China Intelligence Information Systems, Inc. Announces Strong Third Quarter Results

JINAN, China, Nov. 22, 2010 /PRNewswire-Asia-FirstCall/ -- China Intelligence Information Systems, Inc. (OTC Bulletin Board: CVDT), a leading virtualization solutions and services provider in China, today announced strong financial results for the three and nine months ended September 30, 2010. Earnings per share reached $0.07 for the first nine months in 2010 and $0.04 for the third quarter in 2010.

Highlights for the Quarter:

• Revenue was $3,388,676, an increase of $3,252,456, or 2,388%, compared to $136,220 for the three months ended September 30, 2009
• Gross profit was $1.9 million , an increase of $1,842,581 or 2,332%,, compared with $79,021 for the three months ended September 30, 2009
• Operating profit was $1,661,496, compared to operating loss of $1,039,037 for the three months ended September 30, 2009
• Net income was approximately $2.7 million, compared to a net loss of $0.8 million for the three months ended September 30, 2009

"We reported excellent financial and operating results in the third quarter," said Mr. Li Kunwu, President and CEO. "We saw strong demand from diverse industries for our integrated datacenter virtualization solutions and services. We're also increasingly successful in signing additional contracts with our existing clients. This growing customer base supports the rapid revenue increase and solid profit for this quarter."

Mr. Li explained further, "Starting in 2010, we focused on obtaining customers and signing virtualization solutions and services contracts in several strategic industries. We believe these are the critical components of economic growth in China. Penetrating these markets with our virtualization solutions and services is a vital execution for our business' long-term growth. We are pleased to report that we succeeded in gaining several important customers in a number of large-scale industries: healthcare, power supply, education, mining, and the government. Through our alliance program, which was launched earlier this year, we have reached our goals in the four main parts of the Southern Grid system: Guandong, Guizhou, Yunnan and Guangxi grids. To occupy the southern grid market is one of the most important steps for us in reaching our revenue and earnings targets that we set in our 2010 guidance."

The Company's leading virtualization technology solutions and services have the potential to significantly optimize traditional IT infrastructures. Just as important, they can not only help their customers reduce costs and increase energy savings, but also enhance system security. These contracts provide the Company not only with software implementation revenues, but also recurring annual technical support revenues from service contracts.

Recent developments in the quarter:

• Strategically positioned the Southern Grid market which accounts for 13.3% of the total revenue of this quarter.
• On July 20, the Board of Jinan Yinquan Technology Co., Ltd., one of the wholly-owned subsidiaries of the Company, has approved investing RMB17.5 million to Shandong Yinquan Investment Holding Limited to establish a cloud computing science park in Shandong Province. The new cloud computing Science Park obtained strong support from the local government. In addition, the Company expects many social and environmental benefits to come from the project in the near future.
• On July 26, the Company successfully changed its name to China Intelligence Information Systems, Inc. which more accurately reflects its core business and our new website www.ciisi.com was launched.
• On August 13, the Company made total payments of $3 million along with 1.1 million shares of common stock to an investor to terminate the $5 million of convertible debt it borrowed in 2007. The termination of the convertible debt and warrants associated with the debt helped the Company significantly improve its capital structure. In the last two years, its financial statements were impacted by the fluctuations of the derivative liabilities related to the warrants based on the share price.

Mr. Li continued, "We are confident that we can deliver $15 million in revenue and $3.5 million in EBITDA for 2010 based on our virtualization pipelines and existing contracts. In the last couple of months, we have signed virtualization contracts with several high-caliber multinationals including Huaneng Power International Inc., CITIC Group, and China Southern Power Grid. We expect to continue to penetrate these markets and maintain our leadership position."

Mr. Li Kunwu is also pleased with the Company's operating success. He said, "In such a short period, we transformed from a VoIP service provider to a server virtualization solution and services provider. During this short period of time, we have increased our revenues significantly over the previous year and successfully penetrated most of our strategic markets. Our marketing efforts should allow us to aggressively pursue additional customers within these markets to fuel our revenue growth. More importantly, our termination of the convertible debt, a complex financial instrument, should help us to regain focus on the expansion of our virtualization and cloud computing business. We are aggressively pursuing all opportunities available to us to continue our growth objectives."

Mr. Li concluded, "We will continue to strengthen the cooperation with world-class enterprises, research institutions and universities on cloud computing and virtualization, in order to provide the best and most financially rewarding products and services to our clients. I am very pleased to announce that we have successfully won the virtualization project bid of a large-scale enterprise in China, which was highly ranked in the 2010 Global Fortune 500. We competed with several well-known global virtualization venders in the fierce competition to obtain this customer. The project will have a significant impact on our revenue and profit in next two years. This case success fully demonstrated our leading technical and service expertise in China virtualization industry. "

About China Intelligence Information Systems, Inc.

China Intelligence Information Systems, Inc. (CIIS) offers virtualization technology application and cloud computing products in the People's Republic of China through its wholly owned subsidiary Jinan Yinquan Technology Co., Ltd and Beijing PowerUnique Technologies, Co., Ltd. Through the two subsidiaries, CIIS is well positioned to take full advantage of the tremendous economic growth currently being experienced in China. The Company is currently marketing its integrated virtualization solutions and services in China and at this time is in the testing stages of other Information Technology products.  More information can be found www.ciisi.com.

About Virtualization Technology

Virtualization is a proven software technology that is rapidly transforming the IT landscape and fundamentally changing the way people compute.

Today's powerful x86 computer hardware was originally designed to run only a single operating system and a single application, but virtualization breaks that boundary, making it possible to run multiple operating systems and multiple applications on the same computer at the same time, increasing the utilization and flexibility of hardware.

Virtualization is a technology that can benefit anyone who uses a computer, from IT professionals and Mac enthusiasts to commercial businesses and government organizations. Millions of people around the world use virtualization to save time, money and energy while achieving more with the computer hardware they already own.

About Cloud Computing

Cloud computing is a general term for anything that involves delivering hosted services over the Internet. These services are broadly divided into three categories: Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS). The name cloud computing was inspired by the cloud symbol that's often used to represent the Internet in flowcharts and diagrams.

A cloud service has three distinct characteristics that differentiate it from traditional hosting. It is sold on demand, typically by the minute or the hour; it is elastic -- a user can have as much or as little of a service as they want at any given time; and the service is fully managed by the provider (the consumer needs nothing but a personal computer and Internet access). Significant innovations in virtualization and distributed computing, as well as improved access to high-speed Internet and a weak economy, have accelerated interest in cloud computing

Safe Harbor Statement

Certain of the statements made in the press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People's Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.

SOURCE China Intelligence Information Systems, Inc.