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This contract is the first of its kind for the Companys recently launched Operating Services Division, and represents a turnkey security solution to Shandong Jiaonans Safe City program.  Under the terms of the agreement, China Security will provide equipment and installation, operating consultancy services, ongoing training, backoffice data management and future development of the program for the city government.

Initially, China Security will install the equipment and technology, at a cost of roughly 25-30% of the total contract value.  The Company expects to begin realizing revenue from this contract in the first quarter 2008. Over the life of the contract, gross margins are expected to be higher than the Companys existing gross margins, at roughly 50%, as a result of the higher service component.

Mr. Guo Shen Tu, Chief Executive Officer of China Security, commented, We are thrilled to announce the first contract win in our Operating Services Division, so soon after our third quarter launch of the business segment.  We believe this higher-margin model will provide us -- and potential customers -- with a template for future contracts in this business area.  We have been focused on building our organization into a vertically-integrated, recurring revenue business, and this contract signifies the first step of our development in the recurring revenue business.  Given our experience of determining market demand, and our ability to provide the security market with total solutions, we are confident that this segment of the security industry will provide China Security with a significant growth area in future quarters.  We look forward to meeting the entire spectrum of security needs for our customers by strengthening our leadership position in the security solutions business, with the broadest product and service offerings.

In addition, the Company has signed a contract with China Telecoms Hainan province division to jointly deliver security & surveillance solutions for China Telecoms safe city projects within the Hainan province.  As part of the contract, China Telecom will sub-contract separate safe city projects to the Company up to a value of RMB500 million over the next 12 months starting from December 2007. The Company expects to recognize a majority of the revenues from these contracts during 2008.

We are excited to participate in these projects with China Telecom.  Our acquisition strategy has allowed us to provide a comprehensive solution to our partners and customers.  We look forward to other similar co-operations in the near future, concluded Tu.