On August 28, 2009, China Information Security Technology, Inc. (the "Company") and its wholly-owned subsidiary China Public Security Holdings Limited, a British Virgin Islands company ("CPSH"), entered into a Share Purchase Agreement (the "Purchase Agreement") with Rita Kwai Fong Leung (the "Seller"), the sole shareholder of Topwell Treasure Ltd., a Hong Kong limited company ("Topwell"), for the purchase of Topwell and its wholly-owned Chinese subsidiary, Huipu Electronics (Shenzhen) Co., Ltd. ("Huipu"), for an aggregate purchase price of $16,000,000. The Company is obligated to pay $8,000,000 (approximately RMB54,640,000) of the purchase price in cash on or before November 28, 2009, and $4,000,000 in 1,101,930 shares of the Company’s common stock, par value $0.01 (the "Shares"), valued at $4,000,000, or approximately $3.63 per share (the average of the closing price of the Company’s common stock at Nasdaq for the 20 trading days prior to August 28, 2009), within 90 days of the closing of the Purchase Agreement. The remaining $4,000,000 in 1,101,930 shares of the Company’s common stock should be issued by the Company according to the following make good provision. The closing is expected to occur on or before October 1, 2009.

The Purchase Agreement contains a make good provision, pursuant to which, the Company is obligated to issue and deliver shares of the Company’s common stock to the Seller if Topwell attains certain audited consolidated after tax net income ("ATNI") thresholds for fiscal years 2009 through 2011, as follows:

Topwell’s wholly-owned PRC subsidiary, Huipu, was a major customer of the Company and accounted for 13% of the Company’s sales in fiscal year 2008. In May 2008, the Company’s wholly-owned PRC subsidiary, Information Security Technology (China) Co., Ltd. ("IST"), entered into a contractual joint venture agreement with Topwell’s wholly-owned PRC subsidiary, Huipu, to set up a joint venture project in the manufacturing and sales of LCD screens. In May 2008, IST also entered into a contractual joint venture agreement with Lianchengwen Technology (Shenzhen) Co., Ltd. to set up a joint venture project in leasing LCD screens. According to the contracts, the Company provided funds to the projects for equipment acquisition, repayable by the other parties if certain revenue and income targets were not met. This contractual arrangement also resulted in the creation of a variable interest under FIN 46R, as the Company is the primary beneficiary of the project. Effective December 31, 2008, the contractual joint venture arrangements were terminated and IST received approximately $718,000, representing its agreed-upon share of the joint venture project’s net income from inception through termination. As a result of the termination, the cash flows of the joint ventures have been eliminated from IST’s ongoing operations and IST has no continuing involvement in the projects. Accordingly, the assets and liabilities and revenues and expenses of the two joint ventures are no longer included in the Company’s consolidated financial statements and the $718,000 has been recorded as income from discontinued operations.

Other than with respect to the foregoing, Topwell has not had a material relationship with the Company or any of the Company’s officers, directors or affiliates or any associate of any such officer or director prior to its entry into this transaction.

The foregoing summary of the material terms and conditions of the Purchase Agreement is qualified in its entirety by reference to the Purchase Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated by reference herein.

The information pertaining to the Company’s shares of common stock in Item 1.01 is incorporated herein by reference in its entirety. The Shares of the Company’s common stock that will be issuable to the Seller within 90 days of the closing of the Purchase Agreement will not have been registered under the Securities Act of 1933, as amended (the "Securities Act") and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The Company intends to issue the Shares in reliance on the exemption from registration provided by Regulation S of the Securities Act. The Company’s reliance upon Regulation S was based upon the following factors: (a) the Seller is not a U.S. person and is not acquiring the Shares for the account or benefit of any U.S. person, (b) the Seller agreed not to offer or sell the Shares (including any pre-arrangement for a purchase by a U.S. person or other person in the United States) directly or indirectly, in the United States or to any natural person who is a resident of the United States or to any other U.S. person as defined in Regulation S unless registered under the Securities Act and all applicable state laws or an exemption from the registration requirements of the Securities Act and similar state laws is available and (c) at the time of the origination of contact concerning the Purchase Agreement and at the date of the execution and delivery of this Agreement, the Seller was outside of the United States.

  (d)   Exhibits.