China Fire & Security Group, Inc. Announces Third Quarter 2008 Financial Results

- Record revenue of $16.7 million, an increase of 44.4% versus Q3 2007 - GAAP net income of $6.5 million, an increase of 47.0% versus Q3 2007 - Gross margin of 58.9% - GAAP EPS of $0.23 on a fully diluted basis - Reiterate 2008 full year guidance

- $7.6 million contract wins with China Nuclear Power Engineering Co., Ltd.

- Conference call on Wednesday, November 12, 2008 at 8:00 AM EST

BEIJING, Nov. 11 /Xinhua-PRNewswire-FirstCall/ -- China Fire & Security Group, Inc. ("China Fire" or "the Company"), a leading industrial fire protection product and solution provider in China, announced its financial results for the quarter ended September 30, 2008. The Company reported quarterly revenue of $16.7 million, up 44.4 percent year-over-year, compared to $11.6 million in the third quarter of 2007. Gross margin for the third quarter of 2008 reached 58.9 percent, compared to 59.2 percent in the third quarter of 2007. GAAP net income for the third quarter of 2008 was $6.5 million and the earnings per share (EPS) on the fully diluted basis was $0.23.

Key Financial Indicators (All numbers in US dollar) Q3/2008 Q3/2007 Percent Change Revenue 16,743,267 11,596,970 44.4 % Gross Profit 9,864,431 6,867,432 43.6 % Operating Expenses 3,737,632 2,769,996 34.9 % Income from Operations 6,126,799 4,097,436 49.5 % GAAP Net Income 6,457,964 4,392,035 47.0 % Fully Diluted GAAP EPS 0.23 0.16 44.8 % Financial Results

Revenues increased to a record $16.7 million in the third quarter of 2008, up 44.4% percent from $11.6 million in the third quarter of 2007. This increase was mainly attributable to the execution of increased number of total solution contracts during this quarter and also reflected a significant increase in revenue from maintenance services.

Gross profit for the third quarter increased 43.6 percent to approximately $9.9 million from $6.9 million for the same period of last year. The gross margin was 58.9 percent, compared to 59.2 percent of the third quarter of last year.

Operating income was approximately $6.1 million, compared to $4.1 million for the same period of last year, representing 49.5 percent growth. The improvement in operating income was mainly attributable to the increase in the Company's revenue and the improvement in operating margin.

GAAP net income was approximately $6.5 million for the third quarter of 2008 as compared to approximately $4.4 million for the same period of 2007, representing an increase of 47.0 percent. The reason for the increase in the net income was mainly due to the increase in revenues and the improvement in operating margin during the period. Fully diluted GAAP EPS was $0.23 for the third quarter of 2008 as compared to the fully diluted GAAP EPS of $0.16 for the third quarter of 2007, representing an increase of 44.8 percent.

Total revenues for the nine months ended September 30, 2008 were $48.1 million, compared to $32.6 million for the same period of 2007, representing a 47.3 percent increase. Gross profit for the first nine months of 2008 increased 54.4 percent to $28.1 million from $18.2 million for the same period of last year. The gross margin was 58.4 percent, compared to 55.7 percent of the same period of last year. Operating income for the first nine months of 2008 was $17.4 million, representing an increase of 59.4 percent above $10.9 million in the same period of last year. GAAP net income for the first nine months of 2008 was $17.9 million as compared to $12.8 million for the same period of last year, representing 40.0 percent growth. On a non-GAAP basis, net income increased 54.6 percent from $11.6 million for the same period of 2007, which excluded a one-time non-cash gain of $1.2 million for the change in fair value of derivatives in the period. Fully diluted GAAP EPS was $0.63 for the nine months ended September 30, 2008 as compared to GAAP EPS of $0.47 for the same period of 2007.

Balance Sheet and Cash Flow

As of September 30, 2008, the Company had working capital of $ 59.0 million including cash and cash equivalents of $21.8 million. Net cash provided by operating activities was approximately $7.3 million during the first nine months of 2008 as compared to $3.2 million net cash provided by operating activities for the same period of 2007. Days sales outstanding or DSOs were 117 days for the third quarter of 2008 as compared to 135 days for the same period of last year.

As of September 30, 2008, total liabilities stood at $35.2 million, while shareholders' equity totaled $71.7 million, improved from $50.2 millions in beginning of 2008. Currently the Company has no debt.

Business Outlook

The current global financial turmoil and general economic weakness presents a challenging environment for most companies. Consequently, the Company believes it is prudent to disclose to its shareholders the potential negative impact of the economic slowdown on business. However, the Board of Directors and senior management team have extensively discussed the Company's business model and its future growth strategies and concluded that the Company expects to see healthy growth in its business in the future, as China Fire progresses towards the end of the year and for the years to come. Strategically, China Fire will

-- Focus on and serve its major customers who are the top tier companies in the iron and steel industry in China to maintain its leading position in the industry and, potentially, even to expand its market share. -- Continue to invest in technological innovation, intellectual property protection, product standards and fire code enhancement. China Fire believes that its patented proprietary products will provide strong support to the Company's future business growth in China and enhance its ability to maintain healthy margins. -- Expedite the Company's expansion into industrial sectors other than iron and steel industry. By leveraging on its leading brand reputation as a total solution provider and its comprehensive line of proprietary products, the Company will continue to diversify its customer basis. The Company has provided integrated products and solutions for traditional power generation, petrochemical plants, highway tunnels, subways, and nuclear power plants and expected to see additional growth as a result of significant government investment in these verticals over the next two years. -- Pursue fire protection projects and product sales in international markets with the initial focus on India and Russia. The Company is actively bidding for projects in India now. -- Grow through merger and acquisitions to support and supplement its organic growth strategies. The bottom line for the Company's M&A is that all transactions should be accretive.

"China Fire is still in the early stage of executing its growth strategies. The current global economic slowdown presents us with additional challenges. In addition to the growth strategies discussed above, we have recently reevaluated the credit policies extended to our current customers and have adopted tighter control over our expenditures and payments. We believe these efforts will ensure healthy cash flows for our business," commented Mr. Brian Lin, Chief Executive Officer of China Fire.

"We are confident about our organic growth over the next few years. We also believe there are opportunities for consolidation and we aspire to grow faster by becoming a consolidator in China's fire protection industry," further commented by Mr. Gangjin Li, Executive Chairman of China Fire.

"Given our operating results in the first three quarters of 2008 and our expectations for the fourth quarter, we reiterate that we are comfortable with the increased guidance made on August 13th of this year as follows: Revenue at least $68 million, GAAP net income at least $24 million, and fully diluted at least $.84," concluded Mr. Gangjin Li, Executive Chairman of China Fire.

Teleconference Information China Fire & Security Group, Inc. 2008 Q3 Earning Results Conference Call Date/Time: November 12, 2008 (Wednesday) 8:00 A.M. EST Conference Call: Unite States: 1-800-860-2442 International: 1-412-858-4600 Passcode: China Fire Call Webcast /Audio Recording:

This call is being web cast by MultiVu and can be accessed by clicking on this link http://www.visualwebcaster.com/event.asp?id=53174 .

About China Fire & Security Group, Inc.

China Fire & Security Group, Inc. , through its wholly owned subsidiaries, Sureland Industrial Fire Safety Limited ("Sureland") and Tianjin Tianxiao Fire Safety Equipment ("Tianxiao"), is a leading total solution provider of industrial fire protection systems in China. Leveraging on its proprietary technologies, China Fire is engaged primarily in the design, manufacture, sales and maintenance services of a broad product portfolio including detectors, controllers, and fire extinguishers. Via its nationwide direct sales force, China Fire has built a solid client base including major companies in iron and steel, traditional power generation, petrochemical and nuclear power industries throughout China. China Fire has a seasoned management team with strong focus on standards and technologies. Currently, China Fire has 52 issued patents covering fire detection, system control and fire extinguishing technologies. Founded in 1995, China Fire is headquartered in Beijing with about 500 employees in more than 30 sales and project offices throughout China.

Cautionary Statement Regarding Forward Looking Information

This presentation may contain forward-looking information about China Fire & Security Group, Inc. and its wholly owned subsidiary Sureland which are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. 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, and include discussions of strategy, statements about industry trends and China Fire & Security Groups' future performance, operations and products. This and other "Risk Factors" are contained in China Fire & Security Groups' public filings with the SEC.

For more information, please contact: China Fire & Security Group, Inc. Shayla Suen, Investor Relations Tel: [phone] Email:[e-mail] site: http://www.chinafiresecurity.com/ CHINA FIRE & SECURITY GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007 REVENUES System contracting projects $15,173,858 $6,105,899 $41,060,246 $23,270,285 Products 978,806 5,188,117 5,393,942 8,827,922 Maintenance services 590,603 302,954 1,639,429 545,410 Total revenues 16,743,267 11,596,970 48,093,617 32,643,617 COST OF REVENUES System contracting projects 6,459,973 2,539,812 18,001,928 10,564,382 Products 117,258 2,065,515 1,176,638 3,705,298 Maintenance services 301,605 124,211 821,932 181,085 Total cost of Revenues 6,878,836 4,729,538 20,000,498 14,450,765 GROSS PROFIT 9,864,431 6,867,432.00 28,093,119 18,192,852.00 OPERATING EXPENSE Selling and marketing 1,582,557 1,205,360 4,592,598 3,058,663 General and administrative 1,268,864 1,297,037 4,021,984 3,390,596 Depreciation and amortization 123,829 128,394 445,779 387,933 Research and development 762,382 139,205 1,656,983 457,126 Total operating expense 3,737,632 2,769,996 10,717,344 7,294,318 INCOME FROM OPERATIONS 6,126,799 4,097,436 17,375,775 10,898,534 OTHER INCOME (EXPENSE) Other income 280,094 249,537 501,737 577,535 Other expense (3,675) (1,400) (89,063) (7,817) Interest income 48,010 46,462 139,754 90,632 Change in fair value of derivative instruments -- -- -- 1,205,791 Total other income 324,429 294,599 552,428 1,866,141 INCOME BEFORE PROVISION FOR INCOME TAXES 6,451,228 4,392,035 17,928,203 12,764,675 PROVISION (CREDIT) FOR INCOME TAXES (6,736) -- 53,359 -- NET INCOME 6,457,964 4,392,035 17,874,844 12,764,675 OTHER COMPREHENSIVE INCOME: Foreign currency translation adjustment 173,873 540,152 3,534,472 1,350,486 COMPREHENSIVE INCOME $6,631,837 $4,932,187 $21,409,316 $14,115,161 BASIC EARNINGS PER SHARE Weighted average number of shares 27,572,112 27,026,221 27,562,087 26,649,859 Earnings per share $0.23 $0.16 $0.65 $0.48 DILUTED EARNINGS PER SHARE Weighted average number of shares 28,259,171 27,825,442 28,205,583 27,436,695 Earnings per share $0.23 $0.16 $0.63 $0.47 CHINA FIRE & SECURITY GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2008 AND DECEMBER 31, 2007 ASSETS September 30, December 31, 2008 2007 CURRENT ASSETS: (Unaudited) Cash $21,805,340 $17,110,449 Restricted cash 5,177,631 3,829,927 Accounts receivable, net of allowance for doubtful accounts of $3,188,660 and $2,483,359 as of September 30, 2008 and December 31, 2007, respectively 19,159,300 16,525,161 Notes receivable 5,139,588 3,315,811 Other receivables 1,291,967 748,195 Other receivable - related party 329,884 -- Inventories 7,752,813 4,048,283 Costs and estimated earnings in excess of billings 28,786,789 13,068,036 Employee advances 1,147,653 1,307,433 Employee advances - officers and directors 36,910 18,682 Prepayments and deferred expenses 3,562,333 2,218,391 Total current assets 94,190,208 62,190,368 PLANT AND EQUIPMENT, net 8,372,761 6,568,250 OTHER ASSETS: Restricted cash - non current 990,616 -- Accounts receivable - retention 831,043 193,029 Deferred expenses - non current -- 21,234 Advances on building and equipment purchases 156,709 366,317 Investment in joint ventures 1,166,782 1,156,294 Intangible assets, net of accumulated amortization 1,133,601 1,150,935 Total other assets 4,278,751 2,887,809 Total assets $106,841,720 $71,646,427 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $7,515,936 $6,327,182 Customer deposits 16,168,355 4,757,179 Billings in excess of costs and estimated earnings 3,363,588 4,882,217 Other payables 1,338,031 168,868 Accrued liabilities 5,346,951 4,214,530 Taxes payable 1,454,849 1,088,335 Total current liabilities 35,187,710 21,438,311 COMMITMENTS AND CONTINGENCIES -- -- SHAREHOLDERS' EQUITY: Common stock, $0.001 par value, 65,000,000 shares authorized, 27,586,593 and 27,556,893 shares issued and outstanding as of September 30, 2008 and December 31, 2007, respectively 27,586 27,556 Additional paid-in-capital 19,353,835 19,317,287 Statutory reserves 5,067,061 5,067,061 Retained earnings 40,102,939 22,228,095 Accumulated other comprehensive income 7,102,589 3,568,117 Total shareholders' equity 71,654,010 50,208,116 Total liabilities and shareholders' equity $106,841,720 $71,646,427