China HGS Reports Full Year Financial Results for the Fiscal Year 2018

HANZHONG,China,Jan. 10,2019 -- China HGS Real Estate Inc. (NASDAQ: HGSH) ("China HGS" or the "Company"),a leading regional real estate developer headquartered in Hanzhong City,Shaanxi Province,today filed its Annual Report on Form 10-K for the fiscal year 2018 ended September 30,2018 withthe U.S. Securities and Exchange Commission. An electronic copy of the Annual Report on Form 10-K can be accessed on the SEC's website atwww.sec.gov.

Highlights for the Fiscal2018

Total revenues for the fiscal 2018 were approximately $65.5 million,an increase of approximately 12% from approximately $58.7 million in fiscal 2017.

For the Company's long-term real estate development projects,the related revenue recognized from percentage of completion method was approximately $36.7 million,which accounted for 56% of total revenue in fiscal 2018 and increased 174% from the revenue recognized from percentage completion method in fiscal 2017.

Net income for the fiscal 2018 totaled approximately $5.2 million,a decrease of approximately 17% from the net income of approximately $6.3 million in fiscal 2017.

Basic and diluted net earnings per share ("EPS") attributable to shareholders for the fiscal 2018 were $0.12,compared to $0.14 for the fiscal 2017.

SafeHarborStatement

This press release contains forward-looking statements,which are subject to change. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All "forward-looking statements" relating to the business of China HGS Real Estate Inc.,which can be identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions,involve known and unknown risks and uncertainties which could cause actual results to differ. These factors include but are not limited to: the uncertain market for the Company's business,macroeconomic,technological,regulatory,or other factors affecting the profitability of real estate business; and other risks related to the Company's business and risks related to operating in China. Please refer to the Company's Annual Report on Form 10-K for the fiscal year ended September 30,2018,for specific details on risk factors. Given these risks and uncertainties,you are cautioned not to place undue reliance on forward-looking statements. The Company's actual results could differ materially from those contained in the forward-looking statements. The Company undertakes no obligation to revise or update its forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

About China HGS Real Estate,Inc.

China HGS Real Estate,Inc. (NASDAQ: HGSH),founded in 1995 and headquartered in Hanzhong City,is a leading real estate developer in the region and holds the national grade I real estate qualification. The Company focuses on the development of high-rise,sub-high-rise residential buildings and multi-building apartment complexes in China's Tier 3 and Tier 4 cities and counties with rapidly growing populations driven by increased urbanization. The Company provides affordable housing with popular and modern designs to meet the needs of multiple buyer groups. The Company's development activity spans a range of services,including land acquisition,project planning,design management,construction management,sales and marketing,and property management. For further information about China HGS,please go to www.chinahgs.com.

Company contact:

Randy Xiong,President of Capital Market

China Phone: (86) 091-62622612

Email: randy.xiong@chinahgs.com

CHINA HGS REAL ESTATE INC.

CONSOLIDATED BALANCE SHEETS

September 30,

September 30,

2018

2017

ASSETS

Current assets:

Cash

$

3,267,020

$

1,970,199

Restricted cash

3,508,557

2,746,405

Cost and earnings in excess of billings

12,582,965

12,673,349

Real estate property development completed

58,999,178

79,233,948

Real estate property under development

60,128,554

87,126,402

Other current assets

1,408,826

1,529,698

Total current assets

139,895,100

185,280,001

Property,plant and equipment,net

718,366

825,833

Real estate property development completed,net of current portion

1,217,650

1,386,552

Security deposits

8,296,782

8,564,517

Real estate property under development,net of current portion

215,431,915

180,667,276

Due from local government for real estate property development completed

2,836,865

2,928,410

Total Assets

$

368,396,678

$

379,652,589

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Other loans

$

55,610,803

$

28,545,233

Accounts payables

20,507,128

24,047,980

Other payables

4,894,774

3,897,093

Construction deposits

1,879,570

1,966,115

Billings in excess of cost and earnings

5,844,189

4,247,477

Customer deposits

20,234,072

24,613,864

Shareholder loans

2,142,110

2,304,632

Accrued expenses

3,006,150

3,158,432

Taxes payables

15,492,902

17,259,202

Total current liabilities

129,611,698

110,040,028

Deferred tax liabilities

2,068,257

170,950

Tax payable – long term

4,960,779

5,120,862

Customer deposits,914,677

2,314,641

Other loans,less current portion

66,885,378

98,797,447

Construction deposits,278,053

1,319,295

Total liabilities

206,718,842

217,763,223

Commitments and Contingencies

Stockholders' equity

Common stock,$0.001 par value,100,000,000 shares authorized,

45,050,000 shares issued and outstanding September 30,2018 and 2017

45,050

45,050

Additional paid-in capital

129,907,805

129,853,172

Statutory surplus

9,925,794

9,899

Retained earnings

30,803,052

26,343,030

Accumulated other comprehensive deficit

(9,003,865)

(3,494,785)

Total stockholders' equity

161,677,836

161,889,366

Total Liabilities and Stockholders' Equity

$

368,589

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

CHINA HGS REAL ESTATE INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED SEPTEMBER 30,2018 and 2017

2018

2017

Real estate sales

$

65,487,296

$

58,671,424

Less:Sales tax

1,248,230

1,215,960

Net real estate sales

64,239,066

57,455,464

Cost of real estate sales

48,642,392

45,590,345

Gross profit

15,596,674

11,865,119

Operating expenses

Selling and distribution expenses

843,813

568,081

General and administrative expenses

2,530,269

3,177,649

Total operating expenses

3,374,082

3,745,730

Operating income

12,222,592

8,119,389

Interest expense,net

(499,855)

(497,798)

Other income (expense),net

(1,407,109)

2,222

Income before income taxes

10,315,628

7,623,813

Provision for income taxes

5,072,711

1,294,699

Net income

5,242,917

6,329,114

Other comprehensive income (loss)

Foreign currency translation adjustment

(5,509,080)

551,711

Comprehensive income (loss)

$

(266,163)

$

6,880,825

Basic and diluted income per common share

Basic and diluted

$

0.12

$

0.14

Weighted average common shares outstanding

Basic and diluted

45,000

45,000

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

CHINA HGS REAL ESTATE INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED SEPTEMBER 30,2018 AND 2017

Common Stock

Additional

Statutory

Retained

Accumulated

Other

Comprehensive

Shares

Amount

Paid-inCapital

Surplus

Earnings

Deficit

Total

Balance at

September 30,

2016

45,000

$

45,050

$

129,793,572

$

8,495,631

$

20,661,184

$

(4,046,496)

$

154,948,941

Stock-based Compensation

-

-

59,600

-

-

-

59,600

Appropriation of statutory reserve

-

-

-

647,268

(647,268)

-

-

Net income

for the year

-

-

-

-

6,114

-

6,114

Foreign currency translation adjustments

-

-

-

-

-

551,711

551,711

Balance at September 30,2017

45,050

129,172

9,899

26,030

(3,785)

161,366

Stock-based Compensation

-

-

54,633

-

-

-

54,633

Appropriation of statutory reserve

-

-

-

782,895

(782,895)

-

-

Net income

for the year

-

-

-

-

5,917

-

5,917

Foreign currency translation adjustments

-

-

-

-

-

(5,080)

(5,080)

Balance at September 30,2018

45,805

$

9,794

$

30,052

$

(9,865)

$

161,836

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

CHINA HGS REAL ESTATE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED SEPTEMBER 30,2018 and 2017

2018

2017

Cash flows from operating activities

Net income

$

5,917

$

6,114

Adjustments to reconcile net income to net cash provided by (used in)

operating activities:

Deferred tax provision

1,052

167,007

Depreciation

85,788

67,074

Stock based compensation

54,633

59,600

Changes in assets and liabilities:

Restricted cash

(917,026)

(1,253,981)

Advances to vendors

38,990

-

Security deposits

-

(590,274)

Cost and earnings in excess of billings

(321,291)

(734,569)

Real estate property development completed

18,789,499

33,033

Real estate property under development

(16,955,946)

(58,501,531)

Other current assets

37,764

1,171,589

Accounts payables

(2,930,405)

(6,451,836)

Other payables

1,176,231

(1,286,545)

Billings in excess of cost and earnings

1,817,121

2,082,143

Customer deposits

(4,137,470)

(604,497)

Construction deposits

(26,353)

35,365

Accrued expenses

(74,789)

(50,932)

Taxes payables

(1,413,508)

1,421

Net cash provided by (used in) operating activities

2,465,207

(24,500,819)

Cash flow from investing activities

Purchases of fixed assets

-

(97,524)

Net cash used in investing activities

-

(97,524)

Cash flow from financing activities

Proceeds from other loans

5,150,795

26,657,111

Repayment of other loans

(6,060,305)

(6,039,415)

Proceeds from shareholder loan

1,505,324

8,444,575

Repayment of shareholder loan

(1,659,834)

(8,842,359)

Net cash (used in) provided by financing activities

(1,064,020)

20,219,912

Effect of changes of foreign exchange rate on cash

(104,366)

(52,607)

Net increase (decrease) in cash

1,821

(4,038)

Cash,beginning of year

1,199

6,401,237

Cash,end of year

$

3,199

Supplemental disclosures of cash flow information:

Interest paid

$

6,643,169

$

5,756,560

Income taxes paid

$

772,337

$

721,177

Reclassification of deferred tax liability to income tax payable

$

-

$

5,862

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