---

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-Q(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended:
March 31, 2010

[   ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934      For the transition period from ____________ to _____________

Commission File Number: 001-33774

CHINA SECURITY & SURVEILLANCE TECHNOLOGY,
INC.(Exact name of small business issuer as specified in its
charter)

|Delaware                        | 98-0509431               
|------------------------------- | -------------------------
|(State or other jurisdiction of | (I.R.S. Empl. Ident. No.)
|incorporation or organization)  |                          

13/F, Shenzhen Special Zone Press Tower, Shennan Road
Futian District, Shenzhen, China 518034(Address of principal
executive offices, Zip Code)

(86) 755-8351-0888(Registrant's telephone number,
including area code)

_____________________________________________________________(Former
name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. 
Yes [X]         No [   ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).

Yes [   ]         No [   ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of "large accelerated filer,"
"accelerated filer" and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.

|Large Accelerated Filer [   ]                 | Accelerated Filer [X]            
|--------------------------------------------- | ---------------------------------
|Non-Accelerated Filer [   ]                   | Smaller reporting company [  
  ]
|(Do not check if a smaller reporting company) |                                  

Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). 
Yes [   ]         No
[X]

The number of shares outstanding of each of the issuer's
classes of common equity, as of April 22, 2010 is as follows:

|Class of
      Securities       |  | Shares Outstanding
|------------------------------- |  | ------------------
|Common Stock, $0.0001 par value |  | 69,063,257        

---

TABLE OF CONTENTS

|         | PART I                                                                                      | Page
|-------- | ------------------------------------------------------------------------------------------- | ----
|         |                                                                                             |     
|Item 1.  | Financial
      Statements                                                                  | 1   
|Item 2.  | Management's Discussion and
      Analysis of Financial Condition and Results of Operations | 24  
|Item 3.  | Quantitative and
      Qualitative Disclosures About Market Risk                            | 39  
|Item 4.  | Controls and Procedures                                                                     | 40  
|         |                                                                                             |     
|         | PART II                                                                                     |     
|         |                                                                                             |     
|Item 1.  | Legal Proceedings                                                                           | 41  
|Item 1A. | Risk Factors                                                                                | 41  
|Item 2.  | Unregistered Sales of Equity
      Securities and Use of Proceeds                           | 41  
|Item 3.  | Defaults Upon
      Senior Securities                                                       | 41  
|Item 4.  | Submission of Matters to a Vote
      of Securities Holders                                 | 41  
|Item 5.  | Other Information                                                                           | 41  
|Item 6.  | Exhibits                                                                                    | 41  

---

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES
|---------------------------------------------------------------------
|CONDENSED CONSOLIDATED BALANCE SHEETS                                
|AS OF MARCH 31, 2010 (UNAUDITED) AND DECEMBER 31,
      2009         
|Expressed in thousands of U.S. dollars                               
|(Except for share and per share amounts)                             

|ASSETS                                                                               
|-------------------------------------------------------------------------------------
|                                                                                     
|                                                                                     
|Cash and cash equivalents                                                            
|Accounts receivable, net                                                             
|Inventories, net                                                                     
|Prepayments and deposits                                                             
|Advances to suppliers                                                                
|Other receivables                                                                    
|Deferred tax assets - current portion                                                
|Total current assets                                                                 
|                                                                                     
|Deposits paid for acquisition of subsidiaries, properties
      and intangible assets
|Plant and equipment, net                                                             
|Land use rights, net                                                                 
|Intangible assets                                                                    
|Goodwill                                                                             
|Deferred financing cost                                                              
|TOTAL ASSETS                                                                         

Continued

1

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES
|---------------------------------------------------------------------
|CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)                    
|AS OF MARCH 31, 2010 (UNAUDITED) AND DECEMBER 31,
      2009         
|Expressed in thousands of U.S. dollars                               
|(Except for share and per share amounts)                             
|                                                                     
|LIABILITIES AND EQUITY                                               

|                                                                                                                                                                                                                                        |   | March 31, 2010 |   |   | December 31, 2009 |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------------- | - | - | ----------------- | -
|CURRENT LIABILITIES                                                                                                                                                                                                                     |   |                |   |   |                   |  
|                                                                                                                                                                                                                                        |   |                |   |   |                   |  
|Notes payable                                                                                                                                                                                                                           | $ | 134,040        |   | $ | 57,116            |  
|Obligation under product financing arrangements  short
      term                                                                                                                                                                      |   | 5,308          |   |   | 5,184             |  
|Guaranteed senior unsecured notes payable 
      short term                                                                                                                                                                            |   | 36,127         |   |   | 35,701            |  
|Accounts and bills payable                                                                                                                                                                                                              |   | 65,924         |   |   | 68,817            |  
|Accrued expenses                                                                                                                                                                                                                        |   | 15,836         |   |   | 26,762            |  
|Advances from customers                                                                                                                                                                                                                 |   | 33,186         |   |   | 27,503            |  
|Taxes payable                                                                                                                                                                                                                           |   | 16,468         |   |   | 14,835            |  
|Payable for acquisition of businesses, properties and land
      use rights                                                                                                                                                             |   | 5,105          |   |   | 5,105             |  
|Deferred income                                                                                                                                                                                                                         |   | 2,028          |   |   | 1,868             |  
|Total current liabilities                                                                                                                                                                                                               |   | 314,022        |   |   | 242,891           |  
|                                                                                                                                                                                                                                        |   |                |   |   |                   |  
|LONG TERM LIABILITIES                                                                                                                                                                                                                   |   |                |   |   |                   |  
|Obligation under product financing
      arrangements  long term                                                                                                                                                                       |   | 5,168          |   |   | 6,541             |  
|Guaranteed senior unsecured notes payable  long term                                                                                                                                                                                   |   | 25,192         |   |   | 43,988            |  
|Net deferred tax liabilities                                                                                                                                                                                                            |   | 460            |   |   | 773               |  
|Total liabilities                                                                                                                                                                                                                       |   | 344,842        |   |   | 294,193           |  
|                                                                                                                                                                                                                                        |   |                |   |   |                   |  
|EQUITY                                                                                                                                                                                                                                  |   |                |   |   |                   |  
|Preferred stock, $0.0001 par
      value;        10,000,000
      shares authorized, 0
      shares        issued and
      outstanding                                                                                                 |   |                |   |   |                   |  
|Common stock, $0.0001 par
      value;        290,000,000
      shares
      authorized        68,494,270
      (March 31, 2010)
      and        67,866,730
      (December 31, 2009)
      shares        issued and
      outstanding |   | 7              |   |   | 7                 |  
|Additional paid-in capital                                                                                                                                                                                                              |   | 293,351        |   |   | 285,025           |  
|Retained earnings                                                                                                                                                                                                                       |   | 169,259        |   |   | 165,982           |  
|Statutory surplus reserve fund                                                                                                                                                                                                          |   | 804            |   |   | 804               |  
|Accumulated other comprehensive income                                                                                                                                                                                                  |   | 27,689         |   |   | 27,565            |  
|                                                                                                                                                                                                                                        |   |                |   |   |                   |  
|Total equity of the Company                                                                                                                                                                                                             |   | 491,110        |   |   | 479,383           |  
|Noncontrolling interest                                                                                                                                                                                                                 |   | (20            | ) |   | (18               | )
|Total equity                                                                                                                                                                                                                            |   | 491,090        |   |   | 479,365           |  
|TOTAL
      LIABILITIES AND EQUITY                                                                                                                                                                                                      | $ | 835,932        |   | $ | 773,558           |  

See the accompanying notes to the condensed consolidated
financial statements.

2

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES     
|--------------------------------------------------------------------------
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
      COMPREHENSIVE INCOME
|FOR THE THREE MONTHS ENDED MARCH 31, 2010 and 2009                        
|Expressed in thousands of U.S. dollars                                    
|(Except for share and per share amounts)                                  

|                                                                                                                                                                        |   | Three Months Ended March 31 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------------------------- | -
|                                                                                                                                                                        |   | 2010                        |  
|                                                                                                                                                                        |   | (Unaudited)                 |  
|Revenues                                                                                                                                                                | $ | 120,190                     |  
|                                                                                                                                                                        |   |                             |  
|Cost of goods sold (including depreciation
      and amortization for the three months ended March 31, 2010 and 2009 of
      $254 and $241, respectively)              |   | 91,211                      |  
|Gross profit                                                                                                                                                            |   | 28,979                      |  
|Selling and marketing                                                                                                                                                   |   | 2,714                       |  
|General and administrative (including non-cash employee
      compensation for the three months ended March 31, 2010 and 2009 of $8,326
      and $4,218, respectively) |   | 16,322                      |  
|Depreciation and amortization                                                                                                                                           |   | 2,980                       |  
|Income from operations                                                                                                                                                  |   | 6,963                       |  
|Interest income                                                                                                                                                         |   | 78                          |  
|Interest expense                                                                                                                                                        |   | (2,295                      | )
|Other income, net                                                                                                                                                       |   | 246                         |  
|Income before income taxes                                                                                                                                              |   | 4,992                       |  
|Income taxes                                                                                                                                                            |   | (1,717                      | )
|Net income                                                                                                                                                              |   | 3,275                       |  
|                                                                                                                                                                        |   |                             |  
|Add: net loss attributable to the noncontrolling interest                                                                                                               |   | 2                           |  
|Net income attributable to the
      Company                                                                                                                            |   | 3,277                       |  
|                                                                                                                                                                        |   |                             |  
|Foreign currency translation gain                                                                                                                                       |   | 124                         |  
|Comprehensive income attributable to the
      Company                                                                                                                  |   | 3,401                       |  
|Comprehensive loss attributable to the
      noncontrolling interest                                                                                                    |   | (2                          | )
|                                                                                                                                                                        |   |                             |  
|Comprehensive income                                                                                                                                                    | $ | 3,399                       |  
|                                                                                                                                                                        |   |                             |  
|NET INCOME PER SHARE                                                                                                                                                    |   |                             |  
|ATTRIBUTABLE TO THE COMPANYS COMMON SHAREHOLDERS                                                                                                                       |   |                             |  
|BASIC                                                                                                                                                                   | $ | 0.05                        |  
|DILUTED                                                                                                                                                                 | $ | 0.05                        |  
|                                                                                                                                                                        |   |                             |  
|WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING                                                                                                                           |   |                             |  
|BASIC                                                                                                                                                                   |   | 63,961,000                  |  
|DILUTED                                                                                                                                                                 |   | 68,369,000                  |  

See the accompanying notes to condensed consolidated financial
statements

3

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES
|---------------------------------------------------------------------
|CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY                
|FOR THE THREE MONTHS ENDED MARCH 31, 2010 (UNAUDITED)                
|Expressed in thousands of U.S. dollars                               
|(Except for share and per share amounts)                             

Common Stock
    
    
    **The Companys Shareholders****Accumulated**
    
    
    Statutory**Additional**
    
    
    
    
    
    **Other**
    
    
    Surplus**Par**
    
    
    **Paid-in**
    
    
    **Retained**
    
    
    **Comprehensive**
    
    
    Reserve
    
    
    **Noncontrolling**
    
    
    **Total**Shares
    
    
    Value
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    Fund
    
    
    Interest
    
    
    EquityBALANCE AT JANUARY 1, 2010
    
    67,866,730
    
    $
    7
    
    $
    285,025
    
    $
    165,982
    
    $
    27,565
    
    $
    804
    
    $
    (18
    )
    $
    479,365Issuance of restricted stock under Equity
      Incentive Plan and recognition of stock-based compensation
    
    627,540
    
    
    --
    
    
    8,326
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    8,326Foreign currency translation gain
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    124
    
    
    --
    
    
    --
    
    
    124Net income (loss) for the period
    
    --
    
    
    --
    
    
    --
    
    
    3,277
    
    
    --
    
    
    --
    
    
    (2
    )
    
    3,275BALANCE AT MARCH 31, 2010
    
    68,494,270
    
    $
    7
    
    $
    293,351
    
    $
    169,259
    
    $
    27,689
    
    $
    804
    
    $
    (20
    )
    $
    491,090


See the accompanying notes to condensed consolidated financial
statements

4

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES CONDENSED
|-------------------------------------------------------------------------------
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                
|FOR THE THREE MONTHS ENDED MARCH 31, 2010 and 2009                             
|Expressed in thousands of U.S. dollars                                         
|(Except for share and per share amounts)                                       

|                                                                                                        |   | Three Months Ended March 31 |  
|------------------------------------------------------------------------------------------------------- | - | --------------------------- | -
|                                                                                                        |   | 2010                        |  
|                                                                                                        |   | (Unaudited)                 |  
|CASH FLOWS FROM OPERATING
      ACTIVITIES:                                                             |   |                             |  
|Net income                                                                                              | $ | 3,275                       |  
|Adjustments
      to reconcile net income to net cash (used in) provided by operating
      activities: |   |                             |  
|Provision for doubtful accounts                                                                         |   | --                          |  
|Depreciation and amortization                                                                           |   | 3,234                       |  
|Amortization of consultancy services                                                                    |   | --                          |  
|Amortization of deferred financing cost                                                                 |   | 217                         |  
|Non-cash employee compensation                                                                          |   | 8,326                       |  
|Debt
      discount amortization                                                                        |   | 950                         |  
|Redemption accretion on convertible notes                                                               |   | --                          |  
|Deferred taxes                                                                                          |   | (310                        | )
|Changes in operating assets and liabilities:                                                            |   |                             |  
|(Increase) decrease in:                                                                                 |   |                             |  
|Accounts receivable                                                                                     |   | (48,573                     | )
|Other receivables                                                                                       |   | (3,626                      | )
|Inventories                                                                                             |   | (3,308                      | )
|Prepayments and deposits                                                                                |   | (46                         | )
|Advances to suppliers                                                                                   |   | (14,634                     | )
|(Decrease) increase in:                                                                                 |   |                             |  
|Accounts payable and accrued expenses                                                                   |   | (13,846                     | )
|Advances from customers                                                                                 |   | 5,675                       |  
|Taxes payable                                                                                           |   | 1,629                       |  
|Deferred income                                                                                         |   | 159                         |  
|Net cash (used in) provided by operating activities                                                     |   | (60,878                     | )
|CASH FLOWS FROM INVESTING
      ACTIVITIES:                                                             |   |                             |  
|Additions to plant and equipment                                                                        |   | (597                        | )
|Additions to intangible assets                                                                          |   | (533                        | )
|Deposits paid for acquisition of subsidiaries                                                           |   | (6,526                      | )
|Payments for business acquisitions                                                                      |   | --                          |  
|Cash acquired in business acquisitions                                                                  |   | --                          |  
|Net cash used in investing activities                                                                   |   | (7,656                      | )
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                   |   |                             |  
|New borrowings, net of issuing cost                                                                     |   | 109,137                     |  
|Repayment of borrowings                                                                                 |   | (32,229                     | )
|New borrowings from obligation under
      product financing arrangements                               |   | --                          |  
|Repayment of obligation under product financing arrangements                                            |   | (1,251                      | )
|Repayment of guaranteed senior unsecured
      notes payable                                            |   | (19,320                     | )
|Net cash provided by financing activities                                                               |   | 56,337                      |  
|NET (DECREASE) INCREASE IN CASH AND CASH
      EQUIVALENTS                                              |   | (12,197                     | )
|Effect of exchange rate changes on cash                                                                 |   | 7                           |  
|Cash and cash equivalents, beginning of period                                                          |   | 154,483                     |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                                | $ | 142,293                     |  

Continued

5

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES CONDENSED
|-------------------------------------------------------------------------------
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
      (CONTINUED)              
|FOR THE THREE MONTHS ENDED MARCH 31, 2010 and 2009                             
|Expressed in thousands of U.S. dollars                                         
|(Except for share and per share amounts)                                       

|                                     |   | Three Months Ended March 31, | 
|------------------------------------ | - | ---------------------------- | 
|                                     |   | 2010                         | 
|SUPPLEMENTARY CASH FLOW INFORMATION: |   | (Unaudited)                  | 
|Interest paid                        | $ | 1,090                        | 
|Income taxes paid                    | $ | 498                          | 

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:

139,573 shares of common stock were issued in satisfaction of a
payable of approximately $906 related to the acquisition of DIT Industry (H.K.)
Limited (DIT) in February 2009.

341,228 shares of common stock were issued in satisfaction of
the purchase price of approximately $1,669 in the acquisition of Shenzhen Coson
Electronic Co. Ltd. (Coson) in February 2009. Additionally, the Company
recorded a liability in the amount of $1,170 representing the estimated fair
value of contingent consideration, to be payable in cash, issued in the
acquisition.

See the accompanying notes to condensed consolidated financial
statements

6

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

1. BASIS OF PRESENTATION

The accompanying financial statements, as of March 31, 2010 and
for the three months ended March 31, 2010 and 2009, have been prepared by CHINA
SECURITY & SURVEILLANCE TECHNOLOGY, INC. (the Company) without an audit.
Pursuant to the rules and regulations of the Securities and Exchange Commission
(the SEC), certain information and footnote disclosures normally included in
the financial statements prepared in accordance with accounting principles
generally accepted in the United States of America (US GAAP) have been
condensed or omitted pursuant to such rules and regulations. These financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Company's audited annual financial statements for
the year ended December 31, 2009, which are included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on
March 2, 2010, as amended on March 10, 2010. Amounts as of December 31, 2009 are
derived from these audited consolidated financial statements.

The preparation of financial statements in conformity with US
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities. Actual results could differ
from these estimates.

In the opinion of the management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position as of March 31, 2010, results of operations and cash flows
for the three months ended March 31, 2010 and 2009, have been made. The results
of operations for the three months ended March 31, 2010 are not necessarily
indicative of the operating results for the full year.

2. SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES

(a) Use of Estimates

The preparation of financial statements in conformity with US
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Management makes these
estimates using the best information available at the time the estimates are
made; however actual results could differ materially from those estimates.

(b) Fair Value Measurement

Accounting Standards Codification (ASC) 820 Fair Value
Measurements and Disclosures, which defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. The statement clarifies that the exchange price is the price in an
orderly transaction between market participants to sell the asset or transfer
the liability in the market in which the reporting entity would transact for the
asset or liability, that is, the principal or most advantageous market for the
asset or liability. It also emphasizes that fair value is a market-based
measurement, not an entity-specific measurement, and that market participant
assumptions include assumptions about risk and effect of a restriction on the
sale or use of an asset.

This ASC establishes a fair value hierarchy that prioritizes
the inputs to valuation techniques used to measure fair value. The hierarchy
gives the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the lowest priority
to unobservable inputs (Level 3 measurements). The three levels of the fair
value hierarchy are described below:

Level 1:Unadjusted quoted prices in active markets that
are accessible at the measurement date for identical, unrestricted assets or
liabilities;

Level 2:Quoted prices in markets that are not active,
or inputs that are observable, either directly or indirectly, for substantially
the full term of the asset or liability; and

Level 3:Prices or valuation techniques that require
inputs that are both significant to the fair value measurement and unobservable
(supported by little or no market activity).

At March 31, 2010, the Company has no financial assets or
liabilities subject to recurring fair value measurements.

7

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

2. SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

(b) Fair Value - continued

ASC 825-10 Financial Instruments allows entities to
voluntarily choose to measure certain financial assets and liabilities at fair
value (fair value option), may be elected on an instrument-by-instrument basis
and is irrevocable, unless a new election date occurs. If the fair value option
is elected for an instrument, unrealized gains and losses for that instrument
should be reported in earning at each subsequent reporting date. The Company has
not elected to apply the fair value option to any outstanding instruments.

The Companys financial instruments include cash and cash
equivalents, accounts receivable, other receivables, accounts and bills payable,
notes payable, obligation under product financing arrangements, and guaranteed
senior unsecured notes payable. Management estimates that the carrying amounts
of the non related party financial instruments approximate their fair values due
to their short-term nature.

(c) Accounts Receivable

Trade receivables are recognized and carried at the original
invoice amount less allowance for any uncollectible amounts. An estimate for
doubtful accounts is made when collection of the full amount is no longer
probable. Bad debts are written off as incurred.

No trade receivable due from any single individual customer
exceeds 10% of total accounts receivable at March 31, 2010 and December 31,
2009.

From time to time, the Company enters into receivable factoring
agreements. The Company accounts for those arrangements under ASC 860
Transfer and Servicing. These arrangements are without recourse, the
receivables are isolated from the Company, the transferee has the right to
pledge or exchange the receivables, and the Company does not maintain effective
control over the receivables. Therefore, these arrangements satisfy the
conditions to be accounted for as a sale and the Company recognizes any gain or
loss in earnings.

(d) Inventories

Inventories are stated at the lower of cost, determined on a
weighted average basis, or net realizable value. Net realizable value is the
estimated selling price in the ordinary course of business less the estimated
cost of completion and the estimated costs necessary to make the sale.

When inventories are sold, their carrying amount is charged to
expense in the year in which the revenue is recognized. Write-downs for declines
in net realizable value or for losses of inventories are recognized as an
expense in the year the impairment or loss occurs. There were no declines in net
realizable value of inventory for the three months ended March 31, 2010 and
2009.

As of March 31, 2010 and December 31, 2009, inventories held
under the product financing arrangements were $12,957 and $12,953, respectively.

During the three months ended March 31, 2010 and 2009,
inventory purchases from the top five suppliers constituted approximately 46%
and 28% of the total inventory purchases, respectively.

(e) Accounting for Software to Be Sold, Leased or Marketed

The Company accounts for software development costs in
accordance with ASC 985-20, Costs of Software to be Sold, Leased, or
Marketed. Costs related to establishing the technological feasibility of a
software product are expensed as incurred as a part of research and development
in general and administrative expenses. Costs that are incurred to produce the
finished product after technological feasibility is established are capitalized
and amortized over the estimated economic life of 5 years. The Company performs
periodic reviews to ensure that unamortized program costs remain recoverable
from future revenue.

As of March 31, 2010 and December 31, 2009, unamortized
computer software costs were $4,984 and $4,693, respectively. During the three
months ended March 31, 2010 and 2009, $313 and $316 amortization expense was
charged to income, respectively.

8

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

2. SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

(f) Revenue Recognition

Revenues from sales of surveillance and safety products and
systems are recognized in accordance with Staff Accounting Bulletin (SAB) No.
104,Revenue Recognition , and related interpretations. Revenues are
recognized when the following criteria are met:

| | (i)   | Persuasive evidence of an arrangement exists  The
      Company requires evidence of an agreement with a customer specifying the
      terms and conditions of the products to be delivered typically in the form
      of a signed contract or purchase order;  
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                   
| | (ii)  | Delivery has occurred  For product sales, delivery
      generally takes place when title to the product is transferred, which
      generally take place when products are shipped to or accepted by the
      customer, depending on the terms of the contract;
| |       |                                                                                                                                                                                                                                                                   
| | (iii) | The fee is fixed or determinable  Fees are fixed or
      determinable based on the contract or purchase order terms; and                                                                                                                                        
| |       |                                                                                                                                                                                                                                                                   
| | (iv)  | Collection is probable  The Company performs a credit
      review of all customers with significant transactions to determine whether
      a customer is creditworthy and collection is
probable.                                                              

The sales contracts generally provide a one to three-year
product warranty to customers from the date of purchase. We estimate the costs
of satisfying warranty claims based on an analysis of past experience and
provide for the future claims in the period the revenue is recognized. As of
March 31, 2010 and December 31, 2009, no material product warranty reserve was
accrued. Warranty costs incurred by the Company have not been material.

The Company derives the bulk of its revenue from the supply and
installation of surveillance and safety equipment and the two deliverables do
not meet the separation criteria under ASC 605-25 Multiple-Element
Arrangements. Revenue from the supply and installation of surveillance and
safety equipment are recognized when the installation is completed and the
customer acceptance is received. Approximately 1% of contract installation
revenue is deferred for the repair work during the one year warranty period. The
Company carefully monitors the warranty work requested by its customers, and has
determined that very little warranty work has historically been requested to be
performed. Management believes that this 1% warranty reserve appears adequate as
of March 31, 2010 and December 31, 2009.

Repairs and maintenance service revenue is recognized when the
service is performed.

The Company derives a portion of its revenue from one-year
software upgrades. These services are typical postcontract service (PCS)
arrangements according to ASC 985-605-25 Revenue Recognition. Under
this guidance, PCS revenue may be recognized together with the initial licensing
fee on delivery of the software if all of the following conditions are met:

| | (i)   | The PCS fee is included with the initial licensing
      fee;                                                                                                  
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                
| | (ii)  | The PCS included with the initial license is for one year
      or less;                                                                                       
| |       |                                                                                                                                                                
| | (iii) | The estimated cost of providing PCS during the
      arrangement is insignificant; and                                                                         
| |       |                                                                                                                                                                
| | (iv)  | Unspecified upgrades/enhancements offered during PCS
      arrangements historically have been and are expected to continue to be
      minimal and infrequent.

Revenue from surveillance and safety system one year software
upgrades is recognized when delivery occurs and the risk of ownership passes to
the customers, as the Company believes it meets the conditions in compliance
with the ASC guidance.

(g) Research and Development Costs

Research and development costs are expensed as incurred.
Research and development costs included in general and administrative expenses
for the three months ended March 31, 2010 and 2009 amounted to $633 and $670,
respectively.

9

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

2. SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

(h) Advertising Costs

The Company expenses advertising costs as incurred or the first
time advertising takes place. During the three months ended March 31, 2010 and
2009, the Company incurred advertising costs of approximately $649 and $97,
respectively.

(i) Retirement Benefits

Retirement benefits in the form of contributions under defined
contribution retirement plans to the relevant authorities are charged to the
consolidated statements of income as incurred. The retirement benefit expenses
for the three months ended March 31, 2010 and 2009 were $290 and $270,
respectively and are included in the selling and marketing expenses and general
and administrative expenses.

(j) Income taxes

The Company accounts for income taxes using the asset and
liability method prescribed by ASC 740 Income Taxes. Under this method,
deferred tax assets and liabilities are determined based on the difference
between the financial reporting and tax bases of assets and liabilities using
enacted tax rates that will be in effect in the year in which the differences
are expected to reverse. The Company records a valuation allowance to offset
deferred tax assets if based on the weight of available evidence, it is
more-likely-than-not that some portion, or all the deferred tax assets will not
be realized. The effect on deferred taxes of a change in tax rates is recognized
as income or loss in the period that includes the enactment date.

The Company does not have any material unrecognized tax
benefits.

The Company files income tax returns with the relevant
government authorities in the U.S. and the PRC. The Company was not subject to
U.S. federal tax examinations for years before 2006. The Company does not
believe there will be any material changes in its unrecognized tax positions
over the next 12 months.

The Companys policy is to recognize interest and penalties
accrued on any unrecognized tax benefits as a component of income tax expense.
The Companys effective tax rate differs from the federal statutory rate
primarily due to non-deductible expenses, temporary differences, and
preferential tax treatment.

(k) Earnings Per Share

ASC 260 Earnings Per Share, requires dual presentation
of basic and diluted earnings per share (EPS) with a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity.

10

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

2. SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

(k) Earnings Per Share  continued

Earnings per basic share of common stock is based on the
weighted average number of shares of common stock outstanding during each
respective period. Earnings per diluted share of common stock adds to basic
weighted shares the weighted average number of shares issuable under convertible
securities, contingent issuances, stock options and warrants outstanding during
each respective period, using the if-converted or treasury-stock methods.

For purposes of the computation of net income per share, shares
issued in connection with acquisitions that are returnable are considered
contingently returnable shares. These contingently returnable shares, although
classified as issued and outstanding, are not included in basic weighted average
number of shares until all necessary conditions are met that no longer cause the
shares to be contingently returnable. These contingently returnable shares are
included in diluted weighted average number of shares as of the beginning of the
period in which the conditions were satisfied (or as of the date of the
agreement, if later).

Unvested restricted shares issued (share-based compensation)
under the Equity Incentive Plan are not included in basic weighted average
number of shares but are considered to be outstanding as of the grant date for
purposes of computing diluted earnings per share even though the shares are
subject to vesting requirements.

The calculation of diluted earnings per share is based on the
outstanding warrants for the three months ended March 31, 2010 and 2009. As of
March 31, 2010, warrants were outstanding to acquire 3,528,302 shares of common
stock. Warrants which were outstanding to acquire 3,498,296 and 174,515 shares
of common stock, respectively, were not included in the dilutive calculation for
the three months ended March 31, 2010 and 2009, as the effect would be
anti-dilutive.

Basic and diluted earnings per share for the three months ended
March 31, 2010 and 2009 were calculated as follows:

|                                               |   | 2010       |  |   | 2009       | 
|---------------------------------------------- | - | ---------- |  | - | ---------- | 
|Net income attributable to the Company         | $ | 3,277      |  | $ | 2,013      | 
|Weighted average number of common shares:      |   |            |  |   |            | 
|Basic                                          |   | 63,961,000 |  |   | 45,041,000 | 
|Effect of
      diluted securities:            |   |            |  |   |            | 
|Warrants                                       |   | 11,000     |  |   | --         | 
|Employee share-based compensation              |   | 4,397,000  |  |   | 4,321,000  | 
|Diluted                                        |   | 68,369,000 |  |   | 49,362,000 | 
|Earnings per share attributable to the Company |   |            |  |   |            | 
|Basic                                          | $ | 0.05       |  | $ | 0.04       | 
|Diluted                                        | $ | 0.05       |  | $ | 0.04       | 

11

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

2. SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

(l) New Accounting Standards

Accounting for Transfers of Financial Assets(Included in ASC 860 Transfers and Serving)

This ASC guidance addresses information a reporting entity
provides in its financial statements about the transfer of financial assets; the
effects of a transfer on its financial position, financial performance, and cash
flows; and a transferors continuing involvement in transferred financial
assets. Also, this ASC guidance removes the concept of a qualifying special
purpose entity, limits the circumstances in which a transferor derecognizes a
portion or component of a financial asset, defines participating interest and
enhances the information provided to financial statement users to provide
greater transparency. This guidance was effective for the Company as of January
1, 2010. The adoption of this guidance had no impact on the Companys
consolidated financial statements.

Consolidation of Variable Interest Entities  Amended(Included in ASC 810 Consolidation)

Revisions under ASC 810 require an enterprise to perform an
analysis to determine the primary beneficiary of a variable interest entity; to
require ongoing reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity and to eliminate the quantitative
approach previously required for determining the primary beneficiary of a
variable interest entity. This ASC guidance also requires enhanced disclosures
that will provide users of financial statements with more transparent
information about an enterprises involvement in a variable interest entity. ASC
810 was effective for the Company as of January 1, 2010. The adoption of this
guidance had no impact on the Companys consolidated financial statements.

Multiple Deliverable Revenue Arrangements(Accounting Standards Updates 2009-13 and 2009-14)

In October 2009, the FASB issued a new accounting standard
which provides guidance for arrangements with multiple deliverables.
Specifically, the new standard requires an entity to allocate consideration at
the inception of an arrangement to all of its deliverables based on their
relative selling prices. In the absence of the vendor-specific objective
evidence or third-party evidence of the selling prices, consideration must be
allocated to the deliverables based on managements best estimate of the selling
prices. In addition, the new standard eliminates the use of the residual method
of allocation. In October 2009, the FASB also issued a new accounting standard
which changes revenue recognition for tangible products containing software and
hardware elements. Specifically, tangible products containing software and
hardware that function together to deliver the tangible products essential
functionality are scoped out of the existing software revenue recognition
guidance and will be accounted for under the multiple-element arrangements
revenue recognition guidance discussed above. Both standards will be effective
for the Company in the first quarter of 2011. Early adoption is permitted. The
Company is currently evaluating the impact that the adoption of this standard
may have on its consolidated financial statements.

12

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

3. ACCOUNTS RECEIVABLE

The Company provides an allowance for doubtful accounts related
to its receivables. The receivables and allowance balances at March 31, 2010 and
December 31, 2009 are as follows:

|                                      |   | March 31, |   |   | December 31, |  
|------------------------------------- | - | --------- | - | - | ------------ | -
|                                      |   | 2010      |   |   | 2009         |  
|Accounts receivable                   | $ | 302,252   |   | $ | 253,610      |  
|Less: allowance for doubtful accounts |   | (2,005    | ) |   | (2,006       | )
|Accounts receivable, net              | $ | 300,247   |   | $ | 251,604      |  

4. INVENTORIES

Inventories consist of the following as of March 31, 2010 and
December 31, 2009:

|                                         |   | March 31, |   |   | December 31, |  
|---------------------------------------- | - | --------- | - | - | ------------ | -
|                                         |   | 2010      |   |   | 2009         |  
|                                         |   |           |   |   |              |  
|Raw materials                            | $ | 16,273    |   | $ | 14,292       |  
|Work in progress                         |   | 2,114     |   |   | 2,212        |  
|Finished goods                           |   | 25,986    |   |   | 18,790       |  
|Installations in process                 |   | 30,620    |   |   | 36,371       |  
|Total                                    |   | 74,993    |   |   | 71,665       |  
|Less: allowance for obsolete inventories |   | (1,524    | ) |   | (1,524       | )
|Inventories, net                         | $ | 73,469    |   | $ | 70,141       |  

5. PREPAYMENTS AND DEPOSITS

Prepayments and deposits consist of the following as of March
31, 2010 and December 31, 2009:

|                                                                    |   | March 31, |  |   | December 31, | 
|------------------------------------------------------------------- | - | --------- |  | - | ------------ | 
|                                                                    |   | 2010      |  |   | 2009         | 
|                                                                    |   |           |  |   |              | 
|Current portion                                                     | $ | 4,755     |  | $ | 4,706        | 
|Non current portion                                                 |   |           |  |   |              | 
|- Deposits paid for acquisition of subsidiaries                     |   | 11,608    |  |   | 5,081        | 
|- Deposits paid for acquisition of properties and intangible assets |   | 2,118     |  |   | 2,118        | 
|                                                                    | $ | 13,726    |  | $ | 7,199        | 

The deposits paid for acquisition of subsidiaries, properties
and intangible assets are refundable. There are no commitments to acquire the
subsidiaries, properties and intangible assets.

13

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

6. ADVANCE PAYMENTS

The Company has made payments to unrelated suppliers in advance
of receiving merchandise. The advance payments are meant to ensure preferential
pricing and delivery. The amounts advanced under such arrangements totaled
$54,044 and $39,399 as of March 31, 2010 and December 31, 2009, respectively.

7. PLANT AND EQUIPMENT

At March 31, 2010 and December 31, 2009, plant and equipment,
at cost, consist of:

|                               |   | March 31, |   |   | December 31, |  
|------------------------------ | - | --------- | - | - | ------------ | -
|                               |   | 2010      |   |   | 2009         |  
|Buildings                      | $ | 62,120    |   | $ | 62,102       |  
|Leasehold improvements         |   | 2,983     |   |   | 2,763        |  
|Plant and equipment            |   | 8,099     |   |   | 7,971        |  
|Electronic equipment           |   | 9,473     |   |   | 9,305        |  
|Motor vehicles                 |   | 5,344     |   |   | 5,343        |  
|                               |   | 88,019    |   |   | 87,484       |  
|Less: accumulated depreciation |   | (13,163   | ) |   | (12,037      | )
|Plant and equipment, net       | $ | 74,856    |   | $ | 75,447       |  

Depreciation expense for the three months ended March 31, 2010
and 2009 was $1,209 and $1,023, respectively.

8. LAND USE RIGHTS

Land use rights consist of the following as of March 31, 2010
and December 31, 2009:

|                               |   | March 31, |   |   | December 31, |  
|------------------------------ | - | --------- | - | - | ------------ | -
|                               |   | 2010      |   |   | 2009         |  
|Cost of land use rights        | $ | 8,529     |   | $ | 8,526        |  
|Less: accumulated amortization |   | (813      | ) |   | (793         | )
|Land use rights, net           | $ | 7,716     |   | $ | 7,733        |  

Amortization expense for the three months ended March 31, 2010
and 2009 was $42 and $43, respectively.

Amortization expense for the next five years and thereafter is
as follows:

|2010 (for the remaining 9 months) | $ | 128   | 
|--------------------------------- | - | ----- | 
|2011                              |   | 171   | 
|2012                              |   | 171   | 
|2013                              |   | 171   | 
|2014                              |   | 171   | 
|2015                              |   | 171   | 
|Thereafter                        |   | 6,733 | 
|Total                             | $ | 7,716 | 

14

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

9. INTANGIBLE ASSETS

|                                                      |   | March 31, |   |   | December 31, |  
|----------------------------------------------------- | - | --------- | - | - | ------------ | -
|                                                      |   | 2010      |   |   | 2009         |  
|Trademarks (life of 11 to 25 years)                   | $ | 17,222    |   | $ | 17,222       |  
|Exclusive cooperation agreements (life of 20 years)   |   | 13,632    |   |   | 13,632       |  
|Customer base (life of 5 to 10 years)                 |   | 10,448    |   |   | 10,448       |  
|Patents (life of 10 years)                            |   | 4,542     |   |   | 4,542        |  
|Technical know-how (life of 9 to 10 years)            |   | 17,030    |   |   | 17,030       |  
|Non-compete agreements (life of 5 years)              |   | 1,303     |   |   | 1,303        |  
|Contracts in progress (life of 2 to 9
      months)   |   | 410       |   |   | 410          |  
|Surveillance software (life of 5 years)               |   | 9,812     |   |   | 9,268        |  
|Surveillance recording system (life of 5
      years) |   | 500       |   |   | 500          |  
|                                                      |   | 74,899    |   |   | 74,355       |  
|Less: accumulated amortization                        |   | (21,657   | ) |   | (19,678      | )
|Intangible assets, net                                | $ | 53,242    |   | $ | 54,677       |  

The amortization expense for the three months ended March 31,
2010 and 2009 was $1,983 and $1,997, respectively.

Estimated amortization expense for the next five years and
thereafter is as follows:

|2010 (for the remaining nine months) | $ | 5,983  | 
|------------------------------------ | - | ------ | 
|2011                                 |   | 6,578  | 
|2012                                 |   | 5,787  | 
|2013                                 |   | 5,294  | 
|2014                                 |   | 4,758  | 
|2015                                 |   | 3,877  | 
|Thereafter                           |   | 20,965 | 
|Total                                | $ | 53,242 | 

10. NOTES PAYABLE

The Companys notes payable to banks (all current) as of March
31, 2010 and December 31, 2009 are $134,040 and $57,116, respectively.

Repayments under the terms of the notes are as follows:

|                                     |   | Short-term notes | 
|------------------------------------ | - | ---------------- | 
|2010 (for the remaining nine months) | $ | 35,890           | 
|2011                                 |   | 98,150           | 
|Total                                | $ | 134,040          | 

On March 31, 2010, the Company entered into a loan agreement
with China Merchants Bank. The Company borrowed RMB50,000 (approximately $7,325)
with an annual interest rate equal to 5.31%, with interest payable on the 20th
of each month. The loan is due in March 2011. The loan is guaranteed by the CEO
of the Company, his wife, and a subsidiary of the Company, and is collateralized
by the property and land use rights of a subsidiary.

On March 25, 2010, the Company entered into a loan agreement
with China Citic Bank. The Company borrowed RMB90,000 (approximately $13,184)
with an annual interest rate equal to 5.31%, with interest payable on the 20th
of each month. The loan is due in March 2011. The loan is guaranteed by the CEO
of the Company, his wife and a subsidiary of the Company, and properties of two
subsidiaries of the Company.

On March 24, 2010, the Company entered into a loan agreement
with China Citic Bank. The Company borrowed RMB60,000 (approximately $8,790) with an annual interest rate equal to
5.31%, with interest payable on the 20th of each month. The loan is due in March
2011. The loan is guaranteed by the CEO of the Company, his wife and a
subsidiary of the Company, and properties of two subsidiaries of the Company.

On March 4, 2010, the Company entered into a loan agreement
with Industrial and Commercial Bank of China. The Company borrowed RMB31,000
(approximately $4,541) with an annual interest rate equal to 4.78%, with
interest payable on the 20th of each month. The loan is due in March 2011. The
loan is guaranteed by three subsidiaries of the Company, and is collateralized
by property of a subsidiary.

On March 4, 2010, the Company entered into a loan agreement
with Industrial and Commercial Bank of China. The Company borrowed RMB39,000
(approximately $5,713) with an annual interest rate equal to 4.78%, with
interest payable on the 20th of each month. The loan is due in March 2011. The
loan is guaranteed by three subsidiaries of the Company, and is collateralized
by property of a subsidiary.

On March 3, 2010, the Company entered into a loan agreement
with China Construction Bank. The Company borrowed RMB50,000 (approximately
$7,325) with an annual interest rate equal to 5.58%, with interest payable on
the 20th of each month. The loan is due in March 2011. The loan is guaranteed by
the CEO of the Company and a subsidiary of the Company, and is collateralized by
property of a subsidiary of the Company.

15

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

10. NOTES PAYABLE (CONTINUED)

On March 2, 2010, the Company entered into a loan agreement
with China Merchants Bank. The Company borrowed RMB41,000 (approximately $6,006)
with an annual interest rate equal to 5.31%, with interest payable on the 20th
of each month. The loan is due in March 2011. The loan is guaranteed by the CEO
of the Company, his wife, and a subsidiary of the Company, and is collateralized
by the property and land use rights of a subsidiary.

On February 26, 2010, the Company entered into a loan agreement
with Bank of China. The Company borrowed RMB48,000 (approximately $7,031) with
an annual interest rate equal to 5.04%, with interest payable on the 20th of
each month. The loan is due in November 2010. The loan is guaranteed by the CEO
of the Company and two subsidiaries of the Company, collateralized by the
property and land use rights of a subsidiary.

On February 11, 2010, the Company entered into a loan agreement
with Bank of China. The Company borrowed RMB75,000 (approximately $10,987) with
an annual interest rate equal to 5.84%, with interest payable on the 20th of
each month. The loan is due in February 2011. The loan is guaranteed by the CEO
of the Company and two subsidiaries of the Company, collateralized by the
property and land use rights of a subsidiary.

On February 8, 2010, the Company entered into a loan agreement
with Societe Generale. The Company borrowed RMB27,000 (approximately $3,955)
with an annual interest rate equal to 4.86%, with interest payable on the due
date of the loan. The loan is due in August 2010. The loan is guaranteed by a
subsidiary of the Company.

On February 3, 2010, the Company entered into a loan agreement
with China Merchants Bank. The Company borrowed RMB59,000 (approximately $8,643)
with an annual interest rate equal to 5.31%, with interest payable on the 20th
of each month. The loan is due in February 2011. The loan is guaranteed by the
CEO of the Company, his wife, and a subsidiary of the Company, and is
collateralized by the property and land use rights of a subsidiary.

On January 26, 2010, the Company entered into a loan agreement
with Industrial and Commercial Bank of China. The Company borrowed RMB100,000
(approximately $14,649) with an annual interest rate equal to 4.78%, with
interest payable on the 20th of each month. The loan is due in January 2011. The
loan is guaranteed by the CEO of the Company.

On January 7, 2010, the Company entered into a loan agreement
with Bank of China. The Company borrowed RMB75,000 (approximately $10,987) with
an annual interest rate equal to 5.31%, with interest payable on the 20thof each month. The loan is due in January 2011. The loan is guaranteed by
the CEO of the Company and two subsidiaries of the Company, collateralized by
the property and land use rights of a subsidiary.

On December 25, 2009, the Company entered into a loan agreement
with Bank of Ningbo. The Company borrowed RMB30,000 (approximately $4,395) with
an annual interest rate equal to 5.31%, with interest payable on the 20thof each month. The loan is due in December 2010. The loan is guaranteed by
the CEO of the Company and a subsidiary of the Company.

On December 11, 2009, the Company entered into a loan agreement
with Agricultural Bank of China. The Company borrowed RMB20,000 (approximately
$2,930) with an annual interest rate equal to 5.31%, with interest payable on
the 20thof each month. The loan was due in September 2010. The loan
was guaranteed by the CEO and COO of the Company and a subsidiary of the
Company, and was collateralized by the land use right and properties of a
subsidiary. The loan was repaid in January 2010.

On December 11, 2009, the Company entered into a loan agreement
with Agricultural Bank of China. The Company borrowed RMB20,000 (approximately
$2,930) with an annual interest rate equal to 5.31%, with interest payable on
the 20thof each month. The loan was due in October 2010. The loan
was guaranteed by the CEO and COO of the Company and a subsidiary of the
Company, and was collateralized by the land use right and properties of a
subsidiary. The loan was repaid in January 2010.

On November 6, 2009, the Company entered into a loan agreement
with Industrial and Commercial Bank of China. The Company borrowed RMB50,000
(approximately $7,325) with an annual interest rate equal to 5.31%, with
interest payable on the 20thof each month. The loan is due in
November 2010. The loan is guaranteed by three subsidiaries of the Company, and
is collateralized by the land use rights and property of a subsidiary.

On September 30, 2009, the Company entered into a loan
agreement with Shenzhen Development Bank. The Company borrowed RMB20,000
(approximately $2,930) with an annual interest rate equal to 105% of benchmark
lending rate (5.5755% as of March 31, 2010), with interest payable on the 20th of each month. The
loan is due in September 2010. The loan is guaranteed by the CEO of the Company
and two subsidiaries of the Company, and is collateralized by the property of a
subsidiary.

On August 13, 2009, the Company entered into a loan agreement
with China Construction Bank. The Company borrowed RMB30,000 (approximately
$4,395) with an annual interest rate equal to 5.5755%, with interest payable on
the 20thof each month. The loan is due in August 2010. The loan is
collateralized by the property of a subsidiary.

16

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

10. NOTES PAYABLE (CONTINUED)

On May 20, 2009, the Company entered into a loan agreement with
China Everbright Bank Co., Ltd. The Company borrowed RMB40,000 (approximately
$5,859) with an annual interest rate equal to 5.31%, with interest payable on
the 20thof each month. The loan is due in May 2010. The loan is
guaranteed by the CEO of the Company, a subsidiary of the Company, and Chuang
Guan.

On April 15, 2009, the Company entered into a loan agreement
with Shanghai PuDong Development Bank. The Company borrowed RMB80,000
(approximately $11,716) with an annual interest rate equal to 5.31%, with
interest payable on the 20thof each month. The loan was due in April
2010 and repaid in March 2010. The loan was collateralized by the properties of
two subsidiaries.

On April 1, 2009, the Company entered into a loan agreement
with China Merchants Bank. The Company borrowed RMB50,000 (approximately $7,325)
with an annual interest rate equal to 92% of benchmark lending rate (4.89% as of
March 31, 2010), with interest payable on the 20thof each month. The
loan was due in April 2010 and repaid in March 2010. The loan was guaranteed by
the CEO of the Company, his wife, and subsidiaries of the Company, and was
collateralized by the land use rights of a subsidiary.

On February 25, 2009, the Company entered into a loan agreement
with China Merchants Bank. The Company borrowed RMB60,000 (approximately $8,789)
with an annual interest rate equal to 92% of benchmark lending rate (4.89% as of
March 31, 2010). The loan was due in February 2010 and the interest was payable
on the 20thof each month. The loan was guaranteed by the CEO of the
Company, his wife and subsidiaries of the Company, and was collateralized by the
land use rights of a subsidiary. The Company repaid RMB 10,000 (approximately
$1,464) and RMB50,000 (approximately $7,325) in March 2009 and in the first
quarter of 2010, respectively.

11. OBLIGATIONS UNDER PRODUCT FINANCING ARRANGEMENTS

In September 2009, the Company entered into product financing
agreements with a financial institution. Under the terms of the agreements, the
Company agreed to pay an annual interest rate of 8.46% on inventory financings.
The Company borrowed RMB50,000 (approximately $7,322). The loans expire in
September 2012, and payments are due at the end of each quarter.

In February 2009, the Company entered into product financing
agreements with a financial institution. Under the terms of the agreements, the
Company agreed to pay an annual interest rate of 10.5% on inventory financings.
The Company borrowed RMB 7,114 (approximately $1,041). The loans expire in
February 2013, and payments are due at the end of each quarter.

In July 2008, the Company entered into product financing
agreements with a financial institution. Under the terms of the agreements, the
Company agreed to pay an annual interest rate of 10% on inventory financings.
The Company borrowed RMB53,492 (approximately $7,845). The loans expire in July
2011, and payments are due at the end of each quarter.

The Company paid $271 and $188, respectively, during the three
months ended March 31, 2010 and 2009 of interest expense on the product
financing arrangements.

17

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

11. OBLIGATIONS UNDER PRODUCT FINANCING ARRANGEMENTS
(CONTINUED)

The following is a summary of the Companys obligations under
product financing arrangements as of March 31, 2010 and December 31, 2009:

|                                                      |   | March 31, |   |   | December 31, |  
|----------------------------------------------------- | - | --------- | - | - | ------------ | -
|                                                      |   | 2010      |   |   | 2009         |  
|Obligation under product financing
      arrangements | $ | 10,476    |   | $ | 11,725       |  
|Less: current portion                                 |   | (5,308    | ) |   | (5,184       | )
|Long-term portion                                     | $ | 5,168     |   | $ | 6,541        |  

Estimated repayments are as follows:

|2010 (for the remaining nine months) | $ | 4,566  |  
|------------------------------------ | - | ------ | -
|2011                                 |   | 4,554  |  
|2012                                 |   | 2,323  |  
|2013                                 |   | 174    |  
|Total                                |   | 11,617 |  
|Less: amount representing interest   |   | (1,141 | )
|Net                                  | $ | 10,476 |  

Approximately RMB10,206 (approximately $1,495) and RMB11,373
(approximately $1,665) of other costs directly associated with the product
financing agreements is recorded as deferred financing costs in the balance
sheet at March 31, 2010 and December 31, 2009, respectively. The Company is
amortizing these financing costs over the term of the obligation. The
amortization is recorded as interest expense, which was $192 and $100,
respectively for the three months ended March 31, 2010 and 2009.

12. DEFERRED INCOME

Deferred income balances as of March 31, 2010 and December 31,
2009, were $2,028 and $1,868 respectively, and represented amounts invoiced but
deferred as revenue as an estimated warranty reserve.

18

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

13. GUARANTEED SENIOR UNSECURED NOTES PAYABLE

As of March 31, 2010, the Company has outstanding Tranche B
Zero Coupon Guaranteed Senior Unsecured Notes (the Tranche B Notes). The
Tranche B Notes had a principal amount of $84,000, zero coupon interest and a
fair value of $78,440, resulting in a debt discount of $5,560 and an effective
interest rate of approximately 5%. The notes mature on September 2, 2012. The
Company is to 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
Tranche B Notes are not convertible. The Company is entitled to redeem the
Tranche B Notes at any time with no premium or penalty at a redemption price
equal to 100% of the principal amount of the Tranche B Notes to be redeemed,
plus default interest, if any. The Tranche B Notes are guaranteed by the
Company's significant subsidiaries to the extent permitted under the applicable
laws. The Company repaid $19,320 of principal on the Tranche B Notes in March
2010.

The Company has recorded $950 of debt discount amortization for
the three months ended March 31, 2010 related to the Tranche B Notes. This
amount is included in interest expense.

19

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

13. GUARANTEED SENIOR UNSECURED NOTES PAYABLE (CONTINUED)

Approximately $300 of legal fees and other costs directly
associated with the issuance of the Tranche B Notes is recorded as deferred
financing costs in the balance sheet at March 31, 2010. The Company is
amortizing these financing costs over the life of the Tranche B Notes. The
amortization for the three months ended March 31, 2010 was $25.

The following is a summary of the guaranteed senior unsecured
notes payable as of March 31, 2010 and December 31, 2009:

|                      |   | March 31, |   |   | December 31, |  
|--------------------- | - | --------- | - | - | ------------ | -
|                      |   | 2010      |   |   | 2009         |  
|Total                 | $ | 61,319    |   | $ | 79,689       |  
|Less: current portion |   | (36,127   | ) |   | (35,701      | )
|Long-term portion     | $ | 25,192    |   | $ | 43,988       |  

Repayments under the terms of the notes are as follows:

|2010 (remaining nine months)                         | $ | 19,320 |  
|---------------------------------------------------- | - | ------ | -
|2011                                                 |   | 38,640 |  
|2012                                                 |   | 6,720  |  
|Total                                                |   | 64,680 |  
|Less: amount representing unamortized
      discount |   | (3,361 | )
|Net                                                  | $ | 61,319 |  

20

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

14. WARRANTS

A summary of the status of the Company's warrants issued in
2009, 2008 and 2006, and the changes during the three months ended March 31,
2010 and 2009, is presented below:

|                                 |  | 2010      |  |   | 2009     | 
|-------------------------------- |  | --------- |  | - | -------- | 
|                                 |  |           |  |   | Weighted | 
|                                 |  |           |  |   | Exercise | 
|                                 |  | Shares    |  |   | Prices   | 
|Outstanding at January 1         |  | 3,528,302 |  | $ | 8.72     | 
|Granted                          |  | --        |  |   | --       | 
|Exercised                        |  | --        |  |   | --       | 
|Outstanding at March 31          |  | 3,528,302 |  | $ | 8.72     | 
|Warrants exercisable at March 31 |  | 3,528,302 |  | $ | 8.72     | 

15. EQUITY INCENTIVE PLAN

On February 7, 2007, the Company adopted the 2007 Equity
Incentive Plan (the Plan), which was amended in February 2010. The Plan, as
amended, has a ten-year term and provides for grants of stock options, stock
appreciation rights, performance units, restricted stock units and performance
shares. The total number of shares which may be issued under the Plan is
12,000,000.

During the three months ended March 31, 2010 and 2009, 686,705
and 419,818 shares of restricted stock were granted. During the three months
ended March 31, 2010 and 2009, 59,165 and 0 shares of restricted stock were
forfeited and retired, respectively. The shares that have been issued under the
Plan vest over a four to five-year period, and at issuance, resulted in total
deferred compensation of $84,624 and $80,101 as of March 31, 2010 and December
31, 2009, respectively. The fair values of these restricted stock awards are
equal to the fair value of the Company's stock on the date of grant, after
taking into account certain discount. Such restricted stock is subject to the
risk of forfeiture upon the occurrence of certain events. During the three
months ended March 31, 2010 and 2009, the Company recognized $8,326 and $4,218,
respectively, of compensation expense under the plan. As of March 31, 2010 and
December 31, 2009, there was $40,799 and $44,632 of unrecognized compensation
expense related to the nonvested restricted stock. This cost is expected to be
recognized over a four to five-year period. During the three months ended March
31, 2010 and 2009, the Company has not recognized any tax benefits for the
compensation expense under the Plan.

The following table summarizes the status of the Company's
nonvested restricted stock awards during the three months ended March 31, 2010
and 2009:

|                         |  | Nonvested Restricted Stock |   |   | Nonvested Restricted Stock |  
|------------------------ |  | -------------------------- | - | - | -------------------------- | -
|                         |  | and                        |   |   | and                        |  
|                         |  | Stock Unit Awards          |   |   | Stock Unit Awards          |  
|                         |  | 2010                       |   |   | 2009                       |  
|                         |  |                            |   |   | Weighted                   |  
|                         |  |                            |   |   | Average                    |  
|                         |  |                            |   |   | Grant                      |  
|                         |  | Number of                  |   |   | Date Fair                  |  
|                         |  | Shares                     |   |   | Values                     |  
|                         |  |                            |   |   |                            |  
|Outstanding at January 1 |  | 4,713,983                  |   | $ | 9.47                       |  
|Granted                  |  | 686,705                    |   |   | 7.78                       |  
|Vested                   |  | (857,055                   | ) |   | (9.71                      | )
|Forfeited                |  | (59,165                    | ) |   | (13.79                     | )
|Outstanding at March 31  |  | 4,484,468                  |   | $ | 9.11                       |  

21

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

16. CONSOLIDATED SEGMENT DATA

Segment information is consistent with how management reviews
the businesses, makes investing and resource allocation decisions and assesses
operating performance. The segment data presented reflects this segment
structure. The Company reports financial and operating information in the
following three segments:

(a) System installation: designs, sells, installs, services and
monitors electronics surveillance and safety systems to residential, commercial,
industrial and governmental customers (the Installation Segment);

(b) Manufacturing of surveillance and safety products: designs,
manufactures and sells surveillance and safety products, including intrusion
security, access control and video management systems (the Manufacturing
Segment); and

(c) Distribution of surveillance and safety products: sells
surveillance and safety products, including intrusion security, access control
and video management systems (the Distribution Segment).

The Company also provides general corporate services to its
segments and these costs are reported as Corporate and others.

Selected information in the segment structure is presented in
the following tables for the three months ended March 31, 2010 and 2009:

Revenues by segment for the three months ended March 31, 2010
and 2009 are as follows:

|Revenues(1)                                                                |   | 2010    |  |   | 2009   | 
|-------------------------------------------------------------------------- | - | ------- |  | - | ------ | 
|Installation Segment                                                       | $ | 92,749  |  | $ | 74,920 | 
|Manufacturing Segment                                                      |   | 16,009  |  |   | 15,310 | 
|Distribution Segment                                                       |   | 11,432  |  |   | 6,186  | 
|                                                                           | $ | 120,190 |  | $ | 96,416 | 
|(1)Revenues by operating
      segments exclude intercompany transactions. |   |         |  |   |        | 

Income (loss) by segment for the three months ended March 31,
2010 and 2009 are as follows:

|Income from operations     |   | 2010    |   |   | 2009   |  
|-------------------------- | - | ------- | - | - | ------ | -
|Installation Segment       | $ | 19,742  |   | $ | 13,998 |  
|Manufacturing Segment      |   | (1,051  | ) |   | (458   | )
|Distribution Segment       |   | (661    | ) |   | (376   | )
|Corporate and others (1)   |   | (11,067 | ) |   | (5,181 | )
|Income from operations     |   | 6,963   |   |   | 7,983  |  
|Corporate interest income  |   | 78      |   |   | 29     |  
|Corporate interest expense |   | (2,295  | ) |   | (6,037 | )
|Corporate other income     |   | 246     |   |   | 229    |  
|Income before income taxes |   | 4,992   |   |   | 2,204  |  
|Income taxes               |   | (1,717  | ) |   | (202   | )
|Net income                 | $ | 3,275   |   | $ | 2,002  |  

(1) Includes non-cash employee compensation,
professional fees and consultancy fees for the Company.

Non-cash employee compensation by segment for the three months
ended March 31, 2010 and 2009 is as follows:

|Non-cash employee compensation |   | 2010  |  |   | 2009  | 
|------------------------------ | - | ----- |  | - | ----- | 
|Installation Segment           | $ | 566   |  | $ | 508   | 
|Manufacturing Segment          |   | 936   |  |   | 735   | 
|Distribution Segment           |   | 362   |  |   | 352   | 
|Corporate and others           |   | 6,462 |  |   | 2,623 | 
|                               | $ | 8,326 |  | $ | 4,218 | 

22

---

|CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
      SUBSIDIARIES 
|----------------------------------------------------------------------
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|Expressed in thousands of U.S. dollars                                
|(Except for share and per share amounts)                              

16. CONSOLIDATED SEGMENT DATA (CONTINUED)

Total assets by segment as of March 31, 2010 and December 31,
2009 are as follows:

|Total assets                                                                                       |   | March 31, |  |   | December 31, | 
|-------------------------------------------------------------------------------------------------- | - | --------- |  | - | ------------ | 
|                                                                                                   |   | 2010      |  |   | 2009         | 
|Installation Segment                                                                               | $ | 510,463   |  | $ | 476,743      | 
|Manufacturing Segment                                                                              |   | 181,482   |  |   | 188,978      | 
|Distribution Segment                                                                               |   | 47,290    |  |   | 47,458       | 
|Corporate and others (1)                                                                           |   | 96,697    |  |   | 60,379       | 
|                                                                                                   | $ | 835,932   |  | $ | 773,558      | 
|(1)Includes deposits paid for acquisition of
      subsidiaries, properties and intangible assets. |   |           |  |   |              | 

Goodwill by segment as of March 31, 2010 and December 31, 2009,
is as follows:

|Goodwill              |   | March 31, |  |  | December 31, | 
|--------------------- | - | --------- |  |  | ------------ | 
|                      |   | 2010      |  |  | 2009         | 
|Installation Segment  | $ | 11,079    |  |  | 11,079       | 
|Manufacturing Segment |   | 56,456    |  |  | 56,456       | 
|Distribution Segment  |   | 11,976    |  |  | 11,976       | 
|                      | $ | 79,511    |  |  | 79,511       | 

Depreciation and amortization by segment for the three months
ended March 31, 2010 and 2009 are as follows:

|Depreciation and amortization |   | 2010  |  |   | 2009  | 
|----------------------------- | - | ----- |  | - | ----- | 
|Installation Segment          | $ | 1,091 |  | $ | 1,137 | 
|Manufacturing Segment         |   | 1,586 |  |   | 1,453 | 
|Distribution Segment          |   | 352   |  |   | 357   | 
|Corporate and others          |   | 205   |  |   | 116   | 
|                              | $ | 3,234 |  | $ | 3,063 | 

23

---

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. We use words such as believe,
expect, anticipate, project, target, plan, optimistic, intend,
aim, will or similar expressions which are intended to identify
forward-looking statements. Such statements include, among others, those
concerning market and industry segment growth and demand and acceptance of new
and existing products; any projections of sales, earnings, revenue, margins or
other financial items; any statements of the plans, strategies and objectives of
management for future operations; any statements regarding future economic
conditions or performance; uncertainties related to conducting business in
China, as well as all assumptions, expectations, predictions, intentions or
beliefs about future events. You are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, as well as assumptions, that, if they were to ever materialize or
prove incorrect, could cause the results of the Company to differ materially
from those expressed or implied by such forward-looking statements. Such risks
and uncertainties, among others, include:

- Our ability to attract new customers;
- Our ability to employ and retain qualified employees;
- Our ability to successfully integrate companies that we have acquired and
  to avoid or mitigate potential damages arising from risks associated with
  acquired companies and the legal structures utilized to effectuate
  acquisitions of these companies;
- Our ability to keep pace with technological developments in the
  surveillance and safety industry, and to develop and commercialize new
  products;
- Competition and competitive factors in the markets in which we compete;
- General economic and business conditions in China and in the local
  economies in which we regularly conduct business, which can affect demand for
  the Companys products and services;
- Changes in laws, rules and regulations governing the business community in
  China in general and the surveillance and safety industry in particular; and
- The risks identified in the Risk Factors section included in the
  Companys annual report on Form 10-K for the year ended December 31, 2009 and
  the subsequent SEC filings.

All statements other than statements of historical fact are
statements that could be deemed forward-looking statements. The Company assumes
no obligation and does not intend to update these forward-looking statements,
except as required by law.

Use of terms

Except as otherwise indicated by the context, references to
CSR, we, us, our, our Company, or the Company are to China Security
& Surveillance Technology, Inc., a Delaware corporation, and its
consolidated subsidiaries. Unless the context otherwise requires, all references
to:

- Allied Rich are to Allied Rich Limited, a Hong Kong corporation and an
  indirect, wholly owned subsidiary of the Company;
- Chain Star are to Chain Star Investments Limited, a Hong Kong
  corporation and an indirect, wholly owned subsidiary of the Company;
- Cheng Feng are to Shanghai Cheng Feng Digital Technology Co. Ltd., a
  corporation incorporated in the Peoples Republic of China and an indirect,
  wholly owned subsidiary of the Company;
- Chuang Guan are to Shenzhen Chuang Guan Intelligence Network Technology
  Co., Ltd., a corporation incorporated in the Peoples Republic of China;
- Coson are to Shenzhen Coson Electronic Co. Ltd., a corporation
  incorporated in the Peoples Republic of China and an indirect, wholly owned
  subsidiary of the Company;
- CSSD are to China Security & Surveillance Distribution (PRC) Inc., a
  corporation incorporated in the Peoples Republic of China and a direct,
  wholly owned subsidiary of the Company;
- CSSM are to China Security & Surveillance Manufacturing (PRC) Inc.,
  a corporation incorporated in the Peoples Republic of China and a direct,
  wholly owned subsidiary of the Company;
- CSSS are to China Security & Surveillance Services (PRC) Inc., a
  corporation incorporated in the Peoples Republic of China and a direct,
  wholly owned subsidiary of the Company;
- CSST HK are to China Security & Surveillance Technology (HK) Ltd., a
  Hong Kong corporation and an indirect, wholly owned subsidiary of the Company;

24

---

- CSST PRC are to China Security & Surveillance Technology (PRC) Inc.,
  a corporation incorporated in the Peoples Republic of China and a direct,
  wholly owned subsidiary of the Company;
- DIT are to DIT Industry(H.K.) Limited, a Hong Kong corporation and an
  indirect, wholly owned subsidiary of the Company;
- DM are to Beijing DM Security & Technology Co., Ltd., a corporation
  incorporated in the Peoples Republic of China;
- Golden are to Golden Group Corporation (Shenzhen) Limited, a corporation
  incorporated in the Peoples Republic of China and an indirect, wholly owned
  subsidiary of the Company;
- Guanling are to Beijing Aurine Divine Land Technology Co., Ltd., a
  corporation incorporated in the Peoples Republic of China and an indirect,
  wholly owned subsidiary of the Company;
- HiEasy are to HiEasy Electronic Technology Development Co., Ltd., a
  corporation incorporated in the Peoples Republic of China and an indirect,
  wholly owned subsidiary of the Company;
- Hongtianzhi are to Shenzhen Hongtianzhi Electronics Co., Ltd., a
  corporation incorporated in the Peoples Republic of China and an indirect,
  wholly owned subsidiary of the Company;
- Huge Long are to Huge Long Limited, a Hong Kong corporation and an
  indirect, wholly owned subsidiary of the Company;
- Jin Lin are to Shenzhen Jin Lin Technology Co., Ltd., a corporation
  incorporated in the Peoples Republic of China and an indirect, wholly owned
  subsidiary of the Company;
- Kit Grant are to Kit Grant Limited, a Hong Kong corporation and an
  indirect, wholly owned subsidiary of the Company;
- Link Billion are to Link Billion Investment Limited, a Hong Kong
  corporation and an indirect, wholly owned subsidiary of the Company;
- Long Top are to Long Top Limited, a Hong Kong corporation and an
  indirect, wholly owned subsidiary of the Company;
- Longhorn are to Shenzhen Longhorn Security Technology Co., Ltd., a
  corporation incorporated in the Peoples Republic of China and an indirect,
  wholly owned subsidiary of the Company;
- Minking are to Changzhou Minking Electronics Co., Ltd., a corporation
  incorporated in the Peoples Republic of China and an indirect, wholly owned
  subsidiary of the Company;
- Multiwin are to Multiwin International Holdings Limited, a Hong Kong
  corporation and an indirect, wholly owned subsidiary of the Company;
- Ocean Pacific are to Ocean Pacific Technology Limited, a Hong Kong
  corporation and an indirect, wholly owned subsidiary of the Company;
- Safetech are to China Safetech Holdings Limited, a British Virgin
  Islands corporation and a direct, wholly owned subsidiary of the Company;
- Sharp Eagle are to Sharp Eagle (HK) Limited, a Hong Kong corporation and
  an indirect, wholly owned subsidiary of the Company;
- Sincere On are to Sincere On Limited, a Hong Kong corporation and an
  indirect, wholly owned subsidiary of the Company;
- Stonesonic are to Guangdong Stonesonic Digital Technique Co., Ltd., a
  corporation incorporated in the Peoples Republic of China and an indirect,
  wholly owned subsidiary of the Company;
- Tsingvision are to Hangzhou Tsingvision Intelligence System Co., Ltd., a
  corporation incorporated in the Peoples Republic of China and an indirect,
  wholly owned subsidiary of the Company;
- WDH are to Shenzhen Wandaiheng Industry Limited, a corporation
  incorporated in the Peoples Republic of China and an indirect, wholly owned
  subsidiary of the Company;
- BVI are to the British Virgin Islands;
- PRC and China are to the Peoples Republic of China;
- RMB are to Yuan Renminbi of China;
- U.S. dollar, $ and US$ are to United States dollars;
- Exchange Act are to the Securities Exchange Act of 1934, as amended; and
- Securities Act are to the Securities Act of 1933, as amended.

25

---

Overview of Our Business

We are primarily engaged, through our indirect Chinese
subsidiaries, in the manufacturing, distributing, installing, and servicing of
surveillance and safety products and systems and developing surveillance and
safety related software in China. Our customers are primarily comprised of: (1)
governmental entities, such as customs agencies, courts, public security
bureaus, and prisons; (2) non-profit organizations, including schools, museums,
sports arenas, and libraries; and (3) commercial entities, such as airports,
hotels, real estate, banks, mines, railways, supermarkets, and entertainment
venues.

A majority of our revenues are derived from the provision of
surveillance and safety packaged solutions, including manufacturing,
installation and after-sale service maintenance of surveillance and safety
systems. Because the majority of our revenues are derived from installations,
they are generally non-recurring. Our revenues are not concentrated within any
one customer or group of related customers. Maintenance services in our packaged
solutions are included for the first year following installation. Our customers
may separately purchase maintenance services after the first year.

Our sales network covers most of Chinas populated areas, and
we do not rely on any particular region for revenues. Our subsidiaries
collectively have more than 140 branch offices and distribution points.

Reportable Operating Segments

Segment information is consistent with how management reviews
the businesses, makes investing and resource allocation decisions and assesses
operating performance. We report financial and operating information in the
following three segments:

- The Installation Segment provides design, sales, installation, services
  and monitoring of electronics surveillance and safety systems to residential,
  commercial, industrial and governmental customers (the Installation
  Segment);
- The Manufacturing Segment provides design, manufacturing and sales of
  surveillance and safety products, including intrusion security, access control
  and video management systems (the Manufacturing Segment); and
- The Distribution Segment provides distribution and sales of surveillance
  and safety products and services, including intrusion security, access control
  and video management systems (the Distribution Segment).

The Company also provides general corporate services to its
segments and these costs are reported as Corporate and Others.

First Quarter Financial Performance Highlights

We continued to experience strong demand for our products and
services during the first quarter of 2010 and growth in our revenues. The
surveillance and safety product market in China continued to expand in the first
quarter of 2010 due, in part, to several programs and regulatory drivers
initiated by the Chinese government , such as State Ordinance 458 and the Safe
City program, which require many public places to install security systems,
including city-wide surveillance systems, traffic conjunctions, critical
government locations, cyber cafés, bars and discotheques. The ongoing
installation of these security systems as required by applicable Chinese law is
being conducted by the affected constituents. In addition, economic development
in China and the general rise in affluence of the population of China continue
to contribute to increased demand for surveillance and safety products within
various industries and organizations, such as residential real estate, factories
and shopping centers. Our first quarter financial results also included the
consolidation of Coson acquired in January 2009, which contributed approximately
$0.82 million in revenue, accounting for approximately 0.7% of the total
revenues for the first quarter of 2010.

26

---

Following are some financial highlights for the first quarter
of 2010:

- Revenues:Revenues increased $23.77 million, or 24.7%, to $120.19
  million for the three months ended March 31, 2010, from $96.42 million for the
  three months ended March 31, 2009.
- Gross margin: Gross margin was 24.1% for the three months ended
  March 31, 2010, compared to 26.0% for the three months ended March 31, 2009.
  Such decrease was primarily due to a change of product mix and lower sales
  prices.
- Income from operations:Income from operations decreased $1.01
  million, or 12.7%, to $6.97 million for the three months ended March 31, 2010,
  from $7.98 million in 2009.
- Operating margin: Operating margin (the ratio of income from operations to
  revenues, expressed as a percentage) was 5.8% for the three months ended March
  31, 2010, compared to 8.3% in 2009.
- Net income: Net income increased $1.28 million, or 64.0%, to $3.28 million
  for the three months ended March 31, 2010, from $2.00 million for the three
  months ended March 31, 2009.
- Net margin: Net margin (the ratio of net income to revenues, expressed as
  a percentage) was 2.8% for the three months ended March 31, 2010, compared to
  2.1% for the three months ended March 31, 2009. The increase was primarily due
  to non-cash expenses described below.
- Fully diluted net income per share: Fully diluted net income per share was
  $0.05 for the three months ended March 31, 2010, as compared to $0.04 for the
  three months ended March 31, 2009.
- Non-cash expenses: Total non-cash expenses were $11.56 million for the
  three months ended March 31, 2010, representing a decrease of $1.10 million,
  or 8.7%, from $12.66 million during the same period last year. Non-cash
  expenses for the three months ended March 31, 2010 included (i) depreciation
  and amortization of $3.23 million, and (ii) non-cash employee compensation
  expense of $8.33 million.

Our net income for the periods ended March 31, 2010 and 2009
was approximately $3.28 million and $2.00 million, respectively. Our net income
was materially impacted by: depreciation and amortization of long-lived assets
in the subsidiaries we acquired; non-cash employee compensation recognized
pursuant to Accounting Standard Codification (ASC) 718; redemption accretion
on convertible notes we issued in February and April 2007. In the table below,
we have presented a non-GAAP financial disclosure to provide a quantitative
analysis of the impact of the depreciation and amortization of long-lived assets
in the subsidiaries we acquired, non-cash employee compensation and redemption
accretion on convertible notes on our net income. Because these items do not
require the use of current assets, management does not include these items in
its analysis of our financial results or how we allocate our resources. Because
of this, we deemed it meaningful to provide this non-GAAP disclosure of the
impact of these significant items on our financial results.

27

---

The following table summarizes the Companys non-cash expenses
during the three months ended March 31, 2010 and 2009.

|All amounts in millions of U.S.
      dollars                        |  
|-------------------------------------------------------------------- | -
|Non-cash expenses                                                    |  
|                                                                     |  
|Depreciation and amortization                                        | $
|Depreciation and amortization (included in cost of goods
      sold) |  
|Non-cash employee compensation                                       |  
|Redemption accretion on convertible notes                            |  
|Total                                                                | $

Results of Operations

The following table sets forth key components of our results of
operations for the three months ended March 31, 2010 and 2009, in dollars and as
a percentage of revenues.

|All amounts, other than percentages, in
      millions of U.S. dollars                              |     
|--------------------------------------------------------------------------------------------------- | ----
|                                                                                                    | 2010
|Revenues                                                                                            | $   
|Cost of goods sold (including depreciation and amortization amounted $0.25 and $0.24, respectively) |     
|Gross profit                                                                                        |     
|Selling and marketing                                                                               |     
|General and administrative                                                                          |     
|Non-cash employee compensation                                                                      |     
|Depreciation and amortization                                                                       |     
|Income from operations                                                                              |     
|Other income                                                                                        |     
|Interest expense, cash                                                                              |     
|Redemption accretion on convertible notes                                                           |     
|Income before income taxes                                                                          |     
|Income taxes                                                                                        |     
|Net income                                                                                          | $   

28

---

Revenues

Our revenues are generated from system installations and
manufacturing and distribution of surveillance and safety products. During the
first quarter of 2010, we experienced solid growth in revenues. Revenues
increased from $96.42 million for the first quarter of 2009 to $120.19 million
for the first quarter of 2010, representing a 24.7% increase. Such increase was
mainly attributable to growth in the surveillance and safety market in China,
the increased market demand for our products, our increased brand recognition
and the acquisition of several companies in 2008 and 2009 as discussed in detail
below. Our strategic efforts to increase our distribution channels during 2008
and 2009 and adequate working capital from prior fundraising activities with
banks also allowed us to successfully take advantage of the growth in market
demand in this quarter. Historically, the first quarter has generally been a
slow quarter for us due to the Chinese New Year holiday and the fourth quarter
has generally been the strongest quarter. Management expects the same trend in
2010 and that revenue growth will remain strong for the remainder of 2010.

After Coson became our wholly owned subsidiary, we consolidated
the financial results of Coson beginning in the first quarter of 2009, which
contributed $0.82 million and $0.83 million to revenues in the first quarter of
2010 and 2009, respectively. As the acquisitions of Stonesonic, Longhorn,
Guanling, Jin Lin and DIT have all surpassed the one year anniversary, we have
included the revenues contributed by these companies in our organic growth since
the fourth quarter of 2009.

The following table shows the components of revenues recognized
in the first quarter of 2010.

|(In millions of U.S. dollars)                                                                                                                   |  
|----------------------------------------------------------------------------------------------------------------------------------------------- | -
|Revenues from the Installation Segment
      recognized from installation contracts signed in 2009                                              | $
|Revenues from the Installation Segment recognized from
      installation contracts signed in the first quarter 2010                            | $
|Revenues from the Manufacturing Segment
      recognized from manufacturing contracts signed in 2009                                            | $
|Revenues from the Manufacturing Segment recognized from
      manufacturing contracts signed in the first quarter of 2010                       | $
|Revenues from the Distribution Segment
      recognized from distribution contracts signed in 2009                                              | $
|Revenues from the Distribution Segment recognized from
      distribution contracts signed in the first quarter of 2010                         | $
|Total revenues recognized in the first
      quarter of 2010                                                                                    | $
|Revenues deferred                                                                                                                               | $
|Backlog of contracts for system
      installation and manufacturing of surveillance and safety products signed
      before March 31, 2010 (1) | $

(1) We have conservatively not included the letter
of intents, framework agreements and various signed partnership agreements in
our backlog numbers as they are subject to final binding individual agreements
to be entered into at later dates.

Our revenues are generated from three business segments:
Installation Segment, Manufacturing Segment and Distribution Segment. The
following table shows the different segments comprising our total revenues for
the three months ended March 31, 2010 and 2009.

|All amounts in millions of U.S. dollars |  
|--------------------------------------- | -
|                                        |  
|Revenues                                |  
|Installation Segment                    | $
|Manufacturing Segment                   |  
|Distribution Segment                    |  
|Total                                   | $

29

---

For the three months ended March 31, 2010 and 2009, our
Installation Segment generated revenues of $92.75 million and $74.92 million
which represented 77.2% and 77.7% of our total revenues, respectively. The
increase in revenues was mainly due to the following factors: First, demand for
security and surveillance products has grown in China, which we attribute in
part to the general rise in affluence of population in China . The increased
demand within various industries and organizations, such as residential real
estate, factories and shopping centers, also contributed to increased demand for
surveillance and safety products. Second, the Chinese government initiated
several programs and regulatory drivers, such as State Ordinance 458 and the
3111 program, that require many public places, including city-wide
surveillance systems, traffic surveillance systems, critical government
locations, cyber cafés, bars and discotheques, to install security systems.
Third, our strategic efforts to increase our distribution channels during 2008
and 2009 allowed us to successfully take advantage of the growth in market
demand in the first quarter of 2010. Fourth, in November 2008, the Chinese
government announced an economic stimulus package to invest RMB 4 trillion
(approximately $586 billion) in infrastructure and social welfare by the end of
2010. The economic stimulus package increased the demand for surveillance and
safety products in China. Fifth, we have been successful in raising sufficient
working capital to facilitate expansion in the China market. Finally, our
increased brand recognition also contributed to the growth in revenues.

For the three months ended March 31, 2010 and 2009, our
Manufacturing Segment generated revenues of $16.01 million and $15.31 million,
representing 13.3% and 15.9% of our total revenues, respectively. Such increase
was primarily driven by the increase of overseas sales. For the three months
ended March 31, 2010 and 2009, our Distribution Segment generated revenues of
$11.43 million and $6.19 million, representing 9.5% and 6.4% of our total
revenues, respectively. Such increase was primarily driven by the decrease of
selling prices due to market competition which, in turn, increased sales volume.
Management believes that revenues from the installation projects will continue
to be the Company's major revenue source in the next few years. With the
acquisition in 2009 and other planned acquisitions, management believes that the
percentage of revenues from the Manufacturing Segment and the Distribution
Segment will increase in the future.

Management expects growth in all three segments to remain
strong in the remainder of 2010 due to (i) continued growth in the security and
surveillance market both within the corporate and government sectors, (ii) strong branding
and profiling in China, and (iii) acquisition strategy intended to boost our
market share and competitiveness.

Cost of goods sold

Our cost of goods sold is primarily comprised of the costs of
our raw materials, labor and overhead. Cost of goods sold for the first quarter
of 2010 increased by 27.8% to $91.21 million as compared to $71.39 million for
the same period last year. The increase was generally in line with the increase
of revenues.

Gross profit and gross margin

Our gross profit is equal to the difference between our
revenues and our cost of goods sold. Our gross profit increased $3.95 million,
or 15.8%, to $28.98 million for the three months ended March 31, 2010 from
$25.03 million for the same period last year. Gross margin for the three months
ended March 31, 2010 was 24.1%, as compared to 26.0% for the same period of
2009. The decrease in our gross margin was primarily driven by the decrease of
sales prices. We made a strategic decision to decrease our sales prices in order
to maintain our market share and expand our customer base.

The following table shows the different segment components
comprising our gross profit margin over the three months ended March 31, 2010
and 2009.

|Gross Margin          |  | 2010  |  |  | 2009  | 
|--------------------- |  | ----- |  |  | ----- | 
|Installation Segment  |  | 24.8% |  |  | 25.8% | 
|Manufacturing Segment |  | 27.8% |  |  | 27.5% | 
|Distribution Segment  |  | 13.0% |  |  | 23.6% | 
|Total                 |  | 24.1% |  |  | 26.0% | 

For the three months ended March 31, 2010, gross margins of the
Installation Segment, Manufacturing Segment and Distribution Segment were
approximately 24.8%, 27.8% and 13.0%, compared to 25.8%, 27.5% and 23.6% for the
same period last year, respectively. The decreased gross margin in the
Installation Segment was primarily due to decrease of selling price and
declining margins from smaller scale projects resulting primarily from our
efforts in maintaining market share and expansion of customer base. Gross margin
for the Manufacturing Segment increased to 27.8% for the three months ended
March 31, 2010 from 27.5% for the same period last year. The slight increase in
gross margin with respect to the Manufacturing Segment was primarily driven by
increased bargaining power in the purchase of raw materials resulting from
increased economies of scale. Gross margin for the Distribution Segment
decreased to 13.0% for the three months ended March 31, 2010 from 23.6% for the
same period last year. Such high gross margin in the same period last year was
mainly because our software solutions that were sold during the same period last
year, generally had a higher margin.

30

---

Selling and marketing expenses

Our selling and marketing expenses are comprised primarily of
sales commissions, the cost of advertising and promotional materials, salaries
and fringe benefits of sales personnel, after-sale support services and other
sales related costs. Our selling and marketing expenses remained stable at $2.71
million for the three months ended March 31, 2010. As a percentage of revenues,
our selling and marketing expenses decreased to 2.3% for the three months ended
March 31, 2010 from 2.8% for the same period in 2009. The slight percentage
decrease was due to cost efficiency.

General and administrative expenses

General and administrative expenses consist primarily of
compensation and benefits to our general management, finance and administrative
staff, professional advisor fees, audit fees and other expenses incurred in
connection with general operation. Our general and administrative expenses
increased $0.69 million, or 9.5%, to $7.99 million for the three months ended
March 31, 2010 from $7.30 million for the same period in 2009. The dollar
increase was mainly due to the hiring of additional staff and professional
expenses related to consolidating our recently acquired subsidiary into the
public reporting company. As a percentage of revenues, general and
administrative expenses decreased to 6.6% for the three months ended March 31,
2010 from 7.6% for the same period in 2009. The percentage decrease was mainly
due to cost efficiency.

Non-cash employee compensation

Non-cash employee compensation by segment for the three months
ended March 31, 2010 and 2009 is as follows:

|All amounts in millions of U.S. dollars |  
|--------------------------------------- | -
|Non-cash employee
      compensation    |  
|Installation Segment                    | $
|Manufacturing Segment                   |  
|Distribution Segment                    |  
|Corporate and Other                     |  
|Total                                   | $

Effective February 7, 2007, our board of directors adopted the
2007 Equity Incentive Plan (the Plan) which was subsequently amended in
February 2010. The Plan provides for grants of stock options, stock appreciation
rights, performance units, restricted stock, restricted stock units, and
performance shares. A total of 12,000,000 shares of our common stock may be
issued under our Plan. The Plan has a 10-year term. During the three months
ended March 31, 2010 and 2009, we granted an aggregate of 686,705 and 419,818
shares of restricted stock pursuant to the Plan to our employees and
consultants, respectively. These shares will vest with respect to each of the
employees and consultants over a period of four to five years.

Non-cash employee compensation for the three months ended March
31, 2010 increased to $8.33 million from $4.22 million for the same period in
2009, primarily because more shares were granted to employees and consultants
under the Plan in this quarter.

Depreciation and amortization

Our depreciation and amortization costs increased $0.17
million, or 5.6%, to $3.23 million (including $0.25 million depreciation and
amortization costs included under cost of goods sold) for the three months ended
March 31, 2010 from $3.06 million for the same period in 2009. This increase was
primarily due to the increased amortization cost of assets resulting from the
acquired subsidiaries. As a percentage of revenues, depreciation and
amortization expenses decreased to 2.7% for the three months ended March 31,
2010 from 3.2% for the same period in 2009. Such percentage decrease was
primarily due to the increase in incremental revenue in this quarter.

Income from operations

Our income from operations decreased $1.01 million, or 12.7%,
to $6.97 million for the three months ended March 31, 2010 as compared to $7.98
million for the same period in 2009. As a percentage of revenues, income from
operations decreased to 5.8% for the three months ended March 31, 2010 from 8.3%
for the same period in 2009. Such dollar and percentage decrease was primarily
due to the decrease of our gross margin and the increase of our general and
administrative expenses and non-cash employee compensation as discussed above.

31

---

The following table shows the different segments comprising our
income from operations for the three months ended March 31, 2010 and 2009.

|All amounts in millions of U.S. dollars |  
|--------------------------------------- | -
|Income from operations                  |  
|Installation Segment                    | $
|Manufacturing Segment                   |  
|Distribution Segment                    |  
|Corporate and others                    |  
|Total                                   | $

Income from operations related to the Installation Segment
increased 41.0%, or $5.74 million to $19.74 million for the three months ended
March 31, 2010, compared to $14.00 million for the same period in 2009. Such
increase was mainly due to higher demand of our total one-stop-shop installation
from customers. We completed more projects in this quarter than the same quarter
last year in an effort to expand our market share.

Loss from operations related to the Manufacturing Segment was
$1.05 million for the three months ended March 31, 2010, compared to the
operating loss of $0.46 million for the same period in 2009. Such increase was
mainly due to the non-cash employee compensation related to the Manufacturing
Segment. The Company expects that the Manufacturing Segment margin will increase
as we integrate the recently completed acquisitions which will allow us to
further benefit from economies of scale.

Loss from operations related to the Distribution Segment was
$0.66 million for the three months ended March 31, 2010, compared to the
operating loss of $0.38 million for the same period in 2009. Such increase was
mainly due to the decrease of gross margin.

We also provide general corporate services to our segments.
Costs attributable to these services are reported as corporate and other
expenses. These costs include amortization, depreciation, and non-cash
compensation for employees. For the three months ended March 31, 2010 and 2009,
we incurred $11.06 million and $5.18 million in corporate and other expense,
respectively. The increase was mainly due to the increase of non-cash employee
compensation discussed above, and professional expenses related to the costs of
integrating our subsidiaries into our public reporting company system.

Other income

Our other income increased 23.1%, or $0.06 million to $0.32
million for the three months ended March 31, 2010 from $0.26 million for the
same period in 2009. As a percentage of revenues, other income for the three
months ended March 31, 2010 was 0.3%, as compared to 0.3% for the same period in
2009.

Interest expense (excluding redemption accretion on
convertible notes)

During the first quarter of 2010, we borrowed funds under 18
short-term loans from banks and incurred total interest expense of $1.34
million, as compared to $0.38 million for the same period in 2009. For the
guaranteed senior unsecured notes payable, we incurred $0.95 million in interest
during the three months ended March 31, 2010. For the convertible notes, we paid
$0.28 million in interest during the three months ended March 31, 2009. Such
increase was primarily due to the increase in the outstanding balances of our
bank loans.

Redemption accretion on convertible notes

Redemption accretion on convertible notes for the three months
ended March 31, 2010 and 2009 was $0 and $5.38 million, respectively. We raised
$110 million from the issuance of convertible notes in February and April 2007
which were retired and restructured into two new zero coupon interest notes on
September 2, 2009.

32

---

Income before taxes

Our income before taxes increased $2.80 million, or 127.3%, to
$5.00 million for the three months ended March 31, 2010 from $2.20 million for
the same period in 2009. As a percentage of revenues, income before taxes
increased to 4.2% from 2.3% for the same period in 2009. Such percentage
increase was primarily due to decreased non-cash expenses related to the
redemption accretion on convertible notes as discussed above.

Income Taxes

China Security & Surveillance Technology, Inc. is subject
to the United States federal income tax at a tax rate of 34%. No provision for
income taxes in the United States has been made as China Security &
Surveillance Technology, Inc. had no United States taxable income during the
three months ended March 31, 2010.

Our wholly owned subsidiary Safetech was incorporated in the
British Virgin Island and, under the current laws of the British Virgin Islands,
is not subject to income taxes.

Before January 1, 2008, foreign invested enterprises (FIEs)
established in the PRC were generally subject to an enterprise income tax
(EIT) rate of 33%, which included a 30% state income tax and a 3% local income
tax. FIEs established in Shenzhen Special Economic Zone, such as our Chinese
subsidiary, Golden, and certain high-technology companies were subject to a
reduced tax rate. On March 16, 2007, the National People's Congress of China
passed the new Enterprise Income Tax Law (EIT Law), and on November 28, 2007,
the State Council of China passed the Implementing Rules for the EIT Law
(Implementing Rules) which took effect on January 1, 2008. The EIT Law and
Implementing Rules impose a unified EIT of 25% on all domestic-invested
enterprises and FIEs, unless they qualify under certain limited exceptions.
Therefore, nearly all FIEs are subject to the new tax rate alongside other
domestic businesses rather than benefiting from the EIT, and its associated
preferential tax treatments, beginning January 1, 2008.

Despite these changes, the EIT Law gives the Old FIEs a
five-year grandfathering period during which they can continue to enjoy their
existing preferential tax treatments. During this five-year grandfathering
period, the Old FIEs which enjoyed tax rates lower than 25% under the original
EIT Law shall gradually increase their EIT rate within 5 years until the tax
rate reaches 25%. In addition, the Old FIEs that are eligible for the two-year
exemption and three-year half reduction or five-year exemption and five-year
half-reduction under the original EIT Law, are allowed to remain to enjoy their
preference until these holidays expire. The discontinuation of any such special
or preferential tax treatment or other incentives would have an adverse affect
on any organization's business, fiscal condition and current operations in
China.

In addition to the changes to the current tax structure, under
the EIT Law, an enterprise established outside of China with de facto
management bodies within China is considered a resident enterprise and will
normally be subject to an EIT of 25% on its global income. The Implementing
Rules define the term de facto management bodies as an establishment that
exercises, in substance, overall management and control over the production,
business, personnel, accounting, etc., of a Chinese enterprise. If the PRC tax
authorities subsequently determine that the Company should be classified as a
resident enterprise, then the organizations global income will be subject to
PRC income tax of 25%.

Our subsidiary, Golden, is subject to an EIT rate of 22% for
2010. Hongtianzhi is located in Shenzhen and its 2010 EIT rate is 22% because it
receives a lower tax rate as a high-technology company. Cheng Feng, HiEasy,
Minking, and Stonesonic are each subject to an EIT rate of 15% in 2010 due to
their high-technology or software company status. CSST PRC and Longhorn are
located in Shenzhen and their 2010 EIT rate is 11% because they receive a lower
tax rate as a high-technology company. Coson and Zhuhai DIT Digital Technology
Limited are each subject to an EIT rate of 22% in 2010 due to their
high-technology company status. Tsingvision and Jin Lin are subject to an EIT
rate of 12.5% in 2010 due to their software company status. CSSM, CSSS, CSSD and
Guanling are subject to an EIT rate of 25% in 2010.

33

---

Income taxes increased $1.52 million to $1.72 million for the
three months ended March 31, 2010 from $0.20 million for the same period of
2009. Such increase was primarily because of the increase in tax rate. The
income tax exemption of some of our major subsidiaries expired as of the
beginning of 2010.

Net income

Net income increased $1.28 million, or 64.0%, to $3.28 million
for the three months ended March 31, 2010 from $2.00 million for the same period
in 2009. As a percentage of revenues, net income increased to 2.8% for the three
months ended March 31, 2010 from 2.1% for the same period in 2009. This
percentage increase was mainly due to the decrease of non-cash expenses related
to the redemption accretion on our convertible notes as discussed above.

Foreign Currency Translation Gains

Our operating subsidiaries are located in China. The operating
subsidiaries purchase all products and render services in China, and receive
payment from customers in China using RMB as the functional currency. We do not
engage in currency hedging.

We incurred a foreign currency translation gain of $0.12
million for the three months ended March 31, 2010 as compared with a foreign
currency translation gain of $0.05 million for the same period in 2009.

As we have done since China revalued the RMB by 2.1 percent and
allowed the RMB to appreciate as much as 0.3 percent per day against the U.S.
dollar, we implemented different exchange rates in translating RMB into U.S.
dollars in our financial statements for fiscal quarter ended March 31, 2010 and
2009.

For the three months ended March 31, 2010, the exchange rates
of 6.83, 6.83 and 8.04 were implemented in calculating the assets and
liabilities, revenue and expenses, and shareholders' equity, respectively, which
results in a $0.12 million foreign currency translation gain in the first
quarter of 2010. In the first quarter of 2009, the exchange rates of 6.84,
6.84 and 8.04 were implemented in calculating the assets and liabilities,
revenue and expenses, and shareholders' equity, respectively, which results in
an $0.05 million foreign currency translation gain in such period.

Liquidity and Capital Resources

General

As of March 31, 2010 and December 31, 2009, we had cash and
cash equivalents of $142.29 million and $154.48 million, respectively. The
following table provides detailed information about our net cash flow for the
three months ended March 31, 2010 and 2009.

Cash Flow

|All amounts in millions of U.S. dollars                  
|---------------------------------------------------------
|                                                         
|Net cash (used in) provided by operating
      activities
|Net cash used in investing activities                    
|Net cash provided by financing activities                
|Effect of exchange rate changes on cash                  
|Net cash (outflow) inflow                                

Operating Activities:

Net cash used in operating activities was $60.88 million for
the three months ended March 31, 2010, as compared to $21.44 million of the net
cash provided by operating activities for the same period in 2009. The change in
net cash used in operating activities was mainly due to increases in accounts
receivable and advances to suppliers.

34

---

Investing Activities:

Our main uses of cash for investing activities during the first
quarter of 2010 were deposits for the acquisition of subsidiaries and businesses
and for property, plant and equipment.

Net cash used in investing activities for the three months
ended March 31, 2010 was $7.66 million, which is an increase of $4.85 million
from net cash used in investing activities of $2.81 million in the same period
of 2009. Such increase was primarily due to increased deposits for acquisitions
of subsidiaries in the first quarter of 2010.

Financing Activities:

Net cash provided by financing activities in the three months
ended March 31, 2010 totaled $56.34 million as compared to $5.95 million used in
financing activities in the same period of 2009. The net cash provided by
financing activities was mainly attributable to the additional bank loans raised
in the first quarter of 2010.

Loan Facilities:

As of March 31, 2010, the amount, maturity date and term of
each of our bank loans are as follows:

All amounts in millions of U.S. dollars

|Lender                                  |   | Amount |  |  | Maturity Date  |  |  | Duration | 
|--------------------------------------- | - | ------ |  |  | -------------- |  |  | -------- | 
|                                        |   |        |  |  |                |  |  |          | 
|China Merchants Bank                    | $ | 7.33   |  |  | March 2011     |  |  | 1 year   | 
|China Citic Bank                        |   | 13.18  |  |  | March 2011     |  |  | 1 year   | 
|China Citic Bank                        |   | 8.79   |  |  | March 2011     |  |  | 1 year   | 
|Industrial and Commercial Bank of China |   | 4.54   |  |  | March 2011     |  |  | 1 year   | 
|Industrial and Commercial Bank of China |   | 5.71   |  |  | March 2011     |  |  | 1 year   | 
|China Construction Bank                 |   | 7.33   |  |  | March 2011     |  |  | 1 year   | 
|China Merchants Bank                    |   | 6.00   |  |  | March 2011     |  |  | 1 year   | 
|Bank of China                           |   | 7.03   |  |  | February 2011  |  |  | 1 year   | 
|Bank of China                           |   | 10.99  |  |  | February 2011  |  |  | 1 year   | 
|Societe Generale                        |   | 3.96   |  |  | August 2010    |  |  | 6 months | 
|China Merchants Bank                    |   | 8.64   |  |  | February 2011  |  |  | 1 year   | 
|Industrial and Commercial Bank of China |   | 14.65  |  |  | January 2011   |  |  | 1 year   | 
|Bank of China                           |   | 10.99  |  |  | January 2011   |  |  | 1 year   | 
|Bank of Ningbo                          |   | 4.39   |  |  | December 2010  |  |  | 1 year   | 
|Industrial and Commercial Bank of China |   | 7.33   |  |  | November 2010  |  |  | 1 year   | 
|Shenzhen Development Bank               |   | 2.93   |  |  | September 2010 |  |  | 1 year   | 
|China Construction Bank                 |   | 4.39   |  |  | August 2010    |  |  | 1 year   | 
|China Everbright Bank                   |   | 5.86   |  |  | May 2010       |  |  | 1 year   | 
|A Financial Institution                 |   | 0.69   |  |  | February 2013  |  |  | 4 years  | 
|A Financial Institution                 |   | 6.23   |  |  | September 2012 |  |  | 3 years  | 
|A Financial Institution                 |   | 3.56   |  |  | July 2011      |  |  | 3 years  | 
|                                        |   |        |  |  |                |  |  |          | 
|Total                                   | $ | 144.52 |  |  |                |  |  |          | 

35

---

a) Notes payable

On March 31, 2010, we entered into a loan agreement with China
Merchants Bank. We borrowed RMB50 million (approximately $7.33 million) with an
annual interest rate equal to 5.31%, with interest payable on the 20th of each
month. The loan is due in March 2011. The loan is guaranteed by our CEO, his
wife, and our subsidiary, and is collateralized by the property and land use
rights of a subsidiary.

On March 25, 2010, we entered into a loan agreement with China
Citic Bank. We borrowed RMB90 million (approximately $13.18 million) with an
annual interest rate equal to 5.31%, with interest payable on the 20th of each
month. The loan is due in March 2011. The loan is guaranteed by our CEO, his
wife and our subsidiary, and properties of two subsidiaries.

On March 24, 2010, we entered into a loan agreement with China
Citic Bank. We borrowed RMB60 million (approximately $8.79 million) with an
annual interest rate equal to 5.31%, with interest payable on the 20th of each
month. The loan is due in March 2011. The loan is guaranteed by our CEO, his
wife and our subsidiary, and properties of two subsidiaries.

On March 4, 2010, we entered into a loan agreement with
Industrial and Commercial Bank of China. We borrowed RMB31 million
(approximately $4.54 million) with an annual interest rate equal to 4.78%, with
interest payable on the 20th of each month. The loan is due in March 2011. The
loan is guaranteed by our three subsidiaries, and is collateralized by property
of a subsidiary.

On March 4, 2010, we entered into a loan agreement with
Industrial and Commercial Bank of China. We borrowed RMB39 million
(approximately $5.71 million) with an annual interest rate equal to 4.78%, with
interest payable on the 20th of each month. The loan is due in March 2011. The
loan is guaranteed by our three subsidiaries, and is collateralized by property
of a subsidiary.

On March 3, 2010, we entered into a loan agreement with China
Construction Bank. We borrowed RMB50 million (approximately $7.33 million) with
an annual interest rate equal to 5.58%, with interest payable on the 20th of
each month. The loan is due in March 2011. The loan is guaranteed by our CEO and
our subsidiary, and is collateralized by property of a subsidiary.

On March 2, 2010, we entered into a loan agreement with China
Merchants Bank. We borrowed RMB41 million (approximately $6.00 million) with an
annual interest rate equal to 5.31%, with interest payable on the 20th of each
month. The loan is due in March 2011. The loan is guaranteed by our CEO, his
wife, and our subsidiary, and is collateralized by the property and land use
rights of a subsidiary.

On February 26, 2010, we entered into a loan agreement with
Bank of China. We borrowed RMB48 million (approximately $7.03 million) with an
annual interest rate equal to 5.04%, with interest payable on the 20th of each
month. The loan is due in November 2010. The loan is guaranteed by our CEO and
our two subsidiaries, collateralized by the property and land use rights of a
subsidiary.

On February 11, 2010, we entered into a loan agreement with
Bank of China. We borrowed RMB75 million (approximately $10.99 million) with an
annual interest rate equal to 5.84%, with interest payable on the 20th of each
month. The loan is due in February 2011. The loan is guaranteed by our CEO and
our two subsidiaries, collateralized by the property and land use rights of a
subsidiary.

On February 8, 2010, we entered into a loan agreement with
Societe Generale. We borrowed RMB27 million (approximately $3.96) with an annual
interest rate equal to 4.86%, with interest payable on the due date of the loan.
The loan is due in August 2010. The loan is guaranteed by our subsidiary.

On February 3, 2010, we entered into a loan agreement with
China Merchants Bank. We borrowed RMB59 million (approximately $8.64 million)
with an annual interest rate equal to 5.31%, with interest payable on the 20th
of each month. The loan is due in February 2011. The loan is guaranteed by our
CEO, his wife, and our subsidiary, and is collateralized by the property and
land use rights of a subsidiary.

On January 26, 2010, we entered into a loan agreement with
Industrial and Commercial Bank of China. We borrowed RMB100 million
(approximately $14.65 million) with an annual interest rate equal to 4.78%, with
interest payable on the 20th of each month. The loan is due in January 2011. The
loan is guaranteed by our CEO.

On January 7, 2010, we entered into a loan agreement with Bank
of China. We borrowed RMB75 million (approximately $10.99 million) with an
annual interest rate equal to 5.31%, with interest payable on the 20th of each
month. The loan is due in January 2011. The loan is guaranteed by our CEO and
our two subsidiaries, and is collateralized by the property and land use rights
of a subsidiary.

On December 25, 2009, we entered into a loan agreement with
Bank of Ningbo. We borrowed RMB30 million (approximately $4.39 million) with an
annual interest rate equal to 5.31%, with interest payable on the 20th of each
month. The loan is due in December 2010. The loan is guaranteed by our CEO and our subsidiary.

36

---

On November 6, 2009, we entered into a loan agreement with
Industrial and Commercial Bank of China. We borrowed RMB50 million
(approximately $7.33 million) with an annual interest rate equal to 5.31%, with
interest payable on the 20th of each month. The loan is due in November 2010.
The loan is guaranteed by our three subsidiaries, and is collateralized by the
land use rights and property of a subsidiary.

On September 30, 2009, we entered into a loan agreement with
Shenzhen Development Bank. We borrowed RMB20 million (approximately $2.93
million) with an annual interest rate equal to 105% of benchmark lending rate
(5.5755% as of March 31, 2010), with interest payable on the 20th of each month.
The loan is due in September 2010. The loan is guaranteed by our CEO and our two
subsidiaries, and is collateralized by the property of a subsidiary.

On August 13, 2009, we entered into a loan agreement with China
Construction Bank. We borrowed RMB30 million (approximately $4.39 million) with
an annual interest rate equal to 5.5755%, with interest payable on the 20thof each month. The loan is due in August 2010. The loan is collateralized
by the property of a subsidiary.

On May 20, 2009, we entered into a loan agreement with China
Everbright Bank Co., Ltd. We borrowed RMB40 million (approximately $5.86
million) with an annual interest rate equal to 5.31%, with interest payable on
the 20th of each month. The loan is due in May 2010. The loan is guaranteed by
our CEO, our subsidiary, and Chuang Guan.

b) Product financing arrangements

In September 2009, we entered into product financing
arrangements with a financial institution. Under the terms of the agreements, we
agreed to pay an annual interest rate of 8.46% on inventory financings. We
borrowed RMB50 million (approximately $7.32 million). The loans expire in
September 2012, and payments are due at the end of each quarter. As of March 31,
2010, the outstanding liability relating to this loan was RMB42.52 million
(approximately $6.23 million).

In February 2009, we entered into product financing
arrangements with a financial institution. Under the terms of the agreements, we
agreed to pay an annual interest rate of 10.5% on inventory financings. We
borrowed RMB7.11 million (approximately $1.04 million). The loans expire in
February 2013, and payments are due at the end of each quarter. As of March 31,
2010, the outstanding liability relating to this loan was RMB4.69 million
(approximately $0.69 million).

In July 2008, we entered into product financing arrangements
with a financial institution. Under the terms of the agreements, we agreed to
pay an annual interest rate of 10% on inventory financings. We borrowed RMB53
million (approximately $7.85 million). These loans mature in July 2011. The
interest is payable at the end of each quarter. As of March 31, 2010, the
outstanding liability relating to these arrangements was RMB24.31 million
(approximately $3.56 million).

c) Guaranteed senior unsecured notes payable

As of March 31, 2010, we have outstanding Tranche B Zero Coupon
Guaranteed Senior Unsecured Notes (the Tranche B Notes). The Tranche B Notes had a principal amount of $84.00 million,
zero coupon interest and a fair value of $78.44 million, resulting in a debt
discount of $5.56 million and an effective interest rate of approximately 5%.
The Tranche B Notes mature on September 2, 2012. We are to 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 Tranche B Notes are not convertible. We will be entitled to
redeem the Tranche B Notes at any time with no premium or penalty at a
redemption price equal to 100% of the principal amount of the Tranche B Notes to
be redeemed, plus default interest, if any. The Tranche B Notes are guaranteed
by our significant subsidiaries to the extent permitted under the applicable
laws. We repaid $19.32 million of the principal on the Tranche B Notes in March
2010.

d) Others

In March 2009, Industrial and Commercial Bank of China (ICBC)
confirmed that it would acquire all accounts receivable from our Kunming Safe
City project and cash payment would be made without delay once the project is
completed and passes inspection. The Kunming Municipal Government will then make
full payment to ICBC in installments over a five-year period.

On October 3, 2006, we signed a banking facility agreement with
China Construction Bank under which the bank agreed to provide a new
receivable-based facility to support our efforts in securing new contracts
relating to the Safe City Project initiative, also known as Plan 3111. This
facility will provide three possible financing options: (1) the government takes
a loan from the bank to finance the project; (2) we sell the accounts receivable
to the bank, 85% of the total account receivables value will be paid by the bank
to the Company and the remaining 15% will be collected by the bank from the
government; from the 15% collected from the government, the bank will retain
certain finance charges and pay the remainder over to the Company; or (3) we
take a loan from the bank to finance the project. As part of this agreement, we
will make periodic deposits with the bank, which, depending upon the specific
project, will provide a maximum factoring capacity of five to ten times the
amount deposited. None of the facility has been drawn down as of the date of
this report.

We believe that our currently available working capital, after
receiving the aggregate proceeds of our capital raising activities and the
credit facilities referred to above, should be adequate to sustain our
operations at our current levels through at least the next twelve months.

Obligations Under Material Contracts

Below is a table setting forth our material contractual
obligations as of March 31, 2010:

All amounts in millions of U.S. dollarsPayments due by periodLess than 1
    
    
    
    
    
    
    
    
    More than 5Total
    
    
    year
    
    
    1-3 years
    
    
    3-5 years
    
    
    yearsDebt Obligations
    $
    210.34
    
    $
    178.39
    
    $
    31.95
    
    $
    --
    
    $
    --Operating Lease Obligations
    
    2.21
    
    
    0.93
    
    
    1.28
    
    
    --
    
    
    --Total
    $
    212.55
    
    $
    179.32
    
    $
    33.23
    
    $
    --
    
    $
    --


37

---

Recent Accounting Pronouncements

Accounting for Transfers of Financial Assets
(Included in ASC 860 Transfers and Serving)

This ASC guidance addresses information a reporting entity
provides in its financial statements about: the transfer of financial assets;
the effects of a transfer on its financial position, financial performance, and
cash flows; and a transferors continuing involvement in transferred financial
assets. Also, ASC 860 removes the concept of a qualifying special purpose
entity, limits the circumstances in which a transferor derecognizes a portion or
component of a financial asset, defines participating interest and enhances the
information provided to financial statement users to provide greater
transparency. This guidance was effective for us as of January 1,
2010. The adoption of this guidance had no impact on our
consolidated financial statements.

Consolidation of Variable Interest Entities  Amended
(Included in ASC 810 Consolidation)

Revisions under ASC 810, require an enterprise to perform an
analysis to determine the primary beneficiary of a variable interest entity;
require ongoing reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity; and eliminate the quantitative
approach previously required for determining the primary beneficiary of a
variable interest entity. This ASC guidance also requires enhanced disclosures
that will provide users of financial statements with more transparent
information about an enterprises involvement in a variable interest entity.
This guidance was effective for us as of January 1, 2010. The
adoption of this guidance had no impact on our consolidated
financial statements.

38

---

Multiple Deliverable Revenue Arrangements
(Accounting Standards Updates 2009-13 and 2009-14)

In October 2009, the FASB issued a new accounting standard
which provides guidance for arrangements with multiple deliverables.
Specifically, the new standard requires an entity to allocate consideration at
the inception of an arrangement to all of its deliverables based on their
relative selling prices. In the absence of the vendor-specific objective
evidence or third-party evidence of the selling prices, consideration must be
allocated to the deliverables based on managements best estimate of the selling
prices. In addition, the new standard eliminates the use of the residual method
of allocation. In October 2009, the FASB also issued a new accounting standard
which changes revenue recognition for tangible products containing software and
hardware elements. Specifically, tangible products containing software and
hardware that function together to deliver the tangible products essential
functionality are scoped out of the existing software revenue recognition
guidance and will be accounted for under the multiple-element arrangements
revenue recognition guidance discussed above. Both standards will be effective
for us in the first quarter of 2011. Early adoption is permitted. We are
currently evaluating the impact that the adoption of this standard may have on
our consolidated financial statements.

Critical Accounting Policies

See Item 7, Management's Discussion and Analysis of Results of
Operations and Financial Condition in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2009, for a discussion of the Company's
critical accounting policies.

Seasonality

Our operating results and operating cash flows historically
have been subject to seasonal variations. Our revenues are usually higher in the
second half of the year than in the first half of the year and the first quarter
is usually the slowest quarter because fewer projects are undertaken during and
around the Chinese spring festival.

Inflation

We believe our operations have not been materially adversely
affected by inflation or changing prices.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK

Interest Rate Risk

The Company deposits surplus funds with Chinese banks earning
daily interest. The Company does not invest in any instruments for trading
purposes. All of the Companys outstanding debt instruments carry fixed rates of
interest. The Companys operations generally are not directly sensitive to
fluctuations in interest rates. The amount of long-term debt outstanding as of
March 31, 2010 and December 31, 2009 was $30.36 million and $50.53 million,
respectively. A hypothetical 1.0% increase in the annual interest rates for all
of our credit facilities under which we had outstanding borrowings at March 31,
2010 would not have any material impact on our net income before provision for
income taxes for the quarter. Management monitors the banks prime rates in
conjunction with our cash requirements to determine the appropriate level of
debt balances relative to other sources of funds. We have not entered into any
hedging transactions in an effort to reduce our exposure to interest rate risk.

39

---

Foreign Exchange Risk

Our reporting currency is the U.S. dollar. Except for the U.S.
holding company, all of our consolidated revenues, consolidated costs and
expenses, and our assets are denominated in RMB. As a result, we
are exposed to foreign exchange risk as our revenues and results of operations
may be affected by fluctuations in the exchange rate between U.S. dollars and RMB. If the RMB depreciates against the U.S. dollar, the value of our RMB
revenues, earnings and assets as expressed in our U.S. dollar financial
statements will decline. Assets and liabilities are translated at exchange rates
at the balance sheet dates and revenue and expenses are translated at the
average exchange rates and shareholders equity is translated at historical
exchange rates. Any resulting translation adjustments are not included in
determining net income but are included in determining other comprehensive
income, a component of shareholders equity. An average appreciation
(depreciation) of the RMB against the U.S. dollar of 5% would increase our
comprehensive income by $0.12 million based on our outstanding revenues, costs
and expenses, assets and liabilities denominated in RMB as of March 31, 2010. As
of March 31, 2010, our accumulated other comprehensive income was $27.69
million. We have not entered into any hedging transactions in an effort to
reduce our exposure to foreign exchange risk.

The value of the Renminbi against the U.S. dollar and other
currencies is affected by, among other things, changes in Chinas political and
economic conditions. Since July 2005, the Renminbi has not been pegged to the
U.S. dollar. Although the Peoples Bank of China regularly intervenes in the
foreign exchange market to prevent significant short-term fluctuations in the
exchange rate, the Renminbi may appreciate or depreciate significantly in value
against the U.S. dollar in the medium to long term. Moreover, it is possible
that in the future, PRC authorities may lift restrictions on fluctuations in the
Renminbi exchange rate and lessen intervention in the foreign exchange market.

Inflation

Inflationary factors such as increases in the cost of our
product and overhead costs may adversely affect our operating results. Although
we do not believe that inflation has had a material impact on our financial
position or results of operations to date, a high rate of inflation in the
future may have an adverse effect on our ability to maintain current levels of
gross margin and selling, general and administrative expenses as a percentage of
net revenues if the selling prices of our products do not increase with these
increased costs.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. We
maintain a system of disclosure controls and procedures. The term "disclosure
controls and procedures," as defined by regulations of the SEC, means controls
and other procedures that are designed to ensure that information required to be
disclosed in the reports that we file or submit to the SEC under the Exchange
Act, is recorded, processed, summarized and reported, within the time periods
specified in the SEC's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file or submit
to the SEC under the Exchange Act is accumulated and communicated to our
management, including our principal executive officer and our principal
financial officer, or persons performing similar functions, as appropriate to
allow timely decisions to be made regarding required disclosure. Each of Guoshen
Tu, our Chief Executive Officer, and Terence Yap, our Chief Financial Officer,
have evaluated the design and operating effectiveness of our disclosure controls
and procedures as of March 31, 2010. Based upon their evaluation, these
executive officers have concluded that our disclosure controls and procedures
are effective as of March 31, 2010.

Changes in Internal Control over Financial Reporting.
There has been no change to our internal control over financial reporting during
the quarter ended March 31, 2010 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

40

---

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may have disputes that arise in the
ordinary course of its business. Currently, there are no material legal
proceedings to which we are a party, or to which any of our property is subject,
that we expect to have a material adverse effect on our financial condition.

ITEM 1A. RISK FACTORS

There are no material changes from the risk factors previously
disclosed in Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K
for the year ended December 31, 2009, filed with the SEC on March 2, 2010.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

|Exhibit | Description                                                                                                                                                                 
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                             
|31.1    | Certification of Principal Executive Officer filed pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.                                                         
|31.2    | Certification of Principal
      Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002.                                                   
|32.1    | Certification of Principal Executive Officer furnished
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.
|32.2    | Certification of Principal
      Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

41

---

SIGNATURES

Pursuant to the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto duly authorized.

DATED: April 26, 2010

|China Security & Surveillance Technology, Inc.
|----------------------------------------------
|                                              
|By: /s/ Guoshen
      Tu                      
|Principal Executive Officer                   
|                                              
|By: /s/ Terence
      Yap                     
|Principal Financial Officer                   

42

---

EXHIBIT INDEX

|Exhibit | Description                                                                                                                                                                 
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                             
|31.1    | Certification of Principal Executive Officer filed pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.                                                         
|31.2    | Certification of Principal
      Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002.                                                   
|32.1    | Certification of Principal Executive Officer furnished
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.
|32.2    | Certification of Principal
      Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

43

---