UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2012

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the ~~quarterly~~transition period ~~ended:~~from ~~September~~____________to ~~30, 2011~~ _____________

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________to ______________

Commission File Number: 001-34076

CHINA INFORMATION TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Its Charter)

Nevada	98-0575209
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

21st Floor, Everbright Bank Building Zhuzilin, Futian District Shenzhen, Guangdong, 518040 People’s Republic of China (Address of principal executive offices, Zip Code) ~~(+86) 755 -8370-8333 (Registrant’s telephone number, including area code)~~

~~_____________________________________________________(Former~~ ~~name,~~(+86) ~~former~~755 ~~address~~-8370-8333 (Registrant’s ~~and~~telephone ~~former fiscal year~~number, ifincluding ~~changed~~area ~~since last report~~code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ] No [ ]

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

Yes [ X ] No [ ]

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

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

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

Yes [ ] No [ X ]

The number of shares outstanding of each of the issuer’s classes of common stock, as of ~~November~~May 94, ~~2011~~2012 is as follows:

Class of Securities	~~Shares Outstanding~~	Shares Outstanding
Common Stock, $0.01 par value	~~55,104,715~~	27,007,608

Quarterly Report on Form 10-Q
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1.	Financial Statements.	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2421
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	3630
Item 4.	Controls and Procedures.	3730
PART II
OTHER INFORMATION
Item 1.	Legal Proceedings	3731
Item 1A.	Risk Factors.	3731
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	3731
Item 3.	Defaults Upon Senior Securities	3832
Item 4.	~~(Removed~~Mine ~~and~~Safety ~~Reserved)~~Disclosures	3832
Item 5.	Other Information.	3832
Item 6.	Exhibits	3932

PART I FINANCIAL INFORMATION

PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.

CHINA INFORMATION TECHNOLOGY, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

Contents	Page(s)
Condensed Consolidated Balance Sheets	2
Condensed Consolidated Statements of (Loss) Income	3
Condensed Consolidated Statements of Comprehensive (Loss) Income	4
Condensed Consolidated Statement of Changes in Equity	5
Condensed Consolidated Statements of Cash Flows	6
Notes to Condensed Consolidated Financial Statements	7 - 20

~~ITEM~~ - 1. ~~FINANCIAL~~- ~~STATEMENTS.~~

CHINA INFORMATION TECHNOLOGY, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
MARCH 31, 2012 AND DECEMBER 31, 2011
Contents	Page(s)
Expressed in U.S. dollars (Except for share amounts)
Condensed Consolidated Balance Sheets	2 - 3
				March 31			December 31
Condensed Consolidated Statements of Income	4
				2012			2011
Condensed Consolidated Statements of Comprehensive Income	5
		NOTES		(Unaudited)
Condensed Consolidated Statement of Changes in Equity	6
ASSETS
Condensed Consolidated Statements of Cash Flows	7-8
CURRENT ASSETS
Notes to Condensed Consolidated Financial Statements	9-23
Cash and cash equivalents			$	7,600,800		$	14,019,634
Restricted cash				11,043,299			12,538,049
Accounts receivable:
Billed, net of allowance for doubtful accounts of $10,296,000 and $9,373,000, respectively				22,791,406			31,117,415
Unbilled				82,247,636			72,225,044
Bills receivable				334,541			247,338
Advances to suppliers				6,593,778			5,020,747
Amounts due from related parties		6		239,569			22,823
Inventories, net of provision of $5,387,000 and $5,224,000, respectively		7		25,042,389			22,317,260
Other receivables and prepaid expenses				8,341,022			9,603,954
Deferred tax assets		12		2,740,487			2,548,834
TOTAL CURRENT ASSETS				166,974,927			169,661,098
Deposit for purchase of land use rights		10(a)		27,739,710			27,564,586
Long-term investments		8		2,416,819			2,401,561
Property, plant and equipment, net		9		89,068,915			91,161,093
Land use rights, net		10(b)		1,957,709			1,956,616
Intangible assets, net		10(c)		14,497,630			14,380,459
Goodwill				54,346,040			53,983,687
Deferred tax assets		12		669,208			683,042
TOTAL ASSETS			$	357,670,958		$	361,792,142
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term bank loans		11 $		35,001,363		$	40,983,457
Accounts payable				20,690,465			19,013,509
Bills payable				24,806,687			27,399,393
Advances from customers				5,207,919			6,403,966
Amounts due to related parties		6		621,835			593,617
Accrued payroll and benefits				2,574,306			3,060,384
Other payables and accrued expenses				12,728,599			6,784,353
Income tax payable		12		3,559,753			3,525,949
TOTAL CURRENT LIABILITIES				105,190,927			107,764,628
Long-term bank loans		11		100,722			109,524
Amounts due to related parties, long-term portion		6		12,704			12,624
Deferred tax liabilities		12		1,336,669			1,365,680
TOTAL LIABILITIES				106,641,022			109,252,456
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock, par $0.01; authorized capital 100,000,000 shares; shares issued and outstanding 2012: 27,007,608 shares, 2011: 27,230,835 shares				286,326			286,326
Treasury stock, 2012: 584,231 shares, 2011: 360,627at cost				(1,011,091	)		(695,514	)
Additional paid-in capital				101,261,307			101,261,307
Reserve				14,488,533			14,488,533
Retained earnings				92,618,690			95,600,619
Accumulated other comprehensive income				21,446,108			19,925,259
Total equity of the Company				229,089,873			230,866,530
Non-controlling interest				21,940,063			21,673,156
Total equity				251,029,936			252,539,686
TOTAL LIABILITIES AND EQUITY			$	357,670,958		$	361,792,142

The -accompanying 1notes -are an integral part of these unaudited condensed consolidated financial statements

- ~~CHINA~~2 ~~INFORMATION TECHNOLOGY, INC.~~- ~~CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2011 AND DECEMBER 31, 2010 Expressed in U.S. dollars (Except for share amounts)~~

			September 30			December 31
CHINA INFORMATION TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME THREE MONTHS ENDED MARCH 31, 2012 AND 2011 Expressed in U.S. dollars (Except for share amounts) (Unaudited)
	NOTES		2011			2010
				Three Months			Three Months
			(Unaudited)
				Ended			Ended
ASSETS
				March 31,			March 31,
CURRENT ASSETS
	NOTES			2012			2011
Cash and cash equivalents		$	5,179,223		$	18,166,857
Revenue - Products			$	6,037,489		$	8,006,993
Restricted cash			10,835,585			8,344,147
Revenue - Software				6,366,430			13,891,525
Accounts receivable:
Revenue - System integration				3,576,377			4,920,500
Billed, net of allowance for doubtful accounts of $6,690,000 and $6,073,000, respectively			21,464,972			31,172,599
Revenue - Others				299,693			129,730
Unbilled			83,085,830			67,622,656
TOTAL REVENUE				16,279,989			26,948,748
Bills receivable			551,437			201,003
Cost - Products sold				4,719,407			5,810,023
Advances to suppliers			9,587,335			9,246,437
Cost - Software sold				2,897,949			4,249,606
Amounts due from related parties	6		64,636			330,876
Cost - System integration				2,641,726			3,143,157
Inventories, net of provision of $1,030,000 and $578,000, respectively	7		32,886,623			19,931,866
Cost - Others				239,225			91,122
Other receivables and prepaid expenses			4,940,203			2,463,562
TOTAL COST				10,498,307			13,293,908
Deferred tax assets	12		1,383,572			1,565,006
GROSS PROFIT				5,781,682			13,654,840
TOTAL CURRENT ASSETS			169,979,416			159,045,009
Administrative expenses				(5,648,632	)		(2,504,307	)
Deposit for software purchase			1,721,500			3,034,000
Research and development expenses				(1,481,027	)		(733,330	)
Deposit for purchase of land use rights	10(a)		27,406,974			26,566,377
Selling expenses				(1,860,628	)		(1,502,150	)
Long-term investments	8		2,387,829			3,296,252
(LOSS) INCOME FROM OPERATIONS				(3,208,605	)		8,915,053
Property, plant and equipment, net	9		88,604,444			79,348,883
Subsidy income				393,780			30,440
Land use rights, net	10(b)		1,956,630			1,929,194
Other income, net				467,653			833,780
Intangible assets, net	10(c)		14,113,898			13,725,274
Interest income				76,676			95,006
Goodwill			53,657,569			51,918,275
Interest expense				(828,186	)		(699,706	)
Deferred tax assets	12		828,076			538,460
(LOSS) INCOME BEFORE INCOME TAXES				(3,098,682	)		9,174,573
TOTAL ASSETS		$	360,656,336		$	339,401,724
Income tax benefit (expense)	12			27,001			(1,080,518	)
LIABILITIES AND EQUITY
NET (LOSS) INCOME				(3,071,681	)		8,094,055
CURRENT LIABILITIES
Less: Net loss attributable to the non-controlling interest				211,883			128,278
Short-term bank loans	11	$	35,600,638		$	35,326,566
NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY	3		$	(2,859,798	)	$	8,222,333
Accounts payable			17,717,509			17,249,334
Weighted average number of shares
Bills payable			28,023,135			20,536,475
Basic	3			27,048,521			26,265,405
Advances from customers			5,014,972			7,480,686
Diluted	3			27,048,521			26,265,405
Amounts due to related parties	6		593,491			1,293,866
Earnings (loss) per share - Basic and Diluted
Accrued payroll and benefits			3,065,738			4,304,988
Basic - Net (loss) income attributable to the Company’s common stockholders			$	(0.11	)	$	0.31
Other payables and accrued expenses			9,622,439			6,953,561
Diluted - Net (loss) income attributable to the Company’s common stockholders			$	(0.11	)	$	0.31
Contingent consideration, current portion			-			3,267,087
Income tax payable	12		3,109,904			3,809,708
TOTAL CURRENT LIABILITIES			102,747,826			100,222,271
Long-term bank loans	11		118,036			5,863,205
Amounts due to related parties, long-term portion	6		12,552			5,014,949
Contingent consideration, net of current portion			-			901,171
Deferred tax liabilities	12		1,414,158			1,824,434
TOTAL LIABILITIES			104,292,572			113,826,030

The -accompanying 2notes - are an integral part of these unaudited condensed consolidated financial statements

COMMITMENTS AND CONTINGENCIES		-			-
EQUITY
Common stock, par $0.01; authorized capital 200,000,000 shares; shares
issued and outstanding 2011: 55,182,924, 2010: 52,061,787 shares		286,326			255,115
Treasury stock, 6,000 shares, at cost		(11,468	)		(11,468	)
Additional paid-in capital		101,261,307			92,294,350
Reserve		12,968,985			12,968,985
Retained earnings		104,992,512			90,240,665
Accumulated other comprehensive income		18,559,709			11,325,040
Total equity of the Company		238,057,371			207,072,687
Non-controlling interest		18,306,393			18,503,007
Total equity		256,363,764			225,575,694
TOTAL LIABILITIES AND EQUITY	$	360,656,336		$	339,401,724

- 3 -

CHINA ~~The~~INFORMATION ~~accompanying~~TECHNOLOGY, ~~notes~~INC.CONDENSED CONSOLIDATED ~~are~~STATEMENTS anOF ~~integral~~COMPREHENSIVE ~~part~~(LOSS) ofINCOME ~~these~~FOR ~~unaudited~~THE THREE MONTHS ~~condensed~~ENDED ~~consolidated~~MARCH ~~financial~~31, ~~statements~~2012 AND 2011 Expressed in U.S. dollars (Except for share amounts) (Unaudited)

- 3 -

		Three Months			Three Months
		Ended			Ended
		March 31,			March 31,
		2012			2011
Net (loss) income	$	(3,071,681	)	$	8,094,055
Other comprehensive (loss) income:
Foreign currency translation gain		1,594,075			1,572,519
Comprehensive (loss) income		(1,477,606	)		9,666,574
Comprehensive loss attributable to the non-controlling interest		138,657			77,818
Comprehensive (loss) income attributable to the Company	$	(1,338,949	)	$	9,744,392

CHINA INFORMATION TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
Expressed in U.S. dollars (Except for share amounts)
(Unaudited)
	NOTES		Three Months Ended						Nine Months Ended
			September 30,			September 30,			September 30,			September 30,
			2011			2010			2011			2010
Revenue - Products		$	13,042,469		$	12,643,172		$	32,162,844		$	26,462,653
Revenue - Software			6,852,447			29,474,263			29,999,605			67,059,131
Revenue - System integration			8,134,110			1,347,984			20,189,827			7,617,390
Revenue - Others			433,545			340,712			946,822			1,488,952
TOTAL REVENUE			28,462,571			43,806,131			83,299,098			102,628,126
Cost - Products sold			10,315,504			10,725,203			24,910,658			21,779,326
Cost - Software sold			2,534,256			11,314,585			8,921,148			27,973,686
Cost - System integration			5,983,569			621,310			14,097,762			3,667,840
Cost - Others			143,894			59,440			306,786			205,922
TOTAL COST			18,977,223			22,720,538			48,236,354			53,626,774
GROSS PROFIT			9,485,348			21,085,593			35,062,744			49,001,352
Administrative expenses			(5,181,609	)		(5,449,209	)		(11,061,388	)		(10,840,741	)
Research and development expenses			(1,106,500	)		(937,774	)		(2,990,237	)		(2,067,854	)
Selling expenses			(1,831,845	)		(1,697,564	)		(5,270,739	)		(4,401,337	)
INCOME FROM OPERATIONS			1,365,394			13,001,046			15,740,380			31,691,420
Subsidy income			475,026			6,521			592,530			438,201
Other (loss) income, net			(109,459	)		350,874			1,481,792			992,973
Interest income			119,861			22,024			254,807			51,318
Interest expense			(943,947	)		(548,184	)		(2,420,600	)		(960,832	)
INCOME BEFORE INCOME TAXES			906,875			12,832,281			15,648,909			32,213,080
Income tax expense	12		(11,807	)		(2,361,593	)		(1,331,765	)		(5,696,285	)
NET INCOME			895,068			10,470,688			14,317,144			26,516,795
Less: Net loss (income ) attributable to the non-controlling interest			32,759			139,080			434,703			(273,850	)
NET INCOME ATTRIBUTABLE TO THE COMPANY	3	$	927,827		$	10,609,768		$	14,751,847		$	26,242,945
Weighted average number of shares
Basic	3		53,801,841			51,466,927			52,994,328			51,377,933
Diluted	3		53,801,841			51,466,927			52,994,328			51,377,933
Earnings per share - Basic and Diluted
Basic - Net income attributable to the Company's common stockholders		$	0.02		$	0.21		$	0.28		$	0.51
Diluted - Net income attributable to the Company's common stockholders		$	0.02		$	0.21		$	0.28		$	0.51

- 4 -

-CHINA 4INFORMATION -TECHNOLOGY, INCCONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY THREE MONTHS ENDED MARCH 31, 2012 Expressed in U.S. dollars(Except for share amounts) (Unaudited)

CHINA INFORMATION TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 Expressed in U.S. dollars (Except for share amounts) (Unaudited)

																	Accumulated
	Common stock			Treasury stock						Additional							other		Non
	Par value $0.01			Par value $0.01						Paid-in				Retained			comprehensive		controlling
	Shares		Amount	Shares			Amount			Capital		Reserve		earnings			income		interest			Total
BALANCE AS AT DECEMBER 31, 2011	27,591,462	$	286,326	(360,627	)	$	(695,514	)	$	101,261,307	$	14,488,533	$	95,600,619		$	19,925,259	$	21,673,156		$	252,539,686

Purchase of treasury stock (Note 14)	-		-	(223,604	)		(315,577	)		-		-		-			-		-			(315,577	)
Rounding impact of Share changes due to one for two reverse stock split of common stock	377		-	-			-			-		-		-			-		-			-
Net loss for the period	-		-	-			-			-		-		(2,859,798	)		-		(211,883	)		(3,071,681	)
Capital injection to Zhongtian by minority shareholders	-		-	-			-			-		-		-			-		283,433			283,433
Changes in an Ownership Interest in Zhongtian	-		-	-			-			-		-		(122,131	)		-		122,131			-
Foreign currency translation gain	-		-	-			-			-		-		-			1,520,849		73,226			1,594,075
BALANCE AS AT MARCH 31, 2012	27,591,839	$	286,326	(584,231	)	$	(1,011,091	)	$	101,261,307	$	14,488,533	$	92,618,690		$	21,446,108	$	21,940,063		$	251,029,936

		Three Months Ended					Nine Months Ended
		September			September		September		September
		30,			30,		30,		30,
		2011			2010		2011		2010
Net income	$	895,068		$	10,470,688	$	14,317,144	$	26,516,795
Other comprehensive income:
Foreign currency translation gain		2,590,250			2,948,257		7,472,758		3,972,752
Comprehensive income		3,485,318			13,418,945		21,789,902		30,489,547
Comprehensive loss (income) attributable to the non-controlling interest		(57,098	)		99,972		196,614		(333,456	)
Comprehensive income attributable to the Company	$	3,428,220		$	13,518,917	$	21,986,516	$	30,156,091
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

- 5 -

CHINA INFORMATION TECHNOLOGY, INC
CHINA INFORMATION TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2011
THREE MONTHS ENDED MARCH 31, 2012 AND 2011
Expressed in U.S. dollars (Except for share amounts)
Expressed in U.S. dollars
(Unaudited)
																			Accumulated
		Three Months			Three Months
		Common stock					Treasury stock						Additional						other		Non
		Ended			Ended
		Par value $0.01					Par value $0.01						Paid-in				Retained		comprehensive		controlling
		March 31, 2012			March 31, 2011
		Shares			Amount		Shares			Amount			Capital		Reserve		earnings		income		interest			Total
OPERATING ACTIVITIES
BALANCE AS AT DECEMBER 31, 2010		52,061,787		$	255,115		(6,000	)	$	(11,468	)	$	92,294,350	$	12,968,985	$	90,240,665	$	11,325,040	$	18,503,007		$	225,575,694
Net (loss) income	$	(3,071,681	)	$	8,094,055
Stock-based compensation (Note 14)		250,000			2,500		-			-			1,142,499		-		-		-		-			1,144,999
Adjustments to reconcile net income to net cash provided by operating activities:
Common stock issued upon achieved earn out target (Note 14)		330,578			3,306		-			-			1,719,006		-		-		-		-			1,722,312
Provision (recovery) for losses on accounts receivable and other current assets		781,955			(866,161	)
Common stock issued on conversion of shareholder’s loan (Note 6)		1,851,852			18,518		-			-			4,981,482		-		-		-		-			5,000,000
Depreciation		2,989,548			2,471,967
Common stock issued upon amendment of the earn out clause in relation to business acquisition		688,707			6,887		-			-			957,303		-		-		-		-			964,190
Amortization of intangible assets and land use rights		458,487			456,221
Net income (loss) for the period		-			-		-			-			-		-		14,751,847		-		(434,703	)		14,317,144
(Gain) loss on disposal of property, plant and equipment, net		(7,289	)		11,074
Imputed interests in relation to shareholder’s loan (Note 6)		-			-		-			-			166,667		-		-		-		-			166,667
Provision for obsolete inventories		1,057,033			266,658
Foreign currency translation gain		-			-		-			-			-		-		-		7,234,669		238,089			7,472,758
Change in fair value of contingent consideration		-			(1,178,375	)
BALANCE AS AT SEPTEMBER 30, 2011		55,182,924		$	286,326		(6,000	)	$	(11,468	)	$	101,261,307	$	12,968,985	$	104,992,512	$	18,559,709	$	18,306,393		$	256,363,764
Change in deferred income tax		(195,466	)		(113,687	)
Impairment of long-term investments		-			548,845
Imputed interests in relation to shareholder’s loan		-			62,500
Changes in operating assets and liabilities, net of effects of business acquisitions
Decrease in restricted cash		346,883			1,133,647
(Increase) decrease in accounts receivable		(1,908,668	)		139,635
(Increase) in advances to suppliers		(1,440,889	)		(3,801,954	)
Decrease (increase) in other receivables and prepaid expenses		1,224,617			(1,444,804	)
Increase in inventories		(3,687,425	)		(8,377,510	)
(Decrease) increase in accounts payable and bills payable		(1,213,669	)		4,853,698
(Decrease) increase in advances from customers		(1,239,856	)		107,117
(Decrease) increase in amounts due to/from related parties		(210,224	)		1,426,360
Increase (decrease) in accrued expenses and other liabilities		5,416,757			(1,751,438	)
(Increase) decrease in income tax payable		11,979			(137,684	)
Net cash ( used in) provided by operating activities		(687,908	)		1,900,164
INVESTING ACTIVITIES
Proceeds from sales of property and equipment		8,662			-
Purchases of property, plant and equipment		(313,820	)		(334,364	)
Capitalized and purchased software development costs		(472,993	)		(441,182	)
Dividends received		79,368			-
Deposit for land-use-rights		-			(2,237,340	)
Net cash used in investing activities		(698,783	)		(3,012,886	)
FINANCING ACTIVITIES
Borrowings under short-term loans		15,994,996			27,350,005
Capital injection to Zhongtian by minority shareholders		283,433			-
Repayment of short-term loans		(22,237,204	)		(27,411,314	)
Repayment of long-term loans		(8,894	)		(570,750	)
Purchase of treasury stock		(315,577	)		-
Decrease (increase) in restricted cash in relation to bank borrowings		1,231,501			(827,683	)
Net cash used in financing activities		(5,051,745	)		(1,459,742	)
Effect of exchange rate changes on cash and cash equivalents		19,602			86,446
NET DECREASE IN CASH AND CASH EQUIVALENTS		(6,418,834	)		(2,486,018	)
CASH AND CASH EQUIVALENTS, BEGINNING		14,019,634			18,166,857
CASH AND CASH EQUIVALENTS, ENDING	$	7,600,800		$	15,680,839
Supplemental disclosure of cash flow information:
Cash paid during the period
Income taxes	$	209,740		$	1,342,979
Interest paid	$	807,734		$	658,460

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

- 6 -

CHINA INFORMATION TECHNOLOGY, INC. ~~CONDENSED CONSOLIDATED~~ ~~STATEMENTS~~NOTES OFTO ~~CASH~~THE ~~FLOWSNINE~~CONDENSED ~~MONTHS~~CONSOLIDATED ~~ENDED~~FINANCIAL ~~SEPTEMBER 30, 2011 AND 2010 Expressed in U.S. dollars~~ STATEMENTS (~~Unaudited~~UNAUDITED)

		Nine Months			Nine Months
		Ended			Ended
		September 30, 2011			September 30, 2010
OPERATING ACTIVITIES
Net income	$	14,317,144		$	26,516,795
Adjustments to reconcile net income to net cash provided by operating activities:
Provide provision for losses on accounts receivable and other receivables		323,961			1,060,348
Depreciation		7,966,319			5,415,554
Amortization of intangible assets and land use rights		1,315,848			1,349,745
Stock-based compensation		-			1,130,000
Loss on disposal of property, plant and equipment, net		195,196			321,854
Loss on write-off of land use rights		-			231,615
Impairment of long-term investments		997,449			850,320
Provide provision for obsolete inventories		426,295			130,328
Change in fair value of contingent consideration		(1,481,757	)		(940,986	)
Change in deferred income tax		(643,327	)		162,900
Imputed interests in relation to shareholder's loan		166,667			125,000
Changes in operating assets and liabilities
Increase in restricted cash		(2,966,985	)		(658,872	)
Increase in accounts receivable		(3,488,629	)		(19,772,920	)
Increase in advances to suppliers		(194,542	)		(2,394,325	)
(Increase) decrease in other receivables and prepaid expenses		(2,267,718	)		8,134,566
Increase in inventories		(12,515,398	)		(12,431,677	)
Increase in accounts and bills payable		6,662,046			11,143,415
(Decrease) increase in advances from customers		(2,655,120	)		2,100,476
(Decrease) increase in amounts due to related parties		(501,058	)		75,244
Increase (decrease) in accrued expenses and other liabilities		2,231,628			(5,931,994	)
(Decrease) increase in income tax payable		(663,790	)		2,253,344
Net cash provided by operating activities		7,224,229			18,870,730
INVESTING ACTIVITIES
Purchase of land use rights		-			(231,615	)
Purchases of property, plant and equipment		(7,239,423	)		(24,332,630	)
Capitalized and purchased software development costs		(1,237,774	)		(899,204	)
Proceeds from sales of property and equipment		-			55,925
Deposit for purchase of land use rights		-			(17,266,658	)
Deposit for software purchase		(5,934,390	)		(4,963,154	)
Net cash (used in) investing activities		(14,411,587	)		(47,637,336	)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

- China 7Information Technology Inc (the “Company” or “CNIT”), together with its subsidiaries, is a total solutions provider of information and display technology products and services in the People’s Republic of China (“PRC”). The Company’s total solutions include specialized software, hardware, systems integration, and related services. These services are provided through the Company’s wholly-owned PRC subsidiaries, Information Security Technology (PRC) Co., Ltd ("IST"), Information Security Software (China) Co., Ltd (formerly, Information Security Development Technology Co., Ltd), or "ISS," Shenzhen Bocom Multimedia Display Technology Co., Ltd ("Bocom"), and Huipu Electronics (Shenzhen) Co., Ltd (“Huipu”), and through the Company’s variable interest entity ("VIE"), iASPEC Software Company Limited ("iASPEC"), and its subsidiaries, Wuda Geoinformatics Co., Ltd ("Geo"), Shenzhen Zhongtian Development Company Ltd (“Zhongtian”) and Shenzhen iASPEC Software Company Limited ("SZ iASPEC") .

FINANCING ACTIVITIES
Borrowings under short-term loans		68,899,346			37,198,374
Borrowing of shareholder’s loan		-			6,029,700
Borrowing of long-term loans		-			8,443,540
Increase in restricted cash in relation to credit facilities		773,158			(1,172,663	)
Repayment of short-term loans		(73,811,687	)		(26,150,419	)
Repayment of shareholder’s loan		-			(1,029,700	)
Repayment of long-term loans		(1,751,780	)		(1,912,300	)
Issued common stock		-			9,383,440
Capital injection to Geo by minority shareholders		-			1,734,309
Net cash (used in)/ provided by financing activities		(5,890,963	)		32,524,281
Effect of exchange rate changes on cash and cash equivalents		90,687			765,526
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS		(12,987,634	)		4,523,201
CASH AND CASH EQUIVALENTS, BEGINNING		18,166,857			13,478,633
CASH AND CASH EQUIVALENTS, ENDING	$	5,179,223		$	18,001,834
Supplemental disclosure of cash flow information:
Cash paid during the year
Income taxes	$	2,687,586		$	3,288,052
Interest paid	$	2,006,813		$	834,857

The operating results of Bocom, Geo, Zhongtian and Huipu have been included in the Company’s consolidated financial statements since February 1, 2008, April 1, 2008, November 1, 2008, and November 1, 2009, their respective acquisition dates.

The ~~Supplemental~~interim ~~disclosure~~condensed consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of ~~significant~~the ~~non~~Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. The condensed consolidated statements of (loss) income for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2012. The condensed consolidated balance sheet at December 31, 2011 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. For further information, refer to the Consolidated Financial Statements and Notes thereto of the Company’s Annual Report on Form 10-~~cash~~K ~~transactions:~~ for the fiscal year ended December 31, 2011. It is suggested that these interim consolidated financial statements be read in conjunction with the financial statements of the Company and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 and notes thereto. The Company follows the same accounting policies in the preparation of interim reports.

~~On February 8, 2011, the Company granted eligible employees a~~ ~~total of 250,000 shares of the Company's common stock as compensation under the China Information Technology, Inc~~2. ~~2007~~SUMMARY ~~Equity~~OF ~~Incentive~~SIGNIFICANT ~~Plan.~~ACCOUNTING ~~The fair value of these shares of approximately $1.1 million, based on the quoted market price, was accrued as of December 31, 2010 as the compensation was for services provided in 2010.~~ POLICIES

~~On May 3, 2011, upon achievement of earn out targets by~~ ~~Huipu , the~~(a) ~~Company~~Basis ~~issued 330,578 shares~~ of ~~the Company’s common stock in connection~~Consolidation ~~with the acquisition of Huipu .~~

The Oncondensed ~~August~~consolidated ~~16,~~financial ~~2011,~~statements of the Company ~~issued~~have abeen ~~total~~prepared ofin ~~1,851,852 shares~~accordance with U.S. generally accepted accounting principles. The condensed consolidated financial statements include the accounts of the Company’s, ~~common~~its ~~stock~~subsidiaries and atits aVIE ~~conversion~~for ~~price~~which ofthe $2Company is the primary beneficiary.7 ~~per~~All ~~share~~significant ~~as full~~intercompany ~~repayment~~accounts ofand ~~shareholder’s~~transactions ~~loan~~have ofbeen $5eliminated ~~million.~~in consolidation.

~~On August 30, 2011, the Company settled the remaining potential~~ ~~earn~~(b) ~~out~~Foreign ~~for~~Currency ~~2011 and 2012 with Huipu’s former shareholder and issued 688,707~~Translation ~~shares of the Company’s common stock in connection with the acquisition of Huipu .~~

The ~~accompanying~~functional ~~notes~~currency ~~are~~of anthe ~~integral~~US ~~part~~and British Virgin Islands (“BVI”) companies is the United States dollar. The functional currency of ~~these~~the ~~unaudited condensed~~Company’s ~~consolidated~~Hong ~~financial~~Kong ~~statements~~subsidiaries is the Hong Kong dollar.

The -functional 8currency of the Company’s wholly-owned PRC subsidiaries and its VIE is the Chinese Renminbi Yuan, (“RMB”). RMB is not freely convertible into foreign currencies. The Company’s PRC subsidiaries and their VIE’s financial statements are maintained in the functional currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet date. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Exchange gains or losses arising from foreign currency transactions are included in the determination of net (loss) income for the respective periods.

For ~~CHINA~~financial ~~INFORMATION~~reporting ~~TECHNOLOGY~~purposes, ~~INC~~the financial statements of the Company have been translated into United States dollars. ~~NOTES~~Assets TOand ~~THE~~liabilities are translated at exchange rates at the balance sheet dates and revenue and expenses are translated at ~~CONDENSED~~average ~~CONSOLIDATED~~exchange ~~FINANCIAL~~rates, ~~STATEMENTS~~and equity is translated at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are included in foreign exchange adjustment to other comprehensive (~~UNAUDITED~~loss) income, a component of equity.

- 1.7 ~~ORGANIZATION AND PRINCIPAL ACTIVITIES~~ -

~~China Information Technology Inc (the “Company” or “ CNIT ”),~~ ~~together~~CHINA ~~with~~INFORMATION ~~its subsidiaries~~TECHNOLOGY, ~~is a total solutions provider of information and display technology products and services in the People's Republic of China (“PRC”)~~INC. ~~The Company’s total solutions include specialized software, hardware,~~ ~~systems~~NOTES ~~integration,~~TO ~~and~~THE ~~related~~CONDENSED ~~services.~~CONSOLIDATED ~~These~~FINANCIAL total solutions are provided through the Company’s wholly-owned PRC subsidiaries, Information Security Technology (China) Co., Ltd (“ IST ”), Information Security Software (China) Co., Ltd (formerly, Information Security Development Technology Co., Ltd), or “ ISS ,” Shenzhen Bocom Multimedia Display Technology Co., Ltd (“ Bocom ”), Shenzhen Zhongtian Technology Development Company Ltd (“ Zhongtian ”), and Huipu Electronics (Shenzhen) Co., Ltd. (" Huipu "), and through the Company’s variable interest entity (“VIE”), iASPEC Software Co., Ltd (“ iASPEC ”), and iASPEC’s 52.54% majority-owned subsidiary, Wuda Geoinformatics Co., Ltd (“Geo”). STATEMENTS

~~The operating results of~~ ~~Bocom ,~~2. ~~Geo, Zhongtian and Huipu have been~~SUMMARY ~~included~~OF inSIGNIFICANT ~~the~~ACCOUNTING ~~Company’s~~POLICIES ~~consolidated financial statements since February 1, 2008, April 1, 2008, November 1, 2008, and November 1, 2009, their respective acquisition dates.~~ (CONTINUED)

~~The interim condensed consolidated financial statements~~ ~~included~~(c) ~~herein,~~Revenue ~~presented in accordance with United States generally accepted~~Recognition accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. The condensed consolidated statements of income for the three and nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2011. The condensed consolidated balance sheet at December 31, 2010 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. For further information, refer to the Consolidated Financial Statements and Notes thereto of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010. It is suggested that these interim consolidated financial statements be read in conjunction with the financial statements of the Company and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and notes thereto. The Company follows the same accounting policies in the preparation of interim reports.

The Company generates its revenues primarily from three sources, (1) hardware sales, (2) software sales, and (3) system integration services. ~~SUMMARY~~The OFCompany’s ~~SIGNIFICANT~~revenue ~~ACCOUNTING~~recognition ~~POLICIES~~policies are in accordance with SEC Staff Accounting Bulletin No. 104, "Revenue Recognition" and Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) No.605-35 ("FASB ASC 605-35").

Revenues ~~(a)~~from ~~Basis~~hardware products are recognized only when persuasive evidence of ~~Consolidation~~an arrangement exists, delivery has occurred and upon receipt of customers’ acceptance, the price to the customer is fixed or determinable in accordance with the contract, and collectability is reasonably assured.

Software ~~The~~revenues ~~condensed~~are ~~consolidated~~generated ~~financial~~from ~~statements~~fixed-price contracts which include the development of software products, and services to customize such software to meet customers’ needs. Generally, when the ~~Company~~services are determined to be essential to the ~~have~~functionality ~~been~~of ~~prepared~~the delivered software, revenue is recognized using the percentage of completion method of accounting in accordance with UFASB ASC 605-35.S. ~~generally~~The ~~accepted~~percentage ~~accounting~~of completion for each contract is estimated based on the ratio of direct labor ~~principles~~hours incurred to total estimated direct labor hours. The ~~condensed~~Company ~~consolidated~~provides ~~financial~~post ~~statements~~contract ~~include~~support (PCS), which includes telephone technical support, which is not essential to the ~~accounts~~ functionality of the ~~Company,~~software. ~~its~~Although ~~subsidiaries~~vendor-specific ~~and~~objective evidence ~~its~~does ~~VIE~~not exist for ~~which~~PCS, because (1) the ~~Company~~PCS fees are included in the total contract amount, (2) the PCS service period is for less than one year, (3) the ~~primary~~ ~~beneficiary.~~estimated ~~All~~cost ~~significant~~of ~~intercompany~~providing ~~accounts~~PCS is not significant, and ~~transactions~~(4) ~~have~~unspecified upgrades ~~been~~and ~~eliminated~~enhancements inoffered ~~consolidation~~are minimal and infrequent; the Company recognizes PCS revenue after delivery and customer acceptance.

System ~~(b)~~integration ~~Foreign~~revenues ~~Currency~~are ~~Translation~~generated from fixed-price contracts which provide for software development and hardware integration, which involves more than minor modifications to the functionality of the software and hardware products. Accordingly, system integration revenues are accounted for in accordance with FASB ASC 605-35, using the percentage of completion method of accounting. The percentage of completion for each contract is estimated based on the ratio of costs incurred to total estimated costs. Contract periods are usually less than six months, and typical contract periods for PCS are 12 months.

System ~~The~~integration ~~functional~~projects ~~currency~~are billed in accordance with contract terms, which typically require partial payment at the signing of the UScontract, at delivery and ~~British~~customer ~~Virgin~~acceptance ~~Islands~~dates, with the remainder due within a stated period of time not ~~(“BVI”)~~exceeding ~~companies~~12 ismonths. Occasionally, the ~~United~~Company ~~States~~enters ~~dollars.~~into ~~The~~contracts ~~functional~~which ~~currency~~allow a percentage of the total contract price to be paid one to three years after completion of the system integration project. Revenues on these extended payments are ~~Company’s~~recognized ~~Hong~~upon ~~Kong~~completion ~~subsidiaries~~of isthe terms specified in the ~~Hong~~contract ~~Kong~~and ~~dollars~~when collectability is reasonably assured.

No ~~The~~rights ~~functional currency~~ of ~~the~~return ~~Company’s~~are ~~wholly-owned~~allowed ~~PRC subsidiaries~~except ~~and~~for ~~its~~non-conforming ~~VIE is the Chinese Renminbi Yuan~~products, ~~(“RMB”).~~which ~~RMB~~have isbeen ~~not freely~~insignificant ~~convertible~~based ~~into~~on ~~foreign~~historical ~~currencies~~experiences. ~~The~~If ~~Company’s~~non-conforming ~~PRC~~products ~~subsidiaries’ and their VIE’s financial statements~~ are ~~maintained~~returned indue ~~the~~to ~~functional~~software ~~currency. Monetary~~issues, ~~assets and liabilities denominated in currencies other than~~ the ~~functional~~ ~~currency~~Company ~~are~~will ~~translated~~provide ~~into~~upgrades ~~the~~or ~~functional currency at rates of~~additional ~~exchange~~customization ~~prevailing~~to atsuit ~~the~~customers’ ~~balance sheet date~~needs. ~~Transactions~~In ~~denominated~~cases ~~in currencies~~where ~~other~~non-conformity ~~than~~is ~~the~~a ~~functional~~result ~~currency~~of ~~are~~integrated ~~translated~~hardware, ~~into~~ the ~~functional currency~~Company atreturns the ~~exchange~~hardware ~~rates~~to ~~prevailing at~~ the ~~dates~~original ofvendor ~~the transactions. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income~~ for ~~the respective periods~~replacement.

(d) -Accounts ~~9 -~~ receivable

The ~~CHINA~~Company ~~INFORMATION~~evaluates ~~TECHNOLOGY,~~the ~~INC~~creditworthiness of each customer before accepting them and continuously monitors their recoverability. If there are any indicators that the customer may not make payment, then we may consider making provision for ~~NOTES~~impairment TOfor ~~THE~~that ~~CONDENSED~~particular ~~CONSOLIDATED~~customer. ~~FINANCIAL~~At ~~STATEMENTS~~the same time, we may cease further sales or services to such customer. The following are some of the factors that we will consider in determining whether to discontinue sales or revenue recognition:

the 2.customer ~~SUMMARY~~fails OFto ~~SIGNIFICANT~~comply ~~ACCOUNTING~~with ~~POLICIES~~its ~~(CONTINUED)~~payment schedule;
the ~~(b)~~customer ~~Foreign~~is ~~Currency~~in ~~Translation~~serious –financial ~~continued~~ difficulty;
a ~~For~~significant ~~financial~~dispute ~~reporting~~with ~~purposes,~~ the ~~financial~~customer ~~statements~~has ofoccurred ~~the~~regarding ~~Company~~job ~~have~~progress ~~been translated into United States dollars. Assets and liabilities are translated at exchange rates at the balance sheet dates and revenue and expenses are translated at~~or average exchange rates, and equity is translated at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are included in foreign exchange adjustment to other ~~comprehensive income, a component of equity.~~ matters;
the ~~(c)~~customer ~~Revenue~~breaches ~~Recognition~~ any of the contractual obligations;
the ~~The~~customer ~~Company~~appears ~~generates~~to ~~its~~be ~~revenues~~financially ~~primarily~~distressed due ~~from~~to ~~three sources, (1) hardware sales, (2) software sales, and (3) system integration services. The Company's revenue recognition policies are in accordance with SEC Staff Accounting Bulletin No. 104,~~ economic ~~"Revenue~~or ~~Recognition" and~~legal ~~Financial~~factors; ~~Accounting Standards Board Accounting Standards Codification (“FASB ASC”) No.605-35 ("FASB ASC 605-35").~~
the ~~Revenues~~business ~~from~~between ~~hardware~~the ~~products~~customer ~~are recognized only when persuasive evidence of an arrangement exists, delivery has occurred~~ and ~~upon receipt of customers' acceptance,~~ the ~~price~~Company ~~to the customer~~ is ~~fixed~~not oractive; ~~determinable in accordance with the contract,~~ and ~~collectability is reasonably assured.~~
other ~~Software~~objective ~~revenues~~evidence ~~are generated from fixed-price contracts~~ which ~~include~~indicate the ~~development~~impairment of ~~software products, and services to customize such software to meet customers' needs. Generally, when~~ the ~~services are determined to be essential to the~~accounts ~~functionality of the delivered software, revenue is recognized using the percentage of completion method of accounting in accordance with FASB ASC 605-35~~receivables. The percentage of completion for each contract is estimated based on the ratio of direct labor hours incurred to total estimated direct labor hours. The Company provides post contract support (PCS), which includes telephone technical support, that is not essential to the functionality of the software. Although vendor-specific objective evidence does not exist for PCS, because (1) the PCS fees are included in the total contract amount, (2) the PCS service period is for less than one year, (3) the estimated cost of providing PCS is not significant, and (4) unspecified upgrades enhancements offered are minimal and infrequent; the Company recognizes PCS revenue together with the initial fee after delivery and customer acceptance of the software products.

We ~~System~~consider ~~integration~~the ~~revenues~~following ~~are~~factors ~~generated~~when ~~from~~determining ~~fixed-price~~whether ~~contracts which provide for software development and hardware integration, which involves more than minor modifications~~ to ~~the~~permit ~~functionality~~a oflonger ~~the~~payment ~~software~~period ~~and~~or ~~hardware~~provide ~~products. Accordingly,~~other ~~system~~concessions integration revenues are accounted for in accordance with FASB ASC 605-35, using the percentage of completion method of accounting. The percentage of completion for each contract is estimated based on the ratio of costs incurred to ~~total estimated costs. Contract periods are usually less than six months, and typical contract periods for PCS are 12 months.~~ customers:

~~System integration projects are billed in accordance with contract terms, which typically require partial payment at~~ the ~~signing of the contract, at delivery and~~ customer’s ~~acceptance~~past ~~dates,~~payment with the remainder due within a stated period of time not exceeding 12 months. Occasionally, the Company enters into contracts which allow a percentage of the total contract price to be paid one to three years after completion of the system integration project. Revenues on these extended payments are recognized upon completion of the terms specified in the contract and when collectability is reasonably assured. history;
the Nocustomer’s ~~rights~~general ofrisk ~~return are allowed except for non-conforming products~~profile, ~~which~~including ~~have~~factors ~~been~~such ~~insignificant~~as ~~based on historical experiences. If non-conforming products are returned due to software issues,~~ the ~~Company will provide upgrades or additional~~customer’s ~~customization~~size, ~~to suit customers' needs. In cases where non-conformity is a result of integrated hardware~~age, ~~the~~and ~~Company~~public ~~returns~~or ~~the~~private ~~hardware to the original vendor for replacement.~~ status;
macroeconomic -conditions 10that - may affect a customer’s ability to pay;
and ~~CHINA~~the ~~INFORMATION~~relative ~~TECHNOLOGY,~~importance ~~INC.~~of ~~NOTES~~the TOcustomer ~~THE~~relationship ~~CONDENSED~~to ~~CONSOLIDATED~~our ~~FINANCIAL STATEMENTS~~ business.

- 2.8 ~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)~~ -

. CHINA INFORMATION TECHNOLOGY, INC.NOTES TO THE ~~(d)~~CONDENSED ~~Accounts~~CONSOLIDATED ~~receivable~~ FINANCIAL STATEMENTS

~~The Company evaluates the creditworthiness of each customer before accepting them and continuously monitors their recoverability~~2. IfSUMMARY ~~there~~OF ~~are~~SIGNIFICANT ~~any~~ACCOUNTING ~~indicators that the customer may not make payment, then we may consider making provision for~~POLICIES impairment for that particular customer. At the same time, we may cease further sales or services to such customer. The following are some of the factors that we will consider in determining whether to discontinue sales or revenue recognition:(CONTINUED)

~~the~~(d) ~~customer~~Accounts ~~fails~~receivable ~~to comply with its payment schedule;~~(continued)

~~the~~The ~~customer~~following istable describes the movement in ~~serious~~the ~~financial~~allowance ~~difficulty;~~for doubtful accounts during the period ended March 31, 2012:

a significant dispute with the customer has occurred regarding job progress or other matters;

Balance at January 1, 2012	$	9,373,326
Increase in allowance for doubtful accounts		864,805
Amounts recovered during current period		-
Foreign exchange difference		57,373
Balance at March 31, 2012	$	10,295,504

~~the~~(e) ~~customer breaches any of the contractual obligations;~~Inventories

Inventories are valued at the lower of cost or market. Market is the ~~customer~~estimated ~~appears~~selling toprice bein ~~financially~~the ~~distressed~~ordinary ~~difficulties~~course ~~due~~of tobusiness ~~economic~~less orthe estimated ~~legal~~cost ~~factors;~~of completion and the estimated costs necessary to make the sale.

The Company performs an analysis of slow-moving or obsolete inventory periodically and any necessary valuation reserves, which could potentially be significant, are included in the ~~business~~period ~~between~~in which the ~~customer~~evaluations are ~~and~~completed. As of March 31, 2012, the ~~Company~~inventory isimpairment ~~not~~was ~~active;~~mainly from raw materials, and results in a new cost basis for accounting purposes.

~~other~~(f) ~~objective~~Stock-based ~~evidences which indicate the impairment of the accounts receivables.~~compensation

WeThe ~~will~~Company ~~consider~~applies ASC No. 718, “Compensation — Stock Compensation” (formerly the ~~following~~SFAS ~~factors~~No. ~~when~~123 ~~determining~~(revised ~~whether~~2004) to“Share-based ~~permit~~Payment”), which arequires ~~longer~~that share-based payment transactions with employees, such as share options, be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period, with a corresponding addition to equity. Under this method, compensation cost related to employee share options or ~~provide~~similar ~~other~~equity instruments ~~concessions~~is measured at the grant date based on the fair value of the award and is recognized over the period during which an employee is required to provide ~~customers:~~service in exchange for the award, which generally is the vesting period.

~~the~~(g) ~~customer’s~~Treasury ~~past payment history;~~Stock

The Company repurchases its common stock from time to time in the ~~customer’s~~open ~~general~~market ~~risk~~and ~~profile,~~holds ~~including~~such ~~factors~~shares as treasury stock. The Company applies the “cost method” and presents the cost to repurchase such shares as ~~the~~a ~~customer~~reduction in shareholders’s ~~size,~~equity. ~~age~~During the period, ~~and~~the ~~public~~Company orhas ~~private~~repurchased ~~status;~~a net total of 223,604 shares of common stock.

~~macroeconomic~~(h) ~~conditions~~Recent ~~that~~Accounting ~~may affect a customer’s ability to pay;~~ Pronouncements

In September 2011, the FASB issued ASU 2011-08—Intangibles—Goodwill and Other (Topic 350) - Testing Goodwill for Impairment. ASU 2011-08 provides an entity the ~~relative~~option ~~importance~~to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair ~~customer~~value ~~relationship~~of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is not required. ASU 2011-08 is effective for fiscal year 2013. Early adoption is permitted, however we have not yet adopted it. We do not expect the adoption of ASU 2011-08 to have a material impact on our ~~business~~consolidated financial statements.

- ~~(e)~~9 ~~Treasury Stock~~ -

CHINA ~~The~~INFORMATION ~~Company~~TECHNOLOGY, ~~repurchases its common stock from time to time in the open market and holds such shares as treasury stock~~INC.NOTES ~~The~~TO ~~Company applies the “cost method” and presents the cost to repurchase such shares as a reduction in~~THE ~~shareholders’~~CONDENSED ~~equity.~~CONSOLIDATED ~~During~~FINANCIAL ~~the period, the Company did not repurchase shares of common stock.~~ STATEMENTS

3. EARNINGS (fLOSS) ~~Recent~~PER ~~Accounting Pronouncements – Intangibles – Goodwill and Other (Accounting Standards Updates 2011-08)~~ SHARE

Basic Inearnings ~~September 2011, the FASB issued ASU 2011-08—Intangibles—Goodwill and Other~~ (~~Topic 350~~loss) -per ~~Testing~~share ~~Goodwill~~are ~~for~~computed ~~Impairment.~~by ~~ASU~~dividing ~~2011-08 provides an entity the option to first assess qualitative factors to determine whether the existence~~income ofavailable ~~events or circumstances leads~~ to acommon ~~determination~~shareholders ~~that~~by ~~it is more likely than not that~~ the ~~fair~~weighted-average ~~value~~number of acommon ~~reporting~~stock outstanding ~~unit~~during isthe ~~less~~period. ~~than~~Diluted ~~its~~earnings ~~carrying~~per ~~amount.~~share ~~If,~~reflects ~~after assessing~~ the ~~totality of events or circumstances, an entity determines it is not~~potential ~~more~~dilution ~~likely than not~~ that ~~the~~could ~~fair~~occur ~~value~~if ofsecurities aor ~~reporting~~other ~~unit~~contracts isto ~~less~~issue ~~than~~common ~~its~~stock were ~~carrying~~exercised ~~amount,~~or ~~then~~converted ~~performing~~into ~~the~~common ~~two-step~~stock, ~~impairment~~or ~~test~~resulted isin ~~not~~the ~~required.~~issuance ~~ASU 2011-08 is effective for fiscal year 2013. Early adoption is permitted, however we have~~of ~~not~~common ~~yet~~stock ~~adopted~~that ~~it.~~shared Wein ~~do not expect~~ the ~~adoption~~earnings of ~~ASU~~the ~~2011-08 to have a material impact on our consolidated financial statements~~entity.

Components -of 11basic -and diluted earnings per share were as follows:

CHINA INFORMATION TECHNOLOGY, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

		Three Months			Three Months
		Ended March			Ended March
		31, 2012			31, 2011
		(Unaudited)			(Unaudited)
Net (loss) income attributable to the common stockholders	$	(2,859,798	)	$	8,222,333
Weighted average outstanding shares of common stock (basic and diluted)		27,048,521			26,265,405
Dilutive effect of options ,warrants, and contingently issuable shares		-			-
Earnings (loss) per share:
Basic	$	(0.11	)	$	0.31
Diluted	$	(0.11	)	$	0.31

Warrants 3.for ~~EARNINGS~~the ~~PER~~purchase ~~SHARE~~ of 200,000 shares were not included in 2012 and 2011 as their effect would have been anti-dilutive.

~~Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common stock outstanding during the period~~4. ~~Diluted~~FAIR ~~earnings~~VALUE ~~per~~OF ~~share~~FINANCIAL ~~reflects~~INSTRUMENTS ~~the~~AND ~~potential dilution~~FAIR ~~that could occur if securities or other contracts to issue common stock~~VALUE were exercised or converted into common stock, or resulted in the issuance of common stock that shared in the earnings of the entity. For purposes of the computation of net income per share, shares issued in connection with acquisitions that are returnable are considered contingently returnable shares under FASB ASC 260, although classified as issued and outstanding, are not included in the basic weighted average number of shares until all necessary conditions are met that no longer cause the shares to be contingently returnable. These contingently returnable shares are included in the diluted weighted average number of shares as of the beginning of the period in which the conditions were satisfied (or as of the date of the agreement, if later). ACCOUNTING

Components of basic and diluted earnings per share were as follows:
		Three Months Ended September 30,				Nine Months Ended September 30,
		2011		2010		2011		2010
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Net income attributable to the common stockholders	$	927,827	$	10,609,768	$	14,751,847	$	26,242,945
Weighted average outstanding shares of common stock		53,801,841		51,466,927		52,994,328		51,377,933
Dilutive effect of options ,warrants, and contingently issuable shares		-		-		-		-
Common stock and common stock equivalents		53,801,841		51,466,927		52,994,328		51,377,933
Earnings per share:
Basic	$	0.02	$	0.21	$	0.28	$	0.51
Diluted	$	0.02	$	0.21	$	0.28	$	0.51

Financial Instruments

Management 4has estimated that the carrying amounts of non-related party financial instruments approximate fair values for all periods presented due to their short-term maturities. ~~FAIR~~The ~~VALUE~~carrying OFamount ~~FINANCIAL~~of ~~INSTRUMENTS~~debt approximates ~~AND~~fair ~~FAIR~~value ~~VALUE~~because of its variable interest rate. The fair value of ~~ACCOUNTING~~the amount due from (to) related parties is not practicable to estimate due to the related party nature of the underlying transactions.

Fair ~~Financial~~Value ~~Instruments~~ Accounting

FASB ~~Management~~ASC ~~has~~820-10 ~~estimated~~establishes a fair value hierarchy that prioritizes the ~~carrying~~inputs ~~amounts~~to ~~of non-related~~valuation ~~party~~techniques ~~financial~~used ~~instruments~~to ~~approximate~~measure fair ~~values~~value. ~~for~~The hierarchy ~~all~~gives ~~periods presented~~the ~~due~~highest priority to ~~their~~unadjusted ~~short-term~~quoted ~~maturities.~~prices ~~The~~in ~~carrying~~active markets ~~amount~~for ofidentical ~~debt approximates~~assets ~~fair~~or ~~value~~liabilities ~~because~~(Level of1 ~~its~~measurements) ~~variable~~and ~~interest~~the lowest ~~rate.~~priority ~~The~~to ~~fair~~unobservable ~~value~~inputs of(Level 3 measurements). As required by ~~the~~FASB ~~amount~~ASC ~~due~~820-10, ~~from~~assets ~~(to)~~are ~~related~~classified ~~parties~~in istheir ~~not~~entirety ~~practicable~~based toon ~~estimate~~the ~~due~~lowest level of input that is significant to the ~~related~~fair ~~party~~value ~~nature~~measurement. The three levels of the ~~underlying~~fair ~~transactions.~~ value hierarchy under FASB ASC 820-10 are described below:

Fair Value Accounting

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

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

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

~~FASB ASC 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value~~5. ~~The hierarchy~~VARIABLE ~~gives~~INTEREST the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). As required by FASB ASC 820-10, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy under FASB ASC 820-10 are described below: ENTITY

Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The Company is the primary beneficiary of iASPEC, pursuant to a Management Service Agreement (“MSA”), and iASPEC qualifies as a variable interest entity of the Company. Accordingly, the assets and liabilities and revenues and expenses of iASPEC have been included in the accompanying consolidated financial statements. In the opinion of management, (i) the ownership structure of the Company, and the VIEs are in compliance with existing PRC laws and regulations; (ii) the contractual arrangements with the VIEs and its shareholder are valid and binding, and will not result in any violation of PRC laws or regulations currently in effect; and (iii) the Company’s business operations are in compliance with existing PRC laws and regulations in all material respects.

- As10 ~~of December 31, 2010, the contingent consideration of the Company’s acquisition of Huipu was measured at fair values using level 3 inputs.~~ -

CHINA -INFORMATION 12TECHNOLOGY, -INC.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~CHINA INFORMATION TECHNOLOGY, INC~~5. ~~NOTES~~VARIABLE TOINTEREST ~~THE~~ENTITY ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ (CONTINUED)

However, 5there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, ~~VARIABLE~~the ~~INTEREST~~Company ~~ENTITY~~cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to its opinion. If the current ownership structure of the Company and its contractual arrangements with VIEs are found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its ownership structure and operations in the PRC to comply with the changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company’s current ownership structure or the contractual arrangements with VIEs is remote based on current facts and circumstances.

In ~~The~~order ~~Company~~to isfacilitate ~~the~~iASPEC’s ~~primary~~expansion ~~beneficiary~~and ofalso to provide ~~iASPEC ,~~financing ~~pursuant~~for iASPEC to complete the ~~Management~~acquisition ~~Service~~of ~~Agreement~~Geo, the Company advanced RMB38 million (~~“ MSA ”~~approximately $5.4 million), ~~and~~ to iASPEC ~~qualifies~~ asin atwo ~~variable~~installments on ~~interest~~November ~~entity~~20, of2007 ~~the~~and ~~Company.~~May ~~Accordingly~~8, ~~the~~2008, ~~assets~~respectively, ~~and~~to ~~liabilities~~increase ~~and~~iASPEC’s registered ~~revenues~~capital. ~~and~~In ~~expenses~~order ~~of iASPEC have~~to ~~been~~comply ~~included~~with inPRC laws and regulations, the ~~accompanying consolidated~~advance ~~financial~~was ~~statements~~made to Mr. InLin, ~~the~~iASPEC’s ~~opinion~~then ofmajority ~~management~~shareholder, ~~(i)~~who, upon the ~~ownership~~ ~~structure~~authority and direction of the ~~Company~~Board of Directors, ~~and~~forwarded the ~~VIEs are~~funds into ~~compliance~~iASPEC. ~~with~~The ~~existing~~Company ~~PRC~~has ~~laws~~recorded ~~and regulations; (ii)~~ the ~~contractual~~advance ~~arrangements~~of ~~with~~these ~~the~~ funds ~~VIEs and its~~as ~~shareholder~~an ~~are~~interest-free ~~valid~~loan ~~and~~to ~~binding~~iASPEC, which ~~and~~was ~~will~~eliminated ~~not~~against ~~result~~additional incapital ~~any violation~~ of ~~PRC~~ ~~laws~~iASPEC orin ~~regulations~~consolidation. ~~currently~~The increase in ~~effect;~~iASPEC’s ~~and~~registered ~~(iii)~~capital ~~the~~does ~~Company~~not affect IST’s ~~business~~exclusive option ~~operations~~to ~~are~~purchase iniASPEC’s ~~compliance~~assets ~~with existing PRC laws~~ and ~~regulations~~shares inunder ~~all material~~the ~~respects~~MSA.

For ~~However, there are substantial uncertainties regarding~~ the ~~interpretation~~ ~~and~~three ~~application~~months ofended ~~current~~March ~~and~~31, ~~future~~2012 ~~PRC laws~~ and ~~regulations. Accordingly~~2011, ~~the~~net ~~Company~~loss ~~cannot be assured that PRC regulatory authorities will~~of ~~not~~$211,883 ~~ultimately~~(net ~~take~~loss aof ~~contrary~~$32,490 ~~view~~from toiASPEC, ~~its~~net ~~opinion.~~loss ~~If the current ownership structure~~ of ~~the~~$235,059 ~~Company~~from Geo and ~~its~~net ~~contractual arrangements with~~income of ~~VIEs are~~$55,666 ~~found~~from ~~to be~~Zhongtian), innet ~~violation~~loss of ~~any~~$128,278 ~~existing~~(income or$183,594 ~~future~~from ~~PRC~~iASPEC ~~laws~~ and ~~regulations, the Company~~ ~~may~~loss beof ~~required~~$311,872 tofrom ~~restructure~~Geo), ~~its~~respectively, ~~ownership~~was ~~structure~~attributable ~~and~~to ~~operations~~non-controlling interest in the ~~PRC to~~consolidated ~~comply~~statements ~~with the changing and new PRC laws and regulations. In the opinion~~ of ~~management,~~ ~~the~~income ~~likelihood~~ of ~~loss in respect of~~ the Company~~’s current ownership structure or the contractual arrangements with VIEs is remote based on current facts and circumstances~~.

At InMarch ~~order~~31, to2012, ~~facilitate iASPEC’s expansion~~the ~~and~~consolidation ~~also~~of ~~to provide financing for~~ iASPEC to ~~complete~~,Geo ~~the~~and Zhongtian, ~~acquisition~~resulted ofin ~~Geo,~~an ~~the~~increase ~~Company~~in ~~advanced RMB38~~assets ~~million~~of (approximately $591.447 million), toan increase ~~iASPEC~~ in ~~two installments on November~~liabilities ~~20,~~(consisting ~~2007~~primarily ~~and~~of ~~May~~accounts 8,payable ~~2008,~~and ~~respectively, to increase~~short-term bank ~~iASPEC’s registered capital.~~loans) Inof ~~order~~approximately to$29.76 ~~comply~~million, ~~with PRC laws~~ and ~~regulations,~~an ~~the~~increase ~~advance~~in ~~was made~~non-controlling tointerest ~~Mr.~~of ~~Lin, iASPEC’s then~~approximately ~~majority~~$21.94 ~~shareholder~~million, ~~who, upon the authority~~ and ~~direction~~ offor the ~~Board~~three ofmonths ~~Directors,~~ended ~~forwarded the funds to~~March 31, ~~iASPEC .~~2012 ~~The~~and ~~Company has~~2011 ~~recorded~~ the ~~advance~~consolidation ofresulted ~~these~~in ~~funds as~~ an ~~interest-free~~decrease ~~loan~~in to net ~~iASPEC ,~~loss ~~which~~attributable ~~was~~to ~~eliminated~~parent ~~against~~company ~~additional capital~~ of ~~iASPEC in~~approximately ~~consolidation~~$0.62 ~~The~~ million and increase in ~~iASPEC’s registered~~ net ~~capital~~income ~~does~~attributable ~~not affect IST’s exclusive option~~ to ~~purchase iASPEC’s assets~~parent ~~and~~company ~~shares~~of ~~under~~approximately ~~the MSA~~ $3.5 million, respectively.

For the three months ended September 30, 2011 and 2010, net loss of $32,759 (net income of $28,172 from iASPEC and loss of $60,931 from Geo), loss of $139,080 (net income of $263,690 from iASPEC and loss of $402,770 from Geo), respectively, was attributable to non-controlling interest in the consolidated statements of income of the Company.

6. RELATED PARTY BALANCES AND TRANSACTIONS

(a) Related party balances

As of March 31, 2012 and December 31, 2011, amount due from/to related parties consists of:
		March 31,		December 31,
		2012		2011
		(Unaudited)
Due from related companies
- Xiamen Yili Geo Information Technology Co., Ltd.	$	239,569	$	22,823
Due to related companies
- Wuhan Geo Navigation and Communication Technology Co., Ltd.	$	621,835	$	593,617
Due to related parties, long-term portion
- Shareholders	$	12,704	$	12,624

Due ~~For the nine months ended September 30, 2011 and 2010, net loss of $434,703 (net income of $347,787~~ from ~~iASPEC and~~related ~~loss of $782~~companies,~~490~~ ~~from~~current Geo), net income of $273,850 (net income of $682,909 from iASPEC and loss of $409,059 from Geo), respectively, was attributable to non-controlling interest in the consolidated statements of income of the Company. portion

Approximately At8% ~~September~~of ~~30,~~Xiamen ~~2011,~~Yili ~~the consolidation of iASPEC and~~ Geo~~, resulted~~ inInformation anTechnology ~~increase in assets of approximately $89~~Co.~~42 million~~, ~~an increase~~ inLtd. ~~liabilities~~ (~~consisting primarily of accounts payable and short-term bank loans~~“Yili”) ofis ~~approximately~~owned ~~$30.86~~by ~~million, and an increase in non-controlling interest of approximately $18~~Geo.31 ~~million,~~The ~~and~~balance ~~for~~consists ~~the nine months ended September 30, 2011 and 2010 the consolidation resulted in an increase in net income attributable to parent company~~ of ~~approximately~~accounts ~~$6.61~~receivable ~~million and $12.98~~from ~~million, respectively~~sales.

6. RELATED PARTY BALANCES AND TRANSACTIONS
(a) Related party balances
As of September 30, 2011 and December 31, 2010, amount due from/to related parties consists of:
		September 30,		December 31,
		2011		2010
		(Unaudited)
Due from related companies
- Xiamen Yili Geo Information Technology Co., Ltd.	$	22,693	$	137,289
- Shenzhen Kewen Information Technology Co., Ltd.		41,943		193,587
	$	64,636	$	330,876
Due to related companies
- Wuhan Geo Navigation and Communication Technology Co., Ltd.	$	593,491	$	596,046
- Shenzhen Information Security Investment and Development Co., Ltd.		-		697,820
	$	593,491	$	1,293,866
Due to related parties, long-term portion
- Shareholders	$	12,552	$	5,014,949
- 13 -

Due to related companies

Approximately ~~CHINA~~9% ~~INFORMATION~~of ~~TECHNOLOGY~~Wuhan Geo Navigation and Communication Technology Co., ~~INC~~Ltd. (“Geo Navigation”) is owned by Geo. The balance due to Geo ~~NOTES~~Navigation TOrepresents ~~THE~~advances ~~CONDENSED~~from ~~CONSOLIDATED~~Geo ~~FINANCIAL~~Navigation to Geo. These advances are ~~STATEMENTS~~non-interest bearing and due on demand.

- 6.11 ~~RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)~~ -

CHINA ~~Due~~INFORMATION ~~from related companies~~TECHNOLOGY, ~~current~~INC.NOTES ~~portion~~ TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6. ~~Approximately~~RELATED 8%PARTY ofBALANCES ~~Xiamen Yili Geo~~AND ~~Information Technology Co.,~~TRANSACTIONS ~~Ltd.~~ (~~“ Yili ”~~CONTINUED) ~~is owned by Geo. The balance consists of accounts receivable from sales.~~

~~Shenzhen Kewen Information Technology Co., Ltd.~~ (~~“ Kewen ”~~b) isRevenue ~~a private~~- ~~company~~related ~~owned by a member of the senior management of Zhongtian . The balance due from Kewen primarily consists of accounts receivable from sales.~~ party

Amounts ~~Due~~recognized tofrom ~~related~~Yili ~~companies~~ during the three months ended March 31, 2012 and 2011 were as follows:

Approximately 9% of Wuhan Geo Navigation and Communication Technology Co., Ltd. (“Geo Navigation”) is owned by Geo. The balance due to Geo Navigation represents advances from Geo Navigation to Geo. These advances are non-interest bearing and due on demand.

		Three Months		Three Months
		Ended March		Ended March
		31, 2012		31, 2011
		(Unaudited)		(Unaudited)
Revenue	$	248,908	$	14,079
Cost of sales		147,821		-
Gross profit	$	101,087	$	14,079

Rental ~~The~~expenses ~~balance~~from ~~due~~renting buildings and offices from a related party charged to ~~shareholder~~operations ~~represents~~during the ~~personal~~three ~~loans from~~months ~~Mr. Jianghuai Lin~~ended March 31, ~~the~~2012 and ~~CEO~~2011 ofwere ~~the~~approximately ~~Company~~$68,000, toand ~~the~~$57,000, ~~Company~~respectively.

On January 14, 2010, Mr. Lin loaned the Company a total of $5 million from the proceeds of the sale of his shares for use for general corporate purposes and working capital. In consideration of the loan from Mr. Lin, the Company's Board of Directors approved the issuance and delivery of a one-year, non-interest bearing, convertible promissory note (“the Original Note”) to Mr. Lin, in the principal amount of $5 million. The note is due and payable on January 14, 2011, and is convertible into shares of the Company's common stock at a conversion price of $5.88 per share (the per share closing price on the trading day prior to the delivery date of the Original Note).

7. INVENTORIES

As of March 31, 2012 and December 31, 2011, inventories consist of:
		March 31,		December 31,
		2012		2011
		(Unaudited)
Raw materials	$	7,381,900	$	5,488,149
Work in Processes		4,558,026		4,102,102
Finished goods		3,496,486		4,327,818
Installations in process		9,605,977		8,399,191
Total	$	25,042,389	$	22,317,260

On March 25, 2010, Mr. Lin surrendered the Original Note to the Company and asked the Company to void and rescind the Original Note and issue a replacement note (the “New Note”), in the principal amount of $6,000,000, to reflect the principal amount of the Original Note as well as an additional loan of $1,000,000 made to the Company on March 25, 2010. The New Note omits the conversion feature that was contained in the Original Note and it is non-~~interest~~12 bearing. The maturity date of the New Note is March 5, 2012 and the Company may prepay all or any part of the amounts outstanding under this Note at any time before the maturity date without the express written consent of Mr. Lin. On April 7, 2010, the Company repaid the additional loan of $1,000,000 included in the New Note. -

CHINA OnINFORMATION ~~August 16~~TECHNOLOGY, ~~2011, the Company and Mr~~INC.NOTES ~~Lin~~TO ~~agreed to an~~THE ~~amended~~CONDENSED ~~and~~CONSOLIDATED ~~restated~~FINANCIAL promissory note (the “Amended and Restated Note”) that was issued by the Company to Mr. Lin on March 25, 2010. Under the New Note, the loan was not permitted to be repaid by conversion of the loan balance into shares of common stock of the Company. Pursuant to the Amended and Restated Note, the loan balance may be repaid by conversion of the balance into shares of the Company’s common stock at a conversion price of $2.70 per share. On August 16, 2011, Mr. Lin exercised this conversion right, and therefore has agreed to receive a total of 1,851,852 shares of the Company’s common stock in lieu of cash repayment under the Amended and Restated Note. STATEMENTS

(b) Revenue - related party

8. LONG-TERM INVESTMENTS

As of March 31, 2012 and December 31, 2011, long-term investments consist of:
		March 31,		December 31,
		2011		2011
		(Unaudited)
Tianhe Navigation and Communication Technology Co., Ltd. (" Tianhe ")	$	1,070,419	$	1,063,661
Tianditu Co., Ltd.( "Tianditu")		1,267,200		1,259,200
Xiamen Yili Geo Information Technology Co., Ltd. (" Yili ")		79,200		78,700
	$	2,416,819	$	2,401,561

Geo ~~Amounts~~holds ~~earned~~a ~~from~~20% ownership interest in Tianhe. Although Geo owns ~~Yili and Kewen during~~20% of Tianhe, Geo’s management does not have the ~~three~~ability ~~and~~to ~~nine~~exercise ~~months~~significant ~~ended~~influence ~~September~~over ~~30,~~operating ~~2011~~ and ~~2010~~financial ~~were~~policies asof ~~follows~~Tianhe due to the following factors:

		Three Months		Three Months			Nine Months		Nine Months
		Ended		Ended			Ended		Ended
		September 30,		September 30,			September 30,		September 30,
		2011		2010			2011		2010
		(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)
Revenue	$	-	$	347,126		$	14,258	$	566,790
Cost of sales		-		(88,345	)		-		(196,597	)
Gross profit	$	-	$	258,781		$	14,258	$	370,193

a. The Company and Geo do not participate in the policy making, operations, or financial processes of Tianhe;
b. There are no intercompany transactions between the Company or Geo and Tianhe;
c. There is no interchange of managerial personnel;
d. The Company and Geo do not nominate or hold a board position at Tianhe; and
e. There is no technological or financial dependence between the Company or Geo and Tianhe.

Management -regularly 14evaluates the impairment of the cost method investments based on performance and financial position of the investee as well as other evidence of market value. Such evaluation includes, but is not limited to, reviewing the investee’s cash position, recent financing, projected and historical financial performance, cash flow forecasts and financing needs. As of March 31, 2012, management reassessed the possible impairment on the investment in Tianhe and determined that there was no an other- than-temporary impairment in the value of its investment in Tianhe and no impairment loss for three months ended March 31, 2012. Total impairment loss of $549,000 was recorded for the three months ended March 31, 2011.

Geo ~~CHINA~~holds ~~INFORMATION~~a ~~TECHNOLOGY,~~8% ~~INC.~~ownership interest in Tianditu which was set up ~~NOTES~~in TO2010 ~~THE~~to ~~CONDENSED~~provide ~~CONSOLIDATED~~online ~~FINANCIAL~~map ~~STATEMENTS~~ service.

6. RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)

9. PROPERTY, PLANT AND EQUIPMENT

As of March 31, 2012 and December 31, 2011, property, plant and equipment consist of:
		March 31,			December 31
		2012			2011
		(Unaudited)
Office building	$	8,121,771		$	7,900,978
Plant and machinery		30,218,235			29,822,707
Electronic equipment, furniture and fixtures		10,597,039			10,602,803
Motor vehicles		1,113,992			1,100,810
Purchased software		68,895,193			68,460,250
Total		118,946,230			117,887,548

Less: accumulated depreciation		(29,877,315	)		(26,726,455	)
	$	89,068,915		$	91,161,093

Depreciation ~~(c)~~expense ~~Rental~~for ~~expenses~~the -three ~~related~~months ~~party~~ended March 31, 2012 and 2011 was approximately $2,990,000 and $2,472,000, respectively.

- ~~Rental~~13 expenses from renting buildings and offices from a related party charged to operation during the three and nine months ended September 30, 2011 and 2010 were approximately $66,728, $0, $181,388 and $0, respectively. -

CHINA 7INFORMATION TECHNOLOGY, INC.NOTES ~~INVENTORIES~~TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10. AsLAND ofUSE ~~September~~RIGHTS ~~30,~~AND ~~2011~~INTANGIBLE ~~and December 31, 2010, inventories consist of:~~ ASSETS

		September 30,		December 31,
		2011		2010
		(Unaudited)
Raw materials	$	10,898,127	$	5,274,081
Work in Processes		5,209,329		227,455
Finished goods		5,074,033		4,700,253
Installations in process		11,705,134		9,730,077
Total	$	32,886,623	$	19,931,866

(a) Deposits for purchase of land use rights

As of March 31, 2012, deposits for purchase of land use rights represent deposits for purchase of land use rights in Dongguan City of approximately $19 million (RMB119.96 million) by IST , and additional land right premium paids for increase in plot ratios under existing land use rights in Fuyong County of Shenzhen of approximately $8.74 ~~LONG-TERM~~million ~~INVESTMENTS~~(RMB55.16 million) by Huipu .

(b) AsLand ofuse ~~September 30, 2011 and December 31, 2010, long-term investments consist of:~~ rights

		September 30,		December 31,
		2011		2010
		(Unaudited)
Tianhe Navigation and Communication Technology Co., Ltd. (" Tianhe ")	$	1,057,579	$	2,006,802
Tianditu Co., Ltd		1,252,000		1,213,600
Xiamen Yili Geo Information Technology Co., Ltd. (" Yili ")		78,250		75,850
	$	2,387,829	$	3,296,252

As of March 31, 2012 and December 31, 2011, land use rights consist of:

Geo holds a 20% ownership interest in Tianhe . Although Geo owns 20% of Tianhe , Geo’s management does not have the ability to exercise significant influence over operating and financial policies of Tianhe due to the following factors:

		March 31,			December 31
		2012			2011
		(Unaudited)
Land use rights	$	2,067,310		$	2,054,259
Less: accumulated amortization		(109,601	)		(97,643	)
Land use rights, net	$	1,957,709		$	1,956,616

Amortization a.expense ~~The~~for ~~Company~~the ~~and~~three ~~Geo~~months doended ~~not~~March ~~participate in the policy making~~31, ~~operations,~~ ~~or financial processes of~~2012 ~~Tianhe ; b. There are no intercompany transactions between the Company or Geo~~ and ~~Tianhe ;~~2011 c.was ~~There~~$11,000 ~~is no interchange of managerial personnel; d. The Company~~ and ~~Geo~~$11,000, ~~do not nominate or hold a board position at Tianhe ; and e~~respectively. ~~There is no technological or financial dependence between the Company or Geo and Tianhe .~~

The management regularly evaluates the impairment of the cost method investments based on performance and financial position of the investee as well as other evidence of market value. Such evaluation includes, but is not limited to, reviewing the investee’s cash position, recent financing, projected and historical financial performance, cash flow forecasts and financing needs. As of December 31, 2010, management determined that there was an other-than-temporary impairment in the value of its investment in Tianhe and recorded an impairment loss of approximately $855,000. As of September 30, 2011, the management reassessed the possible impairment on the investment in Tianhe and determined that there was an other-than-temporary impairment in the value of its investment in Tianhe and recorded an impairment loss of approximately $997,000.

Estimated amortization for the next five years and thereafter is as follows:
Remainder of 2012		34,014
2013		45,352
2014		45,352
2015		45,352
2016		45,352
Thereafter		1,742,287
Total	$	1,957,709

As ~~CHINA~~of ~~INFORMATION~~March ~~TECHNOLOGY~~31, ~~INC.~~2012 ~~NOTES~~and TODecember ~~THE~~31, ~~CONDENSED~~2011, ~~CONSOLIDATED~~intangible ~~FINANCIAL~~assets ~~STATEMENTS~~consist of:

9. PROPERTY, PLANT AND EQUIPMENT

		March 31,			December 31
		2012			2011
		(Unaudited)
Software and software development costs	$	10,021,100		$	9,489,011
Technology		7,764,610			7,715,591
Trademarks		4,481,136			4,452,846
Customer base		318,384			316,374
Sub-Total		22,585,230			21,973,822
Less: accumulated amortization		(8,087,600	)		(7,593,363	))
Intangible assets, net	$	14,497,630		$	14,380,459

Amortization Asexpense offor ~~September~~the ~~30,~~three ~~2011~~months ~~and~~ended ~~December~~March 31, ~~2010,~~2012 and ~~property~~2011 was approximately $447,000 ~~plant~~ and ~~equipment~~$445,000, ~~consist of:~~ respectively.

		September 30,			December 31
Estimated amortization for the next five years and thereafter is as follows:
		2011			2010
Remainder of 2012		1,540,708
		(Unaudited)
2013		1,791,451
Office building	$	7,828,507		$	7,559,941
2014		1,780,790
Plant and machinery		30,126,347			27,900,717
2015		1,780,790
Electronic equipment, furniture and fixtures		12,435,516			12,045,103
2016		1,779,725
Motor vehicles		1,138,456			1,102,159
Thereafter		5,824,166
Purchased software		62,587,750			48,814,198
Total	$	14,497,630
Total		114,116,576			97,422,118
Less: accumulated depreciation		(25,512,132	)		(18,073,235	)
	$	88,604,444		$	79,348,883

- ~~Depreciation~~14 expense for the three months ended September 30, 2011 and 2010 was approximately $2,805,000 and $1,974,000, respectively. Depreciation expense for the nine months ended September 30, 2011 and 2010 was approximately $7,966,000 and $5,415,000, respectively. -

10. LAND USE RIGHTS AND INTANGIBLE ASSETS

CHINA INFORMATION TECHNOLOGY, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11. BANK LOANS

(a) Short-term bank loans
		March 31,		December 31,
		2012		2011
		(Unaudited)
Secured short-term loans ⁽¹⁾	$	33,777,814	$	39,177,186
Add: amounts due within one year under long-term loan contracts		1,223,549		1,806,271
Total short-term bank loans	$	35,001,363	$	40,983,457

(a1) ~~Deposits~~Detailed ~~for~~information ~~purchase~~ of ~~land~~secured ~~use~~short-term ~~rights~~loan balances as of March 31, 2012 and December 31, 2011 were as follows:

As of September 30, 2011, deposits for purchase of land use rights represent deposit for purchase of land use rights in Dongguan City of approximately $18.77 million (RMB119.96 million) by IST , and additional land premium paid for increase of plot ratios under existing land use rights in Fuyong County of Shenzhen of approximately $8.63 million (RMB55.16 million) by Huipu .

		March 31,			December 31,
		2012			2011
		(Unaudited)
Collateralized by land and office buildings	$	8,870,400		$	14,260,441
Secured by iASPEC’s trade receivables		3,009,600			2,990,600
Secured by Bocom’s trade receivables and guaranteed by the Company		838,194			1,056,182
Secured by Huipu’s trade receivables and guaranteed by the Company and Huipu		1,493,831			2,623,691
Guaranteed by IST		4,118,400			4,092,400
Secured by HPC’s trade receivables and guarnteed by IST		4,566,704			4,372,404
Guaranteed by Huipu		2,376,000			2,361,000
Guarnteed by the Company, CITH and Bocom		293,230			1,030,028
Guarnteed by IASPEC		8,015,040			6,390,440
Secured by Zhongtian’s trade receivable		196,415			-
Total	$	33,777,814		$	39,177,186

(b) Long-term bank loans
		March 31,			December 31,
		2012			2011
		(Unaudited)
Secured long-term loans	$	1,324,271		$	1,915,795
Less: amounts due within one year under long-term loan contracts		(1,223,549	)		(1,806,271	)
Total long-term bank loans	$	100,722		$	109,524

(b) Land use rights
As of September 30, 2011 and December 31, 2010, land use rights consist of:
		September 30,			December 31
		2011			2010
		(Unaudited)
Land use rights	$	2,042,513		$	1,979,867
Less: accumulated amortization		(85,883	)		(50,673	)
Land use rights, net	$	1,956,630		$	1,929,194

As of March 31, 2012, the Company has borrowings from banks, expiring at various dates from April 5, 2012 to February 21, 2016, primarily used to finance working capital requirements. The bank borrowings are in the form of credit facilities. All amounts available to the Company from the banks are based on the amount of collateral pledged or the amount guaranteed by our subsidiaries. These borrowings bear interest rates ranging from 3.14% to 10% per annum. The weighted average interest rate on short term debt is approximately 7.21% and 5.84% for three months ended March 31, 2012 and 2011, respectively.

- ~~Amortization~~15 expense for the three months ended September 30, 2011 and 2010 was $11,000 and $10,000, respectively. Amortization expense for the nine months ended September 30, 2011 and 2010 was $33,000 and $32,000, respectively. -

Estimated amortization for the next five years and thereafter is as follows:
Remainder of 2011	$	11,202
2012		44,808
2013		44,808
2014		44,808
2015		44,808
Thereafter		1,766,195
Total	$	1,956,630

CHINA INFORMATION TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

-12. 16INCOME - TAXES

Pre-tax ~~CHINA~~(loss)income ~~INFORMATION~~for ~~TECHNOLOGY,~~the ~~INC.~~three months ended March 31, 2012 ~~NOTES~~and TO2011 ~~THE~~was ~~CONDENSED~~taxable ~~CONSOLIDATED~~in ~~FINANCIAL STATEMENTS~~the following jurisdictions:

10. LAND USE RIGHTS AND INTANGIBLE ASSETS (CONTINUED)
		Three months ended March 31, 2012 (Unaudited)			Three months ended March 31, 2011 (Unaudited)
(c) Intangible assets
PRC	$	(2,796,051	)	$	7,980,445
As of September 30, 2011 and December 31, 2010, intangible assets consist of:
Others		(302,631	)		1,194,128
		September 30,			December 31
Total income before income taxes	$	(3,098,682	)	$	9,174,573
		2011			2010
		(Unaudited)
Software and software development costs	$	8,822,494		$	7,333,720
Technology		7,671,474			7,436,182
Trademarks		4,427,385			4,291,593
Customer base		314,565			304,917
Sub-Total		21,235,918			19,366,412
Less: accumulated amortization		(7,122,020	)		(5,641,138	)
Intangible assets, net	$	14,113,898		$	13,725,274

United ~~Amortization expense for the three months ended September 30, 2011 and 2010, was approximately $423,000 and $422,000, respectively.~~ States

The ~~Amortization~~Company ~~expense~~was ~~for~~incorporated in Nevada and is subject to United States of America tax law. It is management’s intention to reinvest all the income ~~nine~~attributable ~~months~~to ~~ended~~the ~~September~~Company ~~30,~~earned by its operations outside the United ~~2011~~States ~~and~~of ~~2010~~America ~~was~~(the ~~approximately~~“U.S.”). $1Accordingly,~~283,000~~ ~~and~~no ~~$1,318,000,~~U.S. ~~respectively~~corporate income taxes are provided in these condensed consolidated financial statements.

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

Remainder of 2011	$	414,614
2012		1,931,242
2013		1,388,237
2014		1,382,391
2015		1,185,600
Thereafter		7,811,814
Total	$	14,113,898

Under the current laws of the BVI, dividends and capital gains arising from the Company’s investments in the BVI are not subject to income taxes.

11. BANK LOANS (a) Short-term bank loans

PRC

The income tax provision consists of the following:
		Three months ended			Three months ended
		March 31, 2012			March 31, 2011
		(Unaudited)			(Unaudited)
Current taxes	$	168,465		$	1,194,205
Deferred taxes		(195,466	)		(113,687	)

(Benefit) provision for income taxes	$	(27,001	)	$	1,080,518

		Three months ended			Three months ended
		March 31, 2012			March 31, 2011
		(Unaudited)			(Unaudited)
PRC federal statutory tax rate		25%			25%
Computed expected income tax (benefit) expense $		(774,671	)	$	2,293,643
Tax concession		273,813			(900,045	)
Tax effect of tax losses not recognized		432,865			9,030
Permanent differences		(43,113	)		(167,794	)
Non-deductible tax loss		62,687			57,999
Other differences		21,418			(212,315	)
Income taxes	$	(27,001	)	$	1,080,518

		September 30,		December 31,
		2011		2010
		(Unaudited)
Secured short-term loans (1)	$	30,025,127	$	33,051,066
Add: amounts due within one year under long-term loan contracts		5,575,511		2,275,500
Total short-term bank loans	$	35,600,638	$	35,326,566

- 16 -

CHINA ~~(1) Detailed~~INFORMATION ~~information~~TECHNOLOGY, ofINC.NOTES ~~secured~~TO ~~short-term loan~~THE ~~balances~~CONDENSED asCONSOLIDATED ofFINANCIAL ~~September 30, 2011 and December 31, 2010 were as follows:~~ STATEMENTS

		September 30,		December 31,
		2011		2010
		(Unaudited)
Collateralized by land and office buildings	$	14,491,900	$	12,682,120
Secured by iASPEC's trade receivable		2,660,500		979,982
Secured by Huipu's trade receivable and guaranteed by the Company and Huipu’s ex- shareholder		-		5,741,894
Secured by HPC's trade receivable and guaranteed by Huipu’s ex-shareholder		2,270,163		1,760,000
Secured by Bocom's trade receivable and guaranteed by the Company		908,094		320,432
Secured by Huipu's trade receivable and guaranteed by the Company and Huipu		2,972,635		4,740,138
Guaranteed by IST		4,069,000		4,551,000
Guaranteed by Huipu		2,347,500		2,275,500
Guaranteed by the Company, CPSH and Bocom		305,335		-
Total	$	30,025,127	$	33,051,066

12. INCOME TAXES (CONTINUED)

The -significant 17components - of deferred tax assets and deferred tax liabilities were as follows as of March 31, 2012 and December 31, 2011:

CHINA INFORMATION TECHNOLOGY, INC.
		March 31, 2012						December 31, 2011
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
		Deferred			Deferred			Deferred			Deferred
11. BANK LOANS (CONTINUED)
		Tax			Tax			Tax			Tax
(b) Long-term bank loans
		Assets			Liabilities			Assets			Liabilities
		September 30,			December 31,
		(Unaudited)			(Unaudited)
		2011			2010
Fixed assets	$	233,103		$	(199,570	)	$	250,127		$	(201,081	)
		(Unaudited)
Intangible assets		93,259			(1,137,099	)		92,233			(1,164,599	)
Secured long-term loans	$	5,693,547		$	8,138,705
Inventory valuation		845,885			-			783,633			-
Less: amounts due within one year under long-term loan contracts		(5,575,511	)		(2,275,500	)
Allowance for doubtful accounts		1,835,209			-			1,706,184			-
Total long-term bank loans	$	118,036		$	5,863,205
Salary payable		43,376			-			43,102			-
Subsidy income		16,016			-			15,915			-
Long-term investments impairment		342,846			-			340,682			-
Loss carry-forwards		803,608			-			633,796			-
Gross deferred tax assets and liabilities		4,213,303			(1,336,669	)		3,865,672			(1,365,680	)
Valuation allowance		(803,608	)		-			(633,796	)		-
Total deferred tax assets and liabilities	$	3,409,695		$	(1,336,669	)	$	3,231,876		$	(1,365,680	)

The ~~12.~~breakdown ~~INCOME~~between ~~TAXES~~current and long-term deferred tax assets and liabilities was as follows as of March 31, 2012 and December 31, 2011:

Pre-tax income for the three and nine months ended September 30, 2011 and 2010 was taxable in the following jurisdictions:

		March 31, 2011			December 31, 2011
		(Unaudited)
Current deferred tax assets	$	2,740,487		$	2,548,834
Current deferred tax liabilities		-			-
Long-term deferred tax assets		669,208			683,042
Long-term deferred tax liabilities		(1,336,669	)		(1,365,680	)

Total net deferred tax assets	$	2,073,026		$	1,866,196

		Three Months Ended			Three Months Ended			Nine Months Ended		Nine Months Ended
		September 30, 2011			September 30, 2010			September 30, 2011		September 30, 2010
		(Unaudited)			(Unaudited)			(Unaudited)		(Unaudited)
PRC	$	1,081,805		$	13,695,925		$	14,214,826	$	33,186,701
Others		(174,930	)		(863,644	)		1,434,083		(973,621	)
Total income before income taxes	$	906,875		$	12,832,281		$	15,648,909	$	32,213,080

13. RESERVE AND DISTRIBUTION OF PROFIT

In ~~United~~accordance ~~States~~ with relevant PRC regulations and the Articles of Association of our PRC subsidiaries, our PRC subsidiaries are required to allocate at least 10% of their annual after-tax profits determined in accordance with PRC statutory financial statements to a statutory general reserve fund until the amounts in said fund reaches 50% of their registered capital. As of March 31, 2012, the balance of general reserve is $14.49 million.

Under ~~The~~applicable ~~Company~~PRC ~~was~~regulations, ~~incorporated~~the inCompany ~~Nevada~~may ~~and~~pay ~~is subject to United~~dividends ~~States~~only out of ~~America~~the ~~tax~~accumulated ~~law.~~profits, Itif isany, ~~management's~~determined ~~intention~~in toaccordance ~~reinvest~~with ~~all the~~PRC ~~income~~accounting ~~attributable~~standards toand ~~the~~regulations. ~~Company~~As ~~earned~~the bystatutory ~~its~~reserve ~~operations~~funds ~~outside~~can ~~the~~only ~~United~~be ~~States~~used offor ~~America~~specific ~~(the~~purposes ~~“U.S.”).~~under ~~Accordingly,~~PRC nolaws ~~U.S.~~and ~~corporate~~regulations, ~~income~~the ~~taxes~~general ~~are~~reserves ~~provided~~are innot ~~these~~distributable ~~condensed~~as ~~consolidated~~cash ~~financial statements~~dividends.

Our ~~BVI~~ after-tax profits or losses with respect to the payment of dividends out of accumulated profits and the annual appropriation of after-tax profits as calculated pursuant to PRC accounting standards and regulations do not result in significant differences as compared to after-tax earnings as presented in our financial statements. However, there are certain differences between PRC accounting standards and regulations and U.S. generally accepted accounting principles, arising from different treatment of items such as amortization of intangible assets and change in fair value of contingent consideration arising from business combinations.

- ~~Under~~17 ~~the current laws of the BVI, dividends and capital gains arising from the Company's investments in the BVI are not subject to income taxes.~~ -

PRC
The income tax provision consists of the following:
		Three months ended						Nine months ended
		September 30						September 30
		2011			2010			2011			2010
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Current taxes	$	343,880		$	2,424,760		$	1,975,092		$	5,539,873
Deferred taxes		(332,073	)		(63,167	)		(643,327	)		156,412
Provision for income taxes	$	11,807		$	2,361,593		$	1,331,765		$	5,696,285

CHINA INFORMATION TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14. ~~- 18 -~~ EQUITY

CHINA INFORMATION TECHNOLOGY, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
12. INCOME TAXES (CONTINUED)
		Three months ended						Nine months ended
		September 30						September 30
		2011			2010			2011			2010
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
PRC federal statutory tax rate	$	25%		$	25%		$	25%		$	25%
Computed expected income tax expense		226,718			3,208,070			3,912,227			8,053,270
Tax concession		(68,214	)		(1,540,799	)		(2,094,102	)		(3,476,118	)
Permanent differences		(188,430	)		72,488			(364,959	)		275,824
Non-deductible tax losses		7,398			716,766			112,509			958,219
Other differences		34,335			(94,932	)		(233,910	)		(114,910	)
Income taxes	$	11,807		$	2,361,593		$	1,331,765		$	5,696,285

Repurchase of common shares

On September 16, 2011, the Company announced a $5 million share repurchase program. The ~~significant~~amount, ~~components~~timing and extent of ~~deferred~~any ~~tax~~repurchases ~~assets~~will depend on market conditions, the trading price of the Company’s common stock and ~~deferred~~other factors ~~tax~~and ~~liabilities~~will ~~were~~be assubject ~~follows~~to asrestrictions ofrelating ~~September~~to 30volume, ~~2011~~price and ~~December~~timing 31under applicable law, ~~2010:~~including Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended.

		September 30, 2011						December 31, 2010
		Deferred			Deferred			Deferred			Deferred
		Tax			Tax			Tax			Tax
		Assets			Liabilities			Assets			Liabilities
		(Unaudited)			(Unaudited)
Fixed assets	$	397,913		$	(203,296	)	$	275,209		$	(205,199	)
Intangible assets		91,429			(1,210,862	)		95,517			(1,619,235	)
Inventory valuation		154,440			-			258,339			-
Accounts receivable allowance		1,188,727			-			1,191,001			-
Salary payable		40,405			-			47,174			-
Subsidy income		-			-			68,493			-
Equity investments		338,734			-			167,733			-
Loss carry-forwards		346,428			-			593,595			-
Gross deferred tax assets and liabilities		2,558,076			(1,414,158	)		2,697,061			(1,824,434	)
Valuation allowance		(346,428	)		-			(593,595	)		-
Total deferred tax assets and liabilities	$	2,211,648		$	(1,414,158	)	$	2,103,466		$	(1,824,434	)

On March 15, 2012, the Company announced that its Board of Directors approved the termination of its stock purchase plan. At the same time, the Company chairman and CEO, Mr. Jiang Huai Lin, entered into a new $2 million purchase plan. Mr. Lin also agreed to purchase 1,084,895 shares in a private transaction outside the purchase plan at a purchase price per share of $1.20.

Before ~~The~~the ~~breakdown~~termination ~~between~~of ~~current~~repurchase ~~and~~plan, ~~long-term~~during ~~deferred~~three ~~tax~~months ~~assets and~~ended ~~liabilities~~March ~~was~~31, as2012, ~~follows~~a asnet total of ~~September 30~~223,604 ~~2011~~shares ~~and~~of ~~December~~the ~~31,~~Company’s ~~2010:~~ common stock were repurchased in accordance with the program at a cost of $315,577.

		September 30,			December 31,
		2011			2010
		(Unaudited)
Current deferred tax assets	$	1,383,572		$	1,565,006
Current deferred tax liabilities		-			-
Long-term deferred tax assets		828,076			538,460
Long-term deferred tax liabilities		(1,414,158	)		(1,824,434	)
Total net deferred tax assets	$	797,490		$	279,032

15. CONSOLIDATED SEGMENT DATA

Segment -information 19is - consistent with how management reviews the businesses, makes investing and resource allocation decisions and assesses operating performance. Transfers and sales between reportable segments, if any, are recorded at cost.

The ~~CHINA~~Company ~~INFORMATION~~reports ~~TECHNOLOGY,~~financial ~~INC.~~and ~~NOTES~~operating TOinformation ~~THE~~in ~~CONDENSED~~the ~~CONSOLIDATED~~following ~~FINANCIAL~~two ~~STATEMENTS~~ segments:

(a) 13IT includes revenues from products and services surrounding the Company’s variety of software core competencies currently primarily in Geographic Information Systems, Digital Public Security Technologies and Hospital Information Systems. ~~RESERVE~~IT ~~AND~~segment ~~DISTRIBUTION~~revenues OFare ~~PROFIT~~ generated from the sales of software and system integration services, as well as hardware other than display products. (b) DT includes revenues from products and services surrounding the Company’s display technology core competencies currently primarily in Geographic Information Systems, Digital Public Security Technologies, Education and Media Solutions and consumer products. DT segment revenues are generated from sales of hardware and total solutions of hardware integrated with proprietary software and content, as well as services.

~~In accordance with relevant PRC regulations and the Articles of Association of our PRC subsidiaries, our PRC subsidiaries are required to allocate at least 10% of their annual after~~-~~tax~~ ~~profits~~18 ~~determined in accordance with PRC statutory financial~~- ~~statements to a statutory general reserve fund until the amounts in said fund reaches 50% of their registered capital. As of September 30, 2011, the balance of general reserve is $12.97 million.~~

CHINA ~~Under~~INFORMATION ~~applicable PRC regulations~~TECHNOLOGY, ~~the Company may pay dividends only out of the accumulated profits, if any, determined in accordance with PRC accounting standards and regulations~~INC.NOTES AsTO ~~the statutory reserve funds can only be used for specific~~THE ~~purposes~~CONDENSED ~~under~~CONSOLIDATED ~~PRC~~FINANCIAL ~~laws and regulations, the general reserves are not distributable as cash dividends.~~ STATEMENTS

Our after-tax profits or losses with respect to the payment of dividends out of accumulated profits and the annual appropriation of after-tax profits as calculated pursuant to PRC accounting standards and regulations do not result in significant differences as compared to after-tax earnings as presented in our financial statements15. ~~However,~~CONSOLIDATED ~~there~~SEGMENT ~~are~~DATA certain differences between PRC accounting standards and regulations and U.S. generally accepted accounting principles, arising from different treatment of items such as amortization of intangible assets and change in fair value of contingent consideration arising from business combinations. (CONTINUED)

Selected ~~14.~~information ~~EQUITY~~by segment ~~(a)~~is ~~Issuance~~presented ofin ~~new~~the ~~shares~~following tables for the three months ended March 31, 2012 and 2011.

On February 8, 2011, the Company issued 250,000 shares of common stock to eligible employees in connection with the Equity Incentive Plan. On May 3, 2011, upon achievement of earn out targets by Huipu , the Company issued 330,578 shares of common stock in connection with the acquisition of Huipu .

		Three Months Ended		Three Months Ended
		March 31,		March 31,
		2012		2011
Revenues⁽¹⁾		(Unaudited)		(Unaudited)
IT Segment	$	10,249,326	$	18,978,749
DT Segment		6,030,663		7,969,999
Revenues	$	16,279,989	$	26,948,748

~~On August 16, 2011, the Company issued a total of~~ (1~~,851,852~~) ~~shares~~Revenues ofby ~~the~~operating ~~Company’s~~segments ~~common~~exclude ~~stock at a conversion price of $2~~intercompany transactions.7 ~~per~~(Loss) ~~share~~income asfrom ~~full repayment of $5 million shareholder’s loan.~~ operations:

On August 30, 2011, the Company waived the requirement for earn out targets by Huipu for fiscal years 2011 and 2012 and issued 688,707 shares of the Company’s common stock in connection with the acquisition of Huipu .

IT Segment	$	(944,035	)	$	7,430,777
DT Segment		(2,014,486	)		1,676,820
Corporate and others⁽²⁾		(250,084	)		(192,544	)
		(3,208,605	)		8,915,053
Corporate other income (expenses), net		861,433			864,220
Corporate interest income		76,676			95,006
Corporate interest expense		(828,186	)		(699,706	)
(Loss) income before income tax		(3,098,682	)		9,174,573

Income tax benefit (expense)		27,001			(1,080,518	)
Net (loss) income		(3,071,681	)		8,094,055

Net loss attributable to the non-controlling interest		211,883			128,278
Net (loss) income attributable to the Company	$	(2,859,798	)	$	8,222,333

(b2) ~~Stock~~Includes non-~~based~~cash compensation , professional fees and consultancy fees for the Company. Total assets by segment as of March 31, 2012 and December 31, 2011 are as follows:

Effective September 13, 2007, the Board of Directors of the Company adopted the China Information Security Technology, Inc. 2007 Equity Incentive Plan (the “Plan”). The Plan provides for grants of stock options, stock appreciation rights, performance units, restricted stock, restricted stock units and performance shares. A total of 8,000,000 shares of the Company’s common stock may be issued pursuant to awards granted under the Plan.

		March 31,		December 31,
		2012		2011
		(Unaudited)
Total assets:
IT Segment	$	195,833,107	$	205,623,157
DT Segment		161,517,415		155,559,917
Corporate and others		320,436		609,068
	$	357,670,958	$	361,792,142

~~On November 30, 2007, subject to ratification of the Plan by the stockholders, the Company issued options to certain employees to purchase 490,000 shares of the Company’s common stock, par value $0~~16.~~01,~~ ~~with~~COMMITMENTS anAND ~~exercise price of $9.48 per share. The options were to vest on December 5, 2008 and expire on December 5, 2011.~~ CONTINGENCIES

iASPEC, OnBocom ~~March 3~~, ~~2008~~Zhongtian , ~~the~~and ~~Company's~~Geo ~~Board~~lease ofoffices, ~~Directors~~employee dormitories ~~voided~~ and ~~canceled the~~ ~~grant~~factory ofspace ~~the~~in ~~stock~~Shenzhen, ~~options~~Guangzhou, Beijing and onDongguan ~~March~~in the 20PRC, ~~2008~~under ~~approved~~lease ~~the~~agreements ~~grant~~that ofwill ~~400,000~~expire ~~shares~~on ofvarious ~~common~~dates ~~stock~~through ~~to the employees~~June 2013. ~~The~~For ~~fair value of~~ the ~~Company’s~~three ~~common~~months ~~stock based~~ended ~~on quoted market prices on~~ March 2031, ~~2008~~2012 ~~was $4.30 per share. Since the cancellation~~ and ~~grant of the replacement award occurred concurrently~~2011, ~~they were treated as a modification of~~ the ~~terms~~rent ofexpenses ~~the cancelled award. 100,000 shares of~~were ~~common~~approximately ~~stock became vested on June 20~~$109,400 ~~2008~~ and ~~September 20~~$104, ~~2008~~500, respectively~~, and the remaining 200,000 shares of common stock were vested on December 20, 2008~~.

- 20 -

Future minimum lease payments under these lease agreements are as follows:
Remainder of 2012		286,998
2013		171,051
Total	$	458,049

On July 9, 2010, the Company entered into an agreement with the municipal ~~CHINA~~government ~~INFORMATION~~of ~~TECHNOLOGY~~Dongguan City, ~~INC~~to purchase a land use right for a land of 101,764 square meters at a consideration of approximately $24.34 million (RMB ~~NOTES~~153.6 TOmillion) ~~THE~~to ~~CONDENSED~~be ~~CONSOLIDATED~~paid ~~FINANCIAL~~in ~~STATEMENTS~~cash in installments. As of March 31, 2012, the Company has paid deposits of approximately $19 million (RMB 119.96 million).

- ~~14.~~19 ~~EQUITY (CONTINUED)~~ -

CHINA OnINFORMATION ~~February 8~~TECHNOLOGY, ~~2011, the Company granted eligible employees a total of 250,000 shares of the Company's common stock as compensation under the Plan~~INC. ~~The fair value of these shares of approximately $1.10 million, based on the quoted market price,~~ ~~was~~NOTES ~~accrued~~TO asTHE ofCONDENSED ~~December~~CONSOLIDATED ~~31,~~FINANCIAL ~~2010 as the compensation was for services provided on 2010.~~ STATEMENTS

~~As of September 30, 2011, there was no unrecognized compensation expenses related to the non-vested options~~17. CONCENTRATIONS

Financial 15instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. ~~CONSOLIDATED~~The ~~SEGMENT~~Company ~~DATA~~ extends credit to its customers in the normal course of business and generally does not require collateral. As a result, management performs ongoing credit evaluations, and the Company maintains an allowance for potential credit losses based upon its loss history and its aging analysis. As of March 31, 2012 and December 31, 2011, the allowance of doubtful accounts were $10,296,000 and $9,373,000, respectively, which is the Company’s best estimate of the amount of probable credit losses in existing accounts receivable.

Management ~~Segment~~reviews ~~information~~the isallowance ~~consistent~~for ~~with~~doubtful ~~how~~accounts each reporting period based on a detailed analysis of accounts receivable. In the analysis, management ~~reviews~~primarily considers the ~~businesses~~age of the customer’s receivable and also considers the creditworthiness of the customer, ~~makes~~the ~~investing~~economic conditions of the customer’s industry, and ~~resource~~general ~~allocation~~economic ~~decisions~~conditions and ~~assesses~~trends, ~~operating~~among ~~performance~~other factors. ~~Transfers~~If ~~and~~any ~~sales~~of ~~between~~these ~~reportable~~factors ~~segments~~change, ifthe ~~any~~Company may also change its original estimates, ~~are~~which ~~recorded~~could impact atthe ~~cost~~level of the Company’s future allowance for doubtful accounts. If judgments regarding the collectability of accounts receivables were incorrect, adjustments to the allowance may be required, which would reduce profitability.

For ~~In connection with~~ the ~~changes~~three inmonths ~~the~~ended ~~Company's~~March ~~business~~31, ~~portfolio~~2012 and ~~realignment of management~~2011, no ~~management~~customer ~~conducted~~accounted afor ~~review~~greater ofthan ~~its operating business segments during the first quarter of 2011. The review resulted in changing the segment reporting to Information Technology (“IT”), and Display Technology (“DT”).~~ 10% revenue.

At ~~The~~March ~~Company's~~31, ~~new segment reporting~~2012, ~~which~~accounts ~~has~~receivables ~~been~~were ~~used~~due ~~for~~from ~~all~~384 ~~periods~~customers. ~~presented~~Of these, ~~follows~~no ~~the~~customer ~~organizational~~accounted ~~structure~~for asover ~~reflected~~10% inof ~~its~~the ~~internal~~total ~~management~~accounts ~~reporting~~receivable. ~~systems,~~At ~~which~~March ~~are~~31, ~~the~~2011, ~~basis~~accounts ~~for~~receivables ~~assessing~~were ~~the~~due ~~financial~~from ~~performance~~331 ofcustomers ~~the business~~and ~~segments~~no ~~and~~customer accounted for over ~~allocating~~10% ~~resources~~of to the ~~business~~total ~~segments~~accounts receivable.

- ~~The~~20 ~~Company reports financial and operating information in the following two segments:~~ -

~~(a)~~ITEM IT includes revenues from products and services surrounding the Company’s variety of software core competencies currently primarily in Geographic Information Systems, Digital Public Security Technologies and Hospital Information Systems2. IT segment revenues are generated from the sales of software and system integration services, as well as hardware other than display products. (b) DT includes revenues from products and services surrounding the CompanyMANAGEMENT’sS ~~display~~DISCUSSION ~~technology~~AND ~~core~~ANALYSIS ~~competencies~~OF ~~currently~~FINANCIAL ~~primarily~~CONDITION inAND ~~Geographic~~RESULTS ~~Information~~OF ~~Systems, Digital Public Security Technologies, Education and Media Solutions and consumer products~~OPERATIONS. ~~DT segment revenues are generated from sales of hardware and total solutions of hardware integrated with proprietary software and content, as well as services.~~

Special -Note 21Regarding -Forward Looking Statements

In ~~CHINA~~addition ~~INFORMATION~~to ~~TECHNOLOGY~~historical information, ~~INC~~this report 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. We use words such ~~NOTES~~as TO“believe,” ~~THE~~“expect,” ~~CONDENSED~~“anticipate,” ~~CONSOLIDATED~~“project,” ~~FINANCIAL~~“target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to ~~STATEMENTS~~identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A, “Risk Factors” described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

Readers 15are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. ~~CONSOLIDATED~~These ~~SEGMENT~~reports ~~DATA~~attempt ~~(CONTINUED)~~ to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

~~Selected information by segment is presented in the following~~ ~~tables~~Use ~~for~~of ~~the three and nine months ended September 30, 2011 and 2010.~~ Terms

		Three months ended						Nine months ended
		September 30						September 30
		2011			2010			2011			2010
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues(1)
IT Segment	$	15,766,275		$	34,853,839		$	51,540,425		$	81,665,047
DT Segment		12,696,296			8,952,292			31,758,673			20,963,079
		28,462,571			43,806,131			83,299,098			102,628,126
(1) Revenues by operating segments exclude intercompany transactions.
Income from operations:
IT Segment	$	671,971		$	13,380,307		$	13,614,906		$	32,226,401
DT Segment		897,893			1,275,281			2,635,203			1,907,610
Corporate and others (2)		(204,470	)		(1,654,542	)		(509,729	)		(2,442,591	)
Income from operations		1,365,394			13,001,046			15,740,380			31,691,420
Corporate other income (expenses), net		365,567			357,395			2,074,322			1,431,174
Corporate interest income		119,861			22,024			254,807			51,318
Corporate interest expense		(943,947	)		(548,184	)		(2,420,600	)		(960,832	)
Income before income tax		906,875			12,832,281			15,648,909			32,213,080
Income tax expense		(11,807	)		(2,361,593	)		(1,331,765	)		(5,696,285	)
Net income		895,068			10,470,688			14,317,144			26,516,795
Net loss (income) attributable to the non-controlling interest		32,759			139,080			434,703			(273,850	)
Net income attributable to the Company	$	927,827		$	10,609,768		$	14,751,847		$	26,242,945

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to:

(1)	Revenues by operating segments exclude intercompany transactions.
(2)	Includes non-cash compensation, professional fees and consultancy fees for the Company.

“CNIT,” “we,” “us,” “our” and the “Company” are to the combined business of China Information Technology, Inc. and its consolidated subsidiaries, Bocom, CITH, HPC, Huipu, ISS, ISSI, ISIID, IST, and iASPEC, to whose operations we succeeded on October 9, 2006 and which became our variable interest entity effective July 1, 2007, and its 52.54% majority-owned subsidiary, Geo and 81.65% majority-owned subsidiary, Zhongtian;
“Bocom” ~~Total~~are ~~assets~~to byShenzhen ~~segment~~Bocom asMultimedia ofDisplay ~~September~~Technology 30Co., ~~2011 and December 31~~Ltd., ~~2010~~a ~~are~~PRC ~~as follows:~~ company;

		September 30,		December 31,
		2011		2010
		(Unaudited)
Total assets:
IT Segment	$	202,913,404	$	209,739,372
DT Segment		157,416,620		129,533,782
Corporate and others		326,312		128,570
	$	360,656,336	$	339,401,724

“CITH” are to China Information Technology Holdings Limited, a British Virgin Islands company;
“HPC” -are 22to -HPC Electronics (China) Company Limited, a Hong Kong company;
“Huipu” ~~CHINA~~are ~~INFORMATION~~to ~~TECHNOLOGY,~~Huipu ~~INC.~~Electronics ~~NOTES~~(Shenzhen) TOCo., ~~THE~~Ltd., ~~CONDENSED~~a ~~CONSOLIDATED~~PRC ~~FINANCIAL STATEMENTS~~ company;
“ISS” 16are to Information Security Software (China) Co., ~~COMMITMENTS~~Ltd., ~~AND~~a ~~CONTINGENCIES~~ PRC company;
~~iASPEC ,~~ ~~Bocom , Zhongtian ,~~“ISSI” ~~and HPC lease~~are ~~offices,~~to ~~employee dormitories~~Information ~~and~~Security ~~factory~~Software ~~space~~Investment ~~in Shenzhen~~Limited, ~~Guangzhou,~~a ~~Beijing~~Hong ~~and~~ Kong Dongguan in the PRC, under lease agreements that will expire on various dates through March 2013. For the three months ended September 30, 2011 and 2010, the rent expenses were approximately $ 126,097 and $84,700, respectively. For the nine months ended September 30, 2011 and 2010, the rent expenses were approximately $ 360,891 and $300,900, respectively. company;
“ISIID” ~~Future~~are ~~minimum~~to ~~lease~~Information ~~payments~~Security ~~under~~International ~~these~~Investment ~~lease~~and ~~agreements~~Development ~~are as~~Limited, ~~follows:~~ a Hong Kong company;

Remainder of 2011	$	118,137
2012		349,348
2013		153,402
Total	$	620,887

“IST” are to Information Security Technology (China) Co., Ltd., a PRC company;
~~On July 9, 2010, the Company entered into an agreement with the~~ ~~municipal~~“iASPEC” ~~government~~are ~~of Dongguan City,~~ to ~~purchase~~iASPEC aSoftware ~~land use right for a land of 101~~Co.,~~764~~ ~~square meters at a consideration of approximately $24~~Ltd.~~04 million (RMB 153.6 million) to be paid in cash in installments . As of September 30~~, ~~2011,~~a ~~the Company~~PRC ~~paid deposits of approximately $18.77 million (RMB 119.96 million). The Company will pay the remaining contracted amount within year 2011.~~ company;
“Geo,” 17are to Wuda Geoinformatics Co., ~~CONCENTRATIONS~~ Ltd., a PRC company;
~~Financial instruments that potentially subject the Company to~~ ~~concentrations~~“Zhongtian,” ofare ~~credit risk consist primarily of trade accounts receivable. The Company extends credit~~ to ~~its~~Shenzhen ~~customers~~Zhongtian inTechnology ~~the~~Development ~~normal course of business and generally does not require collateral. As a result, management performs ongoing credit evaluations, and the~~ Company ~~maintains an allowance for potential credit losses based upon its loss history and its aging analysis~~Ltd. ~~As of September 30~~, ~~2011~~ ~~and~~a ~~December~~PRC ~~31, 2010, the allowance of doubtful accounts were $6,692,000 and $6,073,000, respectively, which is the Company's best estimate of the amount of probable credit losses in existing accounts receivable.~~ company;
~~Management reviews the allowance for doubtful accounts each~~ ~~reporting~~“Hong ~~period~~Kong” ~~based~~are onto ~~a detailed analysis of accounts receivable. In~~ the ~~analysis,~~ ~~management~~Hong ~~primarily~~Kong ~~considers~~Special ~~the~~Administrative ~~age~~Region of the ~~customer'~~People’s ~~receivable and~~Republic ~~also considers the creditworthiness~~ of the customer, the economic conditions of the customer's industry, and general economic conditions and trends, among other factors. If any of these factors change, the Company may also change its original estimates, which could impact the level of the Company's future allowance for doubtful accounts. If judgments regarding the collectability of accounts receivables were incorrect, adjustments to the allowance may be required, which would reduce profitability. China;
“PRC” ~~For the three~~ and ~~nine~~“China” ~~months~~are ~~ended~~to ~~September 30, 2011 and 2010,~~ the ~~Company~~People’s ~~had~~Republic ~~no customer accounted for greater than 10%~~ of ~~third-party revenue.~~ China;
~~At September 30, 2011, accounts receivables were due from 350~~ ~~customers.~~“SEC” Ofare ~~these,~~to ~~no customer accounted for over 10% of~~ the ~~total~~Securities ~~accounts receivable. At September 30, 2010, accounts receivables were due from 282 customers~~ and noExchange ~~customer accounted for over 10% of the total accounts receivable.~~ Commission;
“Exchange ~~18.~~Act” ~~SUBSEQUENT~~are ~~EVENT~~ to the Securities Exchange Act of 1934, as amended;
~~On September 16, 2011, the Company issued a press release about~~ ~~the~~“Securities $5Act” ~~million~~are ~~shares repurchase program. The amount, timing and extent of any repurchases will depend on market conditions, the trading price of its common stock and other factors and will be subject~~ to ~~restrictions relating to volume, price and timing under applicable law, including Rule 10b-18 promulgated under~~ the Securities ~~Exchange~~ Act of ~~1934~~1933, as amended. The Company expects to implement this share repurchase program over the next 12 months, in a manner consistent with market conditions and the interest of shareholders. Repurchases may be in open-market transactions or through privately negotiated transactions, and the repurchase program may be expanded by the Board of Directors in the future. The repurchases will be funded with available cash on hand. Any shares of common stock repurchased under the program will be returned to treasury. On November 9, 2011, total 72,209 of the Company’s common stock were repurchased in accordance with the program. ;
“Renminbi” -and 23“RMB” - are to the legal currency of China; and
“U.S. ~~ITEM~~dollars,” 2.“dollars” ~~MANAGEMENT’S~~and ~~DISCUSSION~~“$” ~~AND~~are ~~ANALYSIS~~to OFthe ~~FINANCIAL~~legal ~~CONDITION~~currency ~~AND~~of ~~RESULTS~~the OFUnited ~~OPERATIONS~~States.

- ~~Special~~21 ~~Note Regarding Forward Looking Statements~~ -

Overview ~~In addition to historical information, this report contains forward-looking statements within the meaning~~ of ~~Section~~Our ~~27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such~~Business as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A, “Risk Factors” described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

We ~~Readers~~ are ~~urged~~a toleading ~~carefully~~provider ~~review~~of information and ~~consider~~display ~~the~~technologies ~~various disclosures made by us~~ in ~~this report and our other filings with~~ the ~~SEC~~PRC. ~~These~~We ~~reports~~provide ~~attempt~~a tobroad ~~advise~~portfolio ~~interested parties~~ of ~~the risks and factors that may affect our business~~software, ~~financial~~ ~~condition~~hardware and ~~results~~fully ofintegrated ~~operations~~solutions ~~and~~to ~~prospects.~~customers ~~The forward-looking statements made~~ in ~~this~~a ~~report~~variety ~~speak only as~~ of ~~the~~technology ~~date~~sectors ~~hereof~~including ~~and~~Geographic weInformation ~~disclaim~~Systems, or ~~any obligation~~GIS, ~~except~~Digital asPublic ~~required~~Security ~~by law~~Technologies, toor ~~provide updates~~DPST, ~~revisions~~Digital orHospital ~~amendments to~~Information ~~any~~Systems, ~~forward-looking~~or ~~statements~~DHIS, toeducation, ~~reflect~~media, ~~changes~~and inconsumer ~~our expectations or future events~~products.

We ~~Use~~were founded in 1993 and are headquartered in Shenzhen, China. As of ~~Terms~~ March 31, 2012, we had approximately 1,582 employees and 24 sales offices nationwide.

Our ~~Except~~customers asare ~~otherwise~~mostly ~~indicated~~public bysector ~~the~~entities ~~context~~that use our products and ~~for~~services to improve the ~~purposes~~service quality and management level and efficiency of ~~this~~public ~~report~~security, ~~only~~traffic control, ~~references~~fire control, medical rescue, border control, and surveying and mapping. Our typical customers include some of the most important governmental departments in ~~this~~China, ~~report~~including the Ministry of Public Security, the public security, fire fighting, traffic and police departments of several provinces, the Shenzhen General Station of Exit and Entry Frontier Inspection, and several provincial personnel, urban planning, civil administration, land resource, and mapping and surveying bureaus. Over the past several years, we have diversified our customer base beyond our local reach. In the future, we expect to: continually expand our market and product offerings in the public and other sectors, through geographic expansion and enhancement of our technical capabilities.

We ~~“CNIT~~generate revenues through the sale of our software and hardware products,” ~~“we~~through our fully integrated total solutions,” ~~“us~~and through the provision of related support services. A significant portion of our operations are conducted through iASPEC ,” our orvariable “interest entity. iASPEC is a PRC domestic company owned by Mr. Jiang Huai Lin, our” Chairman and ~~the~~Chief ~~“Company”~~Executive Officer, who is a PRC citizen and resident. iASPEC is able to obtain governmental licenses that are restricted to ~~the~~PRC entities ~~combined~~that ~~business~~have ofno ~~China~~foreign ownership. These licenses allow iASPEC to perform Police-use Geographic Information ~~Technology~~Systems, ~~Inc~~or PGIS, services for PRC governmental customers. Under our Amended and ~~its~~Restated ~~consolidated~~Management ~~subsidiaries,~~Services Agreement among our ~~CITH~~ subsidiary, IST , ~~ISSI , ISS , ISIID , Bocom , Zhongtian , HPC , Huipu ,;~~ ~~and~~ iASPEC and Mr. Lin, or the MSA, IST is entitled to ~~whose~~receive ~~operations~~95% weof ~~succeeded~~the onnet ~~October~~received 9profit of iASPEC during the term of the agreement, ~~2006~~less costs and ~~who~~expenses ~~became~~related ~~our~~to ~~variable~~sales ~~interest~~and ~~entity~~operations, ~~effective~~and ~~July~~accrued 1but uncollected accounts receivable. During the three months ended March 31, ~~2007~~2012, ~~and~~$8.4 ~~its~~million, 52or 51.546% ~~majority~~of ~~owned~~our ~~subsidiary~~revenue, ~~Geo;~~was generated under this exclusive commercial arrangement with iASPEC.

First ~~“CITH”~~Quarter ~~are~~Financial toPerformance ~~China Information Technology Holdings Limited, a British Virgin Islands company;~~ Highlights

We ~~“IST”~~experienced ~~are~~significant toweakness ~~Information~~in ~~Security~~demand ~~Technology~~for ~~(China)~~our ~~Co.~~products and services during the three months ended March 31, ~~Ltd~~2012., aThe ~~PRC~~following ~~company;~~are some financial highlights for the first quarter of 2012:

Revenue: ~~“ISSI”~~Revenue ~~are~~decreased by $10.67 million, or 39.59%, to ~~Information~~$16.28 ~~Security~~million ~~Software~~for ~~Investment~~the ~~Limited~~three months ended March 31, a2012, ~~Hong~~from ~~Kong~~$26.95 ~~company;~~million for the same period in 2011.
Gross ~~“ISS”~~profit: ~~are~~Gross toprofit ~~Information~~decreased ~~Security~~by ~~Software~~$7.87 ~~(China)~~million, Coor 57.66%, ~~Ltd~~to $5.78 million for the three months ended March 31, a2012, ~~PRC~~from ~~company;~~$13.65 million for the same period in 2011.
Income ~~“ISIID”~~from ~~are~~operations: toIncome ~~Information~~from ~~Security~~operations ~~International~~decreased ~~Investment~~by ~~and~~$12.12 ~~Development~~million, ~~Limited~~or 135.99%, to a ~~Hong~~loss ~~Kong~~of ~~company;~~$3.21 million for the three months ended March 31, 2012, from an income of $8.92 million for the same period in 2011.
Net ~~“Bocom”~~income ~~are~~attributable to ~~Shenzhen~~ the ~~Bocom Multimedia~~Company: ~~Display~~Net ~~Technology~~income Coattributable to the Company was a loss of $2.86 million for the three months ended March 31, ~~Ltd.~~2012, a ~~PRC~~decrease ~~company;~~of $11.08 million, or 134.78%, from an income of $8.22 million for the same period in 2011.
Fully ~~“Zhongtian”~~diluted ~~are~~net toincome ~~Shenzhen Zhongtian Technology~~per ~~Development~~share: ~~Company~~Fully ~~Ltd~~diluted net income per share was a loss of $0.11 for the three months ended March 31, a2012, ~~PRC~~as ~~company;~~compared to an income of $0.31 for the same period in 2011.

Business ~~“HPC”~~Segment ~~are to~~Information ~~HPC Electronics (China) Company Limited, a Hong Kong company;~~

Segment ~~“Huipu”~~information ~~are~~is to consistent ~~Huipu Electronics~~with ~~(Shenzhen)~~how ~~Co.~~management reviews the businesses, ~~Ltd~~makes investing and resource allocation decisions and assesses operating performance. Transfers and sales between reportable segments, aif ~~PRC~~any, ~~company;~~are recorded at cost.

- ~~“iASPEC”~~22 ~~are to~~- ~~iASPEC Software Co., Ltd., a PRC company;~~

In ~~“Geo”~~connection ~~are~~with to the ~~Wuda~~changes in our business portfolio and ~~Geoinformatics Co.,~~realignment ~~Ltd.~~of management, management conducted a ~~PRC~~review ~~company;~~of our operating business segments during the first quarter of 2011. The review resulted in changing the segment reporting.

Our new segment reporting, which has been used for all periods presented, ~~“Hong~~follows ~~Kong”~~the ~~are~~organizational tostructure reflected in our internal management reporting systems, which are the ~~Hong~~basis ~~Kong~~for ~~Special~~assessing ~~Administrative~~the ~~Region~~financial performance of the ~~People’s~~business ~~Republic~~segments ofand ~~China;~~for allocating resources to the business segments.

We ~~“PRC”~~report financial and ~~“China”~~operating ~~are~~information toin the ~~People’s~~following two ~~Republic~~segments: ~~of China;~~

“SEC” are to the Securities and Exchange Commission;

(1)	IT segment: The IT segment includes revenues from products and services surrounding a variety of our software core competencies, currently primarily in GIS, DPST and DHIS. IT segment revenues are generated from the sales of software and system integration services, as well as hardware other than display products.

(2)	DT segment: The DT segment includes revenues from products and services surrounding our display technology core competencies, currently primarily in GIS, DPST, education, media, and consumer products. DT segment revenues are generated from sales of hardware and total solutions of hardware integrated with proprietary software and content, as well as services.

For more information regarding our operating segments, see Note 15 ~~“Securities~~(Consolidated ~~Act”~~Segment ~~are~~Data) to ~~the~~our ~~Securities~~unaudited ~~Act~~consolidated offinancial statements ~~1933,~~included aselsewhere ~~amended;~~in this report.

Results ~~“Exchange Act” are to the Securities Exchange Act~~ of ~~1934, as amended;~~ Operations

The ~~“Renminbi”~~following ~~and~~table ~~“RMB”~~sets ~~are~~forth tokey ~~the~~components ~~legal~~of ~~currency~~our results of operations ~~China;~~for the periods indicated, both in dollars and as a percentage of sales revenue.

“U.S. dollars,” “dollars” and “$” are to the legal currency of the United States.

		Three Months Ended					Three Months Ended					Period-Over-Period
		March 31, 2012					March 31, 2011					Increase (Decrease)
				%of					% of
		Amount		Revenue			Amount		Revenue			Amount		%
Revenue	$	16,279,989		100.00%		$	26,948,748		100.00%		$	(10,668,759	)	(39.59%	)
Costs of revenue		10,498,307		64.49%			13,293,908		49.33%			(2,795,601	)	(21.03%	)
Gross Profit		5,781,682		35.51%			13,654,840		50.67%			(7,873,158	)	(57.66%	)
Administrative expenses		(5,648,632	)	(34.70%	)		(2,504,307	)	(9.29	)%		(3,144,325	)	125.56%
Research and development expenses		(1,481,027	)	(9.10%	)		(733,330	)	(2.72	)%		(747,697	)	101.96%
Selling expenses		(1,860,628	)	(11.43%	)		(1,502,150	)	(5.57	)%		(358,478	)	23.86%
(Loss)/Income from operations		(3,208,605	)	(19.71%	)		8,915,053		33.08%			(12,123,658	)	(135.99%	)
Subsidy income		393,780		2.42%			30,440		0.11%			363,340		1,193.63 %
Other income, net		467,653		2.87%			833,780		3.09%			(366,127	)	(43.91%	)
Interest income		76,676		0.47%			95,006		0.35%			(18,330	)	(19.29%	)
Interest expense		(828,186	)	(5.09%	)		(699,706	)	(2.60	)%		(128,480	)	18.36%
(Loss)/Income before Income Taxes		(3,098,682	)	(19.03%	)		9,174,573		34.04%			(12,273,255	)	(133.77%	)
Income Tax Expense		27,001		0.17%			(1,080,518	)	(4.01	)%		1,107,519		(102.50%	)
Net (Loss)/Income		(3,071,681	)	(18.87%	)		8,094,055		30.03%			(11,165,736	)	(137.95%	)
Less: Net Loss attributable to non-controlling interest		211,883		1.30%			128,278		0.48%			83,605		65.17%
Net (Loss)/Income Attributable to CNIT	$	(2,859,798	)	(17.57%	)	$	8,222,333		30.51%		$	(11,082,131	)	(134.78%	)

Revenue. Our revenue is generated from the sales of -our 24software and hardware products, our fully integrated total solutions, and the related after-sales services. For the three months ended March 31, 2012, our revenue was $16.28 million, compared to $26.95 million for the three months ended March 31, 2011, a decrease of $10.67 million, or 39.59% . The decrease was primarily due to the difficult fiscal environment faced by many local Chinese governments as a result of the Chinese government’s implementation of macroeconomic tightening policies, which led to a slowdown in projects for our government customers, which traditionally have been our core customer base; and, secondarily due to the continued challenging industry dynamics for traditional flat-screen TV products..

- ~~Overview~~23 ~~of Our Business~~ -

Product sales decreased by $1.97 million, or 24.60%, to $6.04 million Wefor ~~are~~the athree ~~leading~~months ~~provider~~ended ofMarch ~~information~~31, ~~and~~2012, ~~display~~as ~~technologies~~compared to $8.01 million in the ~~PRC.~~same Weperiod ~~provide~~of a2011. ~~broad~~Product ~~portfolio~~sales constituted 37.09% of ~~software~~total revenue during the three-month period ended March 31, ~~hardware~~2012, ~~and~~as ~~fully~~compared ~~integrated~~with ~~solutions~~29.71% during tothe ~~customers~~same period in a2011. ~~variety~~The ofdecrease ~~technology~~in ~~sectors~~product ~~including~~sales ~~Geographic~~primarily reflected ~~Information~~1) ~~Systems,~~our efforts to transition our DT segment from the increasingly orcompetitive ~~GIS,~~and ~~Digital~~low-margin ~~Public~~flat-screen ~~Security~~TV ~~Technologies,~~market orinto the multi-functional and interactive ~~DPST~~ display technology markets, ~~Hospital~~which ~~Information~~caused ~~Systems,~~total orproduct ~~HIS,~~unit ~~Education~~sales to fall, and ~~Media.~~2) lower pricing of our traditional flat-screen TVs in the midst of increasing industry competition for LCD TV products.

Software sales decreased by $7.53 million, or 54.17%, to $6.37 million Wefor ~~were~~the ~~founded~~three inmonths ~~1993~~ended ~~and~~March ~~are~~31, ~~headquartered~~2012, from $13.89 million for the same period in ~~Shenzhen~~2011. Software sales constituted 39.10% of our total revenue, which ~~China~~decreased from 51.55% Asduring the same period in the prior year. The decrease was mainly due to the Chinese government’s implementation of macroeconomic ~~September~~tightening 30policies and the curtailment of the massive government economic stimulus package, ~~2011~~which led to a slowdown in software projects for our government customers. In addition, we ~~had~~instituted more ~~than~~stringent 1customer acceptance policies,~~500~~ ~~employees~~which limited new projects to those with solid credit credentials and 21long-term ~~sales~~business ~~offices~~prospects ~~nationwide~~in light of the unfavorable government fiscal environment.

Sales ~~Our~~of ~~customers~~system ~~have~~integration ~~historically~~services ~~been~~decreased ~~mostly~~by ~~public~~$1.34 million, ~~sector~~or ~~entities~~27.32%, ~~that~~to ~~use~~$3.58 ~~our~~million ~~products~~for ~~and services to improve~~ the ~~service~~three ~~quality~~months ~~and~~ended ~~management~~March ~~level and efficiency of public security~~31, ~~traffic control~~2012, ~~fire control, medical rescue, border~~ ~~control,~~from ~~surveying~~$4.92 ~~and~~million ~~mapping~~for asthe ~~well~~same asperiod ~~healthcare~~in ~~management~~2011. ~~Our~~As ~~typical~~a ~~customers~~percentage ~~include some~~ of ~~the~~revenue, system ~~most~~integration ~~important~~sales ~~governmental~~increased ~~departments~~from in18.26% ~~China,~~during ~~including~~ the ~~Ministry~~three ofmonths ~~Public~~ended March ~~Security~~31, ~~the~~2011 ~~State~~to ~~Bureau~~21.97% ofduring ~~Surveying and Mapping,~~ the ~~State~~ ~~Grid~~three ~~Corporation,~~months ~~the~~ended ~~public~~March ~~security~~31, ~~fire~~2012. ~~fighting,~~The decrease ~~traffic~~was ~~and~~mainly ~~police~~the ~~departments~~result of ~~several provinces,~~ the ~~Shenzhen~~relatively ~~General~~weak ~~Station~~economic ofenvironment ~~Exit and Entry Frontier Inspection, and several provincial personnel, urban planning, civil~~in ~~administration,~~the ~~land~~first ~~resource,~~quarter ~~and~~of ~~mapping~~2012 and ~~surveying~~a ~~bureaus.~~lack ~~Over~~of ~~the~~new ~~past~~large ~~several~~system ~~years,~~integration wesolutions engagement ~~have~~in ~~diversified~~connection ~~our~~with ~~customer~~large ~~base~~projects ~~beyond~~comparable ~~our local reach. In the future, we expect~~ to ~~continually expand our market and product offerings in~~ the ~~public~~ ~~and~~Shenzhen ~~private sectors~~Summer Universiade, ~~through~~which ~~geographic~~was ~~expansion~~held ~~and~~in ~~enhancement~~August ~~of our technical capabilities~~2011.

Other Werevenue ~~generate~~increased ~~revenues~~by ~~through the sale of our software and hardware products, through our fully integrated total solutions, and through the provision of related support services~~$0.17 ~~A significant portion of our operations are conducted through iASPEC~~ million, ~~our~~ ~~variable~~or ~~interest entity~~130. ~~iASPEC is a PRC domestic company owned by Jiang Huai Lin~~01%, ~~our Chairman and Chief Executive Officer, who is a PRC citizen and resident.~~from ~~iASPEC is able to obtain governmental licenses that are restricted to PRC entities that have no foreign ownership~~$0.13 ~~These~~million ~~licenses~~in ~~allow~~ the ~~iASPEC to~~three ~~perform~~months ~~Police-use~~ended ~~Geographic~~March ~~Information Systems~~31, ~~or PGIS ,~~2011 ~~services~~to ~~for PRC governmental customers~~$0.3 ~~Under~~million ~~our~~in ~~Amended and Restated Management Services Agreement among our subsidiary, IST , iASPEC and Mr. Lin, or~~ the ~~MSA , IST is~~same ~~entitled~~period ~~to receive 95%~~ of ~~the~~2012. ~~net~~The ~~received~~increase ~~profit~~was ~~of iASPEC during~~mainly ~~the~~due ~~term of the Agreement, less costs and expenses related~~ to ~~sales~~increase ~~and~~in ~~operations, and accrued but uncollected accounts receivable.~~maintenance ~~During~~services during the ~~nine~~current ~~months ended September 30, 2011, $38~~period.7 ~~million, or 46.42% of our revenue, was generated under this exclusive commercial arrangement with iASPEC .~~

The -following 25table -shows our revenue, percentage of revenue, cost of revenue and gross margin, by category:

Third Quarter Financial Performance Highlights

		Three Months Ended March 31, 2012						Three Months Ended March 31, 2011
			% of		Cost of	Gross			% of		Cost of	Gross
		Revenue	Revenue		Revenue	Margin		Revenue	Revenue		Revenue	Margin
Product	$	6,037,489	37.09%	$	4,719,407	21.83%	$	8,006,993	29.71%	$	5,810,023	27.44%
Software		6,366,430	39.10%		2,897,949	54.48%		13,891,525	51.55%		4,249,606	69.41%
System integration		3,576,377	21.97%		2,641,726	26.13%		4,920,500	18.26%		3,143,157	36.12%
Others		299,693	1.84%		239,225	20.18%		129,730	0.48%		91,122	29.76%
Total	$	16,279,989	100.00%	$	10,498,307	35.51%	$	26,948,748	100.00%	$	13,293,908	50.67%

A Webreakdown ~~experienced~~of ~~significant~~revenue, ~~weakness~~percentage inof ~~demand~~revenue, ~~for~~cost ~~our~~of ~~products~~ revenue and ~~services~~gross ~~during~~margin ~~the~~by ~~three~~segments ~~months~~is ~~ended~~as ~~September 30, 2011. The following are some financial highlights for the third quarter~~follows:

Revenue : Revenue decreased $15.34 million, or 35.03%, to $28.46 million for the three months ended September 30, 2011, from $43.81 million for the same period in 2010.

		Three Months Ended March 31, 2012						Three Months Ended March 31, 2011
			% of		Cost of	Gross			% of		Cost of	Gross
		Revenue	Revenue		Revenue	Margin		Revenue	Revenue		Revenue	Margin
IT Segment	$	10,249,325	62.96%	$	5,771,863	43.69%	$	18,978,749	70.43%	$	7,483,885	60.57%
DT Segment		6,030,664	37.04%		4,726,444	21.63%		7,969,999	29.57%		5,810,023	27.10%
Total	$	16,279,989	100.00%	$	10,498,307	35.51%	$	26,948,748	100.00%	$	13,293,908	50.67%

Cost ~~Gross~~of ~~Profit :~~revenue ~~Gross~~and gross profit. As indicated in the tables above, our cost of revenues decreased by $112.680 million, or 5521.0203%, to $910.495 million for the three months ended ~~September~~March 3031, ~~2011~~2012, ~~from~~as compared with $2113.09 29 million for the three months ended March 31, 2011. As a percentage of revenues, our cost of revenue increased to 64.49% during the three months ended March 31, 2012, from 49.33% in the same period inof ~~2010~~2011. As a result, gross margin was 35.51% for the three months ended March 31, 2012, a decrease of 1,516 basis points from 50.67% in the same period of 2011.

- ~~Income~~24 ~~from operations : Income from operations decreased $11.64 million, or 89.5%, to $1.37 million for the three months ended September 30, 2011, from $13.00 million for the same period in 2010.~~ -

The ~~Net~~decrease ~~income~~in ~~attributable~~gross profit margins, as displayed in the tables above, resulted from several factors. First, in the three months ended March 31, 2012, we continued our effort to increase our DT solutions as a percentage of total revenue. The percentage of DT revenue increased from 29.57% for the ~~Company :~~three ~~Net~~months ~~income~~ended ~~attributable~~March 31, 2011 to 37.04% for the ~~Company~~same ~~was~~period $0of 2012.93 ~~million~~The increase in contribution from DT revenue resulted in a decrease in gross profit margin for the three months ended March ~~September~~31, 302012 as our DT solutions business has lower average gross margins than other segments of our business. Second, ~~2011~~due to the Chinese government’s implementation of macroeconomic tightening policies, our government customers reduced software project orders. As a ~~decrease~~result, the percentage of $9software revenue decreased from 51.6855% ~~million~~for the three months ended March 31, or2011 91to 39.251% for the same period of 2012. The decrease in contribution from software revenues resulted in a decrease in gross profit margin for the three months ended March 31, 2012 as, on average, software projects have higher average gross margins than other segments of our business. Third, the gross profit margin for our system integration business decreased from ~~$10~~36.6112% ~~million~~for the three months ended March 31, 2011 to 26.13% for the same period of 2012, primarily due to the high profit margin of certain projects in the 2011 period. Finally, we lowered our LCD TV prices in the face of increased competition, while costs of manufacturing remained high in ~~2010~~2012. All of these factors resulted in a decrease in overall gross profit margin for the three months ended March 31, 2012. However, as we became more selective with our acceptance of orders in an effort to improve the quality of our earnings, the gross margin for product and software sales were higher in the three months ended March 31, 2012 as compared to the three months ended December 31, 2011.

Administrative ~~Fully~~expenses. ~~diluted~~Our ~~net~~administrative ~~income~~expenses ~~per~~consist ~~share :~~primarily ~~Fully~~of ~~diluted~~compensation ~~net~~and ~~income~~benefits ~~per~~to ~~share~~our ~~was~~general management, finance and administrative staff, professional advisor fees, audit fees and other expenses incurred in connection with general operations. Our administrative expenses increased by $03.0214 million, or 125.56%, to $5.65 million for the three months ended ~~September~~March 3031, ~~2011~~2012, asfrom ~~compared to~~ $02.215 million for the same period of 2011. Notable changes that resulted in ~~2010~~increased administrative expenses were as follows. First, inventory write downs increased by $1.8 million and second, provision of accounts receivables increased by $1.37 million. Our DT segment’s inventory was written down mainly for the following reasons: 1) the DT business’s transition from its traditional flat-screen TV products to multi-functional interactive digital display technologies resulted in some electronic components in inventory becoming incompatible with, and thus not usable for, the new advanced DT products; and 2) traditional LCD TV market continued to face major challenges, including a supply glut and the emergence of new display technologies and products such as 3D-TV and OLED technology that is expected to replace LCD technology in the coming years, leading to the obsolescence of many flat-screen display products and components.

Research Asand development expenses. Our research and development expenses consist primarily of ~~September~~personnel-related 30expenses, ~~2011~~as well as costs associated with new software and hardware development and enhancement. Research and development expenses increased by $0.75 million, or 101.96%, to $1.48 million for the ~~total~~three ofmonths ~~our~~ended ~~contract~~March ~~backlog~~31, ~~was~~2012, ~~approximately~~from $360.6273 million for the same period of 2011. As a percentage of revenue, research and development expenses accounted for approximately 9.1% of total revenue for the three months ended March 31, 2012, compared with 2.72% for the same period in 2011. Such increase was primarily due to efforts to improve the profitability of existing products as well as development of new products.

Selling ~~Business~~expenses. ~~Segment~~Our ~~Information~~ selling expenses consist primarily of compensation and benefits to our sales and marketing staff, sales and after-sales traveling costs, and other sales-related costs. Our selling expenses increased by $0.36 million, or 23.86%, to $1.86 million for the three months ended March 31, 2012, from $1.5 million for the same period of 2011. This increase was due to our increasingly nationwide market expansion, which requires increased travel and telecommunication expenses as well as increased total compensation to sales and marketing staff.

Subsidy ~~Segment~~income. ~~information~~For isthe ~~consistent~~three ~~with~~months ~~how~~ended ~~management~~March ~~reviews~~31, ~~the~~2012 ~~businesses~~and 2011, ~~makes~~in ~~investing~~connection with research and ~~resource~~development ~~allocation~~activities ~~decisions~~in ~~and~~a ~~assesses~~designated ~~operating~~locale, ~~performance.~~we ~~Transfers~~received ~~and~~approximately ~~sales~~$393,780 ~~between~~and ~~reportable~~$30,440, ~~segments~~respectively, ifas ~~any,~~a ~~are~~subsidy ~~recorded~~from the atlocal ~~cost~~governmental agency in China.

- ~~Our~~25 segment reporting follows the organizational structure as reflected in our internal management reporting systems, which are the basis for assessing the financial performance of the business segments and for allocating resources to the business- ~~segments.~~

Income Wetax ~~report~~expense. ~~financial~~Income ~~and~~tax ~~operating~~expense ~~information~~for the three months ended March 31, 2012 decreased by $1.11 million,from $1.08 million for the same period in 2011. The decrease was due to the ~~following~~net ~~two~~impact ~~segments~~of following factors: a) income before taxes from PRC subsidiaries decreased $10.78 million, causing approximately $1.62 million of the decrease; b) offset by tax increase from tax effect generated from tax loss not recognized during the current period of approximately $0.43 million.

Non-controlling ~~Information~~interest. ~~Technology~~Non-controlling interest of $211,883 orfor ITthe three months ended March 31, ~~Segment~~2012 represents the loss of $32,490 fee retained by iASPEC under the MSA, loss of $235,059 from Geo to its 47.46% non-controlling interest, and income of $55,666 from Zhongtian to its 21.79% non-controlling interest .

Net ~~Display~~income ~~Technology~~attributable to the Company. As a result of the cumulative effect of the foregoing factors, ora DTnet loss was $2.86 million during the three months ended March 31, ~~Segment~~2012, as compared to a net income $8.22 million for the same period in 2011.

Liquidity -and 26Capital -Resources

As ~~For~~of ~~more~~March ~~information~~31, ~~regarding our operating segments~~2012, ~~see~~we ~~Note 15~~had ~~(Consolidated~~cash ~~Segment~~and ~~Data)~~cash toequivalents ~~our~~of ~~unaudited~~$7.6 ~~condensed consolidated financial statements included elsewhere in this report~~million.

Our ~~Results~~customers have historically been primarily public sector entities that use our products and services to improve the service quality and management level and efficiency of ~~Operations~~ public security, traffic control, fire control, medical rescue, border control, surveying, mapping, and healthcare management. Over the past several years, especially during 2011 and 2010, we diversified our customer base beyond our historical geographic reach, and expanded our market and product offerings in the public and private sectors, through geographic expansion and the enhancement of our technical capabilities. Along with our expansion in the market, our customer base of accounts receivable increased from to 289 as of December 31, 2010, to 378 as of December 31, 2011 and to 384 as of March 31, 2012.

Due ~~Comparison~~to the Chinese government’s implementation of ~~Three~~macroeconomic ~~Months~~tightening ~~Ended~~policies ~~September~~since ~~30,~~the second quarter of 2011, ~~and~~government customers have slowed their payment of our accounts receivables. Historically, government customers generated over ~~September~~half 30of our revenues. The percentage of total accounts receivable attributable to government customers was 79% and 80% as of March 31, ~~2010~~ 2012 and December 31, 2011, respectively.

As ~~The~~the ~~following~~increase ~~table~~in ~~sets~~our ~~forth~~customer ~~key~~base ~~components~~and sales were primarily a result of ~~our~~an ~~results~~increase in non-public sector customers, the risk of recoverability increased compared with previous periods. Additionally, although we have had no significant experience ~~operations~~of ~~for~~failure in the ~~periods~~collection ~~indicated~~of accounts receivable from government customers, ~~both~~the recent slowdown in ~~dollars~~payments ~~and~~described asabove ahas ~~percentage~~caused us to view these customers’ risk of ~~sales~~ ~~revenue~~recoverability as having increased. In this regard, ~~and~~we ~~the~~further ~~increase~~noted that orturnover ~~decrease~~days inof ~~each~~accounts ~~key~~receivable ~~component~~increased. ~~between~~The ~~the indicated~~accounts ~~periods~~receivable that were outstanding for longer than one year accounted for 61% of total accounts receivable as of March 31, ~~both~~2012 inand ~~dollars~~52% of total accounts receivable as of December 31, 2011, and government customers accounted for 91% of all receivables outstanding for longer than one year as ~~the~~of ~~percentage~~March 31, 2012 compared to 91% as of ~~change~~December 31, 2011.

We ~~(All~~generally ~~amounts,~~do ~~other~~not ~~than~~consider receivables from government customers to be past due at any particular point in time primarily for the following reasons: PRC government entities are very safe customers in that they are generally well-established and ~~percentages~~able to access credit more easily than private-sector customers; we have generally had good collection histories with these customers; and the recent government macroeconomic tightening policies have affected government customers relatively equally, and we therefore believe that the resulting slowdown in Upayments from such customers is outside their immediate control.S We also view government customers as important to our business. ~~dollars)~~ As a result, we have continued sales relationships with most PRC government customers and extended flexible repayment terms to them, including with respect to those that have slowed down their payments to us.

		Three Months Ended				Three Months Ended				Period-Over-Period
		September 30, 2011				September 30, 2010				Increase (Decrease)
				% of				% of
		Amount		Revenue		Amount		Revenue		Amount		%
Revenue	$	28,462,571		100.00%	$	43,806,131		100.00%	$	(15,343,560	)	-35.03%
Costs of revenue		18,977,223		66.67%		22,720,538		51.87%		(3,743,315	)	-16.48%
Gross Profit		9,485,348		33.33%		21,085,593		48.13%		(11,600,245	)	-55.02%
Administrative expenses		(5,181,609	)	-18.20%		(5,449,209	)	-12.44%		267,600		-4.91%
Research and development expenses		(1,106,500	)	-3.89%		(937,774	)	-2.14%		(168,726	)	17.99%
Selling expenses		(1,831,845	)	-6.44%		(1,697,564	)	-3.88%		(134,281	)	7.91%
Income from operations		1,365,394		4.80%		13,001,046		29.68%		(11,635,652	)	-89.50%
Subsidy income		475,026		1.67%		6,521		0.01%		468,505		7,184.56%
Other (loss)/income, net		(109,459	)	-0.38%		350,874		0.80%		(460,333	)	-131.20%
Interest income		119,861		0.42%		22,024		0.05%		97,837		444.23%
Interest expense		(943,947	)	-3.32%		(548,184	)	-1.25%		(395,763	)	72.20%
Income before Income Taxes		906,875		3.19%		12,832,281		29.29%		(11,925,406	)	-92.93%
Income Tax Expense		(11,807	)	-0.04%		(2,361,593	)	-5.39%		2,349,786		-99.50%
Net Income		895,068		3.14%		10,470,688		23.90%		(9,575,620	)	-91.45%
Less: Net Income attributable to non-controlling interest		32,759		0.12%		139,080		0.32%		(106,321	)	-76.45%
Net Income Attributable to CNIT	$	927,827		3.26%	$	10,609,768		24.22%	$	(9,681,941	)	-91.25%

With respect to private-sector customers, we generally provide for a payment period of 90 days. Typically we are willing to extend the payment period to up to 120 days. For payment extensions beyond this time, we typically evaluate private-sector customers based on the criteria described in Note 2(d) to the unaudited financial statements contained in this report. Due to their differing credit histories and periods of operations, as described above, we consider the risk of recoverability for these customers to be higher than public-sector customers. However, we have generally been willing to continue the sales relationship with these customers and allow for additional time for them to make payments upon receipt of assurances that payment will be received as soon as practicable, in light of our aim to diversify our customer base and expand our market penetration. All accounts receivables with aging over two years with non-government customers are fully reserved.

~~Revenue. Our revenue is generated from the sales~~ ~~of our software and hardware products, our fully integrated total solutions, and the related after~~-~~sales~~ ~~services.~~26 For the three months ended September 30, 2011, our revenue was $28.46 million, compared to $43.81 million for the three months ended September 30, 2010, a decrease of $15.34 million, or 35.03% . The decrease was primarily due to the Chinese government’s implementation of monetary tightening policies, which led to a slow-~~down in projects for our government~~ ~~customers, which generated over half of our revenues during the three-month periods ended September 30, 2011 and 2010.~~

Management ~~Product~~performs ~~sales~~ongoing ~~increased~~credit ~~by $0.4 million~~evaluations, orand ~~3.16%,~~we ~~to $13.04~~maintain ~~million~~an allowance for ~~the~~potential ~~three~~credit ~~months~~losses ~~ended~~based ~~September~~upon ~~30,~~our ~~2011,~~loss ashistory ~~compared~~and toour aging ~~$12~~analysis.~~64 million~~ inWe ~~the~~estimated ~~same~~that ~~period~~the amount of ~~2010.~~probable ~~Product~~credit ~~sales~~losses ~~constituted~~in existing ~~45.82%~~accounts ofreceivable ~~total revenue~~was ~~during~~equal to the ~~three-month~~allowance ~~period~~for ~~ended~~doubtful ~~September~~accounts ~~30,~~of $10.3 ~~2011,~~million as ~~compared~~of ~~with 28.86%~~March ~~during~~31, ~~the~~2012 ~~same~~and ~~period~~$9.37 ~~ended~~million ~~September~~at 30December 31, ~~2010~~2011. The following ~~increase~~table ~~mainly reflected~~describes ~~our~~the ~~efforts~~movement toin ~~grow~~the ~~our~~allowance DTfor ~~segment~~doubtful toaccounts during ~~meet~~the ~~market~~three ~~demand~~months ~~from non-government~~ended ~~sectors.~~March 31, 2012:

Software sales decreased by $22.62 million, or 76.75%, to $6.85 million for the three months ended September 30, 2011, from $29.47 million for the three months ended September 30, 2010. Software sales constituted 24.08% of our total revenue, which decreased from 67.28% during the same period in the prior year. The decrease was mainly due to the Chinese government’s implementation of monetary tightening policies, which led to a slow-down in software projects for our government customers.

Balance at January 1, 2012	$	9,373,326
Increase in allowance for doubtful accounts		864,805
Amounts recovered during current period		-
Foreign exchange difference		57,373
Balance at March 31, 2012	$	10,295,504

The ~~Sales~~following oftable ~~system~~summarizes ~~integration services increased by $6.79 million, or 503.43%, to $8.13 million for~~ the ~~three~~key ~~months~~cash ~~ended~~flow ~~September 30,~~components ~~2011, as compared to $1.35 million for the same period of 2010. As a percentage of revenue, system integration sales increased~~ from ~~3.08%~~our ~~during~~consolidated ~~the~~statements ~~three months ended September 30, 2010 to 28.58% during the three months ended September 30, 2011. The increase was mainly the result~~ of ancash ~~increase~~flows ~~in demand~~ for ~~system integration solutions in connection with~~ the ~~Shenzhen~~periods ~~Summer Universiade , which was held in August 2011, and new integration projects we secured during the second quarter of fiscal year 2011, including a $2~~indicated.4 ~~million system integration contract for the Shenzhen Police TETRA system.~~

- 27 -

Cash Flows

		Three Months Ended March 31,
		2012			2011
Net cash (used) in/provided by operating activities	$	(687,908	)	$	1,900,164
Net cash used in investing activities		(698,783	)		(3,012,886	)
Net cash used in financing activities		(5,051,745	)		(1,459,742	)
Effect of exchange rate changes on cash and cash equivalents		19,602			86,446
Net decrease in cash and cash equivalents		(6,418,834	)		(2,486,018	)
Cash and cash equivalents at beginning of the period		14,019,634			18,166,857
Cash and cash equivalents at end of the period	$	7,600,800		$	15,680,839

Operating Other revenue increased by $0.09 million, or 27.25%, from $0.34 million in the three months ended September 30, 2010 to $0.43 million in the same period of 2011. Other revenue was derived from maintenance services during the current period while during the three months ended September 30, 2010, we also generated royalty income. Activities

Net ~~The~~cash ~~following~~used ~~table~~in ~~shows~~operating ~~our~~activities ~~revenue,~~was ~~percentage~~$0.68 ofmillion ~~revenue,~~for the ~~cost~~three ofmonths ~~revenue~~ended ~~and~~March ~~gross~~31, ~~margin~~2012, a decrease from $1.9 million in net cash provided by ~~categories:~~operating activities for the same period of 2011. The decrease was primarily due to the business operational loss during the current period.

(All amounts, other than percentages, in U.S. dollars)
		Three Months Ended September 30, 2011						Three Months Ended September 30, 2010
			% of		Cost of	Gross			% of		Cost of	Gross
		Revenue	Revenue		Revenue	Margin		Revenue	Revenue		Revenue	Margin
Products	$	13,042,469	45.82%	$	10,315,504	20.91%	$	12,643,172	28.86%	$	10,725,203	15.17%
Software		6,852,447	24.08%		2,534,256	63.02%		29,474,263	67.28%		11,314,585	61.61%
System integration		8,134,110	28.58%		5,983,569	26.44%		1,347,984	3.08%		621,310	53.91%
Others		433,545	1.52%		143,894	66.81%		340,712	0.78%		59,440	82.55%
Total Revenue	$	28,462,571	100.00%	$	18,977,223	33.33%	$	43,806,131	100.00%	$	22,720,538	48.13%
A breakdown of revenue, percentage of revenue, cost of revenue and gross margin by segments is as follows:
(All amounts, other than percentages, in U.S. dollars)
		Three Months Ended September 30, 2011						Three Months Ended September 30, 2010
			% of		Cost of	Gross			% of		Cost of	Gross
		Revenue	Revenue		Revenue	Margin		Revenue	Revenue		Revenue	Margin
IT Segment	$	15,766,275	55.39%	$	9,214,322	41.56%	$	34,853,839	79.56%	$	15,798,605	54.67%
DT Segment		12,696,296	44.61%		9,762,901	23.10%		8,952,292	20.44%		6,921,933	22.68%
Total	$	28,462,571	100.00%	$	18,977,223	33.33%	$	43,806,131	100.00%	$	22,720,538	48.13%

Investing Activities

Net ~~The~~cash ~~revenue~~used ~~increase~~in ofinvesting ~~our~~activities DTwas ~~segment~~$0.7 ~~and~~million ~~the~~for ~~decline in~~the ~~revenue~~three ~~from~~months ~~our~~ended ITMarch ~~segment~~31, ~~reflect~~2012, ~~two~~as ~~initiatives~~compared weto ~~are taking in fiscal year 2011~~$3.01 ~~The~~million ~~first~~net ~~initiative~~cash isused ~~to grow our DT segment~~ in ~~response to increased~~ ~~demand~~investing ~~from~~activities for the ~~broader~~same ~~market~~period ~~for~~of ~~more specialized solutions~~2011. The ~~second initiative~~decrease iswas primarily due to bea ~~more~~$2.24 ~~selective~~million ~~with~~deposit ~~our~~for ~~acceptance~~purchasing ofland ~~orders~~use inrights anduring ~~effort~~the toperiod ~~improve~~ended ~~the~~March ~~quality~~31, ~~of our earnings~~2011.

Financing Cost of revenue and gross profit . Our cost of revenues decreased by $3.74 million, or 16.48%, to $18.98 million for the three months ended September 30, 2011, as compared with $22.72 million for the three months ended September 30, 2010. As a percentage of revenues, our cost of revenue increased to 66.67% during the three months ended September 30, 2011, from 51.87% in the same period of 2010. As a result, gross margin was 33.33% for the three months ended September 30, 2011, a decrease of 1,480 basis points from 48.13% in the same period of 2010. Activities

Net ~~The~~cash ~~overall~~used ~~decrease~~ in ~~gross~~financing ~~profit~~activities ~~margins,~~was ~~as displayed in the above tables, resulted from several factors~~$5.05 ~~First,~~million ~~during~~for the ~~quarter ended~~ ~~September 30, 2011, we continued to grow our DT solutions, and the percentage of revenue increased from 20.44% during the~~ three months ended ~~September~~March 3031, ~~2010 to 44.61% during the three months ended September 30~~2012, ~~2011. The increase in contribution from DT revenues resulted in a decrease in gross profit margin for the three months ended September 30, 2011~~ as ~~our~~compared ~~DT solutions business has lower average gross margins than other segments of our business. Second, due~~ to ~~the Chinese government’s implementation of monetary tightening policies, our government customers reduced software project orders~~$1.46 Asmillion anet ~~result,~~cash ~~the~~used ~~percentage of~~in ~~software~~financing ~~revenue~~activities ~~decreased from 67.28%~~ during the ~~three~~same ~~months~~period ~~ended~~of ~~September 30, 2010 to 24.08% during the three months ended September 30,~~ 2011. The ~~decrease~~ inchange ~~contribution~~was ~~from~~mainly attributable ~~software~~to ~~revenues~~an ~~resulted~~increase in anet ~~decrease~~repayment inof ~~gross profit~~bank ~~margin~~loans ~~for the three months ended September 30, 2011as on average, software projects have higher average gross margins than other segments~~ of ~~our business~~$3.56 ~~Third, the gross~~million ~~profit margin for our system integration business decreased from 53.91%~~ during ~~the~~ ~~three months ended September 30, 2010 to 26.44% in~~ the ~~three~~current ~~months ended September 30, 2011, primarily due to the high profit margin of certain projects in the 2010~~ period. ~~However,~~ as ~~the~~compared ~~Company is more selective with our acceptance of orders in an effort~~ to ~~improve~~ the ~~quality~~prior ~~of our earnings, the gross margin for product and software sales increased during the three months ended September 30, 2011~~period.

Loan Administrative expenses. Administrative expenses consist primarily of compensation and benefits to our general management, finance and administrative staff, professional advisor fees, audit fees and other expenses incurred in connection with general operations. Our administrative expenses decreased by $0.27 million, or 4.91%, to $5.18 million for the three months ended September 30, 2011, from $5.45 million in the same period of 2010. Notable changes that resulted in the decrease of administrative expenses were as follows: First, we did not grant any shares to employees during the three months ended September 30, 201, whereas we granted 250,000 shares of the Company’s common stock as compensation to employees during the three months ended September 30, 2010. The fair value based on the quoted market price was approximately $1.3 million. Second, we recognized an increase in impairment of a long-term investment of $0.74 million compared with impairment recognized during the third fiscal quarter of 2010. These changes were offset by an increase of provisions for accounts receivables and inventories of $0.94 million and $0.64 million, respectively, from the three-month period ended September 30, 2010 to the same period of 2011. Facilities

As -of 28March - 31, 2012 and December 31, 2011, our loan facilities were as follows:

Research and development expenses. Our research and development expenses consist primarily of personnel-related expenses, as well as costs associated with new software and hardware development and enhancement. Research and development expenses increased by $0.17 million, or 17.99%, to $1.11 million for the three months ended September 30, 2011, from $0.94 million in the same period of 2010. As a percentage of revenue, research and development expenses accounted for approximately 3.89% of total revenue for the three months ended September 30, 2011, compared with 2.14% of total revenue for the same period in 2010. Such increase was primarily due to efforts to improve the profitability of existing products as well as development of new products.

Short-term bank loans

		March 31, 2012		December 31, 2011
Secured short-term loans	$	33,777,814	$	39,177,186
Add: amounts due within one year under long-term loan contracts		1,223,549		1,806,271
Total short-term bank loans	$	35,001,363	$	40,983,457

~~Selling expenses. Selling expenses consist primarily of compensation and benefits to our sales and marketing staff, sales and after~~-~~sales~~ ~~traveling~~27 ~~costs, and other sales~~-related costs. Our selling expenses increased $0.13 million, or 7.91%, to $1.83 million for the three months ended September 30, 2011, from $1.70 million in the corresponding period of 2010. This increase was due to our increasingly nationwide market expansion, which requires increased travel and telecommunication expenses as well as increased total compensation to sales and marketing staff.

Subsidy income. For the three months ended September 30, 2011 and 2010, in connection with research and development activities in a designated locale, we received approximately $475,026 and $6,521, respectively, as a subsidy from the local governmental agency in China.

Long-term bank loans
		March 31, 2012			December 31, 2011
Secured long-term loans	$	1,324,271		$	1,915,795
Less: amounts due within one year under long-term loan contracts		(1,223,549	)		(1,806,271	)
Total long-term bank loans	$	100,722		$	109,524

The covenants or financial restrictions related to our outstanding ~~Other~~debt ~~loss~~obligations as of March 31, ~~net.~~2012 are as follows: (1) a certain ~~Other~~subsidiary ~~loss~~that ~~for~~is party to the ~~three~~loan ~~months~~should ~~ended~~maintain ~~September~~a ~~30,~~certain ~~2011~~level ~~mainly~~of ~~represented~~tangible assets; (2) the ~~loss~~subsidiary ~~from~~should ~~recognizing~~maintain a ~~loss~~certain level of ~~approximately~~cash ~~$0.16~~in ~~million~~its ~~for~~bank accounts; ~~settlement~~and (3) the subsidiary should inform the bank 30 days before any of the afollowing ~~pending~~events ~~lawsuit~~occurs ~~during~~(if the ~~quarter~~bank ~~ended~~determines that such event will cause a ~~September~~material 30impact to the bank loan, ~~2011.~~ the subsidiary may perform the event only upon receipt of the approval of the bank):

dispose ~~Income~~material ~~tax~~assets ~~expense.~~constituting ~~Income~~over ~~tax~~10% expense for the three months ended September 30, 2011 was $0.01 million, as compared with $2.36 million for the same period in 2010. The decrease was largely attributable to two factors. First, income tax expense decreased approximately $1.89 million due to the decrease of ~~income before taxes arose from PRC subsidiaries of $12.61 million during~~ the ~~fiscal~~total ~~quarter~~net ~~ended~~assets ~~September 30~~by sale, ~~2011 compared to the fiscal quarter ended September 30~~bestowment, ~~2010. Second~~lending, ~~our subsidiary ISS obtained the High Technology Enterprise designation during the second quarter of 2011 and was approved to enjoy the EIT rate at 15%~~transfer, ~~therefore~~mortgage, ~~the~~pledge ~~EIT~~or ~~tax~~any ~~rate~~other ofmeans; ISS was reduced from 22% to 15% in the period ended September 30, 2011, which lowered our income tax expense by approximately $0.16 million during that period as compared with the same period of 2010.
profit ~~Non-controlling~~distribution ~~interest.~~over ~~Non-controlling interest generated net loss of $0.03 million for the three months ended September~~ 30~~, 2011. During July 2011, we transferred 100~~% of the ~~equity~~current ~~interests~~year’s ~~of Zhongtian ,~~after atax ~~subsidiary of the Company~~profits, ~~from our subsidiary Kwong Tai International Technology Limited (“ Kwong Tai”), to~~or ~~iASPEC .~~over ~~The~~20% ~~Company~~of ~~consolidated~~ the ~~operation~~total ~~results of Zhongtian for three months ended September 30, 2011 into iASPEC . This non-controlling interest represents $0.03 million fee~~ retained by earnings; ~~iASPEC under the MSA ,~~ and ~~$0.06 million from~~ ~~Geo’s loss due to its 47.46% non-controlling interest.~~
new ~~Net~~investments ~~income~~by ~~attributable to~~ the ~~Company .~~subsidiary Asoutside aits ~~result~~current ofoperations ~~the~~which constitute ~~factors~~over ~~described above, net income decreased $9.68 million, or 91.25~~20%, toof ~~$0.93~~its ~~million~~net ~~during the three months ended September 30, 2011, from $10~~assets.61 ~~million for the same period in 2010.~~

As ~~Comparison~~ of ~~Nine~~March ~~Months~~31, ~~Ended~~2012, ~~September~~we ~~30,~~were ~~2011~~in ~~and~~compliance ~~September~~with ~~30,~~the ~~2010~~above covenants.

Our short-term loan balances as of March 31, 2012 and December 31, ~~The~~2011 ~~following~~were ~~table~~$35 ~~sets~~million ~~forth~~and ~~key~~$40.98 ~~components~~million, ofrespectively. ~~our~~As ~~results~~a percentage of working ~~operations~~capital, ~~for~~short-term ~~the~~bank ~~periods~~loans ~~indicated,~~accounted ~~both~~for inapproximately ~~dollars~~56.65% and 66.21% as ~~a percentage~~ of ~~sales~~March ~~revenue~~31, 2012 and ~~the~~December ~~increase~~31, or2011, respectively. The net decrease inresult ~~each~~reflects ~~key~~management’s ~~component~~effort ~~between~~to ~~the~~reduce ~~indicated~~our ~~periods,~~reliance ~~both~~on inbank ~~dollars~~borrowings ~~and~~ as ~~the~~a ~~percentage~~source of ~~change~~working capital.

We believe that our current cash and cash equivalents and anticipated -cash 29flow -from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures for at least the next 12 months. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our existing cash and amounts available under existing credit facilities is insufficient to meet our requirements, we may seek to sell additional equity securities, debt securities, or borrow from lending institutions. We can make no assurances that financing will be available in the amounts we need, or on terms acceptable to us, if at all. The sale of additional equity securities, including convertible debt securities, would dilute the interests of our current shareholders. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer.

~~(All~~Intracompany ~~amounts, other than percentages, in U.S. dollars)~~ Transfers

		Nine Months Ended				Nine Months Ended				Period-Over-Period
		September 30, 2011				September 30, 2010				Increase (Decrease)
				% of				% of
		Amount		Revenue		Amount		Revenue		Amount		%
Revenue	$	83,299,098		100.00%	$	102,628,126		100.00%	$	(19,329,028	)	-18.83%
Costs of revenue		48,236,354		57.91%		53,626,774		52.25%		(5,390,420	)	-10.05%
Gross Profit		35,062,744		42.09%		49,001,352		47.75%		(13,938,608	)	-28.45%
Administrative expenses		(11,061,388	)	-13.28%		(10,840,741	)	-10.56%		(220,647	)	2.04%
Research and development expenses		(2,990,237	)	-3.59%		(2,067,854	)	-2.01%		(922,383	)	44.61%
Selling expenses		(5,270,739	)	-6.33%		(4,401,337	)	-4.29%		(869,402	)	19.75%
Income from operations		15,740,380		18.90%		31,691,420		30.88%		(15,951,040	)	-50.33%
Subsidy income		592,530		0.71%		438,201		0.43%		154,329		35.22%
Other income, net		1,481,792		1.78%		992,973		0.97%		488,819		49.23%
Interest income		254,807		0.31%		51,318		0.05%		203,489		396.53%
Interest expense		(2,420,600	)	-2.91%		(960,832	)	-0.94%		(1,459,768	)	151.93%
Income before Income Taxes		15,648,909		18.79%		32,213,080		31.39%		(16,564,171	)	-51.42%
Income Tax Expense		(1,331,765	)	-1.60%		(5,696,285	)	-5.55%		4,364,520		-76.62%
Net Income		14,317,144		17.19%		26,516,795		25.84%		(12,199,651	)	-46.01%
Less: Net Income attributable to non-controlling interest		434,703		0.52%		(273,850	)	-0.27%		708,553		-258.74%
Net Income Attributable to CNIT	$	14,751,847		17.71%	$	26,242,945		25.57%	$	(11,491,098	)	-43.79%

Our subsidiaries that are organized in the PRC may pay dividends only out of their accumulated profits and our PRC subsidiaries are required to set aside at least 10% of their after-tax profit to their general reserves until such reserves cumulatively reach 50% of their respective registered capital. Our PRC subsidiaries’ general reserves are not distributable as cash dividends. Restrictions on our net assets also include the conversion of local currency into foreign currencies, tax withholding obligations on dividend distributions, the need to obtain approval from the State Administration of Foreign Exchange of the People’s Republic of China, or SAFE, for loans to a non-PRC consolidated entity and the covenants or financial restrictions related to outstanding debt obligations. We are not aware of other restrictions on our net assets or the transferability of assets via loans or advances to our non-PRC consolidated entities. As our operations are principally based in China, our non-PRC consolidated entities do not have material cash obligations.

The ~~Revenue.~~following ~~For~~table provides the ~~nine~~amount ~~months~~of ~~ended~~our statutory ~~September~~general 30reserve, ~~2011,~~the ~~our~~amount ~~revenue~~of ~~was~~restricted ~~$83.3~~net ~~million~~assets, ~~compared~~consolidated tonet ~~$102.63 million~~assets, ~~for~~and the ~~nine~~amount ~~months~~of ~~ended~~restricted ~~September~~net ~~30,~~assets ~~2010,~~as a ~~decrease~~percentage of ~~$19.33~~consolidated ~~million~~net assets, ~~or 18.83%~~as .of March 31, 2012 and December 31, 2011:

- ~~Product~~28 sales increased by $5.7 million, or 21.54%, to $32.16 million for the nine months ended September 30, 2011, as compared to $26.46 million in the same period of 2010. Product sales constituted 38.61% of total revenue during the current period as compared with 25.78% during the same period in the prior year. The increase of product sales business reflected our efforts to grow our DT segment. -

Software sales decreased by $37.06 million, or 55.26%, to $30 million for the nine months ended September 30, 2011, from $67.06 million for the nine months ended September 30, 2010. Software sales constituted 36.01% of our total revenue during the nine months ended September 30, 2011, compared with 65.34% during the same period in the prior year. The decrease was mainly due to the Chinese government’s implementation of monetary tightening policies, which led to a slow-down in software projects for our government customers .

		March 31, 2012		December 31, 2011
PRC general reserve	$	14,488,533	$	14,488,533
Restricted net assets and retained earnings related to covenants of existing bank loans		19,008,000		18,595,200
Total restricted net assets	$	33,496,533	$	33,083,733
Consolidated net assets	$	229,089,873	$	230,866,530
Restricted net assets as percentage of consolidated net assets		14.62%		14.33%

An ~~Sales~~offshore ofholding ~~system~~company, ~~integration~~as ~~services~~a ~~increased~~shareholder byof ~~$12.57~~a foreign ~~million~~invested enterprise established in the PRC, or ~~165.05%~~an FIE, tocan ~~$20.19~~make ~~million~~loans ~~for~~to the FIE, ~~nine~~provided ~~months~~the ~~ended~~parties ~~September~~comply ~~30, 2011,~~with asPRC ~~compared~~regulations togoverning $7such loans.62 ~~million~~Our parent ~~for~~company ~~the~~can ~~same~~make ~~period~~a ofshareholder ~~2010.~~loan Asto a ~~percentage~~PRC subsidiary provided that (i) the amount of ~~revenue,~~the itloan ~~increased~~does ~~from~~not ~~7.42%~~exceed ~~during~~the difference between the ~~nine~~total investment ~~months~~and ~~ended~~registered ~~September~~capital ~~30,~~as approved by the local Administration for ~~2010~~Industry toand ~~24.24%~~Commerce ~~during~~that issued the ~~current~~business ~~period.~~license ~~Such~~of ~~growth~~the ~~primarily~~subsidiary; ~~resulted~~and (ii) ~~from~~before ~~an increase~~the inloan ~~demand~~can ~~for~~be ~~system~~converted ~~integration~~into ~~solutions~~RMB, inthe ~~connection~~subsidiary ~~with~~reports ~~the~~to SAFE ~~Shenzhen~~the ~~Summer Universiade,~~intended use of proceeds (which ~~was~~cannot ~~held~~be to purchase domestic assets). The subsidiary can finance the operations of iASPEC in ~~August~~accordance ~~2011,~~with ~~and~~the ~~other~~terms ~~new~~of ~~secured~~the ~~projects~~Management ~~during~~Services ~~the~~Agreement ~~current~~with ~~year~~iASPEC.

Obligations ~~Other~~Under ~~revenue~~Material decreased from $1.49 million in the nine months ended September 30, 2010 to $0.95 million in the same period of 2011, a decrease of $0.54 million, or 36.41%. Other revenue mainly derived from maintenance services in the nine months ended September 30, 2011, while in the same period of 2010, in addition to maintenance services, we also generated $0.55 million in royalty income from Huipu by licensing other manufacturers to use the HPC trademark. Contracts

The following table ~~shows~~sets forth our ~~revenue,~~material ~~percentage of revenue,~~contractual ~~cost~~obligations as of ~~revenue~~March ~~and gross margin~~31, ~~by categories~~2012:

(All amounts, other than percentages, in U.S. dollars)

	Payments Due by Period
				Less than					More than
Contractual Obligations		Total		1 year	1-3 years		3-5 years		5 years
Operating Lease Obligations	$	458,049	$	286,998	171,051	$	-	$	-
Purchase Obligations		5,333,378		5,333,378	-		-		-
Interest payable on long-term bank loans		51,314		31,871	13,332		6,111		-
Long-term bank loans		1,324,271		1,223,549	71,098		29,624		-
Total	$	7,167,012	$	6,875,796	255,481		35,735	$	-

		Nine Months Ended September 30, 2011						Nine Months Ended September 30, 2010
			% of		Cost of	Gross			% of		Cost of	Gross
		Revenue	Revenue		Revenue	Margin		Revenue	Revenue		Revenue	Margin
Products	$	32,162,844	38.61%	$	24,910,658	22.55%	$	26,462,653	25.78%	$	21,779,326	17.70%
Software		29,999,605	36.01%		8,921,148	70.26%		67,059,131	65.34%		27,973,686	58.29%
System integration		20,189,827	24.24%		14,097,762	30.17%		7,617,390	7.42%		3,667,840	51.85%
Others		946,822	1.14%		306,786	67.60%		1,488,952	1.45%		205,922	86.17%
Total Revenue	$	83,299,098	100.00%	$	48,236,354	42.09%	$	102,628,126	100.00%	$	53,626,774	47.75%

Critical Accounting Policies

Critical -accounting 30policies are those we believe are most important to portraying our financial conditions and results of operations and also require the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10- K for the fiscal year ended December 31, 2011.

Recently AIssued ~~breakdown~~Accounting ~~of revenue, percentage of revenue, cost of revenue and gross margin by segments is as follows:~~ Pronouncements

Please ~~(All~~refer ~~amounts,~~to ~~other~~Note ~~than~~2 ~~percentages,~~to our unaudited financial statements included elsewhere in ~~U.S.~~this ~~dollars)~~report for a discussion of relevant pronouncements.

		Nine Months Ended September 30, 2011						Nine Months Ended September 30, 2010
			% of		Cost of	Gross			% of		Cost of	Gross
		Revenue	Revenue		Revenue	Margin		Revenue	Revenue		Revenue	Margin
IT Segment	$	51,540,425	61.87%	$	23,886,248	53.66%	$	81,665,047	79.57%	$	37,519,555	54.06%
DT Segment		31,758,673	38.13%		24,350,106	23.33%		20,963,079	20.43%		16,107,219	23.16%
Total	$	83,299,098	100.00%	$	48,236,354	42.09%	$	102,628,126	100.00%	$	53,626,774	47.75%

Seasonality of our Sales

The ~~Cost~~first ofquarter ~~revenue and gross profit. As indicated in the above tables, our cost~~ of ~~revenues decreased $5.39 million, or 10.05%, to $48.24 million, for~~ the ~~nine~~calendar ~~months~~year ~~ended~~is ~~September~~typically ~~30, 2011, from $53.63 million for~~ the ~~nine months ended September 30, 2010. As a percentage of~~slowest ~~revenues,~~season ~~our cost~~ of ~~revenue increased to 57.91% during~~ the ~~nine~~year ~~months~~due ~~ended September~~to ~~30, 2011, from 52.25% in~~ the ~~same~~Chinese ~~period~~New ofYear ~~2010~~holiday. AsDuring athis ~~result~~period, ~~gross~~ ~~margin~~accounts ~~was~~receivable ~~42.09%~~collection ~~for~~is ~~the~~very ~~nine~~slow ~~months~~and ~~ended~~we ~~September~~also ~~30,~~need ~~2011,~~to aprepare ~~decrease of~~for ~~5.66%~~upcoming ~~from~~busier ~~47.75%~~seasons inby ~~the~~making ~~same~~payments ~~period~~for ~~of 2010~~inventory.

The decrease in gross profit margins, as displayed in the tables above, resulted from our efforts in continuing to grow our DT solutions during the current period. The percentage of DT revenue increased from 20.43% during the nine months ended September 30, 2010 to 38.13% during the nine months ended September 30, 2011. The increase in contribution from DT revenues resulted in a decrease in gross profit margin for the nine months ended September 30, 2011. Inflation

Inflation ~~Administrative~~does ~~expenses.~~not ~~Our~~materially ~~administrative expenses~~affect ~~increased~~our bybusiness ~~about $0.22 million,~~ or ~~2.04%, to $11.06 million for~~ the ~~nine~~results ~~months ended September 30, 2011, from $10.84 million in the same period~~ of ~~2010.~~ ~~Notable~~our ~~changes that resulted in increased administrative expenses were: First, impairment of a long term investment increased by $0~~operations.15 million between the nine months ended September 30, 2011 and 2010. Second, provisions of accounts receivables and inventory increased by $0.15 million and $0.49 million, respectively, between the nine months ended September 30, 2011 and 2010. Third, depreciation and amortization expenses increased by $0.24 million between the nine months ended September 30, 2011 and 2010. Fourth, miscellaneous daily operation expenses, such as building rental expense, due to inflation in China, increased by $0.39 million between the nine months ended September 30, 2011 and 2010. These changes were offset by the decrease of share based compensation expenses to employees of $1.3 million between the nine months ended September 30, 2011 and 2010.

Off-Balance ~~Research~~Sheet ~~and~~Arrangements development expenses. Research and development expenses increased by $0.92 million, or 44.61% to $2.99 million for the nine months ended September 30, 2011, from $2.07 million in the same period of 2010. As a percentage of sales, research and development expenses accounted for approximately 3.59% of the total revenue for the nine months ended September 30, 2011, compared with 2.01% of total revenue for the same period in 2010. Such an increase was primarily a result of our efforts in improving product profitability and developing new products.

We ~~Selling~~do ~~expenses .~~not ~~Our~~have ~~selling expenses increased~~any ~~$0.87~~off-balance ~~million,~~sheet ~~or 19~~arrangements.75%, to $5.27 million for the nine months ended September 30, 2011, from $4.40 million in the corresponding period of 2010. The increase in selling expenses reflects our heightened efforts in national market expansion.

- ~~Subsidy~~29 income. For the nine months ended September 30, 2011 and 2010, in connection with research and development activities in a designated locale, we received approximately $592,530 and $438,201, respectively, as a subsidy from the local governmental agency in China. -

Other income, net. Other income, net of $1.48 million for the nine months ended September 30, 2011, was primarily due to the fair value change for contingent shares paid towards the HPC acquisition. The approximate gain of $1.48 million resulted from a decrease of fair value of the liability associated with issuing contingent consideration that was recorded during the nine months ended September 30, 2011. Because our stock price declined during the period, the contingent liability, which is based on our stock price, also decreased in fair value. This decrease in contingent liability served to increase our income.

Income tax expense. Income tax expense for the nine months ended September 30, 2011 was $1.33 million, a decrease from $5.70 million for the same period in 2010. The decrease was largely due to the following factors: a) income before taxes arose from PRC subsidiaries decreased $18.97 million, causing approximately $2.85 million of the decrease; b) our subsidiary ISS obtained the High Technology Enterprise designation during the nine months ended September 30, 2011 and was approved to enjoy the EIT rate at 15% with retroactive effect from fiscal year 2010, causing approximately $0.5 million of the decrease from the reversal of accrued income tax for 2010; c) the income before tax of our subsidiary Huipu increased approximately $1.62 million as compared with the same period of last year, as there is unused carry-forward tax loss, causing approximately $0.24 million income tax expense decrease during the current period.

- 31 -

Non-controlling interest. Non-controlling interest of a net loss of $0.43 million for the nine months ended September 30, 2011 represents the $0.35 million fee retained by iASPEC under the MSA , and $0.78 million of Geo’s losses retained by the 47.46% non-controlling interest in Geo.

Net income attributable to the Company . As a result of the factors described above, net income decreased $11.49 million, or 43.79%, to $14.75 million during the nine months ended September 30, 2011, from $26.24 million for the same period in 2010.

Liquidity and Capital Resources

As of September 30, 2011, we had cash and cash equivalents of $5.18 million.

Our customers have historically been primarily public sector entities that use our products and services to improve the service quality and management level and efficiency of public security, traffic control, fire control, medical rescue, border control, surveying, mapping, and healthcare management. Over the past several years, especially during 2011 and 2010, we diversified our customer base beyond our historical geographic reach and expanded our market and product offerings in the public and private sectors, through geographic expansion and enhancement of our technical capabilities. Along with our expansion in the market, our customer base of accounts receivable increased from 234 as of December 31, 2009, to 289 as of December 31, 2010, and to 350 as of September 30, 2011.

Due to the Chinese government’s implementation of monetary tightening policies since the second quarter of 2011, government customers have slowed their payment of our accounts receivables. Historically, government customers generated over half of our revenues. As a result, the percentage of total accounts receivable attributable to government customers increased to 82% as of September 30, 2011 from 77% as of December 31, 2010.

As the increase in our customer base and sales were primarily a result of an increase in non-public sector customers, the risk of recoverability increased compared with previous periods. Additionally, although we have had no significant experience of failure of collection of accounts receivables by government customers, the recent slowdown in payments described above has caused us to view these customers’ risk of recoverability as having increased. In this regard, we further noted that turnover days of accounts receivables increased. The accounts receivables that were outstanding for longer than one year accounted for 41% of total accounts receivable as of September 30, 2011 and 6% as of December 31, 2010, and government customers accounted for 91% of all receivables outstanding for longer than 1 year as of September 30, 2011 compared to 57% as of December 31, 2010.

We generally do not consider receivables from government customers to be past due at any particular point in time primarily for the following reasons: PRC government entities are very safe customers in that they are generally well-established and able to access credit more easily than private-sector customers. We have generally had good collection histories with these customers. The recent credit tightening policies has affected government customers relatively equally, and we therefore believe that the resulting slowdown in payments from such customers is outside their immediate control. We also view government customers as important to our business. As a result, we have continued sales relationships with most PRC government customers and extended flexible repayment terms to them, including with respect to those that have slowed payments to us.

With respect to private-sector customers, we generally provide for a payment period of 90 days. Typically we are willing to extend the payment period to up to 120 days. For payment extensions beyond this time, we typically evaluate private-sector customers based on the criteria described in Note 2(d) of the financial statements contained in this report. Due to their differing credit histories and period of operations, as described above, we consider the risk of recoverability for these customers to be higher than public-sector customers. However, we have generally been willing to continue the sales relationship with these customers and allow for additional time for them to make payments upon receipt of assurances that payment will be received as soon as practicable, in light of our aim to diversify our customer base and expand our market penetration. All accounts receivables with aging over 2 years with non-government customers were fully provided.

Management performs ongoing credit evaluations, and the Company maintains an allowance for potential credit losses based upon its loss history and its aging analysis. The Company estimated that the amount of probable credit losses in existing accounts receivable was equal to the allowance for doubtful accounts of $6.69 million at September 30, 2011 and $6.07 million at December 31, 2010. The following table describes the movement of allowance for doubtful accounts during the nine months ended September 30, 2011:

Balance at January 1, 2011	$	6,072,644
Increase in allowance for doubtful accounts		3,137,251
Amounts recovered during current period		(2,205,330	)
Reversal of allowance for doubtful accounts		(511,631	)
Foreign exchange difference		198,582
Balance at September 30, 2011	$	6,691,516

-32-

The following table summarizes the key cash flow metrics from our condensed consolidated statements of cash flows for the nine months ended September 30, 2011 and 2010.

Cash Flows
(All amounts in U.S. dollars)
		Nine Months EndedSeptember 30,
		2011			2010
Net cash provided by operating activities	$	7,224,229		$	18,870,730
Net cash used in investing activities		(14,411,587	)		(47,637,336	)
Net cash (used in)/provided by financing activities		(5,890,963	)		32,524,281
Effect of exchange rate changes on cash and cash equivalents		90,687			765,526
Net (decrease)/increase in cash and cash equivalents		(12,987,634	)		4,523,201
Cash and cash equivalents at beginning of the period		18,166,857			13,478,633
Cash and cash equivalents at end of the period	$	5,179,223		$	18,001,834

Operating Activities

Net cash provided by operating activities was $7.22 million for the nine months ended September 30, 2011, a decrease from $18.87 million in net cash provided by operating activities for the same period of 2010. The decrease was primarily due to an increase of our accounts receivables turnover days during the nine months ended September 30, 2011. Many government customers slowed down their payments as a result of China’s implementation of monetary tightening policies. Because over half of our total revenues are generated from government projects, accounts receivable turnover days increased from 215 days during the nine months ended September 30, 2010 to 330 days during the nine months ended September 30, 2011.

Investing Activities

Net cash used in investing activities was $14.41 million for the nine months ended September 30, 2011, as compared to $47.64 million net cash used in investing activities for the same period of 2010. The decrease was primarily due to: a) the Company paid approximately $17.27 million deposit for purchasing land use right during the nine months ended September 30, 2010; b) the Company decreased approximately $10.17 million software purchase during the nine months ended September 2011 as compared with the nine months ended September 30, 2010; and c) the Company used approximately $5 million to complete the construction of the plant acquired in the Huipu transaction during the nine months ended September 30, 2010.

Financing Activities

Net cash used in financing activities was $5.89 million during the nine months ended September 30, 2011, as compared to $32.52 million net cash provided by financing activities during the same period of 2010. The change was mainly attributable to the net proceeds of $9.38 million raised from an offering of common stock during the nine months ended September 30, 2010, and a decrease in net borrowings of $29.24 million during the nine months ended September 30, 2011 as compared with the same period of last year.

Loan Facilities
As of September 30, 2011 and December 31, 2010, our short-term loan facilities were as follows:
(a) Short-term bank loans
(All amounts in U.S. dollars)
		September 30, 2011		December 31, 2010
Secured short-term loans	$	30,025,127	$	33,051,066
Add: amounts due within one year under long-term loan contracts		5,575,511		2,275,500
Total short-term bank loans	$	35,600,638	$	35,326,566

- 33 -

(b) Long-term bank loans
(All amounts in U.S. dollars)
		September 30, 2011			December 31, 2010
Secured long-term loans	$	5,693,547		$	8,138,705
Less: amounts due within one year under long-term loan contracts		(5,575,511	)		(2,275,500	)
Total long-term bank loans	$	118,036		$	5,863,205

The covenants or financial restrictions related to our outstanding debt obligations as of September 30, 2011 related to Huipu are as follows:

Huipu should maintain a certain level of tangible assets;

Huipu should inform the bank 30 days before any of the following events occurs; if the bank determines that such event will cause a material impact to the bank loan, Huipi may perform the event only upon receipt of the approval of the bank:

dispose material assets constituting over 10% of the total net assets by sale, bestowment, lending, transfer, mortgage, pledge or any other means; profit distribution over 30% of the current year’s after tax profits, or over 20% of the total retained earnings; and new investments by Huipu outside its current operations which constitute over 20% of its net assets.

As of September 30, 2011, we were in compliance with the above covenants.

Our short-term loan balances as of September 30, 2011 and December 31, 2010 were $35.6 million and $35.33 million, respectively. As a percentage of working capital, short-term bank loans accounted for approximately 52.95% and 60.06% as of September 30, 2011 and December 31, 2010, respectively. The net result reflects management’s effort to reduce our reliance on bank borrowings as a source of working capital.

We believe that our current cash and cash equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures for at least the next 12 months. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our existing cash and amount available under existing credit facilities is insufficient to meet our requirements, we may seek to sell additional equity securities, debt securities or borrow from lending institutions. We can make no assurances that financing will be available in the amounts we need or on terms acceptable to us, if at all. The sale of additional equity securities, including convertible debt securities, would dilute the interests of our current shareholders. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer.

Intracompany Transfers

Our subsidiaries that are organized in the PRC may pay dividends only out of their accumulated profits and our PRC subsidiaries are required to set aside at least 10% of their after-tax profit to their general reserves until such reserves cumulatively reach 50% of their respective registered capital. Our PRC subsidiaries’ general reserves are not distributable as cash dividends. Restrictions on our net assets include the conversion of local currency into foreign currencies, tax withholding obligations on dividend distributions, the need to obtain State Administration for Foreign Exchange, or SAFE, approval for loans to a non-PRC consolidated entity and the covenants or financial restrictions related to outstanding debt obligations. We are not aware of other restrictions on our net assets or the transferability of assets via loans or advances to our non-PRC consolidated entities. As our operations are principally based in China, our non-PRC consolidated entities do not have material cash obligations.

An offshore holding company, as a shareholder of a foreign-invested enterprise, or FIE, can make loans to the FIE, provided the parties comply with PRC regulations governing such loans. Our parent company can make a shareholder loan to a PRC subsidiary provided that (i) the amount of the loan does not exceed the difference between the total investment and registered capital as approved by the local Administration for Industry and Commerce that issued the business license of the subsidiary; and (ii) before the loan can be converted into RMB, the subsidiary reports to SAFE the intended use of proceeds (which cannot be to purchase domestic assets). The subsidiary can finance the operations of iASPEC in accordance with the terms of the MSA.

Obligations Under Material Contracts

The following table sets forth our material contractual obligations as of September 30, 2011:

- 34 -

(All amounts in U.S. dollars)

				Payments Due by Period
				Less than					More than
Contractual Obligations		Total		1 year	1-3 years		3-5 years		5 years
Operating Lease Obligations	$	620,887	$	118,137	502,750	$	-	$	-
Purchase Obligations		5,269,405		5,269,405	-		-		-
Interests payable of loan-term bank loan		135,627		114,322	13,281		8,024		-
Long-term bank loan		5,693,547		5,575,511	70,822		47,214		-
Total	$	11,719,466	$	11,077,375	586,853	$	55,238	$	-

Critical Accounting Policies

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 the following:

Goodwill

In accordance with FASB ASC topic 350, we reviewed goodwill impairment annually or more frequently if an event occurs or circumstances change that would reduce the fair value below its carrying value. Due to the Chinese government’s implementation of monetary tightening policy, our revenue decreased significantly, especially software technology sales during the three months ended September 30, 2011. Although we do not consider the slowdown of our growth gives rise to a significant adverse change in our business, to be prudent, we performed the goodwill impairment test for the nine-month period ended September 30, 2011.

We used the Discounted Cash Flow Method to estimate the fair value of goodwill. Determining the fair value of a reporting unit involved the use of significant estimates and assumptions, such as revenue growth rate, gross profit rate, and discount rate. The average net income increase rate used in the cash flow models approximately ranged from 5% to 9% depending on the reporting unit over the initial five-year forecast period. The discount rate used in the cash flow models was approximately 12%, which was calculated by weighted average cost of capital.

Based on the above calculation of our cash flow models, the test results indicated that all of the fair value of each reporting units exceeding their carrying values. The percentage of the excess of DT segment and IT segment was 14% and 50%, respectively. We believed that the reporting unit for DT segment which the fair value exceeded carrying value by only approximately 14% is at risk of failing step one of the goodwill impairment test in the future. The Company put more effort in developing the display technology business, and the contribution from DT segment has been increased during the current period. Though the management has the confidence in the developing of our DT segment in the future, we intend to closely monitor any event or change in circumstances that could negatively affect the key assumptions relating to this reporting unit.

Our valuation techniques could yield variable results based on changes in assumptions such as the discount rate and net income increase rate. We performed a sensitivity analysis that indicated that the discount rate ranged from 11% to 14%, the net income increase rate ranged from 4% to 8%, the fair value of each reporting unit still exceeded the carrying value, and that no goodwill impairment was required.

Goodwill by segment as of September 30, 2011 and December 31, 2010 was as follows:
		(All amounts in U.S. dollars)
Goodwill		September 30, 2011		December 31, 2010
IT Segment	$	26,816,149	$	25,941,242
DT Segment		26,841,420		25,977,033
Total	$	53,657,569	$	51,918,275

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation shall be treated as assets and liabilities of the foreign operation. Thus they shall be expressed in the functional currency of the foreign operation and shall be translated at the closing rate. As our acquired subsidiaries’ functional currency is RMB, goodwill arising on these acquisitions is denominated in RMB. As our presentation currency is USD, the change of goodwill balance represents the foreign exchange difference between each period or year end.

- 35 -

Recently Issued Accounting Pronouncements

Please refer to note 2 to our condensed interim consolidated financial statements, “Summary of Significant Accounting Policies – (f) Recent Accounting Pronouncements – Intangibles – Goodwill and Other (Accounting Standards Updates 2011-08),” for a discussion of relevant pronouncements.

Seasonality of our Sales

The first quarter of the calendar year is typically the slowest season of the year due to the Chinese New Year holiday. During this period, accounts receivable collection is very slow and we also need to prepare for upcoming busier seasons by making payments for inventory.

Inflation

Inflation does not materially affect our business or the results of our operations.

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

We deposit surplus funds with Chinese banks earning daily interest. We do not invest in any instruments for trading purposes. Most of our outstanding debt instruments carry fixed rates of interest. Our operations generally are not directly sensitive to fluctuations in interest rates. The amount of long-term debt outstanding as of ~~September~~March 3031, ~~2011~~2012 and December 31, ~~2010~~2011 was $0.121 million and $50.8611 million, respectively. A hypothetical 1.0% increase in the annual interest rates for all of our credit facilities under which we had outstanding borrowings at ~~September~~March 3031, ~~2011~~2012 would decrease net income before ~~provision for~~ income taxes by approximately $96$88,000, or less than 1% for the three months ended ~~September~~March 3031, ~~2011~~2012. Management monitors the banks’ prime rates in conjunction with our cash requirements to determine the appropriate level of debt balances relative to other sources of funds. We have not entered into any hedging transactions in an effort to reduce our exposure to interest rate risk.

Foreign Exchange Risk

While our reporting currency is the U.S. dollar, substantially all of our consolidated revenues and consolidated costs and expenses are denominated in RMB. Substantially all of our assets are denominated in RMB except for cash. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between the U.S. dollar and the RMB. If the RMB depreciates against the U.S. dollar, the value of our RMB revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. Assets and liabilities are translated at exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and equity is translated at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are included in determining other comprehensive income, a component of equity. An average appreciation (depreciation) of the RMB against the U.S. dollar of 5% would increase (decrease) our comprehensive income by $14.0438 million based on our outstanding revenues, costs and expenses, assets and liabilities denominated in RMB as of ~~September~~March 3031, ~~2011.~~ 2012. As of ~~September~~March 3031, ~~2011~~2012, our accumulated other comprehensive income was $1821.5645 million. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.

The value of RMB 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, RMB has not been pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, RMB 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 RMB exchange rate and lessen intervention in the foreign exchange market.

- 36 -

Inflation

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

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

~~As required by Rule 13a~~-~~15(e),~~ our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer, Mr. Jiang Huai Lin, and our Interim Chief Financial Officer, Mr. Zhi Qiang Zhao, of the effectiveness of the design and operation of our disclosure controls and procedures, as of September 30, ~~2011. Based upon, and as of the date of this evaluation, Mr. Lin and Mr. Zhao, determined that, as of September 30, 2011, and as of the date of~~- ~~this report, our disclosure controls and procedures were effective.~~

As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer, Mr. Jiang Huai Lin and our Chief Financial Officer, Mr. Daniel K. Lee, of the effectiveness of the design and operation of our disclosure controls and procedures, as of March 31, 2012. Based upon, and as of the date of this evaluation, Messrs. Lin and Lee, determined that, as of March 31, 2012, and as of the date of this report, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during the ~~third~~first quarter of ~~fiscal~~2012 ~~2011~~ that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II IIOTHER ~~OTHER~~ INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

ITEM 1A. RISK FACTORS.

There are no material changes from the risk factors previously disclosed in Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2010~~2011.

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

We Ashave ~~disclosed~~not insold ~~the~~any ~~Company’s~~equity ~~Form~~securities ~~8-K~~during ~~filed with~~ the ~~SEC~~first ~~on August 29, 2011,~~quarter ~~CITH , HPC , Rita Leung Kwai Fong, or the Seller, and the Company entered into an amendment, dated as~~ of August 26, 2011, to a Purchase Agreement among the parties, dated as of August 28, 2009, or the Amendment, pursuant to which the Company waived the requirement for HPC to attain certain audited consolidated after tax net income thresholds for fiscal years 2011 and 2012 ~~and~~that ~~agreed~~were tonot ~~issue~~previously ~~688,707~~disclosed ~~shares~~in ~~of the~~a ~~Company’s~~quarterly ~~common~~report ~~stock~~on toForm ~~the~~10-Q ~~Seller~~ or ~~her~~ designee(s ) within 10 days of the execution of the Amendment, in consideration of termination of employment of the Seller and certain other members of HPC’s management with immediate effect and a ~~release~~current ofreport ~~all~~on ~~claims~~Form ~~that~~8-K ~~the Seller and the related members of HPC’s management had or may have had against the Company. The parties agreed~~ that ~~the~~was ~~termination~~filed ofduring the ~~relationship would put the Company in a better position to execute its management strategies related to HPC~~ quarter.

During the first quarter of fiscal year 2012, we and our chairman -and 37chief executive officer, Mr. Jiang Huai Lin, purchased shares of our common stock. Below is a table containing information about these purchases. Prices and share amounts have been retroactively adjusted to give effect to the one- for-two reverse stock split effected on March 1, 2012.

Pursuant to the Amendment, on August 30, 2011, the Company issued 688,707 shares of the Company’s common stock to the Seller’s designee. The shares of the Company’s common stock that were issued were not 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 issued the shares in reliance on the exemptions 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’s designee is not a U.S. person and was not acquiring the shares for the account or benefit of any U.S. person, (b) the Seller’s designee agreed not to offer or sell the shares (including any prearrangement 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 and at the date of the execution and delivery of the Amendment, the Seller’s designee was outside of the United States.

Approximate

Total Number of

Dollar

Shares Purchased

Value of Shares

that

Part of Publicly

May Yet Be

Announced Plans

Purchased Under

Total Number of

Average Price

the

Period

Shares Purchased⁽¹⁾

Paid Per Share

Programs

Plans or Programs

January 1, 2012 to January 31, 2012

223,604

1.3713

581,231

4,071,349

February 1, 2012 to February 29, 2012

581,231

4,071,349

March 1, 2012 to March 31, 2012

581,231

4,071,349

⁽¹⁾Except for one purchase by Mr. Jiang Huai Lin as described in this footnote, all purchases were made pursuant to an amended and restated Rule 10b5-1 repurchase plan. This plan was originally announced on September 24, 2010; an extension to the plan was announced on September 16, 2010; and an amendment to the plan was announced on November 17, 2011. Under the plan as amended, up to $5 million of shares could be repurchased by the Company. The plan was to expire no later than September 15, 2012. On March 15, 2012, the Company announced that its Board of Directors had approved the termination of the plan. As also announced on that date, Mr. Lin entered into a new $2 million purchase plan. This plan will expire no later than September 15, 2012. On March 12, 2012, Mr. Lin agreed to purchase 1,084,895 shares in a private transaction outside his purchase plan at a purchase price per share of $1.20.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. ~~(REMOVED~~MINE ~~AND~~SAFETY ~~RESERVED)~~DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

We Ashave ~~disclosed~~no ininformation ~~the Company’s Form 8-K filed with the SEC on August 29, 2011, CITH , HPC , Rita Leung Kwai Fong, or the Seller, and the Company entered into an amendment, dated as of August 26, 2011,~~ to adisclose ~~Purchase~~that ~~Agreement~~was ~~among~~required ~~the parties, dated as of August 28, 2009, or the Amendment, pursuant~~ to ~~which~~be the Company waived the requirement for HPC to attain certain audited consolidated after tax net income thresholds for fiscal years 2011 and 2012 and agreed to issue 688,707 shares of the Company’s common stock to the Seller or her designee(s ) within 10 days of the execution of the Amendment, in ~~consideration of termination of employment of the Seller and certain other members of HPC’s management with immediate effect and~~ a ~~release~~report ofon ~~all~~Form ~~claims~~8-K ~~that~~during the ~~Seller~~first ~~and~~quarter ~~the related members~~ of ~~HPC’s management~~2012, ~~had~~but orwas ~~may~~not ~~have had against the Company~~reported. ~~The~~There ~~parties~~have ~~agreed~~been ~~that~~no ~~the~~material ~~termination~~changes ofto the ~~relationship~~procedures ~~would~~by ~~put~~which ~~the~~security ~~Company~~holders inmay arecommend ~~better~~nominees ~~position~~ to ~~execute~~our ~~its~~board ~~management~~of ~~strategies related to HPC~~ directors.

We have no information to disclose that was required to be in a report on Form 8-K during the period covered by this report, but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

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ITEM 6. EXHIBITS.

The ~~following~~list of exhibits ~~are~~in ~~filed~~the asExhibit ~~part~~Index ofto this report or is incorporated herein by reference: .

Exhibit No.	Description
10.1	First Amendment to Stock Purchase Agreement, dated as of August 26, 2011, by and among China Information Technology Holdings Limited, HPC Electronics (China) Company Limited, Rita Leung Kwai Fong, and China Information Technology, Inc. [incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 30, 2011]
31.1	Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certifications 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.

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SIGNATURES

Pursuant Into ~~accordance~~the ~~with~~requirements ~~Section 13 or 15(d)~~ of the Securities Exchange Act of 1935, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 9, 2011

Date: May 4, 2012	CHINA INFORMATION TECHNOLOGY, INC.

	By:	/s/ Jiang Huai Lin
		Jiang Huai Lin, Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Daniel K. Lee
		Daniel K. Lee, Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

CHINA INFORMATION TECHNOLOGY, INC.

By: /s/ Jiang Huai Lin Jiang Huai Lin, Chief Executive Officer (Principal Executive Officer)

By: /s/ Zhi Qiang Zhao Zhi Qiang Zhao, Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

EXHIBIT INDEX

Exhibit No.	~~Description~~	Description
10.1	First Amendment to Stock Purchase Agreement, dated as of August 26, 2011, by and among China Information Technology Holdings Limited, HPC Electronics (China) Company Limited, Rita Leung Kwai Fong, and China Information Technology, Inc. [incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 30, 2011]
31.1		Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.1	Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certifications 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.
32.2	Certifications 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.
101		Interactive data files pursuant to Rule 405 of Regulation S-T (furnished herewith).

Filing Compare · China Information Technology, Inc.