Home System Group Reports Third Quarter Revenue Increased 185%, Income from Operations Increased 133%

Home System Group (OTCBB: HSYT; "Home System" or the "Company"), a Chinese - based manufacturer of a variety of household appliances sold by large retailers, today announced its financial results for the three and nine months ended September 30, 2010.

2010 Third Quarter Noteworthy Items:

• Revenue recorded reached $29 million, a 185% increase from the $10.3 million recorded in the third quarter of 2009.
• The Fans and Lightings segment contributed significantly to the Company's revenue and operating results with revenues of $24.4 million for the three months ended September 30, 2010, up more than 200% from last year’s $7.4 million revenue level.
• Gross profit was $6.5 million, up from the $3.3 million of the third quarter of 2009, reflecting the favorable revenue performance in Fans and Lightings and other consumer goods sections.
• Income from operations in the third quarter of 2010 increased by 133% over the corresponding 2009 period.
• Net Income increased to $3.4 million, as compared to the prior year’s third quarter net income of $3.1 million, which included a non-recurring pre-tax gain of $2.3 million on a transfer of property.

Results Commentary

For the fiscal 2010 third quarter, the Company posted revenue of $29 million. This result represented a substantial increase as compare to the $10.3 million of revenue last year third quarter. This gain resulted from the strong performance of the Company’s Fans and Lightings segment, which recorded $24.4 million in sales, more than tripling the prior year level of $7.4 million due to the continuing strong demand reflecting the market’s response to the Company’s decision to focus on this segment, our competitive pricing and some manufacturers’ recently exiting the market.

Gross profit for the third quarter of 2010 was $6.5 million, an increase of 96% compared to $3.3 million for the three months ended September 30, 2009. Gross margin decreased to 22.1%, reflecting the impact of increased raw material prices and that the wider variety of products required shorter and thus less efficient production runs.

General, selling and administrative expenses for the third quarter of 2010 were $1.9 million, an increase compared to $1.3 million for the same period in 2009, primarily driven by higher sales related expenses and higher rental fee.

As a result, income from operations for the third quarter of 2010 was $4.6 million, an increase of 133% compared with $2.0 million for the corresponding quarter of 2009. Net income for the third quarter was $3.4 million as compared to last year’s level of $3.1 million, which included the pre-tax benefit of a $2.3 million gain on the transfer of property. Excluding this non-recurring gain, the third quarter net income for 2009 would have been $1.4 million.

Home System’s CEO, Mr. Yu, observed, "We’re extremely pleased to report record third quarter revenue and earnings. During the third quarter of 2010, product demand continued to be robust and Home System benefited from the substantial increase in sales of ceiling fans and decorative lightings. We are making innovative products and are seeing a strong response from our customers. Building upon this performance, on October 1, 2010 the Company closed the acquisitions of two fan manufacturers. As a result of these acquisitions, Home System will expand its geographic market coverage into Southeast Asia and Japan, thus further diversifying our customer base and our product lines, as well as reducing the seasonality impact on the Company’s operation. This will enable us to more consistent production levels and thus improve our manufacturing efficiencies. Moreover, by combining the raw product procurements requirements, we expect to improve our raw material pricing, thus benefiting our gross margin and earnings. With an improved debt to capitalization ratio and stronger market base, we are confident in our business strategy and believe that Home System is very well positioned for continued growth.”

2010 Nine Months Financial Highlights

• Revenue was $86.6 million for the nine months ended September 30, 2010, an increase of $40.4 million or 87% over the corresponding 2009 level.
• The Fans and Lightings segment significantly benefited the Company's revenue and operating results with segment revenue of $70.7 million for the nine months ended September 30, 2010, a 156% increase from the $27.6 million of the prior year comparable period.
• Gross profit was $19.7 million for nine months ended September 30, 2010, up 78% as compared to the $11.1 million recorded in the nine months ended September 30, 2009.
• Income from operations of $14.4 million was more than double the $6.8 million of the corresponding 2009 period.
• In April, the Company completed a debt for equity swap that converted $17.5 million into equity. This resulted in a non-cash conversion loss of $1.7 million.
• Net income for the nine months ended September 30, 2010 was $9.4 million, which included the $1.7 million conversion loss, increased by $3.3 million as compared to 2009 comparable period, which included the pre-tax $2.3 million gain on the property transfer. Excluding the after tax effects of the 2010 conversion loss and the 2009 property gain, net income increased to $11.1 million in 2010 from $4.4 million in 2009, which is an increase of approximately 152%.

About Home System Group

Home System Group is primarily engaged in the production of a variety of fans and lamps, small household appliances, and stainless steel gas grills and ovens,. Its products are sold through distributors and direct to retailers located in America, Europe, Australia, Africa, Southeast Asia and China. For more information, please visit: http://www.homesystemgroup.com.

FORWARD-LOOKING STATEMENTS:

This release contains "forward-looking statements" for purposes of the Securities and Exchange Commission's "safe harbor" provisions under the Private Securities Litigation Reform Act of 1995 and Rule 3b-6 under the Securities Exchange Act of 1934. These forward-looking statements are subject to various risks and uncertainties that could cause Home System Group's actual results to differ materially from those currently anticipated, including the risk factors identified in Home System Group's filings with the Securities and Exchange Commission.

(a) The gain recorded in the three months ended September 30, 2009 relates to a transfer of property in satisfaction of debt
(b) This non-cash loss from the debt conversion is not deductible for tax purposes

NOTE: The above numbers may not equal the total due to rounding.

NOTE: The above numbers may not equal the total due to rounding.

NOTE: The above numbers may not equal the total due to rounding.