China Security & Surveillance Technology, Inc. (CSR), a leading provider of digital surveillance technology in the PRC, today announced that it has completed its registered direct offering with certain accredited investors for 9.36 million shares of its common stock at a price at $6.25 per share under its Form S-3 Registration Statement resulting in gross proceeds to the Company of $58.5 million, before deducting placement agent fees and expenses of the offering. In addition, the Company has issued to the investors warrants to purchase 2.3 million shares of common stock, in the aggregate, at a price of $8.16 per share for a term of one year. Brean Murray, Carret & Co., LLC acted as the sole placement agent on the transaction.

The net proceeds from the offering will be used to repay the Company’s $50 million Tranche A Zero Coupon Guaranteed Senior Unsecured Convertible Notes for a purchase price of $47.5 million, as specified in a non-binding term sheet signed between the Company and Citadel Equity Fund Ltd. Pending such repayments the Company will use the remaining net proceeds from the offering for working capital and general corporate purposes.

About China Security & Surveillance Technology, Inc.

Based in Shenzhen, China, CSST manufactures, distributes, installs and services surveillance and safety products and systems as well as develops surveillance and safety related software in China. Its customers are mainly comprised of commercial and government entities and non-profit organizations. CSST has built a diversified customer base through its extensive sales and service network that includes over 150 branch offices and distribution points throughout China. To learn more about the Company visit http://www.csst.com .

China Security & Surveillance Technology, Inc. (CSR), a leading provider of digital surveillance technology in the PRC, today announced that it has entered into definitive agreements with certain accredited investors to sell in a registered direct offering 9.36 million shares of its common stock at a price at $6.25 per share under its Form S-3 Registration Statement resulting in gross proceeds to the Company of $58.5 million, before deducting placement agent fees and expenses of the offering. In addition, the Company has issued to the investors warrants to purchase 2.3 million shares of common stock, in the aggregate, at a price of $8.16 per share for a term of one year. The closing is subject to certain customary closing conditions and is expected to occur early next week.

The net proceeds from the offering will be used to repay the Company’s $50 million Tranche A Zero Coupon Guaranteed Senior Unsecured Convertible Notes for a purchase price of $47.5 million, as specified in a non-binding term sheet signed between the Company and Citadel Equity Fund Ltd. Pending such repayments the Company will use the net proceeds from the offering for working capital and general corporate purposes.

Mr. Guoshen Tu, Chief Executive Officer of CSST, commented, “We are very pleased by the strong interest to our offering and to be able to sign the term sheet with Citadel to retire the Tranche A Notes. We believe the combination of these two transactions will further strengthen our balance sheet, create additional cost savings, improve future cash flows, and enhance our capital structure. These ongoing efforts should augment our financial flexibility and help us support our strategic expansion and long term growth.”

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any jurisdiction. The shares of common stock may only be offered by means of a prospectus. Copies of the final prospectus supplement and accompanying base prospectus can be obtained from Brean Murray, Carret & Co., LLC (570 Lexington Avenue, 11th Floor, New York, NY 10022, fax +1-212-702- 6548), or from China Security & Surveillance Technology, Inc. (13/F, Shenzhen Special Zone Press Tower, Shennan Road, Futian District, Shenzhen, People’s Republic of China, 518034).

Existing Notes Details

On September 2, 2009, the Company restructured its two 1% Guaranteed Senior Unsecured Convertible Notes due 2012 into two new tranches of notes: the Tranche A Zero Coupon Guaranteed Senior Unsecured Convertible Notes (the “Tranche A Notes”) and the Tranche B Zero Coupon Guaranteed Senior Unsecured Notes (the “Tranche B Notes”).

The Tranche A Notes have a principal amount of $50 million, zero coupon interest, and mature on September 2, 2012. The Company will repay the principal amount in six consecutive semi-annual installments, starting March 2, 2010, with 25%, 25% and 50% of the principal amount to be repaid in the first, second and third year, respectively. The conversion price will be $10.00 per share initially, subject to customary conversion price adjustments, anti- dilution protections and a one-time price reset on March 2, 2011 (the ‘Reset Date’) based on the volume weighted average price of the Company’s shares during the 45 trading days immediately preceding the Reset Date, provided that the conversion price shall be adjusted to no lower than $6.00 per share.

The Tranche B Notes, which are not convertible, have a principal amount of $84 million, zero coupon interest, and mature on September 2, 2012. The Company will repay the principal amount in six consecutive semi-annual installments, starting March 2, 2010, with 46%, 46% and 8% of the principal amount to be repaid in the first, second and third year, respectively.

The Company is entitled to redeem the two tranches of notes at any time with no premium or penalty at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus default interest, if any.

About China Security & Surveillance Technology, Inc.

Based in Shenzhen, China, CSST manufactures, distributes, installs and services surveillance and safety products and systems as well as develops surveillance and safety related software in China. Its customers are mainly comprised of commercial and government entities and non-profit organizations. CSST has built a diversified customer base through its extensive sales and service network that includes over 150 branch offices and distribution points throughout China. To learn more about the Company visit http://www.csst.com .

China Security & Surveillance Technology (CSR) is down 27% over the past 12-months, but the price drop may offer an opportunity to buy a growing company in a growing sector at a compelling price.

China Security & Surveillance Technology, Inc. [[CSR]] is a manufacturer, distributer and servicer of surveillance and safety systems in China to both government and the private sector. The stock burst on to a lot of investors’ radar today with the company’s announcement of impressive results, but setting that aside for the moment, there is a lot to like about the company.

China Security & Surveillance By the Numbers

P/E: 15
Forward P/E (December 2010): 3.9
P/E-to-Growth Ratio (5-year): 0.14
Current Ratio: 2.6

Surveillance: A Growing Industry

It is probably not surprising that surveillance technology is a growth industry in China given its political regime.

China Security & Surveillance’s bread and butter is video surveillance, which is in high demand due to Chinese ordinances that require its installation in more than 650 Chinese cities. Also, the coming 2010 World’s Fair in Shanghai has China spending north of $6 billion on surveillance and safety equipment for the event.

The private sector in China also offers opportunities as video surveillance is becoming standard in places ranging from shopping centers to factories – and with unexpectedly high GDP growth in the most recent quarter, the global economic downturn is probably less relevant in China right now than any other country. On the earnings conference call today, the company noted:

“Our corporate sector has always been a strong performer. Our projects on the second quarter include banks, airports, gasoline stations, community centers, shopping malls, business centers and entertainment venues. Corporate revenues as a percentage of our total revenues totaled roughly 58% for the quarter.”

Impressive Second Quarter Results

Shares in the company jumped a giant 16.3% after China Security & Surveillance beats analysts’ EPS estimates by $0.01, as earnings came in at $0.39 per share, while revenues demolished expectations, rising 53% year-over-year to $141.9 million versus expectations of only $116 million. Even better, China Security and Surveillance also issued full-year guidance for EPS well above analysts’ expectations – $2.16 to $2.26.

A Stock Worth Watching with a Caveat

On the heels of a strong quarter and strong guidance, China Security & Surveillance is certainly worth watching. Its valuation relative to growth is fairly attractive right now – largely because the stock is down nearly 27%, even after today’s jump, over the past twelve months. Basically, the stock is still on sale right now.

A possible concern for the company’s future was mentioned in its conference call today:

“Gross margin for the second quarter was 21.9% as compared to 32.8% for the same period of 2008 due to a higher price competition in the corporate sector and lower margin from small scale projects. Gross margins for the installation segment, manufacturing segment, and distribution segment were approximately 21.5%, 27.8%, and 15.4% respectively compared to 34%, 35%, and 21.6% for the same period last year.”

Margins were maintained in the government sector, but with government contracts accounting for less than half of the company’s business, continued “price competition” could give future earnings’ estimates a real haircut. Hopefully, this is a temporary decline. On the conference call, the discussion of gross margins is closed with the company saying:

“Generally, we expect larger government contracts in our total revenue mix from third and fourth quarters. And as such, we anticipate the total gross margin will rebound in the second half of 2009. We are also confident that the gross margins can improve in each of our revenue segments in the second half of 2009.”

Government margins buoying the corporate sector margins is only a temporary solution, but if margins indeed improve in all revenue seconds in the third and fourth quarters of 2009, China Security & Surveillance shareholders could stand to profit handsomely.