UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION

FORM 10

(Mark One)

QQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934For the quarterly period ended:
September 30, 2007

OR

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

Commission File Number: 000-25901

|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)

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

Indicate by check mark whether the
registrant is a larger accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of "accelerated filer and large
accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer

Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes

The number of shares outstanding of
each of the issuers classes of common equity, as of November 9, 2007 is as
follows:

|Class of Securities             |  | Shares Outstanding
|------------------------------- |  | ------------------
|Common Stock, $0.0001 par value |  | 42,153,676        



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TABLE OF CONTENTS

|         | PART I Financial
    Information                                                          | Page
|-------- | ----------------------------------------------------------------------------------------- | ----
|         |                                                                                           |     
|Item 1.  | Financial Statements                                                                      | 1   
|Item 2.  | Management's
    Discussion and Analysis of Financial Condition and Results of Operations | 25  
|Item 3.  | Quantitative and
    Qualitative Disclosures About Market Risk                            | 36  
|Item 4.  | Controls and
    Procedures                                                               | 37  
|         |                                                                                           |     
|         | PART II Other
    Information                                                             |     
|         |                                                                                           |     
|Item 1.  | Legal Proceedings                                                                         | 38  
|Item 1A. | Risk Factors                                                                              | 38  
|Item 2.  | Unregistered Sales of
    Equity Securities and Use of Proceeds                           | 38  
|Item 3.  | Defaults Upon Senior
    Securities                                                       | 38  
|Item 4.  | Submission of Matters
    to a Vote of Securities Holders                                 | 38  
|Item 5.  | Other Information                                                                         | 38  
|Item 6.  | Exhibits                                                                                  | 38  





---

PART I 
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
SUBSIDIARIES 
CONDENSED CONSOLIDATED BALANCE SHEETS 
Expressed in thousands of U.S. dollars 
(Except for share and per share amounts)

|                                                                               |               |              |             |     
|------------------------------------------------------------------------------ | ------------- | ------------ | ----------- | ----
|                                                                               | September 30, | December 31,
|                                                                               |               | 2007         |             | 2006
|                                                                               |               |              | (Unaudited) |     
|                                                                               |               | USD          |             | USD 
|ASSETS                                                                        
|CURRENT ASSETS                                                                 |               |              |             |     
|Cash and cash equivalents                                                      |               | $            | 79,787      |     
|Accounts receivable, net                                                       |               |              | 50,625      |     
|Related party receivables                                                      |               |              | 434         |     
|Inventories, net                                                               |               |              | 41,998      |     
|Prepayments & deposits                                                         |               |              | 2,532       |     
|Advances to suppliers                                                          |               |              | 3,726       |     
|Other receivables                                                              |               |              | 6,355       |     
|Tax refundable                                                                 |               |              | 80          |     
|Deferred tax assets - current portion                                          |               |              | 39          |     
|Total current assets                                                           |               |              | 185,576     |     
|                                                                               |               |              |             |     
|Deposits for acquisition of subsidiaries,
    properties and intangible assets |               |              | 40,188      |     
|Property, plant and equipment, net                                             |               |              | 22,937      |     
|Land use rights, net                                                           |               |              | 1,980       |     
|Intangible assets                                                              |               |              | 40,442      |     
|Investment, at cost                                                            |               |              | 13          |     
|Goodwill                                                                       |               |              | 52,231      |     
|Deferred financing cost                                                        |               |              | 159         |     
|Deferred tax assets - non-current portion                                      |               |              | 480         |     
|TOTAL ASSETS                                                                   |               | $            | 344,006     |     

See the accompanying notes to condensed consolidated financial
statements

1

---

CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
SUBSIDIARIES 
CONDENSED CONSOLIDATED BALANCE SHEETS 
Expressed in thousands of U.S. dollars 
(Except for share and per share amounts)
(Continued)

|                                                                                                                                                                        | September 30, | December 31,
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ------------
|                                                                                                                                                                        |               | 2007        
|                                                                                                                                                                        |               |             
|                                                                                                                                                                        |               | USD         
|LIABILITIES
    AND SHAREHOLDERS' EQUITY                                                                                                                               
|CURRENT LIABILITIES                                                                                                                                                     |               |             
|Notes payable - short term                                                                                                                                              |               | $           
|Accounts payable                                                                                                                                                        |               |             
|Accrued expenses                                                                                                                                                        |               |             
|Advances from customers                                                                                                                                                 |               |             
|Taxes payable                                                                                                                                                           |               |             
|Payable for acquisition of business                                                                                                                                     |               |             
|Deferred income                                                                                                                                                         |               |             
|Due to a director                                                                                                                                                       |               |             
|Total current liabilities                                                                                                                                               |               |             
|                                                                                                                                                                        |               |             
|LONG-TERM
    LIABILITIES                                                                                                                                               |               |             
|Notes payable - long term                                                                                                                                               |               |             
|Convertible notes payable                                                                                                                                               |               |             
|Total liabilities                                                                                                                                                       |               |             
|                                                                                                                                                                        |               |             
|MINORITY INTEREST
    IN CONSOLIDATED SUBSIDIARIES                                                                                                                      |               |             
|                                                                                                                                                                        |               |             
|SHAREHOLDERS'
    EQUITY                                                                                                                                                |               |             
|Common stock, $0.0001 par
    value; 100,000,000 shares authorized 39,884,136 (September 30, 2007) and
    31,824,938 (December 31, 2006) shares issued and outstanding |               |             
|Additional paid-in capital                                                                                                                                              |               |             
|Retained earnings                                                                                                                                                       |               |             
|Statutory reserves                                                                                                                                                      |               |             
|Accumulated other
    comprehensive income                                                                                                                              |               |             
|Total shareholders' equity                                                                                                                                              |               |             
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                              |               | $           

See the accompanying notes to condensed consolidated financial
statements

2

---

CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME 
Expressed in thousands of U.S. dollars 
(Except for share and per share amounts)

|                                                                                                                                                            |  |   | Three Months Ended |  |   | Nine Months Ended
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------------------ |  | - | -----------------
|                                                                                                                                                            |  |   | September 30,      |  |   | September 30,    
|                                                                                                                                                            |  |   | 2007               |  |   | 2006             
|                                                                                                                                                            |  |   | (Unaudited)        |  |   | (Unaudited)      
|                                                                                                                                                            |  |   | USD                |  |   | USD              
|                                                                                                                                                            |  |   |                    |  |   |                  
|Revenues                                                                                                                                                    |  | $ | 65,438             |  | $ | 43,448           
|                                                                                                                                                            |  |   |                    |  |   |                  
|Cost of goods sold                                                                                                                                          |  |   | 45,700             |  |   | 30,588           
|                                                                                                                                                            |  |   |                    |  |   |                  
|Gross profit                                                                                                                                                |  |   | 19,738             |  |   | 12,860           
|                                                                                                                                                            |  |   |                    |  |   |                  
|Selling and marketing                                                                                                                                       |  |   | 1,455              |  |   | 393              
|General and administrative                                                                                                                                  |  |   | 3,836              |  |   | 1,302            
|(including non-cash employee compensation for
    the three and nine months ended September 30, 2007 and 2006 of $989, $2,055,
    $0 and $0, respectively) |  |   |                    |  |   |                  
|Depreciation and
    amortization                                                                                                                           |  |   | 1,436              |  |   | 383              
|Income from operations                                                                                                                                      |  |   | 13,011             |  |   | 10,782           
|                                                                                                                                                            |  |   |                    |  |   |                  
|Rental income received from
    related party                                                                                                               |  |   | 124                |  |   | 127              
|Interest income                                                                                                                                             |  |   | 89                 |  |   | -                
|Interest expense                                                                                                                                            |  |   | (4,768)            |  |   | -                
|Equity in net loss of
    affiliated companies                                                                                                              |  |   | -                  |  |   | (7)              
|Gain on disposal of land
    use right and property                                                                                                         |  |   | 5,517              |  |   | -                
|Other income, net                                                                                                                                           |  |   | 329                |  |   | 123              
|Income before income taxes
    and minority interest                                                                                                        |  |   | 14,302             |  |   | 11,025           
|                                                                                                                                                            |  |   |                    |  |   |                  
|Minority interest in income
    of consolidated subsidiaries                                                                                                |  |   | (19)               |  |   | (6)              
|                                                                                                                                                            |  |   |                    |  |   |                  
|Income taxes                                                                                                                                                |  |   | (2,587)            |  |   | (773)            
|Income from continuing
    operations                                                                                                                       |  |   | 11,696             |  |   | 10,246           
|Loss from discontinued
    operations, net of taxes                                                                                                         |  |   | -                  |  |   | (18)             
|Gain on disposal of
    discontinued operations, net of taxes                                                                                               |  |   | -                  |  |   | 34               
|Net income                                                                                                                                                  |  |   | 11,696             |  |   | 10,262           
|Foreign currency
    translation gain                                                                                                                       |  |   | 2,185              |  |   | 708              
|                                                                                                                                                            |  |   |                    |  |   |                  
|Comprehensive income                                                                                                                                        |  | $ | 13,881             |  | $ | 10,970           
|                                                                                                                                                            |  |   |                    |  |   |                  
|Net income per share                                                                                                                                        |  |   |                    |  |   |                  
|Basic                                                                                                                                                       |  | $ | 0.30               |  | $ | 0.37             
|Diluted                                                                                                                                                     |  | $ | 0.29               |  | $ | 0.36             
|                                                                                                                                                            |  |   |                    |  |   |                  
|Weighted average number of
    shares outstanding                                                                                                           |  |   |                    |  |   |                  
|Basic                                                                                                                                                       |  |   | 38,547,263         |  |   | 27,647,979       
|Diluted                                                                                                                                                     |  |   | 40,512,247         |  |   | 28,377,362       

See the accompanying notes to condensed consolidated financial
statements

3

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CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 
NINE MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) 
Expressed in thousands of U.S. dollars 
(Except for share and per share amounts)

|                                 |              |            |         |          | Accumulated   | Statutory |       
|-------------------------------- | ------------ | ---------- | ------- | -------- | ------------- | --------- | ------
|                                 | Common Stock | Additional |         |          | Other         | Surplus   |       
|                                 |              | Par        | Paid-in | Retained | Comprehensive | Reserve   |       
|                                 | Shares       | Value      | Capital | Earnings | Income        | Fund      | Total 
|                                 |              | USD        | USD     | USD      | USD           | USD       | USD   
|BALANCE AT JANUARY 1,            |              |            |         |          |               |           |       
|2007                             | 31,824,938   |            | $       | 3        |               | $         | 45,320
|Warrants exercised (cashless)    |              |            |         |          |               |           |       
|per Securities Purchase          |              |            |         |          |               |           |       
|Agreement                        | 312,304      |            |         | -        |               |           | -     
|Warrants exercised for cash per  |              |            |         |          |               |           |       
|Securities Purchase Agreement    | 552,855      |            |         | -        |               |           | 2,654 
|Common stock issued under Equity |              |            |         |          |               |           |       
|Incentive Plan                   | 1,760,776    |            |         | -        |               |           | 2,055 
|Common stock issued for          |              |            |         |          |               |           |       
|acquisition of Cheng Feng        | 1,361,748    |            |         | -        |               |           | 7,500 
|Common stock issued for          |              |            |         |          |               |           |       
|acquisition of Hongtianzhi       | 2,800,711    |            |         | 1        |               |           | 16,203
|Common stock issued for          |              |            |         |          |               |           |       
|acquisition of HiEasy            | 811,804      |            |         | -        |               |           | 5,198 
|Common stock issued for          |              |            |         |          |               |           |       
|acquisition of Tsingvision       | 459,000      |            |         | -        |               |           | 6,533 
|                                 |              |            |         |          |               |           |       
|Foreign currency translation     | -            |            |         | -        |               |           | -     
|                                 |              |            |         |          |               |           |       
|Net income for the period        | -            |            |         | -        |               |           | -     
|                                 |              |            |         |          |               |           |       
|BALANCE AT SEPTEMBER             |              |            |         |          |               |           |       
|30, 2007                         | 39,884,136   |            | $       | 4        |               | $         | 85,463

See the accompanying notes to condensed consolidated financial
statements

4

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CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
Expressed in thousands of U.S. dollars 
(Except for share and per share amounts)

|                                                                                                | Nine Months Ended
|----------------------------------------------------------------------------------------------- | -----------------
|                                                                                                | September 30,    
|                                                                                                |                  
|                                                                                                |                  
|                                                                                                |                  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                           |                  
|Net income                                                                                      |                  
|Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                  
|Depreciation and amortization                                                                   |                  
|Amortization of loan origination fees                                                           |                  
|Issue of warrants for investor relation
    services                                            |                  
|Amortization of consultancy services                                                            |                  
|Amortization of deferred financing cost                                                         |                  
|Non-cash employee compensation                                                                  |                  
|Gain on disposal of land use right and property                                                 |                  
|Redemption accretion on convertible notes                                                       |                  
|Equity in net loss of affiliated companies                                                      |                  
|Non-cash adjustments related to discontinued
    operations                                     |                  
|Deferred taxes                                                                                  |                  
|Minority interest                                                                               |                  
|                                                                                                |                  
|Changes in operating assets and liabilities,
    net of effects from business acquisitions:     |                  
|(Increase) decrease in:                                                                         |                  
|Accounts receivable                                                                             |                  
|Related party receivables                                                                       |                  
|Inventories                                                                                     |                  
|Prepayments & deposits                                                                          |                  
|Advances to suppliers                                                                           |                  
|Other receivables                                                                               |                  
|                                                                                                |                  
|Increase in:                                                                                    |                  
|Accounts payable and accrued expenses                                                           |                  
|Advances from customers                                                                         |                  
|Related party payables                                                                          |                  
|Tax payable                                                                                     |                  
|Deferred income                                                                                 |                  
|Net cash provided by (used in) operating
    activities                                         |                  

See the accompanying notes to condensed consolidated financial
statements

5

---



CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) 
Expressed in thousands of U.S. dollars 
(Except for share and per share amounts)

(Continued)

|                                                                      | Nine Months Ended
|--------------------------------------------------------------------- | -----------------
|                                                                      | September 30,    
|                                                                      |                  
|                                                                      |                  
|                                                                      |                  
|CASH FLOWS FROM INVESTING
    ACTIVITIES:                             |                  
|Additions to property, plant and equipment                            |                  
|Additions to intangible assets                                        |                  
|Additions to land use rights                                          |                  
|Deposits paid for acquisition of subsidiaries                         |                  
|Deposits paid for acquisition of properties and
    intangible assets |                  
|Net cash outflow for acquisition of
    subsidiaries                  |                  
|(net of cash acquired from subsidiaries)                              |                  
|Proceeds from dispositions of discontinued
    operations             |                  
|Proceeds from disposal of land use right and
    property             |                  
|Net cash used in investing activities                                 |                  
|                                                                      |                  
|CASH FLOWS FROM FINANCING
    ACTIVITIES:                             |                  
|Due to a director                                                     |                  
|Issuance of common stock, net of issuing
    expenses                 |                  
|New borrowings, net of issuing cost                                   |                  
|Repayment of borrowings                                               |                  
|Net cash provided by financing activities                             |                  
|                                                                      |                  
|EFFECT OF EXCHANGE RATE
    CHANGES ON CASH                           |                  
|                                                                      |                  
|NET INCREASE IN CASH AND CASH
    EQUIVALENTS                         |                  
|                                                                      |                  
|Cash and cash equivalents, beginning of period                        |                  
|CASH AND CASH EQUIVALENTS, END
    OF PERIOD                          |                  

See the accompanying notes to condensed consolidated financial
statements

6

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CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) 
Expressed in thousands of U.S. dollars 
(Except for share and per share amounts)

(Continued)

|SUPPLEMENTARY CASH FLOW INFORMATION: |  |   |       |  |   |    
|------------------------------------ |  | - | ----- |  | - | ---
|                                     |  |   |       |  |   |    
|                                     |  |   |       |  |   |    
|Interest paid                        |  | $ | 640   |  | $ | -  
|Income taxes paid                    |  | $ | 4,449 |  | $ | 940

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

1,361,748 shares of common stock
issuable in satisfaction of the equity portion of the purchase price of
approximately $7,500 in the acquisition of Shanghai Cheng Feng Digital
Technology Co., Ltd., ("Cheng Feng"), were issued in the first quarter of 2007.

2,800,711 shares of common stock
issuable in satisfaction of the equity portion of the purchase price of
approximately $16,204 in the acquisition of Shenzhen Hongtianzhi Electronics
Co., Ltd., ("Hongtianzhi"), were issued in the second quarter of 2007. (Note 3)

811,804 shares of common stock
issuable in satisfaction of the equity portion of the purchase price of
approximately $5,198 in the acquisition of HiEasy Electronics Technology
Development Co., Ltd., ("HiEasy"), were issued in the third quarter of 2007.
(Note 3)

459,000 shares of common stock
issuable in satisfaction of the equity portion of the purchase price of
approximately $6,533 in the acquisition of Hangzhou Tsingvision Intelligence
System Co., Ltd., ("Tsingvision"), were issued in the third quarter of 2007.
(Note 3)

See the accompanying notes to condensed consolidated financial
statements

7

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CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. 
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 September 30, 2007 and for the three and nine months ended
September 30, 2007 and 2006, have been prepared by CHINA SECURITY & SURVEILLANCE
TECHNOLOGY, INC. (the "Company") without 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, 2006, which are included in the Company's Annual Report on Form 10-K for the
year ended December 31, 2006, filed with the SEC on March 21, 2007, as amended
on March 23, 2007. Amounts as of December 31, 2006 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 management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the Company's financial position as of September 30, 2007,
results of operations for the three and nine months ended September 30, 2007 and
2006, and cash flows for the nine months ended September 30, 2007 and 2006, have
been made. The results of operations for the three and nine months ended
September 30, 2007 are not necessarily indicative of the operating results for
the full year.
2.
SUMMARY OF
SELECTED SIGNIFICANT ACCOUNTING POLICIES
(a)
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 receivables
due from one individual customer exceed 10% of total accounts receivable at
September 30, 2007 and December 31, 2006.
(b)
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 and nine months ended September 30, 2007 and 2006.
During the three and
nine months ended September 30, 2007 and 2006, approximately 54%, 66%, 98% and
98%, of total inventory purchases were from five suppliers, respectively.

8

---



CHINA SECURITY &
SURVEILLANCE TECHNOLOGY, INC. 
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)

(c)

Accounting for
Computer Software To Be Sold, Leased or Otherwise Marketed

The Company accounts for software
development costs in accordance with Statement of Financial Accounting Standards
("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise 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 September 30, 2007 and December
31, 2006, unamortized computer software costs were $1,913 and $267,
respectively. During the three and nine months ended September 30, 2007 and
2006, $311, $374, $18 and $18 amortization expense was charged to income,
respectively.

(d)

Revenue
Recognition

The Company derives the bulk of its
revenue from the supply and installation of security and surveillance equipment
and the two deliverables do not meet the separation criteria under Emerging
Issues Task Force ("EITF") issue 00-21. The installation is not considered to be
essential to the functionality of the equipment having regard to the following
criteria as set out in Staff Accounting Bulletin ("SAB") 104:

(i)

The security and
surveillance equipment is a standard product with minor modifications according
to customers' specifications;

(ii)

Installation does
not significantly alter the security and surveillance equipment's capabilities;
and

(iii)

Other companies
which possess the relevant licenses are available to perform the installation
services.

In early 2006, the Company began
performing much larger security installation contracts than it had been
performing previously. As a marketing approach, the Company prepared standard
contracts with its new larger customers, whereby 90% of the contract amount was
due when installation was complete and payment of the remaining 10% was deferred
for one year as a warranty provision. Because of the newness of the larger
contracts and the inability to immediately determine the amount of warranty work
that would be required, the Company initially deferred recognizing the 10% of
the contract amount as revenue and amortized this amount to income over the one
year period. During the second and third quarters of 2006, the Company carefully
monitored the warranty work requested by its customers, and determined that very
little warranty work had been required to be performed.

The Company reduced its estimate of
future warranty requirements to approximately 1% of contract installation
revenue since the fourth quarter of 2006.

9

---



CHINA SECURITY &
SURVEILLANCE TECHNOLOGY, INC. 
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)

(d)

Revenue
Recognition  continued

Revenue from the outright sale of
security and surveillance equipment is recognized when delivery occurs and risk
of ownership passes to the customers.

The Company derives a portion of its
revenue from one-year software upgrades. These services are typical postcontract
service ("PCS") arrangements according to AICPA Statement of Position ("SOP")
97-2. Under SOP 97-2,  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 security and
surveillance 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 of SOP 97-2.

(e)

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 and nine months ended September 30, 2007
and 2006 were $99, $207, $71 and $71, respectively.

(f)

Advertising Costs

The Company expenses advertising
costs as incurred or the first time advertising takes place. During the three
and nine months ended September 30, 2007 and 2006, the Company incurred
approximately $160, $363, $37 and $57, respectively.

(g)

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 (included in selling and marketing and general
and administrative expenses) for the three and nine months ended September 30,
2007 and 2006 were $128, $255, $45 and $55, respectively.

(h)

Income taxes

The Company adopted the provisions of
Financial Accounting Standards Board ("FASB") Interpretation No. 48, "Accounting
for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109,"
("FIN 48"), on January 1, 2007. The Company did not have any material
unrecognized tax benefits and there was no effect on its financial condition or
results of operations as a result of implementing FIN 48.

The Company files income tax returns
with the relevant government authorities in the U.S. and 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.

10

---



CHINA SECURITY &
SURVEILLANCE TECHNOLOGY, INC. 
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)

Income taxes -
continued

The Company's policy is to recognize
interest and penalties accrued on any unrecognized tax benefits as a component
of income tax expense. As of the date of adoption of FIN 48, the Company did not
have any accrued interest or penalties associated with any unrecognized tax
benefits, nor was any interest expense recognized during the three and nine
month periods ended September 30, 2007. The Company's effective tax rate differs
from the federal statutory rate primarily due to non-deductible expenses,
temporary differences, and preferential tax treatment.

On March 16, 2007, the National
Peoples Congress of the People's Republic of China ("PRC") adopted a new
corporate income tax law in its fifth plenary session. The new corporate income
tax law unifies the application scope, tax rate, tax deduction and preferential
policy for both domestic and foreign-invested enterprises. The new corporate
income tax law will be effective on January 1, 2008. According to the new
corporate income tax law, the applicable income tax rate for our operating
subsidiaries may be subject to change. As the implementation detail has not yet
been announced, we cannot be sure of the potential impact of such new corporate
income tax law on financial position and operating results.

(i)

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.

(j)

Earnings Per Share

SFAS No. 128,"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.

Earning 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.

With respect to outstanding warrants,
the calculation of diluted earnings per share for the three and nine months
ended September 30, 2007. As of September 30, 2007, warrants were outstanding to
acquire 450,016 shares of common stock. The dilutive impact on weighted average
number of shares was 344,121, 326,965, 300,407 and 91,789 for the three and nine
months ended September 30, 2007 and 2006, respectively.

The Company is to issue 1,435,111
shares of common stock in connection with the acquisition of Minking (as
described in Note 3) and the exclusive cooperation agreement with Chuang Guan
(as described in Note 11) and issued 4,071,515 shares of common stock in
connection with the acquisitions of Hongtianzhi, HiEasy and Tsingvision. The
impact of these shares has been included in dilutive weighted average number of
shares from the date of the closing of the acquisitions, through the earlier of
September 30, 2007 or the date the shares were issued.

Approximately 5,452,000 shares of
common stock underlying convertible notes were not included in the dilutive
calculation for the three months and nine months ended September 30, 2007, as
the effect would be anti-dilutive.

11

---



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

3.

BUSINESS
ACQUISITIONS

On April 2, 2007, the Company entered
into an equity transfer agreement relating to the acquisition of 100% of the
equity of Chain Star Investments Limited, the holding company of Hongtianzhi.
The acquisition was financed with proceeds from the Companys February Notes (as
described in Note 15). The results of operations of Hongtianzhi are included in
the Companys consolidated financial statements beginning on April 2, 2007.

The Company agreed to pay total
consideration equaling RMB250,000 (approximately $32,000) in exchange for the
100% ownership of Chain Star Investment Limited, consisting of RMB125,000
(approximately $16,000) in cash and shares of the Companys common stock valued
at RMB125,000 (approximately $16,000). RMB 12,500 (approximately $1,600) of the purchase price was paid
as a deposit in October 2006. The balance of the cash portion of the purchase
price, RMB 112,500 (approximately $14,400), was paid in April 2007. The number
of shares issuable in satisfaction of the equity portion of the purchase price
was 2,800,711 shares, which were issued in May and June 2007. Chain Star
Investment Limited is a holding company with no assets other than 100% of the
equity interests of Hongtianzhi.

The operational control of
Hongtianzhi passed to the Company effective April 2, 2007. Government approval
to consummate the acquisition was subsequently received. The results of
Hongtianzhis operations from April 2, 2007 through September 30, 2007 are
included in the Companys Consolidated Statements of Income and Comprehensive
Income.

On May 11, 2007, the Company entered
into an equity transfer agreement relating to the acquisition of 100% of the
equity of Link Billion Limited which is the holding company of HiEasy Electronic
Technology Development Co., Ltd. ("HiEasy"). The acquisition was financed with
proceeds from the Companys February Notes and April Notes (as described in Note
15). The results of operations of HiEasy are included in the Companys
consolidated financial statements beginning on May 11, 2007.

The Company agreed to pay total
consideration equaling RMB80,000 (approximately $10,000) in exchange for the
100% ownership of Link Billion Limited, consisting of RMB40,000 (approximately
$5,000) in cash and shares of the Companys common stock valued at RMB40,000
(approximately $5,000).
RMB32,290 (approximately $4,100) of the purchase price was paid as of the
execution of the equity transfer agreement. The balance of the cash portion of
the purchase price, RMB7,710 (approximately $900), was paid in June 2007. The
number of shares of the Companys common stock issuable in satisfaction of the
equity portion of the purchase price was 811,804 shares, which were issued in
August 2007. Link Billion Limited is a holding company with no assets other than
100% of the equity interests of HiEasy.

The operational control of HiEasy
passed to the Company effective May 11, 2007. Government approval to consummate
the acquisition was subsequently received. The results of HiEasys operations
from May 11, 2007 through September 30, 2007 are included in the Companys
Consolidated Statements of Income and Comprehensive Income.

On June 4, 2007, the Company entered
into an equity transfer agreement relating to the acquisition of 100% of the
equity of Allied Rich Limited which is the holding company of Changzhou Minking
Electronics Co., Ltd. ("Minking"). The acquisition was financed with proceeds
from the Companys February Notes and April Notes (as described in Note 15). The
results of operations of Minking are included in the Companys consolidated
financial statements beginning on June 4, 2007.

The Company agreed to pay RMB200,000
(approximately $26,000) in exchange for 100% ownership of Allied Rich Limited,
consisting of RMB100,000 (approximately $13,000) in cash and shares of the
Companys common stock valued at RMB100,000 (approximately $13,000). RMB30,833 (approximately $4,000) of
the purchase price was paid as a deposit in March 2007. The balance of the cash
portion of the purchase price, RMB69,167 (approximately $9,000), was paid in
June 2007. The number of shares issuable in satisfaction of the equity portion
of the purchase price was 968,611 shares which were issued in the fourth quarter
of 2007. Allied Rich Limited is a holding
company with no assets other than 100% of the equity interests of Minking.

The operational control of Minking
passed to the Company effective June 4, 2007. The results of Minkings
operations from June 4, 2007 through September 30, 2007 are included in the
Companys Consolidated Statements of Income and Comprehensive Income.

On July 2, 2007, the Company entered
into an equity transfer agreement relating to the acquisition of 100% of the
equity of Ocean Pacific Technology Limited, the holding company of Hangzhou
Tsingvision Intelligence System Co., Ltd. ("Tsingvision"). The acquisition was
financed with proceeds from the Companys February Notes and April Notes (as
described in Note 15). The results of operations of Tsingvision are included in
the Companys consolidated financial statements beginning on July 2, 2007.

12

---



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

3.

BUSINESS
ACQUISITIONS - (CONTINUED)

The Company agreed to pay total
consideration equaling RMB99,346 (approximately $13,000) in exchange for the
100% ownership of Ocean Pacific Technology Limited, consisting of RMB50,000
(approximately $6,500) in cash and shares of the Company's common stock valued
at RMB49,346 (approximately $6,500). RMB 3,000 (approximately $400)of the purchase price was paid as a
deposit in April 2007. The balance of the cash portion of the purchase price, RMB 47,000 (approximately $6,100), was paid in May 2007. The number of shares issuable in satisfaction of the equity portion of the purchase price was 459,000
shares, which were issued in August 2007. Ocean Pacific Technology Limited is a
holding company with no assets other than 100% of the equity interests of
Tsingvision.

The operational control of
Tsingvision passed to the Company effective July 2, 2007. The results of
Tsingvisions operations from July 2, 2007 through September 30, 2007 are
included in the Companys Consolidated Statements of Income and Comprehensive
Income.

The following represents the purchase
price allocation at the dates of the acquisition of Hongtianzhi, HiEasy, Minking
and Tsingvision based on the valuation reports which were prepared by a third
party appraisal firm:

| |                                                |   | Hongtianzhi |  |   | HiEasy  |  |   | Minking |  |   | Tsingvision |  |   | Total   
| | ---------------------------------------------- | - | ----------- |  | - | ------- |  | - | ------- |  | - | ----------- |  | - | --------
| | Cash
    and cash equivalents                  | $ | 924         |  | $ | 291     |  | $ | 2,680   |  | $ | 410         |  | $ | 4,305   
| | Other
    current assets                       |   | 8,998       |  |   | 2,630   |  |   | 7,414   |  |   | 511         |  |   | 19,553  
| | Property, plant and equipment                  |   | 3,869       |  |   | 200     |  |   | 2,084   |  |   | 112         |  |   | 6,265   
| | Other
    assets                               |   | 420         |  |   | -       |  |   | 364     |  |   | -           |  |   | 784     
| | Goodwill                                       |   | 20,092      |  |   | 3,154   |  |   | 11,839  |  |   | 8,720       |  |   | 43,805  
| | Intangible assets                              |   | 6,051       |  |   | 5,587   |  |   | 8,560   |  |   | 3,493       |  |   | 23,691  
| | Current liabilities                            |   | (5,931)     |  |   | (1,480) |  |   | (6,805) |  |   | (201)       |  |   | (14,417)
| | Long-term liabilities                          |   | (2,043)     |  |   | -       |  |   | -       |  |   | -           |  |   | (2,043) 
| | Minority interest in consolidated subsidiaries |   | (56)        |  |   | -       |  |   | -       |  |   | -           |  |   | (56)    
| | Total
    purchase price                       | $ | 32,324      |  | $ | 10,382  |  | $ | 26,136  |  | $ | 13,045      |  | $ | 81,887  

The following tables
show supplemental information of the results of operations on a pro forma basis
for the nine months ended September 30, 2007 and for the three and nine months
ended September 30, 2006 as if the acquisition of Hongtianzhi, HiEasy, Minking
and Tsingvision had been completed at the beginning of 2007 and 2006. Since the
most recent acquisition was completed on July 2, 2007, there is no pro forma
effect on the results of operations for the three months ended September 30,
2007. 
For the three months ended September 30, 2006 (Unaudited)

| |                          | Historical |                 |  |   |              |  |  
| | ------------------------ | ---------- | --------------- |  | - | ------------ |  | -
| |                          |            |                 |  |   | Hongtianzhi, |  |  
| |                          |            |                 |  |   | HiEasy,      |  |  
| |                          |            |                 |  |   | Minking and  |  |  
| |                          |            | The
    Company |  |   | Tsingvision  |  |  
| |                          |            |                 |  |   |              |  |  
| | Revenues                 | $          | 43,448          |  | $ | 7,651        |  |  
| |                          |            |                 |  |   |              |  |  
| | Income From Operations   | $          | 10,782          |  | $ | 2,239        |  | $
| |                          |            |                 |  |   |              |  |  
| | Net
    Income           | $          | 10,262          |  | $ | 1,707        |  | $
| |                          |            |                 |  |   |              |  |  
| | Net
    Income Per Share |            |                 |  |   |              |  |  
| | Basic                    | $          | 0.37            |  |   |              |  |  
| | Diluted                  | $          | 0.36            |  |   |              |  |  

13

---



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

3.

BUSINESS
ACQUISITIONS - (CONTINUED)

For the nine months
ended September 30, 2007 (Unaudited)

| |                                                          | Historical |                 |  |   |              |  |  
| | -------------------------------------------------------- | ---------- | --------------- |  | - | ------------ |  | -
| |                                                          |            |                 |  |   | Hongtianzhi, |  |  
| |                                                          |            |                 |  |   | HiEasy,      |  |  
| |                                                          |            |                 |  |   | Minking and  |  |  
| |                                                          |            | The
    Company |  |   | Tsingvision  |  |  
| |                                                          |            |                 |  |   |              |  |  
| | Revenues                                                 | $          | 156,014         |  | $ | 10,631       |  |  
| |                                                          |            |                 |  |   |              |  |  
| | Income From Operations                                   | $          | 29,115          |  | $ | 1,389        |  | $
| |                                                          |            |                 |  |   |              |  |  
| | Net Income                                               | $          | 20,494          |  | $ | 977          |  | $
| |                                                          |            |                 |  |   |              |  |  
| | Net Income Per Share                                     |            |                 |  |   |              |  |  
| | Basic                                                    | $          | 0.57            |  |   |              |  |  
| | Diluted                                                  | $          | 0.54            |  |   |              |  |  
| |                                                          |            |                 |  |   |              |  |  
| |                                                         
| | For the nine months
ended September 30, 2006 (Unaudited)
| |                                                          |            |                 |  |   |              |  |  
| |                                                          | Historical |                 |  |   |              |  |  
| |                                                          |            |                 |  |   | Hongtianzhi, |  |  
| |                                                          |            |                 |  |   | HiEasy,      |  |  
| |                                                          |            |                 |  |   | Minking and  |  |  
| |                                                          |            | The
    Company |  |   | Tsingvision  |  |  
| |                                                          |            |                 |  |   |              |  |  
| | Revenues                                                 | $          | 66,057          |  | $ | 17,641       |  |  
| |                                                          |            |                 |  |   |              |  |  
| | Income From Operations                                   | $          | 17,061          |  | $ | 3,450        |  | $
| |                                                          |            |                 |  |   |              |  |  
| | Net Income                                               | $          | 16,298          |  | $ | 2,663        |  | $
| |                                                          |            |                 |  |   |              |  |  
| | Net Income Per Share                                     |            |                 |  |   |              |  |  
| | Basic                                                    | $          | 0.66            |  |   |              |  |  
| | Diluted                                                  | $          | 0.65            |  |   |              |  |  

The pro forma adjustments represent the
amortization of the intangible assets arising upon the acquisition of
Hongtianzhi, HiEasy, Minking and Tsingvision.

14

---



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

4.

ACCOUNTS
RECEIVABLE

The Company provides an allowance for
doubtful accounts related to its receivables. The receivables and allowance
balances at September 30, 2007 and December 31, 2006 are as follows:

| |                                           |   | September 30, |  |   | December
    31,
| | ----------------------------------------- | - | ------------- |  | - | ----------------
| |                                           |   | 2007          |  |   | 2006            
| |                                           |   |               |  |   |                 
| | Accounts receivable                       | $ | 50,884        |  | $ | 26,877          
| | Less:
    allowance for doubtful accounts |   | (259)         |  |   | (123)           
| | Accounts receivable, net                  | $ | 50,625        |  | $ | 26,754          

5.

RELATED PARTY
RECEIVABLES

The Company had receivables from
several companies whose directors and shareholders are common with the Company.
All receivables arise from advances made prior to the date of the reverse merger
on September 22, 2005 and from the rental of real estate properties. The
receivables are classified as related party receivables on the balance sheets.
The balances as of September 30, 2007 and December 31, 2006 are as follows:

| |                                           |   | September 30, |  |   | December
    31,
| | ----------------------------------------- | - | ------------- |  | - | ----------------
| |                                           |   | 2007          |  |   | 2006            
| |                                           |   |               |  |   |                 
| | Related party receivables                 | $ | 434           |  | $ | 440             
| | Less:
    allowance for doubtful accounts |   | -             |  |   | -               
| | Related party receivables, net            | $ | 434           |  | $ | 440             

The Company has leased offices to
three related parties since January 1, 2004. The leases expire on December 31,
2007. The rental income was $124, $380, $127 and $373 for the three and nine
months ended September 30, 2007 and 2006, respectively.

6.

INVENTORIES

Inventories consist of the following as of
September 30, 2007 and December 31, 2006:

| |                                              |   | September 30, |  |   | December
    31,
| | -------------------------------------------- | - | ------------- |  | - | ----------------
| |                                              |   | 2007          |  |   | 2006            
| |                                              |   |               |  |   |                 
| | Raw
    materials                            | $ | 11,360        |  | $ | 2,261           
| | Work
    in progress                         |   | 2,073         |  |   | -               
| | Finished goods                               |   | 10,615        |  |   | 642             
| | Installations in process                     |   | 18,479        |  |   | 17,091          
| | Total                                        |   | 42,527        |  |   | 19,994          
| | Less:
    allowance for obsolete inventories |   | (529)         |  |   | (273)           
| | Inventories, net                             | $ | 41,998        |  | $ | 19,721          

15

---



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

7.

PREPAYMENTS & DEPOSITS

Prepayments and deposits consist of
the following as of September 30, 2007 and December 31, 2006:

| |                                                                         |   | September 30, |  |   | December
    31,
| | ----------------------------------------------------------------------- | - | ------------- |  | - | ----------------
| |                                                                         |   | 2007          |  |   | 2006            
| |                                                                         |   |               |  |   |                 
| | Current portion                                                         | $ | 2,532         |  | $ | 3,533           
| | Non current portion                                                     |   |               |  |   |                 
| |                                                                         |   |               |  |   |                 
| | - Deposits paid for
    acquisition of subsidiaries                     |   | 18,148        |  |   | -               
| | - Deposits paid for
    acquisition of properties and intangible assets |   | 22,040        |  |   | -               
| |                                                                         | $ | 40,188        |  | $ | -               

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.

8.

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 $3,726 and $2,889 as of September 30,
2007 and December 31, 2006, respectively.

9.

PROPERTY, PLANT AND EQUIPMENT

On September 30, 2007
and December 31, 2006, property, plant and equipment, at cost, consist of

| |                                        |   | September 30, |  |   | December
    31,
| | -------------------------------------- | - | ------------- |  | - | ----------------
| |                                        |   | 2007          |  |   | 2006            
| |                                        |   |               |  |   |                 
| | Buildings                              | $ | 18,121        |  | $ | 7,450           
| | Leasehold improvements                 |   | 1,032         |  |   | 888             
| | Plant and equipment                    |   | 2,384         |  |   | 267             
| | Electronic equipment                   |   | 2,438         |  |   | 669             
| | Motor vehicles                         |   | 2,654         |  |   | 938             
| |                                        |   | 26,629        |  |   | 10,212          
| | Less: accumulated
    depreciation     |   | (3,692)       |  |   | (1,873)         
| | Property, plant and
    equipment, net | $ | 22,937        |  | $ | 8,339           

16

---



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

10.

LAND USE RIGHTS

Land use rights consist of the following as of
September 30, 2007 and December 31, 2006:

| |                                    |   | September 30, |  |   | December
    31,
| | ---------------------------------- | - | ------------- |  | - | ----------------
| |                                    |   | 2007          |  |   | 2006            
| |                                    |   |               |  |   |                 
| | Cost of land use
    rights        |   | 2,204         |  |   | 1,445           
| | Less: Accumulated
    amortization |   | (224)         |  |   | (293)           
| | Land use rights, net               | $ | 1,980         |  | $ | 1,152           

Amortization expense for the three and nine months
ended September 30, 2007 and 2006 was $13, $33, $7 and $22, respectively.

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

2007 (for the
      remaining 3 months)
      $
      112008
      
      442009
      
      442010
      
      442011
      
      442012
      
      44Thereafter
      
      1,749Total
      $
      1,980




17

---



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

11.

INTANGIBLE ASSETS

| |                                                        |   | September 30, |  |   | December
    31,
| | ------------------------------------------------------ | - | ------------- |  | - | ----------------
| |                                                        |   | 2007          |  |   | 2006            
| |                                                        |   |               |  |   |                 
| | Trademarks (life of 11
    to 25 years)                | $ | 12,081        |  | $ | -               
| | Exclusive cooperation
    agreement (life of 20 years) |   | 8,834         |  |   | -               
| | Customer base (life of
    5 to 10 years)              |   | 7,225         |  |   | 5,840           
| | Patents (life of 10
    years)                         |   | 4,532         |  |   | -               
| | Technical know-how
    (life of 9 to 10 years)         |   | 5,313         |  |   | -               
| | Non-compete agreements
    (life of 5 years)           |   | 1,303         |  |   | 953             
| | Contracts in progress
    (life of 2 to 9 months)      |   | 410           |  |   | 177             
| | Surveillance software
    (life of 5 years)            |   | 3,982         |  |   | 3,159           
| | Surveillance recording
    system (life of 5 years)    |   | 500           |  |   | 511             
| | Less: accumulated
    amortization                     |   | (3,738)       |  |   | (643)           
| | Intangible assets, net                                 | $ | 40,442        |  | $ | 9,997           

On September 20, 2007, the Company
entered into an exclusive cooperation agreement with Shenzhen Chuang Guan
Intelligence Network Technology Co., Ltd. ("Chuang Guan"), which is engaged in
the business of system integration, pursuant to which the parties have agreed,
among other things, that the Company will provide various items to Chuang Guan,
including training services, provision of technology licenses, equipment,
consultations, workforces and other related services. Chuang Guan will
subcontract all its work to the Company or its designees to the extent permitted
by the local laws and regulations either at the face value of the contract or at
the face value of the contract minus the costs or expenses incurred by Chuang
Guan. Chuang Guan has agreed to add the Companys name to its market materials
and its marketing and business development activities will be conducted either
in the name of both Chuang Guan and the Company or through a joint venture
established by the parties. The valuation of the agreement was determined by a
third party appraisal firm. The Company did not acquire any of the assets or
liabilities of Chuang Guan, and the entire purchase price was allocated to an
intangible asset, consisting of an exclusive cooperation relationship. The
Companys total cost for entry into the exclusive cooperation agreement amounted
to $8,834, after taking into account of certain discounts of the shares issued
to Chuang Guan due to the fact that the issued shares are restricted shares.
466,500 restricted shares were issued in the fourth quarter of 2007.

The Company acquired Hongtianzhi,
HiEasy, Minking and Tsingvision and entered into the exclusive cooperation
agreement with Chuang Guan during the second and third quarters of 2007. The
Company acquired Cheng Feng in 2006. The valuation and allocation of the
intangible assets were determined by third party appraisal firms.

In November 2006, the Company
acquired the security and surveillance business of Jian Golden An Ke Technology
Co. Ltd., or "Jian An Ke," Shenzhen Golden Guangdian Technology Co. Ltd., or
"Shenzhen Guangdian," Shenyang Golden Digital Technology Co. Ltd., or "Shenyang
Golden," and Jiangxi Golden Digital Technology Co. Ltd., or "Jiangxi Golden," of
which the Companys CEO and director Guoshen Tu formerly owned 80%, 60%, 42% and
90%, respectively. These four companies are referred herein as the Four-Related
Companies. The former minority shareholders of the Four-Related Companies
received in aggregate 850,000 shares of the Companys common stock in exchange
for the value of the Four-Related Companies, which was determined to be $6,970
by a third party valuation firm. Mr. Tu did not receive any consideration in the
Companys acquisition of the Four-Related Companies. However, his wife, Ms.
Zhiqun Li, was issued 100,000 of the 850,000 shares for her ownership in Jian An
Ke. Simultaneously with the receipt of her shares of the Companys common stock,
Ms. Li transferred all of the shares she received to employees of the company in
which she had an ownership interest. The other minority shareholders of the
Four-Related Companies also transferred a portion of the Companys stock they
received to employees of the Four-Related Companies and others. The shares
transferred to the employees were considered to be performance incentives for
services rendered by them prior to the acquisition. Shenzhen Guangdian is
engaged in the business of manufacturing and distributing security and
surveillance products. The other three companies are engaged in the business of
distributing security and surveillance products.

The Companys intangible assets
acquired from Shenzhen Yuan Da Wei Shi Technology Limited ("Yuan Da") represent
the value determined by an independent accounting firm for the intellectual
property pertaining to a surveillance recording system developed by Yuan Da
which was acquired by the Company on December 31, 2005.

18

---



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

11.

INTANGIBLE ASSETS - (CONTINUED)

The amortization expense for the
three and nine months ended September 30, 2007 and 2006 was $1,109, $2,574, $250
and $327, respectively.

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

2007 (for the
      remaining 3 months)
      $
      1,1642008
      
      4,7152009
      
      5,5142010
      
      4,6112011
      
      3,1742012
      
      2,532Thereafter
      
      18,732Total
      $
      40,442


12.

NOTES PAYABLE

The following is a summary of the
Companys short-term and long-term notes payable as of September 30, 2007 and
December 31, 2006:

| |                       |   | September 30, |  |   | December
    31,
| | --------------------- | - | ------------- |  | - | ----------------
| |                       |   | 2007          |  |   | 2006            
| |                       |   |               |  |   |                 
| | Bank loans            | $ | 11,130        |  | $ | 4,282           
| | Less: current portion |   | (10,331)      |  |   | (2,272)         
| | Long-term portion     | $ | 799           |  | $ | 2,010           

| |                                                              |   |           |  |   |            |  |   |       
| | ------------------------------------------------------------ | - | --------- |  | - | ---------- |  | - | ------
| |                                                              |   | Long-term |  |   | Short-term |  |   |       
| | At September 30, 2007,
    notes payable are due as follows: |   | notes     |  |   | notes      |  |   | Total 
| | 2007 (for the
    remaining 3 months)                        | $ | 120       |  | $ | 1,864      |  | $ | 1,984 
| | 2008                                                         |   | 480       |  |   | 7,987      |  |   | 8,467 
| | 2009                                                         |   | 679       |  |   | --         |  |   | 679   
| | Total                                                        | $ | 1,279     |  | $ | 9,851      |  | $ | 11,130

On May 28, 2007, the Company entered
into a loan agreement with a Chinese bank. The Company borrowed RMB20,000
(approximately $2,663) with an annual interest rate of 5.913%. The loan is due
in May 2008, and the interest is payable at the end of each month. The loan
agreement requires the Company to use the loan proceeds only for the Companys
operations. The loan is guaranteed by the CEO of the Company and by a subsidiary
of the Company.

On February 16, 2007, the Company
entered into a loan agreement with a Chinese bank. The Company borrowed RMB
10,000 (approximately $1,331) with an annual interest rate of 6.39%. The loan is
due in February 2008, and the interest is payable at the end of each month. The
loan agreement requires the Company to use the loan proceeds only for the
Companys operations. The bank has the right to increase the interest rate and
demand repayment of the entire loan principal and unpaid interest if the Company
uses the loan for any purpose other than operations. The loan is guaranteed by
the CEO of the Company and by Chuang Guan.

On February 2, 2007, the Company
entered into a loan agreement with a Chinese bank. The Company borrowed RMB
30,000 (approximately $3,993) with an annual interest rate of 6.12%. The loan is
due in February 2008, and the interest is payable at the end of each month. The
loan agreement requires the Company to use the loan proceeds only for the
Companys operations. The bank has the right to increase the interest rate and
demand repayment of the entire loan principal and unpaid interest if the Company
uses the loan for any purpose other than operations. The loan is guaranteed by
the CEO of the Company and by Chuang Guan.

19

---



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

12.

NOTES PAYABLE -
(CONTINUED)

On November 27, 2006, the Company
entered into a loan agreement with a Chinese bank. The Company borrowed RMB
8,000 (approximately $1,065) with an annual interest rate of 6.732%. The loan is
due in November 2007, and the interest is payable at the end of each month. The
loan agreement requires the Company to use the loan proceeds only for the
construction of the Companys factory. The bank has the right to increase the
interest rate and demand repayment of the entire loan principal and unpaid
interest if the Company uses the loan for other purposes. The land use rights
are pledged as collateral for the bank loan.

The long term note payable is from
another Chinese bank. As of September 30, 2007, total long term liabilities were
RMB9,600 (approximately $1,279), consisting of a 3-year loan payable to a
Chinese bank. This loan was entered into on January 17, 2006 and matures on
March 3, 2009, with an annual interest rate of 6.435 %. The loan agreement
requires the Company to use the loan proceeds only for the construction of the
Companys factory. The loan is collateralized by the personal assets of the CEO
of one of the Companys subsidiaries.

On August 16, 2006, the Company
entered into a loan agreement with a Chinese bank, guaranteed by the CEO of the
Company. The Company borrowed RMB 10,000 (approximately $1,331) with an annual
interest rate of 5.94% payable at the end of each month. The loan was repaid in
February 2007.

On November 1, 2005, the Company
entered into a loan agreement with a Chinese bank in the amount of RMB 6,000
(approximately $799) with an annual interest rate of 5.76%. The loan is due on
November 7, 2007, and the interest is payable at the end of each quarter. The
loan agreement requires the Company to use the loan proceeds only for the
Companys operations. The bank has the right to increase the interest rate and
demand repayment of the entire loan principal and unpaid interest if the Company
uses the loan for any purpose other than operations.

The loan is guaranteed by two
third-party companies. According to the guaranty and security agreement, the
loan is also collateralized by the office building owned by a subsidiary and the
personal assets of the subsidiarys CEO. The Company is required to pay the
guarantors an annual guaranty fee equal to 2.5% of the loan principal amount and
an annual management and security fee equal to 3% of the loan principal amount.
The Company prepaid these fees in November 2005 and amortizes the fees
throughout the loan term. The Company is also required to pay the guarantors a
loan default fee equal to 20% of the loan principal amount plus interest at
10.7% if the loan is in default.

13.

DEFERRED INCOME

Deferred income balances as of
September 30, 2007 and December 31, 2006 were $859 and $831, respectively, and
represented amounts invoiced but deferred as revenues as an estimated warranty
reserve.

14.

DUE TO A DIRECTOR

The Company had received advances
from a director that were repaid during the nine months ended September 30,
2007. The advances were non-interest bearing and were repayable upon demand. The
balances due to the director were $0 and $76, at September 30, 2007 and December
31, 2006, respectively.

20

---



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

15.

CONVERTIBLE NOTES
PAYABLE

On February 20, 2007, pursuant to a
notes purchase agreement and indenture with Citadel Equity Fund Ltd.
("Citadel"), the Company issued to Citadel $60,000 aggregate principal amount of
guaranteed senior unsecured convertible notes due 2012 (the "February Notes").
The terms of the February Notes indenture was subsequently amended on each of
March 29, 2007 and April 24, 2007. The February Notes financing replaced the
existing bridge financing that was closed on February 8, 2007 in which the
Company had issued to Citadel $60,000 aggregate principal amount of senior
notes. The February Notes bear an annual interest of 1%. All the net proceeds
from the sales of the February Notes are and will be used for the Companys
working capital and acquisition plan.

Under the February Notes indenture,
the February Notes are convertible, by the holders thereof, at any time on or
prior to maturity, into common stock of the Company initially at the conversion
price of $18 per share (subject to adjustment in certain circumstances,
including semi-annual reset of the conversion price and upon occurrence of
certain dilutive events, in each case subject to certain conditions). If the
February Notes are not converted before maturity, the February Notes will be
redeemed by the Company on the maturity date at a redemption price equal to 100%
of the principal amount of the February Notes then outstanding plus an
additional amount of 15.0% per annum, calculated on a quarterly compounded
basis, plus any accrued and unpaid interest. In addition, if the 45-day variable
weighted average price ("VWAP") during the one year period from February 16,
2009 to February 15, 2010 equals or is greater than $30.0 per share of common
stock, the Company shall, within one trading day, force holders of the February
Notes to convert 50% of the then-outstanding principal amount of the February
Notes at the then applicable conversion rate on a pro rata basis (the "February
Notes 2010 Mandatory Conversion"). If the 45-day VWAP during the one year period
from February 16, 2010 to February 15, 2011 equals or is greater than $35.0 per
share of common stock (the "February Notes 2011 Mandatory Conversion Trigger")
and the February Notes 2010 Mandatory Conversion had occurred, the Company
shall, within one trading day, force holders of the February Notes to convert
all of the then-outstanding principal amount of the February Notes at the then
applicable conversion price. If the February Notes 2011 Mandatory Conversion
Trigger occurs and the February Notes 2010 Mandatory Conversion had not
occurred, the Company shall, within one trading day, force holders of the
February Notes to convert 50% of the then-outstanding principal amount of the
February Notes at the then applicable conversion rate on a pro rata basis.

On April 24, 2007, pursuant to
another notes purchase agreement with Citadel, the Company issued to Citadel
$50,000 aggregate principal amount of guaranteed senior unsecured convertible
notes due 2012 (the "April Notes"). The April Notes bear an annual interest of
1%. All the net proceeds from the sales of the April Notes are and will be used
for the Companys working capital and acquisition plan.

Under the April Notes indenture, the
April Notes are convertible, by the holders thereof, at any time on or prior to
maturity, into common stock of the Company initially at the conversion price of
$23.60 per share (subject to adjustment in certain circumstances, including
semi-annual reset of the conversion price and upon occurrence of certain
dilutive events, in each case subject to certain conditions). If the April Notes
are not converted before maturity, the April Notes will be redeemed by the
Company on the maturity date at a redemption price equal to 100% of the
principal amount of the April Notes then outstanding plus an additional amount
of 15.0% per annum, calculated on a quarterly compounded basis, plus any accrued
and unpaid interest. In addition, if the 45-day VWAP during the one year period
from February 16, 2009 to February 15, 2010 equals or is greater than $40.0 per
share of common stock, the Company shall, within one trading day, force holders
of the April Notes to convert 50% of the then-outstanding principal amount of
the April Notes at the then applicable conversion rate on a pro rata basis (the
"April Notes 2010 Mandatory Conversion"). If the 45-day VWAP during the one year
period from February 16, 2010 to February 15, 2011 equals or is greater than
$45.00 per share of common stock (the "April Notes 2011 Mandatory Conversion
Trigger") and the April Notes 2010 Mandatory Conversion had occurred, the
Company shall, within one trading day, force holders of the April Notes to
convert all of the then-outstanding principal amount of the April Notes at the
then applicable conversion price. If the April Notes 2011 Mandatory Conversion
Trigger occurs and the April Notes 2010 Mandatory Conversion had not occurred,
the Company shall, within one trading day, force holders of the April Notes to
convert 50% of the then-outstanding principal amount of the April Notes at the
then applicable conversion rate on a pro rata basis.

21

---



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

15.

CONVERTIBLE NOTES
PAYABLE - (CONTINUED)

The February Notes and April Notes
indentures, the notes purchase agreements and certain investor rights agreements
between the Company and Citadel entered into in connection with the February
Notes and April Notes financings contain various covenants that may limit the
Companys discretion in operating its business. In particular, the Company is
limited in its ability to merge, consolidate or transfer substantially all of
its assets, issue stock of subsidiaries, incur additional debt and create liens
on assets to secure debt. In addition, if there is a default, or if the Company
does not maintain certain financial covenants or does not maintain borrowing
availability in excess of certain pre-determined levels, the February Notes and
the April Notes may be accelerated with the balance becoming due and payable
immediately and the Company may be unable to incur additional indebtedness, make
restricted payments (including paying cash dividends on capital stock) or redeem
or repurchase capital stock. As of September 30, 2007, the Company has complied
with all the required covenants.

The Company has accreted $4,363 and
$9,338 for the three and nine months ended September 2007 of the additional
redemption amount related to the February Notes and April Notes, which amount is
included in interest expense.

Approximately $176 of legal fees and
other costs directly associated with the issuance of the February Notes and
April Notes is recorded as deferred financing costs in the balance sheet at
September 30, 2007. The Company has amortized these financing costs over the
life of the February Notes and April Notes. The interest expense for the three
and nine months ended September 30, 2007 was $9 and $18, respectively.

16.

ISSUANCE OF COMMON
STOCK AND WARRANTS

On April 4, 2006, the Company entered
into a securities purchase agreement with certain investors for the sale of
2,666,667 shares of the Companys common stock at a price of $3.00 per share.
Net proceeds to the Company from the sale of the common stock were approximately
$7,400.

Pursuant to this securities purchase
agreement, the Company also issued warrants to a private placement agent to
purchase 416,667 shares of its common stock as commission for its services in
connection with the private placement. A total of 150,000 of the warrants are
exercisable at a price of $3.80 per share, which is the closing bid price for
the Companys common stock as of the date of closing under such agreement, and a
total of 266,667 of the warrants are exercisable at a price of $3.00 per share.
All of the warrants have a term of 5 years and include a cashless exercise
feature. 90,000 and 90,000 warrants were exercised during the three and nine
months ended September 30, 2007, respectively.

On July 6, 2006, the Company entered
into another securities purchase agreement with certain accredited investors
relating to the private placement of units, consisting of one share of the
Companys common stock and a warrant to purchase one-fifth of one share of
common stock.

Such securities purchase agreement
was amended on each of July 30, 2006 and July 31, 2006. Closing thereunder
occurred July 31, 2006. The purchase price of each unit was $3.50 and the
exercise price for each whole warrant was set at $4.80. The warrants have a term
of five years and include a cashless exercise feature which does not apply when
there is an effective registration statement covering the shares underlying the
warrants. In addition, the Company had granted a put right to all of the
investors which would have allowed the investors to require the Company to
repurchase all, but not less than all, of the securities issued pursuant to such
securities purchase agreement if the Company had failed to obtain the necessary
governmental approvals to consummate the acquisition of Cheng Feng on or before
December 31, 2006. As such governmental approvals were obtained before December
31, 2006, the put right has terminated.

Pursuant to this securities purchase
agreement, the Company sold 4,634,592 units to certain accredited investors at
$3.50 per unit for gross proceeds of $16,200.

Net proceeds to the Company from the
sale of all of the units pursuant to such securities purchase agreement were
approximately $14,900. 69,999 and 552,855 warrants were exercised at $4.80 per
share during the three and nine months ended September 30, 2007, respectively.

22

---



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

16.

ISSUANCE OF COMMON
STOCK AND WARRANTS - (CONTINUED)

In conjunction with execution of this
securities purchase agreement, the Company also executed a registration rights
agreement under which it was obligated to file registration statements on Form
S-4 and Form S-1, or other available form, to register the shares and the shares
underlying the warrants for resale, within 45 days and 55 days after the closing
date, respectively. The Company was obligated to use its best efforts to cause
the registration statement to be declared effective within 150 days of the
closing date, and was liable for payment of penalties to the purchasers in the
event the registration statement has not declared effective within the 150-day
period. The Company filed the registration statements on Form S-4 and Form S-1
on October 3, 2006 and October 23, 2006 and they were declared effective on
November 13, 2006 and November 15, 2006, respectively.

The Company also issued warrants to
purchase 324,421 shares of its common stock with an exercise price of $4.20 to
two private placement agents as commission for their services in connection with
the private placement. 0 and 324,421 of such warrants were exercised using the
cashless exercise feature during the three and nine months ended September 30,
2007.

A summary of the status of the
Companys warrants issued in 2006 as described above, and the changes during the
three months ended September 30, 2007 and 2006, is presented below:

| |                                      | 2007      |  | 2006
| | ------------------------------------ | --------- |  | ----
| |                                      |           |  |     
| |                                      |           |  |     
| |                                      |           |  |     
| |                                      | Shares    |  |     
| | Outstanding at July 1                | 610,015   |  | $   
| | Granted                              | -         |  |     
| | Exercised                            | (159,999) |  |     
| | Outstanding at September 30          | 450,016   |  |     
| | Warrants exercisable at September 30 | 450,016   |  | $   

A summary of the status of the
Companys warrants issued in 2006 as described above, and the changes during the
nine months ended September 30, 2007 and 2006, is presented below:

| |                                      | 2007      |  | 2006
| | ------------------------------------ | --------- |  | ----
| |                                      |           |  |     
| |                                      |           |  |     
| |                                      |           |  |     
| |                                      | Shares    |  |     
| | Outstanding at January 1             | 1,417,292 |  | $   
| | Granted                              | -         |  |     
| | Exercised                            | (967,276) |  |     
| | Outstanding at September 30          | 450,016   |  |     
| | Warrants exercisable at September 30 | 450,016   |  | $   

23

---



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

17.

EQUITY INCENTIVE
PLAN

On February 7, 2007, the Company
adopted the 2007 Equity Incentive Plan, which has a five-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 8,000,000 shares of common stock. During the
three and nine months ended September 30, 2007, the Company has granted 720,176
and 1,812,576 shares of restricted stock. During the three and nine months ended
September 30, 2007, 22,900 and 51,800 shares of restricted stock were retired.
The shares issued vest over a four-year period, and at issue resulted in total
deferred compensation of $25,885. The fair values of these restricted stock
awards are equal to the fair value of the Company's stock on the date of grant.
Such restricted stock is subject to the risk of forfeiture upon the occurrence
of certain events. During the three and nine months ended September 30, 2007,
the Company has recognized $989 and $2,055 of compensation expense under the
plan, respectively. As of September 30, 2007, there was $23,830 of unrecognized
compensation expense related to the nonvested restricted stock. This cost is
expected to be recognized over a four-year period.

The following table summarizes the
status of the Company's nonvested restricted stock awards during the three
months ended September 30, 2007:

| |                                   | Nonvested Restricted Stock and 
    Stock Unit Awards
| | --------------------------------- | -----------------------------------------------------
| |                                   | Number of 
    Shares                                
| |                                   |                                                      
| | Outstanding at July 1, 2007       | 975,879                                              
| | Granted                           | 720,176                                              
| | Vested                            | (76,613)                                             
| | Retired                           | (22,900)                                             
| | Outstanding at September 30, 2007 | 1,596,542                                            

The following table summarizes the
status of the Company's nonvested restricted stock awards during the nine months
ended September 30, 2007:

| |                                   | Nonvested Restricted Stock and 
    Stock Unit Awards
| | --------------------------------- | -----------------------------------------------------
| |                                   | Number of 
    Shares                                
| |                                   |                                                      
| | Outstanding at January 1, 2007    |                                                     
| | Granted                           | 1,812,576                                            
| | Vested                            | (164,234)                                            
| | Retired                           | (51,800)                                             
| | Outstanding at September 30, 2007 | 1,596,542                                            

18.

SUBSEQUENT EVENTS

On October 29, 2007, the Companys common stock
started trading on the New York Stock Exchange under the symbol "CSR".

24

---



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

Special Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q, including the following
"Managements Discussion and Analysis of Financial Condition and Results of
Operations," contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such statements include, among others, those
concerning our expected financial performance and strategic and operational
plans, our future operating results, our expectations regarding the market for
security and surveillance products, our expectations regarding the continued
growth of the security and surveillance market, 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 that a number of risks and uncertainties could cause our actual
results to differ materially from those anticipated, expressed or implied in the
forward-looking statements. These risks and uncertainties include, but not
limited to, the factors mentioned in the "Risk Factors" section of our Annual
Report on Form 10-K for the year ended December 31, 2006, and other risks
mentioned in this Form 10-Q or in our other reports filed with the Securities
Exchange Commission (the "SEC"). The words "believe," "expect," "anticipate,"
"project," "targets," "optimistic," "intend," "aim," "will" or similar
expressions are intended to identify forward-looking statements. 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 any forward-looking statements, except as required by law.

Use of terms

Except as otherwise indicated by the context, references in
this Quarterly Report to "CSST," "we," "us," "our," 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 (i) "Safetech"
are to China Safetech Holdings Limited, a British Virgin Islands corporation and
a wholly owned subsidiary of the Company; (ii) "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; (iii)
"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; (iv) "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; (v)
"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; (vi) "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; (vii) "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; (viii) "BVI" are to the British Virgin Islands; (ix) "PRC"
and "China" are to the Peoples Republic of China; (x) "U.S. dollar," "$" and
"US$" are to United States dollars; (xi) "RMB" are to Yuan Renminbi of China;
(xii) "Securities Act" are to the Securities Act of 1933, as amended; and (xiii)
"Exchange Act" are to the Securities Exchange Act of 1934, as amended.

Overview of Our Business

China Security & Surveillance Technology, Inc. is a Delaware
holding company whose China-based operating subsidiaries are primarily engaged
in manufacturing, distributing, installing and servicing security and
surveillance products and systems and developing security and surveillance
related software in China. In July 2006, we acquired 100% of the equity of Cheng
Feng. On April 2, 2007, we acquired 100% of the equity of Chain Star Investment,
a Hong Kong corporation and the holding company of Hongtianzhi, a manufacturer
of digital cameras. On May 11, 2007, we acquired 100% of the equity of Link
Billion Limited, a Hong Kong corporation and the holding company of HiEasy, a
software developer. On June 4, 2007, we acquired 100% of the equity of Allied
Rich Limited, a Hong Kong corporation and the holding company of Minking, a
manufacturer of high speed dome cameras.

Our customers are mainly comprised of (i) governmental
entities (including customs agencies, courts, public security bureaus and
prisons), (ii) non-profit organizations (including schools, museums, sports
arenas and libraries) and (iii) commercial entities (including airports, hotels,
real estate, banks, mines, railways, supermarkets and entertainment venues).
These account for approximately 42%, 1%, and 57% of our revenues, respectively.

A majority of our revenues is derived from the provision of
security and surveillance packaged solutions which include the products,
installation and after sale service maintenance to our customers. Because
majority of our revenues are derived from the installation, 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 from the date of completion. Our customers have an
option to sign up for our maintenance program after the first year.

Our sales network covers most of Chinas populated areas and
we do not rely on any particular region for our business. Among our
subsidiaries, Golden has 33 branch offices in provincial cities, Cheng Feng has
22 distribution points, Hongtianzhi has 53 distribution points, HiEasy has 11
distribution points, Minking has 10 distribution points and Tsingvision has 4
distribution points.

25

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In the third quarter of 2007, we acquired 100% of the equity
of Ocean Pacific Technology Limited with a total consideration of approximately
$13.05 million (RMB 99.35 million). Ocean Pacific Technology Limited is a Hong
Kong corporation and the holding company of Tsingvision. The acquisition closed
on July 2, 2007, as a result, the results of operations of Tsingvision are
included in the Companys consolidated financial statements beginning on July 2,
2007. Tsingvision is engaged in the business of researching and developing
digital audio and video software products.

On September 20, 2007, we entered into an exclusive
cooperation agreement with Shenzhen Chuang Guan Intelligence Network Technology
Co., Ltd. ("Chuang Guan") which is engaged in the business of
system integration. Under the exclusive cooperation agreement, the parties have
agreed, among other things, that our subsidiary Golden will provide various
services to Chuang Guan, including training services, provision of technology
licenses, equipments, consultations, workforces and other related services.
Chuang Guan will subcontract all its work to Golden or its designees to the
extent permitted by the PRC laws and regulations either at the face value of the
contract or at the face value of the contract minus the costs or expenses
incurred by Chuang Guan. Chuang Guan has agreed to add Goldens name into its
market materials and its marketing and business development activities will be
conducted either in the name of both Chuang Guan and Golden or through a joint
venture established by the parties. In addition, we have agreed to pay a total
consideration of approximately $8.8 million to Chuang Guan, consisting of RMB 5
million (approximately $0.7 million) in cash and $8.1 million in shares of the
Companys common stock (466,500 shares), which will be issued to Chuang Guan or
its designees within 90 days after the signing of the agreement. The term of the
agreement is 20 years which is automatically renewable for another 20 years
unless terminated by Golden.

Recent Developments

We have received approval for listing on the New York Stock
Exchange ("NYSE") and our common stock started trading on the NYSE under the
symbol "CSR" on October 29, 2007.

Third Quarter Financial Performance Highlights

We continued to experience strong demand for our products and
services during the third quarter of 2007 and growth in our revenues and net
income. The security and surveillance product market in China continued to
expand in the third quarter of 2007 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, including
city-wide surveillance systems, traffic conjunctions, critical government
locations, cyber cafés, bars and discotheques, to install security systems. In
addition, the economic development in China and the fact that the population in
China in general is becoming relatively wealthier also contributed to increased
demand for security and surveillance products within various industries and
organizations, such as residential estates, factories and shopping centers. Our
third fiscal quarter financial results also benefited from the consolidation of
companies acquired in 2007, which contributed approximately $15.4 million
revenues in aggregate, accounting for approximately 23.5% of the total revenues
of the third quarter of 2007. Among the newly acquired companies, Tsingvision
which we acquired in July 2007 contributed approximately $0.8 million revenues
in the third quarter of 2007.

The following are some financial highlights for the third
quarter of 2007:

- 













26

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Non-cash
  items: Non-cash items included (i) the redemption accretion on convertible
  notes of $4.4 million, (ii) depreciation and amortization of $1.4 million, and
  (iii) non-cash employee compensation expense of $1.0 million for the third
  quarter of 2007. Total non-cash items are $6.8 million, an increase of $6.4
  million, or 1686.8%, from $0.4 million for the same quarter of last year. 

The following table summarizes the Companys non-cash components during the
three months ended September 30, 2007.
All amounts, other than for share and per share amounts, in
millions of U.S. dollars

Three Months Ended
      September 30,Non-cash items
      
      2007
      
      
      2006
      
      
      IncreaseDepreciation and amortization
      $
      1.44
      
      $
      0.38
      
      $
      1.06Non-cash employee compensation
      
      0.99
      
      
      -
      
      
      0.99Redemption accretion on convertible notes
      
      4.36
      
      
      -
      
      
      4.36Total
      $
      6.79
      
      $
      0.38
      
      $
      6.41Non-cash items per share - basicDepreciation and amortization
      $
      0.04
      
      $
      0.01
      
      $
      0.03Non-cash employee compensation
      
      0.03
      
      
      -
      
      
      0.03Redemption accretion on convertible notes
      
      0.11
      
      
      -
      
      
      0.11Total non-cash items per share - basic
      $
      0.18
      
      $
      0.01
      
      $
      0.17Non-cash items per share - dilutedDepreciation and amortization
      $
      0.04
      
      $
      0.01
      
      $
      0.03Non-cash employee compensation
      
      0.02
      
      
      -
      
      
      0.02Redemption accretion on convertible notes
      
      0.11
      
      
      -
      
      
      0.11Total non-cash items per share - diluted
      $
      0.17
      
      $
      0.01
      
      $
      0.16Net income per share - basic
      $
      0.30
      
      $
      0.37Net income per share - diluted
      $
      0.29
      
      $
      0.36Weighted average number of shares  outstandingBasic
      
      38,547,263
      
      
      27,647,979Diluted
      
      40,512,247
      
      
      28,377,362


27

---



The following table summarizes the Companys non-cash components during the
nine months ended September 30, 2007 and 2006.

All amounts, other than for share and per share amounts, in
millions of U.S. dollars



Nine Months Ended
      September 30,Non-cash items
      
      2007
      
      
      2006
      
      
      IncreaseDepreciation and amortization
      $
      3.33
      
      $
      0.57
      
      $
      2.76Non-cash employee compensation
      
      2.06
      
      
      -
      
      
      2.06Redemption accretion on convertible notes
      
      9.34
      
      
      -
      
      
      9.34Total
      $
      14.73
      
      $
      0.57
      
      $
      14.16Non-cash items per share - basicDepreciation and amortization
      $
      0.09
      
      $
      0.02
      
      $
      0.07Non-cash employee compensation
      
      0.06
      
      
      -
      
      
      0.06Redemption accretion on convertible notes
      
      0.26
      
      
      -
      
      
      0.26Total non-cash items per share - basic
      $
      0.41
      
      $
      0.02
      
      $
      0.39Non-cash items per share - dilutedDepreciation and amortization
      $
      0.09
      
      $
      0.02
      
      $
      0.07Non-cash employee compensation
      
      0.05
      
      
      -
      
      
      0.05Redemption accretion on convertible notes
      
      0.25
      
      
      -
      
      
      0.25Total non-cash items per share - diluted
      $
      0.39
      
      $
      0.02
      
      $
      0.37Net income per share - basic
      $
      0.57
      
      $
      0.66Net income per share - diluted
      $
      0.54
      
      $
      0.65Weighted average number of shares outstandingBasic
      
      35,807,815
      
      
      24,597,358Diluted
      
      37,772,753
      
      
      25,118,122


28

---



Results of Operations

The following table sets forth key components of our results
of operations for the periods indicated, in dollars and as a percentage of
revenues.

All amounts, other than percentages, in millions of U.S.
dollars

Three months ended
      September 30,
      
      Nine months ended
      September 30,2007
      
      2006
      
      2007
      
      2006Revenues
      $
      65.4
      100.0%
      
      $
      43.4
      100.0%
      
      $
      156.0
      100.0%
      
      $
      66.1
      100.0%Cost of goods sold
      
      45.7
      69.8%
      
      
      30.6
      70.4%
      
      
      111.3
      71.3%
      
      
      45.8
      69.3%Gross profit
      
      19.7
      30.2%
      
      
      12.8
      29.6%
      
      
      44.7
      28.7%
      
      
      20.3
      30.7%ExpensesSelling and marketing
      
      1.4
      2.1%
      
      
      0.4
      0.9%
      
      
      2.9
      1.9%
      
      
      0.7
      1.1%General and administrative
      
      2.8
      4.3%
      
      
      1.3
      3.0%
      
      
      7.3
      4.7%
      
      
      2.0
      3.0%Non-cash employee compensation
      
      1.0
      1.5%
      
      
      -
      0.0%
      
      
      2.1
      1.3%
      
      
      -
      0.0%Depreciation and amortization
      
      1.4
      2.1%
      
      
      0.4
      0.9%
      
      
      3.3
      2.1%
      
      
      0.6
      0.9%Income from operations
      
      13.0
      19.9%
      
      
      10.7
      24.8%
      
      
      29.1
      18.7%
      
      
      17.0
      25.7%Other income, net
      
      6.0
      9.2%
      
      
      0.4
      0.7%
      
      
      7.3
      4.7%
      
      
      1.0
      1.5%Interest expense
      
      (0.4)
      -0.6%
      
      
      -
      0.0%
      
      
      (0.9)
      -0.6%
      
      
      -
      0.0%Redemption accretion on convertiblenotes
      
      (4.4)
      -6.7%
      
      
      -
      0.0%
      
      
      (9.3)
      -6.0%
      
      
      -
      0.0%Income before income taxes
      
      14.3
      21.9%
      
      
      11.1
      25.3%
      
      
      26.2
      16.8%
      
      
      18.0
      27.2%Income taxes
      
      (2.6)
      -4.0%
      
      
      (0.8)
      -1.8%
      
      
      (5.7)
      -3.7%
      
      
      (1.7)
      -2.6%Net income
      $
      11.7
      17.9%
      
      $
      10.3
      23.5%
      
      $
      20.5
      13.1%
      
      $
      16.3
      24.7%


Comparison of Three Months Ended September 30, 2007 and
September 30, 2006

Revenues. Our revenues are generated from the supply
and installation of security and surveillance packaged products. During the
three months ended September 30, 2007, we experienced solid growth in revenues.
Revenues increased $22.0 million, or 50.6%, to $65.4 million for the three
months ended September 30, 2007 from $43.4 million for the three months ended
September 30, 2006. The increase in revenues was mainly attributable to growth
in the security and surveillance market in China, the increased market demand
for our products and our increased brand recognition. Our strategic efforts to
increase our distribution channels during 2005 and 2006 and sufficient working
capital from our recent fundraising activities also allowed us to successfully
take advantage of the growth in market demand in the third quarter of 2007.
After Hongtianzhi, HiEasy, Minking and Tsingvision became our wholly owned
subsidiaries, we consolidated the financial results of these four companies in
the third quarter of 2007, which contributed $6.8 million, $2.3 million, $5.5
million and $0.8 million to revenues in the third quarter of 2007, respectively.
We consolidated the financial results of Cheng Feng starting from the third
quarter of 2006. Cheng Feng had revenues of $5.4 million in the third quarter of
2007. Management expects revenue growth to remain strong due to (i) continued
growth in the security and surveillance market both within the corporate and
government sectors, (ii) better capitalization of the Company to fuel our
growth, (iii) continued enhancement of our branding and profiling in China, and
(iv) our acquisition strategy intended to boost our market share and
competitiveness.

During the third quarter of 2007, we signed 49 new
installation project contracts with a total contract value of approximately
$51.4 million, of which we recognized $12.7 million in revenues. Of the 49
projects, 16 were finished as of September 30, 2007, and, accordingly,
approximately $0.8 million of revenues related to warranty requirements was
deferred to the fourth quarter of 2007. The remaining 33 projects had not been
finished as of September 30, 2007. The total installation backlog projects and
the backlog from sales of parts were approximately $38.7 million and $6 million,
respectively. During the third quarter of 2007, the Company also completed
implementation of 29 contracts signed before the third quarter of 2007
(representing all of the contracts that had been signed, but not yet fully
implemented, during the second quarter of 2007), and recognized revenues of $28.2
million related to those contracts. The following table shows the revenues
recognized in the third quarter of 2007:

29

---



(In millions of U.S. dollars)

|Revenue recognized
    from contracts signed before the third quarter of 2007             | $ | 28.2
|----------------------------------------------------------------------------------------- | - | ----
|Revenue recognized
    from contracts signed in the third quarter 2007                    | $ | 12.7
|Revenue recognized
    from Cheng Feng                                                    | $ | 5.4 
|Revenue recognized
    from Hongtianzhi                                                   | $ | 6.8 
|Revenue recognized
    from HiEasy                                                        | $ | 2.3 
|Revenue recognized
    from Minking                                                       | $ | 5.5 
|Revenue recognized
    from Tsingvision                                                   | $ | 0.8 
|Other revenue
    recognized in the third quarter 2007                                    | $ | 3.7 
|Total revenue
    recognized in the third quarter 2007                                    | $ | 65.4
|Revenue deferred                                                                          | $ | 0.8 
|Backlog of contracts
    for projects and sales of parts signed before September 30, 2007 | $ | 44.7

Components of Revenues. The following table shows the
different components comprising our total revenues during the three months ended
September 30, 2007 and 2006.

All amounts in millions of U.S. dollars

|                                  | Three months ended
    September 30,
|--------------------------------- | ------------------------------------
|                                  | 2007                                
|                                  |                                     
|Security systems and installation | $                                   
|Sales
    of parts                |                                     
|                                  |                                     
|Total                             | $                                   

Income from installation projects contributed 62.5% of our
revenues for the three months ended September 30, 2007, as compared to 89.2% for
the same period last year. Management believes that revenues from the
installation projects and sales of parts will continue to be the Companys major
revenue source in the next a few years. With the acquisitions of Cheng Feng,
Hongtianzhi, Minking, HiEasy, Tsingvision and other planned acquisitions,
management believes that the percentage of revenues from the sale of parts will
increase in the future.

Cost of goods sold. Our cost of goods sold is
primarily comprised of the costs of our raw materials, labor and overhead. Our
cost of goods sold increased $15.1 million, or 49.4%, to $45.7 million for the
three months ended September 30, 2007 from $30.6 million during the same period
in 2006. This dollar increase was primarily attributable to the increase of our
revenues in the third quarter of 2007. Components of cost of goods sold in the
three months ended September 30, 2007 and 2006 are as follows:

All amounts in millions of U.S. dollars

|                                             | Three months ended
    September 30,
|-------------------------------------------- | ------------------------------------
|                                             | 2007                                
|                                             |                                     
|Purchases of raw material (for installation) | $                                   
|Installation labor                           |                                     
|Purchases of parts                           |                                     
|Other                                        |                                     
|                                             |                                     
|Total                                        | $                                   

Installation labor and costs for raw materials for
installation accounted for 1.1% and 60.0% of the total cost of goods sold for
the three months ended September 30, 2007, respectively, as compared to 1.3% and
85.3% for the same period in 2006. The percentage of cost of goods sold related
to the sales of parts represented approximately 32.2% of the total cost of goods
sold in the third quarter of 2007 as compared to 10.5% for the same period in
2006 mainly due to the increase of the percentage of revenues contributed by
sale of parts.



30

---



Gross profit. Our gross profit is equal to the
difference between our revenues and our cost of goods sold. Our gross profit
increased $6.9 million, or 53.5%, to $19.7 million for the three months ended
September 30, 2007 from $12.8 million for the same period last year. Gross
margin for the three months ended September 30, 2007 was 30.2%, as compared to
29.6% for the same period of 2006. We were able to benefit from economies of
scale and reductions in our per unit costs of raw materials, components and
labor because of the significant increase of sales volume in the third quarter
of 2007. The increase of our gross margin in the third quarter of 2007 also
resulted from the change of product mix, where certain higher margin products
accounted for a higher percentage of our revenues. In addition, we recognized
revenues from some Safe City projects which have a higher gross profit.

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 increased $1.0 million, or 270.2%, to $1.4
million for the three months ended September 30, 2007 from $0.4 million for the
same period in 2006. This dollar increase was primarily attributable to the
consolidation of the financial results of Cheng Feng, Hongtianzhi, HiEasy,
Minking and Tsingvision, which incurred selling and marketing expenses
associated with sales of their products. As a percentage of revenues, our
selling and marketing expenses increased to 2.1% for the three months ended
September 30, 2007 from 0.9% for the same period in 2006. The percentage
increase was mainly due to the hiring of additional staff and the increased cost
in promotion with our products to new customers.

General and administrative expenses. Our general and
administrative expenses consist of the costs associated with staff and support
personnel who manage our business activities and professional fees paid to third
parties. Our general and administrative expenses increased $1.5 million, or
118.7%, to $3.8 million for the three months ended September 30, 2007 from $1.3
million of the same period in 2006. As a percentage of revenues, general and
administrative expenses increased to 4.3% for the three months ended September
30, 2007 from 3.0% for the same period in 2006. The dollar and percentage
increase was mainly due to the increase of the non-cash employee compensation as
discussed below, consolidation of the financial results of Cheng Feng,
Hongtianzhi, HiEasy, Minking and Tsingvision, the hiring of additional staff,
the increased costs in connection with documenting and testing our internal
controls and professional expenses related to the costs of being a public
reporting company.

Non-cash employee compensation. Non-cash employee
compensation for the three months ended September 30, 2007 increased by $1.0
million from $0 of the same period in 2006, primarily as a result of the
adoption of the equity incentive plan in February 2007 and grants to senior
management and other staff made under the equity incentive plan after its
adoption.

Depreciation and amortization. Our depreciation and
amortization costs increased $1.0 million, or 274.9%, to $1.4 million for the
three months ended September 30, 2007 from $0.4 million for the same period in
2006. As a percentage of revenues, depreciation and amortization expenses
increased to 2.1% for the three months ended September 30, 2007 from 0.9% for
the same period in 2006. Such dollar and percentage increase was primarily due
to the amortization of intangible assets from the acquisition of Cheng Feng,
Hongtianzhi, HiEasy, Minking and Tsingvision.

Income from operations. Our income from operations
increased $2.2 million, or 20.7%, to $13.0 million for the three months ended
September 30, 2007 from $10.8 million for the same period in 2006. As a
percentage of revenues, income from operations decreased to 19.9% for the three
months ended September 30, 2007 from 24.8% for the same period in 2006. Such
percentage decrease was primarily due to the increase of our selling and
marketing expenses as well as the general and administrative expenses as
discussed above.

Other income.Our other income
increased $5.6 million, or 2,416.7%, to $6.0 million for the three months ended
September 30, 2007 from $0.4 million for the same period in 2006. As a
percentage of revenues, other income increased to 9.2%for the three months ended
September 30, 2007 from 0.7% for the same period in 2006. Such percentage
increased was primarily due to gain on disposal of certain property and land use
right. Net proceeds of $5.5 million from such disposition were recognized in the
third quarter of 2007. Fully diluted net proceeds per share were $0.14 for the
third quarter of 2007, as compared to $0 for the same period last year.

Interest expense. Interest expense for the three
months ended September 30, 2007 was $0.4 million, as compared to $0.0 of the same
period in 2006. Such increase was primarily due to borrowing under bank loans
for our operations.

Redemption accretion on convertible notes.
Redemption accretion on convertible notes for the three months ended September
30, 2007 was $4.4 million, as compared to $0 for the same period in 2006. We
raised $110 million from issuance of convertible notes in February and April
2007 to finance our acquisitions. The redemption accretion on convertible notes
will not be paid if the convertible notes are converted into shares of our
common stock before their maturities.

Income before taxes.Our income before taxes
increased $3.3 million, or 30.0%, to $14.3 million for the three months ended
September 30, 2007 from $11.0 million for the same period in 2006. As a
percentage of revenues, income before taxes decreased to 21.9% for the three
months ended September 30, 2007 from 25.3% for the same period in 2006. Such
percentage decrease was primarily due to increased non-cash expenses including
the redemption accretion on convertible notes, depreciation and amortization and
non-cash employee compensation.

31

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Income taxes. Foreign Invested Enterprises ("FIEs")
established in the PRC are generally subject to an enterprise income tax ("EIT").
FIEs established in Shenzhen Special Economic Zone, such as our Chinese
subsidiaries Golden and Hongtianzhi, are subject to an EIT rate of 15% for the
fiscal year 2007. Our subsidiaries Cheng Feng is subject to an EIT rate of 7.5%
for fiscal year 2007 due to the software and high technology company status.
HiEasy, Minking and Tsingvision are subject to an EIT rate of 0% since the date
of acquisition because their holding companies are foreign companies. We
anticipate that our effective tax rate will change from the current 18.2% in the
three months ended September 30, 2007 because the companies we acquired and
intend to acquire are located in different cities and may have different tax
rates.

On March 16, 2007, the National Peoples Congress of China
passed the new EIT Law, which will take effect as of January 1, 2008. Under the
new 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 EIT at the rate of 25.0% on its global income. The new
EIT Law, however, does not define the term "de facto management bodies." If the
PRC tax authorities subsequently determine that we should be classified as a
resident enterprise, then our global income will be subject to PRC income tax at
a tax rate of 25.0%. In addition, under the new EIT Law, dividends from our PRC
subsidiaries to us will be subject to a withholding tax. The rate of the
withholding tax has not yet been finalized, pending promulgation of implementing
regulations. Furthermore, the ultimate tax rate will be determined by treaty
between China and the tax residence of the holder of the PRC subsidiaries. We
are actively monitoring the proposed withholding tax and are evaluating
appropriate organizational changes to minimize the corresponding tax impact. The
new EIT Law imposes a unified income tax rate of 25.0% on all domestic-invested
enterprises and FIEs, such as our PRC operating subsidiaries, unless they
qualify under certain limited exceptions, but the EIT Law permits companies to
continue to enjoy their existing preferential tax treatments until such
treatments expire in accordance with their current terms. We expect details of
the transitional arrangement for the five-year period from January 1, 2008 to
December 31, 2012 applicable to enterprises approved for establishment prior to
March 16, 2007 to be set out in more detailed implementing rules to be adopted
in the future. Any increase in our effective tax rate as a result of the above
may adversely affect our operating results. However, details regarding
implementation of this new law are expected to be provided in the form of one or
more implementing regulations to be promulgated by the PRC government, and the
timing of the issuance of such implementing regulations is currently unclear.

Our income taxes increased $1.8 million to $2.6 million for
the three months ended September 30, 2007 from $0.8 million for the same period
of 2006. We incurred more taxes during three months ended September 30, 2007 as
a result of increased income before income taxes during that period.

Net income. Net income increased $1.4 million, or
14.0%, to $11.7 million for the three months ended September 30, 2007 from $10.3
million for the same period in 2006. As a percentage of revenues, net income
decreased to 17.9% for the three months ended September 30, 2007 from 23.6% for
the same period in 2006. This percentage decrease was mainly due to the non-cash
expenses such as redemption accretion on convertible notes, depreciation and
amortization and non-cash employee compensation.

Comparison of Nine Months Ended September 30, 2007 and
September 30, 2006

Revenues. During the nine months ended September 30,
2007, we experienced solid growth in revenues. Revenues increased $89.9 million,
or 136.18%, to $156.0 million for the nine months ended September 30, 2007 from
$66.1 millions for the nine months ended September 30, 2006. The increase in
revenues was primarily attributable to growth in the security and surveillance
market in China, the increased market demand for our products and our increased
brand recognition. Our strategic efforts to increase our distribution channels
during 2005 and 2006 and sufficient working capital from our recent fundraising
activities also allowed us to successfully take advantage of the growth in
market demand in the first nine months of 2007. After Hongtianzhi, HiEasy, Minking,
and Tsingvision became our wholly owned subsidiaries, we consolidated the
financial results of these four companies, which in the first nine months of 2007
contributed $12.1 million, $3.0 million, $7.4 million and $0.8 million to
revenues, respectively. In addition, Cheng Feng contributed $11.3 million to
revenues in the first nine months of 2007 compared to $2.6 million in 2006.

Components of revenues. The following table shows the
different components comprising our total revenues during the nine months ended
September 30, 2007 and 2006.

All amounts in millions of U.S. dollars

|                                  | Nine months ended
    September 30,
|--------------------------------- | -----------------------------------
|                                  | 2007                               
|                                  |                                    
|Security systems and installation | $                                  
|Sales
    of parts                |                                    
|                                  |                                    
|                                  | $                                  

Income from installation projects constituted 73.2% of our
total revenues for the nine months ended September 30, 2007, as compared to
89.0% for the same period last year. Income from sales of parts constituted
26.8% of our total revenues for the nine months ended September 30, 2007, as
compared to 11.0% for the same period last year.

Cost of goods sold. Our cost of goods sold increased
$65.5 million, or 143.0%, to $111.3 million for the nine months ended September
30, 2007 from $45.8 million during the same period in 2006. This dollar increase
was mainly attributable to the increase in our revenues in the first nine months
of 2007. Components of cost of goods sold in the nine months ended September 30,
2007 and 2006 are as follows:

32

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All amounts in millions of U.S. dollars

|                                             | Nine months ended September 30,
|-------------------------------------------- | -------------------------------
|                                             |                                
|                                             |                                
|Purchases of raw material (for installation) |                                
|Installation labor                           |                                
|Purchases of parts                           |                                
|Other                                        |                                
|                                             |                                

Installation labor and security system purchase cost
represented 1.2% and 72.1% of our total cost of goods sold for the nine months
ended September 30, 2007, respectively, as compared to 1.5% and 82.3% for the
same period in 2006. The percentage of cost of goods sold related to the sales
of parts represented about 22.0% of our total revenues as compared to 12.9% for
the same period in 2006.

Gross profit. Our gross profit increased $24.4
million, or 120.5%, to $44.7 million for the nine months ended September 30,
2007 from $20.3 million for the same period last year. Gross margin for the nine
months ended September 30, 2007 was 28.7%, as compared to 30.7% for the same
period of 2006. The decrease in gross margin in the nine months ended September
30, 2007 was mainly due to a decrease in our sales prices in the first two
quarters of 2007. We decreased our prices as a strategic move to increase our
market penetration into new markets. During the nine months ended September 30,
2007, about 40% of the contracts we executed were for projects in the western
part of China where economic development is not as advanced as the coastal
cities. We reduced the prices to gain market penetration in these cities.
Despite the decrease of the gross margin in the first nine months of 2007, we
believe the gross margin for the nine months ended September 30, 2007 was within
the range of the average gross margin anticipated by the Company.

Selling and marketing expenses. Our selling and
marketing expenses increased $2.2 million, or 324.6%, to $2.9 million for the
nine months ended September 30, 2007 from $0.7 million for the same period in
2006. This dollar increase was primarily attributable to the consolidation of
the financial results of Cheng Feng, Hongtianzhi, HiEasy, Minking and
Tsingvision, which incurred selling and marketing expenses associated with sales
of their products. As a percentage of revenues, our selling and marketing
expenses increased to 1.9% for the nine months ended September 30, 2007 from
1.1% for the same period in 2006. The percentage increase was mainly due to the
hiring of additional sales staff and promotion cost of new products and
services.

General and administrative expenses. Our general and
administrative expenses increased $5.3 million, or 271.6%, to $7.3 million for
the nine months ended September 30, 2007 from $2.0 million of the same period in
2006. As a percentage of revenues, general and administrative expenses increased
to 4.7% for the nine months ended September 30, 2007 from 3.0% for the same
period in 2006. The dollar and percentage increase was mainly due to the
increase of non-cash employee compensation as discussed below, the consolidation
of the financial results of Cheng Feng, Hongtianzhi, HiEasy, Minking and
Tsingvision, the hiring of additional staff, the increased costs in connection
with documenting and testing our internal controls and professional expenses
related to the costs of being a public reporting company.

Non-cash employee compensation. Non-cash employee
compensation for the nine months ended September 30, 2007 increased by $2.1
million from $0 of the same period in 2006 primarily as a result of the adoption
of the equity incentive plan in February 2007 and grants to senior management
and other staff made under the equity incentive plan after its adoption.

Depreciation and amortization. Our depreciation and
amortization costs increased $2.7 million, or 481.5%, to $3.3 million for the
nine months ended September 30, 2007 from $0.6 million for the same period in
2006. As a percentage of revenues, depreciation and amortization expenses
increased to 2.1% for the nine months ended September 30, 2007 from 0.9% for the
same period in 2006. Such dollar and percentage increase was primarily due to
the amortization of intangible assets from the acquisition of Cheng Feng,
Hongtianzhi, HiEasy, Minking and Tsingvision.

Income from operations. Our income from operations
increased $12.1 million, or 70.7%, to $29.1 million for the nine months ended
September 30, 2007 from $17.0 million for the same period in 2006. As a
percentage of revenues, income from operations decreased to 18.7% for the nine
months ended September 30, 2007 from 25.7% for the same period in 2006. Such
percentage decrease was primarily due to the hiring of additional staff, non
cash employee compensation and amortization of intangible assets from the
acquisition of Hongtianzhi, HiEasy, Minking and Tsingvision.

Other income. Our other income increased $6.3
million, or 630%, to $7.3 million for the nine months ended September 30, 2007
from $1.0 million for the same period in 2006. As a percentage of revenues,
other income increased to 4.7% for the nine months ended September 30, 2007 from
1.5% for the same period in 2006. Such percentage increase was primarily due to
a gain on disposal of property and land use right. Net proceed of $5.5 million
from such disposition was recognized during the nine months ended September 30,
2007.

33

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Fully diluted net proceeds per share were $0.15 for the nine
months ended September 30, 2007, as compared to $0.00 for the same period last
year.
Interest expense. Interest expense for the nine
months ended September 30, 2007 was $0.9 million, as compared to $0 of the same
period in 2006. Such increase was primarily due to borrowing under bank loans
for our operations.Redemption accretion on convertible notes.Redemption accretion on convertible notes for the nine months
ended September 30, 2007 was $9.3 million, as compared to $0 of the same period
in 2006. We raised $110 million from the issuance of convertible notes in
February and April 2007 to finance our acquisitions. The redemption accretion on
convertible notes will not be paid if the convertible notes are converted into
shares of our common stock before their maturities.

Income before taxes.

Income taxes. Our income taxes increased $4.0 million
to $5.7 million for the nine months ended September 30, 2007 from $1.7 million
for the same period of 2006. We incurred more taxes during the first nine months
of 2007 as a result of increased income during that period.

Net income. Net income increased $4.2 million, or
25.8%, to $20.5 million for the nine months ended September 30, 2007 from the
same period in 2006. As a percentage of revenues, net income decreased to 13.1%
for the nine months ended September 30, 2007 from 24.7% for the same period in
2006. This percentage decrease was mainly due to the non-cash expenses including
the redemption accretion on our convertible notes, depreciation and amortization
and non-cash employee compensation.

Liquidity and Capital Resources

General

As of September 30, 2007, we had cash and cash equivalents of
$79.8 million. The following table sets forth a summary of our net cash flows
for the periods indicated.

CASH FLOW All amounts in millions of U.S. dollars

|                                                        | Nine Months Ended September 30,
|------------------------------------------------------- | -------------------------------
|                                                        | 2007                           
|Net cash provided by (used in) operating
    activities | $                              
|Net cash (used in) investing activities                 | $                              
|Net cash provided by financing activities               | $                              
|Effect of exchange rate changes on cash                 | $                              
|Net cash flow                                           | $                              

Operating Activities

Net cash provided by operating activities was $11.4 million
for the nine months period ended September 30, 2007, which is an increase of
$12.5 million from $1.1 million net cash used in operating activities for the
same period of 2006. The increase in net cash provided by operating activities in
the nine months ended September 30, 2007 was primarily due to net income earned
during the nine months ended September 30, 2007.

Investing Activities

Our main uses of cash for investing activities during the
first nine months of 2007 were deposits for the acquisition of subsidiaries and
acquisitions of subsidiaries, properties and intangible assets.

Net cash used in investing activities for the nine months
ended September 30, 2007 was $81.2 million. Our net cash used in investing
activities for the nine months ended September 30, 2006 was $4.0 million. The
increase of net cash used in investing activities was mainly due to the
acquisition of subsidiaries and properties and deposits for the acquisition of
subsidiaries, properties and intangible assets.

34

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Financing Activities

Net cash provided by financing activities for the nine months
ended September 30, 2007 was $116.9 million, which is an increase of $91.1
million from $25.8 million net cash provided by financing activities during the
same period of 2006. The increase of the cash provided by financing activities
was mainly attributable to funds received from the two convertible notes issued
to Citadel Equity Fund, Ltd. ("Citadel").

Loan Facilities

As of September 30, 2007, the amount, maturity date and term of each of our
bank loans were as follows:

All amounts in millions of U.S. dollars

|Bank                             |  | Amount |       | Maturity Date |                | Duration
|-------------------------------- |  | ------ | ----- | ------------- | -------------- | --------
|                                 |  |        |       |               |                |         
|China Construction Bank          |  |        | -     |               | September 2016 |         
|Shanghai PuDong Development Bank |  | $      | 1.33  |               | February 2008  |         
|Shanghai PuDong Development Bank |  | $      | 3.99  |               | February 2008  |         
|Shanghai PuDong Development Bank |  | $      | 0.80  |               | November 2007  |         
|Shanghai PuDong Development Bank |  | $      | 2.66  |               | May 2008       |         
|Shenzhen Commercial Bank         |  | $      | 1.07  |               | November 2007  |         
|Shenzhen Commercial Bank         |  | $      | 1.28  |               | January 2009   |         
|Total                            |  | $      | 11.13 |               |                |         

In February 2007, we completed a financing with Citadel
pursuant to which we issued to Citadel $60 million aggregate principal amount of
guaranteed senior unsecured convertible notes due 2012 (the "February Notes").
The February Notes bear an annual interest of 1% and carry an initial conversion
price of $18.0 per share. If the February Notes are not converted before their
maturity, they will be redeemed by us on the maturity date at a redemption price
equal to 100% of the principal amount of the February Notes then outstanding
plus an additional amount of 15.0% per annum, calculated on a quarterly
compounded basis, plus any accrued and unpaid interest. The net proceeds from
such financing are and will be used for working capital and our acquisition
plan.

In April 2007, we completed another financing with Citadel
pursuant to which we issued to Citadel $50 million aggregate principal amount of
guaranteed senior unsecured convertible notes due 2012 (the "April Notes"). The
April Notes bear an annual interest of 1% and carry an initial conversion price
of $23.60 per share. If the April Notes are not converted before their maturity,
they will be redeemed by us on the maturity date at a redemption price equal to
100% of the principal amount of the April Notes then outstanding plus an
additional amount of 15.0% per annum, calculated on a quarterly compounded
basis, plus any accrued and unpaid interest. The net proceeds from such
financing are and will be used for working capital and our acquisition plan.

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 September 30, 2007:

All amounts in millions of U.S. dollars

|                            | Payments due by period
|--------------------------- | ----------------------
|                            |                       
|                            |                       
|Long-Term Debt Obligations  |                       
|Operating Lease Obligations |                       
|Total                       |                       

Critical Accounting Policies

This "Managements Discussion and Analysis of Financial
Condition and Results of Operations" is based on our condensed consolidated
financial statements, which have been prepared using accounting principles
generally accepted in the United States of America. The preparation of financial statements, in
conformity with accounting principles generally accepted in the United States,
requires our management to make assumptions, estimates and judgments that affect
the amounts reported in the financial statements, including the notes thereto,
and related disclosures of commitments and contingencies, if any. We consider
our critical accounting policies to be those that require the more significant
judgments and estimates in the preparation of financial statements, including
basis of consolidation, intangible assets, goodwill, inventories, revenue
recognition, foreign currency translation, use of estimates and income taxes.
Except for the implementation of Financial Accounting Standards Board ("FASB")
Interpretation No. 48 ("FIN 48"), as described below, management believes there
have been no material changes during the nine months ended September 30, 2007 to
the critical accounting policies discussed in the Managements Discussion and
Analysis of Financial Condition and Results of Operations section of our Annual
Report on Form 10-K for the year ended December 31, 2006, as filed with the SEC
on March 21, 2007, as amended on March 23.

35

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We adopted the provisions of FIN 48, "Accounting for
Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" on
January 1, 2007. We did not have any material unrecognized tax benefits and
there was no effect on our financial condition or results of operations as a
result of implementing FIN 48.

We file income tax returns in the U.S. federal jurisdiction
and PRC jurisdictions. We were not subject to U.S. federal tax examinations for
years before 2006. We do not believe there will be any material changes in our
unrecognized tax positions over the next 12 months.

Our policy is to recognize interest and penalties accrued on
any unrecognized tax benefits as a component of income tax expense. As of the
date of adoption of FIN 48, we did not have any accrued interest or penalties
associated with any unrecognized tax benefits, nor were any interest expenses
recognized during the quarter. Our effective tax rate differs from the federal
statutory rate primarily due to non-deductible expenses, temporary differences,
and preferential tax treatment.

Revenue from the outright sale of security and surveillance equipment is
recognized when delivery occurs and risk of ownership passes to the customers.
We derive a portion of our revenue from one-year software upgrades. These
services are typical postcontract service ("PCS") arrangements according to
AICPA SOP 97-2. SOP 97-2 Paragraph 59 states:  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."

Our revenues from security and surveillance system one year
software upgrades is recognized when delivery occurs and the risk of ownership
passes to the customers, as we believe it meets the conditions of SOP 97-2.

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.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES 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.

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 no longer 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.

36

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Because substantially all of our earnings and cash assets are
denominated in Renminbi, but our reporting currency is the U.S. dollar,
fluctuations in the exchange rate between the U.S. dollar and the Renminbi will
affect our balance sheet and our earnings per share in U.S. dollars. In
addition, appreciation or depreciation in the value of the Renminbi relative to
the U.S. dollar would affect our financial results reported in U.S. dollar terms
without giving effect to any underlying change in our business or results of
operations. Fluctuations in the exchange rate will also affect the relative
value of any dividend we issue in the future that will be exchanged into U.S.
dollars and earnings from, and the value of, any U.S. dollar-denominated
investments we make in the future.

Very limited hedging transactions are available in China to
reduce our exposure to exchange rate fluctuations. To date, we have not entered
into any hedging transactions in an effort to reduce our exposure to foreign
currency exchange risk. While we may enter into hedging transactions in the
future, the availability and effectiveness of these transactions may be limited,
and we may not be able to successfully hedge our exposure at all. In addition,
our foreign currency exchange losses may be magnified by PRC exchange control
regulations that restrict our ability to convert Renminbi into foreign
currencies.

Inflation

Inflationary factors such as increases in the cost of our
products 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 may increase our 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 President and Chief Executive Officer, and Terence Yap, our Chief
Financial Officer, has evaluated the design and operating effectiveness of our
disclosure controls and procedures as of September 30, 2007. Based upon their
evaluation, these executive officers have concluded that our disclosure controls
and procedures are effective as of September 30, 2007.

Changes in Internal Control Over Financial Reporting.
There has been no change to our internal control over financial reporting during
the three months ended September 30, 2007 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

37

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PART II 
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may have disputes that arise in the
ordinary course of our business. Currently, there are no 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 of our Annual Report on Form 10-K for
the year ended December 31, 2006, filed with the SEC on March 21, 2007, and
amended on March 23, 2007.

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

On July 2, 2007, pursuant to an equity transfer agreement
with Yi Li, the sole owner of Ocean Pacific Technology Limited, we agreed to
issue 459,000 shares of our common stock to Mr. Li as part of the total
consideration for the acquisition of 100% of the equity interest of Ocean
Pacific Technology Limited. The offer and sales of the securities were made in
an offshore transaction pursuant to Regulation S under the Securities Act.

On September 20, 2007, pursuant to an exclusive cooperation
agreement with Chuang Guan, we agreed to issue 466,500 shares of our common
stock to Chuang Guan or its designees within 90 days after the signing of the
agreement as part of the consideration for inducing Chuang Guan to enter into
such agreement. The offer and sales of the securities were made in an offshore
transaction pursuant to Regulation S under the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities in the quarter
ended September 30, 2007.

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

N/A

ITEM 5. OTHER INFORMATION

N/A

ITEM 6. EXHIBITS

|Exhibit |  |                                                                                                                                                                            |  | Filed    |  | To be Filed  |  |                              
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- |  | ------------ |  | -----------------------------
|Index   |  | Description of Document                                                                                                                                                    |  | Herewith |  | by Amendment |  | Incorporated by Reference To:
|        |  |                                                                                                                                                                            |  |          |  |              |  |                              
|        |  |                                                                                                                                                                            |  |          |  |              |  |                              
|31.1    |  | Certification of
    Principal Executive Officer filed pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002                                                       |  | X        |  |              |  |                              
|        |  |                                                                                                                                                                            |  |          |  |              |  |                              
|31.2    |  | Certification of
    Principal Financial Officer filed pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002                                                       |  | X        |  |              |  |                              
|        |  |                                                                                                                                                                            |  |          |  |              |  |                              
|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 |  | X        |  |              |  |                              
|        |  |                                                                                                                                                                            |  |          |  |              |  |                              
|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    |  | X        |  |              |  |                              

38

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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 thereunto duly authorized.

DATED: November 13, 2007

| | China
    Security & Surveillance Technology, Inc.
| | --------------------------------------------------
| |                                                   
| |                                                   
| | By:                                               
| |                                                   
| |                                                   
| |                                                   
| |                                                   
| | By:                                               
| |                                                   
| |                                                   



39

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EXHIBIT INDEX

|Exhibit |  |                                                                                                                                                                            |  | Filed    |  | To be Filed  |  |                              
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- |  | ------------ |  | -----------------------------
|Index   |  | Description of Document                                                                                                                                                    |  | Herewith |  | by Amendment |  | Incorporated by Reference To:
|        |  |                                                                                                                                                                            |  |          |  |              |  |                              
|        |  |                                                                                                                                                                            |  |          |  |              |  |                              
|31.1    |  | Certification of
    Principal Executive Officer filed pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002                                                       |  | X        |  |              |  |                              
|        |  |                                                                                                                                                                            |  |          |  |              |  |                              
|31.2    |  | Certification of
    Principal Financial Officer filed pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002                                                       |  | X        |  |              |  |                              
|        |  |                                                                                                                                                                            |  |          |  |              |  |                              
|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 |  | X        |  |              |  |                              
|        |  |                                                                                                                                                                            |  |          |  |              |  |                              
|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    |  | X        |  |              |  |                              





40

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