China HGS Reports Second Quarter of Fiscal Year 2021 Results

HANZHONG,China,May 18,2021 -- 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 reported its financial results for the second quarter of fiscal 2021 ended March 31,2021 withthe U.S. Securities and Exchange Commission. An electronic copy of the quarterly report on Form 10-Q can be accessed on the SEC's website atwww.sec.gov

Highlights for the quarter

Total revenues for the second quarter of fiscal 2021 were approximately $18.3 million,representing an increase of 867.2% from approximately $1.9 million in the same quarter of fiscal 2020 due to less gross floor area sold during the current quarter.

Net income for the second quarter of fiscal 2021 totaled approximately $2.2 million,significantly increased from net loss of approximately $0.6 million in the same period of last year.

Basic and diluted net loss per share ("EPS") attributable to shareholders for the second quarter of fiscal 2021 were $0.10,compared to net loss per share of $0.03 for the same quarter of the last year.

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 30,2020,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.

CHINA HGS REAL ESTATE,INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

March31,

September30,

2021

2020

ASSETS

(Unaudited)

Cash

$

555,576

$

457,699

Restricted cash

3,297,734

3,409,837

Contract assets

15,195,730

14,255,328

Real estate property development completed

93,359,420

94,671,258

Other assets

9,709,848

8,132,555

Property,plant and equipment,net

567,292

571,330

Security deposits

1,922,853

1,855,506

Real estate property under development

251,151,767

227,741,017

Due from local governments for real estate property development completed

2,973,777

2,869,623

Total Assets

$

378,733,997

$

353,964,153

LIABILITIES AND STOCKHOLDERS' EQUITY

Construction loans

$

116,060,624

$

109,937,408

Accounts payable

31,854,281

25,415,352

Other payables

4,569,384

4,028,048

Construction deposits

3,318,974

3,202,730

Contract liabilities

1,885,982

1,847,685

Customer deposits

21,498,027

19,405,528

Accrued expenses

1,861,745

1,920,370

Taxes payable

20,592,607

19,881,211

Total liabilities

201,641,624

185,638,332

Commitments and Contingencies

Stockholders' equity

Common stock,$0.001 par value,50,000,000 shares authorized,22,525,000 shares issued and

outstanding March31,2021 and September30,2020

22,525

22,525

Additional paid-in capital

129,930,330

129,330

Statutory surplus

10,458,395

10,395

Retained earnings

37,466,885

34,954,061

Accumulated other comprehensive loss

(785,762)

(7,039,490)

Total stockholders' equity

177,092,373

168,325,821

Total Liabilities and Stockholders' Equity

$

378,153

CHINA HGS REAL ESTATE,INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSAND COMPREHENSIVE INCOME

(LOSS)

(Unaudited)

Three months ended March31,

Six months ended March31,

2021

2020

2021

2020

Real estate sales

$

18,278,112

$

1,889,829

$

21,033,374

$

4,194,073

Less: Sales tax

(115,166)

(27,048)

(138,704)

(66,281)

Cost of real estate sales

(14,474,264)

(1,381)

(16,327,906)

(3,171,993)

Gross profit

3,688,682

396,400

4,566,764

955,799

Operating expenses

Selling and distribution expenses

16,821

200,390

96,166

400,558

General and administrative expenses

543,334

819,415

849,259

1,408,254

Total operating expenses

560,155

1,019,805

945,425

1,808,812

Operating income (loss)

3,128,527

(623,405)

3,621,339

(853,013)

Interest income (expense),net

712

(15,586)

3,537

(32,839)

Other expense

(166,571)

(96,729)

(272,428)

(96,729)

Income (loss) before income taxes

2,962,668

(735,720)

3,352,448

(982,581)

Provision (benefit) for income taxes

741,431

(111,699)

839,624

(101,179)

Net income (loss)

2,221,237

(624,021)

2,512,824

(881,402)

Other Comprehensive income (loss)

Foreign currency translation adjustment

(737,431)

(2,823,145)

6,253,728

1,557,717

Comprehensive income (loss)

$

1,483,806

$

(3,447,166)

$

8,766,552

$

676,315

Basic and diluted income (loss) per common share

Basic and diluted

$

0.10

$

(0.01)

$

0.11

$

(0.02)

Weighted average common shares outstanding

Basic and diluted

22,000

22,000

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

CHINA HGS REAL ESTATE INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

Common Stock

Additional

Statutory

Retained

Accumulated

Other

Comprehensive

Shares

Amount

Paid-

inCapital

Surplus

Earnings

Income (loss)

Total

Balance at September30,2019

22,000

$

22,525

$

129,330

$

10,360,251

$

34,070,767

$

(15,683,723)

$

158,700150

Net loss for the period

-

-

(257,381)

(257,381)

Foreign currency translation adjustments

-

-

4,380,862

4,862

Balance at December31,000

22,525

129,330

10,251

33,189,365

(11,302,861

162,631

Net loss for the period

-

-

(624,021)

(624,021)

Foreign currency translation adjustments

-

-

(2,145

(2,145

Balance at March31,2020

22,251

$

33,365

$

(14,126,006)

$

159,376,465

Balance at September30,395

$

34,061

$

(7,490)

$

168,821

Net income for the period

-

-

-

-

291,587

-

291,587

Foreign currency translation

adjustments

-

-

-

-

-

6,991,159

6,159

Balance atDecember31,395

35,245,648

(48,331)

175,608,567

Net income for the period

-

-

-

-

2,237

-

2,237

Foreign currency translation

adjustments

-

-

-

-

-

(737,431)

(737,431)

Balance at March31,2021

22,395

$

37,885

$

(785,762)

$

177,373

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

CHINA HGS REAL ESTATE,INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six months ended March31,

2021

2020

Cash flows from operating activities

Net income (loss)

$

2,824

$

(881,402)

Adjustments to reconcile net income (loss) to net cash provided by(used in) operating activities:

Deferred tax provision (benefit)

-

(235,179)

Depreciation

24,772

37,710

Changes in operating assets and liabilities:

Contract assets

(422,948)

651,289

Real estate property development completed

4,747,385

2,724

Real estate property under development

(13,010,220)

(2,835,288)

Other current assets

(1,281,964)

(935,053)

Security deposit

3,887

Accounts payable

5,515,797

89,325

Other payables

395,088

111,347

Contract liabilities

(28,762)

(71,507)

Customer deposits

1,387,999

2,349,028

Construction deposits

(428)

Accrued expenses

(675,478)

Taxes payables

109,454

(1,379,060)

Net cash (used in) provided by operating activities

(50,575)

2,358,915

Cash flow from financing activities

Repayments of construction loans

-

(2,585)

Net cash used in financing activities

-

(2,585)

Effect of changes of foreign exchange rate on cash and restricted cash

36,349

103,801

Net (decrease) increasein cash and restricted cash

(14,226)

334,131

Cash and restricted cash,beginning of period

3,867,536

4,117

Cash and restricted cash,end of period

$

3,853,310

$

4,536,248

Supplemental disclosures of cash flow information:

Interest paid

$

1,904

$

3,416,592

Income taxes paid

$

135,462

$

375,601

Reconciliation to amounts on condensed consolidated balance sheets:

Cash

$

555,576

$

658,313

Restricted

$

3,734

$

3,877,935

Total cash and restricted cash

$

3,248

Cash,beginning of period

$

457,699

$

263,139

Restricted,beginning of period

$

3,837

$

3,938,978

Total cash and restricted cash,536

$

4,117

Non-cash financing activities:

Reclassification of interest payable to construction loan

$

1,626,210

$

-

Real estate sales for settlements in real estate property under development

$

(14,432,275)

$

-

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

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