China Housing & Land Development Reports Financial Results for the Second Quarter 2008

China Housing & Land Development, Inc., (NASDAQ: CHLN) today reported that total revenues increased 10.2 percent to $13,244,490 from $12,018,590 in the second quarter 2007, net income decreased 38.0 percent to $1,135,879 in the second quarter 2008 from $1,830,880 in the second quarter 2007, and earnings per diluted share decreased 57.1 percent to $0.03 per share in the second quarter 2008 from $0.07 per diluted share in the second quarter 2007. This performance is consistent with periodic nature of real estate development. Mr. Lu, Chairman & CEO of China Housing & Land Development, Inc., said, "In our Tsining JunJing II project, we began above-ground construction which permitted us to recognize $12 million in revenues for this project in the second quarter using the percentage of completion method of accounting. Tsining JunJing II is a multi-family and retail project on 18 acres with 2,119 apartments totaling about 2.5 million square feet. It is scheduled to be completed in 2010. "Tsining JunJing II also helped to create our strong cash position of $25.4 million at quarter end. We expect additional cash from this project in the future quarters. Our strong cash position will enable us to acquire additional land and develop it in the near future. "Here is an update on our other projects. JunJing III will be a multi-family and retail project with 570 apartments. It is in the planning stage and construction should be completed in 2010. Yijing Yuan, also a multi-family and retail project, will have 1,500 apartments and is scheduled for completion in 2011. "Our 487-acre Baqiao project is progressing nicely. We are in the planning stage for three projects within Baqiao. First and second are Oriental Venice Town I and II to be located on the Ba River, each with 5,500 apartments. Venice Town I should finish in 2012, Venice Town II in 2013. Third is The Baqiao Hotel, which will be a hotel, office, and retail complex with about 960,000 square feet that should be completed in 2012. "Looking at our region’s economic news, during the second quarter, Xi’an issued a new city development plan covering the years 2008 through 2020. Within the new plan, the district that includes our Baqiao project is now included in the Main City Zone of Xi’an, making the district a formal part of the center city. The municipal government expects to invest about $7.2 billion in the district in the next 10 years. That new plan reinforces the growth and success we expect for our Baqiao project. "In early July 2008, we completed a new strategic partnership agreement with the China Construction Bank Shaanxi Branch that established a RMB 1 billion credit line for loans to support our construction work. In addition, the agreement gives our housing clients a priority status with the China Construction Bank Shaanxi Branch so they can receive new mortgage loans with favorable timing and terms. With the global financial market continuing to be tight, this new bank agreement permits both our clients and our company to move forward with greater ease and assurance. "All in all, we believe that our market remains healthy. Our construction, planning, and financing are on track. And we are pleased with our progress.” Second quarter 2008 results Revenues Total revenues for the second quarter 2008 increased 10.2 percent to $13,244,490 from $12,018,590 for the second quarter 2007. The increase was due primarily to the revenues from the Tsining JunJing II project that was reported using the percentage of completion method of accounting and included all pre-sales that had been completed since September 2007. Revenues by our major projects Project Tsining JunJing II revenues for the second quarter 2008 were $12,041,821 compared with no revenue for the second quarter 2007. Progress during the quarter permitted all cash received from the pre-sales of housing units to be recognized as revenues during the second quarter of 2008. The pre-sales of units began in September 2007 and the first revenue recognition for this project occurred in the second quarter 2008. Project Tsining-24G revenues for the second quarter 2008 were $173,919 compared with $9,720,990 for the second quarter 2007. Sales for most of 24G project were completed in the second quarter 2007. The revenues in the second quarter 2008 resulted from the sales of a few of the remaining available retail spaces. Project Tsining JunJing I revenues for the second quarter 2008 decreased 64.4 percent to $414,220 from $1,163,950 for the second quarter 2007 because most of the available units in this project were sold in March 2008, so only a few remaining units were sold during the second quarter 2008. The Baqiao infrastructure construction project generated revenues of $358,716 for the second quarter 2008 compared with no revenue for the second quarter 2007. The company acquired the infrastructure construction project in March 2007, and the first revenues occurred in the fourth quarter of 2007. The revenues in the second quarter of 2008 consisted of the government’s allowance for interest income on the company’s investments required to support the infrastructure construction project, support continued river management, and support suburban planning for the entire Baqiao high-technology industrial park. Revenues by project:   3 monthsended   3 monthsended (US$ in millions) June 30, 2008 June 30, 2007   Projects Tsining JunJing II 12.1 - Tsining-24G 0.2 9.7 Tsining JunJing I 0.4 1.2 Additional projects 0.0 0.2 Baqiao infrastructure construction 0.4 - Sales of properties 13.1 11.1 Other income Other income for the second quarter 2008 decreased 78.6 percent to $189,260 from $882,778 for the second quarter 2007 primarily due to the absence of a property clean-up project performed in second quarter of 2007. The revenues in the second quarter 2008 consisted primarily of sales of excess assets. Cost of revenues The cost of revenues for the second quarter 2008 increased 35.3 percent to $11,252,721 from $8,315,189 for the second quarter 2007. The higher cost of revenues for the second quarter 2008 was primarily due to the costs of revenues recognized using the percentage of completion method of accounting for the Tsining JunJing II project in the second quarter 2008. The second quarter 2007 included the cost of revenues using the full accrual method of accounting. Gross profit and gross profit margin Gross profit for the second quarter 2008 was $1,991,769, down 46.2 percent from $3,703,401 for the second quarter 2007. The gross profit margin for the second quarter 2008 was 15.40 percent compared to 30.81 percent for the second quarter 2007. The declines were due primarily to the incentive discounts given to the first buyers in the new Tsining JunJing II to promote market interest and encourage future sales for the project. Selling, general, and administrative expenses Selling, general, and administrative expenses for the second quarter 2008 increased 127.8 percent to $1,418,750 from $622,867 for the second quarter 2007 due primarily to the selling expenses for the new Tsining JunJing II project. Operating profit and operating profit margin Operating profit for the second quarter 2008 decreased 81.4 percent to $573,019 from $3,077,474 for the second quarter 2007. The operating profit margin decreased to 4.33 percent for the second quarter 2008 from 25.61 percent for the second quarter 2007. The declines were due primarily to the incentive discounts given to the first buyers in the new Tsining JunJing II to promote market interest and encourage future sales for the project and to higher selling expenses also for Tsining JunJing II. Interest expense Interest expense for the second quarter 2008 increased 114.0 percent to $658,443 from $307,651 for the second quarter 2007. The increase for the second quarter 2008 was due primarily to the 2008 debt financing associated with the purchase in March 2007 of the company that owned the exclusive rights to develop the Baqiao project and perform the related infrastructure construction. The financings in 2007 and 2008 included the issuance of interest-bearing convertible debt with warrants in January 2008 and the issuance of common stock and warrants in the December 2007. Change in fair value of warrants In 2006, 2007, and 2008 the company issued warrants in conjunction with the issuance of common shares or convertible debt. In the second quarter 2008, shareholders did not exercise warrants to buy common shares. For the second quarter 2008, the company was required to estimate the fair value of its remaining warrants outstanding and adjust the value as needed, and it chose to use the Cox-Ross-Rubinstein Binomial Lattice valuation model to estimate their fair value. The Change in fair value of warrants of $(946,563) in the second quarter 2008 consisted of (a) the cost to the company of the warrants issued in 2008, (b) a result of the exercise of warrants during the quarter, of which there were none exercised, and (c) the periodic adjustment to the estimated cost to the company to provide the common shares, assuming that all the warrants will be exercised sometime in the future. The basis for estimating the cost to provide those common shares was provided by the valuation model. Net income Net income for the second quarter 2008 decreased 38.0 percent to $1,135,879 from $1,830,880 for the second quarter 2007. The decrease in net income was due primarily to two reasons. The first reason was the new Tsining JunJing II project’s higher selling expenses and the incentive discounts given to the project’s first buyers to promote market interest and encourage future sales. The second reason was higher interest expense due to convertible debt issued in March 2008 to help finance the 2007 acquisition of the company owning the exclusive rights for the Baqiao project land and related infrastructure construction project. Basic and diluted earnings per share Basic earnings per share were $0.04 for the second quarter 2008, down 42.9 percent from $0.07 for the second quarter 2007. Diluted earnings per share were $0.03 for the second quarter 2008, down 57.1 percent from $0.07 for the second quarter 2007. Gain on foreign exchange The company’s subsidiaries operate in China and account for their operations using the Chinese renminbi. China Housing & Land Development translates the results of its subsidiaries into U.S. dollars based on the exchange rates of the two currencies and reports its financial results in dollars. During the second quarter of 2008, the renminbi appreciated in value against the dollar, which when translating the operating results and financial positions of the subsidiaries at different exchange rates created the accrued gain on foreign exchange. Cash flow Net cash from operating activities provided $(7,997,053) in the first half of 2008 compared with $4,454,481 provided in the first half of 2007 primarily due the increase in the costs for the new Tsining JunJing II construction in 2008. Net cash from investing activities provided $(1,630,906) in the first half of 2008 compared with $1,299,834 provided in the first half of 2007 primarily due to the decrease of the restricted cash in 2008. Net cash from financing activities provided $29,270,443 in the first half of 2008 compared with $1,646,838 provided in the first half of 2007 primarily due to the issuance of convertible debt and warrants and construction loans from banks, partly offset by payments on loans payable to New Land's previous shareholders in the first half of 2008. As a result of the above net cash changes from operating, investing, and financing activities, the increase in cash for the first half of 2008 was $19,662,484 compared with $7,401,153 for the first half of 2007. Debt leverage Total debt outstanding as of June 30, 2008 was $53,095,880 compared with $27,922,125 on December 31, 2007. Net debt outstanding (total debt less cash) as of June 30, 2008 was $27,713,994 compared with $25,469,759 on December 31, 2007. The company's net debt as a percent of total capital (net debt plus shareholders' equity) was 27.60 percent on June 30, 2008 and 27.79 percent on December 31, 2007. The increase in net debt as a percent of total capital was primarily due to the issuance of convertible debt and warrants in January 2008 and the construction loans proceeds in June 2008. About China Housing & Land Development, Inc. Based in Xi'an, the capital city of China’s Shaanxi province, China Housing & Land Development, Inc., is a leading developer of residential and commercial properties in northwest China. China Housing has been engaged in land acquisition, development, and management, including the sales of residential and commercial real estate properties through its wholly-owned subsidiary in China, since 1992. China Housing & Land Development is the first and only Chinese real estate development company traded on NASDAQ. By leveraging its strong relationships with China’s local state authorities, China Housing & Land Development has been able to capitalize on the supply of available land and develop residential and commercial properties, further increase China Housing’s brand recognition, and outperform its competitors in medium size residential and commercial real estate developments in greater Xi’an. Conference call and webcast China Housing & Land Development will webcast its second quarter conference call at 8:00 a.m. eastern daylight time (U.S.A.) on Friday, August 15, 2008. The live conference call audio broadcast can be reached using the investor relations page of the company's website at www.chldinc.com. Safe Harbor This news release may contain forward-looking information about China Housing & Land Development, Inc., which is covered under the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as believe, expect, may, will, should, project, plan, seek, intend, or anticipate or the negative thereof or comparable terminology, and include discussions of strategy, and statements about industry trends and China Housing & Land Development's future performance, operations, and products. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Actual performance results may vary significantly from expectations and projections. Further information regarding this and other risk factors are contained in China Housing & Land Development, Inc.'s public filings with the U.S. Securities and Exchange Commission. All information provided in this news release and in the attachments is as of the date of the release, and the Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law. China Housing & Land Development news releases, project information, photographs, and more are available on the internet at http://www.chldinc.com. China Housing & Land Development Inc. and Subsidiary Consolidated Balance Sheets As of June 30, 2008 and December 31, 2007       June 30, December 31, 2008     2007 (Unaudited)     (Unaudited) Assets Cash $ 22,765,615 $ 2,351,015 Cash - restricted 2,616,271 101,351 Accounts receivable, net of allowance for doubtful accounts of $100,515 and $95,515, respectively 14,803,669 12,107,882 Other receivables, prepaid expenses and other assets 695,326 567,308 Notes receivable, net 3,902,925 947,918 Real estate Finished projects 14,800,499 16,130,130 Construction in progress 43,264,042 24,856,801 Total real estate held for development or sale 58,064,541 40,986,931   Property and equipment, net 5,373,441 5,707,012 Assets held for sale 13,730,140 12,910,428 Advance to suppliers 1,848,771 2,071,549 Deposits on land use rights 33,133,574 29,694,103 Intangible assets, net 51,266,387 48,205,697 Deferred tax asset 517,854 - Deferred Financing Costs 703,356 55,451 Total assets $ 209,421,870 $ 155,706,645   Liabilities Accounts payable $ 15,713,607 $ 9,311,995 Advances from customers 9,534,514 5,258,351 Accrued expenses 2,850,233 1,903,451 Payable to original shareholders 8,560,152 11,413,229 Income and other taxes payable 25,241,322 22,711,981 Other payables 4,865,949 3,881,137 Loans from employees 1,861,795 2,388,862 Loans payable 29,595,720 14,120,034 Deferred tax liability 16,917,908 15,907,880 Warrants liability 5,094,052 2,631,991 Fair value of embedded derivatives 3,472,887 - Convertible debt 13,078,213 - Total liabilities $ 136,786,352 $ 89,528,911       SHAREHOLDERS' EQUITY Common stock: $.001 par value, authorized 100,000,000 shares issued and outstanding 30,143,757 and 30,141,887, respectively 30,144 30,142 Additional paid in capital 28,391,500 28,381,534 Statutory reserves 2,885,279 2,885,279 Retained earnings 31,548,720 30,365,156 Accumulated other comprehensive income 9,779,875 4,515,623   Total shareholders' equity 72,635,518 66,177,734   Total liabilities and shareholders' equity $ 209,421,870 $ 155,706,645 China Housing & Land Development Inc. and Subsidiary Consolidated Statements of Income and Other Comprehensive Income For the three months periods ended June 30, 2008 and 2007         3 months 6 months June 30, June 30, June 30, June 30, 2008 2007 2008 2007 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues Sale of properties $ 13,055,230 $ 11,135,812 $ 17,579,175 $ 19,181,388 Other income 189,260 882,778 411,952 1,033,399         Total revenue 13,244,490   12,018,590 17,991,127   20,214,787   Costs and Expenses Cost of properties and land 11,252,721 8,315,189 13,619,833 14,566,647 Selling, general and administrative expenses 1,418,750 622,867 2,567,351 1,120,946 Other expense - 3,060 15,910 35,679 Interest expense 658,443 307,651 1,098,116 515,527 Accretion expense on convertible debt 253,558 - 425,241 - Change in fair value of embedded derivatives (738,999 ) - (454,488 ) - Change in fair value of warrants (946,563 ) 11,204 (956,052 ) 11,204 Foreign exchange loss 103,344   - 103,344   - Total costs and expenses 12,001,254   - 9,259,971 16,419,255   16,250,003   Income before provision for income taxes 1,243,236 2,758,619 1,571,872 3,964,784   Provision for income taxes 107,357   927,739 388,308   1,341,402   Net income 1,135,879 1,830,880 1,183,564 2,623,382   Gain (loss) on foreign exchange 1,735,766   678,248 5,264,252   959,113   Comprehensive income $ 2,871,645   $ 2,509,128 $ 6,447,816   $ 3,582,495   Weighted average shares outstanding Basic 30,143,757   26,312,014 30,143,161   23,453,110   Diluted 30,311,201   26,386,036 30,304,679   23,527,132   Earnings per share Basic $ 0.04   $ 0.07 $ 0.04   $ 0.11   Diluted $ 0.03   $ 0.07 $ 0.02   $ 0.11 The accompanying notes are an integral part of these consolidated financial statements China Housing & Land Development Inc. and Subsidiary Consolidated Statements of Cash Flows For the six month period ended June 30, 2008 and 2007     2008 2007 (Unaudited) (Unaudited) Cash flows from operating activities: Net income $ 1,183,564 $ 2,623,382 Adjustments to reconcile net income to cash provided by (used in) operating activities: Allowance for bad debt - Depreciation 183,657 176,107 Exchange loss (gains) 103,344 133,465 Payment to suppliers using capital assets Gain on disposal of fixed assets and inventory 14,844 (702,314 ) Amortization of stock issued for investor relations fees 67,367 66,370 Amortization on Intangible assets - Change in fair value of warrants (956,052 ) 11,204 Change in fair value of embedded derivatives (454,488 ) Accretion expense convertible debt 425,241 Non-cash proceeds from sales (2,923,177 ) (Increase) decrease in assets: Accounts receivable (1,871,161 ) 944,207 Real estate (14,440,226 ) 525,434 Advance to suppliers 375,487 (222,916 ) Deposit on land use rights (1,594,144 ) Other receivable and deferred charges 233,934 (1,234,706 ) Increase (decrease) in liabilities: Accounts payable 5,654,551 1,617,561 Advances from customers 3,869,507 (1,306,372 ) Accrued expense 902,519 (1,536,651 ) Other payable 694,784 1,913,614 Income and other taxes payable 553,396   1,446,096   Net cash provided by (used in) operating activities $ (7,977,053 ) $ 4,454,481     Cash flows from investing activities: Change in restricted cash (2,437,759 ) (102,776 ) Purchase of buildings, equipment and automobiles (123,516 ) 256,904 Notes receivable collected 71,614 1,095,005 Gain on sales of investment Proceed from sale of fixed assets 858,755 Acquisition of subsidiary Cash from acquisition   50,701   Net cash provided by (used in) investing activities $ (1,630,906 ) $ 1,299,834     Cash flows from financing activities: Net Proceeds from issuance of convertible debt 19,230,370 Loan from bank 14,168,119 Payments on loans (11,426,243 ) Payments to original shareholders (11,409,312 ) Loans from employees (659,605 ) 1,446,255 Repayment of loan from New Land previous shareholders (3,476,856 ) Proceeds from issuance of common stock and warrants 8,415   23,036,138   Net cash provided by financing activities $ 29,270,443   $ 1,646,838     Increase in cash 19,662,484 7,401,153   Effects on foreign currency exchange 752,116 55,138   Cash, beginning of period 2,351,015 379,633   Cash, end of period $ 22,765,615   $ 7,835,924     The accompanying notes are an integral part of these consolidated financial statements China Housing & Land Development Inc. and Subsidiary Consolidated Statements of Shareholders' equity For the six months ended June 30, 2008                 Accumulated Additional paid in capital Capital other Common Stock Statutory reserves Retained contribution comprehensive Shares Par Value earnings receivable income Totals   Balance, December 31, 2007 30,141,887 $ 30,142 $ 28,381,534 $ 2,885,279 $ 30,365,156 $ - $ 4,515,623 $ 66,177,734   Common Stock issued from warrants conversion 1,870 2 9,966 9,968 Net Income 1,183,564 1,183,564 Foreign currency translation adjustment 5,264,252 5,264,252                 Balance, June 30, 2008 30,143,757 $ 30,144 $ 28,391,500 $ 2,885,279 $ 31,548,720 $ - $ 9,779,875 $ 72,635,518 The accompanying notes are an integral part of these consolidated financial statements