all the issued and outstanding stock of CPSH from our current Chairman and Executive
Officer Jiang Huai Lin, for 25,500,000 shares of our common stock in the aggregate. As a result of
these transactions CPSH and its wholly-owned subsidiary, Bo Hai Wen, became our wholly-owned subsidiaries,
and Mr. Lin became the beneficial owner of 25,500,000 shares of our common stock in the aggregate,
which, at January 31, 2007, constituted 80.8 % of our issued and outstanding common stock. Mr. Lin
has since transferred 1,182,065 of these shares and now holds&nbsp;21,717,935 of these shares directly
and 2,600,000 of these shares indirectly through Total Device Management Limited, an entity controlled
by Mr. Lin. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On January 31, 2007 and February 6, 2007, we issued 7,868,422 shares of our common stock to two accredited
investors in a private placement transaction. The issuance of our shares to these individuals was
made in reliance on the exemption provided by Section 4(2) of the Securities Act&nbsp;for the offer
and sale of securities not involving a public offering&nbsp;and Regulation D promulgated thereunder. These stockholders who received the securities
in such instances made representations that (a) the stockholder is acquiring the securities for his,
her or its own account for investment and not for the account of any other person and not with a
view to or for distribution, assignment or resale in connection with any distribution within the
meaning of the Securities Act, (b) the stockholder agrees not to sell or otherwise transfer the purchased
shares unless they are registered under the Securities Act and any applicable state securities laws,
or an exemption or exemptions from such registration are available, (c) the stockholder has knowledge
and experience in financial and business matters such that he, she or it is capable of evaluating
the merits and risks of an investment in us, (d) the stockholder had access to all of our documents,
records, and books pertaining to the investment and was provided the opportunity ask questions and
receive answers regarding the terms and conditions of the offering and to obtain any additional information
which we possessed or were able to acquire without unreasonable effort and expense, and (e) the stockholder
has no need for the liquidity in its investment in us and could afford the complete loss of such
investment. Our Management made the determination that the investors are accredited investors as
defined in Regulation D, based upon Management&#146;s inquiry into their sophistication and net worth.
In addition, there was no general solicitation or advertising for securities issued in reliance upon Regulation D.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>II-2</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On October 29, 2007, we issued 5,000,000 shares of our common stock to certain accredited investors
in a private placement transaction. The issuance of our shares to these individuals was made in reliance
on the exemption provided by Section 4(2) of the Securities Act&nbsp;for the offer and sale of securities
not involving a public offering&nbsp;and Regulation D promulgated thereunder. The stockholders who
received the securities agreed that (a) they had access to all of the Company&#146;s information
pertaining to the investment and were provided with the opportunity to ask questions and receive
answers regarding the offering, (b) they were acquiring the securities for their own account for
investment and not for the account of any other person and not with a view to or for any distribution
within the meaning of the Securities Act and (c) they would not sell or otherwise transfer the purchased
shares unless in compliance with state and federal securities laws. Each of the stockholders represented
that they are accredited investors as defined in Rule 501(a) under the Securities Act and that there
was no general solicitation or advertising in connection with the offer and sale of the Shares.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Item 27. Exhibits and Financial Statement Schedules</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following exhibits are included as part of this Form S-1. </FONT></P>
<TABLE width=100% border="0" cellPadding="0" cellSpacing="0">
  <TR>
    <TD width="12%" vAlign=top><font size="2" face="Times New Roman, Times, serif"><B><U>Exhibit No.</U></B></font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"><B><U>Description</U></B></font></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">3.1</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Amended and Restated Articles of Incorporation of the Registrant, as filed with the Secretary of State of Florida on January 25, 2006 (incorporated by reference to Exhibit 3.1 of the current report on Form 8-K filed by the Company on January 26, 2006).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">3.2</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the registration statement on Form SB-2 filed by the Company on March 1, 2006).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">4.1</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Form of Registration Rights Agreement, dated October 25, 2007 (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on October 25, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">4.2</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Common Stock Purchase Warrant issued to Roth Capital Partners, LLC, dated October 29, 2007 (incorporated by reference to Exhibit 4.2 to the current report on Form 8-K filed by the Company on October 30, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">4.3</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Common Stock Purchase Warrant issued to Brean Murray, Carret &amp; Co., LLC, dated October 29, 2007 (incorporated by reference to Exhibit 4.3 to the current report on Form 8-K filed by the Company on October 30, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">4.4</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Registration Rights Agreement, dated January 31, 2007, among the Company and the investors signatory thereto (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on February 1, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">4.5</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Amendment No. 1 to Registration Rights Agreement, dated March 9, 2007, among the Registrant and the investors signatory thereto (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on March 20, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">4.6</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">China Information Security Technology, Inc. 2007 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by the Company on June 13, 2007).</font></div></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>II-3</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<TABLE cellSpacing="0" cellPadding="0" border="0">
  <TR>
    <TD width=12% vAlign=top><font size="2" face="Times New Roman, Times, serif">4.7</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Registration Rights Agreement, dated March 26, 2008, among the Company and the investors signatory thereto (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on March 28, 2008).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">
    <a href="exh_5.htm" style="text-decoration: none">5*</a></font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">
      <a href="exh_5.htm" style="text-decoration: none">Opinion of Thelen Reid Brown Raysman &amp; Steiner, LLP, as to the legality of the shares.</a></font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.1</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Form of Securities Purchase Agreement, dated October 25, 2007 (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on October 25, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.2</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Form of Closing Escrow Agreement, dated as of October 25, 2007 (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on October 25, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.3</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Securities Purchase Agreement, dated January 16, 2007, among the Registrant and the investors signatory thereto (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on January 17, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.4</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Amendment No. 1 to the Securities Purchase Agreement, dated January 31, 2007, among the Registrant and the investors signatory thereto (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on February 1, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.5</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Make Good Escrow Agreement, dated January 31, 2007, among the Registrant, Mr. Jiang Huai Lin, the investors signatory thereto, Roth Capital Partners, LLC and Securities Transfer Corporation, as escrow agent (incorporated by reference to Exhibit 10.3 of the current report on Form 8-K filed by the Company on February 1, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.6</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Lockup Agreement, dated January 31, 2007, among the Registrant and the stockholders signatory thereto (incorporated by reference to Exhibit 10.4 of the current report on Form 8-K filed by the Company on February 1, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.7</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Rescission; Termination and Share Exchange Agreement, dated January 31, 2007, among Shenzhen iASPEC Software Engineering Company Limited, the shareholders of iASPEC who are signatories thereto, including Jiang Huai Lin, Public Security Technology (PRC) Co., Ltd., China Public Security Holdings Limited and the Registrant (incorporated by reference to Exhibit 10.5 of the current report on Form 8-K filed by the Company on February 1, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.8</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Amended and Restated Business Turnkey Agreement, dated as of January 31, 2007, by and between Public Security Technology (PRC) Co., Ltd. and Shenzhen iASPEC Software Engineering Company Limited and the shareholders of iASPEC party thereto (incorporated by reference to Exhibit 10.6 of the current report on Form 8-K filed by the Company on February 1, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.9</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Management Service Agreement, dated as of August 1, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on August 6, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.10</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Guaranty, dated August 1, 2007, by Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on August 6, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.11</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Purchase Option Agreement, dated August 1, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.3 of the current report on Form 8-K filed by the Company on August 6, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.12</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Notice of Termination, dated August 1, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.4 of the current report on Form 8-K filed by the Company on August 6, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.13</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Letter Agreement, dated as of September 12, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai.</font></div></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>II-4</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<TABLE cellSpacing="0" cellPadding="0" border="0">
  <TR>
    <TD width=12% vAlign=top><font size="2" face="Times New Roman, Times, serif">10.14</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">English Translation of Form of China Information Security Technology, Inc. Employment Agreement (incorporated by reference to Exhibit 10.7 of the annual report on Form 10-KSB filed by the Company on April 16, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.15</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">English Translation of Form of China Information Security Technology, Inc. Non-Disclosure Agreement (incorporated by reference to Exhibit 10.8 of the annual report on Form 10-KSB filed by the Company on April 16, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.16</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Letter Agreement, dated March 29, 2007, among the Registrant and the investors and stockholder signatory thereto (incorporated by reference to Exhibit 10.9 of the annual report on Form 10-KSB filed by the Company on April 16, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.17</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Form of China Information Security Technology, Inc. Independent Director Agreement (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on August 16, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.18</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Form of China Information Security Technology, Inc. Indemnification Agreement (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on August 16, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.19</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Share Purchase Agreement, dated as of November 7, 2007, by and among China Public Security Holdings Limited, Cheer Crown International Investment Limited, the Registrant, and Dongwei Gao (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on November 9, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.20</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Share Purchase Agreement, dated as of December 9, 2007, by and among China Public Security Holdings Limited, Bocom Venture Inc., and the Company. (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on December 13, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.21</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Share Purchase and Increase Capital Agreement, dated as of February 16, 2008, by and among iASPEC Software Engineering Co., Ltd., Wuhan Wuda Venture Capital Co., Ltd., Wuhan Wuda Geoinformatics Co., Ltd. and Song Ai Hong (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on February 19, 2008).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.22</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Share Purchase and Increase Capital Agreement, dated as of February 16, 2008, by and among iASPEC Software Engineering Co., Ltd. and Li Wei (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on February 19, 2008).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.23</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Purchase Agreement, dated as of March 26, 2008, by and among Jiang Huai Lin, the Company and the investors signatory thereto (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on March 28, 2008).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><FONT size="2" face="Times New Roman, Times, serif" style="TEXT-DECORATION: none">14</FONT></TD>
    <TD vAlign=top><div align="justify"><FONT size="2" face="Times New Roman, Times, serif" style="TEXT-DECORATION: none">Amended and Restated Code of Ethics, adopted on December 25, 2007</FONT><font size="2" face="Times New Roman, Times, serif"> (incorporation by reference to Exhibit 14 of the annual report on Form 10-K filed by the Company on March 31, 2008).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><FONT size="2" face="Times New Roman, Times, serif" style="TEXT-DECORATION: none">
    <a href="exh_21.htm" style="text-decoration: none">21</a></FONT><font size="2" face="Times New Roman, Times, serif"><a href="exh_21.htm" style="text-decoration: none">*</a></font></TD>
    <TD vAlign=top><div align="justify"><FONT size="2" face="Times New Roman, Times, serif" style="TEXT-DECORATION: none">
      <a href="exh_21.htm" style="text-decoration: none">List of Subsidiaries</a></FONT></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">
    <a href="exh_23.htm" style="text-decoration: none">23.1*</a></font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">
      <a href="exh_23.htm" style="text-decoration: none">Consent of GHP Horwath, P.C.</a></font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">23.2*</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Consent of Thelen Reid Brown Raysman &amp; Steiner LLP (included in Exhibit 5</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">24*</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Power of Attorney (included on the signature page of this registration statement)</font></div></TD>
  </TR>
</TABLE>
<P align="justify">_________________<br>
<FONT face="Times New Roman, Times, Serif" size=2>* Filed herewith</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>Item 28. Undertakings</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The undersigned registrant hereby undertakes to:</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>File, during any period in which offers or sales are being made, a post-effective amendment to this
registration statement to:</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Include
any prospectus required by Section 10(a)(3) of the Securities Act, and</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>II-5</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reflect
in the prospectus any facts or events which, individually or together, represent a fundamental change
in the information in the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of the securities offered would
not exceed that which was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth in the &#147;Calculation
of Registration Fee&#148; table in the effective registration statement, and</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Include
any additional or changed material information on the plan of distribution.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>For determining liability under the Securities Act, treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the securities at that time to be the initial
bona fide offering.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>File a post-effective amendment to remove from registration any of the securities that remain unsold
at the end of the offering.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>For purposes of determining any liability under the Securities Act to any purchaser in the initial
distribution of the securities, treat the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part
of this registration statement as of the time it was declared effective.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>In the event that a claim for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Securities Act and will be governed by the final adjudication of such issue.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>For determining any liability under the Securities Act, treat the information omitted from the form
of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant under Rule 424(b)(1), or (4) or 497(h) under the
Securities Act (Sections 230.424(b)(1), (4) or 230.497(h)) as part of this registration statement
as of the time the Commission declared it effective.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>For determining any liability under the Securities Act, treat each post-effective amendment that contains
a form of prospectus as a new registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial bona fide offering of
those securities.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>II-6</FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>SIGNATURES</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has
duly caused this registration statement on Form&nbsp;S-1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Shenzhen, People&#146;s Republic of China, on the 13th
day of March, 2008.</FONT></P>
<TABLE width="100%" border="0" cellPadding="0" cellSpacing="0">
  <TR>
    <TD width=50% vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colSpan=2 vAlign=top nowrap><font size="2" face="Times New Roman, Times, serif"><B>CHINA INFORMATION SECURITY TECHNOLOGY, INC.</B></font></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top nowrap>&nbsp;</TD>
    <TD vAlign=top nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD width=3% nowrap><font size="2" face="Times New Roman, Times, serif">By:</font></TD>
    <TD nowrap><font size="2" face="Times New Roman, Times, serif">/s/ Jiang Huai Lin</font></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top nowrap></TD>
    <TD vAlign=top nowrap><hr size="1" color="#000000"></TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top nowrap><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top nowrap><font size="2" face="Times New Roman, Times, serif">Jiang Huai Lin </font></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top nowrap>&nbsp;</TD>
    <TD vAlign=top nowrap><font size="2" face="Times New Roman, Times, serif">President and Chief Executive Officer</font></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>POWER OF ATTORNEY</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Jiang Huai Lin, his attorney-in-fact, for him in any and all capacities, to sign any and
all amendments to this registration statement (including post-effective amendments and abbreviated
registration statements), and any and all registration statements filed pursuant to Rule&nbsp;462
or Rule&nbsp;429 under the Securities Act of 1933, as amended, in connection with the registration
under the Securities Act of 1933, as amended, of common stock of China Information Security Technology,
Inc., and to file or cause to be filed the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitutes, may do or cause to be done by virtue hereof.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement
on Form&nbsp;S-1 has been signed by the following persons in the capacities indicated on May 13,
2008.</FONT></P>
<TABLE width="100%" border="0" cellPadding="0" cellSpacing="0">
  <TR>
    <TD width=25% vAlign=bottom><div align="center"><font size="2" face="Times New Roman, Times, serif">Signature</font></div></TD>
    <TD width=5% vAlign=bottom><div align="center"><font face="Times New Roman, Times, serif"><font size="2"></font></font></div></TD>
    <TD vAlign=bottom><div align="center"><font size="2" face="Times New Roman, Times, serif"><B>Title</B></font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top><hr size="1" color="#000000"></TD>
    <TD><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD><hr size="1" color="#000000"></TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"><U>/s/ Jiang Huai Lin</U> <br>
      Jiang Huai Lin</font></TD>
    <TD><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD valign="top"><font size="2" face="Times New Roman, Times, serif">Chief Executive Officer and Chairman (Principal Executive Officer)</font></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD></TD>
    <TD valign="top">&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"><U>/s/ Zhaoyang Chen</U> <br>
      Zhaoyang Chen</font></TD>
    <TD><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD valign="top"><font size="2" face="Times New Roman, Times, serif">Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer)</font></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD></TD>
    <TD valign="top">&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"><U>/s/ Zhi Xiong Huang</U> <br>
      Zhi Xiong Huang</font></TD>
    <TD><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD valign="top"><font size="2" face="Times New Roman, Times, serif">Director</font></TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"><U>/s/ Qiang Lin</U> <br>
      Qiang Lin</font></TD>
    <TD><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD valign="top"><font size="2" face="Times New Roman, Times, serif">Director</font></TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"><U>/s/ Yun Sen Huang</U> <br>
      Yun Sen Huang</font></TD>
    <TD><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD valign="top"><font size="2" face="Times New Roman, Times, serif">Director</font></TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"><U>/s/ Sean Shao </U> <br>
      Sean Shao</font></TD>
    <TD><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD valign="top"><font size="2" face="Times New Roman, Times, serif">Director</font></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD></TD>
    <TD></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, serif" size=2> </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>EXHIBIT INDEX</B></FONT></P>
<TABLE cellSpacing="0" cellPadding="0" border="0">
  <TR>
    <TD width=12% vAlign=top><font size="2" face="Times New Roman, Times, serif"><B><U>Exhibit No.</U></B></font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"><B><U>Description</U></B></font></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">3.1</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Amended and Restated Articles of Incorporation of the Registrant, as filed with the Secretary of State of Florida on January 25, 2006 (incorporated by reference to Exhibit 3.1 of the current report on Form 8-K filed by the Company on January 26, 2006).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">3.2</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the registration statement on Form SB-2 filed by the Company on March 1, 2006).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">4.1</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Form of Registration Rights Agreement, dated October 25, 2007 (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on October 25, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">4.2</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Common Stock Purchase Warrant issued to Roth Capital Partners, LLC, dated October 29, 2007 (incorporated by reference to Exhibit 4.2 to the current report on Form 8-K filed by the Company on October 30, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">4.3</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Common Stock Purchase Warrant issued to Brean Murray, Carret &amp; Co., LLC, dated October 29, 2007 (incorporated by reference to Exhibit 4.3 to the current report on Form 8-K filed by the Company on October 30, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">4.4</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Registration Rights Agreement, dated January 31, 2007, among the Company and the investors signatory thereto (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on February 1, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">4.5</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Amendment No. 1 to Registration Rights Agreement, dated March 9, 2007, among the Registrant and the investors signatory thereto (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on March 20, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">4.6</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">China Information Security Technology, Inc. 2007 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by the Company on June 13, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">4.7</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Registration Rights Agreement, dated March 26, 2008, among the Company and the investors signatory thereto (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on March 28, 2008).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">
    <a href="exh_5.htm" style="text-decoration: none">5*</a></font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">
      <a href="exh_5.htm" style="text-decoration: none">Opinion of Thelen Reid Brown Raysman &amp; Steiner, LLP, as to the legality of the shares.</a></font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.1</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Form of Securities Purchase Agreement, dated October 25, 2007 (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on October 25, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.2</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Form of Closing Escrow Agreement, dated as of October 25, 2007 (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on October 25, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.3</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Securities Purchase Agreement, dated January 16, 2007, among the Registrant and the investors signatory thereto (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on January 17, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.4</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Amendment No. 1 to the Securities Purchase Agreement, dated January 31, 2007, among the Registrant and the investors signatory thereto (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on February 1, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.5</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Make Good Escrow Agreement, dated January 31, 2007, among the Registrant, Mr. Jiang Huai Lin, the investors signatory thereto, Roth Capital Partners, LLC and Securities Transfer Corporation, as escrow agent (incorporated by reference to Exhibit 10.3 of the current report on Form 8-K filed by the Company on February 1, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.6</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Lockup Agreement, dated January 31, 2007, among the Registrant and the stockholders signatory thereto (incorporated by reference to Exhibit 10.4 of the current report on Form 8-K filed by the Company on February 1, 2007).</font></div></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, serif" size=2> </FONT></P>
<hr color="#000000" size="5"><p style="page-break-before: always">
<PAGE>
<TABLE width=100% border="0" cellPadding="0" cellSpacing="0">
  <TR>
    <TD width=12% vAlign=top><font size="2" face="Times New Roman, Times, serif">10.7</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Rescission; Termination and Share Exchange Agreement, dated January 31, 2007, among Shenzhen iASPEC Software Engineering Company Limited, the shareholders of iASPEC who are signatories thereto, including Jiang Huai Lin, Public Security Technology (PRC) Co., Ltd., China Public Security Holdings Limited and the Registrant (incorporated by reference to Exhibit 10.5 of the current report on Form 8-K filed by the Company on February 1, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.8</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Amended and Restated Business Turnkey Agreement, dated as of January 31, 2007, by and between Public Security Technology (PRC) Co., Ltd. and Shenzhen iASPEC Software Engineering Company Limited and the shareholders of iASPEC party thereto (incorporated by reference to Exhibit 10.6 of the current report on Form 8-K filed by the Company on February 1, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.9</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Management Service Agreement, dated as of August 1, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on August 6, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.10</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Guaranty, dated August 1, 2007, by Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on August 6, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.11</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Purchase Option Agreement, dated August 1, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.3 of the current report on Form 8-K filed by the Company on August 6, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.12</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Notice of Termination, dated August 1, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.4 of the current report on Form 8-K filed by the Company on August 6, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.13</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Letter Agreement, dated as of September 12, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai.</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.14</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">English Translation of Form of China Information Security Technology, Inc. Employment Agreement (incorporated by reference to Exhibit 10.7 of the annual report on Form 10-KSB filed by the Company on April 16, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.15</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">English Translation of Form of China Information Security Technology, Inc. Non-Disclosure Agreement (incorporated by reference to Exhibit 10.8 of the annual report on Form 10-KSB filed by the Company on April 16, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.16</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Letter Agreement, dated March 29, 2007, among the Registrant and the investors and stockholder signatory thereto (incorporated by reference to Exhibit 10.9 of the annual report on Form 10-KSB filed by the Company on April 16, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.17</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Form of China Information Security Technology, Inc. Independent Director Agreement (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on August 16, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.18</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Form of China Information Security Technology, Inc. Indemnification Agreement (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on August 16, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.19</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Share Purchase Agreement, dated as of November 7, 2007, by and among China Public Security Holdings Limited, Cheer Crown International Investment Limited, the Registrant, and Dongwei Gao (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on November 9, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.20</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Share Purchase Agreement, dated as of December 9, 2007, by and among China Public Security Holdings Limited, Bocom Venture Inc., and the Company. (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on December 13, 2007).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.21</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Share Purchase and Increase Capital Agreement, dated as of February 16, 2008, by and among iASPEC Software Engineering Co., Ltd., Wuhan Wuda Venture Capital Co., Ltd., Wuhan Wuda Geoinformatics Co., Ltd. and Song Ai Hong (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on February 19, 2008).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">10.22</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Share Purchase and Increase Capital Agreement, dated as of February 16, 2008, by and among iASPEC Software Engineering Co., Ltd. and Li Wei (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on February 19, 2008).</font></div></TD>
  </TR>
</TABLE>
<P align=center><FONT face="Times New Roman, Times, serif" size=2> </FONT></P>
<HR noShade color="#000000" SIZE=5>

<P style="PAGE-BREAK-BEFORE: always"><PAGE>
<TABLE width=100% border="0" cellPadding="0" cellSpacing="0">
  <TR>
    <TD width=12% vAlign=top><font size="2" face="Times New Roman, Times, serif">10.23</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Purchase Agreement, dated as of March 26, 2008, by and among Jiang Huai Lin, the Company and the investors signatory thereto (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on March 28, 2008).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><FONT size="2" face="Times New Roman, Times, serif" style="TEXT-DECORATION: none">14</FONT></TD>
    <TD vAlign=top><div align="justify"><FONT size="2" face="Times New Roman, Times, serif" style="TEXT-DECORATION: none">Amended and Restated Code of Ethics, adopted on December 25, 2007</FONT><font size="2" face="Times New Roman, Times, serif"> (incorporation by reference to Exhibit 14 of the annual report on Form 10-K filed by the Company on March 31, 2008).</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><FONT size="2" face="Times New Roman, Times, serif" style="TEXT-DECORATION: none">
    <a href="exh_21.htm" style="text-decoration: none">21</a></FONT><font size="2" face="Times New Roman, Times, serif"><a href="exh_21.htm" style="text-decoration: none">*</a></font></TD>
    <TD vAlign=top><div align="justify"><FONT size="2" face="Times New Roman, Times, serif" style="TEXT-DECORATION: none">
      <a href="exh_21.htm" style="text-decoration: none">List of Subsidiaries</a></FONT></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">
    <a href="exh_23.htm" style="text-decoration: none">23.1*</a></font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">
      <a href="exh_23.htm" style="text-decoration: none">Consent of GHP Horwath, P.C.</a></font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">23.2*</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Consent of Thelen Reid Brown Raysman &amp; Steiner LLP (included in Exhibit 5)</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">24*</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Power of Attorney (included on the signature page of this registration statement)</font></div></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="100%" border="0">

<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=27>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>* Filed herewith</FONT></TD></TR></TABLE>
<P align=center><FONT face="Times New Roman, Times, serif" size=2> </FONT></P>
<HR noShade color="#000000" SIZE=5>



</body>
</html>
[{"type": "S-1", "sequence": "1", "filename": "cist_s1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1559106}]
{"company-data": {"conformed-name": "China Information Security Technology, Inc.", "cik": "0001350684", "assigned-sic": "7372", "irs-number": "591944687", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-150896", "film-number": "08829282"}, "business-address": {"street1": "21ST FLOOR, EVERBRIGHT BANK BUILDING", "street2": "ZHUZILIN, FUTIAN DISTRICT", "city": "SHENZHEN, GUANGDONG", "state": "F4", "zip": "518040", "phone": "(86) 755 8370 8333"}, "mail-address": {"street1": "21ST FLOOR, EVERBRIGHT BANK BUILDING", "street2": "ZHUZILIN, FUTIAN DISTRICT", "city": "SHENZHEN, GUANGDONG", "state": "F4", "zip": "518040"}, "former-company": [{"former-conformed-name": "China Public Security Technology, Inc.", "date-changed": "20070209"}, {"former-conformed-name": "Irish Mag, Inc.", "date-changed": "20060123"}]}
China Information Security Technology, Inc.: Form S-1 - Prepared By TNT
Filings Inc.
As filed with the Securities and Exchange Commission on May 13, 2008
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
(Name of small business issuer in its charter)
Nevada
7373
98-0575209
(State or other jurisdiction of incorporation
or organization)
(Primary Standard Industrial Classification
Code Number)
(I.R.S. Employer
Identification No.)
21
st
Floor, Everbright Bank Building,
Zhuzilin, Futian District, Shenzhen, Guangdong, 518040
People's Republic of China
(+86) 755 -8370-8333
(Address and telephone number of principal executive offices)
Louis A. Bevilacqua, Esq.
Thomas M. Shoesmith, Esq.
Joseph R. Tiano, Jr., Esq.
Thelen Reid Brown Raysman & Steiner LLP
701 8th Street, N.W.
Washington, D.C. 20001
(202) 508-4000
(Names, addresses and telephone numbers of agents for service)
Approximate date of commencement of proposed sale to public
: From time to time after the effective date of this registration statement, as determined by market
conditions and other factors.
If any of the securities being registered on this form are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.
x
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under
the Securities Act, check the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.
o
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
o
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement the same offering.
o
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following
box.
o
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be
registered
Amount to be
registered
(1)(3)
Proposed maximum offering
price per share
Proposed maximum
aggregate offering price)
Amount of
registration fee
Common stock, $0.01 par value
1,070,000
$6.85
(2)
$7,329,500
(2)
$288
Common stock, $0.01 par value
400,
000
(4)
$9.60
(5)
$3,840
,000
(5)
$151
Total
1,470,000
–
$11
,169,500
(5)
$439
(1)
In accordance with Rule 416(a), the Registrant is also registering hereunder an indeterminate
  number of shares that may be issued and resold resulting from stock splits, stock dividends or similar
  transactions.
(2)
Estimated pursuant to Rule 457(c) of the Securities Act of 1933 solely for the purpose of computing
  the amount of the registration fee based on the average of the bid and asked prices reported on the
  OTC Bulletin Board maintained by the National Association of Securities Dealers, Inc. on May 9, 2008.
(3)
Represents shares of the Registrant's common stock being registered for resale that have been
  issued to the selling stockholders named in this registration statement.
(4)
Represents shares of common stock issuable upon exercise of five-year warrants to purchase shares of
  common stock held by the selling stockholders named in this registration statement.
(5)
Calculated in accordance with Rule 457(g) based upon the price at which the warrants may be exercised.
The registrant hereby amends this registration statement on such date or dates as may be necessary
to delay its effective date until the registrant shall file a further amendment which specifically
states that this registration statement shall hereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the registration statement shall become effective on such
date as the Commission, acting pursuant to such Section 8(a), may determine.
PROSPECTUS
Subject to completion, dated May [__], 2008
1,470,000 Shares of Common Stock
This prospectus relates to 1,470,000 shares of common stock of China Information Security Technology,
Inc., that may be sold from time to time by the selling stockholders named in this prospectus, which
includes:
•     1,070,000 shares of common stock; and
•     400,000 shares of common stock issuable upon exercise
of five-year warrants.
We will not receive any proceeds from the sales by the selling stockholders, but we will receive funds

from the exercise of warrants held by the selling stockholders, if exercised for cash.
Our common stock is quoted on the OTC Bulletin Board maintained by the National Association of Securities
Dealers, Inc. under the symbol "CIFS.OB" The closing bid price for our common stock
on May 9, 2008 was $6.85 per share, as reported on the OTC Bulletin Board.
Any participating broker-dealers and any selling stockholders who are affiliates of broker-dealers
are "underwriters" within the meaning of the Securities Act of 1933, as amended, or the
Securities Act, and any commissions or discounts given to any such broker-dealer or affiliate of
a broker-dealer may be regarded as underwriting commissions or discounts under the Securities Act.
The selling stockholders have informed us that they do not have any agreement or understanding, directly
or indirectly, with any person to distribute their common stock.
Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning
on page 10 to read about factors you should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities commission has approved or
disapproved of these securities or determined if this prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
The date of this Prospectus is________, 2008.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with |the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
TABLE OF CONTENTS
PROSPECTUS SUMMARY
4
RISK FACTORS
10
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
20
USE OF PROCEEDS
21
DIVIDEND POLICY
21
MARKET FOR OUR COMMON STOCK
21
DILUTION
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
22
BUSINESS
38
MANAGEMENT
47
EXECUTIVE COMPENSATION
50
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
52
CHANGE IN ACCOUNTANTS
55
SELLING STOCKHOLDERS
55
PLAN OF DISTRIBUTION
59
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
60
DESCRIPTION OF CAPITAL STOCK
62
SHARES ELIGIBLE FOR FUTURE SALE
63
WHERE YOU CAN FIND MORE INFORMATION
64
3
PROSPECTUS SUMMARY
This summary highlights some information from this prospectus, and it may not contain all of the information
that is important to you. You should read the following summary together with the more detailed information
regarding our company and the common stock being sold in this offering, including "Risk Factors"
and our consolidated financial statements and related notes, included elsewhere in, or incorporated
by reference into, this prospectus.
The Company
Our Business
China Information Security Technology, Inc. is a holding company that owns all of the issued and outstanding
capital stock of China Public Security Holdings Limited, a British Virgin Islands holding company,
or CPSH. We operate through CPSH's wholly-owned operating Chinese subsidiary, Information
Security Technology (China) Co., Ltd. (formerly, Public Security Technology (PRC) Co., Ltd.), or
IST, and through IST's commercial arrangement with iASPEC Software Co., Ltd. (formerly, Shenzhen
iASPEC Software Engineering Co., Ltd.), or iASPEC, our variable interest entity, or VIE. We recently
acquired Fortune Fame International Investment Limited, a Hong Kong company, or Fortune Fame, and
its wholly-owned subsidiary, Information Security Development Technology (Shenzhen) Company Ltd.,
a PRC company, or ISDT, and Bocom Multimedia Display Company Limited, or Bocom Multimedia, and its
operating PRC subsidiary Shenzhen Bocom Multimedia Display Technology Co. Ltd, or Bocom Technology.
Through IST, ISDT and Bocom Technology we are a China based company providing integrated solutions
for the public security sector in China, specializing in providing public security information communication
applications and Geographic Information Systems, or GIS, software services.
Our customers are mostly public sector entities that use our products and services to improve the service
quality and management level of civil and medical emergencies, traffic control, fire control, medical
rescue and border control. Our customers include the Guangdong Public Security Department, the Shenzhen
Border Check Station, the Shenzhen Public Security Bureau, the Shenzhen Traffic Police Bureau, the
Shenzhen Fire Department and the Dongfang Public Security Bureau of Hainan Province. In the future,
we expect to expand the application of our products and services in the public security sector and
to other sectors in China as well.
We generate revenues through the sale of our integrated hardware and software products and through
the provision of related support services, including our Certification Authority, or CA, application
platform through ISDT, our new PRC subsidiary. In fiscal years ended December 31, 2007 and 2006,
68% and 55% of our revenues, respectively, were generated under our exclusive commercial
arrangement with iASPEC. Fulfillment of certain Police-Use GIS, or PGIS, contracts with PRC Government
customers is restricted to entities possessing the necessary government licenses and approvals which
IST does not have. The commercial arrangement with iASPEC anticipates that iASPEC will fulfill all
obligations for PGIS contracts, IST will receive 100% of the net received profit of iASPEC, net of
an annual fee of $180,000, and IST will reimburse iASPEC for all net losses incurred by iASPEC.
Our Industry
Over the past two decades, the PRC government has encouraged the development and use of new technologies

for information and communication (or ICTs) and their application in all spheres of government,
industry,
education and culture. The term "Informatization" or "
xinxihua
" has been coined in China to describe the overall process of ICT application in China and has
in recent years become a key component of central and many local economic development strategies.
As a part of the Informatization process, the PRC government has launched a series of online programs
to accelerate its pace of implementing and using information technology to improve China's current
government information management systems, and help promote China's economic development. The
Informatization process has led to a growth in the use of information technology, such as e-Government
platforms and GIS, for public security.
With the urbanization and fast economic growth along the coastal areas of China, the demands for information
technology by government agencies has greatly increased, especially in the areas of urban planning,
travel and land management. PRC government agencies face challenges, such as financial constraints
and public safety, and must find ways to better manage resources and serve their citizens. For example,
police departments explore methods to better protect the public by more effectively and efficiently
analyzing crime patterns within specific geographic areas. Likewise, government authorities look
to improve security by assessing threats across their geographic areas and departments and plan appropriate
emergency responses. Our software services and operations have been concentrated in and are used
by the public security sector (such as by the Police, Fire Department and Healthcare Emergency Services).
The use of security information technology in the private sector is still developing in China and presents a growth opportunity for us. In the future, we plan to target the telecommunications, logistics and insurance
sectors as areas for business development within the private sector.
4
Our Competitive Strengths
Our services are designed to provide our customers with integrated and innovative public safety and
security solutions. Key advantages of our solutions include:
•
Growing Portfolio of Software and Services
–
We offer our customers location-based public security solutions through our growing portfolio
  of software and services offerings. Government agencies use our core products to incorporate location-based
  data into their decision-making processes to drive more effective results. Through our platforms,
  our customers can develop unique location-based applications, which can be extended across their
  agencies to support a variety of needs and generate more valuable intelligence. As a complement to
  these offerings, we offer related services, such as application development and systems integration,
  which help our customers quickly implement and customize our solutions.
•
Successful Implementation of High Profile Contracts
–
Our management team has a proven track record of successful implementation of high profile government
  contracts in China. During 2007, we procured or completed several large-scale system integration
  contracts relating to our First Responder Coordination System, our Intelligent Border Control System
  and our Residence Card Management System. We have successfully implemented our Consolidated Command
  System, or Three-in-One System, which combines the functions of the police emergency system, the
  fire emergency system, and the traffic control emergency system, in Shenzhen City, Guangdong and
  in Dongbang City, Hainan. In April we were granted our third contract for its implementation in the
  Shantou Special Economic Zone in Shantou, Guandong. We won a contract for the implementation of our
  Intelligent Border Control System at the Shenzhen Bay Port and the Futian Bay Port, the former of
  which received official recognition in July 2007, when China's President Hu Jintao inspected
  the system and became the first passenger to use the crossing.
•
High Barriers to Entry
–
Our high qualifications, our successful contractual implementation record, the high cost of switching
  to other providers provides us with a "first mover" advantage in the PRC market and poses
  high barriers to entry for our potential competitors. We have a proven track record of contract implementation
  and our commercial partner, iASPEC holds the Computer System Integration Level 1 license from the
  PRC Ministry of Information and the Information System Security Service qualification from Guangdong
  Province. In addition, after investing in our systems, our existing customers have a strong incentive
  to purchase follow-on phases with us in order to expedite implementation and save costs.
•
Scalability of Platform
–
We have digitized detailed proprietary information systems data related to Shenzhen City and Guangdong
  Province that can be leveraged for future civil-use applications in logistics, insurance, and location
  based services across industries.
Our Growth Strategy
Our objective is to be the leading provider of integrated solutions for public security information
technology and GIS software service operations in China. Our intelligence solutions can help organizations
make more insightful decisions and improve the efficiency of their internal processes. Five key elements
of our strategy are as follows:
•
Expand geographic footprint to cover all major China markets
- Based on our successful track record and reputation, management sees significant opportunities
  to grow revenues from existing clients by winning follow-on contracts for subsequent phases of project
  implementation, capitalizing on our first mover advantage and related high cost of switching to other
  vendors. We plan to manage our national operations under six areas with centers located in Guangzhou,
  Beijing, Shanghai, Wuhan, Chongqing and Xi'an. So far we have set up offices in Guangzhou and
  Beijing, and representatives in Changsha, capital city of Hunan Province, and Nanning, capital city
  of Guangxi Province.
•
Strengthen R&D capability to enhance and expand core products and further penetrate customer base
– We expect to provide additional value-added services and add-ins to our current platform
  through continuous research and development, to enhance our product and service offerings and to
  maintain our leadership position in our core areas of focus.
•
Continue to dominate rapidly growing public security technology market and expand beyond Guangdong
– We plan to leverage our strong brand recognition and maintain a high contract bid/win
  ratio and follow on orders with our: 1) First Responder Coordination Platform, 2) Intelligent Border
  Control & Security Surveillance and 3) Residence Card Information Management System product lines.
5
•
Pursue strategic acquisitions to support strong internal growth
– We expect that acquisitions will enable our geographic expansion, enhance our technological
  capabilities or competitive advantages, provide licensing and recurring revenue opportunities and
  propel our expansion into high growth enterprise class markets.
•
Leverage existing capabilities
– We plan to leverage our PGIS strength and our recent acquisition of Wuda Geoinformatics
  to target planned expansion into Civil-use GIS, enterprise class information security markets and
  other government sectors. We also plan to continue providing our superior E-Government Platform and
  to maintain strong relationships with our current clients. Geo was founded in 1999 by Wuhan University,
  a leading university in Asia for GIS-related studies. Geo develops and sells GIS software, contracts
  surveying and mapping projects, produces space measurement data and provides technical consulting
  and supervision services for GIS projects.
We expect to execute these five elements of our growth strategy through a combination of investments
in internal initiatives. Internal initiatives will focus typically on expanding capacity and enhancing
our technology and services capabilities. We may also attempt to grow through acquisitions.
Risk Factors
Our ability to successfully operate our business and achieve our goals and strategies is subject to
numerous risks as discussed more fully in the section captioned "Risk Factors," including,
for example, risks related to:
•
Our ability to develop new products and service offerings could have an adverse effect on our future
  growth;
•
Our ability to keep pace with the rapid technological changes in our industry could reduce demand for
  our products and services which would adversely affect our revenues;
•
Our ability to increase our customer base beyond our government customers in Guangdong and Hainan Provinces;
  and
•
Our ability to conduct our business activities in China.
Any of the above risks could materially and negatively affect our business, financial position and
results of operations. An investment in our common stock involves risks. You should read and consider
the information set forth in "Risk Factors" and all other information set forth in this
prospectus before investing in our common stock.
Use of Non-GAAP Financial Measures
We use financial measures that are not in accordance with generally accepted accounting principles,
or non-GAAP financial measures, in the sections of this prospectus captioned "Description of
Business" and "Management's Discussion and Analysis of Financial Condition and Results
of Operations". All of the non-GAAP financial measures used by us in this prospectus relate
to the inclusion of financial information of iASPEC, which for accounting purposes is treated as
our predecessor company, and is referred to in our financial statements herein as Predecessor. Although
CPSH was formed on January 17, 2006, it had no significant operations in the period from January
17, 2006 through September 30, 2006. Accordingly the accompanying financial statements for the period
from January 1, 2006 through September 30, 2006, the Predecessor Period, reflect the results of operations
of iASPEC. Effective as of July 1 2007, iASPEC became a VIE. Therefore, the accompanying financial
data for the period from January 1, 2007 through December 31, 2007, the Successor Period, reflect
the results of operations of CPSH for the period from January 1,2007 through December 31, 2007 and
the results of operations of iASPEC from July 1 2007 through December 31, 2007, which are referred
to in our financial statements as the Successor. Accordingly, the results of operations of the Predecessor
and the Successor are not comparable in all respects. 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 this non-GAAP financial measure
to the most directly comparable GAAP measure is provided in the aforementioned sections where non-GAAP
financial measures are present in this prospectus in the columns captioned "Successor".
Management believes that these non-GAAP financial measures are necessary because the abnormally high
financial ratios calculated using GAAP financial measures would be misleading to investors and would
not reflect the substance of the Company's performance.
Corporate Information
We were originally organized under the laws of the State of Florida, on September 19, 1979, under the
name Mark Thomas Publishing Inc. and on April 29, 2003 we changed our name to Irish Mag, Inc. and on January
26, 2007, to China Public Security Technology, Inc. Effective as of April 7, 2008 we reincorporated
to the State of Nevada and changed our name to China Information Security Technology, Inc., to more
accurately reflect our business and commercial objectives.
6
The following chart reflects our organizational structure as of the date of this prospectus.
Our corporate headquarters are located at 21
st
Floor, Everbright Bank Building, Zhuzilin, Futian District, Shenzhen, Guangdong, 518040, People's
Republic of China. Our telephone number is (+86) 755 -8370-8333. We maintain a website at
www.chinacpby.com
that contains information about our subsidiaries CPSH and IST, but that information is not a part
of this prospectus.
Use of Certain Defined Terms and Treatment of Stock Split
Except as otherwise indicated by the context, references in this report to:
•
"CIST" "we," "us," or "our," "Successor" and the
"Company" are references to the combined business of China Information Security Technology,
  Inc. and its wholly-owned subsidiary, China Public Security Holdings Limited, a British Virgin Islands
  company, or CPSH, along with CPSH's wholly-owned subsidiaries: Information Security Technology
  (China) Co., Ltd., a PRC company (formerly, Public Security Technology (PRC) Co., Ltd.), or IST;
  Public Security Technology (China) Company Limited, a Hong Kong company; Fortune Fame International
  Investment Limited, a Hong Kong company, or Fortune Fame, and its wholly-owned subsidiary, Information
  Security Development Technology (Shenzhen) Company Ltd., a PRC company, or ISDT; and Bocom Multimedia
  Display Company Limited, or Bocom Multimedia, and its operating PRC subsidiary Shenzhen Bocom Multimedia Display Technology Co. Ltd, or Bocom Technology;
7
•
"iASPEC" refers to iASPEC Software Co., Ltd. (formerly, Shenzhen iASPEC Software Engineering
Co., Ltd.), to whose operations we succeeded on October 9, 2006; and its 57% majority owned subsidiary
Wuhan Wuda Geoinformatics Co., Ltd., or Geo.
•
"China" and "PRC" are references to the People's Republic of China and references
to "Hong Kong" are to the Hong Kong Special Administrative Region of China;
•
"RMB" are to Renminbi, the legal currency of China;
•
"U.S. dollar," "$" and "US$" are to the legal currency of the United States; and
•
"Securities Act" are references to the Securities Act of 1933, as amended and references to "Exchange Act" are references to the Securities Exchange Act of 1934, as amended.
On October 2, 2006, we effected a 4.44444444-to-1 forward split of the outstanding shares of our common
stock held as of September 1, 2006. All share numbers contained in this report are adjusted to reflect
this forward split.
The Offering
Common stock offered by selling stockholders
1,470,000 shares representing
    3.14% of our outstanding common stock, par value $0.01.
Common stock outstanding before the offering (presuming all outstanding warrants are exercised)
47,605,028
Common stock outstanding after the offering (presuming all warrants outstanding are exercised)
47,605,028
Proceeds to us
We will not receive proceeds from the resale of the shares by the Selling Stockholders.
(1) Based on 46,764,396 shares of common stock outstanding and warrants to purchase 840,632 shares
of common stock outstanding at the filing of this Registration Statement.
8
Summary Consolidated Financial Information
The following tables set forth key components of our results of operations for the periods indicated,
both in dollars and as a percentage of sales revenue and key components of our revenue for the periods
indicated in dollars. The financial data for the period from January 1, 2006 through December 31,
2006, the Predecessor Period, reflect the results of operations of iASPEC. Effective as of July 1,
2007, iASPEC became our VIE. Therefore, the accompanying financial data for the period from January
1, 2007 through December 31, 2007, the Successor Period, reflect the results of operations of CPSH
for the period from January 1, 2007 through December 31, 2007 and the results of operations of iASPEC
from July 1, 2007 through December 31, 2007, which are referred to in our financial statements as
the Successor. Accordingly, the results of operations of the Predecessor and the Successor are not
comparable in all respects. 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. In addition, we have combined the Predecessor Period from January 1 through
October 8, 2006 and the Successor Period from January 17, 2006 through December 31, 2006 for the
purpose of the fiscal 2006 analysis. This combination is not in accordance with US GAAP and the periods
presented may not be comparable due to our reverse acquisition by CPSH in 2006. This information
should be read in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and related notes appearing
elsewhere in this prospectus.
For the Three- Month Periods Ended March 31, 2008 and 2007 (Unaudited)
NON-GAAP
THREE MONTHS
THREE MONTHS
REALLOCATION
THREE MONTHS
ENDED
ENDED
OF
ENDED
MARCH 31,
MARCH 31,
RELATED PARTY
MARCH 31,
2008
2007
REVENUE
2007
REVENUE - THIRD PARTIES
$ 14,404,426
$
1,213,318
$
3,932,251
$
5,145,569
REVENUE - RELATED PARTY
-
1,818,823
(1,818,823)
-
TOTAL REVENUE
14,404,426
3,032,141
5,145,569
COST OF REVENUE
(8,352,264)
(210,712)
(1,771,527)
(1,982,239)
GROSS PROFIT
6,052,162
2,821,429
3,163,330
ADMINISTRATIVE EXPENSES
(1,752,735)
(219,294)
(282,794)
(502,088)
RESEARCH AND DEVELOPMENT EXPENSES
(147,003)
-
-
FEE TO iASPEC UNDER THE TURNKEY AGREEMENT
-
(45,000)
(45,000)
SELLING EXPENSES
(417,703)
(68,669)
(59,107)
(127,776)
INCOME FROM OPERATIONS
3,734,721
2,488,466
2,488,466
OTHER INCOME, NET
69,401
7,525
7,525
INTEREST INCOME
26,603
20,304
20,304
MINORITY INTEREST
(45,000)
-
-
INCOME TAX EXPENSE
(206,745)
(377,444)
(377,444)
NET INCOME
$
3,578,980
$
2,138,851
$
2,138,851
WEIGHTED AVERAGE NUMBER OF SHARES
BASIC
45,985,550
36,446,205
N/A
DILUTED
46,720,415
36,760,592
N/A
EARNINGS PER SHARE
BASIC
$ 0.08
$ 0.06
N/A
DILUTED
$ 0.08
$ 0.06
N/A
9
The Fiscal Years Ended December 31, 2007 and 2006
2007
2006
Successor
Year
ended
December 31
Reallocation
of
Related Party
Revenue
Non-GAAP
Year
ended
December 31
Predecessor
January 1
through
October
      8
Successor
January 17
through
December 31
Reallocation
of
Related Party
Revenue
Combined
Non-GAAP
Year ended
December 31
Revenue – Third Parties
$
24,800,750
$
12,713,673
$
37,514,423
$
9,644,332
$
989,755
$
2,677,498
$
13,311,585
Revenue – Related Party
5,541,959
(5,541,959
)
—
—
1,185,449
(1,185,449
)
—
Cost of revenue
(12,714,170
)
(6,558,443
)
(19,272,613
)
(3,739,518
)
(89,934
)
(858,149
)
(4,687,601
)
Gross profit
17,628,539
18,241,810
5,904,814
2,085,270
8,623,984
Administrative expenses
(3,321,333
)
(526,659
)
(3,847,992
)
(931,108
)
(99,024
)
(633,900
)
(1,664,032
)
Research and development
expenses
(424,104
)
(424,104
)
—
—
—
Fee to iASPEC under the
Turnkey Agreement
(92,160
)
(92,160
)
—
(45,000
)
(45,000
)
Selling expenses
(480,465
)
(152,315
)
(632,780
)
(157,855
)
(60,013
)
(217,868
)
Income from operations
13,310,477
13,244,774
4,815,851
1,881,233
6,697,084
Other income
79,435
65,703
145,138
6,584
1,305
7,889
Interest income
138,840
138,840
6,912
1,514
8,426
Minority interest
(90,000
)
(90,000
)
—
—
—
Income taxes
(107,300
)
(107,300
)
(749,381
)
(289,403
)
(1,038,784
)
Net income
$
13,331,452
$
13,331,452
$
4,079,966
$
1,594,649
$
5,674,615
Weighted average number of
      shares
Basic
39,718,967
N/A
N/A
26,958,104
N/A
Diluted
40,152,855
N/A
N/A
26,958,104
N/A
Earnings per share
Basic
$
0.34
N/A
N/A
$
0.06
N/A
Diluted
$
0.33
N/A
N/A
$
0.06
N/A
RISK FACTORS
The shares of our common stock being offered for resale by the selling stockholders are highly speculative
in nature, involve a high degree of risk and should be purchased only by persons who can afford to
lose the entire amount invested in the common stock. Before purchasing any of the shares of common
stock, you should carefully consider the following factors relating to our business and prospects.
If any of the following risks actually occurs, our business, financial condition or operating results
will suffer, the trading price of our common stock could decline, and you may lose all or part of
your investment.
RISKS RELATED TO OUR BUSINESS
If we are unable to develop competitive new products and service offerings our future results of operations
could be adversely affected.
Our future revenue stream depends to a large degree on our ability to utilize our technology in a way
that will allow us to offer new types of software applications and services to a broader client base.
We will be required to make investments in research and development in order to continue to develop
new software applications and related service offerings, enhance our existing software applications
and related service offerings and achieve market acceptance of our software applications and service
offerings. We may incur problems in the future in innovating and introducing new software applications
and service offerings. Our development-stage software applications may not be successfully completed
or, if developed, may not achieve significant customer acceptance. If we are unable to successfully define, develop and introduce competitive new software applications, and enhance existing
software applications, our future results of operations would be adversely affected. Development
schedules for software applications are difficult to predict. The timely availability of new applications
and their acceptance by customers are important to our future success. A delay in new the development
of new applications could have a significant impact on its results of operations.
10
A significant portion of our sales are derived from a limited number of customers, and results from
operations could be adversely affected and stockholder value harmed if we lose any of these customers.
Historically, a significant portion of our revenues have been derived from a limited number of customers.
For the years ended December 31, 2007 and 2006, 59.3% and 31.9% of our revenues, respectively, were
derived from our five largest customers. The loss of any of these significant customers would adversely
affect our revenues and stockholder value.
We depend heavily on key personnel, and turnover of key employees and senior management could harm
our business.
Our future business and results of operations depend in significant part upon the continued contributions
of our key technical and senior management personnel, including Jiang Huai Lin, our Chairman and
Chief Executive Officer, and Zhi Xiong Huang, one of our directors. They also depend in significant
part upon our ability to attract and retain additional qualified management, technical, marketing
and sales and support personnel for our operations. If we lose a key employee or if a key employee
fails to perform in his or her current position, or if we are not able to attract and retain skilled
employees as needed, our business could suffer. Significant turnover in our senior management could
significantly deplete our institutional knowledge held by our existing senior management team. We
depend on the skills and abilities of these key employees in managing the technical, marketing and
sales aspects of our business, any part of which could be harmed by further turnover.
Investor confidence and the market price of our shares may be adversely impacted if we are unable to
correct a material weakness or significant deficiency in our internal controls over our financial
reporting identified by our management.
During its assessment of the effectiveness of our internal control over financial reporting as of December 31,
2007, our management concluded that there was a significant deficiency relating to our cash management
procedures as of December 31, 2007, primarily due to our management's deposit of the proceeds
from the sale of our shares to the investors in the October 2007 private placement into ELNs. Although
he did not have any potential for personal gain from this investment, in order to protect the interest
of outside shareholders, Mr. Lin, our Chief Executive Officer and controlling shareholder, guaranteed
us against any losses from the investment. We liquidated our investment in the ELNs on March 25,
2008, and to honor his guarantee, Mr. Lin delivered the proceeds from the sale of his shares in a
March 2008 private sale to us. As a result of Mr. Lin's actions, the transactions did not have
any impact on our operating results or financial condition for fiscal year 2007 and will not have
such impact in fiscal year 2008. All of our cash is currently invested in interest bearing bank accounts.
In addition, management and our Board of Directors have reviewed our cash management practices and
have now put in place strict controls to ensure that going forward, our cash will only be invested
in straight interest bearing instruments that ensure the liquidity of these funds and the preservation
of capital. Although we have taken steps to remediate this deficiency, our failure to fully remediate
it could result in losses in the future.
We may be exposed to potential risks relating to our internal controls over financial reporting and
our ability to have the
operating effectiveness of our internal controls attested to by our independent auditors.
As directed by Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404, the SEC adopted rules requiring
public companies to include a report of management on their internal controls over financial reporting
in their annual reports, including Form 10-KSB. We are subject to this requirement commencing with
our fiscal year ending December 31, 2007 and a report of our management is included under Item 9A
of this Annual Report on Form 10-KSB. In addition, SOX 404 requires the independent registered public
accounting firm auditing a company's financial statements to also attest to and report on the
operating effectiveness of such company's internal controls. However, this annual report does
not include an attestation report because under current law, we will not be subject to these requirements
until our annual report for the fiscal year ending December 31, 2008 if we are deemed to be an accelerated
filer, or December 31, 2009 if we are not deemed to be an accelerated filer. We can provide no assurance
that we will comply with all of the requirements imposed thereby. There can be no assurance that
we will receive a positive attestation from our independent registered public accountants. In the
event we identify significant deficiencies or material weaknesses in our internal controls that we
cannot remediate in a timely manner or we are unable to receive a positive attestation from our independent
registered public accountants with respect to our internal controls, investors and others may lose
confidence in the reliability of our financial statements.
11
Our holding company structure may limit the payment of dividends.
We have no direct business operations, other than our ownership of our subsidiaries. While we have
no current intention of paying dividends, should we decide in the future to do so, as a holding company,
our ability to pay dividends and meet other obligations depends upon the receipt of dividends or
other payments from our operating subsidiaries and other holdings and investments. In addition, our
operating subsidiaries, from time to time, may be subject to restrictions on their ability to make
distributions to us, including as a result of restrictive covenants in loan agreements, restrictions
on the conversion of local currency into U.S. dollars or other hard currency and other regulatory
restrictions as discussed below. If future dividends are paid in RMB, fluctuations in the exchange
rate for the conversion of RMB into U.S. dollars may reduce the amount received by U.S. stockholders
upon conversion of the dividend payment into U.S. dollars.
Chinese regulations currently permit the payment of dividends only out of accumulated profits as determined
in accordance with Chinese accounting standards and regulations. Our subsidiaries in China are also
required to set aside a portion of their after tax profits according to Chinese accounting standards
and regulations to fund certain reserve funds. Currently, our subsidiaries in China are the only
sources of revenues or investment holdings for the payment of dividends. If they do not accumulate
sufficient profits under Chinese accounting standards and regulations to first fund certain reserve
funds as required by Chinese accounting standards, we will be unable to pay any dividends.
RISKS RELATING TO THE INDUSTRY IN WHICH WE OPERATE
If we are unable to keep pace with the rapid technological changes in our industry, demand for our
products and services could decline which would adversely affect our revenue.
Our industry is characterized by extremely rapid technological change, evolving industry standards
and changing customer demands. These conditions require continuous expenditures on product research
and development to enhance existing products, create new products and avoid product obsolescence.
We believe that the timely development of new products and continuing enhancements to existing products
is essential to maintain our competitive position in the marketplace. Our future success depends
in part upon customer and market acceptance of our products and initiatives, which is uncertain.
Any failure to achieve increased acceptance of these and other new product offerings could have a
material adverse effect on our business and results of operations.
Unfavorable economic conditions may affect the level of technology spending by our customers which
could cause the demand for our products and services to decrease.
The revenue growth and profitability of our business depend on the overall demand for software products
and related services, particularly within the private sector. Our strategy involves a sale of our
products and services primarily to customers in the private sector, so our business depends on the
overall economy and the economic and business conditions within this market. Any future stock market
decline or broad economic slowdown will affect the demand for our software products and related services
and decrease technology spending of many of our customers and potential customers. These events could
have a material effect on us in the future, including, without limitation, on our future revenue
and earnings.
Our software products may contain defects or errors, which could decrease sales, injure our reputation
or delay shipments of our products.
The software products that we develop are complex and must meet the stringent technical requirements
of our customers. In addition, to keep pace with the rapid technological change in our industry and
to avoid the obsolescence of our software products, we must quickly develop new products and enhancements
to existing products. Because of this complexity and rapid development cycle, we cannot assure that
our software products are free of errors, especially in newly released software products and new
versions of existing software products. If our software is not free of errors, this could result
in litigation, fewer sales, increased product returns, damage to our reputation and an increase in
service and warranty costs, which would adversely affect our business.
Our technology may become obsolete which could materially adversely affect our ability to sell our
products and services.
If our technology, products and services become obsolete, our business operations would be materially
adversely affected. The market in which we compete is characterized by rapid technological change,
evolving industry standards, introductions of new products, and changes in customer demands that
can render existing products obsolete and unmarketable. Our current products will require continuous
upgrading or our technology will become obsolete. Our future success will depend upon our ability
to address the increasingly sophisticated needs of our customers by supporting existing and emerging
hardware, software, database, and networking platforms and by developing and introducing enhancements
to our existing products and new products on a timely basis that keep pace with technological developments, evolving industry standards, and changing customer requirements. Research
and development expenses were $424,104 for the year ended December 31, 2007. We had no research and
development expenses during the periods from January 17, 2006 though December 31, 2006. Costs incurred
to produce our products after technological feasibility is established, were capitalized and amounted
to $102,953 in the period from January 1, 2006 through December 31, 2006.
12
We face the risk of systems interruptions and capacity constraints, possibly resulting in adverse publicity,
revenue loss and erosion of customer trust.
The satisfactory performance, reliability and availability of our network infrastructure are critical
to our reputation and our ability to attract and retain customers and to maintain adequate customer
service levels. We may experience temporary service interruptions for a variety of reasons, including
telecommunications or power failures, fire, water damage, vandalism, computer bugs or viruses or
hardware failures. We may not be able to correct a problem in a timely manner. Any service interruption
that results in the unavailability of our system or reduces its capacity could result in real or
perceived public safety issues that may affect customer confidence in our services and result in
negative publicity that could cause us to lose customer accounts or fail to obtain new accounts.
Any inability to scale our systems may cause unanticipated system disruptions, slower response times,
degradation in levels of customer service, or impaired quality and speed of transaction processing.
We are not certain that we will be able to project the rate or timing of increases, if any, in the
use of our services to permit us to upgrade and expand our systems effectively or to integrate smoothly
any newly developed or purchased modules with our existing systems.
If we are not able to adequately secure and protect our patent, trademark and other proprietary rights
our business may be materially affected.
Under the Management Service Agreement, we license 16 copyrighted software applications from iASPEC
on an exclusive basis. To protect the intellectual property underlying these applications and our
other intellectual property, we rely on a combination of copyright, trademark, and trade secret laws.
We also rely on non-disclosure agreements and other confidentiality procedures and contractual provisions
to protect our intellectual property rights. Some of these technologies, other than the iASPEC copyrighted
software applications, are very important to our business and are not protected by copyrights or
patents. It may be possible for unauthorized third parties to copy or reverse engineer our products,
or otherwise obtain and use information that we regard as proprietary. Further, third parties could
challenge the scope or enforceability of our copyrights. In certain foreign countries, including
China where we operate, the laws do not protect our proprietary rights to the same extent as the
laws of the United States. Any misappropriation of our intellectual property could have a material
adverse effect on our business and results of operations, and we cannot assure you that the measures
we take to protect our proprietary rights are adequate.
Claims that we infringe the proprietary rights of third parties could result in significant expenses
or restrictions on our ability to sell our products and services.
Third parties may claim that our products or services infringe their proprietary rights. Any infringement
claim, with or without merit, would be time-consuming and expensive to litigate or settle and could
divert our management's attention from our core business. In the event of a successful infringement
claim against us, we may have to pay significant damages, incur substantial legal fees, develop costly
non-infringing technology, or enter into license agreements that require us to pay substantial royalties
and that may not be available on terms acceptable to us, if at all.
RISKS RELATING TO OUR COMMERCIAL RELATIONSHIP WITH IASPEC
Jiang Huai Lin's association with iASPEC could pose a conflict of interest which may result in
iASPEC decisions that are adverse to our business.
Jiang Huai Lin, our president and Chief Executive Officer and the beneficial owner of 51% of our common
stock also beneficially owns 76% of iASPEC, from whom we derived 68% of our revenue in the fiscal
year ended December 31, 2007, and 55% of our revenue in the fiscal year ended December 31, 2006,
pursuant to existing commercial arrangements. As a result, conflicts of interest may arise from time
to time and these conflicts may result in management decisions that could negatively affect our operations
and potentially result in the loss of opportunities.
If iASPEC or its shareholders violate our contractual arrangements with it, our business could be disrupted
and we may have to resort to litigation to enforce our rights which may be time consuming and expensive.
Our operations are currently dependent upon our commercial relationship with iASPEC. During the fiscal
years ended December 31, 2007 and 2006 we derived 68% and 55% of our revenues, respectively, from
the provision of services to iASPEC customers. A significant portion of these revenues have not yet
been collected. Amounts owed by iASPEC under the Management Service Agreement for each quarter will
be due and payable no later than the last day of the month following the end of each such quarter.
If iASPEC or its shareholders are unwilling or unable to perform their obligations under our commercial arrangements with it, including payment of revenues under the Management
Service Agreement as they become due each quarter, we will not be able to conduct our operations
in the manner currently planned. In addition, iASPEC may seek to renew these agreements on terms
that are disadvantageous to us. Although we have entered into a series of agreements that provide
us with substantial ability to control iASPEC, we may not succeed in enforcing our rights under them.
If we are unable to renew these agreements on favorable terms, or to enter into similar agreements
with other parties, our business may not be able to operate or expand, and our operating expenses
may significantly increase.
13
Uncertainties in the PRC legal system may impede our ability to enforce the commercial agreements that
we have entered into with iASPEC or any arbitral award thereunder and any inability to enforce
these agreements could materially and adversely affect our business and operation.
While disputes under the Management Service Agreement and the Option Agreement with iASPEC are subject
to binding arbitration before the Shenzhen Branch of the China International Economic and Trade Arbitration
Commission, or CIETAC, in accordance with CIETAC Arbitration Rules, the agreements are governed by
PRC law and an arbitration award may be challenged in accordance with PRC law. For example, a claim
that the enforcement of an award in our favor will be detrimental to the public interest, or that
an issue does not fall within the scope of the arbitration would require us to engage in administrative
and judicial proceedings to defend an award. China's legal system is a civil law system based
on written statutes and unlike common law systems, it is a system in which decided legal cases have
little value as precedent. As a result, China's administrative and judicial authorities have
significant discretion in interpreting and implementing statutory and contractual terms, and it may
be more difficult to evaluate the outcome of administrative and judicial proceedings and the level
of legal protection available than in more developed legal systems. These uncertainties may impede
our ability to enforce the terms of the Management Service Agreement, the Option Agreement and the
other contracts that we may enter into with iASPEC. Any inability to enforce the Management
Service Agreement and Option Agreement or an award thereunder could materially and adversely affect
our business and operation.
If iASPEC fails to comply with the confidentiality requirements of certain of its customer contracts,
then iASPEC could be subject to sanctions and could lose its business license which in turn would
significantly disrupt or shut down our operations.
The business and operations of iASPEC, the owner and licensor to us of the copyrighted software applications
and other intellectual property that are essential to the operation of our business, is subject to
Chinese contractual obligations and laws and regulations that restrict its use of security information
and other information that it obtains from its customers in the public security sector. For some
of its contracts with government agencies, iASPEC has agreed to keep confidential all technical and
commercial secrets obtained during the performance of services under the contract. iASPEC or its
shareholders could violate these contractual obligations and laws and regulations by inadvertently
or intentionally disclosing confidential information or by otherwise failing to operate its business
in a manner that complies with these contractual and legal obligations. A violation of these agreements
could result in the significant disruption or shut down of our business or adversely affect our reputation
in the market. If iASPEC or its shareholders violate these contractual and legal obligations, we
may have to resort to litigation to enforce our rights under our contractual obligations with iASPEC.
This litigation could result in the disruption of our business, diversion of our resources and the
incurrence of substantial costs.
A majority of the share capital of iASPEC is held by our major shareholder, who may cause these agreements
to be amended in a manner that is adverse to us.
Our major shareholder, Jiang Huai Lin, controls iASPEC. As a result, Mr. Lin may be able to cause our
commercial arrangements with iASPEC to be amended in a manner that will be adverse to our company,
or may be able to cause these agreements not to be renewed, even if their renewal would be beneficial
for us. Although we have entered into an agreement that prevents the amendment of these agreements
without the approval of the members of our Board other than Mr. Lin, we can provide no assurances
that these agreements will not be amended in the future to contain terms that might differ from the
terms that are currently in place. These differences may be adverse to our interests.
Our arrangements with iASPEC and its shareholders may be subject to a transfer pricing adjustment by
the PRC tax authorities which could have an adverse effect on our income and expenses.
We could face material and adverse tax consequences if the PRC tax authorities determine that our contracts
with iASPEC and its shareholders were not entered into based on arm's length negotiations. Although
our contractual arrangements are similar to other companies conducting similar operations in China,
if the PRC tax authorities determine that these contracts were not entered into on an arm's
length basis, they may adjust our income and expenses for PRC tax purposes in the form of a transfer
pricing adjustment. Such an adjustment may require that we pay additional PRC taxes
plus applicable penalties and interest, if any.
14
The shares purchased by the investors in our recent private placement transaction are subject to redemption
in the event that the PRC government takes action that unwinds our restructuring transaction. Any
such redemption would materially and adversely affect our liquidity and capital resources since we
would have to return the funds raised in the private placement.
If any PRC governmental agency takes action that materially and adversely affects the transactions
contemplated by the restructuring agreement and we are unable to reverse the adverse governmental
action or otherwise address the material adverse effect to the reasonable satisfaction of the investors
in the private placement transaction that closed on January 31, 2006 and February 5, 2006, within
60 days of the occurrence of such governmental action, then if asked, we are obligated, as liquidated
damages, to redeem the shares purchased by such investors, within 30 days of their demand, for an
amount equal to the investor's entire investment amount without interest. If the PRC government
takes action that triggers this redemption right, then our liquidity and capital resources would
be materially adversely affected as we would be required to return the funds raised in the private
placements. If we are required to return such funds we may required to sell assets or to seek financing
on terms that are not favorable, if available at all, and our financial condition could be thereby
materially and adversely affected.
The exercise of our option to purchase part or all of the equity interests in or assets of iASPEC under
the Option Agreement might be subject to approval by the PRC government. Our failure to obtain this
approval may impair our ability to substantially control iASPEC and could result in actions by iASPEC
that conflict with our interests.
Our Option Agreement with iASPEC gives our Chinese operating subsidiary, IST, the option to purchase
all or part of the equity interests in or assets of iASPEC, however, the option may not be exercised
by IST if the exercise would violate any applicable laws and regulations in China or cause any license
or permit held by, and necessary for the operation of iASPEC, to be cancelled or invalidated. Under
the laws of China, if a foreign entity, through a foreign investment company that it invests in,
acquires a domestic related company, China's regulations regarding Mergers and Acquisitions
would technically apply to the transaction. Application of these regulations requires an examination
and approval of the transaction by China's Ministry of Commerce, or MOFCOM, or its local counterparts.
Also, an appraisal of the equity or assets to be acquired is mandatory. However, our local PRC counsel
has advised us that Shenzhen and other local counterparts of MOFCOM hold the view that such a transaction
would not require their approval. Therefore, we do not believe at this time that an approval and
an appraisal are required for IST to exercise its option to acquire iASPEC in Shenzhen. In light
of the different views on this issue, however, it is possible that the central MOFCOM office in Beijing
will issue a standardized opinion imposing the approval and appraisal requirement. If we are not
able to purchase the equity or assets of iASPEC, then we will lose a substantial portion of our ability
to control iASPEC and our ability to ensure that iASPEC will act in our interests.
Our right to elect a majority of the members on iASPEC's Board of Directors and other provisions
of the Management Service Agreement may be viewed by iASPEC's customers as a change in control
of iASPEC, which could subject iASPEC to sanctions and loss of its business license, which in turn
would significantly disrupt or possibly terminate our operations.
Our new commercial arrangement with iASPEC gives us the right to designate two Chinese citizens to
serve as senior managers of iASPEC, serve on iASPEC's Board of Directors and assist in managing
the business and operations of iASPEC. In addition, iASPEC will require the affirmative vote of the
majority of the our Board of Directors, as well as at least one non-insider director, for completing
certain material actions with respect to iASPEC, including, but not limited to: (a) the nomination,
appointment, election or replacement of any board members; (b) the distribution of any dividend or
profits; (c) any merger, division, change of corporate form, dissolution or liquidation; (d) any
reimbursement of net losses or other payments or transfers of funds from IST to iASPEC; (e) the formation
or disposition of a subsidiary or the acquisition or disposition of any interest in any other entity;
and (f) the encumbrance of any assets under any lien not in the ordinary course of business. However,
fulfillment of certain PGIS contracts with PRC Government customers is restricted to entities, such
as iASPEC, that possess the necessary PRC government licenses and approvals, and any change in control
may be viewed under PRC law as creating a new entity. If iASPEC's government customers view
these Management Service Agreement provisions as a change in control of iASPEC or as evidence of
iASPEC's failure to operate its business in a manner that complies with its contractual obligations
or with related laws and regulations. Such a perception could result in the cancellation or invalidation
of iASPEC's licenses and permits. A loss by iASPEC of its licenses and permits could result
in the significant disruption or possible termination of our business or adversely affect our reputation in the market.
RISKS RELATED TO DOING BUSINESS IN CHINA
Changes in China's political or economic situation could harm us and our operational results.
Economic reforms adopted by the Chinese government have had a positive effect on the economic development
of the country, but the government could change these economic reforms or any of the legal systems
at any time. This could either benefit or damage our operations and profitability. Some of the things
that could have this effect are:
15
•
Level of government involvement in the economy;
•
Control of foreign exchange;
•
Methods of allocating resources;
•
Balance of payments position;
•
International trade restrictions; and
•
International conflict.
The Chinese economy differs from the economies of most countries belonging to the Organization for
Economic Cooperation and Development, or OECD, in many ways. As a result of these differences, we
may not develop in the same way or at the same rate as might be expected if the Chinese economy were
similar to those of the OECD member countries.
Our business is largely subject to the uncertain legal environment in China and your legal protection
could be limited.
The Chinese legal system is a civil law system based on written statutes. Unlike common law systems,
it is a system in which precedents set in earlier legal cases are not generally used. The overall
effect of legislation enacted over the past 20 years has been to enhance the protections afforded
to foreign invested enterprises in China. However, these laws, regulations and legal requirements
are relatively recent and are evolving rapidly, and their interpretation and enforcement involve
uncertainties. These uncertainties could limit the legal protections available to foreign investors,
such as the right of foreign invested enterprises to hold licenses and permits such as requisite
business licenses. In addition, all of our executive officers and our directors are residents of
China and not of the U.S., and substantially all the assets of these persons are located outside
the U.S. As a result, it could be difficult for investors to effect service of process in the U.S.,
or to enforce a judgment obtained in the U.S. against us or any of these persons.
The Chinese government exerts substantial influence over the manner in which we must conduct our business
activities which could have an adverse effect on our ability to operate in China.
China only recently has permitted provincial and local economic autonomy and private economic activities.
The Chinese government has exercised and continues to exercise substantial control over virtually
every sector of the Chinese economy through regulation and state ownership. Our ability to operate
in China may be harmed by changes in its laws and regulations, including those relating to taxation,
import and export tariffs, environmental regulations, land use rights, property and other matters.
We believe that our operations in China are in material compliance with all applicable legal and
regulatory requirements. However, the central or local governments of these jurisdictions may impose
new, stricter regulations or interpretations of existing regulations that would require additional
expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.
Accordingly, government actions in the future, including any decision not to continue to support recent
economic reforms and to return to a more centrally planned economy or regional or local variations
in the implementation of economic policies, could have a significant effect on economic conditions
in China or particular regions thereof, and could require us to divest ourselves of any interest
we then hold in Chinese properties or joint ventures.
Future inflation in China may inhibit our ability to conduct business in China.
In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation.
During the past ten years, the rate of inflation in China has been as high as 20.7% and as low as
-2.2%. These factors have led to the adoption by the Chinese government, from time to time, of various
corrective measures designed to restrict the availability of credit or regulate growth and contain
inflation. High inflation may in the future cause the Chinese government to impose controls on credit
and/or prices, or to take other action, which could inhibit economic activity in China, and thereby
harm the market for our products.
Any recurrence of severe acute respiratory syndrome, or SARS, or another widespread public health problem,
could harm our operations.
A renewed outbreak of SARS or another widespread public health problem in China, where our operations
are conducted, could have a negative effect on our operations.
Our operations may be impacted by a number of health-related factors, including the following:
•
quarantines or closures of some of our offices which would severely disrupt our operations,
•
the sickness or death of our key officers and employees, and
•
a general slowdown in the Chinese economy.
16
Any of the foregoing events or other unforeseen consequences of public health problems could damage
our operations.
Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.
The majority of our revenues will be settled in RMB, and any future restrictions on currency exchanges
may limit our ability to use revenue generated in RMB to fund any future business activities outside
China or to make dividend or other payments in U.S. dollars. Although the Chinese government introduced
regulations in 1996 to allow greater convertibility of the RMB for current account transactions,
significant restrictions still remain, including primarily the restriction that foreign-invested
enterprises may only buy, sell or remit foreign currencies after providing valid commercial documents,
at those banks in China authorized to conduct foreign exchange business. In addition, conversion
of RMB for capital account items, including direct investment and loans, is subject to governmental
approval in China, and companies are required to open and maintain separate foreign exchange accounts
for capital account items. We cannot be certain that the Chinese regulatory authorities will not
impose more stringent restrictions on the convertibility of the RMB.
Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies
by PRC residents may subject our PRC resident stockholders to personal liability, limit our ability
to acquire PRC companies or to inject capital into our PRC subsidiaries, limit our PRC subsidiaries'
ability to distribute profits to us or otherwise materially adversely affect us.
In October 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued the Notice on Relevant
Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose
Companies by Residents Inside China, generally referred to as Circular 75, which required PRC residents
to register with the competent local SAFE branch before establishing or acquiring control over an
offshore special purpose company, or SPV, for the purpose of engaging in an equity financing outside
of China on the strength of domestic PRC assets originally held by those residents. Internal implementing
guidelines issued by SAFE, which became public in June 2007 (known as Notice 106), expanded the reach
of Circular 75 by (1) purporting to cover the establishment or acquisition of control by PRC residents
of offshore entities which merely acquire "control" over domestic companies or assets,
even in the absence of legal ownership; (2) adding requirements relating to the source of the PRC
resident's funds used to establish or acquire the offshore entity; (3) covering the use of existing
offshore entities for offshore financings; (4) purporting to cover situations in which an offshore
SPV establishes a new subsidiary in China or acquires an unrelated company or unrelated assets in
China; and (5) making the domestic affiliate of the SPV responsible for the accuracy of certain documents
which must be filed in connection with any such registration, notably, the business plan which describes
the overseas financing and the use of proceeds. Amendments to registrations made under Circular 75
are required in connection with any increase or decrease of capital, transfer of shares, mergers
and acquisitions, equity investment or creation of any security interest in any assets located in
China to guarantee offshore obligations, and Notice 106 makes the offshore SPV jointly responsible
for these filings. In the case of an SPV which was established, and which acquired a related domestic
company or assets, before the implementation date of Circular 75, a retroactive SAFE registration
was required to have been completed before March 31, 2006; this date was subsequently extended indefinitely
by Notice 106, which also required that the registrant establish that all foreign exchange transactions
undertaken by the SPV and its affiliates were in compliance with applicable laws and regulations.
Failure to comply with the requirements of Circular 75, as applied by SAFE in accordance with Notice
106, may result in fines and other penalties under PRC laws for evasion of applicable foreign exchange
restrictions. Any such failure could also result in the SPV's affiliates being impeded or prevented
from distributing their profits and the proceeds from any reduction in capital, share transfer or
liquidation to the SPV, or from engaging in other transfers of funds into or out of China.
We believe that our stockholders, who are PRC residents as defined in Circular 75, have registered
with the relevant branch of SAFE, as currently required, in connection with their equity interests
in us and our acquisitions of equity interests in our PRC subsidiaries. However, we cannot provide
any assurances that their existing registrations have fully complied with, and they have made all
necessary amendments to their registration to fully comply with, all applicable registrations or
approvals required by Circular 75. Moreover, because of uncertainty over how Circular 75 will be
interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it
will affect our business operations or future strategies. For example, our present and prospective
PRC subsidiaries' ability to conduct foreign exchange activities, such as the remittance of
dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular
75 by our PRC resident beneficial holders. In addition, such PRC residents may not always be able
to complete the necessary registration procedures required by Circular 75. We also have little control
over either our present or prospective direct or indirect stockholders or the outcome of such registration
procedures. A failure by our PRC resident beneficial holders or future PRC resident stockholders
to comply with Circular 75, if SAFE requires it, could subject these PRC resident beneficial holders
to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our
subsidiaries' ability to make distributions or pay dividends or affect our ownership structure,
which could adversely affect our business and prospects.
17
If the China Securities Regulatory Commission, or CSRC, or another PRC regulatory agency, determines
that CSRC approval is required in connection with this offering, this offering may be delayed or
cancelled, or we may become subject to penalties.
On August 8, 2006, six PRC regulatory agencies, including the CSRC, promulgated the Regulation on Mergers
and Acquisitions of Domestic Companies by Foreign Investors, which became effective on September
8, 2006. This new regulation, among other things, has certain provisions that require SPVs formed
for the purpose of acquiring PRC domestic companies and controlled by PRC individuals, to obtain
the approval of the CSRC prior to publicly listing their securities on an overseas stock market.
However, the new regulation does not expressly provide that approval from the CSRC is required for
the offshore listing of an SPV which acquires, directly or indirectly, an equity interest or shares
of domestic PRC entities held by domestic companies or individuals by cash payment, nor does it expressly
provide that approval from CSRC is not required for the offshore listing of an SPV which has fully
completed its acquisition of an equity interest in domestic PRC equity prior to September 8, 2006.
On September 21, 2006, the CSRC published on its official website a notice specifying the documents
and materials that are required to be submitted for obtaining CSRC approval. It is not clear whether
the provisions in the new regulation regarding the offshore listing and trading of the securities
of an SPV applies to an offshore company such as us which has acquired equity interests in of PRC
domestic entities for cash and has completed the acquisition of the equity interest of PRC domestic
entities prior to the effective date of the new regulation. Since the new regulation has only recently
been adopted, there remains some uncertainty as to how this regulation will be interpreted or implemented.
If the CSRC or another PRC regulatory agency subsequently determines that the CSRC's approval
is required for this offering, we may face sanctions by the CSRC or another PRC regulatory agency.
If this happens, these regulatory agencies may impose fines and penalties on our operations in the
PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds
from this offering into the PRC, restrict or prohibit payment or remittance of dividends to us or
take other actions that could have a material adverse effect on our business, financial condition,
results of operations, reputation and prospects, as well as the trading price of our shares. The
CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable
for us, to delay or cancel this offering before settlement and delivery of the shares being offered by us.
We may be unable to complete a business combination transaction efficiently or on favorable terms due
to complicated merger and acquisition regulations which became effective on September 8, 2006.
On August 9, 2006, six PRC regulatory agencies, including the CSRC, promulgated the Regulation on Mergers
and Acquisitions of Domestic Companies by Foreign Investors, which became effective on September
8, 2006. This new regulation, among other things, governs the approval process by which a PRC company
may participate in an acquisition of assets or equity interests. Depending on the structure of the
transaction, the new regulation will require the PRC parties to make a series of applications and
supplemental applications to the government agencies. In some instances, the application process
may require the presentation of economic data concerning a transaction, including appraisals of the
target business and evaluations of the acquirer, which are designed to allow the government to assess
the transaction. Government approvals will have expiration dates by which a transaction must be completed
and reported to the government agencies. Compliance with the new regulations is likely to be more
time consuming and expensive than in the past and the government can now exert more control over
the combination of two businesses. Accordingly, due to the new regulation, our ability to engage
in business combination transactions has become significantly more complicated, time consuming and
expensive, and we may not be able to negotiate a transaction that is acceptable to our stockholders
or sufficiently protect their interests in a transaction.
The new regulation allows PRC government agencies to assess the economic terms of a business combination
transaction. Parties to a business combination transaction may have to submit to the Ministry of
Commerce and other relevant government agencies an appraisal report, an evaluation report and the
acquisition agreement, all of which form part of the application for approval, depending on the structure
of the transaction. The regulations also prohibit a transaction at an acquisition price obviously
lower than the appraised value of the PRC business or assets and in certain transaction structures,
require that consideration must be paid within defined periods, generally not in excess of a year.
The regulation also limits our ability to negotiate various terms of the acquisition, including aspects
of the initial consideration, contingent consideration, holdback provisions, indemnification provisions
and provisions relating to the assumption and allocation of assets and liabilities. Transaction structures
involving trusts, nominees and similar entities are prohibited. Therefore, such regulation may impede
our ability to negotiate and complete a business combination transaction on financial terms that
satisfy our investors and protect our stockholders' economic interests.
The value of our securities will be affected by the foreign exchange rate between U.S. dollars and
RMB.
The value of our common stock will be affected by the foreign exchange rate between U.S. dollars and
RMB, and between those currencies and other currencies in which our sales may be denominated. For
example, to the extent that we need to convert U.S. dollars into RMB for our operational needs and should the RMB appreciate against
the U.S. dollar at that time, our financial position, the business of the company, and the price
of our common stock may be harmed. Conversely, if we decide to convert our RMB into U.S. dollars
for the purpose of declaring dividends on our common stock or for other business purposes and the
U.S. dollar appreciates against the RMB, the U.S. dollar equivalent of our earnings from our subsidiaries
in China would be reduced.
18
The discontinuation of any preferential tax treatments or other incentives currently available to us
in the PRC could materially and adversely affect our business, financial condition and results of
operations.
Our subsidiary IST is a sino-foreign joint venture enterprise and has enjoyed certain special or preferential
tax treatments regarding foreign enterprise income tax in accordance with the "Income Tax Law
of the PRC for Enterprises with Foreign Investment and Foreign Enterprises" and its implementing
rules. Accordingly, IST expects to receive a full exemption from the foreign enterprise income tax
or EIT for 2007 and 2008, and a further 7.5% tax exemption for 2009, 2010 and 2011. However, on March
16, 2007, the PRC's National People's Congress passed a new corporate income tax law, which
will be effective on January 1, 2008. This new corporate income tax unifies the corporate income
tax rate, cost deduction and tax incentive policies for both domestic and foreign-invested enterprises.
According to the new corporate income tax law, the applicable corporate income tax rate of our operating
subsidiary will be moved up to a rate of 25% over a five-year grandfather period. We expect the measures
to implement this grandfather period to be enacted by the PRC government in the coming months and
we will make an assessment of what the impact of the new unified tax law is expected to be in the
grandfather period. The discontinuation of any such special or preferential tax treatment or other
incentives could have an adverse affect our business, financial condition and results of operations.
We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that
we violated the Foreign Corrupt Practices Act could have a material adverse effect on our business.
We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper
payments or offers of payments to foreign governments and their officials and political parties by
U.S. persons and issuers as defined by the statute, for the purpose of obtaining or retaining business.
We have operations, agreements with third parties and we make sales in China. Our activities in China
create the risk of unauthorized payments or offers of payments by the employees, consultants, sales
agents or distributors of our Company, even though they may not always be subject to our control.
It is our policy to implement safeguards to discourage these practices by our employees. However,
our existing safeguards and any future improvements may prove to be less than effective, and the
employees, consultants, sales agents or distributors of our Company may engage in conduct for which
we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions,
and we may be subject to other liabilities, which could negatively affect our business, operating
results and financial condition. In addition, the U.S. government may seek to hold our Company liable
for successor liability FCPA violations committed by companies in which we invest or that we acquire.
RISKS RELATED TO THE MARKET FOR OUR STOCK
Our common stock is quoted on the OTC Bulletin Board which may have an unfavorable impact on our stock
price and liquidity.
Our common stock is quoted on the OTC Bulletin Board Electronic maintained by the National Association
of Securities Dealers, Inc.. The OTC Bulletin Board is a significantly more limited market than the
New York Stock Exchange or Nasdaq system. The quotation of our shares on the OTC Bulletin Board may
result in a less liquid market available for existing and potential stockholders to trade shares
of our common stock, could depress the trading price of our common stock and could have a long-term
adverse impact on our ability to raise capital in the future.
We are subject to penny stock regulations and restrictions which may affect our ability to sell our
securities on the secondary market.
The SEC has adopted regulations which generally define so-called "penny stocks" to be an
equity security that has a market price less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exemptions. Trading in our common stock is volatile and since
January 1, 2007, our stock price has fluctuated from a low of $3.98 to a high of $10.80. Our stock
price is currently trading under $5.00 per share which designates it as a "penny stock."
As a "penny stock", our common stock may become subject to Rule 15g-9 under the Exchange
Act of 1934, or the "Penny Stock Rule." This rule imposes additional sales practice requirements
on broker-dealers that sell such securities to persons other than established customers and "accredited
investors" (generally, individuals with a net worth in excess of $1,000,000 or annual incomes
exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9,
a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. As a result,
this rule may affect the ability of broker-dealers to sell our securities and may affect the ability
of purchasers to sell any of our securities in the secondary market.
19
For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any
transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny
stock market. Disclosure is also required to be made about sales commissions payable to both the
broker-dealer and the registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stock.
There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule.
In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject
to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person
from participating in a distribution of penny stock, if the SEC finds that such a restriction would
be in the public interest.
Market volatility may affect our stock price, and the value of our common stock may experience sudden
decreases.
There has been, and will likely continue to be, significant volatility in the market price of securities

of technology companies, including ours. These fluctuations can be unrelated to the operating performance
of these companies. Factors such as the following could cause the market price of our common stock
to fluctuate substantially:
•
announcements of new products by us or our competitors;
•
litigation involving us;
•
quarterly fluctuations in our financial results or other software companies' financial results;
•
shortfalls in our actual financial results compared to our guidance or results previously forecasted
  by stock market analysts;
•
acquisitions or strategic alliances by us or our competitors;
•
any stock repurchase program;
•
the gain or loss of a significant customer; and
•
general conditions in the software industry and conditions in the financial markets.
A decline in the market price of our common stock may adversely impact our ability to attract and retain
employees. In addition, stockholders may initiate securities class action lawsuits if the market
price of our stock drops significantly, which may cause us to incur substantial costs and could divert
the time and attention of our management.
Our controlling stockholder holds a significant percentage of our outstanding voting securities, which
could hinder our ability to engage in significant corporate transactions without his approval.
Mr. Jiang Huai Lin, our Chairman, President and Chief Executive Officer, beneficially owns 51% of our
outstanding voting securities. As a result, he possesses significant influence, giving him the ability,
among other things, to elect a majority of our Board of Directors and to authorize or prevent proposed
significant corporate transactions. His ownership and control may also have the effect of delaying
or preventing a future change in control, impeding a merger, consolidation, takeover or other business
combination or discourage a potential acquirer from making a tender offer.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements and information relating to us that are based on
the beliefs of our management as well as assumptions made by, and information currently available
to, our management. When used in this prospectus, the words "anticipate", "believe",
"estimate", "expect", "intend", "plan" and similar expressions,
as they relate to us or our management, are intended to identify forward-looking statements. These
statements reflect management's current view of us concerning future events and are subject
to certain risks, uncertainties and assumptions, including among many others: our potential inability
to raise additional capital, the possibility that third parties hold proprietary rights that preclude
us from marketing our products, the emergence of additional competing technologies, changes in domestic
and foreign laws, regulations and taxes, changes in economic conditions, uncertainties related to
China's legal system and economic, political and social events in China, a general economic
downturn, a downturn in the securities markets, Securities and Exchange Commission regulations which
affect trading in the securities of "penny stocks," and other risks and uncertainties.
Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in this prospectus as anticipated, estimated or expected.
20
USE OF PROCEEDS
We will not receive any proceeds from the sales by the selling stockholders, but we will receive funds

from the exercise of warrants held by the selling stockholders, if exercised for cash.
DIVIDEND POLICY
We have never declared or paid cash dividends. Any future decisions regarding dividends will be made
by our board of directors. We currently intend to retain and use any future earnings for the development
and expansion of our business and do not anticipate paying any cash dividends in the foreseeable
future.
MARKET FOR OUR COMMON STOCK
Market Information
Our common stock is quoted under the symbol "CIFS.OB" on the Electronic Bulletin Board maintained
by the National Association of Securities Dealers, Inc. Our CUSIP number is 16944F 101.
The following table sets forth, for the periods indicated, the high and low bid prices of our common
stock. These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and may not represent actual transactions. These prices are adjusted to reflect the 4.44444444 for
1 forward split of our common stock that we effected on October 2, 2006.
Bid Prices
(1)
High
Low
Year Ended December 31, 2008
1
st
Quarter
$
8.50
$
4.10
2
nd
Quarter (to May 9, 2008)
$
7.00
$
4.80
Year Ended December 31, 2007
1
st
Quarter
$
9.50
$
3.98
2
nd
Quarter
$
8.00
$
4.00
3
rd
Quarter
$
9.00
$
4.11
4
th
Quarter
$
10.75
$
7.05
________________________
(1)   The above tables set forth the range of high and low closing bid prices per share
of our common stock as reported by Quotemedia.com for the periods indicated.
Reports to Stockholders
We plan to furnish our stockholders with an annual report for each fiscal year ending December 31 containing
financial statements audited by our independent registered public accounting firm. Additionally,
we may, in our sole discretion, issue unaudited quarterly or other interim reports to our stockholders
when we deem appropriate. We intend to maintain compliance with the periodic reporting requirements
of the Securities Exchange Act of 1934.
Holders
On May 9, 2008, there were approximately 84 stockholders of record of our common stock.
DILUTION
Our net tangible book value per share as of December 31, 2007 was $1.81 per share of
common stock. Net tangible book value is determined by dividing our tangible book value (total assets
less intangible assets including know-how, trademarks and copyrights and less total liabilities)
by the number of outstanding shares of our capital stock. Since this offering is being made solely
by the selling stockholders and none of the proceeds will be paid to us, our net tangible book value
will be unaffected by this offering.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
We are a holding company that only operates through our Chinese subsidiaries, IST, ISDT,
Bocom Technology and our VIE,
iASPEC. Through the subcontracting services provided for in our Management Services Agreement with
iASPEC, we are a provider of integrated solutions for the public security sector in China, specializing
in providing public security Informatization and GIS software services. Our customers are mostly
public sector entities that use our products and services to improve the service quality and management
level of civil and medical emergencies, traffic control, fire control, medical rescue and border
control. Our typical customers include some of the most important public security departments in
Guangdong Province and Hainan Province, including the Ministry of Public Security's Shenzhen
City Immigration Border Check Station, the Shantou City Public Security Bureau, the Shantou City
Public Security Bureau, the Shenzhen City Traffic Police Bureau, the Shenzhen City Public Security
Bureau, the Fo Shan City Police Bureau, the Shenzhen Fire Department, the Guangdong Province Department
of Public Security and the Zhuhai Public Security Bureau. In the future we expect to expand the application
of our products and services in the public security sector and to other sectors in China as well.
Principal Factors Affecting Our Financial Performance
Demand for Software Products and Services
The revenue growth and profitability of our business depend on the overall market demand for software
products and related services. Our products and services in the public security sector are considerably
mature. However, if we fail to quickly expand our market share in the public security sector, our
financial results could be adversely affected. Under the Management Service Agreement, we license
16 copyrighted software applications from iASPEC on an exclusive basis. To protect the intellectual
property underlying these applications and our other intellectual property, we rely on a combination
of copyright, trademark, and trade secret laws worldwide. We also rely on non-disclosure agreements
and other confidentiality procedures and contractual provisions under the laws of various jurisdictions
to protect our intellectual property rights. Some of these technologies, other than the iASPEC copyrighted
software applications, are very important to our business and are not protected by copyrights or
patents. It may be possible for unauthorized third parties to copy or reverse engineer our products,
or otherwise obtain and use information that we regard as proprietary. Further, third parties could
challenge the scope or enforceability of our copyrights. In certain foreign countries, including
China where we operate, the laws do not protect our proprietary rights to the same extent as the
laws of the United States. Any misappropriation of our intellectual property could have a material
adverse effect on our business and results of operations. See our Risk Factors under the headings
"Risks Related to our Business" and "Risks Related to Doing Business in China"
to read about significant risk factors related to our intellectual property and our ability to protect them under PRC law.
Taxation
Our subsidiaries, IST and ISDT, and our VIE, iASPEC, 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 15% of assessable
profits. 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 7.5% tax exemption for
the next 3 years. On August 10, 2007, IST was granted the EIT exemption by PRC tax authorities, retroactive
to as of January 1, 2007.
On March 16, 2007, the National People's Congress of the PRC passed the new EIT Law, which will
take effect as of January 1, 2008. Under the new EIT Law, an enterprise established outside of the
PRC with "de facto management bodies" within the PRC is considered a resident enterprise
and will normally be subject to the enterprise income tax at the rate of 25% on its global income.
The new EIT Law, however, does not define the term "de facto management bodies." If the
PRC tax authorities subsequently determine that we should be classified as a resident enterprise,
then our global income will be subject to PRC income tax at a tax rate of 25%. In addition, under
the new EIT Law, dividends from our PRC subsidiaries to us will be subject to a withholding tax.
The rate of the withholding tax has not yet been finalized, pending promulgation of implementing
regulations. Furthermore, the ultimate tax rate will be determined by treaty between the PRC and
the tax residence of the holder of the PRC subsidiary. We are actively monitoring the proposed withholding
tax and are evaluating appropriate organizational changes to minimize the corresponding tax impact.
The new EIT Law imposes a unified income tax rate of 25% on all domestic-invested enterprises and
FIEs, such as our PRC operating subsidiaries, unless they qualify under certain limited exceptions,
but the EIT Law permits companies to continue to enjoy their existing preferential tax treatments
until such treatments expire in accordance with their current terms. We expect details of the transitional
arrangement for the five-year period from January 1, 2008 to December 31, 2012 applicable to enterprises
approved for establishment prior to March 16, 2007 to be set out in more detailed implementing rules
to be adopted in the future. Any increase in our effective tax rate as a result of the above may adversely affect our operating results. However, details
regarding implementation of this new law are expected to be provided in the form of one or more implementing
regulations to be promulgated by the PRC government, and the timing of the issuance of such implementing
regulations is currently unclear.
22
Results of Operations
For the Three- Month Periods Ended March 31, 2008 and 2007 (Unaudited)
The following tables set forth key components of our results of operations for the periods indicated,
both in dollars and as a percentage of sales revenue and key components of our revenue for the periods
indicated in dollars. The financial data for the three months ended March 31, 2008 reflect the operating
results of the Company, its subsidiaries, and its VIE, iASPEC, while the financial data for the same
period in 2007 reflect the operating results of the Company and its subsidiaries. The non-GAAP financial
data for the three months ended March 31, 2007 reallocates related party revenue from iASPEC.
NON-GAAP
THREE MONTHS
THREE MONTHS
REALLOCATION
THREE MONTHS
ENDED
ENDED
OF
ENDED
MARCH 31,
MARCH 31,
RELATED PARTY
MARCH 31,
2008
2007
REVENUE
2007
REVENUE - THIRD PARTIES
$ 14,404,426
$
1,213,318
$
3,932,251
$
5,145,569
REVENUE - RELATED PARTY
-
1,818,823
(1,818,823)
-
TOTAL REVENUE
14,404,426
3,032,141
5,145,569
COST OF REVENUE
(8,352,264)
(210,712)
(1,771,527)
(1,982,239)
GROSS PROFIT
6,052,162
2,821,429
3,163,330
ADMINISTRATIVE EXPENSES
(1,752,735)
(219,294)
(282,794)
(502,088)
RESEARCH AND DEVELOPMENT EXPENSES
(147,003)
-
-
FEE TO iASPEC UNDER THE TURNKEY AGREEMENT
-
(45,000)
(45,000)
SELLING EXPENSES
(417,703)
(68,669)
(59,107)
(127,776)
INCOME FROM OPERATIONS
3,734,721
2,488,466
2,488,466
OTHER INCOME, NET
69,401
7,525
7,525
INTEREST INCOME
26,603
20,304
20,304
MINORITY INTEREST
(45,000)
-
-
INCOME TAX EXPENSE
(206,745)
(377,444)
(377,444)
NET INCOME
$
3,578,980
$
2,138,851
$
2,138,851
WEIGHTED AVERAGE NUMBER OF SHARES
BASIC
45,985,550
36,446,205
N/A
DILUTED
46,720,415
36,760,592
N/A
EARNINGS PER SHARE
BASIC
$ 0.08
$ 0.06
N/A
DILUTED
$ 0.08
$ 0.06
N/A
23
AS A PERCENTAGE OF REVENUE
NON-GAAP
THREE
    MONTHS
THREE
    MONTHS
THREE
    MONTHS
ENDED
ENDED
ENDED
MARCH
    31,
MARCH
    31,
MARCH
    31,
2008
2007
2007
REVENUE - THIRD
    PARTIES
100%
40.0%
100%
REVENUE - RELATED
    PARTY
0.0%
60.0%
0.0%
COST OF REVENUE
58.0%
6.9%
38.5%
GROSS PROFIT
42.0%
93.1%
61.5%
ADMINISTRATIVE
    EXPENSES
12.2%
7.2%
9.8%
RESEARCH AND
    DEVELOPMENT EXPENSES
1.0%
0.0%
0.0%
FEE TO iASPEC UNDER
    THE TURNKEY AGREEMENT
0.0%
1.5%
0.9%
SELLING EXPENSES
2.9%
2.3%
2.5%
INCOME FROM OPERATIONS
25.9%
82.1%
48.4%
OTHER INCOME
0.5%
0.2%
0.1%
INTEREST INCOME
0.2%
0.7%
0.4%
MINORITY INTEREST
0.3%
0.0%
0.0%
INCOME TAX EXPENSE
1.4%
12.4%
7.3%
NET INCOME
24.8%
70.5%
41.6%
Revenue
For the three months ended March 31, 2008, revenue was $14.4
million, compared to $5.1 million for the same period in 2007, an increase of
$9.3 million, or 180%. After ISDT and Bocom Technology became our wholly-owned
subsidiaries, we consolidated the financial results of these companies starting
from November 1, 2007 and February 1, 2008, which contributed $3.0 million and
$0.8 million, respectively to our revenue for the three months ended March 31,
2008. Our expansion in the market, the development of our new product lines and
our procurement of several large-scale systems integration projects also
contributed this increase, as well as our expansion to markets outside Shenzhen
City and our newly signed contracts with fourteen provinces and provincial
cities in China.
Cost of Revenue
Our cost of revenue increased $6.4 million, or 321%, to $8.4
million, for the three months ended March 31, 2008, from $2.0 million for the
same period in 2007. The consolidation of ISDT and Bocom Technology contributed
$2.0 million and $0.4 million respectively to the increase in the cost of
revenue. The increase was generally in line with the revenue increase. As a
percentage of revenue, our cost of revenue was 58% for the three months ended
March 31, 2008, as compared to 38.5% for the same period in 2007. During the
first quarter of 2008, revenue from large-scale systems integration projects,
such as large-scale hardware projects, comprised a higher proportion of total
revenue. The cost of hardware is greater for procured hardware used in these
large-scale projects, which lead to an increase in our cost of revenue.
24
Gross Profit
For the three months ended March 31, 2008, our gross profit
increased to $6.1 million from $3.2 million for the same period in 2007, a $2.9
million, or 91% increase. For the three months ended March 31, 2008, our gross
profit as a percentage of revenue decreased to 42%, from 61.5% for the same
period in 2007. This 19.5% decrease in gross profit was due to significantly
higher costs for procured hardware and other subcontracting costs related to the
implementation of several large-scale systems integration projects.
Administrative Expenses
Administrative expenses consist primarily of compensation and
benefits to our general management, finance and administrative staff,
professional advisor fees, audit fees and other expenses incurred in connection
with general operations. For the three months ended March 31, 2008, our
administrative expenses increased to $1.8 million, from $0.5 million for the
three months ended March 31, 2007, a $1.3 million, or 249% increase, from period
to period. The increase in administrative expenses was mainly attributable to an
increase in our administrative staff and increased administrative costs such as
salary, office operation expenses and legal and audit fees due to the expansion
of our operations. In addition, $0.4 million of stock-based compensation was
charged to administrative expenses in connection with our 2007 Equity Incentive
Plan. As a percentage of revenue, administrative expenses increased to 12.2% for
the three months ended March 31, 2008, from 9.8% for the same period in 2007. We
believe such increase was generally in line with the increase in our revenue.
Research and Development Expenses
Research and development expenses consist primarily of
personnel-related expenses as well as costs associated with new software product
development and enhancement. Research and development expenses were $0.15
million for the three months ended March 31, 2008, while we had no research and
development expenses for the same period in 2007. The expenses 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 costs that are incurred to produce finished products
after technological feasibility is established.
Selling Expenses
For the three months ended March 31, 2008, our selling
expenses increased to $0.4 million, from $0.1 million for the same period in
2007, a $0.3 million, or 227% increase, from period to period. The consolidation
of Bocom Technology starting from February 1, 2008, contributed $0.13 million of
this increase. As a percentage of revenue, our selling expense for the three
months ended March 31, 2008 and 2007 remained stable, mainly due to management's
implementation of more stringent cost controls.
Income from Operations
Income from operations increased $1.2 million, or 50%, to
$3.7 million for the three months ended March 31, 2008, from $2.5 million for
the same period in 2007. Income from operations as a percentage of revenue
decreased to 25.9% during the three months ended March 31, 2008, from 48.4% for
the same period in 2007. The decrease was due to higher costs for procured
hardware and other subcontracting costs related to the implementation of several
large-scale systems integration projects, and the increase in expenses due to
our expansion in operations described above.
Minority Interest
Minority Interest represents the $45,000 fee retained by iASPEC for the three
months ended March 31, 2008 under the MSA.
Income Tax Expense
Our subsidiaries, IST, ISDT and Bocom Technology, and our
VIE, iASPEC are subject to the PRC EIT at a rate of 18% of assessable profits in 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 expense for
the three months ended March 31, 2008 was $0.2 million. For the same period in
2007, we accrued $0.4 million of income tax expense for IST before we were
granted the EIT exemption by PRC tax authorities on August 10, 2007, retroactive
to as of January 1, 2007.
25
Net Income
As a result of the factors described above, net income increased $1.5 million, or 67%, to $3.6 million
during the three months ended March 31, 2008, from $2.1 million for the same period in 2007.
Results of Operations for Fiscal Years Ended December 31, 2007 and 2006
The following tables set forth key components of our results of operations for the periods indicated,
both in dollars and as a percentage of sales revenue and key components of our revenue for the periods
indicated in dollars. The financial data for the period from January 1, 2006 through October 8, 2006
(the Predecessor Period) reflect the results of operations of iASPEC (our Predecessor). The financial
data for the period from January 17, 2006 through December 31, 2006, and the year ended December
31, 2007 (the Successor Period) reflect the results of operations of the Company and its subsidiaries
in 2006, and the result of operations of the Company , its subsidiaries and iASPEC from July 1, 2007,
the date iASPEC became our VIE, respectively.
2007
2006
Successor
Year
ended
December 31
Reallocation
of
Related Party
Revenue
Non-GAAP
Year
ended
December 31
Predecessor
January 1
through
October 8
Successor
January 17
through
December 31
Reallocation
of
Related Party
Revenue
Combined
Non-GAAP
Year ended
December 31
Revenue – Third Parties
$
24,800,750
$
12,713,673
$
37,514,423
$
9,644,332
$
989,755
$
2,677,498
$
13,311,585
Revenue – Related Party
5,541,959
(5,541,959
)
—
—
1,185,449
(1,185,449
)
—
Cost of revenue
(12,714,170
)
(6,558,443
)
(19,272,613
)
(3,739,518
)
(89,934
)
(858,149
)
(4,687,601
)
Gross profit
17,628,539
18,241,810
5,904,814
2,085,270
8,623,984
Administrative expenses
(3,321,333
)
(526,659
)
(3,847,992
)
(931,108
)
(99,024
)
(633,900
)
(1,664,032
)
Research and development expenses
(424,104
)
(424,104
)
—
—
—
Fee to iASPEC under the
Turnkey
      Agreement
(92,160
)
(92,160
)
—
(45,000
)
(45,000
)
Selling expenses
(480,465
)
(152,315
)
(632,780
)
(157,855
)
(60,013
)
(217,868
)
Income from operations
13,310,477
13,244,774
4,815,851
1,881,233
6,697,084
Other income
79,435
65,703
145,138
6,584
1,305
7,889
Interest income
138,840
138,840
6,912
1,514
8,426
Minority interest
(90,000
)
(90,000
)
—
—
—
Income taxes
(107,300
)
(107,300
)
(749,381
)
(289,403
)
(1,038,784
)
Net income
$
13,331,452
$
13,331,452
$
4,079,966
$
1,594,649
$
5,674,615
Weighted average number of shares
Basic
39,718,967
N/A
N/A
26,958,104
N/A
Diluted
40,152,855
N/A
N/A
26,958,104
N/A
Earnings per share
Basic
$
0.34
N/A
N/A
$
0.06
N/A
Diluted
$
0.33
N/A
N/A
$
0.06
N/A
26
AS A PERCENTAGE OF REVENUE
2007
2006
Successor
Non-GAAP
Combined
Year
ended
December 31
Year
ended
December 31
Non-GAAP
Year
ended
December 31
Revenue-third parties
81.7
%
100.0
%
100.0
%
Revenue-related party
18.3
%
0.0
%
0.0
%
Cost of revenue
41.9
%
51.4
%
35.2
%
Gross profit
58.1
%
48.6
%
64.8
%
Administrative expenses
10.9
%
10.3
%
12.5
%
Research and development expenses
1.4
%
1.1
%
0.0
%
Fee to iASPEC under the Turnkey Agreement
0.3
%
0.2
%
0.3
%
Selling expenses
1.6
%
1.7
%
1.6
%
Income from operations
43.9
%
35.3
%
50.3
%
Other income
0.3
%
0.4
%
0.1
%
Interest income
0.5
%
0.4
%
0.1
%
Minority interest
0.3
%
0.2
%
0.0
%
Income taxes
0.4
%
0.3
%
7.8
%
Net income
43.9
%
35.5
%
42.6
%
Revenue
Our revenue is generated from software products and software operating services. In 2007 we experienced
solid growth in revenues. Revenue for the year ended December 31, 2007 increased $24.2 million, or
182%, to $37.5 million, as compared to $13.3 million for 2006. The increase in our revenue 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 2007. Our significant projects included the
Residency ID Card Project for Shenzhen City Public Security Bureau and the Shenzhen City Immigration
Border Check Station Project. After iASPEC became our VIE and ISDT became our wholly owned subsidiary,
we consolidated the financial results of these two companies starting from July 1, 2007 and November
1, 2007, respectively, which contributed $15.2 million and $2.3 million to revenue in 2007, respectively.
Cost of Revenue
Our cost of revenues increased $14.6 million, or 311%, to $19.3 million, for the fiscal year ended
December 31, 2007, from $4.7 million in 2006. The increase was generally in line with the revenue
increase. As a percentage of revenue, our cost of revenue increased to 51.4% during the year ended
December 31, 2007, from 35.2% in 2006. We were engaged in several large-scale system integration
projects in 2007. Those large-scale projects involved higher costs for procured hardware and other
subcontracting costs. The cost for accomplishing those projects is much higher than pure software
development services and, therefore, led to an increase in our cost of revenues. Such increase was
mainly attributable to the increase of revenue.
Gross Profit
Our gross profit increased $9.6 million, to $18.2 million for the year ended December 31, 2007, from
$8.6 million in 2006. Gross profit as a percentage of revenue was 48.6% for the year ended December
31, 2007, a decrease of 16.2%, from 64.8% in 2006. This 16.2% decrease in gross profit was mainly
due to significantly higher costs for procured hardware and other subcontracting costs related to
the implementation of several large-scale system integration projects. Another factor was the increasing
proportion of hardware sales with higher costs after the November 1, 2007 effective date of our acquisition
of ISDT.
Administrative Expenses
Administrative expenses consist primarily of compensation and benefits to our general management, finance
and administrative staff, professional advisor fees, audit fees and other expenses incurred
in connection with general operations. We expect the dollar amount of our general and administrative
expenses will increase as our business grows and we continue to incur increased costs for being a
public reporting company.
Our administrative expenses increased $2.2 million, or 131%, to $3.8 million for the year ended December
31, 2007, from $1.7 million in 2006. Such increase in administrative expenses was mainly attributable
to an increase in our administrative staffs and increased administrative costs in connection with
the expansion of our operations. The number of our employees increased from 180 in 2006, to 460 in
2007. We believe such increase was generally in line with the increase in our revenue. In addition,
we issued 70,000 bonus shares to our senior management and a consulting service company on November
27, 2007, and we also granted to certain employees options on November 30, 2007 to purchase 490,000
shares of our common stock. These had resulted in a total of $677,891 stock-based compensation cost
charged into administrative expenses. As a percentage of revenue, administrative expenses
decreased to 10.3% for the year ended December 31, 2007 from 12.5% in 2006. This
percentage decrease was primarily attributable to the increase in sales revenues
and management's
27
Research and development expenses
Research and development expenses consist primarily of personnel-related expenses incurred, as well
as, costs associated with new software product development and enhancement. We had no research and
development expenses during the year ended December 31, 2006. The costs that are incurred to produce
finished products after technological feasibility is established is capitalized. We incurred additional
research and development expenses in 2007 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 employed 340 employees
in our software development department as of December 31, 2007.
Selling Expenses
Selling Expenses consist primarily of compensation and benefits to our sales and marketing staffs,
business travels after-sale support, transportation costs and other sales related costs. Our selling
expenses increased $0.4 million, or 190%, to $0.6 million for the year ended December 31, 2007, from
$0.2 million in 2006. The increase is mainly attributable to more marketing fees incurred in securing
sales contracts during 2007. As a percentage of revenue, our selling expenses increased to 1.7% for
the year ended December 31, 2007, from 1.6% in 2006. We believe such increase was generally in line
with the increase in our revenue.
Income from operations
Income from operations increased $6.5 million, or 98%, to $13.2 million for the year ended December
31, 2007, from $6.7 million in 2006. Income from operations as a percentage of revenue decreased
to 35.3% during the year ended December 31, 2007, from 50.3% in 2006. The decrease was due to higher
costs for procured hardware and other subcontracting costs related to the implementation of several
large-scale system integration projects, and the increase in expenses due to our expansion in operations
during 2007.
Interest income
Interest income increased $130,414, or 1548%, to $138,840 for the year ended December 31, 2007, from
$8,426 in 2006. As a percentage of revenue, our interest income increased to 0.4% for the year ended
December 31, 2007, from 0.1% in 2006. Such increase was mainly attributable to the increased cash
balances from our fundraising activities during 2007.
Minority Interest
Minority Interest consists primarily of the shareholder's equity of iASPEC as of June 30, 2007,
when it became our VIE, amounting to approximately $10 million, together with the $90,000 fee retained
by iASPEC under the MSA for the six months ended December 31, 2007.
Provision for Income Taxes
Our subsidiaries, IST and ISDT, and our VIE, iASPEC are subject to EIT at a rate of 15% of assessable
profits. 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 7.5% tax exemption for
the next 3 years. On August 10, 2007, IST was granted the EIT exemption by PRC tax authorities, retroactive
to as of January 1, 2007. Income tax expense for the year ended December 31, 2007 was $0.1 million
and represents taxes on iASPEC's income not attributable to the Company under the MSA. Income
tax expenses were $1.0 million for the year ended December 31, 2006.
Net Income
Net income increased $7.7 million, or 135%, to $13.3 million during the year ended December 31, 2007,
from $5.7 million in 2006. Such increase was primarily attributable to the increase in revenue and
other factors described above.
Liquidity and Capital Resources
Cash Flow and Working Capital
As of March 31, 2008, we had cash and cash equivalents of $23,624,772.
On February 6, 2007, we completed a private placement of 7,868,422 shares of our common stock to two
accredited investors. As a result of the private placement we raised $14.9 million in gross proceeds, which left
us with $13.3 million net proceeds after the deduction of offering expenses in the amount of $1.6
million.
28
On October 25, 2007, we completed another private placement of 5,000,000 shares of our common stock
to certain accredited investors, pursuant to the October Purchase Agreement. As a result of the private
placement we raised $40 million in gross proceeds, which left us with $36.5 million net proceeds,
after the deduction of offering expenses. Under the terms of the October Purchase Agreement, we are
obligated to use the net proceeds from the sale of the shares thereunder for general corporate purposes,
including working capital, for the expansion of current business and for potential acquisitions,
and not for the satisfaction of any portion of our debt (other than payment of trade payables and
accrued expenses in the ordinary course of our business and consistent with prior practices), or
to redeem any of our common stock or common stock equivalents.
On November 7, 2007, we acquired 100% of the equity interests of Fortune Fame, a Hong Kong company,
and its operating PRC subsidiary, Shenzhen Information Security Development Technology Company Ltd
for approximately $7.1 million in cash and 883,333 shares of our common stock.
On December 7, 2007, we entered into an agreement to acquire 100% of the equity interests of Bocom
Multimedia and its operating PRC subsidiary, Bocom Technology. The agreement with Bocom Multimedia
provides for $9 million in cash and the issuance of 1,125,000 shares of our common stock. As of December
31, 2007, we had paid $9 million as a good faith deposit for this acquisition.
On February 15, 2008, our Board of Directors approved our VIE, iASPEC's entry into a share purchase
and increased capital agreement, dated as of February 16, 2008, for the purchase of approximately
57% of Geo for RMB49,500,000 (approximately $7,049,000), which is reflected in deposit for business
acquisition in our condensed consolidated financial statements at March 31, 2008.
We believe that our currently available working capital, after receiving the aggregate proceeds of
our capital raising activities, should be adequate to sustain our operations at our current levels
through at least the next twelve months.
The following table provides the statements of net cash flows for the three months ended March 31,
2008 compared to March 31, 2007 (Unaudited):
Cash Flow
THREE MONTHS
ENDED
MARCH 31,
2008
THREE MONTHS
ENDED
MARCH 31,
2007
Net Cash Used In Operating Activities
$
(4,914,136
)
$
(4,684,091
)
Net Cash Provided by (Used in) Investing Activities
8,366,762
(3,815,710
)
Net Cash Provided by Financing Activities
—
13,111,211
Net Increase in Cash and Cash Equivalents
3,452,626
4,611,410
Effect of Exchange Rate Change on Cash
416,964
10,962
Cash and Cash Equivalents, Beginning
19,755,182
172,316
Cash and Cash Equivalents, Ending
23,624,772
4,794,688
Operating Activities
For the three months ended March 31, 2008 and 2007, net cash used in our operating activities was $4.9
million and $4.7 million, respectively. The increase in cash used in operating activities during
the three months ended March 31, 2008 was mainly due to the increase in accounts receivable and advances
to suppliers as a result of the steady growth of our business operations.
Net cash provided by operating activities was $1.6 million for the year ended December 31, 2007,
which is a decrease of $5.6 million from the $7.2 million net cash provided by operating activities
in 2006. The decrease in cash provided by operations during the year ended December 31, 2007 was
mainly due to the increase in accounts receivable and the decrease in related party payables as a result of consolidating iASPEC effective in the latter half
of 2007.
29
Investing Activities
For the three months ended March 31, 2008, net cash provided by investing activities was $7.7 million
(excluding the $0.7 million of cash acquired from Bocom Technology), which is an increase of $11.5
million, from $3.8 million net cash used in investing activities for the same period in 2007. The
increase in cash provided by investing activities during the three months ended March 31, 2008 was
mainly due to the 15.0 million in cash collected from the sale of our investment in marketable securities
and from the honor of a guarantee by our Chief Executive Officer and controlling shareholder, Mr.
Jiang Huai Lin in connection with this investment, offset by the deposit of $6.9 million in connection
with the acquisition for Geo.
On November 9, 2007, we invested in three equity-linked notes, or ELNs, for HKD176,814,000 (approximately
$22,654,000). The ELNs were linked to three different equity securities traded on the Hong Kong Stock
Exchange. Our Chief Executive Officer and controlling shareholder, Mr. Jiang Huai Lin, provided a
guarantee against any losses sustained as a result of the our investment in the ELNs. On December
28, 2007, the maturity date of the ELNs, one of the ELNs was redeemed by the issuer for cash of HKD
60,000,000 (approximately $7,687,000) and with a gain of HKD906,000 (approximately $116,000). The
other two ELNs were redeemed by the issuer's surrender of the underlying equity securities to
us. On March 25, 2008, when we sold the remaining equity securities, the market value of the underlying
securities was HKD85,009,123 (approximately $10,897,000). To honor his guarantee, on March 28,
2008, Mr. Lin consummated a private sale to certain accredited investors of 1,070,000 restricted
shares of our Common Stock owned by him, for an aggregate purchase price of $4.28 million, or $4.00
per share, and delivered the proceeds from the sale of his shares to us. Mr. Lin will not receive
any shares of our common stock, other security or other consideration for this capital contribution
and has waived any and all rights that he may have to make a claim against us for any such shares,
securities or other consideration in the future. In connection with this private sale transaction,
we entered into a registration rights agreement with the purchasers of Mr. Lin's shares, pursuant
to which, among other things, we agreed to register within a predefined period, shares of its common
stock transferred to them by Mr. Lin. There are no liquidated damages associated with the failure
to timely register these shares.
As a result of Mr. Lin's actions, the transactions did not have any impact on our operating results
or financial condition for the first fiscal quarter of 2008 and will not have such impact for the
remainder of fiscal year 2008. All of our cash is currently invested in interest bearing bank accounts.
In addition, management and our Board of Directors have reviewed our cash management practices and
have now put in place strict controls to ensure that going forward, our cash will only be invested
in straight interest bearing instruments that ensure the liquidity of these funds and the preservation
of capital.
Net cash used in investing activities in the year ended December 31, 2007 was $32 million, which is
an increase of $26.5 million from net cash used in investing activities of $5.5 million in 2006.
Our increase in net cash used in investing activities was primarily attributable to our investment
in ELNs discussed above, and following investing activities: to leverage our business, we paid $9
million as a good faith deposit for the acquisition of Bosom Multimedia and paid $7.1 million for
the acquisition of Fortune Fame; and we purchased our new office building in the Futian District,
as well as computer software and motor vehicles.
Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2008 and 2007 are $0
million and $13.1, respectively. For the three months ended March 31, 2007, net cash provided by
financing activities was mainly attributable to the net proceeds of $13.3 million raised in the private
placement with Pinnacle during January and February 2007. No financing activity occurred during the
first quarter of 2008.
Net cash provided by financing activities in the year ended December 31, 2007 totaled $49.5 million,
as compared to $1.0 million used in 2006. The significant increase in cash provided by financing
activities was primarily attributable to the net proceeds of $49.8 million raised in our two private
placements during the 2007 period.
Obligations Under Material Contracts
During the first half of 2007, our wholly-owned subsidiary, IST, was a party to the Turnkey Agreement
with iASPEC, pursuant to which IST was exclusively engaged as a subcontractor providing iASPEC's
customers with certain outsourcing services (to the extent that those services did not violate any
special governmental permits held by iASPEC and did not involve the transfer of any sensitive confidential
governmental or other data), and IST was obligated under the terms of the Turnkey Agreement to pay
for its own costs in providing these services and to pay iASPEC $180,000 per year throughout the
term of the agreement.
30
IST, iASPEC and iASPEC's shareholders, Mr. Lin and Mr. Jin Zhu Cai, terminated the Turnkey Agreement,
effective as of July 1, 2007, and replaced it on the same day with the Management Services Agreement.
Pursuant to the terms of the Management Services Agreement, iASPEC granted IST an exclusive, royalty-free,
transferable, worldwide, license to use and install for a ten-year term, certain iASPEC software,
along with copies of source and object code relating to such software, in any manner permitted by
applicable laws, and IST licensed back to iASPEC a royalty-free, limited, non-exclusive license to
the Software, without right of sub-license, for the sole purpose of permitting iASPEC to carry out
its business as presently conducted. IST also has the right to designate two Chinese citizens to
serve as senior managers of iASPEC, to serve as a majority on iASPEC's Board of Directors and
assist in managing the business and operations of iASPEC. In addition, both iASPEC and IST will require
the affirmative vote of the majority of our Board of Directors, as well as at least one non-insider
director, for certain material actions with respect to iASPEC, including, but not limited to: (a)
the nomination, appointment, election or replacement of any board members; (b) the distribution of
any dividend or profits; (c) any merger, division, change of corporate form, dissolution or liquidation;
(d) any reimbursement of net losses or other payments or transfers of funds from IST to iASPEC; (e)
the formation or disposition of a subsidiary or the acquisition or disposition of any interest in
any other entity; and (f) the encumbrance of any assets under any lien not in the ordinary course of business.
Under the Management Services Agreement, IST receives 100% of the net received profit of iASPEC, and
reimburses iASPEC for all net losses incurred by iASPEC, as such terms are defined in the Management
Services Agreement, and iASPEC is permitted to retain $180,000 per year out of net received profits.
The Management Services Agreement also provides that IST may advance to iASPEC, at its sole discretion,
amounts to be credited against IST's future obligations to iASPEC. Any such advances are treated
as prepayments and not as loans and iASPEC has no obligation to repay any such advances except by
crediting the amount of such advances against IST's obligation to reimburse net losses, or by
adding the amount thereof to net received profit when and as requested by IST. The parties to the
Management Services Agreement also agreed to the calculation of a true-up amount, consisting of the
cumulative net profit or net losses of iASPEC from October 9, 2006, when iASPEC commenced its contractual
relationship with IST, through the date of the Management Services Agreement, and iASPEC will pay
such true-up amount to IST if there is a net received profit, while IST is obligated to reimburse
such true-up amount to iASPEC if it is there is a net loss. The true-up amount has been calculated
to be $7,005,183, and was repaid by iASPEC to IST before December 31, 2007.
In connection with the MSA, IST also entered into an Option Agreement with iASPEC and its shareholders,
effective as of July 1, 2007, pursuant to which the iASPEC shareholders granted the Company or its
designee(s) an exclusive, irrevocable option to purchase, from time to time, all or a part of iASPEC's
shares or iASPEC's assets from the iASPEC shareholders. However, according to the Option Agreement,
the option may not be exercised by IST if the exercise would violate any applicable laws and regulations
in China or cause any license or permit held by, and necessary for the operation of iASPEC, to be
cancelled or invalidated. Under the terms of the Option Agreement, the option is immediately exercisable
at an exercise price of $1,800,000 in the aggregate, subject to regulatory approval. In addition,
iASPEC and the iASPEC shareholders agreed to use their best efforts to acquire all necessary government
approvals and other consents to complete a share purchase under the Option Agreement. The Option
Agreement may be rescinded by the Company upon 30days' notice and will terminate on the date
that the Company purchases all remaining shares or assets of the Company pursuant to the terms of
the Option Agreement. If any of the parties breaches the Option Agreement and fails to remedy the
breach, the breaching party will pay a penalty of RMB5,000,000 (approximately $683,600) to the non-breaching
party or parties, and compensate the non-breaching party or parties for any losses caused by the
breach. For more details regarding the MSA and Option Agreement, see our Current Report on Form 8-K
filed with the SEC on August 6, 2007.
Seasonality of our Sales
Our operating results and operating cash flows historically have not been subject to seasonal variations.
This pattern may change, however, as a result of new market opportunities or new product introductions.
Inflation
Inflation does not materially affect our business or the results of our operations.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires our management to make assumptions, estimates and judgments that affect
the amounts reported in the financial statements, including the notes thereto, and related disclosures
of commitments and contingencies, if any. We consider our critical accounting policies to be those
that require the more significant judgments and estimates in the preparation of financial statements,
including the following:
•
Basis of Consolidation
  -
Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The consolidated financial statements include the accounts
  of us, our subsidiaries and our VIE for which we are the primary beneficiary. All significant intercompany
  accounts and transactions have been eliminated in consolidation.
31
•
Concentration of Risks
  -
Only entities that possess the necessary government licenses and approvals may obtain
  certain PGIS contracts with PRC Government customers and, because IST is considered a foreign owned
  entity in the PRC, it cannot possess these licenses and approvals. Instead IST relies exclusively
  on iASPEC to solicit, obtain and fulfill PGIS contracts. Through June 30, 2007, this was accomplished
  under the Turnkey Agreement and many of the expenses of IST were incurred and paid by iASPEC. In
  accordance with SEC Staff Accounting Bulletin 55, all of the costs associated with the operations
  of IST have been reflected in its financial statements. Accordingly, through June 30, 2007 substantially
  all costs incurred and paid for by iASPEC have been allocated to IST. Management believes that this
  method of allocation is reasonable. Therefore amounts reported by IST under the Turnkey Agreement,
  included in the consolidated financial statements as Revenue – related party, reflect contract
  amounts net of costs incurred by iASPEC.
•
Goodwill
  -
Goodwill represents the excess of the purchase price over the net of the fair value
  of the identifiable tangible and intangible assets acquired and the fair value of liabilities assumed
  upon the acquisition of Fortune Fame International Investment Limited (Note 4) In accordance with
  Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible
  Assets, our management evaluates the carrying value of goodwill annually or when a possible impairment
  is indicated. We perform our impairment annually during the fourth quarter of the fiscal year and
  determined that there was no impairment of goodwill as of December 31, 2007.
•
Revenue Recognition
  -
Revenues from products are recognized only when persuasive evidence of an arrangement
  exists, delivery has occurred or services have been rendered, the price to the customer is fixed
  or determinable, and collectability is reasonably assured. Generally, revenue is recognized (1) upon
  shipment for equipment and software, (2) as work is performed for professional services and
  (3) in equal periodic amounts over the term of the contract for software and hardware maintenance.
  Our revenue recognition policies are in accordance with SEC Staff Accounting Bulletin No. 104, "
Revenue Recognition
," and AICPA Statement of Position No. 97-2, "
Software Revenue Recognition
".
The majority of revenues are generated from fixed-price contracts, which provide for licenses to software
  products, and services to customize such software to meet customers' use. Generally, when the
  services are determined to be essential to the functionality of the delivered software, revenue is
  recognized using the percentage of completion method of accounting in accordance with SOP 97-2 and
  81-1 "Accounting for Long-term Construction Type Contracts". The percentage of completion
  for each contract is estimated based on the ratio of direct labor hours incurred to total estimated
  direct labor hours.
•
Foreign Currency Translation
  -
The functional currency of our wholly- owned PRC subsidiaries, IST, ISDT and our
  VIE, iASPEC is the Chinese Renminbi Yuan, ("RMB"). RMB is not freely convertible into foreign
  currencies. Our PRC subsidiaries' financial statements are maintained in the functional currency.
  Monetary assets and liabilities denominated in currencies other than the functional currency are
  translated into the functional currency at rates of exchange prevailing at the balance sheet date.
  Transactions denominated in currencies other than the functional currency are translated into the
  functional currency at the exchange rates prevailing at the dates of the transactions. Exchange gains
  or losses arising from foreign currency transactions are included in the determination of net income
  for the respective periods.
On October 9, 2006, in connection with the Acquisition, we adopted the United States dollar as its
  reporting currency. The financial statements for the Predecessor Period have been recast using a
  method consistent with SFAS No. 52,
"Foreign Currency Translation"
to reflect the United States dollar as if the United States dollar had been used for the Predecessor

Period.
Accordingly, for financial reporting purposes, our financial statements, which are prepared using the
  functional currency, have been translated into United States dollars. Assets and liabilities are
  translated at exchange rates at the balance sheet dates and revenue and expenses are translated at
  the average exchange rates, and stockholders' equity is translated at historical exchange rates.
  Any resulting translation adjustments are not included in determining net income but are included
  in foreign exchange adjustment to other comprehensive income, a component of stockholders' equity.
32
The exchange rates adopted are as follows:
December 31,
2007
December 31,
2006
Year end exchange rate
7.3141
7.8050
Average yearly exchange rate
7.6172
7.8050
No representation is made that the RMB amounts could have been, or could be, converted into United

States dollars at the rates used in translation.
•
Income Taxes
  -
Income tax expense is based on reported income before income taxes. Deferred income
  taxes reflect the effect of temporary differences between assets and liabilities that are recognized
  for financial reporting purposes and the amounts that are recognized for income tax purposes. In
  accordance with SFAS No. 109
, "Accounting for Income Taxes,"
these deferred taxes are measured by applying currently enacted tax laws.
•
Earnings per Share
  -
Basic earnings per share is computed by dividing income available to common shareholders
  by the weighted-average number of common shares outstanding during the period. Diluted earnings per
  share reflects the potential dilution that could occur if securities or other contracts to issue
  common stock were exercised or converted into common stock, or resulted in the issuance of common
  stock that shared in the earnings of the entity. For the year ended December 31, 2007, dilutive securities
  represent outstanding warrants to acquire 840,632 shares of common stock. There were no outstanding
  dilutive securities during 2006.
Recent Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141 (R), "Business Combinations", which becomes
effective for fiscal periods beginning after December 15, 2008. SFAS No. 141 (R) requires
all business combinations completed after the effective date to be accounted for by applying the
acquisition method (previously referred to as the purchase method). Companies applying this method
will have to identify the acquirer, determine the acquisition date and purchase price and recognize
at their acquisition date fair values of the identifiable assets acquired, liabilities assumed, and
any non-controlling interests in the acquiree. In the case of a bargain purchase the acquirer is
required to reevaluate the measurements of the recognized assets and liabilities at the acquisition
date and recognize a gain on that date if an excess remains. We do not expect the adoption of this
statement to have a material impact on our financial statements.
In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial
Statements, an Amendment of ARB 51" ("SFAS 160") which becomes effective for fiscal
periods beginning after December 15, 2008. This statement amends ARB 51 to establish accounting
and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation
of a subsidiary. The statement requires consolidated net income to be reported at amounts that include
the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure
on the face of the consolidated statement of income, of the amounts of consolidated net income attributable
to the parent and to the non-controlling interest. In addition this statement establishes a single
method of accounting for changes in a parent's ownership interest in a subsidiary that do not
result in deconsolidation and requires that a parent recognize a gain or loss in net income when
a subsidiary is deconsolidated. We do not expect the adoption of this statement to have a material
impact on our financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS 157").
This statement does not require any new fair value measurements but provides guidance on how to measure
fair value and clarifies the definition of fair value under accounting principles generally accepted
in the United States of America. This statement also requires new disclosures about the extent to
which fair value measurements in financial statements are based on quoted market prices, market-corroborated
inputs, or unobservable inputs that are based on management's judgments and estimates. The statement
is effective for fiscal years beginning after November 15, 2008. for non-financial assets and liabilities,
and is effective for fiscal year beginning after November 15, 2007 for financial assets and liabilities.
The statement will be applied prospectively by us for any fair value measurements that arise after
the date of adoption.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and
Financial Liabilities—Including an Amendment of FASB Statement No. 115" ("SFAS No.
159"). SFAS No. 159 allows companies the choice to measure many financial instruments and certain
other items at fair value. This gives a company the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without having to apply complex
hedge accounting provisions. SFAS No. 159 is effective for fiscal years beginning after November 15,
2007. Management is currently evaluating the impact this standard may have on our consolidated operating
results and financial position upon adoption.
33
Off-Balance Sheet Arrangements
We do not have any off-balance arrangements.
CORPORATE STRUCTURE AND HISTORY
Background and Recent Developments
We were originally organized under the laws of the State of Florida, on September 19, 1979, under the
name Mark Thomas Publishing Inc. and on April 29, 2003 we changed our name to Irish Mag, Inc., and
on January 26, 2007 we changed our name to China Public Security Technology, Inc. From our inception
through October 6, 2006, we provided consulting services in the offset printing industry, targeting
individual retail consumers as well as small to mid-size companies. However, as a result of the reverse
merger transaction discussed below, we are now a provider of integrated solutions for the public
security sector in China, specializing in providing public security information communication applications
and GIS software services.
On April 2, 2007, we entered into an agreement and plan of merger with China Information Security
Technology, Inc., or CIST, our wholly-owned subsidiary Nevada subsidiary, pursuant to which we merged
with and into CIST, with CIST being the surviving entity. As a result of the reincorporation, effective
as of April 7, 2008, our name has been changed to China Information Security Technology, Inc and
our legal domicile is now Nevada.
Reverse Merger Transaction
Between October 6, 2006 and January 31, 2007, our shareholders approved a series of transactions whereby
we purchased all the issued and outstanding stock of CPSH from our current Chairman and Executive
Officer Jiang Huai Lin, for 25,500,000 shares of our common stock in the aggregate. As a result of
these transactions CPSH and its wholly-owned subsidiary, IST, became our wholly-owned subsidiaries,
and Mr. Lin became the beneficial owner of 25,500,000 shares of our common stock in the aggregate,
which, at January 31, 2007, constituted 80.8% of our issued and outstanding common stock. Mr. Lin
has since transferred 1,182,065 of these shares and now holds 21,717,935 of these shares directly
and 2,600,000 of these shares indirectly through Total Device Management Limited, an entity controlled
by Mr. Lin.
January Private Placement
On January 16, 2007, we entered into a securities purchase agreement, or January Purchase Agreement,
with two accredited Investors, or the January Investors, led by Pinnacle China Fund, L.P., pursuant
to which, as amended, we agreed to issue and sell to the January Investors up to 7,868,422 shares
of our common stock equaling 19.96% of our issued and outstanding capital stock, for a purchase price,
in the aggregate, of up to $14,950,001.80 or $1.90 per share, half of which was issued for one-half
of the aggregate purchase price on January 31, 2007, and the remaining half of which was issued for
the balance of the aggregate purchase price on February 6, 2007. We additionally represented and
warranted in the January Purchase Agreement that, except for one contract, Shenzhen iASPEC Software
Engineering Company Limited, or iASPEC, a company also controlled by our controlling stockholder,
Mr. Jiang Huai Lin, would not require a certain governmental permit to perform under the Amended
and Restated Turnkey Agreement, or Amended Turnkey Agreement, dated January 31, 2007, as amended,
between iASPEC and our indirect Chinese Subsidiary, Information Security Technology (China) Co.,
Ltd. (formerly, Bo Hai Wen Technology (Shenzhen) Company Limited), and that IST's performance
of the services under the agreement does not conflict with or violate any laws or regulations of
the People's Republic of China, or the PRC. In addition, the parties provided for a payment
of liquidated damages to each of the January Investors, equal to the amount of each Investor's
pro rata share of the purchase price, if (a) any government agency of the PRC takes any action that
materially or adversely affects the restructuring of our arrangements with iASPEC effected simultaneously
with the closing of the January Purchase Agreement and (b) we cannot undo such government action
or otherwise address such material adverse effect to the reasonable satisfaction of the January Investors
within 60 days of such occurrence.
Roth Capital Partners, LLC acted as our placement agent, or Placement Agent, in connection with the
offering of the shares to the January Investors under the January Purchase Agreement. As compensation
for its services, the Placement Agent received a cash fee equal to $1,046,500, representing 7% of
the gross proceeds received from the sale of the shares, of which a 20% cash fee was payable by us
directly to Oppenheimer & Co., Inc., for its services as a finder, or Finder, in connection with
the offering. The Placement Agent will also receive warrants to purchase 550,789 shares of our common
stock, representing 7% of the gross proceeds received from the sale of the shares divided by the
per share price of the shares, 20% of which was also payable by us directly to the Finder. The Placement
Agent and Finder warrants have a term of five years, were exercisable immediately on issuance and
have an exercise price equaling up to 120% of the per share purchase price of the shares purchased
by the January Investors. In addition, we reimbursed the Placement Agent for reasonable out-of-pocket expenses incurred in connection
with the offering and for all road show related expenses.
34
Management Service Agreement
From October 9, 2006 through June 30, 2007, we operated under a Business Turnkey Agreement, or Turnkey
Agreement, with iASPEC, pursuant to which iASPEC exclusively engaged IST as its subcontractor to
provide iASPEC with outsourcing services (to the extent that those services do not violate any special
governmental permits held by iASPEC and do not involve the improper transfer of any sensitive confidential
governmental or other data). The Turnkey Agreement also provided for a revenue sharing arrangement
between iASPEC and IST where IST was entitled to between 90% and 100% of the revenues actually received
by iASPEC from servicing contracts involving any iASPEC business, but was obligated to pay for its
own costs in providing these services and to pay iASPEC $180,000 per year throughout the term of
the agreement.
Effective July 1, 2007, iASPEC and iASPEC's shareholders, Mr. Lin and Mr. Jin Zhu Cai agreed to
terminate the Turnkey Agreement and replaced it on the same day with a management service agreement,
or Management Service Agreement. Pursuant to the terms of the Management Service Agreement, iASPEC
granted IST an exclusive, royalty-free, transferable, worldwide, license to use and install for a
ten-year term, certain iASPEC software, along with copies of source and object code relating to such
software, in any manner permitted by applicable laws, and IST licensed back to iASPEC a royalty-free,
limited, non-exclusive license to the Software, without right of sub-license, for the sole purpose
of permitting iASPEC to carry out its business as presently conducted. IST will also have the right
to designate two Chinese citizens to serve as senior managers of iASPEC, to serve on iASPEC's
Board of Directors and assist in managing the business and operations of iASPEC. In addition, both
iASPEC and IST will require the affirmative vote of the majority of our Board of Directors, as well
as at least one non-insider director, for certain material actions with respect to iASPEC, including,
but not limited to: (a) the nomination, appointment, election or replacement of any board members;
(b) the distribution of any dividend or profits; (c) any merger, division, change of corporate form,
dissolution or liquidation; (d) any reimbursement of net losses or other payments or transfers of
funds from IST to iASPEC; (e) the formation or disposition of a subsidiary or the acquisition or
disposition of any interest in any other entity; and (f) the encumbrance of any assets under any
lien not in the ordinary course of business. Furthermore, under the Management Service Agreement,
IST will receive 100% of the net received profit of iASPEC and will reimburse iASPEC for all net
losses incurred by iASPEC. The net profit of iASPEC will be paid to IST, and the net losses of iASPEC
will be reimbursed by IST, no later than the last day of the month following the end of each calendar
quarter, commencing on July 1, 2007. IST is also obligated to pay iASPEC $180,000 per year, no later
than the last day of the month following the end of each calendar year, commencing on July 1, 2007,
and this amount may be retained by iASPEC out of any net received profit due and payable to IST as
of such payment date. IST may also advance to iASPEC, at its sole discretion, amounts to be credited
against IST's future obligations to iASPEC, but any such advances will be treated as prepayments
and not as loans. iASPEC will have no obligation to repay any such advances except by crediting the
amount of such advances against IST's obligation to reimburse net losses, or by adding the amount
thereof to net profit when and as requested by IST. If iASPEC or any of the iASPEC shareholders materially
breaches the Management Service Agreement and fails to remedy the breach within 60 days' notice
from IST of such breach, they will be jointly and severally obligated to pay to IST liquidated damages
in an amount equal to the higher of (a) eight times the annualized revenues of IST for the last completed fiscal quarter, or (b) US$50 million.
The Management Service Agreement contains a true-up provision which required iASPEC and IST, on or
before September 30, 2007, to calculate all prior amounts owed to IST under the Turnkey Agreement,
and required iASPEC to pay such amounts. The parties were required to calculate the cumulative net
profit of iASPEC from October 9, 2006, when iASPEC commenced its contractual relationship with IST,
through the commencement date of the Management Service Agreement, and iASPEC was required to pay
the amount due to IST, if there was a net received profit, while IST was obligated to reimburse any
amount to iASPEC if there was a net loss. "Net Received Profit" means the Net Received
Profit of iASPEC, calculated as follows: accrued accounts receivable plus net turnover (revenue),
minus cost of sales, minus operating expenses, and minus accrued but not collected accounts receivable,
but only if the result is a positive number. "Net Losses" means the net losses of iASPEC,
calculated as follows: accrued accounts receivable plus net turnover (revenue), minus cost of sales,
minus operating expenses, and minus accrued but not collected accounts receivable, but only if the
result is a negative number. The calculated true-up amount of $7,005,183 was paid by iASPEC to IST
as of December 31, 2007.
In connection with the Management Service Agreement, IST also entered into a purchase option agreement,
or Option Agreement, with iASPEC and its shareholders, effective as of July 1, 2007, pursuant to
which the iASPEC shareholders granted IST, or its designee(s), an exclusive, irrevocable option to
purchase from the iASPEC shareholders, from time to time, all or a part of iASPEC's shares,
pursuant to an equity transfer agreement, or all or a part of iASPEC's assets, pursuant to an
asset purchase and transfer agreement. However, according to the Option Agreement, the option may
not be exercised by IST if the exercise would violate any applicable laws and regulations in China or cause any license or permit held by, and necessary for the operation of iASPEC, to be cancelled
or invalidated. Under the terms of the Option Agreement, the option is immediately exercisable at
an exercise price of $1,800,000, in the aggregate, subject to regulatory approval. In addition, iASPEC
and the iASPEC shareholders agreed to use their best efforts to acquire all necessary government
approvals and other consents to complete a share purchase under the Option Agreement. The Option
Agreement may be rescinded by IST upon 30 days' notice and will terminate on the date that we
purchase all remaining shares or assets of iASPEC pursuant to the terms of the Option Agreement.
If any of the parties breaches the Option Agreement and fails to remedy the breach, the breaching
party will pay a penalty of RMB5,000,000 (approximately $683,600) to the non-breaching party or parties,
and compensate the non-breaching party or parties for any losses caused by the breach.
35
As a result of the restructuring of its relationship with iASPEC, iASPEC has become a variable interest

entity of our Company. A variable interest represents a contractual or ownership interest in another

entity that causes the holder to absorb the changes in fair value of the other entity's net

assets. Potential variable interests include: holding economic interests, voting rights, or obligations

to an entity; issuing guarantees on behalf of an entity; transferring assets to an entity; managing

the assets of an entity; leasing assets from an entity; and providing financing to an entity. In

such cases FASB Interpretation 46(R), which interprets Accounting Research Bulletin (ARB) 51,
Consolidated Financial Statements
, requires consolidation of such entity by the enterprise that controls the economic risks and rewards
of the entity, regardless of ownership. While we have held an economic interest in iASPEC since October
9, 2006, the Management Service Agreement and the Option Agreement have now given us control over
the business and operations of iASPEC. As a result, iASPEC's financial data is subject to consolidation
with our financial data in accordance with the provisions of FASB Interpretation 46(R), commencing
July 1, 2007. For more details regarding the Management Service Agreement and Option Agreement, see
our Current Report on Form 8-K filed with the SEC on August 6, 2007.
October Private Placement
On October 25, 2007, we entered into a securities purchase agreement, or the October Purchase Agreement,
with certain accredited investors, or Investors. Under the October Purchase Agreement, we agreed
to issue and sell to the Investors up to 5,000,000 shares of our common stock, representing approximately
11% of our issued and outstanding capital stock on a fully-diluted basis as of and immediately after
consummation of the transactions contemplated by the October Purchase Agreement, for an aggregate
purchase price of up to $40,000,000, or $8.00 per share. On October 29, 2007, the 5,000,000 shares
were issued and we received cash proceeds of $36,506,275.
Pursuant to the October Purchase Agreement, we also entered into (i) a registration rights agreement
(the "Registration Rights Agreement") with the Investors, pursuant to which, among other
things, we agreed to register the shares of its common stock issued to the Investors within a pre-defined
period and (ii) a closing escrow agreement (the "Escrow Agreement") with the Investors
and our U.S. legal counsel, as escrow agent, pursuant to which the Investors agreed to deposit the
Purchase Price into escrow to be released upon the occurrence of the events set forth in the Escrow
Agreement. The funds were released in escrow on October 30, 2007, the closing date, and the registration
statement covering these shares was declared effective on February 6, 2008. We also agreed to use
our reasonable best efforts to have our common stock listed and traded on any one of the New York
Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Capital
Market by June 30, 2008.
In connection with the October Purchase Agreement, we issued warrants to Roth Capital Partners, LLC
and Brean Murray, Carret & Co., LLC for the purchase of 300,000 and 100,000 shares of our common
stock, respectively. The warrants are for a term of 5 years, have an exercise price of $9.60 per
share, and include registration rights to register the shares issuable upon exercise of such warrants.
For more details regarding the October Purchase Agreement and the Registration Rights Agreement,
see our Registration Statement on Form S-1, filed with the SEC on February 6, 2008.
Acquisition of Fortune Fame
On November 7, 2007, we acquired 100% of the equity interests of Fortune Fame, and its operating PRC
subsidiary, ISDT, for which we paid approximately $7.1 million in cash and issued 883,333 shares
of its common stock. Of the 883,333 shares of common stock, 383,333 shares were issued to Cheer Crown
International Investment Limited, or Cheer Crown, and 500,000 shares were issued to Mr. Gao, the
Chairman of ISDT's Board of Directors. Under the terms of the acquisition agreement, Mr. Gao,
agreed to continue on as the Chairman of ISDT. Mr. Gao also agreed that he will return 250,000 shares
of our common stock if Fortune Fame does not meet certain net income targets in 2008, and 250,000
shares if Fortune Fame does not meet certain net income targets in 2009.
Acquisition of Bocom Multimedia
On December 9, 2007, we entered into a Share Purchase Agreement (the "Bocom Purchase Agreement"),
with Bocom Venture Inc. ("Bocom Venture"), a British Virgin Islands company, for the acquisition of
100% of the issued and outstanding capital stock of Bocom Multimedia and its wholly-owned Chinese
subsidiary, Bocom Technology, for a purchase price of approximately $18,000,000. We paid approximately
$9,000,000 of the purchase price in cash which is included in deposit for business acquisition as
of December 31, 2007. The remaining $9,000,000 of the purchase price is payable on or before May
1, 2008 in 1,125,000 shares of our common stock. On February 1, 2008, we completed our acquisition
of Bocom Multimedia, and effective immediately, Bocom Multimedia and its subsidiary, Bocom Technology,
became our indirect wholly-owned subsidiary.
36
Bocom Multimedia was formed in Hong Kong on August 10, 2007, and is a leading provider of large screen
digital light processing and integrated solutions in China. Their products have been widely applied
in the fields of public security, communication and multimedia in China. Bocom Multimedia has successfully
completed over 100 digital light processing project installations for police bureaus and municipal
governments in more than ten provinces in China, including Beijing, Shanghai, Chongqing, Sichuan,
Hunan, Guangdong and Fujian.
The following chart reflects our organizational structure as of the date of this prospectus.
Our corporate headquarters are located at 21
st
Floor, Everbright Bank Building, Zhuzilin, Futian District, Shenzhen, Guangdong, 518040, People's
Republic of China. Our telephone number is (+86) 755 -8370-8333. We maintain a website at
www.chinacpby.com
that contains information about our subsidiaries CPSH and Public Security, but that information
is not a part of this prospectus.
Recent Developments
Acquisition of Geo
On February 15, 2008, we approved the entry of our variable interest entity, iASPEC into (1) a share
purchase and increased capital agreement, or the Geo Agreement, dated as of February 16, 2008, by and among iASPEC,
Wuhan Wuda Venture Capital Co., Ltd., or Wuhan Venture, Song Ai Hong and Wuhan Wuda Geoinformatics
Co., Ltd., or Geo, for the purchase of 46% of Geo for a purchase price of approximately $4,819,000,
and to inject an additional approximately $1,388,900 to increase the registered capital of Geo to
approximately $8,333,000 in the aggregate, and (2) a share purchase agreement, or the Li Agreement,
dated as of February 16, 2008, between iASPEC and Li Wei, for the purchase of 2.4% of Geo, for a
purchase price of approximately $666,700. After giving effect to the transactions contemplated by
the Geo Agreement and the Li Agreement, iASPEC paid approximately $6,875,000 for a 57% equity interest
in Wuhan (based on a registered capital of RMB60,000,000). The transaction was consummated on April 1, 2008.
37
Geo was founded in 1999 by Wuhan University, a leading university in Asia for GIS-related studies.
Geo develops and sells GIS software, contracts surveying and mapping projects, produces space measurement
data and provides technical consulting and supervision services for GIS projects. In addition to
its research and development capabilities, Geo provides us with direct access to numerous permits
and mapping data that further enhance our technological capabilities, lower project construction
costs and enable us to price our products and services more competitively. Our ownership of the data
also provide licensing and recurring domestic and international revenue opportunities for us.
As a result of our acquisition of Geo, we are the only company in China with both the Level A Certificate
of Surveying & Mapping and the Computer Information System Integration Level One Qualification
under its umbrella. We believe that these qualifications serve to enhance our technological capabilities
in the GIS sector and gives us additional market presence in other government sectors such as land
and resource planning and civil-use GIS.
Establishment of Board Committees
On April 8, 2008, the Board of Directors of the Company established an Audit Committee, a Compensation
Committee, and a Governance and Nominating Committee and appointed the Company's independent
directors, Yun Sen Huang, Qiang Lin, and Sean Shao to each committee. Mr. Shao was appointed as the
Chair of the Audit Committee, Mr. Huang was appointed as the Chair of the Compensation Committee
and Mr. Lin was appointed as the Chair of the Governance and Nominating Committee. The Board of Directors
of the Company also determined that Mr. Shao possesses accounting or related financial management
experience that qualifies him as financially sophisticated within the meaning of Rule 4350(d)(2)(A)
of the Marketplace Rules of The Nasdaq Stock Market, Inc. and that he is an "audit committee
financial expert" as defined by the rules and regulations of the Securities and Exchange Commission.
BUSINESS
Overview of Our Business
We are a holding company that owns all of the issued and outstanding capital stock of CPSH. CPSH is
also a holding company. We operate through our wholly-owned operating Chinese subsidiary,
IST, ISDT, Bocom Technology and through IST's commercial arrangement with iASPEC, our VIE. Through IST, we are a China
based company providing integrated solutions for the public security sector in China, specializing
in providing public security information communication applications and GIS software services.
Our customers are mostly public sector entities that use our products and services to improve the service
quality and management level of civil and medical emergencies, traffic control, fire control, medical
rescue and border control. Our customers include the Guangdong Public Security Department, the Shenzhen
Border Check Station, the Shenzhen Public Security Bureau, the Shenzhen Traffic Police Bureau, the
Shenzhen Fire Department and the Shantou City Public Security Bureau. In the future we expect to
expand the application of our products and services in the public security sector and to other sectors
in China as well.
We generate revenues through the sale of our integrated hardware and software products and through
the provision of related support services. In fiscal years 2007 and 2006, 68% and 55% of our revenues,
respectively, were generated under our exclusive commercial arrangement with iASPEC. However, fulfillment
of certain PGIS contracts with PRC Government customers is restricted to entities possessing the
necessary government licenses and approvals which IST does not have. The Management Service Agreement
anticipates that iASPEC will fulfill all obligations for PGIS contracts, IST will receive 100% of
the net received profit of iASPEC, net of an annual fee of $180,000, and IST will reimburse iASPEC
for all net losses incurred by iASPEC.
Fortune Fame had no substantive business operations since its formation in July 2007 until it acquired
ISDT on October 26, 2007. ISDT provides a leading CA, an application platform and e-Government solution
technology, and is an exclusive CA application provider for the Shenzhen municipality in the PRC.
The CA certification allows ISDT to issue digital certificates that contain a public key that
can be used by the public to encrypt messages and protect the identity of the user. The CA also certifies that the public key contained in the certificate belongs
to the person, organization, server or other entity noted in the certificate. CAs are currently used
in China's e-Government industry and can be successfully integrated with our e-Government platforms
and solutions to enhance customers' applications.
38
Our Industry
Informatization
Over the past two decades, the PRC government has encouraged the development and use of new technologies

for information and communication (or ICTs) and their application in all spheres of government,
industry,
education and culture. The term "Informatization" or "
xinxihua
" has been coined in China to describe the overall process of ICT application in China and has
in recent years become a linchpin of central and many local economic development strategies.
As a part of the Informatization process, the PRC government has launched a series of online programs
to accelerate its pace of implementing and using information technology to improve China's current
government information management systems, and help promote China's economic development. The
Informatization process has led to a growth in the use of information technology, such as e-Government
platforms and GIS, for public security. An example of this has been the Government Online Project
or GOP. The Government Online Project is a three-stage initiative: Stage One focused upon connecting
800-1,000 government offices and agencies to the Internet; Stage Two focused on having government
offices and agencies move their information systems into compatible electronic form; and Stage Three
focused on making government offices and agencies paperless. The purpose of the GOP is to create
a centrally accessible administrative system that collects and transports data to and from users;
users
being the public and the enterprise system, as well as government departments.
On January 22, 1999, the GOP was formally launched by China Telecom and the State Economic and Trade
Commission's (SETCs) Economic Information Center along with the Information Offices of more
than 40 central government departments. The project interconnects government offices of every province,
autonomous region and municipality. The network will promote the establishment of formal government
websites to provide information and services and then (in theory) also facilitate collaboration between
the government and the nation's growing number of IT enterprises. By developing the basic infrastructure
and encouraging government agencies at all levels to incorporate Internet technologies, the government
hopes to set the tone for online development and, ultimately, e-commerce. Our First Responder Coordination
Platform, Intelligent Border Control and Security Surveillance System, Residence Card Information
Management System are a part of the information technology implementation program of the public security
sector in China.
GIS Industry
The GIS field is a rapidly growing field that incorporates geographical features with data in order
to assess real world problems. In the strictest sense, a GIS is a computer system capable of capturing,
storing, analyzing, and displaying geographically referenced information; that is, data identified
according to location. The term GIS also includes the procedures, operating personnel, and spatial
data that go into the system.
The power of a GIS comes from the ability to relate different information in a spatial context and
reach a conclusion about this relationship. Most of the information we have about our world contains
a location reference, placing that information at some point on the globe. However, GIS can be used
to emphasize objects on a map, their absolute location on the Earth's surface and their spatial
relationships, in a series of attribute tables—the "information" part of a GIS. For
example, while a computer-aided mapping system may represent a road simply as a line, a GIS may also
recognize that road as the boundary between wetland and urban development between two census statistical
areas. A GIS, therefore, can reveal important new information (such as whether features intersect
or whether they are adjacent) that leads to better decision making or solutions.
Data Capture and Integration –
In order to utilize a GIS, data must be directly entered into (or captured by) a GIS in digital
form, that is, in a form the computer can recognize. A GIS can also convert existing digital information,
which may not yet be in map form, into forms it can recognize and use. Map data may also be created
by (1) digitizing maps by hand-tracing with a computer mouse on the screen or on a digitizing tablet
to collect the coordinates of features, (2) using electronic scanners to convert maps to digits,
or (3) uploading coordinates from Global Positioning System or GPS receivers into a GIS. Once a time-consuming
process, the data capture process is now made easier by the development in the GIS industry of software
tools to automatically extract features from satellite images or aerial photographs and create databases
in map form for use in a GIS.
Information Retrieval and Data Output –
With a GIS you can "point" at a location, object, or area on the screen and retrieve
recorded information about it from off-screen files. For example, using scanned aerial photographs
as a visual guide, you can ask a GIS about the location of a fire, analyze the area around the fire
and determine conditions of adjacency (what is next to it), containment (what is enclosed by it) and proximity (how close is something
to it).
39
Another critical component of a GIS is its ability to produce graphics on the screen or on paper to
convey the results of analyses to the people who make decisions about resources. Wall maps, Internet-ready
maps, interactive maps and other graphics can be generated, allowing decision makers to visualize
and thereby understand the results of analyses or simulations of potential events.
Components of GIS
•
Hardware
– Hardware comprises the equipment needed to support the many activities ranging from data
  collection to data analysis. A central piece of the equipment is a workstation, which runs the GIS
  software and is the attachment point for the equipment. Data collection efforts can also require
  the use of a digitizer for conversion of hard copy data to digital data and a GPS data logger to
  collect the field. The use of handheld field technology is also becoming an important tool in GIS.
  With the advent of web-enabled GIS, web servers have become an important piece of equipment for GIS.
•
Software
– Different software packages are important for GIS. Central to this is the GIS application
  package. Such software is essential for creating, editing and adding spatial and attributed data,
  therefore these packages contain a myriad of functions inherent to them. Extensions or add-ons are
  software that extends capabilities of the GIS software package. Component GIS software is the opposite
  of application software. Component GIS seeks to build software applications that meet a specific
  purpose and thus are limited in their spatial analysis capabilities. Utilities are stand-alone programs
  that perform a specific function. For example, a file format utility that converts from one type
  of GIS file to another. There is also web-GIS software that helps serve data through Internet browsers.
•
Data
– Data is the core of any GIS. There are two primary types of data that are used in GIS,
  a geodatabase and attribute data. A geodatabase is a database that is in some way referenced to locations
  on the earth. Geodatabases are grouped into two different types: vector and raster. A vector image
  is stored as geometric objects, such as lines and arcs, which are drawn between specific coordinates.
  If you magnify a vector image you see the lines more accurately, and the line edges stay smooth.
  A raster image is made up from pixels, like the picture obtained from a scanner, or the screen image
  on a computer monitor, and has a finite amount of detail which is dependent upon the image size and
  resolution. However, the closer you look at a raster image the coarser it appears and you don't
  see any extra detail. Vector drawings are utilized in GIS and other applications where accuracy is
  important. Coupled with this data is usually data known as attribute data. Attribute data are data
  that relate to a specific, precisely defined location. The data are often statistical but may be
  text, images or multi-media. These are linked in the GIS to spatial data that define the location.
•
People
- Well-trained people knowledgeable in spatial analysis and skilled in using GIS software are
  essential to the GIS process.
Public Sector Use of GIS
GIS can be used by the public sector in the following ways:
•
Pubic Safety and Emergency Response Planning
– GIS technology gives public safety personnel the ability to manage and analyze large
  amounts of location-based information. Data (including files from legacy systems) can be stored in
  a geodatabase and used to visualize spatial relationships and reveal trends critical to public safety
  response and planning. Computer-generated maps can be shared across a network or the Internet with
  multiple agencies to coordinate efforts and maximize resources.
•
Law Enforcement
– GIS software uses geography and computer-generated maps as an interface for integrating
  and accessing massive amounts of location-based information. GIS allows law enforcement and criminal
  justice personnel to effectively plan for emergency response, determine mitigation priorities, analyze
  historical events, and predict future events. GIS can also be used to get critical information to
  emergency responders upon dispatch or while en route to an incident to assist in tactical planning
  and response. While law enforcement agencies collect vast amounts of data, only a very small part
  of this information can be absorbed from spreadsheets and database files. GIS provides a visual,
  spatial means of displaying data, allowing law enforcement agencies to integrate and leverage their
  data for more informed decision making.
•
Public Works and Development
– Use of GIS software in public works improves efficiency and productivity to better serve
  citizens. For example, GIS applications are in demand in connection with the construction of the
  Pan Asia Railway and development of the Meigong River and Tumen River in the Northwest of China.
  Such public works systems could use GIS to connect all divisions in a public works department from
  engineering to accounting, which streamlines work flows, asset management, operations, and planning.
  Using a GIS throughout the department allows all sections to share and easily access geographic data. GIS promotes data integrity
  and facilitates better communication and decision making throughout the organization.
40
•
Economic Development
– GIS may be used to foster economic development. Agencies could work to advance the quality
  of life and strengthen the economic base of their region by retaining and growing existing businesses
  and attracting new investment.
•
Urban Planning and Site Selection
– Information regarding a proposed site for parcel zoning, transportation planning, waste
  disposal or other use may be combined and manipulated in a GIS to address planning and natural resource
  issues (such as the location of a water well near a proposed waste disposal site) to guarantee the
  quality of life for everyone in livable communities. Planning agencies have realized the power of
  enterprise GIS to identify problems, respond to them efficiently, and share the results with the
  public.
Public Security Information Technology in China
With the urbanization and fast economic growth along the coastal areas of China, the demands for information
technology by government agencies has greatly increased, especially in the areas of urban planning,
travel and land management. PRC government agencies face challenges, such as financial constraints
and public safety, and must find ways to better manage resources and serve their citizens. For example,
police departments explore methods to better protect the public by more effectively and efficiently
analyzing crime patterns within specific geographic areas. Likewise, government authorities look
to improve security by assessing threats across their geographic areas and departments and plan appropriate
emergency responses. Our software services and operations have been concentrated in and are used
by the public security sector (such as by the Police, Fire Department and Healthcare Emergency Services).
The use of security information technology in the private sector is still developing in China and
presents a growth opportunity for us. In the future, we plan to target the telecommunications, logistics
and insurance sectors as areas for business development within the private sector.
Our Products and Services
We offer the following four products and services:
(1)     Public Security Information Technology
* First
Responder Coordination Platform
* Intelligent
Border Control and Security Surveillance Systems
* Residence
Card Information Management System
(2)     Geographic Information Systems (GIS)
(3)     E-Government Platform and Software Sales and Maintenance
Public Security Information Technology
First Responder Coordination Platform
The First Responder Coordination Platform is a software program which integrates the contact numbers
for general police, fire, traffic and other related government organizations into one contact number
and enables these agencies to consolidate and improve their public emergency response. Through this
platform, our public security customers are able to command and coordinate joint responses to provide
the public with immediate, efficient and reliable assistance.
The PRC government, through its "Police Force Technology Reinforcement" initiative, has mandated
the adoption of the first responder system to consolidate and improve public emergency response.
Approximately 660 cities across China are expected to initiate the deployment of their coordinated
emergency response platforms, creating significant opportunities for us.
Intelligent Border Control and Security Surveillance Systems
Our Intelligent Border Control product is used by the Ministry of Public Security for effective border
control management. The Intelligent Border Control System stores biometric information, such as finger-prints
and facial features from passengers in a database and integrates it with infrared and license plate
recognition technologies to enable the automation of border control checkpoints for faster and more
accurate processing of passengers, while at the same time helping to safeguard borders from stowaways, and greatly improving overall efficiency
and the effectiveness of border control management.
41
Compared with traditional surveillance systems, the Intelligent Security Surveillance System adopts
technologies such as biometric recognition, proactive detective and intelligent video analysis, and
integrates with facial recognition, GIS, data storage and analysis, to manage and control surveillance
through a consolidated software platform. This product can be used in city-wide surveillance by the
police department, as well as mass scale applications such as in subways, airports and terminals.
The rapid development of China in recent years has also led to growing passenger traffic across its
borders, which reached 318 million people in 2006. Shenzhen has 11 out of 64 Exit and Entry Frontier
Stations controlled by the Ministry of Public Security in China, through which 167 million passengers
crossed in 2006. The total market opportunity for the Intelligent Border Control System is currently
estimated at $300 million. To address the increasing requirement and faster and more accurate checkpoint
processing of passenger traffic, Exit and Entry Frontier Stations throughout China are in the process
of implementing their own intelligent border control systems. These systems can also be used to strengthen
port control and surveillance in China's 288 air, sea and land ports and have many alternative
private sector applications, including the management and control of stadium attendance, parking
lot traffic, work attendance and toll road traffic.
Residence Card Information Management System
This system is designed to apply the latest information technology to automate the Shenzhen Residence
Card System, and will integrate with police GIS systems. Through an integrated information transfer
platform, the system will facilitate several social programs, including social welfare management,
education management, and house rental service management. Various government and functional departments
can access information regarding the immigrant population in the system to improve work efficacy
and increase managing capability. In the near future, the system may be expanded to be compatible
with other applications, such as medical, personal credit history, and driving records. If successful,
the system may be extended to 660 cities across China. According to national statistics, there are
over 150 million internal immigrants in China. In many mid-to-large cities, the population of recent
immigrants from rural areas exceeds the resident population. As key pilot projects for the Ministry
of China Public Security, our Residence Card information Management System will be first deployed in Shenzhen.
GIS Software Services and Operations
We provide system management and support services in connection with our Police-Use Geographical Information
Services or PGIS Platform. The PGIS platform is a GIS that was developed by iASPEC and licensed exclusively
to us, for use in creating, editing and adding data to our customers' systems. The PGIS platform
allows us to provide our law enforcement customers with different services, including specialized
mapping services, positioning services, messaging services and services which monitor access to their
GIS by users of different levels. We offer the PGIS platform with a full complement of services,
including providing basic map image data from the GIS and specific data in connection with that map
image (such as a bus stop), a consolidation of both basic data and specific data services for data
inquiry services, and application system services, which is the application of consolidated services
to a specific service requirement, such as the position of a police officer in the field.
We also provide application interface services which ensure that our PGIS platform is equipped to interact
with other programs to the benefit of our customers. The data from different law enforcement command
systems can be integrated with our PGIS platform to provide our law enforcement customers with more
robust communication and location information. Typically, our platforms are integrated with the City
Emergency Commanding System, the Police Resource Consolidated Management System, the Residence Management
System, the Internet Surveillance System, the Traffic Commanding System, the Criminal Investigation
System and the City Surveillance System.
Software Sales and Support Services
As a result of our commercial arrangement with iASPEC and our 16 exclusive licenses to iASPEC's
16 copyrighted applications, we have inherited iASPEC's prior service line involving software
sales and distribution and support services. Our Software Sales and Support Services include the
following four categories of services:
•
Software Operation – Application software development, including consolidating the software development
  and pure application software development of different IT projects. Currently our customers for this
  service mainly include government agencies which outsource software development to us.
•
System integration – We build integrated systems with necessary hardware equipment purchased by
  iASPEC on behalf of our customers. The system integration project sometimes includes application
  software development, the revenue of which is incorporated into our Software Operation services.
42
•
Consulting – We provide IT consulting services related to the development of IT systems. For example,
  if a customer needs to build an IT system, we fully investigate the customer's requirements
  and then submit relevant solutions.
•
Software Sales and Distribution – Through our exclusive software license from iASPEC, we are entitled
  to sell and provide relevant software services to our customers. Also, as a distributor for some
  specialized software developers, we sell software products to the end-users, which may occur during
  the delivery of Software Operation, System Integration or Consulting services.
Product Warranty
Our Company usually offers a one-year service warranty for our system integration services. The warranty
includes support services, minimal updates and system maintenance. In our experience the cost of
providing this warranty has been immaterial.
We also offer warranties for our hardware sales, but the suppliers of such hardware provide the final
warranty services.
Our Intellectual Property
We currently have the following registered and copyrighted software products, as well as numerous software
licenses from iASPEC under our Management Service Agreement with iASPEC:
Registration Code
Year
Issued
Name
Version
SHEN DGY-2007-0862
2007
IST Workflow Software
V1.0
SHEN DGY-2007-0861
2007
IST Search Engine Software
V1.0
SHEN DGY-2007-0361
2007
IST Short-message Service Platform Software
V1.0
2004SR09334
2004
iASPEC Case Tracking Management System
V 2.0
2004SR09335
2004
iASPEC Application Envelope System
V 2.1
2004SR09336
2004
iASPEC Quality System Document Management System
V 2.2
2004SR09337
2004
iASPEC e-Logistics Support Management System
V 2.0
2004SR09338
2004
iASPEC Secured and Audited Message Switching System
V 2.5
2004SR09084
2004
iASPEC Project e-Time Tracker Management System
V 2.0
2004SR09085
2004
iASPEC Application e-Monitor System
V 3.3
2004SR09086
2004
iASPEC Remote Administered Distributed Application Architecture System
V 2.1.3
2004SR09087
2004
iASPEC Community and Establishment Management System
V 1.1
2004SR09088
2004
iASPEC Document and Work Flow Management System
V 3.0
2004SR09089
2004
iASPEC e-Community Management and Service System
V 1.0
2006SR11589
2006
iASPEC Content Management System
V 1.0
2006SR11590
2006
iASPEC Three In One Police Computer Assistant Dispense System
V 1.0
2006SR11591
2006
iASPEC Police Force General Management System
V 1.0
2006SR11592
2006
iASPEC General Office Automatization System
V 1.0
2006SR11593
2006
iASPEC Police Geographic Information System
V 1.0
Our newly acquired subsidiaries, ISDT and Bocom Technology, have the following copyrighted software
products:
Registration Code
Year
Issued
Name
Version
SHEN DGY-2007-0857
2007
Bocom Multimedia Display Server Software
V 4.0
SHEN DGY-2007-0858
2007
Bocom Multimedia Screen Printing Software
V 4.0
SHEN DGY-2007-0859
2007
Bocom Multimedia Device Server Software
V 4.0
SHEN DGY-2007-0860
2007
Bocom Multimedia Customer End Software
V 4.0
SHEN DGY-2007-0761
2007
ISDT Supplier Management Software
V 1.0
2007SR09783
2006
ISDT GPS Terminal Security Management Software (XAGPS)
V 1.0
SHEN DGY-2007-0337
2007
ISDT GPS Terminal Security Management Software
V 1.0
SHEN DGY-2007-0759
2007
ISDT General Office Automatization System
V 1.0
SHEN DGY-2007-0759
2007
ISDT Content Management Software
V 1.0
43
All copyrighted software applications are effective 5 years from the date of registration. We expect
to renew all copyrighted software applications prior to their respective expiration date.
In addition, Bocom Multimedia owns the following patents in China:
Patent No.
Effective
Date
Description
Duration
ZL 2006 2 0014548.2
11/14/2007
Fiber Signal Access Device of Large Screen Display
10 years
ZL 2006 2 0014546.3
9/12/2007
General Cable  Signal Access Device of Large Screen Display
10 years
ZL 2006 2 0014549.7
9/12/2007
Bus Signal Access Device of Large Screen Display
10 years
We protect our know-how and technologies through confidentiality provisions in the employment contracts
we enter into with our employees. In addition, our engineers are generally divided into different
project groups, each of which generally handles only a portion of the project. As a result, no one
engineer generally has access to the entire design process and documentation for a particular product.
Sales and Marketing
We develop new business by identifying and contacting potential new customers and through referrals,
or as a result of new customers contacting us because of our reputation in the industry. We strengthen
our market presence through various types of marketing campaigns, such as participating in exhibitions,
trade fairs and seminars, and presenting solutions to prospective customers. We participate in several
domestic and international trade fairs such as the China High-Tech Fair in Shenzhen and the e-Gov
China Fair in Beijing. We also participate in seminars held by ESRI, IBM etc. each year, to raise
our recognition and promote our products. These trade fairs not only promote our reputation, but
also our brand name.
Our main marketing and business development focus is on public security information technology and
GIS software services and operations, and software sales and distribution. We have a good reputation
and brand recognition in this market. We expect to expand in the market and obtain more market shares
through our mature products and quality services.
Our Major Customers
Our VIE, iASPEC serves 46 customers located in the Guangdong Province and Hainan Province in China.
iASPEC has begun to explore markets outside of Guangdong and Hainan Province in China. We do not
have any customers outside of China. Our largest client, Shenzhen General Station of Exit and Entry
Frontier Inspection of the PRC, accounted for 26% of our sales in 2007, and our five largest customers
accounted for 59% of our revenue in 2007.
The following table provides information on our major customers in 2007 and 2006. For 2006, revenues
were generated by our Predecessor company, iASPEC, during the Predecessor Period from January 1,
2006 to October 8, 2006 and by us directly through our turnkey arrangement with iASPEC or directly
with clients during the Successor Period from January 17, 2006 to December 31, 2006. For 2007, revenues
were generated by us through our turnkey arrangement with iASPEC for the period from January 1, 2007
to June 30, 2007 and by us through our VIE, iASPEC, during the period from July 1, 2007 to December
31, 2007. We have combined the Predecessor Period from January 1 through October 8, 2006 and the
Successor Period from January 17 through December 31, 2006 for purposes of the following 2006 analysis.
This is not in accordance with US GAAP and the periods presented are not comparable due to our reverse
acquisition by CPSH. We have also combined the results of operations of CPSH for the period from
January 1, 2007 through December 31, 2007 and the results of iASPEC's operations from January
1, 2007 through June 30, 2007 for purposes of the following 2007 analysis, which is not in accordance
with US GAAP since iASPEC's results were not consolidated into CPSH until July 1, 2007 when it became the VIE.
44
2007
No.
Name
Revenues
(in thousands of
US dollars)
Percentage of
Total Sales
1
Shenzhen General Station Of Exit And Entry Frontier Inspection Of The P.R.C.
$
7,756
26
%
2
Shenzhen City Police Department
6, 498
21
%
3
Shantou City Police Department
2,171
7
%
4
Shenzhen City Futian District Information Center
834
3
%
5
Guangzhou Jieqing Computer Co.,Ltd.
739
2
%
TOTAL
$
17,998
59
%
2006
No.
Name
Revenues
(in thousands of
US dollars)
Percentage of
Total Sales
1
Shenzhen City Police Department
$
1,621
13.8
%
2
Shenzhen City Fire Department
835
7.1
%
3
Shenzhen Immigration Bureau of China
791
6.7
%
4
Shenzhen City Nanshan District Police Department
299
2.5
%
5
Shenzhen City Traffic Police Department
207
1.8
%
TOTAL
$
3,753
31.9
%
Our Competition
The markets for public security Information Technology and GIS in China have developed in recent years,
and currently there are only a few software developers engaged in these fields, especially in the
PGIS area, where we do not currently face any direct competition. However, there are many potential
competitors in this area who could enter the market without significant barriers to entry.
We believe that Beijing Founder Digital Company Limited and Zheng Xian Technology (Shenzhen) Company
Limited pose a threat as potential market entrants in the public security Informatization and GIS
areas. However, we believe that we will be able to effectively compete with these software development
companies should they enter the market for our product and service offerings in the future. There
are barriers to accessing the PGIS market which give us a competitive advantage over our potential
competitors. Our pioneering PGIS platform and our ongoing customer relationships have enabled us
to develop a reputation in the industry.
Our services are designed to provide our customers with integrated and innovative public safety and
security solutions. Key advantages of our solutions include:
•
Growing Portfolio of Software and Services –
We offer our customers location-based public security solutions through our growing portfolio
  of software and services offerings. Government agencies use our core products to incorporate location-based
  data into their decision-making processes to drive more effective results. Through our platforms,
  our customers can develop unique location-based applications, which can be extended across their
  agencies to support a variety of needs and generate more valuable intelligence. As a complement to
  these offerings, we offer related services, such as application development and systems integration,
  which help our customers quickly implement and customize our solutions.
•
Successful Implementation of High Profile Contracts –
Our management team has a proven track record of successful implementation of high profile government
  contracts in China. During 2007, we procured or completed several large-scale system integration
  contracts relating to our First Responder Coordination System, our Intelligent Border Control System
  and our Residence Card Management System. We have successfully implemented our First Responder Coordination
  Platform, which combines the functions of the police emergency system, the fire emergency system,
  and the traffic control emergency system, in Shenzhen City, Guangdong and in Dongbang City, Hainan.
  In April we were granted our third contract for its implementation in the Shantou Special Economic
  Zone of Guangdong Province. We won a contract for the implementation of our Intelligent Border Control
  System at the Shenzhen Bay Port and the Futian Port, the former of which received official recognition
  in July 2007, when China's President Hu Jintao inspected the system and became the first passenger to use the crossing.
45
•
High Barriers to Entry –
Our high qualifications, our successful contractual implementation record, the high cost of
  switching to other providers provides us with a "first mover" advantage in the PRC market
  and poses high barriers to entry for our potential competitors. We have a proven track record of
  contract implementation and our commercial partner, iASPEC holds the Computer Information System
  Integration Level 1 Qualification from the PRC Ministry of Information and the Computer Information
  System Security Service qualification from Guangdong Province. In addition, after investing in our
  systems, our existing customers have a strong incentive to purchase follow-on phases with us in order
  to expedite implementation and save costs.
•
Scalability of Platform –
We have digitized detailed proprietary information systems data related to Shenzhen City and
  Guangdong Province that can be leveraged for future civil-use applications in logistics, insurance,
  and location based services across industries.
Regulation
We are subject to the PRC's foreign currency regulations. The PRC government has control over
RMB reserves through, among other things, direct regulation of the conversion of RMB into other foreign
currencies. Although foreign currencies which are required for "current account" transactions
can be bought freely at authorized Chinese banks, the proper procedural requirements prescribed by
Chinese law must be met. At the same time, Chinese companies are also required to sell their foreign
exchange earnings to authorized Chinese banks and the purchase of foreign currencies for capital
account transactions still requires prior approval of the Chinese government.
Our Chinese subsidiary Information Security Technology (China) Co., Ltd. ("IST"), is a Shenzhen
City Software Enterprise, holds ISO 9001:2000 Certification and Maturity Level 2 of Capability Maturity
Model Integration. However, fulfillment of certain PGIS contracts with PRC Government customers is
restricted to entities possessing the necessary government licenses and approvals which IST does
not have. Through our exclusive commercial arrangements with iASPEC we benefit from the following
governmental licenses and permits previously awarded and currently held by iASPEC:
Name
Duration
Computer System Integration Level One Qualification from PRC
Ministry of Information
June 11, 2007 – June 10, 2010
State Secret related Computer Information System Integration
Certificate
April 26, 2004 - April 25, 2008
Guangdong Province Computer Information System Security
Service Qualification
July 22, 2004 - July 22, 2008
Shenzhen City Key Software Enterprise
March 28, 2007 - March 27, 2008
Shenzhen City High Technology Enterprise
December 31, 2001 - June 24, 2008
Guangdong Province Security Technology Surveillance System
Design, Implementation and Repair Qualification
October 31, 2007 – October 30, 2009
Maturity Level 3 of Capability Maturity Model Integration
September 2007 (Authorized Date)
In addition, Bocom Multimedia holds the following certifications and qualifications:
Holder
Name
Duration
Bocom Multimedia
ISO 9001:2000 Certification from
Universal Certification Service Co., Ltd.
November 08, 2004 – September 26, 2010
Bocom Multimedia
Certificate for China Compulsory Product
Certification
August 14, 2007 (Authorized Date)
Our Employees
As of December 31, 2007, we had approximately 460 full-time employees. The following table illustrates
the allocation of these employees among the various job functions conducted at our company.
Department
Number of Employees
Software Development
340
Sales & Marketing
50
Admin & Human Resources
25
Accounting
20
Corporate Finance
15
Management
10
Total
460
46
We believe that our relationship with our employees is good. The remuneration payable to employees
includes basic salaries and allowances. We also provide training for our staff from time to time
to enhance their technical knowledge.
We have not experienced any significant problems or disruption to our operations due to labor disputes,
nor have we experienced any difficulties in recruitment and retention of experienced staff.
Our Chinese subsidiaries have trade unions which protect employees' rights, aim to assist in the
fulfillment of our economic objectives, encourage employee participation in management decisions
and assist in mediating disputes between us and union members.
As required by applicable Chinese law, we have entered into employment contracts with all of our officers,
managers and employees.
Our employees in China participate in a state pension scheme organized by Chinese municipal and provincial
governments. We are required to contribute to the scheme at rates ranging from 13% to 18% of the
average monthly salary. As of the date of this report, we have complied with the regulation and have
paid the state pension plan as required by law.
In addition, we are required by Chinese law to cover employees in China with various types of social
insurance. We have purchased social insurance for all of our employees.
With the expansion of our business operations and several anticipated acquisitions, we expect that
the number of our employees will increase in the next 12 months.
Our Properties and Facilities
All land in China is owned by the state or collectives. Individuals and companies are permitted to
acquire rights to use land or land use rights for specific purposes. In the case of land used for
industrial purposes, the land use rights are granted for a period of 50 years. This period may be
renewed at the expiration of the initial and any subsequent terms according to the relevant Chinese
laws. Granted land use rights are transferable and may be used as security for borrowings and other
obligations.
Prior to June 2007, our subsidiary IST occupied space in offices pursuant to a six month rental agreement.
In June 2007, we moved into our new executive offices located on the 21st Floor of the Everbright
Bank Bldg., Zhuzilin, Futian District, Shenzhen, China, for which IST currently has land use rights.
Our new executive offices, consist of approximately 1,200 square meters, all of which are dedicated
to administrative office space. We have fully paid the land use fees. Our other property primarily
consists of computer equipment, servers, licensed software, some furniture and fixtures. There is
no lien on any of our property and we currently do not have any intention to make large scale improvements
or developments with respect to these properties.
We believe that all our properties have been adequately maintained, are generally in good condition,
and are suitable and adequate for our business.
MANAGEMENT
Directors, Executive Officers and Significant Employees
The following sets forth the name and position of each of our current executive officers and directors.
Name
Age
Position
Jiang Huai Lin
38
President, Chief Executive Officer, and Chairman of the Board
Zhi Xiong Huang
38
Director and Chief Operating Officer
Zhaoyang Chen
43
Chief Financial Officer
Yun Sen Huang
61
Director
Qiang Lin
61
Director
Yi Gang Shen
34
Chief Technology Officer
Sean Shao
51
Director
47
MR.  JIANG HUAI LIN
has been a member of our Board of Directors since September 6, 2006 and he became our President
and Chief Executive Officer on October 3, 2006. Mr. Lin has also served as the Chairman and Chief
Executive Officer of our subsidiary, IST, since its incorporation in January 2006. During the period
from September 2000 to June 2004, Mr. Lin served as the President and Chief Executive Officer of
Hong Kong United Development Group, a consolidated enterprise engaging in investment, high technology
and education. Before that, during the period from February 1995 through August 2000, Mr. Lin was
a Director and the General Manager of Fujian Wild Wolf Electronics Limited, a company engaged in
the business of manufacturing electrical consumer products. Mr. Lin holds a Bachelor's degree
in Industrial Accounting from Xiamen University.
MR. ZHI XIONGHUANG
was appointed as our Chief Operating Officer on May 10, 2007 and has served as a member on our
Board of Directors since November 28, 2006. Mr. Huang has also served as the Vice-President of our
subsidiary IST since its incorporation in January 2006. Since September 2002, he has also been a
Vice President of iASPEC, where he supervises iASPEC's research and development activities and
consults on various types of sophisticated, technical issues. Between July 2001 and March 2002, Mr.
Huang served as the General Manager of product development of Shenzhen Runsheng Information Systems
Company Ltd. and was responsible for overseeing general operations. He holds a B.S. in computer science
from Hehai University in China and has over fifteen years' experience in information systems.
Mr. Huang is currently a Director of the Shenzhen Computer Association and is an Expert with the
Shenzhen Expert Association, a nonprofit organization.
MR. ZHAOYANG CHEN
was appointed as our Chief Financial Officer on December 13, 2007. Mr. Chen has had over 15
years' experience in the field of financial management and investments and has served as our
Vice President of Investments since April 2007. Prior to joining the Company, Mr. Chen served from
July 2004 to March 2007 as the General Manager of the Gaoying Group (Hong Kong), where he was responsible
for overall operations and several acquisition projects. Prior to that Mr. Chen served from September
1999 to June 2004 as the Assistant General Manager of the Shenzhen Zheng Jia Investment Company,
where he was responsible for corporate finance management and project investments. Mr. Chen has also
served as the General Manager of Risk Control for the Shenzhen Zhong Cheng Enterprises Group and
as the Chief Financial Officer and Director of Guizhou Fu Bao Co., Ltd. during its application for
A Share listing in China. Mr. Chen holds a Bachelor's degree in Accounting from the Hangzhou
Dianzi University.
MR. YUN SEN HUANG
has been a member of our Board of Directors since August 10, 2007. Mr. Huang has been a Professor
in the School of Information Engineering at Shenzhen University since September 1984. He has been
involved in many computer application projects, and has received many awards, including a First Grade
Award of Technology Advancement from Sichuan Province, a Second Grade Award of Technology Advancement
from Guangdong Province, and a Third Grade Award of Technology Advancement from the Chemical Ministry.
Mr. Huang has published eight books in the field of Networks and Multimedia Applications. In addition,
Mr. Huang was a founder of the International Software Development (Shenzhen) Co., Ltd, a co-partnership
company incorporated by IBM, East Asia Bank, and Shenzhen SDC Company, and its Chairman between 2001-2006.
Currently, Mr. Huang is a Director of the Shenzhen Computer Academy, a Vice Director of the Guangdong
Province Computer Academy, as well as, Executive Director of the China University Computer Basic
Education Committee. Mr. Huang holds a Bachelor's Degree of Electronics Engineering from Tsinghua
University. There is no relationship between Mr. Huang and our Chief Operating Officer, Zhi Xiong Huang.
MR. QIANG LIN
has been a member of our Board of Directors since August 10, 2007. Mr. Lin has been a Professor
in the School of Information Engineering at Shenzhen University since September 2002. From July 1997
to September 2002, Mr. Lin served as the Director of Computer Science and Technology Department at
Shenzhen University. Mr. Lin has been engaged in teaching and research in the Computer Applications
field for many years. Presently, he is a postgraduate advisor and teacher and focuses his research
in the fields of Computer Networks, Information Systems, Databases, and ERP systems. Mr. Lin has
published many research papers in China's
Computer Science
. He is also the editor-in-chief of
Electrical Business Foundation
. Mr. Lin has significant research experience in information systems, electronic business, logistics,
and image disposal and has successfully developed many computer application systems as a project
principal. He has been awarded with a First Grade Award of Software Development from the Chinese
Chemical Ministry and a Third Grade Award of Science and Technology Development by Guangdong Province.
Mr. Lin holds a Master Degree of Computing Mathematics from Zhongshan University
.
There is no relationship between Mr. Lin and our Chief Executive Officer, Jiang Huai Lin.
MR. YI GANG SHEN
was appointed as our Chief Technology Officer on May 10, 2007. Prior to this, Mr. Shen served
as the Director of the R&D Center of Shenzhen iASPEC Software Engineering Co., Ltd. from February
2006 to May 2007. From March 2003 to January 2006, Mr. Shen served as the Director of product and
business development of Li Ming Network Co., Ltd., and from June 2000 to February 2003, Mr. Shen
served as the Project Manager of "TOM.COM", a company listed on the Hong Kong GEM. Mr.
Shen has over ten years of IT experience in different areas such as e-government and financing. Mr.
Shen graduated from Lanzhou University of China where he earned a Bachelor's Degree in Electronics and Information Science and holds the Senior Project Manager
certificate awarded by China's Ministry of Information Industry.
48
MR. SEAN SHAO
has been a member of our Board of Directors since April 1, 2008. Mr. Shao has been serving as Chief
Financial Officer of Trina Solar Limited since August 2006, where he assisted it in listing on the
NYSE in December 2006. Previously he was the Chief Financial Officer of ChinaEdu Corporation, a Chinese
educational service provider, from September 2005 to August 2006 and was the Chief Financial Officer
of Watchdata Technologies Ltd., a Chinese security software company, from August 2004 to September
2005. He was previously a senior manager at Deloitte Touche Tohmatsu CPA Ltd., Beijing from October
1998 to July 2004 and an assistant manager at Deloitte & Touche Toronto from December 1994 to
November 1997. Mr. Shao received his Master's degree in Health Care Administration from the
University of California at Los Angeles in 1988 and his Bachelor's degree in Art from East China
Normal University in 1982. Mr. Shao is an associate member of the American Institute of Certified
Public Accountants.
There are no agreements or understandings for any of our executive officers or directors to resign
at the request of another person and no officer or director is acting on behalf of nor will any of
them act at the direction of any other person.
Family Relationships
There are no family relationships among our directors or officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, except as set forth in our discussion below in "Certain Relationships
and Related Transactions," none of our directors, director nominees or executive officers has
been involved in any transactions with us or any of our directors, executive officers, affiliates
or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
None of the directors, director designees or executive officers to our knowledge has been convicted
in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party
to any judicial or administrative proceeding during the past five years that resulted in a judgment,
decree or final order enjoining the person from future violations of, or prohibiting activities subject
to, federal or state securities laws, or a finding of any violation of federal or state securities
laws, except for matters that were dismissed without sanction or settlement.
Promoters and Certain Control Persons
We did not have any promoters at any time during the past five fiscal years.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially
own more than ten percent of our equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater than ten percent shareholders
are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based
on its review of the copies of such forms received by us all such filing requirements applicable
to its officers and directors were complied with during the fiscal year ended December 31, 2007.
Code of Ethics
On December 25, 2007, our Board of Directors amended and restated its current code of ethics, or Code
of Ethics, so that it conforms to the rules and regulations of The Nasdaq Stock Market, Inc. The
Code of Ethics applies to all of our directors, officers and employees, including our principal executive
officer, principal financial officer, and principal accounting officer. Our Code of Ethics will serve
as our Company's "code of ethics," as defined in Item 406(b) of Regulation S-K.
Our Code of Ethics addresses, among other things, honesty and ethical conduct, conflicts of interest,
compliance with laws, regulations and policies, confidentiality, and reporting of violations of the
code. A copy of the Code of Ethics is attached to this report as Exhibit 14 and is incorporated herein
by reference. Our Code of Ethics will also be posted on the corporate governance page of our website
at
www.chinacpby.com
as soon as practicable.
Material Changes to Director Nomination Procedures
We currently do not have standing audit, nominating or compensation committees. Currently, our entire
board of directors is responsible for the functions that would otherwise be handled by these committees.
We intend, however, to establish an audit committee, a nominating committee and a compensation committee of the board of
directors during the second quarter of 2008. We envision that the audit committee will be primarily
responsible for reviewing the services performed by our independent auditors, evaluating our accounting
policies and our system of internal controls. The nominating committee would be primarily responsible
for nominating directors and setting policies and procedures for the nomination of directors. The
nominating committee would also be responsible for overseeing the creation and implementation of
our corporate governance policies and procedures. The compensation committee will be primarily responsible
for reviewing and approving our salary and benefit policies (including stock options), including
compensation of executive officers.
49
Shareholder Communications
Shareholders who wish to communicate with the Board may write to it at our address given above. These
communications will be reviewed by one or more employees of the Company designated by the Board,
who will determine whether they should be presented to the Board. The purpose of this screening is
to allow the Board to avoid having to consider irrelevant or inappropriate communications.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning all cash and non-cash compensation awarded to,
earned by or paid to the following persons for services rendered in all capacities during the noted
periods: Jiang Huai Lin, our Chief Executive Officer, Mr. Zhi Xiong Huang, our Chief Operating Officer,
and Mr. Zhaoyang Chen, our Chief Financial Officer. No other executive officers received total annual
salary and bonus compensation in excess of $100,000.
Name and
Principal Position
Year
Salary($)
Bonus($)
Stock
Awards
($)
Option
Awards
(No.of
shares)
Non-Equity
Incentive
Plan Compensation
Earnings
($)
Non-qualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)
Jiang Huai Lin,
Chairman, CEO,
and President
(1)
2006
15,550
—
—
—
—
—
45,000
(2)
60,550
2007
45,949
—
261,000
(3)
—
—
—
108,000
(2)
414,949
Zhi Xiong Huang,
Director and Chief
Operating
Officer
(4)
2006
—
—
—
—
—
—
—
—
2007
27,359
—
174,000
(5)
—
—
—
—
201,359
Narrative to Summary Compensation Table
(1)
On September 6, 2006, Mr. Lin became our Chairman and on October 3, 2006 he became our President and
  Chief Executive Officer. Prior to that, Mr. Lin was (and continues to be) the Chairman and Chief
  Executive Officer of our subsidiary, IST. The annual, long term and other compensation shown in this
  table includes the amount Mr. Lin received from IST during the applicable periods.
(2)
This amount constitutes amounts due to iASPEC under a license agreement between iASPEC and IST. Mr.
  Lin controls 60% of the equity interests of iASPEC.
(3)
Represents the Fair Market Value of 30,000 shares of our common stock, par value $0.01, awarded to
  Mr. Lin on November 27, 2007, pursuant to the Plan.
(4)
Mr. Huang became our Chief Operating Officer on May 10, 2007 and has served on our Board of Directors
  since November 28, 2006. Mr. Huang has also served as the Vice-President of our subsidiary, IST since
  its incorporation in January 2006.
(5)
Represents the Fair Market Value of 20,000 shares of our common stock, par value $0.01, awarded to
  Mr. Huang on November 27, 2007, pursuant to the Plan.
Outstanding Equity Awards at Fiscal Year End
Other than as set forth below, none of our executive officers received unexercised options, stock that
has not vested or
50
equity incentive plan awards that remained outstanding as of the end of the fiscal year ended December
31, 2007.
Name
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(1)
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
Option
Exercise
Price ($)
Option
Expiration
Date
Number of
Shares or
Units of
Stock That
Have Not
Vested (#)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
Equity
Incentive
Plan
Awards:
Number of
Unearned Shares,
Units or Other
Rights That
Have Not
Vested (#)
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other Rights
That Have
Not Vested ($)
Zhaoyang Chen,
Chief Financial
Officer
0
20,000
0
9.48
12/5/2011
N/A
N/A
N/A
N/A
Narrative to outstanding equity awards table
(1)
Represents options to purchase 20,000 shares of our common stock, par value $0.01, which
were granted to Mr. Chen, pursuant to the Plan. The options had an exercise price of $9.48 per share,
were to vest on December 5, 2008 and to expire on December 5, 2011. However, on March 3, 2008,
our Board of Directors voided and canceled the grant of the options to Mr. Chen, effective as of
the date of the grant.
We use the Black-Scholes option pricing model to measure the fair value of stock options, granted in
2007. The determination of the fair value of stock-based compensation awards on the date of grant
using an option-pricing model is affected by our stock price as well as assumptions regarding a number
of complex and subjective variables, including the expected volatility of our stock price over the
term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest
rate and expected dividends.
Additional Narrative Disclosure
All our employees, including Messrs Lin, Huang and Chen, have executed our form of employment agreement
and non-disclosure agreement . Mr. Lin earns RMB 29,167 per month (approximately $3,829) for his
services as our Chief Executive Officer and as IST's Chief Executive Officer, Mr. Huang earns
RMB17,367 per month (approximately $2,280) for his services as our Chief Operating Officer and as
IST's Vice President and Mr. Chen earns RMB 21,011 per month (approximately $2,758) for his
services as our Chief Financial Officer. No other benefits have been granted by us to officers at
this time.
Compensation of Directors
The following table sets forth information concerning all cash and non-cash compensation awarded to,
earned by or paid to our directors for services rendered during our last completed fiscal year.
Name
Fees
Earned or
Paid in
Cash
($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings ($)
All Other
Compensation
($)
Total
($)
Jiang Huai Lin
15,754
—
—
—
—
—
15,754
Zhi Xiong Huang
12,603
—
—
—
—
—
12,603
Qiang Lin
5,004
—
—
—
—
—
5,004
Yun Sen Huang
5,004
—
—
—
—
—
5,004
Narrative to Director Compensation Table
51
Mr. Jiang Huai Lin earns RMB 10,000 per month (approximately $1,313) for his services as the Chairman
of our Board of Directors, Mr. Zhi Xiong Huang earns RMB 8,000 per month (approximately $1,050),
Mr. Qiang Lin earns RMB 3,000 per month (approximately $417), and Mr. Yun Sen Huang earns RMB 3,000
per month (approximately $417) as compensation for their services as independent directors, and are
reimbursed for pre-approved reasonable business-related expenses incurred in good faith in the performance
of their duties for our Company.
Effective as of April 1, 2008, we entered into our form of Independent Director Agreement and form of
Indemnification Agreement with our new independent director, Sean Shao. Under the terms of the Independent
Director Agreement, we agreed to pay Mr. Shao an annual salary of $18,000as compensation for the
services to be provided by him as a director. Under the terms of the Indemnification Agreement we agreed
to indemnify Mr. Shao against expenses, judgments, fines, penalties or other amounts actually and
reasonably incurred by Mr. Shao in connection with any proceeding if Mr. Shao acted in good faith
and in the best interests of the Company.
Other than as set forth herein, there have been no fees earned or paid in cash for services to our
directors. No stock or stock options or other equity incentives were awarded to our directors for
their services as directors during the fiscal year ended December 31, 2007.
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
Certain Relationships and Transactions with Related Persons
The following discloses transactions with related persons entered into over the past two years.
On October 20, 2006, our subsidiary, IST, iASPEC, and iASPEC's shareholders, Mr. Lin and Mr. Jin
Zhu Cai, entered into a software license agreement, or Software License Agreement. Under the terms
of the Software License Agreement, IST was granted an exclusive license to use various different
software that was developed by iASPEC and necessary to operate the business of servicing iASPEC customers
through a Business Turnkey Agreement, or Turnkey Agreement, with iASPEC. In consideration for the
license, IST transferred to Mr. Lin 16,898,714 shares of our common stock valued at $0.58. The closing
of the transactions contemplated by the Software License Agreement occurred on November 13, 2006.
The shares transferred to Mr. Lin under the Software License Agreement constituted 53.5% of our issued
and outstanding common stock on that date.
From October 9, 2006 through June 30, 2007, we operated under the Turnkey Agreement with iASPEC, pursuant
to which iASPEC exclusively engaged IST as its subcontractor to provide iASPEC with outsourcing services
(to the extent that those services do not violate any special governmental permits held by iASPEC
and do not involve the improper transfer of any sensitive confidential governmental or other data).
The Turnkey Agreement also provided for a revenue sharing arrangement between iASPEC and IST where
IST was entitled to between 90% and 100% of the revenues actually received by iASPEC from servicing
contracts involving any iASPEC business, but was obligated to pay for its own costs in providing
these services and to pay iASPEC $180,000 per year throughout the term of the agreement.
On November 9, 2006, we consummated the transactions contemplated by a stock purchase agreement, dated
October 16, 2006, between our subsidiary IST and Mr. Lin. Pursuant to the stock purchase agreement,
Mr. Lin acquired 8,601,286 shares of our common stock, representing 58.91% of our issued and outstanding
common stock at the time of the acquisition. In consideration for those shares, Mr. Lin and Mr. Jin
Zhu Cai caused iASPEC to transfer to IST, RMB 14,000,000 in cash (approximately $1,750,000) and all
of the accounts receivable of iASPEC as of August 31, 2006, which were valued by the parties at RMB
27,286,172 (approximately $3,410,771). No provision for doubtful accounts was made for the accounts
receivable balance. At the closing of the stock purchase agreement, Mr. Lin became our controlling
shareholder.
On January 31, 2007, our Board of Directors recommended and our stockholders approved the rescission
and simultaneous restructuring of the arrangements provided for by the CPSH transaction, the IST
transactions and the software license agreement, pursuant to a rescission, termination and share
exchange agreement among ourselves, IST, CPSH, iASPEC and iASPEC's shareholders, including Mr.
Lin. Pursuant to this restructuring agreement, the parties agreed: (1) to rescind the CPSH transaction
whereby we returned the CPSH shares to Mr. Lin in exchange for his return of the US$50,000 purchase
price; (2) to terminate the software license agreement and return the 16,898,714 shares of our common
stock to us; (3) to terminate the stock purchase agreement, return to iASPEC the payments and rights
received by IST and return the 8,601,286 shares of our common stock to us; and (4) that Mr. Lin will
exchange all the issued and outstanding stock of CPSH for 25,500,00 shares of our common stock, the
sum of the shares Mr. Lin personally received pursuant to the software license agreement and the
stock purchase agreement. As a result of the transactions effected under the restructuring agreement,
Mr. Lin became the beneficial owner of 25,500,000 shares of our common stock in the aggregate, which,
at January 31, 2007, constituted 80.8% of our issued and outstanding common stock. Mr. Lin has since transferred 1,182,065 of these shares and now holds 21,717,935
of these shares directly and 2,600,000 of these shares indirectly through Total Device Management
Limited, an entity controlled by Mr. Lin.
52
Prior to being subject to the Sarbanes-Oxley Act of 2002, in July 2006, IST advanced funds to Hong
Kong United Development Group Limited, a company that is 51% controlled by Mr. Lin, for use as working
capital. At December 31, 2006 the balance owed by Hong Kong United Development Group Limited was
$115,312, however, this balance was fully paid on April 6, 2007.
Effective July 1, 2007, IST, iASPEC and iASPEC's shareholders, Mr. Lin and Mr. Jin Zhu Cai agreed
to terminate the Turnkey Agreement and replaced it on the same day with the Management Service Agreement,
effective as of July 1, 2007. Pursuant to the terms of the Management Service Agreement, iASPEC granted
IST an exclusive, royalty-free, transferable, worldwide, license to use and install for a ten-year
term, certain iASPEC software, along with copies of source and object code relating to such software,
in any manner permitted by applicable laws, and IST licensed back to iASPEC a royalty-free, limited,
non-exclusive license to the Software, without right of sub-license, for the sole purpose of permitting
iASPEC to carry out its business as presently conducted. IST will also have the right to designate
two Chinese citizens to serve as senior managers of iASPEC, to serve on iASPEC's board of directors
and assist in managing the business and operations of iASPEC. In addition, both iASPEC and IST will
require the affirmative vote of the majority of our board of directors, as well as at least one non-insider
director, for certain material actions with respect to iASPEC, including, but not limited to: (a)
the nomination, appointment, election or replacement of any board members; (b) the distribution of
any dividend or profits; (c) any merger, division, change of corporate form, dissolution or liquidation;
(d) any reimbursement of net losses or other payments or transfers of funds from IST to iASPEC; (e)
the formation or disposition of a subsidiary or the acquisition or disposition of any interest in
any other entity; and (f) the encumbrance of any assets under any lien not in the ordinary course
of business. Furthermore, under the Management Service Agreement, IST will receive 100% of the net
received profit of iASPEC and will reimburse iASPEC for all net losses incurred by iASPEC. The net
profit of iASPEC will be paid to IST, and the net losses of iASPEC will be reimbursed by IST, no
later than the last day of the month following the end of each calendar quarter, commencing on July
1, 2007. IST is also obligated to pay iASPEC $180,000 per year, no later than the last day of the
month following the end of each calendar year, commencing on July 1, 2007, and this amount may be
retained by iASPEC out of any net received profit due and payable to IST as of such payment date.
IST may also advance to iASPEC, at its sole discretion, amounts to be credited against IST's
future obligations to iASPEC, but any such advances will be treated as prepayments and not as loans.
iASPEC will have no obligation to repay any such advances except by crediting the amount of such
advances against IST's obligation to reimburse net losses, or by adding the amount thereof to
net profit when and as requested by IST. If iASPEC or any of the iASPEC shareholders materially breaches
the Management Service Agreement and fails to remedy the breach within 60 days' notice from
IST of such breach, they will be jointly and severally obligated to pay to IST liquidated damages
in an amount equal to the higher of (a) eight times the annualized revenues of IST for the last completed fiscal quarter, or (b) US$50 million.
The Management Service Agreement contains a true-up provision which required iASPEC and IST to calculate
all prior amounts owed to IST under the Turnkey Agreement, and required iASPEC to pay such amounts.
The parties were required to calculate the cumulative net profit of iASPEC from October 9, 2006,
when iASPEC commenced its contractual relationship with IST, through the commencement date of the
Management Service Agreement, and iASPEC was required to pay the amount due to IST, if there is a
net received profit, while IST was obligated to reimburse any amount to iASPEC if it is there is
a net loss. "Net Received Profit" means the Net Received Profit of iASPEC, calculated as
follows: accrued accounts receivable plus net turnover (revenue), minus cost of sales, minus operating
expenses, and minus accrued but not collected accounts receivable, but only if the result is a positive
number. "Net Losses" means the net losses of iASPEC, calculated as follows: accrued accounts
receivable plus net turnover (revenue), minus cost of sales, minus operating expenses, and minus
accrued but not collected accounts receivable, but only if the result is a negative number. As of
December 31, 2007, iASPEC had repaid the entire calculated true-up amount of $7,005,183 to IST.
In connection with the Management Service Agreement IST also entered into an Option Agreement, with
iASPEC and its shareholders, effective as of July 1, 2007, pursuant to which the iASPEC shareholders
granted IST, or its designee(s), an exclusive, irrevocable option to purchase from the iASPEC shareholders,
from time to time, all or a part of iASPEC's shares, pursuant to an equity transfer agreement,
or all or a part of iASPEC's assets, pursuant to an asset purchase and transfer agreement. However,
according to the Option Agreement, the option may not be exercised by IST if the exercise would violate
any applicable laws and regulations in China or cause any license or permit held by, and necessary
for the operation of iASPEC, to be cancelled or invalidated. Under the terms of the Option Agreement,
the option is immediately exercisable at an exercise price of $1,800,000, in the aggregate, subject
to regulatory approval. In addition, iASPEC and the iASPEC shareholders agreed to use their best
efforts to acquire all necessary government approvals and other consents to complete a share purchase
under the Option Agreement. The Option Agreement may be rescinded by IST upon 30 days' notice
and will terminate on the date that we purchase all remaining shares or assets of iASPEC pursuant to the terms of the Option Agreement. If any of the parties
breaches the Option Agreement and fails to remedy the breach, the breaching party will pay a penalty
of RMB5,000,000 (approximately $683,600) to the non-breaching party or parties, and compensate the
non-breaching party or parties for any losses caused by the breach.
53
As a result of the restructuring of its relationship with iASPEC, iASPEC has become a variable interest

entity of our Company. A variable interest represents a contractual or ownership interest in another

entity that causes the holder to absorb the changes in fair value of the other entity's net

assets. Potential variable interests include: holding economic interests, voting rights, or obligations

to an entity; issuing guarantees on behalf of an entity; transferring assets to an entity; managing

the assets of an entity; leasing assets from an entity; and providing financing to an entity. In

such cases FASB Interpretation 46(R), which interprets Accounting Research Bulletin (ARB) 51,
Consolidated Financial Statements
, requires consolidation of such entity by the enterprise that controls the economic risks and rewards
of the entity, regardless of ownership. While we have held an economic interest in iASPEC since October
9, 2006, the Management Service Agreement and the Option Agreement have now given us control over
the business and operations of iASPEC. As a result, iASPEC's financial data is subject to consolidation
with our financial data in accordance with the provisions of FASB Interpretation 46(R), on July 1,
2007. For more details regarding the Management Service Agreement and Option Agreement, see our Current
Report on Form 8-K filed with the SEC on August 6, 2007.
On March 28, 2008, Mr. Lin, consummated a private sale to certain accredited investors of 1,070,000
restricted shares of our Common Stock owned by him, for an aggregate purchase price of $4.28 million
or $4.00 per share. Mr. Lin delivered the proceeds from the sale of his shares to honor the guarantee
that he had provided that we would not suffer any loss incurred from our investment in ELNs. See
Management's Discussion and Analysis of Financial Condition and Results of Operation –
Liquidity and Capital Resources – Investing Activities
. In connection with this private sale transaction, we entered into a registration rights agreement
with the purchasers of Mr. Lin's shares, pursuant to which, among other things, we agreed to
register within a predefined period, shares of our common stock transferred to them by Mr. Lin. Mr.
Lin will not receive any shares of our common stock, other securities or other consideration for
this capital contribution and has waived any and all rights that he may have to make a claim against
us for any such shares, securities or other consideration in the future.
From time to time Mr. Lin has advanced us various amounts for our working capital. As of December 31,
2007, we owed Mr. Lin $0.
As of December 31, 2006 related party receivables and amount due from a director consist of the following:
December 31,
2006
Due from related company
Shenzhen iASPEC Software Engineering Co. Ltd. (the Predecessor)
Revenues under the Turnkey Agreement
$
1,185,449
Fee payable under the Turnkey Agreement
(45,000
)
Other advances
154,710
1,295,159
Hong Kong United Development Group Limited
(1)
115,312
Total
$
1,410,471
Due to a director
Due to Mr. Lin
$
(82,304
)
____________
(1)
Hong Kong United Development Group Limited is 51% controlled by Mr. Lin. The amount represents
  advances from our Company as working capital and was unsecured, interest free and was repaid in full
  on April 6, 2007.
At December 31, 2007, the balances with iASPEC were eliminated in consolidation since iASPEC was our
VIE.
Amounts earned under the Turnkey Agreement during the year ended December 31, 2007 and from January
17, 2006 through December 31, 2006 are as follows:
54
Year
ended
December 31,
2007
January 17
through
December 31,
2006
Revenues, per contracts
(1)
$
12,713,673
$
2,677,498
Cost of sales incurred by iASPEC
(6,558,443
)
(858,149
)
Expenses paid by iASPEC on behalf of IST
(613,271
)
(633,900
)
Net
$
5,541,959
$
1,185,449
Annual fee (prorated) payable to iASPEC under the Turnkey Agreement
$
90,000
$
45,000
(1)
The revenue transmitted from iASPEC represents revenue from the exclusive subcontracting activities
generated under the Turnkey Agreement, dated October 9, 2006 which was amended and restated on January
31, 2007. The Turnkey Agreement was terminated and replaced as of July 1, 2007, by the Management
Service Agreement.
Director Independence
The Board of Directors is currently composed of 4 members, Mr. Jiang Huai Lin, Mr. Zhi Xiong Huang,
Mr. Qiang Lin and Mr. Yun Sen Huang. Each of Mr. Qiang Lin and Mr. Yun Sen Huang serve on our Board
of Directors as an "independent director" as defined by Rule 4200(a)(15) of the Marketplace
Rules of The Nasdaq Stock Market, Inc., or the Nasdaq Marketplace Rules.
Mr. Sean Shao has agreed to serve as our third independent director, effective as of April 1, 2008
and to serve as the head of our audit committee as soon as one is established.
Mr. Shao has been serving as Chief Financial Officer of Trina Solar Limited since August 2006, where
he assisted it in listing on the NYSE in December 2006. Previously he was the Chief Financial Officer
of ChinaEdu Corporation, a Chinese educational service provider, from September 2005 to August 2006
and was the Chief Financial Officer of Watchdata Technologies Ltd., a Chinese security software company,
from August 2004 to September 2005. He was previously a senior manager at Deloitte Touche Tohmatsu
CPA Ltd., Beijing from October 1998 to July 2004 and an assistant manager at Deloitte & Touche
Toronto from December 1994 to November 1997. Mr. Shao received his Master's degree in Health
Care Administration from the University of California at Los Angeles in 1988 and his Bachelor's
degree in Art from East China Normal University in 1982. Mr. Shao is an associate member of the American
Institute of Certified Public Accountants.
CHANGE IN ACCOUNTANTS
On January 25, 2007, our Board of Directors elected to terminate our relationship with our independent
registered public accounting firm, Randall N. Drake, C.P.A., P.A., or Drake. Additionally, concurrent
with this decision, our Board appointed the independent registered public accounting firm of GHP
Horwath, P.C., or Horwath, as our new auditor, effective December 31, 2006.
No accountant's report issued by Drake on the financial statements for either of the past two
(2) years contained an adverse opinion or a disclaimer of opinion or was qualified or modified as
to uncertainty, audit scope or accounting principles, except for a going concern opinion expressing
substantial doubt about the ability of us to continue as a going concern.
Drake had been appointed on August 5, 2004 and during the period that Drake served as our independent
registered public accounting firm and through the date of dismissal, we have not had any disagreements
with Drake on any matter of accounting principles or practices, financial disclosure, or auditing
scope or procedure. There were no reportable events, as described in Item 304(a)(1)(iv) of Regulation
S-K, during our two most recent fiscal years (ended December 31, 2007 and 2006) and from January
1, 2008 to date.
SELLING STOCKHOLDERS
This prospectus relates to the resale by the selling stockholders named below from time to time of
up to a total of 1,470,000 shares of our common stock that were issued to selling stockholders pursuant
to transactions described below which are exempt from registration under the Securities Act. All
of the common stock offered by this prospectus is being offered by the selling stockholders for their
own accounts.
55
January Private Placement
On January 16, 2007, we entered into a securities purchase agreement, or January Purchase Agreement,
with two accredited Investors, or the January Investors, led by Pinnacle China Fund, L.P., pursuant
to which, as amended, we agreed to issue and sell to the January Investors up to 7,868,422 shares
of our common stock equaling 19.96% of our issued and outstanding capital stock, for a purchase price,
in the aggregate, of up to $14,950,001.80 or $1.90 per share, half of which was issued for one-half
of the aggregate purchase price on January 31, 2007, and the remaining half of which was issued for
the balance of the aggregate purchase price on February 6, 2007.
Roth Capital Partners, LLC, or Roth, acted as our placement agent in connection with the offering of
the shares to the January Investors under the January Purchase Agreement. As compensation for its
services, the Placement Agent received a cash fee equal to $1,046,500, representing 7% of the gross
proceeds received from the sale of the shares, of which a 20% cash fee was payable by us directly
to Oppenheimer & Co., Inc., or Opco, for its services as a finder in connection with the offering.
Roth also received warrants to purchase 550,789 shares of our common stock, representing 7% of the
gross proceeds received from the sale of the shares divided by the per share price of the shares,
20%, or 110,157 of which was payable by us directly to Opco. The Roth and Opco warrants have a term
of five years, were exercisable immediately on issuance and have an exercise price equaling up to
120% of the per share purchase price of the shares purchased by the January Investors, or $2.85 per
share. In addition, we reimbursed the Placement Agent for reasonable out-of-pocket expenses incurred
in connection with the offering and for all road show related expenses.
October Private Placement
On October 25, 2007, we entered into a securities purchase agreement, or October Purchase Agreement,
with certain accredited investors, led by certain funds managed by Clinton Group, Inc. and Sansar
Capital Management, LLC, pursuant to which on October 29, 2007, we issued and sold to the investors
5,000,000 shares of our common stock equaling 11% of the issued and outstanding capital stock of
the Company on a fully-diluted basis as of and immediately after consummation of the transactions
contemplated by the October Purchase Agreement, for a purchase price, in the aggregate, of $40,000,000
or $8.00per share.
Roth and
Brean Murray, Carret & Co., LLC, or Brean Murray, acted as our co-lead placement
agents in connection with the offering of the shares.  As compensation for
their services, Roth and Brean Murray received cash fees equal to $2,400,000 and
$800,000, respectively, representing 6% and 2% of the gross proceeds received
from the sale of the Shares.  In addition, Roth and Brean Murray received
warrants for the purchase of 300,000 and 100,000 shares of our common stock,
respectively, representing 6% and 2% of the gross proceeds received from the
sale of the Shares divided by the per share price of the Shares.  The
warrants have a term of five years, are exercisable immediately and have an
exercise price of $9.60, or 120% of the per share purchase price of the Shares,
and include registration rights to register shares issuable upon exercise of
such warrants.   The registration statement covering the 400,000
warrants issued to Roth and Brean Murray in the October Private Placement has
been subsequently withdrawn due to the eligibility of all shares thereunder,
other than the warrant shares, to be sold under Rule 144.  These 400,000
warrant shares are being included in this registration statement.
Lin Private Sale
On March 26, 2008, our Chief Executive Officer, Jiang Huai Lin, entered into and consummated a purchase,
agreement with certain accredited investors pursuant to which he agreed to transfer and sell to the
investors, 1,070,000 shares of our common stock owned by him, for an aggregate purchase price of
$4,280,000, or $4.00 per share. We were a party to the purchase agreement for the purpose of providing
certain representations and warranties about our Company and the shares.
Mr. Lin delivered the proceeds from the sale of the shares to us, to cover approximately $4.1 million
in losses realized by us in connection with our investment in certain equity-linked notes ("ELNs").
We liquidated the ELNs on March 25, 2007, our cash has been deposited in straight interest bearing
accounts and no additional losses will accrue in connection with the investment. In addition, the
investment loss did not impact our 2007 operating results and will not impact our 2008 operating
results. Mr. Lin will not receive any shares of our common stock, other securities or other consideration
for this capital contribution to us and he has waived any and all rights that he may have to make
a claim against us for any such shares, securities or other consideration in the future. Roth Capital
Partners, LLC, or Roth, acted as placement agents in connection with the offering of the Shares and received $10,700 as compensation
for their services.
56
As a condition to the purchase agreement, we agreed to enter into a registration rights agreement
with the investors, pursuant to which, among other things, we agreed to register the shares within
a pre-defined period. There are no liquidated damages associated with our failure to timely
register the shares. The shares are covered by this registration statement.
The foregoing securities were issued to the Investors pursuant to the exemption from registration provided
by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public
offering and Rule 506 of Regulation D promulgated thereunder. The stockholders who received
the securities agreed that (a) they had access to all of the Company's information pertaining
to the investment and were provided with the opportunity to ask questions and receive answers regarding
the offering, (b) they were acquiring the securities for their own account for investment and not
for the account of any other person and not with a view to or for any distribution within the meaning
of the Securities Act and (c) they would not sell or otherwise transfer the purchased shares unless
in compliance with state and federal securities laws. Each of the stockholders represented that they
are accredited investors as defined in Rule 501(a) under the Securities Act and that there was no
general solicitation or advertising in connection with the offer and sale of the Shares.
Selling Stockholders
The following table sets forth certain information regarding the selling stockholders and the shares
offered by them under this prospectus. Beneficial ownership is determined in accordance with the
rules of the SEC. In computing the number of shares beneficially owned by a selling stockholder and
the percentage of ownership of that selling stockholder, shares of common stock underlying shares
of convertible preferred stock, options or warrants held by that selling stockholder that are convertible
or exercisable, as the case may be, within 60 days of the filing of this Registration Statement
are included. Those shares, however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other selling stockholder.
Except as specifically set forth in the footnotes to the table, none of the selling stockholders has
held a position as an officer or director of our Company, nor has any selling stockholder had any
material relationship of any kind with us or any of our affiliates. All information with respect
to share ownership has been furnished by the selling stockholders. The shares being offered are being
registered to permit public secondary trading of the shares and each selling stockholder may offer
all or part of the shares owned for resale from time to time. In addition, none of the selling stockholders
has any family relationships with our officers, directors or controlling stockholders. Furthermore,
except as specifically set forth in the footnote to the table below, no selling stockholder is a
registered broker-dealer or an affiliate of a registered broker-dealer.
The term "selling stockholders" also includes any transferees, pledges, donees, or other
successors in interest to the selling stockholders named in the table below. To our knowledge, subject
to applicable community property laws, each person named in the table has sole voting and investment
power with respect to the shares of common stock set forth opposite such person's name. We will
file a supplement to this prospectus to name successors to any named selling stockholders who are
able to use this prospectus to resell the securities registered hereby.
Name and Address
Beneficial
Ownership
Before the
Offering
(1)
Shares of
Common
Stock Being
Offered
Beneficial
Ownership
After the
Offering
(2)
Percentage
of Common
Stock
Owned After
Offering
(3)
Vision Opportunity China LP
(4)
c/o Vision Capital Advisors
20 West 55th St, 5th Floor
New York, NY 10019
760,000
760,000
0
*
Heller Capital Investments, LLC
(5)
700 East Palisade Avenue, 1st Floor
Englewood Cliffs, NJ 07632
271,900
160,000
111,900
*
CGM as c/f Ronald I. Heller IRA
(6)
c/o: Heller Capital Investments, LLC
700 East Palisade Avenue, 1st Floor
Englewood Cliffs, NJ 07632
100,000
100,000
0
*
57
Name and Address
Beneficial
Ownership
Before the
Offering
(1)
Shares of
Common
Stock Being
Offered
Beneficial
Ownership
After the
Offering
(2)
Percentage
of Common
Stock
Owned After
Offering
(3)
Straus Partners, L.P.
(7)
c/o Straus Asset Management
320 Park Avenue, 10th Floor
New York, NY 10022
311,200
23,700
287,500
*
Straus-GEPT Partners, L.P.
(7)
c/o Straus Asset Management
320 Park Avenue, 10th Floor
New York, NY 10022
238,800
26,300
212,500
*
Roth Capital Partners, LLC
(8)
24 Corporate Plaza
Newport Beach, CA 92660
740,632
300,000
440,632
*
Brean Murray, Carret & Co., LLC
(9)
570 Lexington Avenue
New York, NY 10022.6822
100,000
100,000
0
*
____________
(1)
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting
  or investment power with respect to securities. Each of the beneficial owners listed above has direct
  ownership of and sole voting power and investment power with respect to the shares of our common
  stock.
(2)
Assumes that all securities offered are sold.
(3)
A total of 46,764,396 shares of our common stock are considered to be outstanding pursuant to SEC Rule
    13d-3(d)(1). For each beneficial owner above, any options exercisable within 60 days have been included
    in the denominator.
(4)
Adam Benowitz has voting and investment power over the shares held by Vision Opportunity China LP.
(5)
Mr. Ronald I. Heller is the Chief Investment Officer of Heller Capital Investments, LLC and has voting
    and investment power over the securities held by Heller Capital Investments, LLC.
(6)
Mr. Ronald I. Heller is the Chief Investment Officer of Heller Capital Investments, LLC and has voting
    and investment power over the securities held by CGM as c/f Ronald I. Heller IRA.
(7)
Melville Straus has voting and investment power over securities held by Straus Partners, L.P. and Straus-GEPT
  Partners, L.P.
(8)
Represents (i) 440,632 shares of common stock issuable upon the exercise of a five-year warrant
  to purchase our common stock at an exercise price of $2.28, issued to Roth Capital Partners,
  LLC, or Roth, in connection with our private placement which closed in January and February
  of 2007, and registered under our registration statement filed with the SEC on September 14,
  2007; and (ii) 300,000 shares of common stock issuable upon the exercise of a five-year warrant
  to purchase our common stock at an exercise price of $9.60, issued to Roth, in connection with
  our private placement which closed in October 2007. Byron Roth, the chief executive officer, and
  Gordon Roth, the chief financial officer, share voting and investment power over the securities held
  by Roth Capital Partners, LLC.
(9)
Represents 100,000 shares of common stock issuable upon exercise of a warrant to purchase our common
  stock held by Brean Murray, Carret & Co., LLC with an exercise price of $9.60 per share and exercisable
  during a period beginning on October 29, 2007 and expiring October 28, 2012. William J. McCluskey
  is the President and Chief Executive Officer of Brean Murray, Carret & Co., LLC and has voting
  and investment power over the securities held by Brean Murray, Carret & Co., LLC.
We will not receive any proceeds from the sales by the selling stockholders, but we will receive funds
from the exercise of warrants held by the selling stockholders, if exercised for cash. We have agreed
to bear expenses incurred by the selling stockholders that relate to the registration of the shares
being offered and sold by the selling stockholders, including the SEC registration fee and legal,
accounting, printing and other expenses of this offering.
58
PLAN OF DISTRIBUTION
The selling stockholders may from time to time sell, transfer or otherwise dispose of any or all of
their shares of common stock or interests in shares of common stock on any stock exchange, market
or trading facility on which the shares are traded or in private transactions. These dispositions
may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.
The selling stockholders may use any one or more of the following methods when disposing of shares
or interests therein:
•
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
•
block trades in which the broker-dealer will attempt to sell the shares as agent, but may position
and resell a portion of the block as principal to facilitate the transaction;
•
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
•
an exchange distribution in accordance with the rules of the applicable exchange;
•
privately negotiated transactions;
•
short sales effected after the date the registration statement of which this prospectus is a part is
  declared effective by the SEC;
•
through the writing or settlement of options or other hedging transactions, whether through an options
  exchange or otherwise;
•
broker-dealers may agree with the selling stockholders to sell a specified number of such shares at
  a stipulated price per share; and
•
a combination of any such methods of sale.
The selling stockholders may, from time to time, pledge or grant a security interest in some or all
of the shares of common stock owned by them and, if they default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell the shares of common stock, from
time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act amending the list of selling stockholders to
include the pledgee, transferee or other successors in interest as selling stockholders under this
prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances,
in which case the transferees, pledgees or other successors in interest will be the selling beneficial
owners for purposes of this prospectus.
In connection with the sale of our common stock or interests therein, the selling stockholders may
enter into hedging transactions with broker-dealers or other financial institutions, which may in
turn engage in short sales of the common stock in the course of hedging the positions they assume.
The selling stockholders may also sell shares of our common stock short and deliver these securities
to close out their short positions, or loan or pledge the common stock to broker-dealers that in
turn may sell these securities. The selling stockholders may also enter into option or other transactions
with broker-dealers or other financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution of shares offered
by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant
to this prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them
will be the purchase price of the common stock less discounts or commissions, if any. Each of the
selling stockholders reserves the right to accept and, together with their agents from time to time,
to reject, in whole or in part, any proposed purchase of common stock to be made directly or through
agents. We will not receive any of the proceeds from this offering.
Broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to participate
in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or,
if any broker-dealer acts as agent for the purchase of shares, from the purchaser) in amounts to
be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.
59
The selling stockholders also may resell all or a portion of the shares in open market transactions
in reliance upon Rule 144 under the Securities Act, provided that they meet the criteria and conform
to the requirements of that rule.
Any broker-dealers or agents that participate in the sale of the common stock or interests therein
and any selling stockholders who are affiliates of broker-dealers are "underwriters" within
the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit
they earn on any resale of the shares may be underwriting discounts and commissions under the Securities
Act. Selling stockholders who are "underwriters" within the meaning of Section 2(11) of
the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.
We know of no existing arrangements between any of the selling stockholders and any other stockholder,
broker, dealer, underwriter, or agent relating to the sale or distribution of the shares, nor can
we presently estimate the amount, if any, of such compensation. See "Selling Stockholders"
for description of any material relationship that a stockholder has with us and the description of
such relationship.
To the extent required, the shares of our common stock to be sold, the names of the selling stockholders,
the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter,
any applicable commissions or discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration
statement that includes this prospectus.
In order to comply with the securities laws of some states, if applicable, the common stock may be
sold in these jurisdictions only through registered or licensed brokers or dealers. In addition,
in some states the common stock may not be sold unless it has been registered or qualified for sale
or an exemption from registration or qualification requirements is available and is complied with.
We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the
Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders
and their affiliates. In addition, we will make copies of this prospectus (as it may be supplemented
or amended from time to time) available to the selling stockholders for the purpose of satisfying
the prospectus delivery requirements of the Securities Act. The selling stockholders may indemnify
any broker-dealer that participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.
We have agreed with the selling stockholders to keep the registration statement of which this prospectus
constitutes a part effective until the earlier of (1) such time as all of the shares covered by this
prospectus have been disposed of pursuant to and in accordance with the registration statement or
(2) the date on which the shares may be sold pursuant to Rule 144(k) of the Securities Act.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding beneficial ownership of our common stock as of
March 28, 2008 (i) by each person who is known by us to beneficially own more than 5% of our common
stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors
as a group.
Unless otherwise specified, the address of each of the persons set forth below is in care of China
Public Security Technology, Inc., 21
st
Floor, Everbright Bank Building, Zhuzilin, Shenzhen, China 518040.
60
Name & Address of
Beneficial Owner
Office, if Any
Title of Class
Amount & Nature
of Beneficial
Ownership
(1)
Percent of Class
(2)
Officers and Directors
Jiang Huai Lin
CEO and Chairman
Common Stock $0.01 par value
23,277,935
(3)
49.77%
Zhaoyang Chen
CFO
Common Stock $0.01 par value
0
*
Zhi Xiong Huang
COO and Director
Common Stock $0.01 par value
20,000
*
Yun Sen Huang
Director
Common Stock $0.01 par value
0
*
Qiang Lin
Director
Common Stock $0.01 par value
0
*
Yi Gang Shen
CTO
Common Stock $0.01 par value
0
*
All officers and directors as a group (6
persons named above)
Common Stock $0.01 par value
23,297,935
(3)
49.81%
5% Securities Holder
Jiang Huai Lin
Common Stock $0.01 par value
23,277,935
(3)
49.77%
Total Devices Management, Ltd.
Common Stock $0.01 par value
2,600,000
5.56%
Pinnacle China Fund, LP
(4)
4965 Preston Park Blvd.
Suite 240
Plano, TX 75093
Common Stock $0.01 par value
3,934,211
8.41%
The Pinnacle Fund, L.P.
(5)
4965 Preston Park Blvd.
Suite 240 Plano,
TX 75093
Common Stock $0.01 par value
3,934,211
8.41%
Jeffrey L. Feinberg
(6)
2775 Via de la Valle, Suite 204 Del
Mar, California 92014
Common Stock $0.01 par value
2,628,893
5.62%
* Less than 1%.
(1)
Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission
and generally includes voting or investment power with respect to securities. Each of the beneficial
owners listed above has direct ownership of and sole voting power and investment power with respect
to the shares of our common stock.
(2)
A total of 46,764,396 shares of our Common Stock are considered to be outstanding pursuant to
SEC Rule 13d-3(d)(1). For each Beneficial Owner above, any options exercisable within 60 days have
been included in the denominator.
(3)
Includes 2,600,000 shares of our common stock held by Mr. Lin indirectly through Total Devices Management
,
Ltd., an entity that is wholly-owned by Mr. Lin. All 23,277,935 shares held by Mr. Lin are subject
to the terms and conditions of a Lockup Agreement, dated January 31, 2007, between our Company and
Mr. Lin. The lockup period is scheduled to terminate in September 2008.
(4)
Barry M. Kitt exercises investment discretion and control over the shares our Common Stock held by
Pinnacle China Fund, L.P., or Pinnacle China. Mr. Kitt may be deemed to be the beneficial owner of
the shares of Common Stock beneficially owned by Pinnacle China. Mr. Kitt hereby disclaims beneficial
ownership of the shares of Common Stock reported herein to the extent of his direct or indirect pecuniary
interest therein, and nothing herein shall be deemed to be an admission that Mr. Kitt is the beneficial
owner of the shares of Common Stock reported herein for purposes of Section 16 of the Exchange Act
or for any other purpose.
(5)
Barry M. Kitt exercises investment discretion and control over the shares of our Common Stock held
by The Pinnacle Fund, L.P., or Pinnacle. Mr. Kitt may be deemed to be the beneficial owner of the
shares of Common Stock beneficially owned by Pinnacle. Mr. Kitt hereby disclaims beneficial ownership
of the shares of Common Stock reported herein to the extent of his direct or indirect pecuniary interest
therein, and nothing herein shall be deemed to be an admission that Mr. Kitt is the beneficial owner
of the shares of Common Stock reported herein for purposes of Section 16 of the Exchange Act or for
any other purpose.
(6)
The securities reported as held by Mr. Feinberg represent shares of Common Stock held by JLF Partners
I, L.P., JLF Partners II, L.P., JLF Off Shore Fund, Ltd. and JLF Concentrated Partners, LP, to which JLF
Asset Management LLC serves as the management company and/or investment manager. Mr. Feinberg is
the managing member of JLF Asset Management, LLC, and therefore may be deemed to be the beneficial
owner of the shares of Common Stock beneficially owned by JLF Asset Management.
Changes in Control
We do not currently have any arrangements which if consummated may result in a change of control of
our Company.
61
DESCRIPTION OF CAPITAL STOCK
Common and Preferred Stock
We are authorized to issue up to 75,000,000 shares of common stock, par value $0.01 per share. On October
2, 2006, we effected a 4.44444444-to-1 forward split of the outstanding shares of our common stock
held as of September 1, 2006. As of May 9, 2008, we have 46,764,396 shares of common stock issued
and outstanding. We do not have any authorized preferred stock.
Each outstanding share of common stock entitles the holder thereof to one vote per share on all matters.
Our bylaws provide that the persons receiving the greatest number of votes shall be the directors.
Stockholders do not have preemptive rights to purchase shares in any future issuance of our common
stock. Upon our liquidation, dissolution or winding up, and after payment of creditors and preferred
stockholders, if any, our assets will be divided pro-rata on a share-for-share basis among the holders
of the shares of common stock.
The holders of shares of our common stock are entitled to dividends out of funds legally available
when and as declared by our board of directors. Should we decide in the future to pay dividends,
as a holding company, our ability to do so and meet other obligations depends upon the receipt
of dividends or other payments from our operating subsidiaries and other holdings and investments.
In addition, our operating subsidiaries, from time to time, may be subject to restrictions on their
ability to make distributions to us, including as a result of restrictive covenants in loan agreements,
restrictions on the conversion of local currency into U.S. dollars or other hard currency and other
regulatory restrictions. In the event of our liquidation, dissolution or winding up, holders of our
common stock are entitled to receive, ratably, the net assets available to stockholders after payment
of all creditors.
All of the issued and outstanding shares of our common stock are duly authorized, validly issued, fully
paid and non-assessable. To the extent that additional shares of our common stock are issued, the
relative interests of existing stockholders will be diluted.
Our independent stock transfer agent is Island Stock Transfer, Inc., 100 2
nd
Avenue South, Suite 104N, St. Petersburg, Florida 33701. Their telephone number is (727) 289-0010.
Warrants
In connection with our private placement which closed on January 31, 2007 and February 6, 2007, Roth
Capital Partners, LLC, and Oppenheimer & Co., Inc., our placement agent and finder, respectively,
received, as partial compensation, warrants to purchase an aggregate of 550,789 shares of our common
stock. The warrants have a term of five years, are immediately exercisable at $2.28 per share, subject
to the usual adjustments for certain corporate events. First Asia Finance Group Limited, who provided
consulting services in connection with the private placement also received a five-year warrant to
purchase an aggregate of 236,052 shares of our common stock. Their warrant is exercisable immediately
at $2.28 per share, subject to the usual adjustments for certain corporate events. First Asia also
has demand registration and piggyback registration rights in connection with its warrant. The shares
underlying the Roth, Oppenheimer and First Asia warrants were registered on the registration statement
that was effective as of September 14, 2007 and all but the 440,632 warrants held by Roth have been exercised.
In
connection with our private placement which closed on October 29, 2007, Roth and
Brean Murray, our co-lead placement agents, received, as partial compensation,
warrants to purchase 300,000 and 100,000 shares of our common stock,
respectively.  The warrants have a term of five years and are immediately
exercisable at $9.60 per share, subject to the usual adjustments for certain
corporate events.   The shares underlying the Roth and Brean Murray
warrants were registered on the registration statement that was effective as of
February 6, 2008, but none of the warrants have been exercised.  The
registration statement covering the 400,000 warrants issued to Roth and Brean
Murray in the October Private Placement has been subsequently withdrawn due to
the eligibility of all shares thereunder, other than the warrant shares, to be
sold under Rule 144.  These 400,000 warrant shares are being included in
this registration statement.
SHARES ELIGIBLE FOR FUTURE SALE
As of May 9, 2008, we had 46,764,396 shares of common stock outstanding.
62
Shares Covered by this Prospectus
All of the 1,470,000 shares being registered in this offering may be sold without restriction under
the Securities Act, so long as the registration statement of which this prospectus is a part is,
and remains, effective.
Rule 144
The SEC has recently adopted amendments to Rule 144 which will become effective on February 15, 2008
and will apply to securities acquired both before and after that date. Under these amendments, a
person who has beneficially owned restricted shares of our common stock or warrants for at least
six months would be entitled to sell their securities provided that (1) such person is not deemed
to have been one of our affiliates at the time of, or at any time during the three months preceding,
a sale, (2) we are subject to the Exchange Act reporting requirements for at least 90 days before
the sale and (3) if the sale occurs prior to satisfaction of a one-year holding period, we provide
current information at the time of sale.
Persons who have beneficially owned restricted shares of our common stock or warrants for at least
six months but who are our affiliates at the time of, or at any time during the three months preceding,
a sale, would be subject to additional restrictions, by which such person would be entitled to sell
within any three-month period only a number of securities that does not exceed the greater of:
•
1% of the number of shares of common stock then outstanding, which as of May 9, 2008 would equal 467,643
shares; or
•
the average weekly trading volume of our common stock during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to such sale.
provided,
in each case, that we are subject to the Exchange Act periodic reporting requirements for at least
three months before the sale.
However, since we anticipate that our shares will be quoted on the OTC Bulletin Board, which is not
an "automated quotation system," our stockholders will not be able to rely on the market-based
volume limitation described in the second bullet above. If, in the future, our securities are listed
on an exchange or quoted on NASDAQ, then our stockholders would be able to rely on the market-based
volume limitation. Unless and until our stock is so listed or quoted, our stockholders can only rely
on the percentage based volume limitation described in the first bullet above.
Such sales by affiliates must also comply with the manner of sale, current public information and notice
provisions of Rule 144. All but the 1,470,000 of our issued and outstanding shares covered in this
prospectus may currently be sold in reliance on Rule 144. The selling stockholders will not be governed
by the foregoing restrictions when selling their shares pursuant to this prospectus.
Restrictions on the Use of Rule 144 by Shell Companies or Former Shall Companies
Historically, the SEC staff has taken the position that Rule 144 is not available for the resale of
securities initially issued by companies that are, or previously were, blank check companies, like
us. The SEC has codified and expanded this position in the amendments discussed above by prohibiting
the use of Rule 144 for resale of securities issued by any shell companies (other than business combination
related shell companies) or any issuer that has been at any time previously a shell company. The
SEC has provided an important exception to this prohibition, however, if the following conditions
are met:
•
the issuer of the securities that was formerly a shell company has ceased to be a shell company;
•
the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act;
•
the issuer of the securities has filed all Exchange Act reports and material required to be filed,
as applicable, during the preceding 12 months (or such shorter period that the issuer was required
to file such reports and materials), other than Current Reports on Form 8-K; and
•
the least one year has elapsed from the time that the issuer filed current comprehensive disclosure
with the SEC reflecting its status as an entity that is not a shell company.
As a result, it is likely that pursuant to Rule 144, our stockholders, who were stockholders of ours
prior to the reverse acquisition of CPSH that concluded on January 31, 2007, were able to sell their
shares of our common stock from and after January 31, 2008 (the one year anniversary of our reverse
acquisition of CPSH) without registration.
Lock-Up Agreements
Our controlling stockholder entered into a lock-up agreement with us in connection with the private
placement that we completed on January 31, 2007. Under this agreement, subject to exceptions, he
may not, directly or indirectly, offer, sell, contract to sell, pledge or otherwise dispose of or hedge any common stock or securities convertible
into or exchangeable for shares of common stock, or publicly announce the intention to do any of
the foregoing for a period of one year following the effectiveness of the registration statement
filed in connection with the private placement. The lock-up agreement will expire on September 15,
2008.
63
INTEREST OF NAMED EXPERTS AND COUNSEL
The validity of the common stock offered by this prospectus will be passed upon for us by Thelen Reid
Brown Raysman & Steiner, LLP.
Our consolidated financial statements (Successor), iASPEC's financial statements (Predecessor)
and Bocom Technology's financial statements have been audited by GHP Horwath, P.C., an independent
registered public accounting firm, for the periods and to the extent set forth in their reports appearing
herein and elsewhere in this prospectus. Their report regarding our Company describes how we succeeded
to the business operations of the Predecessor on October 9, 2006, and as a result, the financial
statements of the Successor and the Predecessor are not comparable in all respects. Such financial
statements have been so included in reliance upon the reports of such firm given upon the firm's
authority as an expert in auditing and accounting.
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus
or having given an opinion upon the validity of the securities being registered or upon other legal
matters in connection with the registration or offering of the common stock was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial interest, direct
or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected
with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter,
voting trustee, director, officer or employee.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our Bylaws provide for the indemnification of our directors and officers, past, present and future,
under certain circumstances, against attorney's fees, judgments, fines and other expenses incurred
by them in any litigation to which they become a party arising from their association with or activities
on behalf of us. We will also bear expenses of such litigation for any of our directors, officers,
employees or agents upon such persons promise to repay us therefor if it is ultimately determined
that any such person shall not have been entitled to indemnification. This indemnification policy
could result in substantial expenditure by us, which we may be unable to recoup.
Insofar as indemnification by us for liabilities arising under the Securities Exchange Act of 1934

may be permitted to our directors, officers and controlling persons pursuant to provisions
of
the Articles of Incorporation and Bylaws, or otherwise, we have been advised that in the opinion

of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In
the
event that a claim for indemnification by such director, officer or controlling person of us
in the
successful defense of any action, suit or proceeding is asserted by such director, officer
or controlling
person in connection with the securities being offered, we will, unless in the opinion
of our counsel
the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction
the question whether such indemnification by us is against public policy as expressed
in the Act
and will be governed by the final adjudication of such issue.
At the present time, there is no pending litigation or proceeding involving a director, officer, employee
or other agent of ours in which indemnification would be required or permitted. We are not aware
of any threatened litigation or proceeding which may result in a claim for such indemnification.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, or SEC, a registration statement on Form SB-2
under the Securities Act with respect to the common stock offered in this offering. This prospectus
does not contain all of the information set forth in the registration statement. For further information
with respect to us and the common stock offered in this offering, we refer you to the registration
statement and to the attached exhibits. With respect to each such document filed as an exhibit to
the registration statement, we refer you to the exhibit for a more complete description of the matters
involved.
You may inspect our registration statement and the attached exhibits and schedules without charge at
the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549.
You may obtain copies of all or any part of our registration statement from the SEC upon payment
of prescribed fees. You may obtain information on the operation of the public reference room by calling
the SEC at 1-800-SEC-0330.
64
Our SEC filings, including the registration statement and the exhibits filed with the registration
statement, are also available from the SEC's website at www.sec.gov, which contains reports,
proxy and information statements and other information regarding issuers that file electronically
with the SEC.
65
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
Index to Financial Statements
Page
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 31, 2008 AND MARCH 31, 2007 (UNAUDITED)
F-2
Condensed Consolidated Balance Sheet (Unaudited) as of March 31, 2008 and December 31, 2007
F-3
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2008 and 2007
F-4
Condensed Consolidated Statement of Stockholders' Equity for the Period Ended March 31, 2008 (Unaudited)
F-5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007 (Unaudited)
F-6
Notes to Condensed Consolidated Financial Statements
F-7
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2007, THE PERIOD
      FROM JANUARY 1, 2006
TO OCTOBER 8, 2006 AND THE PERIOD FROM JANUARY 17, 2006 TO DECEMBER 31, 2006
F-16
Report of GHP Horwath, P.C.
F-17
Consolidated Statements of Operations for the Year Ended December 31, 2007, the period from January 1, 2006 to
October 8, 2006 and the period from January 17, 2006 To December 31, 2006
F-18
Consolidated Balance Sheet as of December 31, 2007
F-19
Consolidated Statements of Stockholders' Equity for the Year Ended December 31, 2007, the period from January 1, 2006 to
October 8, 2006 and the period from January 17, 2006 To December 31, 2006
F-20
Consolidated Statements of Cash Flows for the Year Ended December 31, 2007, the period from January 1, 2006 to
October 8, 2006 and the period from January 17, 2006 To December 31, 2006
F-21
Notes to Consolidated Financial Statements
F-23
F-1
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(UNAUDITED)
F-2
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2008 AND DECEMBER 31, 2007
NOTES
MARCH 31,
DECEMBER 31,
2008
2007
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
23,624,772
$
19,755,182
Investment in marketable securities
5
-
14,966,752
Accounts receivable
6
21,142,354
11,721,306
Notes receivable
49,842
-
Advances to suppliers
4,984,145
1,791,440
Inventories
8
6,951,380
4,779,930
Other receivables
1,330,867
974,475
TOTAL CURRENT ASSETS
58,083,360
53,989,085
Deposits for business acquisitions
15(a)
7,049,073
8,989,022
Property and equipment
9
14,075,360
13,826,896
Intangible assets
10
9,305,274
4,894,397
Goodwill
4
18,701,923
7,154,395
TOTAL ASSETS
$
107,214,990
$
88,853,795
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
$
3,987,497
$
3,079,304
Advances from customers
1,460,301
394,383
Income tax payable
724,797
326,026
Other payables and accrued expenses
1,625,030
987,483
Acquisition consideration payable
4
9,000,000
-
TOTAL CURRENT LIABILITIES
16,797,625
4,787,196
MINORITY INTEREST
10,105,657
10,060,657
STOCKHOLDERS' EQUITY
Common stock, par $0.01;
Authorized capital, 75,000,000 shares;
Shares issued and outstanding (March 31, 2008 and 
      December 31, 2007: 45,639,396 shares)
190,891
190,891
Additional paid-in capital
12
57,805,115
57,421,150
Reserve
1,755,552
1,755,552
Retained earnings
16,749,529
13,170,549
Accumulated other comprehensive income
3,810,621
1,467,800
TOTAL STOCKHOLDERS' EQUITY
80,311,708
74,005,942
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
107,214,990
$
88,853,795
The accompanying notes are an integral part of these condensed
consolidated financial statements.
F-3
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2008 AND 2007
NOTES
MARCH 31,
MARCH 31,
2008
2007
Revenue - third parties
$
14,404,426
$
1,213,318
Revenue - related party
7
-
1,818,823
TOTAL REVENUE
14,404,426
3,032,141
Cost of revenue
(8,352,264)
(210,712)
GROSS PROFIT
6,052,162
2,821,429
Administrative expenses
(1,752,735)
(219,294)
Research and development expenses
(147,003)
-
Fee to iASPEC under the Turnkey
      Agreement
7
-
(45,000)
Selling expenses
(417,703)
(68,669)
INCOME FROM OPERATIONS
3,734,721
2,488,466
Other income, net
69,401
7,525
Interest income
26,603
20,304
INCOME BEFORE TAXES AND MINORITY INTEREST
3,830,725
2,516,295
Minority interest
(45,000)
-
Income tax expense
11
(206,745)
(377,444)
NET INCOME
3,578,980
2,138,851
Foreign currency translation gain
13
2,342,821
11,318
COMPREHENSIVE INCOME
$
5,921,801
$
2,150,169
WEIGHTED AVERAGE NUMBER OF
      SHARES
Basic
45,985,550
36,446,205
Diluted
46,720,415
36,760,592
EARNINGS PER SHARE
Basic
$
0.08
$
0.06
Diluted
$
0.08
$
0.06
The accompanying notes are an integral part of these condensed
consolidated financial statements.
F-4
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2008
Accumulated
Common stock
Additional
other
par value $0.01
paid-in
Retained
comprehensive
Shares
Amount
capital
Reserve
earnings
income
Total
BALANCE AS AT JANUARY 1, 2008
45,639,396
$ 190,891
$ 57,421,150
$ 1,755,552
$ 13,170,549
$ 1,467,800
$ 74,005,942
Stock-based compensation (Note
      12)
-
-
383,965
-
-
-
383,965
Net income from the period
-
-
-
-
3,578,980
-
3,578,980
Foreign currency translation
      gain
-
-
-
-
-
2,342,821
2,342,821
BALANCE AS AT MARCH 31, 2008
45,639,396
$ 190,891
$ 57,805,115
$ 1,755,552
$ 16,749,529
$ 3,810,621
$ 80,311,708
The accompanying notes are an integral part of these condensed
consolidated financial statements.
F-5
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2008 AND 2007
MARCH 31,
MARCH 31,
2008
2007
OPERATING ACTIVITIES
Net income
$
3,578,980
$
2,138,851
Adjustments to reconcile
      net income to net cash used in operations:
Depreciation
657,678
31,657
Amortization of intangible
      assets
217,854
-
Stock-based compensation
      (Note 12)
383,965
-
Minority interest
45,000
-
Changes in operating assets
      and liabilities, net of effects of business acquisition:
Increase in inventories
(590,698)
-
Increase in accounts
      receivable
(5,648,740)
(12,596)
Increase in related party
      receivable
-
(1,774,640)
Increase in prepaid related
      party expenses
-
(5,386,997)
In
crease
      in other receivables and deposits
(2,738,826)
-
Decrease in accounts
      payable
(303,819)
-
Decrease in advances from
      customers
(1,024,711)
-
Increase (decrease) in
      other payables and accrued expenses
439,039
(23,974)
Increase in income tax
      payable
70,142
343,608
Net cash used in
      operating activities
(4,914,136)
(4,684,091)
INVESTING ACTIVITIES
Cash
      acquired in Bocom acquisition
      (Note 4)
713,793
-
Deposits paid for
      acquisition of Geo (Note 15(a))
(6,909,279)
-
Repayments from third parties
-
332,479
Advances to
      related parties
-
(250,001)
Decrease in amount due from
      a director
-
(251,365)
Purchase of property and
      equipment
(337,212)
(3,646,823)
Capitalized software
      development costs
(67,292)
-
Proceeds from sale of
      marketable securities (Note 5)
14,966,752
-
Net cash provided by
      (used in) investing activities
8,366,762
(3,815,710)
FINANCING ACTIVITIES
Advances  repaid to a third party company
-
(200,000)
Proceeds from first private
      placement
-
13,311,211
Net cash provided by
      financing activities
$
-
$
13,111,211
NET INCREASE IN CASH AND
      CASH EQUIVALENTS
$
3,452,626
$
4,611,410
EFFECT OF EXCHANGE RATE
      CHANGES ON CASH
416,964
10,962
CASH AND CASH
      EQUIVALENTS, BEGINNING
19,755,182
172,316
CASH AND CASH
      EQUIVALENTS, ENDING
$
23,624,772
$
4,794,688
Supplemental disclosure of
      cash flow information
Income taxes paid
$
136,805
$
33,836
1,125,000 shares of common stock were issued for the purchase
price of Bocom Multimedia acquisition, approximately $9,000,000, on April 1,
2008. (Note 4)
The accompanying notes are an integral part of these condensed
consolidated financial statements.
F-6
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
China Information Security Technology Inc., and its
subsidiaries, (the "Company") (formerly China Public Security Technology Inc.) is a provider of integrated solutions for the public
security sector in the People's Republic of China ("PRC"), specializing in
providing public security information technology and Geographic Information
Systems ("GIS") software operating services, as well as the sale of computer
hardware and software, and the provision of Certificate Authority, or CA, an
application platform and e-Government solution technology. These services are
provided through the Company's wholly-owned PRC subsidiaries, Information
Security Technology (PRC) Co., Ltd ("IST"), Information Security Development
Technology (Shenzhen) Co., Ltd ("ISDT"), and Shenzhen Bocom Multimedia Display Technology
Co., Ltd ("Bocom Technology"), and through the Company's variable interest
entity ("VIE"), iASPEC Software Co., Ltd ("iASPEC").
The accompanying financial statements, as of March 31, 2008
and for the three months ended March 31, 2008 and 2007, have been prepared by
the Company without audit. Pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"), certain information and footnote
disclosures normally included in the financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
("US GAAP") have been condensed or omitted pursuant to such rules and
regulations. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's audited
annual financial statements for the year ended December 31, 2007, which are
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2007, filed with the SEC on March 31, 2007. Amounts as of December 31, 2007
are derived from these audited consolidated financial statements.
In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the Company's
financial position as of March 31, 2008, results of operations and cash flows
for the three months ended March 31, 2008 and 2007 have been made. The results
of operations for the three months ended March 31, 2008 are not necessarily
indicative of the operating results for the full year.
Agreement and Plan of Merger
On April 2, 2008, the Company entered into an Agreement and
Plan of Merger (the "Merger Agreement") with China Information Security
Technology, Inc. ("CIST"), a Nevada corporation and wholly-owned subsidiary of
the Company. Pursuant to the Merger Agreement, the Company agreed to merge with
and into CIST, with CIST being the surviving entity (the "Reincorporation
Merger"). The Reincorporation Merger became effective on April 7, 2008 (the
"Effective Time").
Pursuant to the terms of the Merger Agreement, (i) the
Company merged into CIST, with CIST being the surviving corporation, and the
Company thereby changed its name to China Information Security Technology, Inc.;
(ii) from and after the Effective Time, CIST possesses all of the rights,
privileges, powers, and franchises of the Company, and the Company's debts and
liabilities became the debts and liabilities of CIST; (iii) the Company's
existing Board of Directors and officers became the Board of Directors and
officers of CIST; and (iv) the Articles of Incorporation and Bylaws of CIST now
govern the Surviving Corporation.
The Reincorporation Merger did not result in any change in
headquarters, business, jobs, management, location of any  offices or
facilities, number of employees, assets, liabilities or net worth (other than as
a result of the costs incident to the Reincorporation Merger, which are
immaterial). Management, including all directors and officers, remain the same
in connection with the Reincorporation Merger.
As a result of the Reincorporation Merger, each outstanding
share of the Company's common stock, par value $0.01 per share, was
automatically converted into one share of CIST's common stock, par value $0.01
per share.
F-7
1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
Business Turnkey Agreement
On October 9, 2006, IST, entered into a Business Turnkey
Agreement, as amended (the "Turnkey Agreement") with iASPEC, a PRC company
controlled by Mr. Lin, the Company's Chairman and Chief Executive Officer.
iASPEC is a software development company that provides public security
information technology, Police-Use Geographic Information Systems ("PGIS") and
Civil-Use Geographic Information Systems ("CGIS") operating services to
government and private customers in the PRC. Under the Turnkey Agreement, IST
was to pay an annual fee of $180,000 to iASPEC and was to perform all services
necessary for iASPEC to fulfill its customer contracts in exchange for 100% or
90% of the revenue from such contracts, depending on the contract. In addition,
under the Turnkey Agreement, iASPEC granted IST an exclusive, royalty-free,
transferable, worldwide perpetual license to use and install iASPEC's
proprietary software. No other tangible assets or liabilities were transferred
to IST under the Turnkey Agreement.
Effective July 1, 2007, IST, iASPEC and iASPEC's shareholders
terminated the Turnkey Agreement and replaced it with a Management Service
Agreement ("MSA").
Management Service Agreement
Pursuant to the terms of the MSA, iASPEC granted IST a
ten-year, exclusive, royalty-free, transferable worldwide license to use and
install certain iASPEC software, along with copies of source and object codes
relating to such software. In addition, IST licensed back to iASPEC a
royalty-free, limited, non-exclusive license to the software, without right of
sub-license, for the sole purpose of permitting iASPEC to carry out its business
as presently conducted. IST has the right to designate two Chinese citizens to
serve as senior managers of iASPEC, to serve as a majority on iASPEC's Board of
Directors, and to assist in managing the business and operations of iASPEC. In
addition, both iASPEC and IST will require the affirmative vote of a majority of
the Company's Board of Directors, including at least one non-insider director,
for certain material actions, as defined, with respect to iASPEC.
Under the MSA, IST receives 100% of the net received profit
of iASPEC, and reimburses iASPEC for all net losses incurred by iASPEC, as such
terms are defined in the MSA, and iASPEC is permitted to retain $180,000 per
year out of the net received profits. The MSA also provides that IST may advance
to iASPEC, at its sole discretion, amounts to be credited against IST's future
obligations to iASPEC. Any such advances are treated as prepayments and not as
loans and iASPEC has no obligation to repay any such advances except by
crediting the amount of such advances against IST's obligation to reimburse net
losses, or by adding the amount thereof to net received profit when and as
requested by IST. The parties to the MSA also agreed to the calculation of a
true-up amount, consisting of the cumulative net profit or net losses of iASPEC
from October 9, 2006 to June 30, 2007, when iASPEC commenced its contractual
relationship with IST, through the date of the MSA. The calculated true-up
amount was paid by iASPEC to IST in 2007.
In connection with the MSA, IST also entered into an
immediately exercisable purchase option agreement ("Option Agreement") with
iASPEC and its shareholders, pursuant to which the iASPEC shareholders granted
the Company or its designee(s) an exclusive, irrevocable option to purchase,
from time to time, all or a part of iASPEC's shares or iASPEC's assets from the
iASPEC shareholders for $1,800,000 in the aggregate. The option may not be
exercised if the exercise would violate any applicable laws and regulations in
China or cause any license or permit held by, and necessary for the operation of
iASPEC, to be cancelled or invalidated.
The substance of the MSA and the Option Agreement is to:
Allow the Company
  to utilize the business licenses, contacts, permits and other resources of
  iASPEC in order for the Company to be able to expand its operations and
  business model;
Provide the
  Company with effective control over all of iASPEC's operations;
Allow the
  shareholders of iASPEC an opportunity to monetize a portion of their
  investment through the $1.8 million purchase option.
The Company adopted Financial Accounting Standards Board ("FASB")
Interpretation No. ("FIN") 46R, "
Consolidation and Variable Interest
Entities"
("VIEs"), ("FIN 46R"), an interpretation of Accounting Research
Bulletin No. 51, "
Consolidated Financial Statements.
" FIN 46R requires a
VIE to be consolidated by a company if that company is subject to a majority of
the risk of loss for the VIE or is entitled to receive a majority of the VIE's
residual returns. As a result of the MSA and the Option Agreement, on July 1,
2007 iASPEC became a VIE of the Company and iASPEC's results are consolidated in
the Company's financial statements. While the Company has held an economic
interest in iASPEC since October 9, 2006, the MSA and the Option Agreement have
given the Company control over the business and operations of iASPEC, and the
Company became the primary beneficiary of iASPEC. To comply with PRC laws and
regulations that restrict foreign ownership of companies that provide public
security information technology and Geographic Information Systems software
operating services to certain government and other customers, the Company
operates the restricted aspect of its business through iASPEC.
F-8
2. VARIABLE INTEREST ENTITY
During the three months ended March 31, 2008, all but $45,000
of iASPEC's net income was allocated to the Company. The $45,000 was attributed
to the minority interest in the Consolidated Statements of Income and
Comprehensive Income, resulting in minority interest of $10,105,657 as of March
31, 2008.
As of March 31, 2008, the consolidation of iASPEC resulted in an increase in assets
of approximately $13,526,000, an increase in liabilities (consisting primarily
of accounts payable) of approximately $3,420,000, and an increase in minority
interest of $10,106,000, and an increase in net income
of approximately $2,496,000 for the three months ended March 31, 2008.
3. USE OF ESTIMATES
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenue and expenses
during the reporting period. Management makes these estimates using the best
information available at the time the estimates are made; however actual results
could differ from those estimates.
4. BUSINESS ACQUISITION
On February 1, 2008, the Company and its wholly-owned
subsidiary, China Public Security Holdings Limited, a British Virgin Islands
company, acquired 100% of the equity interests of Bocom Multimedia Display Co.,
Ltd, a Hong Kong company ("Bocom Multimedia"), and its wholly-owned Chinese
subsidiary, Shenzhen Bocom Multimedia Display Technology Co., Ltd ("Bocom
Technology"), for approximately $18,044,000. Approximately $9,044,000 of the
purchase price had been paid in cash as a deposit for a business acquisition in
2007 and the balance of the purchase price of $9,000,000 which is included in
acquisition consideration payable at March 31, 2008, was paid on April 1, 2008
through the issuance of 1,125,000 shares of the Company's common stock.
Under the terms of the acquisition agreement, 300,000 shares
of the Company's common stock are to be returned if Bocom Technology does not
meet certain net income targets in 2008, and an additional 300,000 shares are to
be returned if Bocom Technology does not meet certain net income targets in
2009.
Bocom Technology is a leading provider of advanced multimedia
display and control technology, and the products have been widely applied in the
fields of public security, communication and multimedia in China. The
acquisition enhances the Company's PGIS product line by providing full turnkey
solutions to customers.
F-9
4. BUSINESS ACQUISITION (CONTINUED)
The following represents the preliminary purchase price allocation at the
date of the acquisition:
Cash and
      cash equivalents
$
713,793
Accounts
      receivable
2,851,883
Advances to
      suppliers
475,120
Inventory
1,332,661
Other
      current assets
431,
912
Property
      and equipment
49,611
Intangible assets
4,207,282
Goodwill
11,547,528
Current
      liabilities
(3,565,363)
Total
      purchase price
$
18,044,427
The operating results of Bocom Technology have been included
in the condensed consolidated financial statements from February 1, 2008,
the acquisition date. Intangible assets include technology and a trademark with
estimated useful lives of 10 and 20 years respectively. Goodwill  is not expected to be deductible for tax purposes. The following
tables show supplemental information of the results of operations on an unaudited pro forma basis for the three months ended March 31, 2008 and 2007, as
if the acquisition of Bocom Technology had been completed at the beginning of
the respective periods.
For the three months ended March 31, 2008
Pro
Forma
Revenue
$
14,432,919
Income from operations
$
3,591,611
Net income
$
3,435,870
Weighted Average Number of Shares
Basic
46,764,396
Diluted
47,103,657
Earnings per share
Basic
$
0.07
Diluted
$
0.07
For the three months ended March 31, 2007
Pro
Forma
Revenue
$
3,363,338
Income from operations
$
2,283,933
Net income
$
1,936,089
Weighted Average Number of Shares
Basic
37,571,205
Diluted
37,885,592
Earnings per share
Basic
$
0.05
Diluted
$
0.05
F-10
5. INVESTMENT IN MARKETABLE SECURITIES
On November 9, 2007, the Company invested in three
equity-linked notes ("ELNs"), for HKD176,814,000 (approximately $22,654,000).
The ELNs were linked to three different equity securities traded on the Hong
Kong Stock Exchange. Mr. Lin provided a guarantee ("Lin Guarantee") against any
losses sustained as a result of the Company's investment in the ELNs.
On December 28, 2007, the maturity date of the ELNs, one of
the ELNs was redeemed by the issuer for cash of HKD60,000,000 (approximately
$7,687,000) and with a gain of HKD906,000 (approximately $116,000). The other
two ELNs were redeemed by the issuer's surrender of the underlying equity
securities to the Company. On March 25, 2008, when the Company sold the
remaining equity securities, the market value of the underlying securities was
HKD85,009,123 (approximately $10,897,000). To honor  the Lin Guarantee, Mr.
Lin paid the Company approximately $4,080,000. As a result, the Company recorded
no gain or loss on the investments in the ELNs. Mr. Lin paid the Lin Guarantee
from the proceeds of a private sale to certain accredited investors, of
1,070,000 shares of the Company's common stock owned by him. Mr. Lin will not
receive any shares of the Company's common stock, other security or other consideration
for this capital contribution and has waived any and all rights that he may have
to make a claim against the Company for any such shares, securities or other
consideration in the future. In connection with this private sale transaction,
the Company entered into a registration rights agreement with the purchasers of
Mr. Lin's shares, pursuant to which, among other things, the Company agreed to
register within a predefined period, shares of its common stock transferred to
them by Mr. Lin. There are no liquidated damages associated with the Company's
failure to timely register these shares. Although the Company has not suffered
any losses on the investment by the Company in the ELNs, the investment in the
ELNs could result in a claim being alleged against the Company.
6. ACCOUNTS RECEIVABLE
As of March 31, 2008, the Company's top five customers
accounted for 35.9% of accounts receivable, two of which accounted for 12.1% and
11.1% respectively. No other customer accounted for greater than 10% of accounts
receivable at March 31, 2008. As of December 31, 2007, the Company's top five
customers accounted for 40.5% of accounts receivable, two of which accounted for
20% and 10% respectively. No other customer accounted for greater than 10% of
accounts receivable at December 31, 2007. The top five customers accounted for
24.7% and 49.2% of the revenue from third parties for the three months ended March
31, 2008 and 2007, respectively.
No customer accounted for greater than 10% of third parties
revenue for the three months ended March 31, 2008. For the same period in 2007,
three customers accounted for 14.9%, 11% and 10.2% of third parties revenue,
respectively, and no other customers accounted for greater than 10% of third
parties revenue.
7. RELATED PARTY BALANCES AND TRANSACTIONS
Revenue - related party
Effective July 1, 2007, when iASPEC became the Company's VIE,
the results of iASPEC's operations have been consolidated. Prior to July 1,
2007, revenue earned from iASPEC under the Turnkey Agreement was recorded as
related party revenue in the Company's financial statements.
Amounts earned from iASPEC under the Turnkey Agreement during
the three months ended March 31, 2007 were as follows:
Revenue, per contracts
$
3,932,251
Cost of sales incurred by iASPEC
(1,771,527)
Expenses paid by iASPEC on behalf of IST
(341,901)
Net
$
1,818,823
Fee payable to iASPEC under the Turnkey Agreement
$
45,000
F-11
8. INVENTORIES
As of March 31, 2008 and December 31, 2007, inventories
consist of:
March 31,
2008
December 31,
2007
Raw materials
$
36,034
$
-
Work in process
1,104,561
-
Finished goods
105,785
402,940
Installations in process
5,705,000
4,376,990
Total
6,951,380
4,779,930
9. PROPERTY AND EQUIPMENT
As of March 31, 2008 and December 31, 2007, property and equipment consists
of:
March 31,
2008
December 31,
2007
Office equipment
$
122,889
$
116,299
Electronics equipment
8,646,094
8,237,963
Motor vehicles
743,603
566,375
Purchased software
3,256,314
3,126,357
Office building
5,237,230
5,027,304
Leasehold improvements
169,435
-
Total
18,175,565
17,074,298
Less: accumulated depreciation
(4,100,205)
(3,247,402)
$
14,075,360
$
13,826,896
Depreciation expense for the three months ended March 31,
2008 and 2007 was $657,678 and $31,657, respectively.
10. INTANGIBLE ASSETS
As of March 31, 2008 and December 31, 2007, intangible assets
consist of:
March 31,
2008
December 31,
2007
Software development costs
$
1,138,962
$
983,270
Trademark
1,950,956
-
Technology
6,980,576
4,432,398
Total
10,070,494
5,415,668
Less: accumulated amortization
(765,220)
(521,271)
$
9,305,274
$
4,894,397
Amortization expense for the three months ended March 31,
2008 and 2007 was $217,854 and $0, respectively.
Estimated future amortization of intangible assets as of
March 31, 2008 is as follows:
2008 (remaining nine months)
$
401,992
2009
636,261
2010
582,489
2011
482,640
2012
449,357
Thereafter
6,752,535
Total
$
9,305,274
F-12
11. INCOME TAX EXPENSE
Pre-tax income for the three months ended March 31, 2008 and
2007 was taxable in the following jurisdictions:
Three Months
Ended
March 31,
2008
Three Months
Ended
March 31,
2007
PRC
$
4,719,521
$
2,497,104
Others
(888,796)
19,191
Income before taxes and minority interest
$
3,830,725
$
2,516,295
It is management's intention to reinvest all the income
attributable to the Company earned by its operations outside the United States
of America (the "U.S."). Accordingly, no U.S. corporate income taxes are
provided in these condensed consolidated financial statements.
Under the current laws of the BVI, dividends and capital
gains arising from the Company's investments in the BVI are not subject to
income taxes and no withholding tax is imposed on payments of dividends by the
Company.
The reconciliation of income taxes expense for income tax
computed at the PRC federal statutory tax rate applicable to enterprises
operating in the Shenzhen Special Economic Zone is as follows:
Three Months
Ended
March 31,
2008
Three Months
Ended
March 31,
2007
PRC federal statutory tax rate
18%
15%
Computed expected income tax expense
$
849,514
$
377,444
Tax exemption
(677,844)
-
Tax on non-deductible expenses
35,075
-
Income tax expense
$
206,745
$
377,444
IST, ISDT, iASPEC, and Bocom Technology are all governed by
the Income Tax Laws of the PRC and are subject to the PRC enterprise income tax
("EIT") at 15% in 2007. The China Unified Corporate Income Tax Law (the "Unified
Tax Law") was released on March 6, 2007 and became effective on January 1, 2008,
resulting in an increase in the PRC federal statutory tax rate to 25%. The
Unified Tax Law is to be phased in over five years. Companies that were subject to an income tax of 15% in 2007 will pay 18% in 2008, 20% in
2009, 22% in 2010, 24% in 2011 and 25% from 2012. As a wholly-owned foreign
investment enterprise, IST is entitled to enjoy a two-year tax exemption,
followed by a 50% exemption for three years thereafter by PRC tax authorities
beginning August 10, 2007 and retroactive to January 1, 2007. Under the Unified Tax
Law, companies that were previously exempt from taxes or that had concessional
rates are to retain their preferences until the original expiration date. The
Unified Tax Law does not impact IST's income tax qualification to enjoy a tax
exemption in fiscal year 2008 and IST will continue to qualify for a 50% tax
exemption for the three years thereafter. EIT exemptions claimed by IST may
become payable if IST were to dissolve within the next 10 years. However,
management believes that the PRC tax authorities will not request payment of any
such amounts.
The Company adopted the provisions of FASB Interpretation No.
48,
Accounting for Uncertainty in Income Taxes – an Interpretation of FASB
Statement No. 109,
or FIN 48, on January 1, 2007, and did not have any
unrecognized tax benefits. There was no effect on the Company's financial
condition or results of operations as a result of implementing FIN 48.
The Company's policy is to recognize interest and penalties
accrued on any unrecognized tax benefits as a component of income tax expense.
As of the date of adoption of FIN 48, the Company did not have any accrued
interest or penalty associated with any unrecognized tax benefits, nor was any
interest expense recognized for the three months ended March 31, 2008 and 2007.
F-13
12. STOCK-BASED COMPENSATION
Effective June 13, 2007, the Board of Directors of the
Company adopted the China Information Security Technology, Inc. 2007 Equity
Incentive Plan ("The Plan"). The Plan provides for grants of stock options,
stock appreciation rights, performance units, restricted stock, restricted stock
units and performance shares. A total of 8,000,000 shares of the Company's
common stock may be issued pursuant to Awards granted under the Plan.
On November 30, 2007,  the Company issued options to certain employees to purchase
490,000 shares of the Company's common stock, with an exercise
price of $9.48 per share, which options were to vest on December 5, 2008 and to
expire on December 5, 2011.
On March 3, 2008, the Company's Board of Directors voided and
canceled the grant of the stock options, and on March 20, 2008 approved the
grant of 400,000 shares of common stock to the employees. The fair value of the
Company's common stock based on quoted market prices on March 20, 2008 was $4.30
per share. Since the cancellation and grant of the replacement award occurred
concurrently, they will be treated as a modification of the terms of the
cancelled award in accordance with SFAS 123R. These newly granted shares are
vested quarterly at 25% over one year after the grant.
The Company uses Black-Scholes option pricing model to
measure the fair value of stock options granted. The determination of the fair
value of stock-based compensation awards on the date of grant using an
option-pricing model is affected by the Company's stock price as well as
assumptions regarding a number of complex and subjective variables, including
the expected volatility of the Company's stock price over the term of the
awards, actual and projected employee stock option exercise behaviors, risk-free
interest rate and expected dividends.
Expected term represents the weighted average period of time
that stock-based awards are expected to be outstanding, giving consideration to
employees' expected exercise and post-vesting employment termination behavior.
Expected volatilities are based on historical volatilities of the Company's
ordinary shares. Risk-free interest rate is based on U.S. T-bill with maturity
terms similar to the expected term on the stock-based awards. The Company does
not anticipate paying any cash dividends in the foreseeable future. Forfeitures
are estimated at the time of grant and revised in subsequent periods if actual
forfeitures differ from those estimates. The Company uses historical data to
estimate pre-vesting option forfeitures and record stock-based compensation
expense only for those awards that are expected to vest.
During the three months ended March 31, 2008, the Company
recognized $383,965 of compensation expense related to the stock option and
restricted stock plans. As of March 31,
2008, after the cancellation of the stock options, there is approximately
$1,216,000 of unrecognized expense related to the grant of the non-vested
shares. A summary of the status of the Company's non-vested stock options and
shares during the three months ended March 31, 2008 is presented as below:
Per Share
Non-vested Options
Shares
Fair Value
Non-vested at January 1, 2008
490,000
$
3.41
Cancelled and modified
(490,000)
3.94
Non-vested at March 31, 2008
-
$
-
Per Share
Non-vested Shares
Shares
Fair Value
Non-vested at January 1, 2008
-
$
-
Granted and non-vested at March 31, 2008
400,000
$
4.30
13. FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
The financial statements of IST, ISDT, iASPEC and Bocom
Technology are measured using the local currency (Chinese Renminbi Yuan) as the
functional currency. The assets and liabilities are translated using the
exchange rate in effect at the balance sheet date, and the results of operations
of are translated at the average exchange rates during the period. Translation
adjustments are included in comprehensive income in the accompanying statements
of income and comprehensive income. During the three months ended March 31, 2008
and 2007, the Company recorded translation gains of $2,342,821 and $11,318,
respectively, as a component of accumulated other comprehensive income.
F-14
14. COMMITMENTS AND CONTINGENCIES
The Company's subsidiaries, ISDT and Bocom Technology lease
offices and factory space in Shenzhen and Dongguan in the PRC under three lease
agreements that will expire in May 2008, September 2008 and
October 2010, respectively. Rental expense for the three months ended March 31,
2008 and 2007 was approximately $56,000 and $12,000, respectively.
Future minimum lease payments under these lease agreements as
of March 31, 2008 are as follows:
Year ending December 31,
Lease payments
2008 (remaining nine months)
$
141,100
2009
144,800
2010
68,900
Total
$
354,800
15. SUBSEQUENT EVENTS
(a) Acquisition of Wuhan Wuda Geoinformatics Co., Ltd.
On February 15, 2008, the Company approved iASPEC's entry
into a share purchase and increased capital agreement (the "Purchase Agreement
of Geo"), dated as of February 16, 2008, for the purchase of approximately 57%
of Wuhan Wuda Geoinformatics Co., Ltd. ("Geo"), a leading provider of GIS
software products and integrated solutions in China, for RMB49,500,000
(approximately $7,049,000).
As of March 31, 2008, included in deposit for business
acquisition was $7,049,000 in connection with the acquisition, which was
completed on April 1, 2008.
(b) 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 System Co., Ltd., each with a 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.
F-15
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
PERIOD FROM JANUARY 1, 2006 TO
OCTOBER 8, 2006
PERIOD FROM JANUARY 17, 2006 TO DECEMBER 31, 2006
YEAR ENDED DECEMBER 31, 2007
F-16
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
China Public Security Technology, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of China Public Security Technology, Inc.
and subsidiaries (Successor) (Note 1) as of December 31, 2007 and 2006, and the related consolidated
statements of income and comprehensive income, stockholders' equity and cash flows for the year
ended December 31, 2007 and the period from January 17, 2006 to December 31, 2006 (Successor Period);
and we have audited the statements of income and comprehensive income, stockholders' equity
and cash flows of Shenzhen iASPEC Software Engineering Company Limited (Predecessor) (Note 1) for
the period from January 1, 2006 to October 8, 2006 (Predecessor Period). These financial statements
are the responsibility of the Company's management. Our responsibility is to express an opinion
on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of China Public Security Technology, Inc. and its subsidiaries
at December 31, 2007 and 2006, and the consolidated results of their operations and cash flows
for the year ended 2007, for the Successor Period in 2006, and the results of operations and cash
flows of Shenzhen iASPEC Software Engineering Company Limited for the Predecessor Period, in conformity
with accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, China Public Security Technology,
Inc. succeeded to the business operations of the Predecessor on October 8, 2006. As a result, the
financial statements of the Successor and the Predecessor are not comparable in all respects.
/s/ GHP HORWATH, P.C.
GHP Horwath, P.C.
Denver, Colorado
March 28, 2008
F-17
CHINA PUBLIC SECURITY TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2007 AND 2006
NOTES
2007
2006
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
19,755,182
$
172,316
Investment in marketable securities
5
14,966,752
—
Accounts receivable
11,721,306
—
Advances receivable
—
332,479
Advances to suppliers
1,791,440
—
Amount due from related parties
6
—
1,410,471
Inventories
7
4,779,930
243,948
Other receivables
974,475
—
TOTAL CURRENT ASSETS
53,989,085
2,159,214
Deposit for business acquisition
14
8,989,022
—
Property and equipment
8
13,826,896
49,826
Intangible assets
9
4,894,397
—
Goodwill
4
7,154,395
—
TOTAL ASSETS
$
88,853,795
$
2,209,040
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
$
3, 079,304
$
—
Advances payable
—
200,000
Advances from customers
394,383
—
Tax payable
326,026
215,255
Amount due to a director
6
—
82,304
Other payables and accrued expenses
987,483
66,832
TOTAL CURRENT LIABILITIES
4,787,196
564,391
MINORITY INTEREST
10,060,657
—
STOCKHOLDERS' EQUITY
Common stock, par $0.01;
Authorized capital, 75,000,000 shares;
Shares issued and outstanding (2007:45,639,396,
2006: 31,550,298 shares)
190,891
50,000
Additional paid-in capital
57,421,150
—
Reserve
12
1,755,552
159,465
Retained earnings
13,170,549
1,435,184
Accumulated other comprehensive income
1,467,800
—
TOTAL STOCKHOLDERS' EQUITY
74,005,942
1,644,649
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
88,853,795
$
2,209,040
The accompanying notes are an integral part of these consolidated financial statements.
F-18
CHINA PUBLIC SECURITY TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
YEAR ENDED DECEMBER 31, 2007
PERIOD FROM JANUARY 17, 2006 TO DECEMBER 31 2006
PERIOD FROM JANUARY 1, 2006 TO OCTOBER 8, 2006
The consolidated statements of income and comprehensive income for the period from January 1 to October
8, 2006 reflect operations of the Predecessor Company. (See Note 1 to the consolidated financial
statements)
SUCCESSOR
PREDECESSOR
NOTES
YEAR ENDED
DECEMBER 31,
2007
JANUARY 17
THROUGH
DECEMBER 31,
2006
JANUARY 1
THROUGH
OCTOBER 8,
2006
Revenue - third parties
$
24,800,750
$
989,755
$
9,644,332
Revenue - related party
6
5,541,959
1,185,449
—
TOTAL REVENUE
30,342,709
2,175,204
9,644,332
Cost of revenue
(12,714,170
)
(89,934
)
(3,739,518
)
GROSS PROFIT
17,628,539
2,085,270
5,904,814
Administrative expenses
(3,321,333
)
(99,024
)
(931,108
)
Research and development expenses
(424,104
)
—
—
Fee to iASPEC under the Turnkey Agreement
6
(92,160
)
(45,000
)
—
Selling expenses
(480,465
)
(60,013
)
(157,855
)
INCOME FROM OPERATIONS
13,310,477
1,881,233
4,815,851
Other income, net
79,435
1,305
6,584
Interest income
138,840
1,514
6,912
INCOME BEFORE TAXES AND MINORITY INTEREST
13,528,752
1,884,052
4,829,347
Minority interest
(90,000
)
—
—
Income taxes
10
(107,300
)
(289,403
)
(749,381
)
NET INCOME
13,331,452
1,594,649
4,079,966
Foreign currency translation gain
1,467,800
—
268,305
COMPREHENSIVE INCOME
$
14,799,252
$
1,594,649
$
4,348,271
WEIGHTED AVERAGE NUMBER OF SHARES
Basic
39,718,967
26,958,104
N/A
Diluted
40,152,855
26,958,104
N/A
EARNINGS PER SHARE
Basic
$
0.34
$
0.06
N/A
Diluted
$
0.33
$
0.06
N/A
The accompanying notes are an integral part of these consolidated financial statements.
F-19
CHINA PUBLIC SECURITY TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 2007
PERIOD FROM JANUARY 17, 2006 TO DECEMBER 31 2006
PERIOD FROM JANUARY 1, 2006 TO OCTOBER 8, 2006
The consolidated statements of stockholder's equity for the period from January 1 to October 8,
2006 reflect operations of the Predecessor Company. (See Note 1 to the consolidated financial statements)
Common stock
par value $0.12
Additional
paid-in
capital
Reserve
Retained
earnings
(deficit)
Accumulated
other
comprehensive
income
Total
Shares
Amount
THE PREDECESSOR:
Balance as at January 1, 2006
30,000,000
$
3,642,000
$
665,548
$
—
$
846,926
$
—
$
5,514,474
Net income for the period from January 1, 2006
through October 8, 2006
—
—
—
—
4,079,966
—
4,079,966
Foreign currency translation adjustments
—
—
—
—
—
268,305
268,305
Transfer to reserve
—
—
—
774,551
(774,551
)
—
—
BALANCE AS AT OCTOBER 8, 2006
30,000,000
$
3,642,000
$
665,548
$
774,551
$
4,152,341
$
268,305
$
9,502,745
Common stock
par value $0.01
Additional
paid-in
capital
Reserve
Retained
earnings
Accumulated
other
comprehensive
income
Total
Shares
Amount
THE SUCCESSOR:
Capital contribution on January 17, 2006
25,500,000
$
50,000
$
—
$
—
$
—
$
—
$
50,000
Common stock issued for acquisition of
Irish Mag Inc.
6,050,298
—
—
—
—
—
—
Net income from January 17, 2006 through
December 31,
2006
—
—
—
1,594,649
—
1,594,649
Transfer to reserve
—
—
—
159,465
(159,465
)
—
—
BALANCE AS AT DECEMBER 31, 2006
31,550,298
$
50,000
$
—
$
159,465
$
1,435,184
$
—
$
1,644,649
Issuance of common stock in private
placements
12,868,422
128,684
49,688,802
—
—
—
49,817,486
Common stock issued upon the cashless
exercise of warrants
267,343
2,674
(2,674
—
—
—
—
Common stock issued for acquisition of
ISDT (Note 4)
883,333
8,833
7,057,831
—
—
—
7,066,664
Stock-based compensation (Note 12)
70,000
700
677,191
—
—
—
677,891
Net income from the year
—
—
—
—
13,331,452
—
13,331,452
Foreign currency translation gain
—
—
—
—
—
1,467,800
1,467,800
Transfer to reserve
—
—
—
1,596,087
(1,596,087
)
—
—
BALANCE AS AT DECEMBER 31, 2007
45,639,396
$
190,891
$
57,421,150
$
1,755,552
$
13,170,549
$
1,467,800
$
74,005,942
The accompanying notes are an integral part of these consolidated financial statements.
F-20
CHINA PUBLIC SECURITY TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2007
PERIOD FROM JANUARY 17, 2006 TO DECEMBER 31 2006
PERIOD FROM JANUARY 1, 2006 TO OCTOBER 8, 2006
The consolidated statements of cash flows for the period from January 1 to October 8, 2006 reflect
operations of the Predecessor Company. (See Note 1 to the consolidated financial statements)
SUCCESSOR
PREDECESSOR
YEAR ENDED
DECEMBER 31
2007
JANUARY 17,
THROUGH
DECEMBER 31,
2006
JANUARY 1,
THROUGH
OCTOBER 8,
2006
OPERATING ACTIVITIES
Net income
$
13,331,452
$
1,594,649
$
4,079,966
Adjustments to reconcile net income to net cash
provided from operation
Depreciation
1,274,768
1,131
422,946
Amortization of intangible assets
168,747
—
105,630
Stock-based compensation
677,891
—
—
Minority interest
90,000
—
—
Changes in operating assets and liabilities, net of
effects of business acquisition and VIE
consolidation:
(Increase) decrease  in inventories
(1,399,838
)
—
203,236
Increase in trade receivables
(4,115,867
)
—
—
Decrease (increase) in other receivables and deposits
592,182
(243,948
)
1,516,215
Increase in receivables from and advances to iASPEC
prior to VIE consolidation (Note 6)
(10,660,988
)
(1,295,159
)
—
Increase in trade payables
903,475
—
150,266
Increase in advance from customer
54,830
—
—
Increase in other payables
201,253
—
—
Increase (decrease) in accrued expenses
442,700
66,832
(11,332
)
Increase in tax payable
46,586
215,255
354,520
Net cash provided by operating activities
1,607,191
338,760
6,821,447
INVESTING ACTIVITIES
Increase in cash from VIE consolidation (Note 3)
4,731,140
—
—
Cash acquired from Fortune Fame & ISDT (Note 4)
326,831
—
—
Deposits paid for business acquisition of Bocom
Multimedia (Note 14)
(9,000,000
)
—
—
Consideration paid for business acquisition of
(7,051,469
)
—
—
Fortune Fame (Note 4)
Repayments from (advances to) third parties
332,479
(332,479
)
—
Repayments from (advances to) related parties
115,312
(115,312
)
(1,563,806
)
Purchase of plant and equipment
(6,452,450
)
(50,957
)
(3,329,474
)
Capitalized software development cost
—
—
(102,953
)
Purchase of Equity Linked Notes ( Note 5)
(22,654,230
)
—
—
Collection of cash from matured Equity Linked Notes  (Note 5)
7,687,478
—
—
Net cash used in investing activities
(31,964,909
)
(498,748
)
(4,996,233
)
FINANCING ACTIVITIES
Advances received from (repaid to) a third party company
(200,000
)
200,000
—
Amount received from (repaid to) a stockholder
(82,304
)
82,304
—
Short term loan
—
—
632,591
Proceeds from first private placement
13,311,211
—
—
Proceeds from second private placement
36,506,275
—
—
Capital contribution
—
50,000
—
Net cash provided by financing activities
$
49,535,182
$
332,304
$
632,591
SUCCESSOR
PREDECESSOR
YEAR ENDED
DECEMBER 31
2007
JANUARY 17,
THROUGH
DECEMBER 31,
2006
JANUARY 1,
THROUGH
OCTOBER 8,
2006
OPERATING ACTIVITIES
Net income
$
13,331,452
$
1,594,649
$
4,079,966
Adjustments to reconcile net income to net cash
provided from operation
Depreciation
1,274,768
1,131
422,946
Amortization of intangible assets
168,747
—
105,630
Stock-based compensation
677,891
—
—
Minority interest
90,000
—
—
Changes in operating assets and liabilities, net of
effects of business acquisition and VIE
consolidation:
(Increase) decrease  in inventories
(1,399,838
)
—
203,236
Increase in trade receivables
(4,115,867
)
—
—
Decrease (increase) in other receivables and deposits
592,182
(243,948
)
1,516,215
Increase in receivables from and advances to iASPEC
prior to VIE consolidation (Note 6)
(10,660,988
)
(1,295,159
)
—
Increase in trade payables
903,475
—
150,266
Increase in advance from customer
54,830
—
—
Increase in other payables
201,253
—
—
Increase (decrease) in accrued expenses
442,700
66,832
(11,332
)
Increase in tax payable
46,586
215,255
354,520
Net cash provided by operating activities
1,607,191
338,760
6,821,447
INVESTING ACTIVITIES
Increase in cash from VIE consolidation (Note 3)
4,731,140
—
—
Cash acquired from Fortune Fame & ISDT (Note 4)
326,831
—
—
Deposits paid for business acquisition of Bocom
Multimedia (Note 14)
(9,000,000
)
—
—
Consideration paid for business acquisition of
(7,051,469
)
—
—
Fortune Fame (Note 4)
Repayments from (advances to) third parties
332,479
(332,479
)
—
Repayments from (advances to) related parties
115,312
(115,312
)
(1,563,806
)
Purchase of plant and equipment
(6,452,450
)
(50,957
)
(3,329,474
)
Capitalized software development cost
—
—
(102,953
)
Purchase of Equity Linked Notes ( Note 5)
(22,654,230
)
—
—
Collection of cash from matured Equity Linked Notes  (Note 5)
7,687,478
—
—
Net cash used in investing activities
(31,964,909
)
(498,748
)
(4,996,233
)
FINANCING ACTIVITIES
Advances received from (repaid to) a third party company
(200,000
)
200,000
—
Amount received from (repaid to) a stockholder
(82,304
)
82,304
—
Short term loan
—
—
632,591
Proceeds from first private placement
13,311,211
—
—
Proceeds from second private placement
36,506,275
—
—
Capital contribution
—
50,000
—
Net cash provided by financing activities
$
49,535,182
$
332,304
$
632,591
F-21
SUCCESSOR
PREDECESSOR
YEAR ENDED
DECEMBER 31
2007
JANUARY 17,
THROUGH
DECEMBER 31,
2006
JANUARY 1,
THROUGH
OCTOBER 8,
2006
NET INCREASE IN CASH AND CASH EQUIVALENTS
$
19,177,464
$
172,316
$
2,457,805
EFFECT OF EXCHANGE RATE ON CASH
405,402
—
65,740
CASH AND CASH EQUIVALENTS, BEGINNING
172,316
—
57,758
CASH AND CASH EQUIVALENTS, ENDING
$
19,755,182
$
172,316
$
2,581,303
Supplemental disclosure of cash flow information
Income taxes paid
$
24,574
$
74,148
$
508,712
The accompanying notes are an integral part of these consolidated financial statements.
F-22
CHINA PUBLIC SECURITY TECHNOLOGY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
China Public Security Technology Inc., and its subsidiaries, (the "Company" or the "Successor")
(formerly Irish Mag. Inc) is a provider of integrated solutions for the public security sector in
the People's Republic of China ("PRC"), specializing in providing public security
information technology and Geographic Information Systems ("GIS") software operating services,
as well as the sale of computer hardware and software, and the provision of Certificate Authority,
or CA, an application platform and e-Government solution technology. These services are provided
through the Company's wholly-owned subsidiaries, Information Security Technology (PRC) Co.,
Ltd ("IST") (formerly Public Security Technology (PRC) Co. Ltd.) and Fortune Fame International
Investment Limited, and its variable interest entity ("VIE"), iASEPC Software Company Limited.
Reverse Merger Transaction
Prior to October 9, 2006, the Company was a privately owned entity formed as a British Virgin Islands
holding company, China Public Security Holdings ("CPSH"). Between October 6, 2006 and January
31, 2007, the Company consummated a series of transactions whereby CPSH and Irish Mag. a public shell
company, entered into a reverse merger whereby Irish Mag. acquired all the outstanding common stock
of CPSH (the "Acquisition") from the current Chairman and Executive Officer, Jiang Huai
Lin ("Mr. Lin"), for 25,500,000 shares of common stock. For accounting purposes, the Acquisition
of CPSH by Irish Mag. was recorded as a reverse acquisition of a public shell and a recapitalization
of CPSH based on factors demonstrating that CPSH represents the accounting acquirer. The Acquisition
is equivalent to the issuance of stock by CPSH for the net monetary assets (which were not significant)
of Irish Mag. The shareholder of CPSH received approximately 81% of the post-Acquisition common stock
of Irish Mag. In addition, post-Acquisition management personnel and the board of directors of the
Company now consist of individuals previously holding such positions with CPSH. The historical shareholders'
equity of CPSH prior to the Acquisition has been retroactively restated (a recapitalization) for
the equivalent number of shares received in the Acquisition. The restated consolidated retained earnings
of CPSH have been carried forward after the Acquisition. Immediately prior to the Acquisition, Irish
Mag. was essentially a shell company. Irish Mag changed its name to China Public Security Technology,
Inc. (the "Company") in January 2007. Prior to the Acquisition, Irish Mag had 1,350,000
shares of common stock outstanding. On October 2, 2006, Irish Mag. effected a forward stock split
of 4.44444444:1, which increased the issued share capital to 6,000,000 shares of common stock. Share
and per share amounts have been retroactively restated to reflect the forward stock splits.
October 24, 2006, the Company issued an additional 50,298 shares to the former majority shareholder
of Irish Mag. in connection with the Acquisition.
Business Turnkey Agreement
On October 9, 2006, IST, entered into a Business Turnkey Agreement, as amended (the "Turnkey Agreement")
with iASPEC Software Company Limited, (formerly Shenzhen iASPEC Software Engineering Company Limited)
("iASPEC" or the "Predecessor") , a PRC company controlled by Mr. Lin. iASPEC
is a software development company that provides public security information technology, Police-Use
Geographic Information Systems ("PGIS") and Civil-Use Geographic Information Systems ("CGIS")
operating services to government and private customers in the PRC. Under the Turnkey Agreement, IST
was to pay an annual fee of $180,000 to iASPEC and was to perform all services necessary for iASPEC
to fulfill its customer contracts in exchange for 100% or 90% of the revenues from such contracts,
depending on the contract. In addition, under the Turnkey Agreement, iASPEC granted IST an exclusive,
royalty-free, transferable, worldwide perpetual license to use and install iASPEC's proprietary
software. No other tangible assets or liabilities were transferred to IST under the Turnkey Agreement.
Accordingly, IST essentially succeeded to the business operations of iASPEC and iASPEC is considered
the Predecessor to IST.
Effective July 1, 2007, IST, iASPEC and iASPEC's shareholders, Mr. Lin and Mr. Jin Zhu Cai, terminated
the Turnkey Agreement, and replaced it with a Management Service Agreement ("MSA").
F-23
1.  ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)
Management Service Agreement
Pursuant to the terms of the MSA, iASPEC granted IST a ten-year, exclusive, royalty-free, transferable

worldwide license to use and install certain iASPEC software, along with copies of source and object

codes relating to such software. In addition, IST licensed back to iASPEC a royalty-free, limited,

non-exclusive license to the software, without right of sub-license, for the sole purpose of permitting

iASPEC to carry out its business as presently conducted. IST has the right to designate two Chinese

citizens to serve as senior managers of iASPEC, to serve as a majority on iASPEC's Board of

Directors, and to assist in managing the business and operations of iASPEC. In addition, both iASPEC

and IST will require the affirmative vote of a majority of the Company's Board of Directors,

including at least one non-insider director, for certain material actions, as defined, with respect
to iASPEC.
Under the MSA, IST receives 100% of the net received profit of iASPEC, and reimburses iASPEC for all
net losses incurred by iASPEC, as such terms are defined in the MSA, and iASPEC is permitted to retain
$180,000 per year out of the net received profits. The MSA also provides that IST may advance to
iASPEC, at its sole discretion, amounts to be credited against IST's future obligations to iASPEC.
Any such advances are treated as prepayments and not as loans and iASPEC has no obligation to repay
any such advances except by crediting the amount of such advances against IST's obligation to
reimburse net losses, or by adding the amount thereof to net received profit when and as requested
by IST. The parties to the MSA also agreed to the calculation of a true-up amount, consisting of
the cumulative net profit or net losses of iASPEC from October 9, 2006 to June 30, 2007, when iASPEC
commenced its contractual relationship with IST, through the date of the MSA. The calculated true-up
amount of $7,005,183 was paid by iASPEC to IST as of December 31, 2007.
In connection with the MSA, IST also entered into an immediately exercisable purchase option agreement

("Option Agreement") with iASPEC and its shareholders, pursuant to which the iASPEC shareholders

granted the Company or its designee(s) an exclusive, irrevocable option to purchase, from time
to
time, all or a part of iASPEC's shares or iASPEC's assets from the iASPEC shareholders

for $1,800,000 in the aggregate. The option may not be exercised if the exercise would violate
any
applicable laws and regulations in China or cause any license or permit held by, and necessary
for
the operation of iASPEC, to be cancelled or invalidated.
The substance of the MSA and the Option Agreement is to:
•
Allow the Company to utilize the business licenses, contacts, permits and other resources of iASPEC

in order for the Company to be able to expand its operations and business model;
•
Provide the Company with effective control over all of iASPEC's operations;
•
Allow the shareholders of iASPEC an opportunity to monetize a portion of their investment through the

$1.8 million purchase option.
The Company has adopted Financial Accounting Standards Board ("FASB") Interpretation No.
("FIN") 46R, "
Consolidation and Variable Interest Entities"
("VIEs"), ("FIN 46R"), an interpretation of Accounting Research Bulletin
No. 51, "
Consolidated Financial Statements
". FIN 46R requires a VIE to be consolidated by a company if that company is subject to a majority
of the risk of loss for the VIE or is entitled to receive a majority of the VIE's residual returns.
As a result of the MSA and the Option Agreement, on July 1, 2007 iASPEC became a VIE of the
Company and iASPEC's results are consolidated in the Company's financial statements. To
comply with PRC laws and regulations that restrict foreign ownership of companies that provide public
security information technology and Geographic Information Systems software operating services to
certain government and other customers, the Company operates the restricted aspect of its business
through iASPEC.
The financial statements for the period from January 1, 2006 through October 8, 2006 (the "Predecessor
Period") reflect the results of operations of iASPEC (the "Predecessor"). The financial
statements for the period from January 17, 2006 through December 31, 2006 and for the year ended
December 31, 2007 (the "Successor Period") reflect the results of operations of the Company
and its subsidiaries (the "Successor"), and its VIE from July 1, 2007, the date upon which
the Company became the primary beneficiary. Accordingly, the results of operations of the Predecessor
and the Successor are not comparable in all aspects.
F-24
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Consolidation
The consolidated financial statements of the Company have been prepared in accordance with U.S. generally
accepted accounting principles. The consolidated financial statements include the accounts of the
Company, its subsidiaries and its VIE for which the Company is the primary beneficiary. All significant
intercompany accounts and transactions have been eliminated in consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles

requires management to make estimates and assumptions that affect the reported amounts of assets

and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements, and the reported amounts of revenue and expenses during the reporting period. Management

makes these estimates using the best information available at the time the estimates are made;
however
actual results could differ from those estimates.
(c) Concentration of Risks
Only entities that possess the necessary government licenses and approvals may obtain certain PGIS
contracts with PRC Government customers and, because IST is considered a foreign owned entity in
the PRC, it cannot possess these licenses and approvals. Instead IST relies exclusively on iASPEC
to solicit, obtain and fulfill PGIS contracts. Through June 30, 2007 this was accomplished under
the Turnkey Agreement and many of the expenses of IST were incurred and paid by iASPEC. In accordance
with SEC Staff Accounting Bulletin 55, all of the costs associated with the operations of IST have
been reflected in its financial statements. Accordingly, through June 30, 2007 substantially all
costs incurred and paid for by iASPEC have been allocated to IST. Management believes that this method
of allocation is reasonable. Therefore amounts reported by IST under the Turnkey Agreement, included
in the consolidated financial statements as Revenue – related party, reflect contract amounts
net of costs incurred by iASPEC.
(d) Economic and Political Risks
The Company's majority operations are conducted in the PRC. Accordingly, the Company's business,
financial condition and results of operations may be influenced by the political, economic and legal
environment in the PRC, and by the general state of the PRC economy. The Company's operations
in the PRC are subject to special considerations and significant risks not typically associated with
companies in North America and Western Europe. These include risks associated with, among others,
the political, economic and legal environment and foreign currency exchange. The Company's results
may be adversely affected by changes in the political and social conditions in the PRC, and by changes
in governmental policies with respect to laws and regulations, anti-inflationary measures, currency
conversion, remittances abroad, and rates and methods of taxation.
(e) Cash and Cash Equivalents
The Company considers all highly liquid investments purchased and cash deposits with financial institutions
with original maturities of three months or less to be cash equivalents.
The Company maintains its cash accounts at credit worthy financial institutions and closely monitors
the movements of its cash positions.
(f) Investment in marketable securities
The Company's investments in marketable securities are accounted for as either available-for-sale
or trading securities. Investments accounted for as available for sale are stated at fair market
value, with unrealized gains and losses (net of deferred income tax assets (liabilities)) reported
as a component of stockholders' equity. Investments accounted for as trading securities are
stated at fair market value with unrealized holding gains and losses reported in income. The cost
of securities sold is determined based on the specific identification method for purposes of recording
realized gains and losses. At December 31, 2007 investments in marketable securities consist of investments
in marketable equity securities of two companies listed on the Hong Kong Stock Exchange. (Note 5)
F-25
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g) Accounts Receivable and Concentration of Risk
During the normal course of business, the Company extends unsecured credit to its customers. The Company
regularly evaluates and monitors the creditworthiness of each customer on a case-by-case basis. The
Company includes any account balances that are determined to be uncollectible in an allowance for
doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written
off against the allowance. Based on the information available to management, the Company believes
that no allowance for doubtful accounts was necessary as of December 31, 2007 and 2006.
Accounts receivable include $6.4 million of unbilled accounts receivable at December 31,
2007. Unbilled accounts receivable consist of estimated future billings for work performed but not
yet invoiced to the customer. Unbilled accounts receivable are generally invoiced within the following
month.
The Company's top five customers accounted for 40.5% of accounts receivable as of December 31,
2007, among which two customers accounted for 20% and 10% of accounts receivable and no other customer
were greater than 10% of accounts receivable. As of December 31, 2006, no customer accounted for
greater than 10% of accounts receivable. The top five customers accounted for 59.3% of the revenue
from third parties for the year ended December 31, 2007. No provision for doubtful accounts was required
as of December 31, 2007.
For the year ended December 31, 2007, specifically two customers accounted for 21% and 26% of third
party revenues and no other customer contributed greater than 10% of the revenues. During the period
from January 17, 2006 through December 31, 2006 and the period from January 1, 2006 through October
8, 2006, no customer accounted for greater than 10% of third party revenues.
(h) Advances to Suppliers
Advances to suppliers represents cash deposits for the purchase of inventory items from suppliers.
(i) Advances from Customers
Advances from customers represents cash received from customers as advance payments for the purchase
of the Company's products.
(j) Fair Value of Financial Instruments
Management has estimated that the carrying amounts of non-related party financial instruments approximate
their fair values due to their short-term maturities. The fair value of the amount due from (to)
shareholders is not practicable to estimate due to the related party nature of the underlying transactions.
(k) Inventories
Inventories are valued at the lower of cost or net realizable value. Net realizable value is the estimated
selling price in the ordinary course of business less the estimated cost of completion and the estimated
costs necessary to make the sale.
The Company performs an analysis of slow-moving or obsolete inventory periodically and any necessary
valuation reserves, which could potentially be significant, are included in the period in which the
evaluations are completed. As of December 31, 2007, management determined that no allowance was necessary.
During the years ended December 31, 2007 and 2006, approximately 32% and 41%, respectively, of total
inventory purchases were from five unrelated suppliers. One supplier accounted for more than 10%
of total inventory purchases for these two year/period.
F-26
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided over
the assets' estimated useful lives, using the straight-line method. Estimated useful lives of
property and equipment are as follows:
Office equipment
5 years
Electronics equipment
5 years
Motor vehicles
5 years
Purchased software
3-5 years
Office building
20-50 years
Maintenance and repairs costs are expensed as incurred, whereas significant renewals and betterments
are capitalized.
(m) Intangible assets
Intangible assets represent technology-based intangible assets acquired in connection with the acquisition
of Fortune Fame International Investment Limited (Note 4) and software development costs capitalized
by iASPEC (Note 3).
Intangible assets are being amortized using the straight-line method over the following estimated useful
lives:
Software development costs
5 years
Technology
10 years
(o) Goodwill
Goodwill represents the excess of the purchase price over the net of the fair value of the identifiable
tangible and intangible assets acquired and the fair value of liabilities assumed upon the acquisition
of Fortune Fame International Investment Limited (Note 4). In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 142,
Goodwill and Other Intangible Assets
, management of the Company evaluates the carrying value of goodwill annually or when a possible impairment
is indicated. The Company performs its impairment annually during the fourth quarter of the fiscal
year and determined that there was no impairment of goodwill as of December 31, 2007.
(p) Accounting for the Impairment of Long-Lived Assets
Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably
possible that these assets could become impaired as a result of technology or other industry changes.
Determination of recoverability of assets to be held and used is determined by comparing the carrying
amount of an asset to future net undiscounted cash flows to be generated by the assets. If such assets
are considered to be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of
are reported at the lower of the carrying amount or fair value less costs to sell.
There were no impairments of long-lived assets as of December 31, 2007 and 2006.
(q) Revenue Recognition
Revenues from products are recognized only when persuasive evidence of an arrangement exists, delivery
has occurred or services have been rendered, the price to the customer is fixed or determinable,
and collectability is reasonably assured. Generally, revenue is recognized (1) upon shipment
for equipment and software, (2) as work is performed for professional services and (3) in
equal periodic amounts over the term of the contract for software and hardware maintenance. The Company's
revenue recognition policies are in accordance with SEC Staff Accounting Bulletin No. 104, "
Revenue Recognition
," and AICPA Statement of Position No. 97-2, "
Software Revenue Recognition
".
F-27
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q) Revenue Recognition (Continued)
The majority of revenues are generated from fixed-price contracts, which provide for licenses to software
products, and services to customize such software to meet customers' use. Generally, when the
services are determined to be essential to the functionality of the delivered software, revenue is
recognized using the percentage of completion method of accounting in accordance with SOP 97-2 and
81-1
"Accounting for Long-term Construction Type Contracts"
. The percentage of completion for each contract is estimated based on the ratio of direct labor hours
incurred to total estimated direct labor hours.
(r) Retirement Plan
Retirement benefits in the form of contributions under a defined contribution retirement plan to the
relevant authorities are charged to the statements of income as incurred. Retirement benefit expenses
for the year ended December 31, 2007, the Successor period from January 17, 2006 through December
31, 2006, and the Predecessor period from January 1, 2006 through October 8, 2006 were $117,753,
$3,870, and $54,209, respectively.
(s) Stock-based compensation
Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123 (revised 2004), "Share-Based Payment"
("SFAS 123R"), which revises SFAS No. 123, "Accounting-Based Compensation" ("SFAS
123"). Under the fair value recognition provisions of SFAS 123R, the Company is required to
measure the cost of employee services received in exchange for stock-based compensation measured
at the grant date fair value of the award by using the Black-Scholes option pricing model. The Company
recognizes the compensation costs, net of a forfeiture rate, on a straight-line basis over the requisite
service period of the award, which is the vesting term. The provisions of SFAS 123R apply only to
the awards granted or modified after the date of adoption. The unrecognized expense of awards not
yet vested at the date of adoption, determined under the original provisions of SFAS 123, is recognized
in net profit in the periods after adoption. During the year ended December 31, 2007, the Company
has recognized $677,891 of compensation expenses under the Plan. As of December 31, 2007, there was
$1,600,396 of unrecognized compensation expense related to the non-vested options.
(t) Foreign Currency Translation
The functional currency of the Company's wholly- owned PRC subsidiaries and its VIE is the Chinese
Renminbi Yuan, ("RMB"). RMB is not freely convertible into foreign currencies. The Company's
PRC subsidiaries' and its VIE's financial statements are maintained in the functional currency.
Monetary assets and liabilities denominated in currencies other than the functional currency are
translated into the functional currency at rates of exchange prevailing at the balance sheet date.
Transactions denominated in currencies other than the functional currency are translated into the
functional currency at the exchange rates prevailing at the dates of the transactions. Exchange gains
or losses arising from foreign currency transactions are included in the determination of net income
for the respective periods.
On October 9, 2006, in connection with the Acquisition, the Company adopted the United States dollar
as its reporting currency. The financial statements for the Predecessor Period have been recast using
a method consistent with SFAS No. 52,
"Foreign Currency Translation"
to reflect the United States dollar as if the United States dollar had been used for the Predecessor

Period.
Accordingly, for financial reporting purposes, the financial statements of the Company, which are prepared
using the functional currency, have been translated into United States dollars. Assets and liabilities
are translated at exchange rates at the balance sheet dates and revenue and expenses are translated
at the average exchange rates, and stockholders' equity is translated at historical exchange
rates. Any resulting translation adjustments are not included in determining net income but are included
in foreign exchange adjustment to other comprehensive income, a component of stockholders' equity.
F-28
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(t) Foreign Currency Translation (Continued)
The exchange rates adopted are as follows:
December 31
2007
December 31,
2006
Year end exchange rate
7.3141
7.8050
Average yearly exchange rate
7.6172
7.8050
No representation is made that the RMB amounts could have been, or could be, converted into United

States dollars at the rates used in translation.
(u) Accounting for Computer Software to Be Sold, Leased or Otherwise Marketed
The Company accounts for software development costs in accordance with SFAS No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed
". Costs related to establishing the technological feasibility of a software product are expensed
as incurred as a part of research and development expenses. There were no research and development
expenses during the periods from January 17, 2006 to December 31, 2006 and January 1, 2006 through
October 8, 2006. Costs that are incurred to produce the finished product after technological feasibility
is established are capitalized and amortized over the estimated economic life of 5 years. The Company
performs periodic reviews to ensure that unamortized program costs remain recoverable from future
revenue. Software development costs of $102,953 were capitalized as during the period from January
1, 2006 through October 8, 2006. No software development costs were capitalized during the year ended
December 31, 2007 or the period from January 17, 2006 through December 31, 2006. During the year
ended December 31, 2007 and the period from January 1, 2006 through October 8, 2006, amortization
expense of approximately $111,900 and $61,000, respectively was charged to income.
(v) Income Taxes
Income tax expense is based on reported income before income taxes. Deferred income taxes reflect the
effect of temporary differences between assets and liabilities that are recognized for financial
reporting purposes and the amounts that are recognized for income tax purposes. In accordance with
SFAS No. 109
, "Accounting for Income Taxes,"
these deferred taxes are measured by applying currently enacted tax laws.
On March 16, 2007, the National People's Congress of the PRC passed the new EIT Law, which will
take effect as of January 1, 2008. Under the new EIT Law, an enterprise established outside of the
PRC with "de facto management bodies" within the PRC is considered a resident enterprise
and will normally be subject to the enterprise income tax at the rate of 25% on its global income.
The new EIT Law, however, does not define the term "de facto management bodies." If the
PRC tax authorities subsequently determine that the Company should be classified as a resident enterprise,
then its global income will be subject to PRC income tax at a tax rate of 25.0%. In addition, under
the new EIT Law, dividends from its PRC subsidiaries to it will be subject to a withholding tax.
The rate of the withholding tax has not yet been finalized, pending promulgation of implementing
regulations. Furthermore, the ultimate tax rate will be determined by treaty between the PRC and
the tax residence of the holder of the PRC subsidiary. The Company is actively monitoring the proposed
withholding tax and is evaluating appropriate organizational changes to minimize the corresponding
tax impact. The new EIT Law imposes a unified income tax rate of 25.0% on all domestic-invested enterprises
and FIEs, such as its PRC operating subsidiaries, unless they qualify under certain limited exceptions,
but the EIT Law permits companies to continue to enjoy their existing preferential tax treatments
until such treatments expire in accordance with their current terms. The Company expect details of
the transitional arrangement for the five-year period from January 1, 2008 to December 31, 2012 applicable
to enterprises approved for establishment prior to March 16, 2007 to be set out in more detailed
implementing rules to be adopted in the future.
(w) Earnings per Share
Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average
number of common shares outstanding during the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock were exercised or
converted into common stock, or resulted in the issuance of common stock that shared in the earnings
of the entity. For the year ended December 31, 2007, dilutive securities represent outstanding warrants
to acquire 840,632 shares of common stock. There were no outstanding dilutive securities during 2006.
F-29
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(x) Segment reporting
The Company operates and manages its business as a single segment. As the Company primarily generates
its revenues from customers in the PRC, no geographical segments are presented.
(y) Sales, use and other Value Added Tax
Revenue is recorded net of applicable state, use and other Value Added Tax.
(z) Recent Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141 (R),
"Business Combinations"
, which becomes effective for fiscal periods beginning after December 15, 2008. SFAS No. 141 (R) requires
all business combinations completed after the effective date to be accounted for by applying the
acquisition method (previously referred to as the purchase method). Companies applying this method
will have to identify the acquirer, determine the acquisition date and purchase price and recognize
at their acquisition date fair values of the identifiable assets acquired, liabilities assumed, and
any non-controlling interests in the acquiree. In the case of a bargain purchase the acquirer is
required to reevaluate the measurements of the recognized assets and liabilities at the acquisition
date and recognize a gain on that date if an excess remains. The Company does not expect the adoption
of this statement to have a material impact on its financial statements.
In December 2007, the FASB issued SFAS No. 160, "
Non-controlling Interests in Consolidated Financial Statements, an Amendment of ARB 51
" ("SFAS 160") which becomes effective for fiscal periods beginning after December 15,
2008. This statement amends ARB 51 to establish accounting and reporting standards for the non-controlling
interest in a subsidiary and for the deconsolidation of a subsidiary. The statement requires consolidated
net income to be reported at amounts that include the amounts attributable to both the parent and
the non-controlling interest. It also requires disclosure on the face of the consolidated statement
of income, of the amounts of consolidated net income attributable to the parent and to the non-controlling
interest. In addition this statement establishes a single method of accounting for changes in a parent's
ownership interest in a subsidiary that do not result in deconsolidation and requires that a parent
recognize a gain or loss in net income when a subsidiary is deconsolidated. The Company does not
expect the adoption of this statement to have a material impact on its financial statements.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements
("SFAS 157"). This statement does not require any new fair value measurements but provides
guidance on how to measure fair value and clarifies the definition of fair value under accounting
principles generally accepted in the United States of America. This statement also requires new disclosures
about the extent to which fair value measurements in financial statements are based on quoted market
prices, market-corroborated inputs, or unobservable inputs that are based on management's judgments
and estimates. The statement is effective for fiscal years beginning after November 15, 2008 for
non-financial assets and liabilities, and is effective for fiscal year beginning after November 15,
2007 for financial assets and liabilities. The statement will be applied prospectively by the Company
for any fair value measurements that arise after the date of adoption.
In February 2007, the FASB issued SFAS No. 159, "
The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of
FASB Statement No. 115
" ("SFAS No. 159"). SFAS No. 159 allows companies the choice to measure many financial
instruments and certain other items at fair value. This gives a company the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and liabilities differently without
having to apply complex hedge accounting provisions. SFAS No. 159 is effective for fiscal years beginning
after November 15, 2007. Management is currently evaluating the impact this standard may have
on the Company's consolidated operating results and financial position upon adoption.
F-30
3. VARIABLE INTEREST ENTITY
As a result of the MSA, iASPEC became the Company's VIE, effective as of July 1, 2007. While the
Company has held an economic interest in iASPEC since October 9, 2006, the MSA and the Option Agreement
have given the Company control over the business and operations of iASPEC, and the Company became
the primary beneficiary of iASPEC. The consolidated financial statements for the year ended December
31, 2007, include the results of operations of iASPEC from July 1, 2007, even though the Company
does not own any of iASPEC's equity.
iASPEC's assets and liabilities as of July 1, 2007 were as follows:
July 1, 2007
Cash and cash equivalents
$
4,731,140
Accounts receivable
5,837,210
Inventory
3,066,853
Other current assets
2,296,535
Property and equipment
7,844,889
Intangible assets
609,540
Accounts payable
(2,067,458
)
Amount due to related parties
(11,941,282
)
Other current liabilities
(406,770
)
Net assets
$
9,970,657
As of July 1, 2007, minority interest consisted of 100% of the equity of iASPEC owned by Mr. Lin and
Mr. Jin Zhu Cai. During the six months ended December 31, 2007, all but $90,000 of iASPEC's
net income was allocated to the Company. The $90,000 was attributed to the minority interest in the
Consolidated Statements of Income and Comprehensive Income, resulting in minority interest of $10,060,657
as of December 31, 2007.
iASPEC's net assets as of December 31, 2007 were approximately $13,171,000, and the consolidation
of iASPEC resulted in an increase in assets of approximately $29,905,000, an increase in liabilities
(consisting primarily of accounts payable) of approximately $3,567,000, and an increase of net income
of approximately $5,501,000.
4. BUSINESS ACQUISITION
On November 7, 2007, the Company acquired 100% of the equity interests of Fortune Fame International
Investment Limited, (" Fortune Fame"), and its operating PRC subsidiary, Shenzhen Information
Security Development Technology Company Ltd. ("ISDT"), for which the Company paid approximately
$7.1 million in cash and issued 883,333 shares of its common stock.
Of the 883,333 shares of common stock, 383,333 shares were issued to Cheer Crown International Investment
Limited ("Cheer Crown") and 500,000 shares were issued to Mr. Gao, the Chairman of Fortune
Fame's Board of Directors. Under the terms of the acquisition agreement, Mr. Gao, agreed to
continue on as the Chairman of Fortune Fame. Mr. Gao also agreed that he will return 250,000 shares
of the Company's common stock if Fortune Fame does not meet certain net income targets in 2008,
and 250,000 shares if Fortune Fame does not meet certain net income targets in 2009.
Fortune Fame had no substantive business operations since its formation in July 2007 until it acquired
ISDT on October 26, 2007. ISDT provides a leading CA, an application platform and e-Government solution
technology, and is an exclusive CA application provider for the Shenzhen municipality in the PRC.
The CA certification allows ISDT to issue digital certificates that contain a public key that
can be used by the public to encrypt messages and protect the identity of the user. The CA also
certifies that the public key contained in the certificate belongs to the person, organization, server
or other entity noted in the certificate. CAs are currently used in China's e-Government industry
and can be successfully integrated with the Company's platforms and solutions to enhance customers'
applications.
F-31
4. BUSINESS ACQUISITION (CONTINUED)
The following represents the purchase price allocation at the date of the acquisition:
Cash and cash equivalents
$
326,831
Accounts receivable
1,369,257
Advances to suppliers
530,286
Inventory
151,516
Other current assets
257,526
Property and equipment
223,845
Goodwill
7,154,395
Intangible assets
4,334,381
Current liabilities
(229,904
)
Total purchase price
$
14,118,133
The following tables show supplemental information of the results of operations on a pro forma basis
for the years ended December 31, 2007 and the Successor Period from January 17, 2006 through December
31, 2006, as if the acquisition of ISDT had been completed at the beginning of the respective periods.
For the year ended December 31, 2007
(Unaudited)
Historical
CIST
ISDT
Pro Forma
Adjustments
Pro
Forma
Revenues
$
30,342,709
$
7,139,215
$
(314,073
)
a
$
37,167,851
Income from operations
$
13,310,477
$
1,239,981
$
(338,463
)
b
$
14,211,995
Net income
$
13,331,452
$
1,053,977
$
(338,463
)
b
$
14,046,966
Weighted Average Number of Shares
Outstanding
Basic
39,718,967
752,648
c
40,471,615
Diluted
40,152,855
752,648
c
40,905,503
Earnings per share
Basic
$
0.34
$
0.35
Diluted
$
0.33
$
0.34
For the period from January 17,
      2006 through
December 31, 2006
    (Unaudited)
Historical
CIST
ISDT
Pro Forma
Adjustments
Pro
Forma
Revenues
$
2,175,204
$
1,521,792
$
3,696,996
Income from operations
$
1,882,747
$
304,858
$
(406,156
)
b
$
1,781,449
Net income
$
1,594,649
$
260,783
$
(406,156
)
b
$
1,449,276
Weighted Average Number of Shares
Outstanding
Basic
26,958,104
883,333
c
27,841,437
Diluted
26,958,104
883,333
c
27,841,437
Earnings per share
Basic
$
0.06
$
0.05
Diluted
$
0.06
$
0.05
a. The pro forma adjustments represent the sales from ISDT to iASPEC before the acquisition dates.
b. The pro forma adjustments represent the amortization of the intangible assets arising upon the acquisition
of ISDT.
c. The pro forma adjustments represent the weighted average number of shares impact assuming that the
ISDT acquisition occurred at the beginning of the years.
F-32
5. INVESTMENT IN MARKETABLE ASSETS
On November 9, 2007, the Company invested in three equity-linked notes ("ELNs"), for HKD176,814,000
(approximately $22,654,000), The ELNs were linked to three different equity securities traded on
the Hong Kong Stock Exchange. Mr. Lin provided a guarantee ("Lin Guarantee") against any
losses sustained as a result of the Company's investment in the ELNs.
On December 28, 2007, the maturity date of the ELNs, one of the ELNs was redeemed by the issuer for
cash of HKD 60,000,000 (approximately $7,687,000) and with a gain of HKD906,000 (approximately $116,000).
The other two ELNs were redeemed by the issuer's surrender of the underlying equity securities
to the Company. On December 31, 2007, the market value of the underlying securities was HKD112, 637,334
(approximately $14,441,000). On March 25, 2008, the Company sold the remaining equity securities
for HKD85,009,123 (approximately $10,897,000). In addition, Mr. Lin paid the Company approximately
$4,080,000 in connection with the Lin Guarantee. As a result, the Company recorded no gain or loss
on the investments in the ELNs. Mr. Lin paid the Lin Guarantee from the proceeds of a private sale
to certain accredited investors, of 1,070,000 shares of the Company's common stock owned by
him. Mr. Lin will not receive any shares of our common stock, other security or other consideration
for this capital contribution and has waived any and all rights that he may have to make a claim
against us for any such shares, securities or other consideration in the future. In connection with
this private sale transaction, the Company entered into a registration rights agreement with the
purchasers of Mr. Lin's shares, pursuant to which, among other things, the Company agreed to
register within a predefined period, shares of its common stock transferred to them by Mr. Lin. There
are no liquidated damages associated with the Company's failure to timely register these shares.
Although the Company has not suffered any losses on the investment by the Company in the ELNs, the
investment in the ELNs could result in a claim being alleged against the Company.
6. RELATED PARTY BALANCES AND TRANSACTIONS
(a) Related party balances
As of December 31, 2006, related party receivables and amount due to a director consist of:
Due from related companies
2006
Shenzhen iASPEC Software Engineering Co. Ltd. (The Predecessor)
Revenues under the Turnkey Agreement
$
1,185,449
Fee payable under the Turnkey Agreement
(45,000
)
Other advances
154,710
1,295,159
Hong Kong United Development Group Limited
115,312
$
1,410,471
Due to a director
Mr. Lin
$
82,304
Hong Kong United Development Group Limited is 51% controlled by Mr. Lin. The amount as of December
31, 2006 represented advances to the company as working capital and was unsecured, interest free,
and was repaid in full during the year ended December 31, 2007.
The amount due to Mr. Lin represents advances to the Company as working capital. The amount was unsecured,
non-interest bearing and was repaid in full in during the year ended December 31, 2007.
As iASPEC is consolidated effective July 1, 2007, amount due from iASPEC has been eliminated in consolidation.
F-33
6.  RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)
(b) Revenue - related party
Prior to July 1, 2007, revenues earned from iASPEC under the Turnkey Agreement were recorded as related
party revenues in the Company's financial statements.
Amounts earned from iASPEC under the Turnkey Agreement (prior to the consolidation of iASPEC), during
the six months ended June 30, 2007 and the period from January 17, 2006 through December 31, 2006
and are as follows:
SIX
MONTHS
ENDED
JUNE 30,
2007
JANUARY 17
THROUGH
DECEMBER 31,
2006
Revenues, per contracts
$
12,713,673
$
2,677,498
Cost of sales incurred by iASPEC
(6,558,443
)
(858,149
)
Expenses paid by iASPEC on behalf of IST
(613,271
)
(633,900
)
Net
$
5,541,959
$
1,185,449
Fee payable to iASPEC under the Turnkey Agreement
$
90,000
$
45,000
During the six months ended June 30, 2007 (prior to consolidation), the Company advanced iASPEC approximately
$5,200,000 for the establishment of representative offices and branches, and for the development
of marketing networks under the Turnkey Agreement. Additionally, at June 30, 2007, iASPEC owed the
Company approximately $5,500,000 from the net amounts earned under the Turnkey Agreement, as shown
above, and such amount had been paid by iASPEC to IST before December 31, 2007.
7. INVENTORIES
As of December 31, 2007 and 2006, inventories consist of:
2007
2006
Finished goods
$
402,940
$
243,948
Installations in process
4,376,990
—
Inventories
$
4,779,930
$
243,948
F-34
8. PROPERTY AND EQUIPMENT
As of December 31, 2007 and 2006, property and equipment consists of:
2007
2006
Office equipment
$
116,299
$
12,830
Electronics equipment
8,237,963
38,127
Motor vehicles
566,375
—
Purchased software
3,126,357
—
Office building
5,027,304
—
Total
17,074,298
50,957
Less: accumulated depreciation
(3,247,402
)
(1,131
)
$
13,826,896
$
49,826
Depreciation expense for the year ended December 31, 2007 and the periods from January 17, 2006 through
December 31, 2006 and January 1, 2006 through October 8, 2006 was $1,274,768, $1,131 and $422,946,
respectively.
9. INTANGIBLE ASSETS
As of December 31, 2007 intangible assets consist of:
2007
Software development costs
$
983,270
Technology
4,432,398
Total
5,415,668
Less: accumulated amortization
(521,271
)
Intangible assets, net
$
4,894,397
Estimated future amortization of intangible assets as of December 31, 2007 is as follows:
2008
$
639,894
2009
622,684
2010
571,058
2011
475,194
2012
443,240
Thereafter
2,142,326
Total
$
4,894,397
F-35
10. INCOME TAXES
Pre-tax income for the year ended December 31, 2007 and the periods from January 17, 2006 through December
31, 2006 and January 1, 2006 through October 8, 2006 was taxable in the following jurisdictions:
SUCCESSOR
PREDECESSOR
YEAR ENDED
DECEMBER 31,
2007
JANUARY 17
THROUGH
DECEMBER 31,
2006
JANUARY 1
THROUGH
OCTOBER 8,
2006
PRC
$
15,288,111
$
1,884,052
$
4,829,347
Others
(1,759,360
)
—
—
Total net income (loss) before income taxes
$
13,528,751
$
1,884,052
$
4,829,347
It is management's intention to reinvest all the income attributable to the Company earned by
its operations outside the United States of America (the "U.S."). Accordingly, no U.S.
corporate income taxes are provided in these consolidated financial statements.
Under the current laws of the BVI, dividends and capital gains arising from the Company's investments

in the BVI are not subject to income taxes and no withholding tax is imposed on payments of dividends

by the Company.
The reconciliation of income taxes for income tax computed at the PRC federal statutory tax rate applicable
to enterprises operating in the Shenzhen Special Economic Zone, to income tax expense is as follows:
SUCCESSOR
PREDECESSOR
YEAR ENDED
DECEMBER 31,
2007
JANUARY 17
THROUGH
DECEMBER 31,
2006
JANUARY 1
THROUGH
OCTOBER 8,
2006
PRC federal statutory tax rate
15
%
15
%
15
%
Computed expected income tax expense
$
2,293,216
$
282,607
$
724,402
Tax exemption
(2,191,770
)
—
—
Other differences
5,854
6,796
24,979
Income taxes
$
107,300
$
289,403
$
749,381
IST, ISDT and iASPEC, are all governed by the Income Tax Laws of the PRC and are subject to the PRC's
enterprise income tax ("EIT"). The statutory rate is 33%. However, since these entities
are located in the Shenzhen Economic Special Zone, they are entitled to a permanent preferential
income tax rate of 15% of assessable profits.
As a wholly owned foreign investment enterprise, IST is entitled to enjoy a two year tax exemption,
followed by a 7.5% tax exemption for three years thereafter. On August 10, 2007, IST was granted
EIT exemption by PRC tax authorities, retroactive to January 1 2007.
On March 16, 2007, the 10th People's Congress of China passed the China Unified Corporate
Income Tax Law (the "Unified Tax Law"), effective on January 1, 2008, which establishes
a single unified 25% income tax rate for most companies, with a preferential income tax rate of 15% to
be applicable to enterprises in the Shenzhen Special Economic Zone. In January 2008, the government
announced that the new law would be phased in over five years. Companies that are currently subject
to an income tax of 15% will pay 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% from
2012. Companies that are exempt from taxes or have concessional rates will retain their preferences
until the original expiration date. Management believes that the Unified Tax Law will not impact IST's income tax qualification to enjoy a tax exemption in fiscal year 2007. In addition, notwithstanding
the implementation of the Unified Tax Law, management believes that IST will continue to enjoy a
two-year tax exemption, followed by a 7.5% tax exemption for the three years thereafter. Management
also believes that iASPEC and ISDT will benefit from the transition period from 2008 to 2012.
F-36
10. INCOME TAXES (CONTINUED)
EIT exemptions claimed by IST may become payable if IST were to dissolve within the next 10 years.
However, management believes that the PRC tax authorities will not request payment of any such amounts.
In June 2006, the FASB issued Interpretation No. 48 "
Accounting for Uncertainty in Income Taxes
" ("FIN 48"). This interpretation clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements in accordance with SFAS 109. This interpretation
prescribes a recognition threshold and measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return. The interpretation
also provides guidance for de-recognition of tax positions, financial statement classification, interest
and penalties, accounting in interim periods, disclosure, and transition. This interpretation is
effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have
a material effect on the Company's financial position or results of operations.
The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefits
as a component of income tax expense. As of the date of adoption of FIN 48, the Company did not have
any accrued interest or penalty associated with any unrecognized tax benefits, nor was any interest
expense recognized for the year ended December 31, 2007 and the periods from January 17, 2006 through
December 31, 2006 and January 1, 2006 through October 8, 2006.
11. RESERVE AND DISTRIBUTION OF PROFIT
In accordance with relevant PRC regulations and the Articles of Association of IST, and ISDT appropriations
of net income, as reflected in their PRC statutory financial statements, are to be allocated to statutory
reserve, as determined by resolution of the Board of Directors. For the years ended December 31,
2007 and 2006, $1,596,087 and $159,465, respectively, were appropriated.
12. STOCKHOLDERS' EQUITY
(a)    Equity transactions
On January 16, 2007, the Company entered into a Securities Purchase Agreement ("SPA I") with
2 investors, pursuant to which the Company issued an aggregate of 7,868,422 shares of common stock
and received net proceeds of $13,311,211. The Company also paid fees in connection with SPA I consisting
of cash of approximately $670,000 and warrants to purchase 786,841 shares of common stock for $2.28
per share. The warrants have a term of five years, are exercisable immediately on issuance and have
an exercise price of $2.28 per share.
In October and November 2007, the Company issued 267,343 shares of common stock in connection with
the cashless exercise of 346,209 warrants issued in connection with SPA I.
On October 30, 2007, the Company completed a second Securities Purchase Agreement ("SPA II")
with certain accredited investors (collectively, the "Investors"). Under SPA II, the Company
issued 5,000,000 shares of the Company's common stock, and received net proceeds of $36,506,275.
Pursuant to the SPA II, the Company also entered into (i) a registration rights agreement (the "Registration
Rights Agreement") with the Investors, pursuant to which, among other things, the Company agreed
to register the shares of its common stock issued to the Investors within a pre-defined period and
(ii) a closing escrow agreement (the "Escrow Agreement") with the Investors and the Company's
U.S. legal counsel, as escrow agent, pursuant to which the Investors agreed to deposit the Purchase
Price into escrow to be released upon the occurrence of the events set forth in the Escrow Agreement.
The funds were released from in escrow on October 30, 2007, the closing date, and the registration
statement covering these shares was declared effective on February 6, 2008. The Company also agreed
to use its reasonable best efforts to have its common stock listed and traded on any one of the New
York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Capital
Market by June 30, 2008.
F-37
12. STOCKHOLDERS' EQUITY (CONTINUED)
(a)    Equity transactions (Continued)
In connection with SPA II, the Company issued warrants to purchase 400,000 shares of the Company's
common stock. The warrants have a term of 5 years, are currently exercisable, have an exercise price
of $9.60 per share, and include registration rights to register the shares underlying the warrants.
On November 7, 2007, the Company issued 883,333 shares of common stock in connection with the acquisition
of Fortune Fame.
(b)    Equity Incentive Plan
Effective June 13, 2007, the Board of Directors of the Company adopted the China Public Security Technology,
Inc. 2007 Equity Incentive Plan. The Plan provides for grants of stock options, stock appreciation
rights, performance units, restricted stock, restricted stock units and performance shares. A total
of 8,000,000 shares of the Company's common stock may be issued pursuant to Awards granted under
the Plan.
On November 27, 2007, the Company issued 70,000 shares of common stock to the Company's senior
management and an external consultant firm as bonus awards. Stock-based compensation of $609,000
is included in administrative expenses for the year ended December 31, 2007.
The following table summarizes the changes of the company's restricted stock awards during the
year ended December 31, 2007:
Shares
Grant Date Fair
Value
Granted & vested
70,000
$
8.70
On November 30, 2007, the Company's Board of Directors authorized the grant of options to certain
employees to purchase 490,000 shares of the Company's common stock, par value $0.01, subject
to ratification of the Plan by our stockholders. The options had an exercise price of $9.48 per share,
were to vest on December 5, 2008 and to expire on December 5, 2011. On March 3, 2008, the Company's
Board of Directors voided and canceled the grant of the stock options to the Employees, and on March
20, 2008 approved the grant of 400,000 shares stock awards to the Employees, at price of $4.30 per
share. These newly granted shares will be vested quarterly at 1/4 over one year after the grant.
Since the cancellation and grant of the replacement award occurred concurrently, they will be treated
as a modification of the terms of the cancelled award in accordance with SFAS 123R. During the year
ended December 31, 2007, the Company recognized $68,891 of compensation expense related to stock
options granted. At December 31, 2007, there is approximately $1,600,000 of unrecognized expense
related to the Company's stock-based compensation plans.
The Company uses Black-Scholes option pricing model to measure the fair value of stock options, granted
in 2007. The determination of the fair value of stock-based compensation awards on the date of grant
using an option-pricing model is affected by the Company's stock price as well as assumptions
regarding a number of complex and subjective variables, including the expected volatility of the
Company's stock price over the term of the awards, actual and projected employee stock option
exercise behaviors, risk-free interest rate and expected dividends.
The assumptions used to value stock-based compensation awards for the periods presented are as follows:
December 31,
2007
Expected term (in years)
1.0-2.0
Volatility
102
%
Risk-free interest rate
3.0
5
%
Expected dividend
0
F-38
12. STOCKHOLDERS' EQUITY (CONTINUED)
(b)    Equity Incentive Plans (Continued)
Expected term represents the weighted average period of time that stock-based awards are expected to
be outstanding, giving consideration to employees' expected exercise and post-vesting employment
termination behavior. Expected volatilities are based on historical volatilities of the Company's
ordinary shares. Risk-free interest rate is based on US T-bill with maturity terms similar to the
expected term on the stock-based awards. The Company does not anticipate paying any cash dividends
in the foreseeable future. Forfeitures are estimated at the time of grant and revised in subsequent
periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate
pre-vesting option forfeitures and record stock-based compensation expense only for those awards
that are expected to vest.
A summary of option activities under the plan as of December 31, 2007 is presented as follows:
Stock Options
Shares
Exercise
Price
Remaining
Contractual Term
(in years)
Aggregate
Intrinsic Value
at Reporting Date
Outstanding at January 1, 2007
—
$
—
—
$
—
Granted
490,000
9.48
1.0-4.0
—
Outstanding at December 31, 2007
490,000
9.48
1.0-4.0
N/A
Exercisable at December 31, 2007
—
$
—
—
N/A
The trading price of the Company's shares at December 31, 2007 was $8.50 per share. Therefore,
no intrinsic value reported.
A summary of the status of the Company's non-vested stock options during the year ended December
31, 2007 is presented below:
Non-vested Options
Shares
Weighted-Average
Grant Date Fair Value
Non-vested at January 1, 2007
—
$
—
Granted
490,000
3.41
Non-vested at December 31, 2007
490,000
$
3.41
13. COMMITMENTS AND CONTINGENCIES
ISDT leases offices in Shenzhen, PRC, under a lease agreement that will expire on May 27, 2008. Rent
expense for the year ended December 31, 2007 was approximately $46,302. As of December 31, 2007,
future minimum lease payments under this office lease are approximately $39,800.
14. SUBSEQUENT EVENTS
(a)    Acquisition of Bocom Multimedia Display Company Limited
On December 9, 2007, the Company entered into a Share Purchase Agreement (the "Purchase Agreement
of Bocom"), with Bocom Venture Inc. ("Bocom Venture"), a British Virgin Islands company,
for the acquisition of Bocom Multimedia Display Company Limited, a Hong Kong company, and its wholly-owned
Chinese subsidiary, Shenzhen Bocom Multimedia Display Technology Co. Ltd. (collectively, "Bocom
Multimedia"), for a purchase price of approximately $18,000,000.
The Company paid approximately $9,000,000 of the purchase price in cash which is included in deposit
for business acquisition as of December 31, 2007. The remaining $9,000,000 of the purchase price
was payable on or before May 1, 2008 in 1,125,000 shares of the Company's common stock. On February
1, 2008, the Company completed the acquisition of 100% of the issued and outstanding capital stock of Bocom Multimedia.
F-39
(b)    Acquisition of Wuhan Wuda Geoinformatics Co., Ltd.
On February 15, 2008, the Company approved iASPEC's entry into a share purchase and increased
capital agreement (the "Purchase Agreement of Wuhan"), dated as of February 16, 2008, for
the purchase of approximately 57% of Wuhan Wuda Geoinformatics Co., Ltd. ("Wuhan Geo")
for approximately $6,875,000, This transaction is expected to close on or about April 1, 2008 (the
"Closing"). As of March 21, 2008, approximately $6,875,000­­ had been deposited
in connection with the purchase.
F-40
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
1,470,000 shares of common stock
PROSPECTUS
________,  2008
II-1
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 24.  Indemnification of Directors and Officers
Our bylaws provide for the indemnification of our directors and officers, past, present and future,
under certain circumstance, against attorney's fees, judgments, fines and other expenses incurred
by them in any litigation to which they become a party arising from their association with or activities
on behalf of us. We will also bear expenses of such litigation for any of our directors, officers,
employees or agents upon such persons promise to repay us therefor if it is ultimately determined
that any such person shall not have been entitled to indemnification. This indemnification policy
could result in substantial expenditure by us, which we may be unable to recoup.
Insofar as indemnification by us for liabilities arising under the Securities Exchange Act of 1934

may be permitted to our directors, officers and controlling persons pursuant to provisions
of
the Articles of Incorporation and Bylaws, or otherwise, we have been advised that in the opinion

of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In
the
event that a claim for indemnification by such director, officer or controlling person of us
in the
successful defense of any action, suit or proceeding is asserted by such director, officer
or controlling
person in connection with the securities being offered, we will, unless in the opinion
of our counsel
the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction
the question whether such indemnification by us is against public policy as expressed
in the Act
and will be governed by the final adjudication of such issue.
At the present time, there is no pending litigation or proceeding involving a director, officer, employee
or other agent of ours in which indemnification would be required or permitted. We are not aware
of any threatened litigation or proceeding which may result in a claim for such indemnification.
Item 25.  Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than underwriting discounts and commissions,
payable by us in connection with the sale of common stock being registered. All amounts, other than
the SEC registration fee, are estimates. We will pay all these expenses.
Amount to be
Paid
SEC Registration Fee
$
439
Printing Fees and Expenses
5,000
Legal Fees and Expenses
100,000
Accounting Fees and Expenses
5,500
Blue Sky Fees and Expenses
2,000
Transfer Agent and Registrar Fees
3,000
Miscellaneous
3,000
Total
$
118,939
Item 26. Recent Sales of Unregistered Securities
Between October 6, 2006 and January 31, 2007, our shareholders approved a series of transactions whereby
we purchased all the issued and outstanding stock of CPSH from our current Chairman and Executive
Officer Jiang Huai Lin, for 25,500,000 shares of our common stock in the aggregate. As a result of
these transactions CPSH and its wholly-owned subsidiary, Bo Hai Wen, became our wholly-owned subsidiaries,
and Mr. Lin became the beneficial owner of 25,500,000 shares of our common stock in the aggregate,
which, at January 31, 2007, constituted 80.8 % of our issued and outstanding common stock. Mr. Lin
has since transferred 1,182,065 of these shares and now holds 21,717,935 of these shares directly
and 2,600,000 of these shares indirectly through Total Device Management Limited, an entity controlled
by Mr. Lin.
On January 31, 2007 and February 6, 2007, we issued 7,868,422 shares of our common stock to two accredited
investors in a private placement transaction. The issuance of our shares to these individuals was
made in reliance on the exemption provided by Section 4(2) of the Securities Act for the offer
and sale of securities not involving a public offering and Regulation D promulgated thereunder. These stockholders who received the securities
in such instances made representations that (a) the stockholder is acquiring the securities for his,
her or its own account for investment and not for the account of any other person and not with a
view to or for distribution, assignment or resale in connection with any distribution within the
meaning of the Securities Act, (b) the stockholder agrees not to sell or otherwise transfer the purchased
shares unless they are registered under the Securities Act and any applicable state securities laws,
or an exemption or exemptions from such registration are available, (c) the stockholder has knowledge
and experience in financial and business matters such that he, she or it is capable of evaluating
the merits and risks of an investment in us, (d) the stockholder had access to all of our documents,
records, and books pertaining to the investment and was provided the opportunity ask questions and
receive answers regarding the terms and conditions of the offering and to obtain any additional information
which we possessed or were able to acquire without unreasonable effort and expense, and (e) the stockholder
has no need for the liquidity in its investment in us and could afford the complete loss of such
investment. Our Management made the determination that the investors are accredited investors as
defined in Regulation D, based upon Management's inquiry into their sophistication and net worth.
In addition, there was no general solicitation or advertising for securities issued in reliance upon Regulation D.
II-2
On October 29, 2007, we issued 5,000,000 shares of our common stock to certain accredited investors
in a private placement transaction. The issuance of our shares to these individuals was made in reliance
on the exemption provided by Section 4(2) of the Securities Act for the offer and sale of securities
not involving a public offering and Regulation D promulgated thereunder. The stockholders who
received the securities agreed that (a) they had access to all of the Company's information
pertaining to the investment and were provided with the opportunity to ask questions and receive
answers regarding the offering, (b) they were acquiring the securities for their own account for
investment and not for the account of any other person and not with a view to or for any distribution
within the meaning of the Securities Act and (c) they would not sell or otherwise transfer the purchased
shares unless in compliance with state and federal securities laws. Each of the stockholders represented
that they are accredited investors as defined in Rule 501(a) under the Securities Act and that there
was no general solicitation or advertising in connection with the offer and sale of the Shares.
Item 27. Exhibits and Financial Statement Schedules
The following exhibits are included as part of this Form S-1.
Exhibit No.
Description
3.1
Amended and Restated Articles of Incorporation of the Registrant, as filed with the Secretary of State of Florida on January 25, 2006 (incorporated by reference to Exhibit 3.1 of the current report on Form 8-K filed by the Company on January 26, 2006).
3.2
Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the registration statement on Form SB-2 filed by the Company on March 1, 2006).
4.1
Form of Registration Rights Agreement, dated October 25, 2007 (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on October 25, 2007).
4.2
Common Stock Purchase Warrant issued to Roth Capital Partners, LLC, dated October 29, 2007 (incorporated by reference to Exhibit 4.2 to the current report on Form 8-K filed by the Company on October 30, 2007).
4.3
Common Stock Purchase Warrant issued to Brean Murray, Carret & Co., LLC, dated October 29, 2007 (incorporated by reference to Exhibit 4.3 to the current report on Form 8-K filed by the Company on October 30, 2007).
4.4
Registration Rights Agreement, dated January 31, 2007, among the Company and the investors signatory thereto (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on February 1, 2007).
4.5
Amendment No. 1 to Registration Rights Agreement, dated March 9, 2007, among the Registrant and the investors signatory thereto (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on March 20, 2007).
4.6
China Information Security Technology, Inc. 2007 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by the Company on June 13, 2007).
II-3
4.7
Registration Rights Agreement, dated March 26, 2008, among the Company and the investors signatory thereto (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on March 28, 2008).
5*
Opinion of Thelen Reid Brown Raysman & Steiner, LLP, as to the legality of the shares.
10.1
Form of Securities Purchase Agreement, dated October 25, 2007 (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on October 25, 2007).
10.2
Form of Closing Escrow Agreement, dated as of October 25, 2007 (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on October 25, 2007).
10.3
Securities Purchase Agreement, dated January 16, 2007, among the Registrant and the investors signatory thereto (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on January 17, 2007).
10.4
Amendment No. 1 to the Securities Purchase Agreement, dated January 31, 2007, among the Registrant and the investors signatory thereto (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on February 1, 2007).
10.5
Make Good Escrow Agreement, dated January 31, 2007, among the Registrant, Mr. Jiang Huai Lin, the investors signatory thereto, Roth Capital Partners, LLC and Securities Transfer Corporation, as escrow agent (incorporated by reference to Exhibit 10.3 of the current report on Form 8-K filed by the Company on February 1, 2007).
10.6
Lockup Agreement, dated January 31, 2007, among the Registrant and the stockholders signatory thereto (incorporated by reference to Exhibit 10.4 of the current report on Form 8-K filed by the Company on February 1, 2007).
10.7
Rescission; Termination and Share Exchange Agreement, dated January 31, 2007, among Shenzhen iASPEC Software Engineering Company Limited, the shareholders of iASPEC who are signatories thereto, including Jiang Huai Lin, Public Security Technology (PRC) Co., Ltd., China Public Security Holdings Limited and the Registrant (incorporated by reference to Exhibit 10.5 of the current report on Form 8-K filed by the Company on February 1, 2007).
10.8
Amended and Restated Business Turnkey Agreement, dated as of January 31, 2007, by and between Public Security Technology (PRC) Co., Ltd. and Shenzhen iASPEC Software Engineering Company Limited and the shareholders of iASPEC party thereto (incorporated by reference to Exhibit 10.6 of the current report on Form 8-K filed by the Company on February 1, 2007).
10.9
Management Service Agreement, dated as of August 1, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on August 6, 2007).
10.10
Guaranty, dated August 1, 2007, by Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on August 6, 2007).
10.11
Purchase Option Agreement, dated August 1, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.3 of the current report on Form 8-K filed by the Company on August 6, 2007).
10.12
Notice of Termination, dated August 1, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.4 of the current report on Form 8-K filed by the Company on August 6, 2007).
10.13
Letter Agreement, dated as of September 12, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai.
II-4
10.14
English Translation of Form of China Information Security Technology, Inc. Employment Agreement (incorporated by reference to Exhibit 10.7 of the annual report on Form 10-KSB filed by the Company on April 16, 2007).
10.15
English Translation of Form of China Information Security Technology, Inc. Non-Disclosure Agreement (incorporated by reference to Exhibit 10.8 of the annual report on Form 10-KSB filed by the Company on April 16, 2007).
10.16
Letter Agreement, dated March 29, 2007, among the Registrant and the investors and stockholder signatory thereto (incorporated by reference to Exhibit 10.9 of the annual report on Form 10-KSB filed by the Company on April 16, 2007).
10.17
Form of China Information Security Technology, Inc. Independent Director Agreement (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on August 16, 2007).
10.18
Form of China Information Security Technology, Inc. Indemnification Agreement (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on August 16, 2007).
10.19
Share Purchase Agreement, dated as of November 7, 2007, by and among China Public Security Holdings Limited, Cheer Crown International Investment Limited, the Registrant, and Dongwei Gao (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on November 9, 2007).
10.20
Share Purchase Agreement, dated as of December 9, 2007, by and among China Public Security Holdings Limited, Bocom Venture Inc., and the Company. (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on December 13, 2007).
10.21
Share Purchase and Increase Capital Agreement, dated as of February 16, 2008, by and among iASPEC Software Engineering Co., Ltd., Wuhan Wuda Venture Capital Co., Ltd., Wuhan Wuda Geoinformatics Co., Ltd. and Song Ai Hong (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on February 19, 2008).
10.22
Share Purchase and Increase Capital Agreement, dated as of February 16, 2008, by and among iASPEC Software Engineering Co., Ltd. and Li Wei (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on February 19, 2008).
10.23
Purchase Agreement, dated as of March 26, 2008, by and among Jiang Huai Lin, the Company and the investors signatory thereto (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on March 28, 2008).
14
Amended and Restated Code of Ethics, adopted on December 25, 2007
(incorporation by reference to Exhibit 14 of the annual report on Form 10-K filed by the Company on March 31, 2008).
21
*
List of Subsidiaries
23.1*
Consent of GHP Horwath, P.C.
23.2*
Consent of Thelen Reid Brown Raysman & Steiner LLP (included in Exhibit 5
24*
Power of Attorney (included on the signature page of this registration statement)
_________________
* Filed herewith
Item 28. Undertakings
The undersigned registrant hereby undertakes to:
File, during any period in which offers or sales are being made, a post-effective amendment to this
registration statement to:
(a)           Include
any prospectus required by Section 10(a)(3) of the Securities Act, and
II-5
(b)           Reflect
in the prospectus any facts or events which, individually or together, represent a fundamental change
in the information in the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of the securities offered would
not exceed that which was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement, and
(c)           Include
any additional or changed material information on the plan of distribution.
For determining liability under the Securities Act, treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the securities at that time to be the initial
bona fide offering.
File a post-effective amendment to remove from registration any of the securities that remain unsold
at the end of the offering.
For purposes of determining any liability under the Securities Act to any purchaser in the initial
distribution of the securities, treat the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part
of this registration statement as of the time it was declared effective.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Securities Act and will be governed by the final adjudication of such issue.
For determining any liability under the Securities Act, treat the information omitted from the form
of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant under Rule 424(b)(1), or (4) or 497(h) under the
Securities Act (Sections 230.424(b)(1), (4) or 230.497(h)) as part of this registration statement
as of the time the Commission declared it effective.
For determining any liability under the Securities Act, treat each post-effective amendment that contains
a form of prospectus as a new registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial bona fide offering of
those securities.
II-6
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has
duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Shenzhen, People's Republic of China, on the 13th
day of March, 2008.
CHINA INFORMATION SECURITY TECHNOLOGY, INC.
By:
/s/ Jiang Huai Lin
Jiang Huai Lin
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Jiang Huai Lin, his attorney-in-fact, for him in any and all capacities, to sign any and
all amendments to this registration statement (including post-effective amendments and abbreviated
registration statements), and any and all registration statements filed pursuant to Rule 462
or Rule 429 under the Securities Act of 1933, as amended, in connection with the registration
under the Securities Act of 1933, as amended, of common stock of China Information Security Technology,
Inc., and to file or cause to be filed the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement
on Form S-1 has been signed by the following persons in the capacities indicated on May 13,
2008.
Signature
Title
/s/ Jiang Huai Lin
Jiang Huai Lin
Chief Executive Officer and Chairman (Principal Executive Officer)
/s/ Zhaoyang Chen
Zhaoyang Chen
Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer)
/s/ Zhi Xiong Huang
Zhi Xiong Huang
Director
/s/ Qiang Lin
Qiang Lin
Director
/s/ Yun Sen Huang
Yun Sen Huang
Director
/s/ Sean Shao
Sean Shao
Director
EXHIBIT INDEX
Exhibit No.
Description
3.1
Amended and Restated Articles of Incorporation of the Registrant, as filed with the Secretary of State of Florida on January 25, 2006 (incorporated by reference to Exhibit 3.1 of the current report on Form 8-K filed by the Company on January 26, 2006).
3.2
Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the registration statement on Form SB-2 filed by the Company on March 1, 2006).
4.1
Form of Registration Rights Agreement, dated October 25, 2007 (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on October 25, 2007).
4.2
Common Stock Purchase Warrant issued to Roth Capital Partners, LLC, dated October 29, 2007 (incorporated by reference to Exhibit 4.2 to the current report on Form 8-K filed by the Company on October 30, 2007).
4.3
Common Stock Purchase Warrant issued to Brean Murray, Carret & Co., LLC, dated October 29, 2007 (incorporated by reference to Exhibit 4.3 to the current report on Form 8-K filed by the Company on October 30, 2007).
4.4
Registration Rights Agreement, dated January 31, 2007, among the Company and the investors signatory thereto (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on February 1, 2007).
4.5
Amendment No. 1 to Registration Rights Agreement, dated March 9, 2007, among the Registrant and the investors signatory thereto (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on March 20, 2007).
4.6
China Information Security Technology, Inc. 2007 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by the Company on June 13, 2007).
4.7
Registration Rights Agreement, dated March 26, 2008, among the Company and the investors signatory thereto (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on March 28, 2008).
5*
Opinion of Thelen Reid Brown Raysman & Steiner, LLP, as to the legality of the shares.
10.1
Form of Securities Purchase Agreement, dated October 25, 2007 (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on October 25, 2007).
10.2
Form of Closing Escrow Agreement, dated as of October 25, 2007 (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on October 25, 2007).
10.3
Securities Purchase Agreement, dated January 16, 2007, among the Registrant and the investors signatory thereto (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on January 17, 2007).
10.4
Amendment No. 1 to the Securities Purchase Agreement, dated January 31, 2007, among the Registrant and the investors signatory thereto (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on February 1, 2007).
10.5
Make Good Escrow Agreement, dated January 31, 2007, among the Registrant, Mr. Jiang Huai Lin, the investors signatory thereto, Roth Capital Partners, LLC and Securities Transfer Corporation, as escrow agent (incorporated by reference to Exhibit 10.3 of the current report on Form 8-K filed by the Company on February 1, 2007).
10.6
Lockup Agreement, dated January 31, 2007, among the Registrant and the stockholders signatory thereto (incorporated by reference to Exhibit 10.4 of the current report on Form 8-K filed by the Company on February 1, 2007).
10.7
Rescission; Termination and Share Exchange Agreement, dated January 31, 2007, among Shenzhen iASPEC Software Engineering Company Limited, the shareholders of iASPEC who are signatories thereto, including Jiang Huai Lin, Public Security Technology (PRC) Co., Ltd., China Public Security Holdings Limited and the Registrant (incorporated by reference to Exhibit 10.5 of the current report on Form 8-K filed by the Company on February 1, 2007).
10.8
Amended and Restated Business Turnkey Agreement, dated as of January 31, 2007, by and between Public Security Technology (PRC) Co., Ltd. and Shenzhen iASPEC Software Engineering Company Limited and the shareholders of iASPEC party thereto (incorporated by reference to Exhibit 10.6 of the current report on Form 8-K filed by the Company on February 1, 2007).
10.9
Management Service Agreement, dated as of August 1, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on August 6, 2007).
10.10
Guaranty, dated August 1, 2007, by Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on August 6, 2007).
10.11
Purchase Option Agreement, dated August 1, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.3 of the current report on Form 8-K filed by the Company on August 6, 2007).
10.12
Notice of Termination, dated August 1, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai (incorporated by reference to Exhibit 10.4 of the current report on Form 8-K filed by the Company on August 6, 2007).
10.13
Letter Agreement, dated as of September 12, 2007, among Public Security Technology (PRC) Co., Ltd., Shenzhen iASPEC Software Engineering Company Limited, Jiang Huai Lin and Jin Zhu Cai.
10.14
English Translation of Form of China Information Security Technology, Inc. Employment Agreement (incorporated by reference to Exhibit 10.7 of the annual report on Form 10-KSB filed by the Company on April 16, 2007).
10.15
English Translation of Form of China Information Security Technology, Inc. Non-Disclosure Agreement (incorporated by reference to Exhibit 10.8 of the annual report on Form 10-KSB filed by the Company on April 16, 2007).
10.16
Letter Agreement, dated March 29, 2007, among the Registrant and the investors and stockholder signatory thereto (incorporated by reference to Exhibit 10.9 of the annual report on Form 10-KSB filed by the Company on April 16, 2007).
10.17
Form of China Information Security Technology, Inc. Independent Director Agreement (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on August 16, 2007).
10.18
Form of China Information Security Technology, Inc. Indemnification Agreement (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the Company on August 16, 2007).
10.19
Share Purchase Agreement, dated as of November 7, 2007, by and among China Public Security Holdings Limited, Cheer Crown International Investment Limited, the Registrant, and Dongwei Gao (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on November 9, 2007).
10.20
Share Purchase Agreement, dated as of December 9, 2007, by and among China Public Security Holdings Limited, Bocom Venture Inc., and the Company. (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on December 13, 2007).
10.21
Share Purchase and Increase Capital Agreement, dated as of February 16, 2008, by and among iASPEC Software Engineering Co., Ltd., Wuhan Wuda Venture Capital Co., Ltd., Wuhan Wuda Geoinformatics Co., Ltd. and Song Ai Hong (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on February 19, 2008).
10.22
Share Purchase and Increase Capital Agreement, dated as of February 16, 2008, by and among iASPEC Software Engineering Co., Ltd. and Li Wei (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on February 19, 2008).
10.23
Purchase Agreement, dated as of March 26, 2008, by and among Jiang Huai Lin, the Company and the investors signatory thereto (incorporation by reference to Exhibit 10.1 of the current report on Form 8-K filed by the Company on March 28, 2008).
14
Amended and Restated Code of Ethics, adopted on December 25, 2007
(incorporation by reference to Exhibit 14 of the annual report on Form 10-K filed by the Company on March 31, 2008).
21
*
List of Subsidiaries
23.1*
Consent of GHP Horwath, P.C.
23.2*
Consent of Thelen Reid Brown Raysman & Steiner LLP (included in Exhibit 5)
24*
Power of Attorney (included on the signature page of this registration statement)
* Filed herewith