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CORRECTION: China Information Security Technology, Inc. Announces Second Quarter 2010 Results
Aug 06, 2010 (09:08 AM EDT)
The correction is related to the classification of a shareholder loan to the Company on the Condensed Consolidated Statements of Cash Flows. The shareholder loan was misclassified under Cash Flow from Operations instead of Cash Flow from Financing. The reclassification has no effect on the income statement or balance sheet.
SHENZHEN, China, Aug. 6 /PRNewswire-Asia-FirstCall/ -- China Information Security Technology, Inc. (Nasdaq: CPBY) ("China Information Security," or the "Company"), a leading total solutions provider of Geographic Information Systems (GIS), digital public security and hospital information systems in China, is issuing this press release to correct a press release issued on August 5, 2010, under the same headline, to reflect the correction on the statement of cash flows. A shareholder loan was misclassified under Operating Activities and should have been classified under Financing Activities in the statement of cash flows. The reclassification has no effect on the income statement or balance sheet. The Company is also filing an amendment to its quarterly report on Form 10-Q to reflect the proper classification. The corrected release follows:
Second Quarter 2010 Financial Highlights -- Revenues increased 30% YoY to $33.52 million -- Gross Margin expanded 250 basis points -- Operating Margin expanded 290 basis points -- Attributable Net Income increased 19.9% YoY to $9.35 million -- Non-GAAP Fully Diluted EPS was $0.19 vs. $0.17 a year ago -- Cash flow from operations reached $9.80 million -- New Record High Backlog of $52.27 million representing 50.7% YoY growth -- Reaffirms FY2010 Revenue and Adjusted Net Income Guidance
"We continued to effectively execute on our business strategy which resulted in another promising quarter," commented Mr. Jiang Huai Lin, Chairman and CEO. "New contracts signed in the second quarter reached $39.3 million, up 49% from a year ago and our backlog once again hit a new record high of $52.3 million, up 50.7% from a year ago."
"We believe that contract wins this quarter continue to demonstrate our ability to penetrate new markets nationally and expand in key cities outside Guangdong province. In Shanghai, we are helping the Public Security Bureau manage public security at the 41st World Expo which we believe positions us well to further expand into Eastern China. We are also winning new business by integrating different technologies in our portfolio to create innovative and sophisticated solutions. One specific example is our win of the intelligent traffic management system for the 16th Asian Games in Guangzhou, which delivers highly efficient solutions to improve the quality of our day-to-day lives. Meanwhile, we continue to collaborate with the State Grid Corporation of China on the smart grid project, which is currently in the planning stage."
"We believe that the future of our industry remains bright as the Chinese government continues to demonstrate a long-term commitment to investing in public security, public healthcare and the management of natural resources and disaster-relief."
For the three months ended June 30, 2010, revenue was $33.52 million, compared to $25.79 million for the three months ended June 30, 2009, representing an increase of $7.73 million, or 30%. During the current quarter, Huipu, which was acquired in October 2009, contributed $4.26 million to total revenues. Excluding the impact from Huipu's revenues, organic revenue growth was 13.5% as the Company continued to focus on profitability and the reduction of lower-margin businesses primarily in product and system integration categories.
Software sales increased by 40.7% to $22.41 million for the three months ended June 30, 2010, from $15.92 million for the three months ended June 30, 2009. Software sales constituted 66.9% of the total revenue, which increased from 61.7% during the same period in the prior year, reflecting the Company's continued commitment to the core competency in software. Excluding the impact of Huipu's sales, software sales were 76.6% of organic revenues.
Product sales increased by $3.68 million, or 97.2% for the three months ended June 30, 2010, as compared to $3.79 million in the same period of 2009. Product sales constituted 22.3% of total revenue during the current period as compared with 14.7% during the same period in the prior year. Product sales excluding Huipu's product sales declined by 22.01% from the same period in the prior year to 10.1% of organic revenues. This reflects the Company's focus on higher value-added product sales with the Huipu acquisition.
Sales of system integration services decreased by 37.4% for the three months ended June 30, 2010, as compared to the same period of 2009. As a percentage of revenue, it declined from 21.6% during the three months ended June 30, 2009 to 10.4% during the current quarter. Excluding the impact of Huipu, system integration was 11.9% of organic revenues. The steady decline in weight of system integration business, which carries lower margin, reflects the Company's strategy of growing businesses with higher profitability.
Other revenue decreased by 69.6%, from $0.51 million in the three months ended June 30, 2009 to $0.15 million in the same period of 2010. Other revenue mainly derived from maintenance services in the three months ended June 30, 2009, while in the same period of 2010, in addition to maintenance services, the Company also generated $0.11 million royalty income from Huipu's licensing of its HPC trademark to other manufacturers. The Company believes this was an effective way to monetize Huipu's valuable intellectual property.
Regarding segment breakdown, for the three months ended June 30, 2010, approximately $15.68 million of revenues were generated by the GIS segment, $13.96 million by the DIST segment and $3.88 million by the DHIS segment. This compared with $7.97 million generated by the GIS segment, $15.22 million by the DIST segment and $2.59 million by the DHIS segment for the same period in 2009. The DIST segment decreased by 8.3% compared with the same period of 2009, while the year-over-year growth ratios for the GIS and DHIS segments were 96.6% and 49.7%, respectively.
GIS accounted for 46.8% of the total revenue while DIST and DHIS represented 41.6% and 11.6% respectively. Excluding the impact of Huipu, each of the GIS, DIST and DHIS segment represented 46.3%, 40.4% and 13.3% of total revenue, respectively, as compared to 30.9%, 59.0% and 10.1% of the total revenue, respectively, for the three months ended June 30, 2009. For the first time, the GIS segment exceeded that of the DIST segment and became the Company's largest business segment in the second quarter of 2010. As the Company's technologies continue to evolve, it will be able to integrate more and more DIST functions with those of GIS to create brand new capabilities for customers. Such new offerings contributed to the GIS segment, instead of to DIST, which explains the negative growth rate in the DIST segment. The shifts in segment weights also ultimately reflect the growth momentum in the GIS and DHIS segments outpacing that of the DIST as a result of the Company's focus in the last few years on targeting areas with the highest barriers-to-entry and developing sustainable competitive advantages in the GIS and DHIS segments, in anticipation of accelerating market growth in the coming years. The Company believes it will be well positioned to capture the growth opportunities as this expectation materializes.
Gross Profit and Gross Margin
Gross profit was $16.80 million in 2Q10, an increase of 36.9%, or $4.53 million, from 2Q09. Gross margin was 50.1% in 2Q10, an increase of 2.5%, from 47.6% in the same period of 2009. Huipu yielded a gross margin of 18.5%. Excluding the impact of Huipu's gross margin, the gross margin of the Company's organic business was 54.7%.
The improvement in gross margin resulted from several factors. During the quarter, the Company cut down on lower-margin product sales while benefiting from Huipu's higher-margin product contribution. As a result, the gross margin of products improved by 157 basis points. During the quarter, the Company continued to reduce the weight of the system integration business which typically carries a lower margin. The gross margin for this segment during the quarter was as high as 83.63% primarily due to the progress of certain projects. Meanwhile, the Company continued to increase the weight of its software business, which carries a higher gross margin. However, the gross margin of its software business declined to 54.22% from 62.36% a year ago primarily due to the Company's outsourcing of portions of its software projects commending in the first quarter of 2010. The Company believes that by outsourcing some of the non-essential and labor-intensive portions of software projects, it will be able to focus resources on the higher value-added components of the software business. This practice should enable more effective revenue growth and save operating expenses, which, overtime, will be accretive to long-term shareholder value.
Income from Operations
Income from operations increased $3.53 million, or 41.1%, to $12.13 million for the three months ended June 30, 2010, from $8.60 million in the corresponding period in 2009. Income from operations as a percentage of revenue increased to 36.2% during the three months ended June 30, 2010, from 33.3% in 2009.
Income Tax Expense
Income tax expense for the three months ended June 30, 2010 was $2.16 million, up from $1.09 million for the same period in 2009.
The Company's subsidiaries, ISS, Zhongtian and Huipu 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 22% of assessable profits in 2010, compared to 20% for the same period in 2009, an increase of 2%.
Bocom, and the Company's VIE, iASPEC (inclusive of Geo), as High-Tech Enterprises, are subject to EIT at a rate of 15% of assessable profits. After offsetting accumulated losses from prior years, Geo had no assessable profit subject to EIT for the three months ended June 30, 2010. In addition, as a software company, IST was entitled to a two-year exemption from EIT followed by a 50% tax exemption for the next 3 years. Year 2010 is the fourth year that IST is entitled to the tax holiday and will be subject to a favorable tax rate of 11%.
Net Income Attributable to the Company
As a result of the factors described above, net income increased $1.55 million, or 19.9%, to $9.35 million during the three months ended June 30, 2010, from $7.79 million for the same period in 2009.
Cash and Cash Equivalents
As of June 30, 2010, the Company had $23.54 million in cash and restricted cash, as compared to $19.34 million in the same period one year ago.
During the three months ended June 30, 2010, net cash provided by operating activities improved significantly to $9.80 million, as compared with $5.48 million in the same period a year ago. During the current quarter, accounts receivable balance increased by $0.50 million, as compared with an increase of $11.39 million during the second quarter of 2009.
Recent Developments -- May 18, 2010 - China Information Security Technology PGIS System Plays Critical Role in Public Security Management at the Shanghai World Expo -- June 14, 2010 - China Information Security Technology Wins Intelligent Traffic Management Contract for the 16th Asian Games in Guangzhou, China
For fiscal year 2010, the Company reaffirms its guidance with projected revenue to $141-146 million and adjusted net income to $35.5-39.5 million, excluding any non-cash expenses as a result of employee stock awards, amortization of intangible assets associated with acquisitions, and changes in fair value of contingent considerations.
About Non-GAAP Financial Measures
This press release contains non-GAAP financial measures for earnings that exclude non-cash charges. China Information Security believes that these non- GAAP financial measures are useful to investors because they exclude non-cash charges that China Information Security's management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential operating activities of China Information Security. Accordingly, management excludes the expense arising from certain non-cash charges when making operational decisions. China Information Security believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand China Information Security's financial performance in comparison to historical periods. In addition, it allows investors to evaluate China Information Security's performance using the same methodology and information as that used by China Information Security's management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, China Information Security's management compensates for these limitations by providing the relevant disclosure of the items excluded.
The following table provides the non-GAAP financial measure and the related GAAP measure and provides a reconciliation of the non-GAAP measure to the equivalent GAAP measure.
Q2 2010 Reconciliation of Operating, Net Income and EPS to Exclude SBC, Amortization of Intangible Assets and Contingent Consideration 3 Mos. 3 Mos. 6 Mos. 6 Mos. Ended Ended Ended Ended 30-Jun-10 30-Jun-09 30-Jun-10 30-Jun-09 Operating income 12,126,944 8,597,615 18,690,373 12,766,965 Stock based compensation (SBC) -- -- -- 183,600 Amortization 427,391 437,704 927,048 865,710 Operating income (without SBC and amortization) 12,554,335 9,035,319 19,617,421 13,816,275 Net income Attributable to the Company 9,352,069 7,797,830 15,633,177 11,554,823 Stock based compensation (SBC) -- -- -- 183,600 Amortization 427,391 437,704 927,048 865,710 Change in fair value of contingent consideration* 94,829 -- (700,268) -- Net income (without SBC, amortization and contingent consideration) 9,874,289 8,235,534 15,859,957 12,604,133 Weighted Average Number of Shares Outstanding Basic 51,450,623 47,536,883 51,332,698 47,528,503 Diluted 51,450,623 47,536,883 51,332,698 47,528,503 Earnings per hare (without SBC, amortization and contingent consideration) $0.19 $0.17 $0.31 $0.27 Basic $0.19 $0.17 $0.31 $0.27 * Represents a gain from the change of fair value of the contingent consideration for the acquisition of Huipu as at 06/30/2010, according to FASB ASC 805 - Business Combinations
About China Information Security Technology, Inc.
China Information Security Technology, Inc., together with its subsidiaries, specializes in Geographic Information Systems (GIS), digital public security and hospital information systems, with the goal of being the largest GIS software provider in the People's Republic of China. Headquartered in Shenzhen, China, the Company's total solutions include specialized software, hardware, systems integration, and related services organized into three business segments - Geographic Information Systems, Digital Information Security Technology (DIST), and Digital Hospital Information Systems (DHIS). To learn more about the Company, please visit its corporate website at http://www.chinacpby.com .
Safe Harbor Statement
This press release may contain certain "forward-looking statements" relating to the business of China Information Security Technology, Inc., and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding: the significance of the Company's new contract wins during the quarter; the ability of the Company to continue to strengthen its position in the industry by winning and successfully performing under national contracts; the ability of the Company to secure future opportunities in the market by leveraging its R&D capabilities and reputation; the continued support of the Chinese government for domestic GIS products; the general ability of the Company to achieve its commercial objectives, including the Company's plan to sustain the growth while creating shareholder value; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
For further information, please contact: China Information Security Technology, Inc. Iris Yan Tel: +86-755-8370-4767 Email: email@example.com Web: http://www.chinacpby.com Christensen Kathy Li Tel: +1-480-614-3036 Email: firstname.lastname@example.org Roger Hu Tel: +86-158-1049-5326 Email: email@example.com CHINA INFORMATION SECURITY TECHNOLOGY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2010 AND DECEMBER 31, 2009 Expressed in U.S. dollars (Except for share and per share amounts) June 30 December 31 2010 2009 ASSETS (Unaudited) CURRENT ASSETS Cash and cash equivalents $17,745,272 $ 13,478,633 Restricted cash 5,795,203 5,859,910 Accounts receivable: Billed, net of allowance for doubtful accounts of $2,944,000 and $3,123,000, respectively 24,114,664 23,907,035 Unbilled 58,149,465 47,851,638 Bills receivable 218,622 -- Advances to suppliers 4,084,692 6,924,035 Amount due from related parties, net of allowance for doubtful accounts of $0 and $73,000, respectively 158,467 129,937 Inventories, net of provision of $183,000 and $184,000, respectively 20,985,556 10,936,004 Other receivables and prepaid expenses 14,751,936 15,405,089 Deferred tax assets 1,622,613 1,719,327 TOTAL CURRENT ASSETS 147,626,490 126,211,608 Deposit for software purchase 4,797,561 1,426,452 Deposit for purchase of land use rights 925,912 -- Long-term investments 2,873,722 2,862,016 Property, plant and equipment, net 62,612,136 53,586,514 Land use rights, net 2,123,702 1,907,611 Intangible assets, net 13,138,669 13,556,141 Goodwill 50,067,871 50,609,866 Deferred tax assets 428,336 668,730 TOTAL ASSETS $284,594,399 $ 250,828,938 LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term bank loans $22,121,740 $ 15,927,780 Accounts payable 17,115,384 20,159,317 Bills payable 10,605,305 12,658,029 Advances from customers 3,266,171 3,950,744 Amount due to related parties, current portion 667,138 583,736 Accrued payroll and benefits 1,609,966 3,142,240 Other payables and accrued expenses 14,969,739 14,252,918 Contingent consideration, current portion 1,568,437 1,857,994 Income tax payable 3,875,563 3,290,245 TOTAL CURRENT LIABILITIES 75,799,443 75,823,003 Long-term bank loans 4,036,020 1,907,100 Amount due to related parties, long- term portion 5,015,528 -- Contingent consideration, net of current portion 2,224,685 2,635,397 Deferred tax liabilities 1,896,337 2,564,604 TOTAL LIABILITIES 88,972,013 82,930,104 COMMITMENTS AND CONTINGENCIES -- -- CHINA INFORMATION SECURITY TECHNOLOGY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2010 AND DECEMBER 31, 2009 (CONTINUED) Expressed in U.S. dollars (Except for share and per share amounts) EQUITY Common stock, par $0.01; authorized capital 200,000,000 shares; shares issued and outstanding 2010: 51,811,787: 2009: 49,905,141 shares $ 252,615 $233,548 Treasury stock, 6,000 shares, at cost (11,468) (11,468) Additional paid-in capital 89,128,945 78,495,062 Reserve 8,345,371 8,345,371 Retained earnings 76,095,452 60,462,275 Accumulated other comprehensive income 6,020,572 5,016,575 Total equity of the Company 179,831,487 152,541,363 Non-controlling interest 15,790,899 15,357,471 Total equity 195,622,386 167,898,834 TOTAL LIABILITIES AND EQUITY 284,594,399 250,828,938 CHINA INFORMATION SECURITY TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (Unaudited) Expressed in U.S. dollars (Except for share and per share amounts) Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2010 2009 2010 2009 Revenue - Products $7,471,511 $ 3,789,288 $13,819,481 $6,610,416 Revenue - Software 22,406,236 15,921,487 37,584,868 24,932,952 Revenue - System integration 3,485,523 5,571,619 6,269,406 8,527,076 Revenue - Others 153,618 505,525 1,148,240 697,659 TOTAL REVENUE 33,516,888 25,787,919 58,821,995 40,768,103 Cost - Products sold 5,813,701 3,007,849 11,054,123 5,620,640 Cost - Software sold 10,257,690 5,993,637 16,659,101 8,694,577 Cost - System integration 570,721 4,395,011 3,046,531 6,540,763 Cost - Others 76,470 124,671 146,481 162,108 TOTAL COST 16,718,582 13,521,168 30,906,236 21,018,088 GROSS PROFIT 16,798,306 12,266,751 27,915,759 19,750,015 Administrative expenses (2,621,501) (2,304,376) (5,391,532) (4,520,723) Research and development expenses (560,649) (720,411) (1,130,080) (1,224,263) Selling expenses (1,489,212) (644,349) (2,703,774) (1,238,064) INCOME FROM OPERATIONS 12,126,944 8,597,615 18,690,373 12,766,965 Subsidy income 268,898 318,071 431,680 515,860 Other (loss)/income, net (324,700) (16,845) 642,099 164,521 Interest income 10,403 120,627 29,294 197,544 Interest expense (263,756) (56,443) (412,647) (116,653) INCOME BEFORE INCOME TAXES 11,817,789 8,963,025 19,380,799 13,528,237 Income tax expense (2,163,609) (1,091,800) (3,334,692) (1,680,196) NET INCOME 9,654,180 7,871,225 16,046,107 11,848,041 Less: Net income attributable to the non-controlling interest (302,111) (73,395) (412,930) (293,218) NET INCOME ATTRIBUTABLE TO THE COMPANY $9,352,069 $7,797,830 $15,633,177 $11,554,823 Weighted average number of shares Basic 51,450,623 47,536,883 51,332,698 47,528,503 Diluted 51,450,623 47,536,883 51,332,698 47,528,503 Earnings per share - Basic and Diluted Basic - Net income attributable to the Company's common stockholders $0.18 $0.16 $0.30 $0.24 Diluted - Net income attributable to the Company's common stockholders $0.18 $0.16 $0.30 $0.24 CHINA INFORMATION SECURITY TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (Unaudited) Expressed in U.S. dollars (Except for share and per share amounts) Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2010 2009 2010 2009 Net income $9,654,180 $7,871,225 16,046,107 $11,848,041 Other comprehensive income: Foreign currency translation gain 787,465 (16,365) 1,024,495 435,377 Comprehensive income 10,441,645 7,854,860 17,070,602 12,283,418 Comprehensive income attributable to the non- controlling interest (322,572) (73,310) (433,428) (293,133) Comprehensive income attributable to the Company $10,119,073 $7,781,550 16,637,174 $11,990,285 CHINA INFORMATION SECURITY TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (Unaudited) Expressed in U.S. dollars (Except for share and per share amounts) Six Months Ended June 30, 2010 June 30, 2009 OPERATING ACTIVITIES Net income $16,046,107 $11,848,041 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,441,071 1,852,357 Amortization of intangible assets 927,048 865,710 Stock-based compensation -- 183,600 Loss on disposal of property and equipment 320,957 31,764 Change in allowance for accounts receivable 267,716 573,881 Reversal of write-down of inventories (1,362) -- Change in deferred income tax 215,192 (29,517) Change in fair value of contingent consideration (700,268) -- Changes in operating assets and liabilities, net of effects of business acquisitions: Decrease in restricted cash 457,202 -- Increase in accounts receivable (10,656,507) (14,665,591) Decrease / (increase) in advances to suppliers 2,091,453 (3,028,042) Decrease / (increase) in other receivables and prepaid expenses 313,302 (1,540,531) Increase in inventories (10,164,333) (1,657,773) (Decrease) / increase in accounts payable (5,209,216) 4,643,442 (Decrease) / increase in advances from customers (695,808) 4,469,480 Increase in amount due to related parties 311,077 177,621 Increase / (decrease) in other payables and accrued expenses 921,098 (432,401) Increase in income tax payable 569,611 695,912 Net cash (used in) / provided by operating activities (1,545,660) 3,987,953 INVESTING ACTIVITIES Increase in restricted cash related to bank borrowings (368,895) -- Proceeds from sales of property and equipment 44,007 100,225 Proceeds from sale of short-term investments -- 5,862,800 Refund of investment in former Joint Venture -- 4,397,100 Purchase of land-use-rights (230,970) -- Purchases of property and equipment (11,038,575) (630,478) Capitalized and purchased software development costs (432,547) (308,484) Deposit for software purchase (4,777,693) (4,781,846) Deposit for purchase of land-use- rights (165,093) -- Net cash (used in) / provided by investing activities (16,969,766) 4,639,317 FINANCING ACTIVITIES Borrowing of short-term loans 21,003,299 1,898,082 Borrowing of shareholder's loan 6,026,830 -- Borrowing of long-term loans 4,019,306 -- Repayment of short-term loans (14,887,816) (732,850) Repayment of shareholder's loan (1,026,830) -- Repayment of long-term loans (1,906,970) -- Issued common stock 9,383,440 -- Repurchase of common stock -- (11,468) Net cash provided by financing activities 22,611,259 1,153,764 CHINA INFORMATION SECURITY TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (CONTINUED) (Unaudited) Expressed in U.S. dollars (Except for share and per share amounts) Six Months Ended June 30, June 30, 2010 2009 Effect of exchange rate changes on cash and cash equivalents 170,806 30,757 NET INCREASE IN CASH AND CASH EQUIVALENTS 4,266,639 9,811,791 CASH AND CASH EQUIVALENTS, BEGINNING 13,478,633 9,565,252 CASH AND CASH EQUIVALENTS, ENDING $17,745,272 $19,377,043 Supplemental disclosure of cash flow information: Six Months Ended June 30, June 30, 2010 2009 Cash paid during the period Income taxes $2,547,020 $1,013,801 Interest paid $449,494 $117,327 Supplemental disclosure of significant non-cash transactions:
On January 12, 2010, the Company granted eligible employees a total of 213,363 shares of the Company's common stock as compensation under the China Information Security Technology, Inc. 2007 Equity Incentive Plan ("The Plan"). The fair value of these shares of approximately $1.3 million, based on the quoted market price, was accrued as of December 31, 2009 as the compensation was for services provided in 2009.
On February 2, 2009, the Company granted eligible employees a total of 60,000 shares of the Company's common stock as compensation under the Plan. The fair value of these shares of $183,600 based on quoted market price was recognized as stock-based compensation for the six months ended June 30, 2009.
Selected information by segment is presented in the following tables for the three and six months ended June 2010 and 2009.
Three months ended Six months ended June 30 June 30 2010 2009 2010 2009 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues(1) GIS Segment $15,677,977 $7,974,312 $26,315,057 $13,833,978 DIST Segment 13,957,662 15,221,482 26,055,086 22,741,939 DHIS Segment 3,881,249 2,592,125 6,451,852 4,192,186 $33,516,888 $25,787,919 $58,821,995 $40,768,103 (1) Revenues by operating segments exclude intercompany transactions. Percentage to Revenue GIS Segment 46.8% 30.9% 44.7% 33.9% DIST Segment 41.6% 59.0% 44.3% 55.8% DHIS Segment 11.6% 10.1% 11.0% 10.3%
SOURCE China Information Security Technology, Inc.