Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | ||
Sep. 30, 2019 | Jan. 14, 2020 | Mar. 30, 2019 | |
Document And Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Sep. 30, 2019 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Entity Registrant Name | CHINA HGS REAL ESTATE INC. | ||
Entity Central Index Key | 0001158420 | ||
Current Fiscal Year End Date | --09-30 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Interactive Data Current | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Public Float | $ 13,705,700 | ||
Entity Common Stock, Shares Outstanding | 45,050,000 | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Emerging Growth Company | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 |
Current assets: | ||
Cash | $ 263,139 | $ 3,267,020 |
Restricted Cash | 3,938,978 | 3,508,557 |
Contract assets | 12,668,925 | 12,582,965 |
Real estate property development completed | 100,817,944 | 58,999,178 |
Real estate property under development | 60,128,554 | |
Other current assets | 2,031,937 | 1,408,826 |
Total current assets | 119,720,923 | 139,895,100 |
Property, plant and equipment, net | 614,008 | 718,366 |
Real estate property development completed, net of current portion | 1,115,086 | 1,217,650 |
Security deposits | 7,972,117 | 8,296,782 |
Real estate property under development, net of current portion | 215,745,225 | 215,431,915 |
Due from local government for real estate property development completed | 2,725,854 | 2,836,865 |
Total Assets | 347,893,213 | 368,396,678 |
Current liabilities: | ||
Construction loans | 77,332,569 | 55,610,803 |
Accounts payables | 27,928,131 | 20,507,128 |
Other payables | 5,289,176 | 4,894,774 |
Construction deposits | 1,814,232 | 1,879,570 |
Contract liabilities | 1,907,828 | 5,844,189 |
Customer deposits | 16,139,572 | 20,234,072 |
Shareholder loans | 2,129,114 | 2,142,110 |
Accrued expenses | 3,026,023 | 3,006,150 |
Taxes payable | 13,882,875 | 15,492,902 |
Total current liabilities | 149,449,520 | 129,611,698 |
Deferred tax liabilities | 2,068,257 | |
Tax payable - long term | 8,006,943 | 4,960,779 |
Customer deposits, net of current portion | 1,043,692 | 1,914,677 |
Construction loans, less current portion | 29,464,867 | 66,885,378 |
Construction deposits, net of current portion | 1,228,041 | 1,278,053 |
Total liabilities | 189,193,063 | 206,718,842 |
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, 2019 and 2018 | 45,050 | 45,050 |
Additional paid-in capital | 129,907,805 | 129,907,805 |
Statutory surplus | 10,360,251 | 9,925,794 |
Retained earnings | 34,070,767 | 30,803,052 |
Accumulated other comprehensive loss | (15,683,723) | (9,003,865) |
Total stockholders' equity | 158,700,150 | 161,677,836 |
Total Liabilities and Stockholders' Equity | $ 347,893,213 | $ 368,396,678 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2019 | Sep. 30, 2018 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 45,050,000 | 45,050,000 |
Common stock, shares outstanding | 45,050,000 | 45,050,000 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE LOSS - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE LOSS | ||
Real estate sales | $ 39,964,556 | $ 65,487,296 |
Less: Sales tax | 389,406 | 1,248,230 |
Net real estate sales | 39,575,150 | 64,239,066 |
Cost of real estate sales | 30,253,511 | 48,642,392 |
Gross profit | 9,321,639 | 15,596,674 |
Operating expenses | ||
Selling and distribution expenses | 494,646 | 843,813 |
General and administrative expenses | 2,661,578 | 2,530,269 |
Total operating expenses | 3,156,224 | 3,374,082 |
Operating income | 6,165,415 | 12,222,592 |
Interest expense, net | (131,270) | (499,855) |
Other income (expense), net | (309,930) | (1,407,109) |
Income before income taxes | 5,724,215 | 10,315,628 |
Provision for income taxes | 2,022,043 | 5,072,711 |
Net income | 3,702,172 | 5,242,917 |
Other comprehensive loss | ||
Foreign currency translation adjustment | (6,679,858) | (5,509,080) |
Comprehensive loss | $ (2,977,686) | $ (266,163) |
Basic and diluted income per common share | ||
Basic and diluted | $ 0.08 | $ 0.12 |
Weighted average common shares outstanding | ||
Basic and diluted | 45,050,000 | 45,050,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Statutory Surplus [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Loss [Member] | Total |
Beginning balance at Sep. 30, 2017 | $ 45,050 | $ 129,853,172 | $ 9,142,899 | $ 26,343,030 | $ (3,494,785) | $ 161,889,366 |
Beginning balance (in Shares) at Sep. 30, 2017 | 45,050,000 | |||||
Stock-based Compensation | $ 0 | 54,633 | 0 | 0 | 0 | 54,633 |
Appropriation of statutory reserve | 0 | 0 | 782,895 | (782,895) | 0 | 0 |
Net income for the year | 0 | 0 | 0 | 5,242,917 | 0 | 5,242,917 |
Foreign currency translation adjustment | 0 | 0 | 0 | 0 | (5,509,080) | (5,509,080) |
Ending balance at Sep. 30, 2018 | $ 45,050 | 129,907,805 | 9,925,794 | 30,803,052 | (9,003,865) | 161,677,836 |
Ending Balance (in Shares) at Sep. 30, 2018 | 45,050,000 | |||||
Stock-based Compensation | $ 0 | 0 | 0 | 0 | 0 | 0 |
Appropriation of statutory reserve | 0 | 0 | 434,457 | (434,457) | 0 | 0 |
Net income for the year | 0 | 0 | 0 | 3,702,172 | 0 | 3,702,172 |
Foreign currency translation adjustment | 0 | 0 | 0 | 0 | (6,679,858) | (6,679,858) |
Ending balance at Sep. 30, 2019 | $ 45,050 | $ 129,907,805 | $ 10,360,251 | $ 34,070,767 | $ (15,683,723) | $ 158,700,150 |
Ending Balance (in Shares) at Sep. 30, 2019 | 45,050,000 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities | ||
Net income | $ 3,702,172 | $ 5,242,917 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Deferred tax provision | 1,302,606 | 1,999,052 |
Depreciation | 79,270 | 85,788 |
Stock based compensation | 0 | 54,633 |
Changes in assets and liabilities: | ||
Advances to vendors | 20,395 | 38,990 |
Security deposits | 0 | 0 |
Contract assets | (601,265) | (321,291) |
Real estate property development completed | (45,818,735) | 18,789,499 |
Real estate property under development | 50,974,817 | (16,955,946) |
Other current assets | (725,508) | 37,764 |
Accounts payables | 8,549,293 | (2,930,405) |
Other payables | 609,156 | 1,176,231 |
Contract liabilities | (3,854,568) | 1,817,121 |
Customer deposits | (4,261,166) | (4,137,470) |
Construction deposits | 8,538 | (26,353) |
Accrued expenses | 118,734 | (74,789) |
Taxes payable | (1,166,158) | (1,413,508) |
Net cash provided by operating activities | 8,937,581 | 3,382,233 |
Cash flow from financing activities | ||
Proceeds from construction loans | 488,307 | 5,150,795 |
Repayment of construction loans | (11,825,666) | (6,060,305) |
Proceeds from shareholder loans | 0 | 1,505,324 |
Repayment of shareholder loans | 0 | (1,659,834) |
Net cash used in financing activities | (11,337,359) | (1,064,020) |
Effect of changes of foreign exchange rate on cash | (173,682) | (259,240) |
Net increase (decrease) in cash and restricted cash | (2,573,460) | 2,058,973 |
Cash and restricted cash , beginning of period | 6,775,577 | 4,716,604 |
Cash and restricted cash, end of period | 4,202,117 | 6,775,577 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 7,199,086 | 6,643,169 |
Income taxes paid | 347,675 | 772,337 |
Representing | ||
Cash | 263,139 | 3,267,020 |
Restricted cash | 3,938,978 | 3,508,557 |
Total cash and restricted cash | $ 4,202,117 | $ 6,775,577 |
ORGANIZATION AND BASIS OF PRESE
ORGANIZATION AND BASIS OF PRESENTATION | 12 Months Ended |
Sep. 30, 2019 | |
ORGANIZATION AND BASIS OF PRESENTATION | |
ORGANIZATION AND BASIS OF PRESENTATION | NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION China HGS Real Estate Inc. (the “Company” or “China HGS” or “we”, “our”, “us”) is a corporation organized under the laws of the State of Florida. China HGS does not conduct any substantive operations of its own. Instead, through its subsidiary, Shaanxi HGS Management and Consulting Co., Ltd (“Shaanxi HGS”), it entered into certain exclusive contractual agreements with the management of the Company’s PRC operating subsidiary, Shaanxi Guangsha Investment and Development Group Co., Ltd (“Guangsha”). Pursuant to these agreements, Shaanxi HGS is obligated to absorb a majority of the risk of loss from Guangsha’s activities and entitles Shaanxi HGS to receive a majority of Guangsha’s expected residual returns. In addition, Guangsha’s shareholders have pledged their equity interest in Guangsha to Shaanxi HGS, irrevocably granted Shaanxi HGS an exclusive option to purchase, to the extent permitted under PRC Law, all or part of the equity interests in Guangsha and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by Shaanxi HGS. Based on these contractual arrangements, management believes that Guangsha should be considered a “Variable Interest Entity” (“VIE”) under ASC 810 “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51”, because the equity investors in Guangsha no longer have the characteristics of a controlling financial interest, and the Company, through Shaanxi HGS, is the primary beneficiary of Guangsha. Accordingly, Guangsha has been consolidated. The Company, through its subsidiaries and VIE, engages in real estate development, in the construction and sale of residential apartments, parking lots and commercial properties. Total assets and liabilities presented on the consolidated balance sheets and sales, cost of sales, net income presented on Consolidated Statement of Income and Comprehensive Loss as well as the cash flow from operation, investing and financing activities presented on the Consolidated Statement of Cash Flows are substantially the financial position, operation and cash flow of Guangsha. The Company has not provided any financial support to Guangsha for the years ended September 30, 2019 and 2018. The following assets and liabilities of the consolidated VIE are included in the accompanying consolidated financial statements of the Company as of September 30, 2019 and 2018: Balance as of September 30, September 30, 2019 2018 Current assets $ 119,703,792 $ 139,877,361 Non-current assets 227,832,570 228,136,549 Total assets 347,536,362 368,013,910 Current liabilities 145,194,165 126,047,028 Non-current liabilities 39,743,543 77,107,143 Total liabilities $ 184,937,708 $ 203,154,171 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Sep. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of China HGS Real Estate Inc. (the “Company” or “China HGS”), China HGS Investment Inc. (“HGS Investment”), Shaanxi HGS Management and Consulting Co., Ltd. (“Shaanxi HGS”) and its variable interest entity (“VIE”), Shaanxi Guangsha Investment and Development Group Co., Ltd. (“Guangsha”). All inter-company transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation. Liquidity As of September 30, 2019, the Company had an approximately $29.7 million negative working capital and total cash and restricted cash balance decreased to approximately $4.2 million as of September 30, 2019 as compared to approximately $6.8 million as of September 30, 2018. With respect to capital funding requirements, the Company budgeted our capital spending based on ongoing assessments of needs to maintain adequate cash. Due to the long term relationship with our construction suppliers, we were able to effectively manage cash spending on construction, meantime, we are able to obtain additional funding support from local banks and financial institutions. Also, the Company’s cash flows from pre-sales and current sales should provide financial support for our current developments and operations. For the both years ended September 30, 2019 and 2018, the Company had positive cash flow from operating. In addition, our principal shareholder, Mr. Xiaojun Zhu has been providing and will continue to provide his personal funds, if necessary, to support the Company on an as needed basis. The Company believes it has sufficient working capital for the next twelve months. In order to fully implement our business plan and sustain continued growth, we may also need to raise capital from outside investors. Our expectation, therefore, is that we will seek to access the capital markets in both the U.S. and China to obtain the funds as needed. At the present time, however, we do not have commitments of funds from any third party. Revenue recognition Most of the Company’s revenue is derived from real estate sales of condominiums and commercial property in the PRC. The majority of the Company’s contracts contain a single performance obligations involving significant real estate development activities that are performed together to deliver a real estate property to customers. Revenues arising from real estate sales are recognized when or as the control of the asset is transferred to the customer. The control of the asset may transfer over time or at a point in time. For the sales of individual condominium units in a real estate development project, the Company has an enforceable right to payment for performance completed to date, revenue is recognized over time by measuring the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the asset. Under percentage completion method, revenue and profit from the sales of long term real estate development properties is recognized by the percentage of completion method on the sale of individual units when all the following criteria are met: a. Construction is beyond a preliminary stage. b. The buyer is committed to the extent of being unable to require a refund except for non-delivery of the unit or interest. c. Sufficient units have already been sold to assure that the entire property will not revert to rental property. d. Sales prices are collectible. e. Aggregate sales proceeds and costs can be reasonably estimated. If any of the above criteria is not met, proceeds shall be accounted for as deposits until the criteria are met. Under the percentage of completion method, revenues from individual real estate condominium units sold under development and related costs are recognized over the course of the construction period, based on the completion progress of a project. The progress towards complete satisfaction of the performance obligation is measured based on the Company’s efforts or inputs to the satisfaction of the performance obligation, by reference to the contract costs incurred up to the end of reporting period as a percentage of total estimated costs for each contract. In relation to any project, revenue is determined by calculating the ratio of incurred costs, including land use rights costs and construction costs, to total estimated costs and applying that ratio to the contracted sales amounts. Cost of sales is recognized by determining the ratio of contracted sales during the period to total estimated sales value, and applying that ratio to the incurred costs. Current period amounts are calculated based on the difference between the life-to-date project totals and the previously recognized amounts. Any changes in significant judgments and/or estimates used in determining construction and development revenue could significantly change the timing or amount of construction and development revenue recognized. Changes in total estimated project costs or losses, if any, are recognized in the period in which they are determined. Revenue from the sales of completed real estate condominium units is recognized at the time of the closing of an individual unit sale. This occurs when the customer obtains the physical possession, the legal title, or the significant risks and rewards of ownership of the assets and the Company has present right to payment and the collection of the consideration is probable. For municipal road construction projects, fees are generally recognized at the time of the projects are completed. Disaggregation of Revenues Disaggregated revenues was as follows: For the years ended September 30, 2019 2018 Revenue recognized for completed condominium real estate projects $ 13,400,491 $ 28,833,383 Revenue recognized for condominium real estate projects under development 26,564,065 36,653,913 Total $ 39,964,556 $ 65,487,296 Contract balances Timing of revenue recognition may differ from the timing of billing and cash receipts from customers. The Company records a contract asset when revenue is recognized prior to invoicing, or a contract liability when cash is received in advance of recognizing revenue. A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets include billed and billable receivables, which are the Company’s unconditional rights to consideration other than to the passage of time. Contract liabilities include cash collected in excess of revenues. Customer deposits are excluded from contract liabilities. The Company has elected to apply the optional practical expedient for costs to obtain a contract which allows the Company to immediately expense sales commissions (included under selling expenses) because the amortization period of the asset that the Company otherwise would have used is one year or less. Contract assets and liabilities are generally classified as current based on our contract operating cycle. The Company provides “mortgage loan guarantees” only with respect to buyers who make down-payments of 20%‑50% of the total purchase price of the property. The period of the mortgage loan guarantee begins on the date the bank approves the buyer’s mortgage and we receive the loan proceeds in our bank account and ends on the date the “Certificate of Ownership” evidencing that title to the property has been transferred to the buyer. The procedures to obtain the Certificate of Ownership take six to twelve months (the “Mortgage Loan Guarantee Period”). If, after investigation of the buyer’s income and other relevant factors, the bank decides not to grant the mortgage loan, our mortgage-loan based sales contract terminates and there will be no guarantee obligation. If, during the Mortgage Loan Guarantee Period, the buyer defaults on his or her monthly mortgage payment for three consecutive months, we are required to return the loan proceeds back to the bank, although we have the right to keep the customer’s deposit and resell the property to a third party. Once the Certificate of Property has been issued by the relevant government authority, our loan guarantee terminates. If the buyer then defaults on his or her mortgage loan, the bank has the right to take the property back and sell it and use the proceeds to pay off the loan. The Company is not liable for any shortfall that the bank may incur in this event. To date, no buyer has defaulted on his or her mortgage payments during the Mortgage Loan Guarantee Period and the Company has not returned any loan proceeds pursuant to its mortgage loan guarantees. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes, and disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates are used for, but not limited to, the assumptions and estimates used by management in recognizing development revenue under the percentage of completion method, the selection of the useful lives of property and equipment, provision necessary for contingent liabilities, revenue recognition, taxes and budgeted costs. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates. Changes of estimated gross profit margins related to revenue recognized under the percentage of completion method are made in the period in which circumstances requiring the revisions become known. For the year ended September 30, 2019, the Company did not change the estimated revenue and related gross profit margin from fiscal 2018. For the year end September 30, 2018, real estate development projects with gross profits recognized in 2018 had changes in their estimated revenue and related gross profit margins. The Company increased its prior estimates related to selling prices and total estimated sales values which led to a decrease in the recognized costs of sales under percentage completion revenue recognition approach. As a result of these changes in gross profit margins, net income for the year ended September 30, 2018 increased by $3,278,037 and basic and diluted earnings per share for the year ended September 30, 2018 increased by $0.07. Fair value of financial instruments The Company follows the provisions of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. It clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows: Level 1‑Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. Level 2‑Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. Level 3‑Inputs are unobservable inputs which reflect the reporting entity’s own assumptions or what assumptions the market participants would use in pricing the asset or liability based on the best available information. The carrying amounts reported in the accompanying consolidated balance sheets for cash, restricted cash and all other current assets, security deposits for land use rights, loans and all current liabilities approximate their fair value based on the short-term maturity of these instruments. The fair value of the long term customer, construction and security deposits approximate their carrying amounts because the deposits are received in cash. It was impractical to estimate the fair value of the amount due from the local government and the long term other loans payable. Foreign currency translation The Company’s financial information is presented in U.S. dollars. The functional currency of the Company’s operating subsidiaries is Renminbi (“RMB”), the currency of the PRC. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830‑30 “Translation of Financial Statements”. The financial information is first prepared in RMB and then is translated into U.S. dollars at year-end exchange rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in stockholders’ equity. 2019 2018 Year end RMB : USD exchange rate 7.1477 6.8680 Annual average RMB : USD exchange rate 6.8753 6.5368 The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation. Cash Cash includes cash on hand and demand deposits in accounts maintained with commercial banks within the PRC. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company maintains bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs. Restricted Cash The restricted cash is required by the banks as collateral for mortgage loans given to the home buyers before obtaining the certificates of ownership of the properties as collateral. In order to provide the banks with the certificates of ownership, the Company is required to complete certain procedures with the Chinese government, which normally takes six to twelve months. Because the banks provide the loan proceeds to the Company without obtaining certificates of ownership as loan collateral during this six to twelve months’ period, the mortgage banks require the Company to maintain, as restricted cash, 5% to 10% of the mortgage proceeds as security for the Company’s obligations under such guarantees. The restricted cash is released by the banks once they receive the certificates of ownership. These deposits are not covered by insurance. The Company has not experienced any losses in such accounts and management believes its restricted cash account is not exposed to any significant risks. Advances to vendors Advances to vendors consist of balances paid to contractors and vendors for services and materials that have not been provided or received and generally relate to the development and construction of residential and commercial units in the PRC. Advances to vendors are reviewed periodically to determine whether their carrying value has become impaired. Historically, the Company has not experienced any losses as a result of these advances. Security deposits for land use rights Security deposits for land use rights consist of the deposit held by the PRC government for the purchase of land use rights and the deposit held by an unrelated party to transfer its land use rights to the Company. The deposits will be reclassified to real estate property under development upon the transfers of legal title. Real estate property development completed and under development Real estate property consists of finished residential unit sites, commercial offices and residential unit sites under development. The Company leases the land for the residential unit sites under land use right leases with various terms from the PRC government. The cost of land use rights is included in the development cost and allocated to each project. Real estate property development completed and real estate property under development are stated at the lower of cost or fair value. Expenditures for land development, including cost of land use rights, deed tax, pre-development costs, and engineering costs, exclusive of depreciation, are capitalized and allocated to development projects by the specific identification method. Costs are allocated to specific units within a project based on the ratio of the sales area of units to the estimated total sales area of the project (or phase of the project) multiplied by the total cost of the project (or phase of the project). Cost of amenities transferred to buyers is allocated to specific units as a component of total construction cost. The amenity cost includes landscaping, road paving, etc. Once the projects are completed, the amenities are under control of the property management companies. Real estate property development completed and real estate property under development are reclassified on the balance sheet into current and non-current portions based on the estimated date of construction completion and sales. The real estate property development completed classification is based on the estimated date that each property is expected to be sold within the Company’s normal operating cycle of the business and the Company’s sales plan. Real estate property development completed is classified as a current asset if the property is expected to be sold within the normal operating cycle of the business. Otherwise, it is classified as a non-current asset. The majority of real estate projects the Company has completed in the past were multi-layer or sub-high-rise real estate projects. The Company considers its normal operating cycle is 12 months. Real estate property development completed and under development are subject to valuation adjustments when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets. The Company reviewed all of its real estate projects for future losses and impairment by comparing the estimated future undiscounted cash flows for each project to the carrying value of such project. For the years ended September 30, 2019 and 2018, the Company did not recognize any impairment for real estate property under development or completed. Capitalization of Interest Interest incurred during and directly related to real estate development projects is capitalized to the related real estate property under development during the active development period, which generally commences when borrowings are used to acquire real estate assets and ends when the properties are substantially complete or the property becomes inactive. Interest is capitalized based on the interest rate applicable to specific borrowings or the weighted average of the rates applicable to other borrowings during the period. Interest capitalized to real estate property under development is recorded as a component of cost of real estate sales when related units are sold. All other interest is expensed as incurred. For the years ended September 30, 2019 and 2018, the total interest capitalized in the real estate property development was $7,158,391 and $6,248,513, respectively. Property, Plant and equipment, net Property, plant and equipment are recorded at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after the fixed assets have been put into operation, such as repairs and maintenance and overhaul costs, is normally expensed in the year in which it is incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, less any estimated residual value. Estimated useful lives of the assets are as follows: Buildings years Machinery and office equipment - 10 years Vehicles years Any gain or loss on disposal or retirement of a fixed asset is recognized in the profit and loss account and is the difference between the net sales proceeds and the net carrying amount of the asset. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and the resulting profit or loss is reflected in income. Maintenance, repairs and minor renewals are charged directly to expense as incurred unless such expenditures extend the useful life or represent a betterment, in which case they are capitalized. Impairment of long-lived assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally determined by using the asset’s expected future discounted cash flows or market value. The Company estimates fair value of the assets based on certain assumptions such as budgets, internal projections, and other available information as considered necessary. There is no impairment of long-lived assets for the years ended September 30, 2019 and 2018. Customer deposits Customer deposits consist of amounts received from customers relating to the sale of residential units in the PRC. In the PRC, customers will generally obtain permanent financing for the purchase of their residential unit prior to the completion of the project. The lending institution will provide the funding to the Company upon the completion of the financing rather than the completion of the project. The Company receives these funds and recognizes them as a liability until the revenue can be recognized. Property warranty The Company provides its customers with warranties which cover major defects of building structure and certain fittings and facilities of properties sold. The warranty period varies from two years to five years, depending on different property components the warranty covers. The Company continually estimates potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a property. Reserves are determined based on historical data and trends with respect to similar property types and geographical areas. The Company continually monitors the warranty reserve and makes adjustments to its pre-existing warranties, if any, in order to reflect changes in trends and historical data as information becomes available. The Company may seek further recourse against its contractors or any related third parties if it can be proved that the faults are caused by them. In addition, the Company also withholds up to 2% of the contract cost from sub-contractors for periods of two to five years. These amounts are included in construction deposits, and are only paid to the extent that there has been no warranty claim against the Company relating to the work performed or materials supplied by the subcontractors. For the years ended September 30, 2019 and 2018, the Company had not recognized any warranty costs in excess of the amount retained from subcontractors and therefore, no warranty reserve is considered necessary at the balance sheet dates. Stock-based compensation Share-based payment transactions are measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period, or vesting period. Forfeitures to be estimated at the time of grant and revised, if necessary, in the subsequent period if actual forfeitures differ from initial estimates. Forfeiture rate is estimated based on historical and future expectation of employee turnover rate and are adjusted to reflect future change in circumstances and facts, if any. Share-based compensation expense is recorded net of estimated forfeitures such that expense was recorded only for those stock options and common stock awards that are expected to vest. Construction Deposits Construction deposits are the warranty deposits the real estate contractors provide to the Company upon signing the construction contracts. The Company can use such deposits to reimburse customers in the event of customer claims due to construction defects. The remaining balance of the deposits are returned to the contractors when the terms of the after-sale property warranty expires, which normally occurs within two to five years after the date of the deposit. Income taxes Deferred tax assets and liabilities are for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. ASC 740‑10‑25 prescribes a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. There are no material uncertain tax positions as of September 30, 2019 and 2018. The Company is a corporation organized under the laws of the State of Florida. However, all of the Company’s operations are conducted solely by its subsidiaries in the PRC. No income is earned in the United States and the management does not repatriate any earnings outside the PRC. As a result, the Company did not generate any U.S. taxable income for the years ended September 30, 2019 and 2018. As of September 30, 2019, the Chinese entities’ income tax returns filed in China for the years ended December 31, 2018, 2017, 2016, 2015 and 2014 are subject to examination by the Chinese taxing authorities. As of September 30, 2019, the tax years ended September 30, 2010 through September 30, 2019 for the Company’s PRC entities remain open for statutory examination by PRC tax authorities. The parent Company China HGS Real Estate Inc.’s both U.S. federal tax returns and Florida state tax returns are delinquent since 2009. Its tax years ended September 30, 2014 through September 30, 2019 remain open for statutory examination by U.S. federal and state tax authorities. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a U.S. corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. Due to the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded accrued amounts in our consolidated financial statements As of September 30, 2019 and 2018, including an approximately $2.3 million provision on the deemed repatriation of undistributed foreign earnings and an additional $0.8 million provision for delinquent U.S. and State tax fillings. The Company is in the process of engaging a tax professional to file its delinquent tax returns. Land appreciation tax (“LAT”) In accordance with the relevant taxation laws in the PRC, the Company is subject to LAT based on progressive rates ranging from 30% to 60% on the appreciation of land value, which is calculated as the proceeds of sales of properties less deductible expenditures including borrowing costs and all property development expenditures. LAT is exempted if the appreciation values do not exceed certain thresholds specified in the relevant tax laws. The whole project must be completed before the LAT obligation can be assessed. Accordingly, the Company should record the liability and the total related expense at the completion of a project unless the tax authorities impose an assessment at an earlier date. The methods to implement this tax law vary among different geographic areas. Hanzhong, where the project Mingzhu Garden, Nan Dajie and Central Plaza are located, implements this tax rule by requiring real estate companies prepay the LAT based upon customer deposits received. The tax rate in Hanzhong is 1%. Yang County, where the project Yangzhou Pearl Garden and Yangzhou Palace are located, requires a tax rate of 0.5%. Comprehensive income (loss) In accordance with ASC 220‑10‑55, comprehensive income (loss) is defined as all changes in equity except those resulting from investments by owners and distributions to owners. The Company’s only components of comprehensive loss for the years ended September 30, 2019 and 2018 were net income and foreign currency translation adjustments. Advertising expenses Advertising costs are expensed as incurred. For the years ended September 30, 2019 and 2018, the Company recorded advertising expenses of $57,448 and $164,355, respectively. Basic and diluted earnings per share The Company computes earnings per share (“EPS”) in accordance with the ASC 260, “Earnings per share”, which requires companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. Concentration risk The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. All of the Company’s cash is maintained with state-owned banks within the People’s Republic of China of which no deposits are covered by insurance. For the years ended September 30, 2019 and 2018, the Company has not experienced any delinquent mortgage loans and has not experienced any losses related to this guarantee. The Company believes |
REAL ESTATE PROPERTY COMPLETED
REAL ESTATE PROPERTY COMPLETED AND UNDER DEVELOPMENT | 12 Months Ended |
Sep. 30, 2019 | |
REAL ESTATE PROPERTY COMPLETED AND UNDER DEVELOPMENT | |
REAL ESTATE PROPERTY COMPLETED AND UNDER DEVELOPMENT | NOTE 3. REAL ESTATE PROPERTY COMPLETED AND UNDER DEVELOPMENT The following summarizes the components of real estate property completed and under development as of September 30, 2019 and 2018: Balance as of September 30, September 30, 2019 2018 Development completed: Hanzhong City Mingzhu Garden Phase I $ 530,314 $ 655,268 Hanzhong City Mingzhu Garden Phase II 24,264,216 31,096,125 Hanzhong City Nan Dajie (Mingzhu Xinju) 1,157,554 1,204,695 Hanzhong City Oriental Pearl Garden 19,070,129 21,397,560 Yang County Yangzhou Pearl Garden Phase I 1,514,241 1,673,351 Yang County Yangzhou Pearl Garden Phase II 3,054,412 4,189,829 Yang County Yangzhou Palace (a) 52,342,164 — Real estate property development completed 101,933,030 60,216,828 Less: Real estate property completed – short-term 100,817,944 58,999,178 Real estate property completed – long-term $ 1,115,086 $ 1,217,650 Under development: Yang County Yangzhou Palace (a) $ — $ 60,128,554 Hanzhong City Shijin Project 6,776,688 7,052,669 Hanzhong City Liangzhou Road and related projects (b) 146,958,903 135,011,975 Hanzhong City Hanfeng Beiyuan East (c) 706,194 734,953 Hanzhong City Beidajie 56,654,212 67,793,750 Yang County East 2 nd Ring Road (d) 4,649,228 4,838,568 Real estate property under development 215,745,225 275,560,469 Less: Short-term portion — 60,128,554 Real estate property under development –long-term $ 215,745,225 $ 215,431,915 (a) The Company recognized $21,353,638 of development cost in the cost of real estate sales under the percentage of completion method for the year ended September 30, 2019 (2018 - $28,657,703). (b) In September 2013, the Company entered into an agreement (“Liangzhou Agreement”) with the Hanzhong local government on the Liangzhou Road reformation and expansion project (Liangzhou Road Project”). Pursuant to the agreement, the Company is contracted to reform and expand the Liangzhou Road, a commercial street in downtown Hanzhong City, with a total length of 2,080 meters and width of 30 meters and to resettle the existing residences in the Liangzhou road area. The government’s original road construction budget was approximately $33 million in accordance with the Liangzhou Agreement. The Company, in return, is being compensated by the local government to have an exclusive right on acquiring at least 394.5 Mu land use rights in a specified location of Hanzhong City. The Liangzhou Road Project’s road construction started at the end of 2013. In 2014, the original scope and budget on the Liangzhou road reformation and expansion project was extended, because the local government included more area and resettlement residences into the project, which resulted in additional investments from the Company. In return, the Company is authorized by the local government to develop and manage the commercial and residential properties surrounding the Liangzhou Road project. As of September 30, 2019, the main Liangzhou road construction is substantially completed, due to the complicated multiple level of government review process, the Company expected to the government’s acceptance to be completed before the end of fiscal 2020. The Company’s development cost incurred on Liangzhou Road Project is treated as the Company’s deposit on purchasing the related land use rights, as agreed by the local government. As of September 30, 2019, the actual costs incurred by the Company were $146,958,903 (September 30, 2018 - $135,011,975) and the incremental cost related to residence resettlement approved by the local government. The Company determined that the Company’s Investment in Liangzhou Road Project in exchange for interests in future land use rights is a barter transaction with commercial substance. (c) In September 2012, the Company was approved by the Hanzhong local government to construct four municipal roads with a total length of approximately 1,192 meters. The project was deferred and then restarted during the quarter ended March 31, 2014. As of September 30, 2019, the local government has not completed the budget for these projects therefore the delivery to these projects for government's acceptance and related settlement were extended to fiscal 2020. (d) The Company was engaged by the Yang County local government to construct the East 2nd Ring Road with a total length of 2.15 km. The local government is required to repay the Company’s project investment costs within 3 years with interest at the interest rate based on the commercial borrowing rate with the similar term published by China construction bank (September 30, 2019 and 2018 - 4.75%). The local government has approved a refund to the Company by reducing local surcharges or taxes otherwise required in the real estate development. The road construction was substantially completed as of September 30, 2019 and in process of government review and approval. As of September 30, 2019 and 2018, land use rights included in real estate property under development totaled $6,773,158 and $14,749,085, respectively. |
PROPERTY, PLANT AND EQUIPMENT,
PROPERTY, PLANT AND EQUIPMENT, NET | 12 Months Ended |
Sep. 30, 2019 | |
PROPERTY, PLANT AND EQUIPMENT, NET | |
PROPERTY, PLANT AND EQUIPMENT, NET | NOTE 4. PROPERTY, PLANT AND EQUIPMENT, NET As of September 30, 2019 and 2018, property, plant and equipment was as follows: As of September 30, 2019 2018 Buildings $ 764,867 $ 796,016 Automobiles 207,186 243,478 Total 972,053 1,039,494 Less: accumulated depreciation 358,045 321,128 Property, plant and equipment, net $ 614,008 $ 718,366 Depreciation expense for the years ended September 30, 2019 and 2018 was $79,270 and $85,788, respectively. |
RECEIVABLE FROM LOCAL GOVERNMEN
RECEIVABLE FROM LOCAL GOVERNMENT | 12 Months Ended |
Sep. 30, 2019 | |
RECEIVABLE FROM LOCAL GOVERNMENT | |
RECEIVABLE FROM LOCAL GOVERNMENT | NOTE 5. RECEIVABLE FROM LOCAL GOVERNMENT In June 2012, the Company was approved by Hanzhong local government to construct two municipal roads with total length of 1,064.09 meters. The Company completed and delivered these two roads to the local government on March 21, 2014 with local government’s approval. The Company recognized such revenue during the year ended September 30, 2014. As of September 30, 2019, a receivable from the Hanzhong local government of $2,725,854 was classified as long term on the accompanying consolidated balance sheets (September 30, 2018 - $2,836,865) because the Company expected to realize the receivable to offset municipal surcharges from local government for the Liangzhou Road related projects when the Company started the Liangzhou Road related real estate property construction in 2020 and later years. |
SECURITY DEPOSITS
SECURITY DEPOSITS | 12 Months Ended |
Sep. 30, 2019 | |
SECURITY DEPOSITS | |
SECURITY DEPOSITS | NOTE 6. SECURITY DEPOSITS As of September 30, 2019 and 2018, security deposits were as follows: As of September 30, 2019 2018 Security deposit for land use right (1) $ 2,798,103 $ 2,912,056 Security deposits for other loan (2) 5,174,014 5,384,726 Security deposits $ 7,972,117 $ 8,296,782 (1) In May 2011, the Company entered into a development agreement with the Hanzhong local government. Pursuant to the agreement, the Company prepaid $2,798,103 and $2,912,056 to acquire certain land use rights through public bidding as of September 30, 2019 and 2018, respectively. The Company currently expects to make payment of the remaining development cost as the government’s work progresses. The Company classified the security deposits for land use rights as long term based on the Company’s development plan. (2) In connection with financing from Hanzhong Urban Construction Investment Development Co., Ltd (See note 7), the Company provided a security deposit for the loan received. As of September 30, 2019, the security deposit balances were $5,174,014 (September 30, 2018 - $5,384,726) for other loan with Hanzhong Urban Construction Investment Development Co., Ltd. |
CONSTRUCTION LOANS
CONSTRUCTION LOANS | 12 Months Ended |
Sep. 30, 2019 | |
CONSTRUCTION LOANS | |
CONSTRUCTION LOANS | NOTE 7. CONSTRUCTION LOANS September 30, 2019 September 30, 2018 Loan A (i) $ 90,186,614 $ 96,472,714 Loan B (ii) — 8,736,168 Loan C (iii) 16,610,822 17,287,299 106,797,436 122,496,181 Less: current maturities of other loans 77,332,569 55,610,803 Other loans – long-term portion $ 29,464,867 $ 66,885,378 (i) On June 26, 2015 and March 10, 2016, the Company signed phase I and Phase II agreements with Hanzhong Urban Construction Investment Development Co., Ltd, a state owned Company, to borrow up to approximately $15.8 million (RMB 775,000,000) for a long term loan at 4.75% interest per year to develop Liangzhou Road Project. As of September 30, 2019, the Company borrowed $90,186,614 under this credit line (September 30, 2018 - $96,472,714) with final due date in October 2021. The loan is guaranteed by Hanzhong City Hantai District Municipal Government and pledged by the Company’s Yang County Yangzhou Palace project with carrying value of $52,342,164 as of September 30, 2019 (September 30, 2018‑ $60,128,554). In addition, the Company was required to provide a security deposit for the loan received (see note 6). As of September 30, 2019, the security deposits paid were $5,174,014 (2018 -$5,384,726) for loans received. For the years ended September 30, 2019 and 2018, the interest paid was $6,617,720 and $5,672,717, respectively, which was capitalized in to the development cost of Liangzhou road project. Due to local government’s delay in reallocation of residence in Liangzhou Road and related area, the Hanzhong Urban Construction Investment Development Co., Ltd has not released all the funds available in this loan to the Company and the Company’s withdraw will be based on the project’s development progress. The total required loan repayment schedule assuming total loan proceeds are borrowed are listed below: For the years ending: Repayment in USD Repayment in RMB September 30, 2020 77,332,569 552,750,000 September 30, 2021 12,240,301 87,490,000 September 30, 2022 613,744 4,386,860 Total 90,186,614 644,626,860 (ii) On January 8, 2016, the Company signed a loan agreement with Hanzhong Municipal Housing Provident Fund Management Center (“Housing Fund”) to borrow up to approximately $11.1 million (RMB 80,000,000) on development of Oriental Garden related projects and was fully repaid in January 2019. For the year ended September 30, 2019 and 2018, total interest was $61,097 and $425,779, respectively, which was included in the interest expense, because the related Oriental Garden project was completed in fiscal year 2016. : (iii) In December 2016, the Company signed a loan agreement with Hantai District Urban Construction Investment Development Co., Ltd, a state owned Company, to borrow up to approximately $16.6 million (RMB 119,000,000) for the development of Hanzhong City Liangzhou Road project. As of September 30, 2019, the Company received all the proceeds and repaid unused fund of $37,890 (RMB 270,829). The loan carries interest at a fixed interest of 1.2% and is due on June 20, 2031. The Company is required to repay the loan by equal annual principal repayment of approximately $3.3 million from December 2027 through June 2031. The Company pledged the assets of Liangzhou Road related projects with carrying value of $146,958,903 as collateral for the loan. Total interest of $157,506 and $221,490 for the years ended September 30, 2019 and 2018, respectively, were capitalized in to the development cost of Hanzhong City Liangzhou Road project. Additionally, in September 2017, the Urban Development Center Co., Ltd. approved a construction loan for the Company in the amount of approximately $24.5 million (RMB 175,000,000) with an annual interest rate of 1.2% per year in connection with the Liangzhou Road and related Project. The Company is required to repay the loan by equal annual principal repayment of approximately $4.9 million from December 2027 through May 2031. The amount of this loan is available to be drawn down as soon as the land use rights of the Liangzhou Road is approved and the construction starts, which is expected to begin in the 2019. Interest charge for the years ended September 30, 2019 and 2018 was $231,626 and $325,270, respectively, which was included in the construction capitalized costs. |
CUSTOMER DEPOSITS
CUSTOMER DEPOSITS | 12 Months Ended |
Sep. 30, 2019 | |
CUSTOMER DEPOSITS | |
CUSTOMER DEPOSITS | NOTE 8. CUSTOMER DEPOSITS Customer deposits consist of amounts received from customers for the pre-sale of residential units in the PRC. The details of customer deposits are as follows: As of September 30, 2019 2018 Customer deposits by real estate projects Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) $ 7,029,356 $ 8,246,058 Oriental Pearl Garden 4,182,454 4,648,784 Liangzhou road related projects 1,043,692 1,914,677 Yang County Pearl Garden 1,163,407 997,312 Yangzhou Palace 3,764,355 6,341,918 Total 17,183,264 22,148,749 Less: Customer deposits - short-term 16,139,572 20,234,072 Customer deposits - long-term $ 1,043,692 $ 1,914,677 Customer deposits are typically 10% - 20% of the unit price for those customers who purchase properties in cash and 30%‑50% of the unit price for those customers who purchase properties with mortgages. Buyers with mortgage loans pay customer deposits. The banks provide the balance of the funding to the Company upon consummation of the sales. The banks hold the properties as collateral for customers’ mortgage loans. If the customers default, the bank will repossess the collateral properties. Except during the Mortgage Loan Guarantee Period of approximately six to twelve months, the banks have no recourse to the Company for customers’ defaults. As of September 30, 2019 and 2018, approximately $3.9 million and $3.5 million was guaranteed by the Company, respectively. |
SHAREHOLDERS LOANS
SHAREHOLDERS LOANS | 12 Months Ended |
Sep. 30, 2019 | |
SHAREHOLDERS LOANS | |
SHAREHOLDERS LOANS | NOTE 9. SHAREHOLDERS LOANS As of September 30, 2019 2018 Shareholder loan – USD loan (a) $ 1,810,000 $ 1,810,000 Shareholder loan – RMB loan (b) 319,114 332,110 Total $ 2,129,114 $ 2,142,110 a. The Company has a one year loan agreement (“USD Loan Agreement”) with our Chairman, CEO and major shareholder”), pursuant to which the Company borrowed $1,810,000 to make a capital injection into Shaanxi HGS, the Company’s subsidiary. The interest rate for the loan is 4% per annum and the loan matured on July 19, 2014. The Company entered into the amendments to the USD Loan Agreement to extend the term until July 31, 2020 and the loan is due on demand. The Company recorded interest of $72,400 for each of the years ended September 30, 2019 and 2018. The Company has not yet paid this interest. As of September 30, 2019 and 2018, the interest payable amounted to $597,300 and $524,900, respectively, and included in the accrued expense in the accompanying consolidated balance sheets. b. On December 31, 2013, Shaanxi Guangsha Investment and Development Group Co., Ltd. (the “Guangsha”), the Company’s PRC operating subsidiary, entered into a loan agreement with the Chairman (the “Shareholder RMB Loan Agreement”), pursuant to which Guangsha is able to borrow funds from the Chairman in order to support the Company’s Liangzhou Road construction project development and the Company’s working capital needs. The Loan Agreement has a one-year term, and has been renewed upon maturity to September 25, 2020, with at an interest rate of 4.35% per year. For years ended September 30, 2019 and 2018, the interest was $20,403 and $28,586, respectively, which is capitalized in the development cost of Liangzhou road project. As of September 30, 2019 and 2018, the interest payable amounted to $537,651 and $539,122, respectively, and included in the accrued expense in the accompanying consolidated balance sheets. |
STOCK OPTIONS
STOCK OPTIONS | 12 Months Ended |
Sep. 30, 2019 | |
STOCK OPTIONS | |
STOCK OPTIONS | NOTE 10. STOCK OPTIONS On August 22, 2015, the Company’s Board of Directors granted stock options to two independent directors to purchase up to an aggregate of 120,000 shares of the Company’s common stock (“2015 Stock Options). The shares underlying the options become excisable during the following 36 months period at the end of each quarter. The exercise price of the options is $1.89 per share. As of September 30, 2019 and 2018, all of the option awards have vested. The assumptions used in calculating the fair value of options granted using the Black-Scholes option pricing model are as follows: Options granted in August 2015 Risk-free interest rate 0.95 % Expected life of the options 3 year Expected volatility 143 % Expected dividend yield % Fair value $ 178,800 The Company uses the Black-Scholes option-pricing model, which incorporates various assumptions including volatility, expected life and interest rates to determine fair value. The Company’s expected volatility assumption is based on the historical volatility of Company’s stock. The expected life assumption is primarily based on the simplified method due to the Company’s limited option exercise behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The following table summarizes the stock option activities of the Company: Weighted Weighted Average Average Remaining Number of Exercise Life in Grant Date options Price Years Fair Value Outstanding, September 30, 2017 120,000 $ 1.89 1.89 $ 178,800 Granted — — — — Forfeited (12,000) — — — Exercised — — — — Outstanding, September 30, 2018 — $ — — $ — Granted — — — — Forfeited — — — — Exercised — — — — Outstanding, September 30, 2019 — $ — — — Exercisable, September 30, 2019 — $ — — — Stock-based compensation expense recognized in the years ended September 30, 2019 and 2018 was Nil and $54,633, respectively. As of September 30, 2019 and 2018, there was Nil unrecognized compensation cost related to stock option awards that are expected to be recognized. |
TAXES
TAXES | 12 Months Ended |
Sep. 30, 2019 | |
TAXES | |
TAXES | NOTE 11. TAXES (A) Business sales tax and VAT The Company is subject to a 5% business sales tax on revenue. It is the Company’s continuing practice to recognize the 5% business sales tax based on revenue as a cost of sales as the revenue is recognized. As of September 30, 2019, the Company had business sales tax payable of $7,819,884 (2018 - $9,871,794), which is expected to be paid when the projects are completed and assessed by the local tax authority. In May of 2016, the Business Tax has been incorporated into Value Added Tax in China, which means there will be no more Business Tax and accordingly some business operations previously taxed in the name of Business Tax will be taxed in the manner of VAT thereafter. The Company is subject to 5% of VAT for its all existing real estate project based on the local tax authority’s practice. (B) Corporate income taxes (“CIT”) The Company’s PRC subsidiaries and VIE are governed by the Income Tax Law of the People’s Republic of China concerning the privately run enterprises, which are generally subject to income tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments. However, as approved by the local tax authority of Hanzhong City, the Company’s CIT was assessed annually at a pre-determined fixed rate as an incentive to stimulate the local economy and encourage entrepreneurship. The local income tax rate in Hanzhong is 2.5% and in Yang County is 1.25% on revenue prior to the year ended September 30, 2018. Starting from fiscal 2018, the Company’s CIT changed to 25% on taxable income. The change in the income tax policy could negatively affect the Company’s net income in future years. Although the possibility exists for reinterpretation of the application of the tax regulations by higher tax authorities in the PRC, potentially overturning the decision made by the local tax authority, the Company has not experienced any reevaluation of the income taxes for prior years. The PRC tax rules are different from the local tax rules and the Company is required to comply with local tax rules. The difference between the two tax rules will not be a liability of the Company. There will be no further tax payments for the difference. For the years ended September 30, 2019 and 2018, the Company’s total income tax payable amounted to $11,720,848 and $8,331,026, respectively, which included the income tax payable balances in PRC of $8,691,848 and $5,872,026, respectively and the Company expects to pay off the income tax payable balance when the related real estate projects are completely sold. The following table reconciles the statutory rates to the Company’s effective tax rate for the years ended September 30, 2019 and 2018: For the years ended September 30, 2019 2018 Chinese statutory tax rate 25.0 % 25.0 % Valuation allowance change 0.2 % 0.2 % Transition toll tax and others — % 23.9 % Net impact of Exemption rendered by local tax authorities and other adjustments 10.1 % 0.1 % Effective tax rate 35.3 % 49.2 % Income tax expense for the years ended September 30, 2019 and 2018 is summarized as follows: For the years ended September 30, 2019 2018 Current tax provision $ 719,437 $ 3,073,659 Deferred tax provision 1,302,606 1,999,052 Income tax expense $ 2,022,043 $ 5,072,711 The components of deferred taxes as of September 30, 2019 and 2018 consist of the following: As of September 30, 2019 2018 Deferred tax liability: Revenue recognized based on percentage of completion* $ — $ 2,068,257 * For the year ended September 30, 2019, the Company reclassified the previous recognized deferred tax liabilities to income tax payable due to the completion of the related real estate project. The Company expects to fully settle the income tax payable when related real estate projects are sold. Recent U.S. federal tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “U.S. Tax Reform”), was signed into law on December 22, 2017. The U.S. Tax Reform significantly modified the U.S. Internal Revenue Code by, among other things, reducing the statutory U.S. federal corporate income tax rate from 35% to 21% for taxable years beginning after December 31, 2017; limiting and/or eliminating many business deductions; migrating the U.S. to a territorial tax system with a one-time transition tax on a mandatory deemed repatriation of previously deferred foreign earnings of certain foreign subsidiaries; subject to certain limitations, generally eliminating U.S. corporate income tax on dividends from foreign subsidiaries; and providing for new taxes on certain foreign earnings. Taxpayers may elect to pay the one-time transition tax over eight years or in a single lump sum. The U.S. Tax Reform also includes provisions for a new tax on GILTI effective for tax years of foreign corporations beginning after December 31, 2017. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of controlled foreign corporations (“CFCs”), subject to the possible use of foreign tax credits and a deduction equal to 50 percent to offset the income tax liability, subject to some limitations. For the years ended September 30, 2018, the Company recognized a one-time transition toll tax of approximately $2.3 million that represented management’s estimate of the amount of U.S. corporate income tax based on the deemed repatriation to the United States of the Company’s share of previously deferred earnings of certain non-U.S. subsidiaries and VIE of the Company mandated by the U.S. Tax Reform. The Company’s estimate of the onetime transition toll Tax is subject to the finalization of management’s analysis related to certain matters, such as developing interpretations of the provisions of the Tax Act and amounts related to the earnings and profits of certain foreign VIEs and the filing of our tax returns. U.S. Treasury regulations, administrative interpretations or court decisions interpreting the Tax Act may require further adjustments and changes in our estimates. As of September 30, 2019, the Company provided an additional $0.8 million provision due to delinquent U.S. tax return fillings. (C) Land appreciation tax (“LAT”) Since January 1, 1994, LAT has been applicable at progressive tax rates ranging from 30% to 60% on the appreciation of land values, with an exemption provided for the sales of ordinary residential properties if the appreciation values do not exceed certain thresholds specified in the relevant tax laws. However, the Company’s local tax authority in Hanzhong City has not imposed the regulation on real estate companies in its area of administration. Instead, the local tax authority has levied the LAT at the rate of 0.5% in Yang County and 1.0% in Hanzhong against total cash receipts from sales of real estate properties, rather than according to the progressive rates. As at September 30, 2019, the outstanding LAT payable balance was Nil with respect to completed real estate properties sold up to September 30, 2019. As at September 30, 2018, the Company has an outstanding LAT payable balance of $1,292,527 with respect to completed real estate properties sold up to September 30, 2018 (D) Taxes payable consisted of the following: September 30, September 30, 2019 2018 CIT $ 11,720,848 $ 8,331,026 Business tax 7,819,884 9,871,794 Other taxes and fees 2,349,086 2,250,861 Total taxes payables 21,889,818 20,453,681 Less: current portion 13,882,875 15,492,902 Tax payable – long term * $ 8,006,943 $ 4,960,779 * The Company reclassified the previous recognized deferred tax liabilities to income tax payable in fiscal 2019 due to the completion of the related real estate project. The Company expects to fully settle the income tax payable when related real estate projects are sold. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Sep. 30, 2019 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | NOTE 12. STOCKHOLDERS’ EQUITY (a) Common stock As of September 30, 2019 and 2018, the Company has a total of 45,050,000 shares of common stock issued and outstanding. (b) Statutory surplus reserves The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory surplus reserve is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors. The statutory surplus reserve fund is non-discretionary other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of shares currently held by them, provided that the remaining statutory surplus reserve balance after such issue is not less than 25% of the registered capital before the conversion. Pursuant to the Company’s articles of incorporation, the Company is to appropriate 10% of its net profits as statutory surplus reserve. As of September 30, 2019 and 2018, the balance of statutory surplus reserve was $10,360,251 and $9,925,794, respectively. The discretionary surplus reserve may be used to acquire fixed assets or to increase the working capital to expend on production and operation of the business. The Company’s Board of Directors decided not to make an appropriation to this reserve for the years ended September 30, 2019 and 2018. |
CONTINGENCIES AND COMMITMENTS
CONTINGENCIES AND COMMITMENTS | 12 Months Ended |
Sep. 30, 2019 | |
CONTINGENCIES AND COMMITMENTS | |
CONTINGENCIES AND COMMITMENTS | NOTE 13. CONTINGENCIES AND COMMITMENTS From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company’s management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate would have a material adverse impact on the Company’s consolidated financial position, results of operations and cash flows. As an industry practice, the Company provides guarantees to PRC banks with respect to loans procured by the purchasers of the Company’s real estate properties for the total mortgage loan amount until the completion of obtaining the “Certificate of Ownership” of the properties from the government, which generally takes six to twelve months. Because the banks provide loan proceeds without getting the “Certificate of Ownership” as loan collateral during this six to twelve months’ period, the mortgage banks require the Company to maintain, as restricted cash, 5% to 10% of the mortgage proceeds as security for the Company’s obligations under such guarantees. If a purchaser defaults on its payment obligations, the mortgage bank may deduct the delinquent mortgage payment from the security deposit and require the Company to pay the excess amount if the delinquent mortgage payments exceed the security deposit. If the delinquent mortgage payments exceed the security deposit, the banks may require us to pay the excess amount. If multiple purchasers default on their payment obligations at around the same time, we will be required to make significant payments to the banks to satisfy our guarantee obligations. If we are unable to resell the properties underlying defaulted mortgages on a timely basis or at prices higher than the amounts of our guarantees and related expenses, we will suffer financial losses. The Company has made necessary reserves in its restricted cash account to cover any potential mortgage defaults as required by the mortgage lenders. For the years ended September 30, 2019 and 2018, the Company has not experienced any delinquent mortgage loans and has not experienced any losses related to this guarantee. As of September 30, 2019 and 2018, our outstanding guarantees in respect of our customers' mortgage loans amounted to approximately $78 million and $70 million, respectively. As of September 30, 2019 and 2018, the amount of security deposits provided for these guarantees was approximately $3.9 million and $3.5 million respectively and the Company believes that such reserves are sufficient. On June 21, 2019, the “Company received a letter from the Listing Qualifications staff of The Nasdaq Stock Market (“Nasdaq”) notifying the Company that it is no longer in compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed companies to maintain a minimum bid price of $1.00 per share. The letter noted that the bid price of the Company’s common stock was below $1.00 for the 30-day period ending June 20, 2019. The notification letter has no immediate effect on the Company’s listing on the Nasdaq Capital Market. Nasdaq has provided the Company with 180 days, or until January 14,2020, to regain compliance with the minimum bid price requirement by having a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. On December 19, 2019, Nasdaq determined that the Company is eligible for an additional 180 calendar day period, or until June 15, 2020, to regain compliance. |
SCHEDULE I
SCHEDULE I | 12 Months Ended |
Sep. 30, 2019 | |
Condensed Financial Information Disclosure [Abstract] | |
SCHEDULE I | CHINA HGS REAL ESTATE INC. SCHEDULE I- PARENT COMPANY BALANCE SHEETS (UNAUDITED) September 30, 2019 2018 ASSETS Investment in subsidiary $ 164,136,450 $ 166,471,736 Total Assets $ 164,136,450 $ 166,471,736 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accrued expenses $ 597,300 $ 524,900 Tax payable 3,029,000 2,459,000 Shareholder loan 1,810,000 1,810,000 Total current liabilities 5,436,300 4,793,900 Stockholders’ equity Common stock, $0.001 par value, 100,000,000 shares authorized, 45,050,000 shares issued and outstanding 45,050 45,050 Additional paid-in capital 129,907,805 129,907,805 Statutory surplus 10,360,251 9,925,794 Retained earnings 34,070,767 30,803,052 Accumulated other comprehensive loss (15,683,723) (9,003,865) Total stockholders' equity 158,700,150 161,677,836 Total Liabilities and Stockholders' Equity $ 164,136,450 $ 166,471,736 The accompanying notes are integral part of Schedule I CHINA HGS REAL ESTATE INC. SCHEDULE I - STATEMENTS OF INCOME AND COMPREHENSIVE LOSS FOR THE YEARS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED) 2019 2018 Equity in profit of subsidiary $ 4,344,572 $ 7,828,950 General and administrative expenses — 54,633 Interest expense 72,400 72,400 Income before income taxes 4,272,172 7,701,917 Provision for income taxes 570,000 2,459,000 Net income 3,702,172 5,242,917 Other comprehensive loss Foreign currency translation adjustment (6,679,858) (5,509,080) Comprehensive loss $ (2,977,686) $ (266,163) The accompanying notes are integral part of Schedule I CHINA HGS REAL ESTATE INC. SCHEDULE I - STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED) 2019 2018 Cash flows from operating activities Net income $ 3,702,172 $ 5,242,917 Adjustments to reconcile net income to net cash used in operating activities: Stock based compensation — 54,633 Equity in profit of subsidiary (4,344,572) (7,828,950) Changes in assets and liabilities: Tax payable 570,000 2,459,000 Accrued expenses 72,400 72,400 Net cash used in operating activities $ — $ — Net increase (decrease) in cash — — Cash, beginning of year — — Cash, end of year $ — $ — Supplemental disclosures of cash flow information: Interest paid $ — $ — Income taxes paid $ — $ — The accompanying notes are integral part of Schedule I CHINA HGS REAL ESTATE INC. NOTES TO SCHEDULE I NOTE 1. BASIS OF PRESENTATION Certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been condensed or omitted. The Company’s investment in subsidiary and variable interest entity (“VIE”) is stated at cost plus equity in undistributed earnings of subsidiaries. NOTE 2. RESTRICTED ASSETS The Company’s PRC VIE and subsidiary are restricted in their ability to transfer a portion of their net assets to the Company. The payment of dividends by entities organized in China is subject to limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. The Company’s subsidiaries and its VIEs are also required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its statutory reserves account until the accumulative amount of such reserves reaches 50% of its respective registered capital. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. In addition, the Company’s operations and revenues are conducted and generated in China, all of the Company’s revenues being earned and currency received are denominated in RMB. RMB is subject to the foreign exchange control regulation in China, and, as a result, the Company may be unable to distribute any dividends outside of China due to PRC foreign exchange control regulations that restrict the Company’s ability to convert RMB into US Dollars. Schedule I of Article 5‑04 of Regulation S-X requires the condensed financial information of registrant shall be filed when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. For purposes of the above test, restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiaries in the form of loans, advances or cash dividends without the consent of a third party. The condensed parent company financial statements have been prepared in accordance with Rule 12‑04, Schedule I of Regulation S-X as the restricted net assets of the Company’s PRC subsidiary and VIE exceed 25% of the consolidated net assets of the Company. NOTE 3. COMMITMENTS The Company did not have any significant commitments or long-term obligations as at September 30, 2019 and 2018. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Sep. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Principles of consolidation | Principles of consolidation The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of China HGS Real Estate Inc. (the “Company” or “China HGS”), China HGS Investment Inc. (“HGS Investment”), Shaanxi HGS Management and Consulting Co., Ltd. (“Shaanxi HGS”) and its variable interest entity (“VIE”), Shaanxi Guangsha Investment and Development Group Co., Ltd. (“Guangsha”). All inter-company transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation. |
Liquidity | Liquidity As of September 30, 2019, the Company had an approximately $29.7 million negative working capital and total cash and restricted cash balance decreased to approximately $4.2 million as of September 30, 2019 as compared to approximately $6.8 million as of September 30, 2018. With respect to capital funding requirements, the Company budgeted our capital spending based on ongoing assessments of needs to maintain adequate cash. Due to the long term relationship with our construction suppliers, we were able to effectively manage cash spending on construction, meantime, we are able to obtain additional funding support from local banks and financial institutions. Also, the Company’s cash flows from pre-sales and current sales should provide financial support for our current developments and operations. For the both years ended September 30, 2019 and 2018, the Company had positive cash flow from operating. In addition, our principal shareholder, Mr. Xiaojun Zhu has been providing and will continue to provide his personal funds, if necessary, to support the Company on an as needed basis. The Company believes it has sufficient working capital for the next twelve months. In order to fully implement our business plan and sustain continued growth, we may also need to raise capital from outside investors. Our expectation, therefore, is that we will seek to access the capital markets in both the U.S. and China to obtain the funds as needed. At the present time, however, we do not have commitments of funds from any third party. |
Revenue recognition | Revenue recognition Most of the Company’s revenue is derived from real estate sales of condominiums and commercial property in the PRC. The majority of the Company’s contracts contain a single performance obligations involving significant real estate development activities that are performed together to deliver a real estate property to customers. Revenues arising from real estate sales are recognized when or as the control of the asset is transferred to the customer. The control of the asset may transfer over time or at a point in time. For the sales of individual condominium units in a real estate development project, the Company has an enforceable right to payment for performance completed to date, revenue is recognized over time by measuring the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the asset. Under percentage completion method, revenue and profit from the sales of long term real estate development properties is recognized by the percentage of completion method on the sale of individual units when all the following criteria are met: a. Construction is beyond a preliminary stage. b. The buyer is committed to the extent of being unable to require a refund except for non-delivery of the unit or interest. c. Sufficient units have already been sold to assure that the entire property will not revert to rental property. d. Sales prices are collectible. e. Aggregate sales proceeds and costs can be reasonably estimated. If any of the above criteria is not met, proceeds shall be accounted for as deposits until the criteria are met. Under the percentage of completion method, revenues from individual real estate condominium units sold under development and related costs are recognized over the course of the construction period, based on the completion progress of a project. The progress towards complete satisfaction of the performance obligation is measured based on the Company’s efforts or inputs to the satisfaction of the performance obligation, by reference to the contract costs incurred up to the end of reporting period as a percentage of total estimated costs for each contract. In relation to any project, revenue is determined by calculating the ratio of incurred costs, including land use rights costs and construction costs, to total estimated costs and applying that ratio to the contracted sales amounts. Cost of sales is recognized by determining the ratio of contracted sales during the period to total estimated sales value, and applying that ratio to the incurred costs. Current period amounts are calculated based on the difference between the life-to-date project totals and the previously recognized amounts. Any changes in significant judgments and/or estimates used in determining construction and development revenue could significantly change the timing or amount of construction and development revenue recognized. Changes in total estimated project costs or losses, if any, are recognized in the period in which they are determined. Revenue from the sales of completed real estate condominium units is recognized at the time of the closing of an individual unit sale. This occurs when the customer obtains the physical possession, the legal title, or the significant risks and rewards of ownership of the assets and the Company has present right to payment and the collection of the consideration is probable. For municipal road construction projects, fees are generally recognized at the time of the projects are completed. Disaggregation of Revenues Disaggregated revenues was as follows: For the years ended September 30, 2019 2018 Revenue recognized for completed condominium real estate projects $ 13,400,491 $ 28,833,383 Revenue recognized for condominium real estate projects under development 26,564,065 36,653,913 Total $ 39,964,556 $ 65,487,296 Contract balances Timing of revenue recognition may differ from the timing of billing and cash receipts from customers. The Company records a contract asset when revenue is recognized prior to invoicing, or a contract liability when cash is received in advance of recognizing revenue. A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets include billed and billable receivables, which are the Company’s unconditional rights to consideration other than to the passage of time. Contract liabilities include cash collected in excess of revenues. Customer deposits are excluded from contract liabilities. The Company has elected to apply the optional practical expedient for costs to obtain a contract which allows the Company to immediately expense sales commissions (included under selling expenses) because the amortization period of the asset that the Company otherwise would have used is one year or less. Contract assets and liabilities are generally classified as current based on our contract operating cycle. The Company provides “mortgage loan guarantees” only with respect to buyers who make down-payments of 20%‑50% of the total purchase price of the property. The period of the mortgage loan guarantee begins on the date the bank approves the buyer’s mortgage and we receive the loan proceeds in our bank account and ends on the date the “Certificate of Ownership” evidencing that title to the property has been transferred to the buyer. The procedures to obtain the Certificate of Ownership take six to twelve months (the “Mortgage Loan Guarantee Period”). If, after investigation of the buyer’s income and other relevant factors, the bank decides not to grant the mortgage loan, our mortgage-loan based sales contract terminates and there will be no guarantee obligation. If, during the Mortgage Loan Guarantee Period, the buyer defaults on his or her monthly mortgage payment for three consecutive months, we are required to return the loan proceeds back to the bank, although we have the right to keep the customer’s deposit and resell the property to a third party. Once the Certificate of Property has been issued by the relevant government authority, our loan guarantee terminates. If the buyer then defaults on his or her mortgage loan, the bank has the right to take the property back and sell it and use the proceeds to pay off the loan. The Company is not liable for any shortfall that the bank may incur in this event. To date, no buyer has defaulted on his or her mortgage payments during the Mortgage Loan Guarantee Period and the Company has not returned any loan proceeds pursuant to its mortgage loan guarantees. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes, and disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates are used for, but not limited to, the assumptions and estimates used by management in recognizing development revenue under the percentage of completion method, the selection of the useful lives of property and equipment, provision necessary for contingent liabilities, revenue recognition, taxes and budgeted costs. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates. Changes of estimated gross profit margins related to revenue recognized under the percentage of completion method are made in the period in which circumstances requiring the revisions become known. For the year ended September 30, 2019, the Company did not change the estimated revenue and related gross profit margin from fiscal 2018. For the year end September 30, 2018, real estate development projects with gross profits recognized in 2018 had changes in their estimated revenue and related gross profit margins. The Company increased its prior estimates related to selling prices and total estimated sales values which led to a decrease in the recognized costs of sales under percentage completion revenue recognition approach. As a result of these changes in gross profit margins, net income for the year ended September 30, 2018 increased by $3,278,037 and basic and diluted earnings per share for the year ended September 30, 2018 increased by $0.07. |
Fair value of financial instruments | Fair value of financial instruments The Company follows the provisions of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. It clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows: Level 1‑Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. Level 2‑Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. Level 3‑Inputs are unobservable inputs which reflect the reporting entity’s own assumptions or what assumptions the market participants would use in pricing the asset or liability based on the best available information. The carrying amounts reported in the accompanying consolidated balance sheets for cash, restricted cash and all other current assets, security deposits for land use rights, loans and all current liabilities approximate their fair value based on the short-term maturity of these instruments. The fair value of the long term customer, construction and security deposits approximate their carrying amounts because the deposits are received in cash. It was impractical to estimate the fair value of the amount due from the local government and the long term other loans payable. |
Foreign currency translation | Foreign currency translation The Company’s financial information is presented in U.S. dollars. The functional currency of the Company’s operating subsidiaries is Renminbi (“RMB”), the currency of the PRC. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830‑30 “Translation of Financial Statements”. The financial information is first prepared in RMB and then is translated into U.S. dollars at year-end exchange rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in stockholders’ equity. 2019 2018 Year end RMB : USD exchange rate 7.1477 6.8680 Annual average RMB : USD exchange rate 6.8753 6.5368 The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation. |
Cash | Cash Cash includes cash on hand and demand deposits in accounts maintained with commercial banks within the PRC. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company maintains bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs. |
Restricted Cash | Restricted Cash The restricted cash is required by the banks as collateral for mortgage loans given to the home buyers before obtaining the certificates of ownership of the properties as collateral. In order to provide the banks with the certificates of ownership, the Company is required to complete certain procedures with the Chinese government, which normally takes six to twelve months. Because the banks provide the loan proceeds to the Company without obtaining certificates of ownership as loan collateral during this six to twelve months’ period, the mortgage banks require the Company to maintain, as restricted cash, 5% to 10% of the mortgage proceeds as security for the Company’s obligations under such guarantees. The restricted cash is released by the banks once they receive the certificates of ownership. These deposits are not covered by insurance. The Company has not experienced any losses in such accounts and management believes its restricted cash account is not exposed to any significant risks. |
Advances to vendors | Advances to vendors Advances to vendors consist of balances paid to contractors and vendors for services and materials that have not been provided or received and generally relate to the development and construction of residential and commercial units in the PRC. Advances to vendors are reviewed periodically to determine whether their carrying value has become impaired. Historically, the Company has not experienced any losses as a result of these advances. |
Security deposits for land use rights | Security deposits for land use rights Security deposits for land use rights consist of the deposit held by the PRC government for the purchase of land use rights and the deposit held by an unrelated party to transfer its land use rights to the Company. The deposits will be reclassified to real estate property under development upon the transfers of legal title. |
Real estate property development completed and under development | Real estate property development completed and under development Real estate property consists of finished residential unit sites, commercial offices and residential unit sites under development. The Company leases the land for the residential unit sites under land use right leases with various terms from the PRC government. The cost of land use rights is included in the development cost and allocated to each project. Real estate property development completed and real estate property under development are stated at the lower of cost or fair value. Expenditures for land development, including cost of land use rights, deed tax, pre-development costs, and engineering costs, exclusive of depreciation, are capitalized and allocated to development projects by the specific identification method. Costs are allocated to specific units within a project based on the ratio of the sales area of units to the estimated total sales area of the project (or phase of the project) multiplied by the total cost of the project (or phase of the project). Cost of amenities transferred to buyers is allocated to specific units as a component of total construction cost. The amenity cost includes landscaping, road paving, etc. Once the projects are completed, the amenities are under control of the property management companies. Real estate property development completed and real estate property under development are reclassified on the balance sheet into current and non-current portions based on the estimated date of construction completion and sales. The real estate property development completed classification is based on the estimated date that each property is expected to be sold within the Company’s normal operating cycle of the business and the Company’s sales plan. Real estate property development completed is classified as a current asset if the property is expected to be sold within the normal operating cycle of the business. Otherwise, it is classified as a non-current asset. The majority of real estate projects the Company has completed in the past were multi-layer or sub-high-rise real estate projects. The Company considers its normal operating cycle is 12 months. Real estate property development completed and under development are subject to valuation adjustments when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets. The Company reviewed all of its real estate projects for future losses and impairment by comparing the estimated future undiscounted cash flows for each project to the carrying value of such project. For the years ended September 30, 2019 and 2018, the Company did not recognize any impairment for real estate property under development or completed. |
Capitalization of Interest | Capitalization of Interest Interest incurred during and directly related to real estate development projects is capitalized to the related real estate property under development during the active development period, which generally commences when borrowings are used to acquire real estate assets and ends when the properties are substantially complete or the property becomes inactive. Interest is capitalized based on the interest rate applicable to specific borrowings or the weighted average of the rates applicable to other borrowings during the period. Interest capitalized to real estate property under development is recorded as a component of cost of real estate sales when related units are sold. All other interest is expensed as incurred. For the years ended September 30, 2019 and 2018, the total interest capitalized in the real estate property development was $7,158,391 and $6,248,513, respectively. |
Property, Plant and equipment, net | Property, Plant and equipment, net Property, plant and equipment are recorded at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after the fixed assets have been put into operation, such as repairs and maintenance and overhaul costs, is normally expensed in the year in which it is incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, less any estimated residual value. Estimated useful lives of the assets are as follows: Buildings years Machinery and office equipment - 10 years Vehicles years Any gain or loss on disposal or retirement of a fixed asset is recognized in the profit and loss account and is the difference between the net sales proceeds and the net carrying amount of the asset. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and the resulting profit or loss is reflected in income. Maintenance, repairs and minor renewals are charged directly to expense as incurred unless such expenditures extend the useful life or represent a betterment, in which case they are capitalized. |
Impairment of long-lived assets | Impairment of long-lived assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally determined by using the asset’s expected future discounted cash flows or market value. The Company estimates fair value of the assets based on certain assumptions such as budgets, internal projections, and other available information as considered necessary. There is no impairment of long-lived assets for the years ended September 30, 2019 and 2018. |
Customer deposits | Customer deposits Customer deposits consist of amounts received from customers relating to the sale of residential units in the PRC. In the PRC, customers will generally obtain permanent financing for the purchase of their residential unit prior to the completion of the project. The lending institution will provide the funding to the Company upon the completion of the financing rather than the completion of the project. The Company receives these funds and recognizes them as a liability until the revenue can be recognized. |
Property warranty | Property warranty The Company provides its customers with warranties which cover major defects of building structure and certain fittings and facilities of properties sold. The warranty period varies from two years to five years, depending on different property components the warranty covers. The Company continually estimates potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a property. Reserves are determined based on historical data and trends with respect to similar property types and geographical areas. The Company continually monitors the warranty reserve and makes adjustments to its pre-existing warranties, if any, in order to reflect changes in trends and historical data as information becomes available. The Company may seek further recourse against its contractors or any related third parties if it can be proved that the faults are caused by them. In addition, the Company also withholds up to 2% of the contract cost from sub-contractors for periods of two to five years. These amounts are included in construction deposits, and are only paid to the extent that there has been no warranty claim against the Company relating to the work performed or materials supplied by the subcontractors. For the years ended September 30, 2019 and 2018, the Company had not recognized any warranty costs in excess of the amount retained from subcontractors and therefore, no warranty reserve is considered necessary at the balance sheet dates. |
Stock-based compensation | Stock-based compensation Share-based payment transactions are measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period, or vesting period. Forfeitures to be estimated at the time of grant and revised, if necessary, in the subsequent period if actual forfeitures differ from initial estimates. Forfeiture rate is estimated based on historical and future expectation of employee turnover rate and are adjusted to reflect future change in circumstances and facts, if any. Share-based compensation expense is recorded net of estimated forfeitures such that expense was recorded only for those stock options and common stock awards that are expected to vest. |
Construction Deposits | Construction Deposits Construction deposits are the warranty deposits the real estate contractors provide to the Company upon signing the construction contracts. The Company can use such deposits to reimburse customers in the event of customer claims due to construction defects. The remaining balance of the deposits are returned to the contractors when the terms of the after-sale property warranty expires, which normally occurs within two to five years after the date of the deposit. |
Income taxes | Income taxes Deferred tax assets and liabilities are for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. ASC 740‑10‑25 prescribes a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. There are no material uncertain tax positions as of September 30, 2019 and 2018. The Company is a corporation organized under the laws of the State of Florida. However, all of the Company’s operations are conducted solely by its subsidiaries in the PRC. No income is earned in the United States and the management does not repatriate any earnings outside the PRC. As a result, the Company did not generate any U.S. taxable income for the years ended September 30, 2019 and 2018. As of September 30, 2019, the Chinese entities’ income tax returns filed in China for the years ended December 31, 2018, 2017, 2016, 2015 and 2014 are subject to examination by the Chinese taxing authorities. As of September 30, 2019, the tax years ended September 30, 2010 through September 30, 2019 for the Company’s PRC entities remain open for statutory examination by PRC tax authorities. The parent Company China HGS Real Estate Inc.’s both U.S. federal tax returns and Florida state tax returns are delinquent since 2009. Its tax years ended September 30, 2014 through September 30, 2019 remain open for statutory examination by U.S. federal and state tax authorities. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a U.S. corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. Due to the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded accrued amounts in our consolidated financial statements As of September 30, 2019 and 2018, including an approximately $2.3 million provision on the deemed repatriation of undistributed foreign earnings and an additional $0.8 million provision for delinquent U.S. and State tax fillings. The Company is in the process of engaging a tax professional to file its delinquent tax returns. |
Land appreciation tax ("LAT") | Land appreciation tax (“LAT”) In accordance with the relevant taxation laws in the PRC, the Company is subject to LAT based on progressive rates ranging from 30% to 60% on the appreciation of land value, which is calculated as the proceeds of sales of properties less deductible expenditures including borrowing costs and all property development expenditures. LAT is exempted if the appreciation values do not exceed certain thresholds specified in the relevant tax laws. The whole project must be completed before the LAT obligation can be assessed. Accordingly, the Company should record the liability and the total related expense at the completion of a project unless the tax authorities impose an assessment at an earlier date. The methods to implement this tax law vary among different geographic areas. Hanzhong, where the project Mingzhu Garden, Nan Dajie and Central Plaza are located, implements this tax rule by requiring real estate companies prepay the LAT based upon customer deposits received. The tax rate in Hanzhong is 1%. Yang County, where the project Yangzhou Pearl Garden and Yangzhou Palace are located, requires a tax rate of 0.5%. |
Comprehensive income (loss) | Comprehensive income (loss) In accordance with ASC 220‑10‑55, comprehensive income (loss) is defined as all changes in equity except those resulting from investments by owners and distributions to owners. The Company’s only components of comprehensive loss for the years ended September 30, 2019 and 2018 were net income and foreign currency translation adjustments. |
Advertising expenses | Advertising expenses Advertising costs are expensed as incurred. For the years ended September 30, 2019 and 2018, the Company recorded advertising expenses of $57,448 and $164,355, respectively. |
Basic and diluted earnings per share | Basic and diluted earnings per share The Company computes earnings per share (“EPS”) in accordance with the ASC 260, “Earnings per share”, which requires companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. |
Concentration risk | Concentration risk The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. All of the Company’s cash is maintained with state-owned banks within the People’s Republic of China of which no deposits are covered by insurance. For the years ended September 30, 2019 and 2018, the Company has not experienced any delinquent mortgage loans and has not experienced any losses related to this guarantee. The Company believes that such reserves are sufficient. The Company is dependent on third-party sub-contractors, manufacturers, and distributors for all construction services and supply of construction materials. For the year ended September 30, 2019, none supplier accounted for more than 10% of the total project expenditure. For the year ended September 30, 2018, only one supplier accounted for more than 10% of the total project expenditure (approximately 10.8%). |
Recent Accounting Pronouncements | Recent Accounting Pronouncements On October 31, 2018 the FASB issued new guidance (ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities) that expands the application of a specific private company accounting alternative related to VIEs and changes the guidance for determining whether a decision-making fee is a variable interest. The amendments in the ASU provide that indirect interests held through related parties under common control will be considered on a proportional basis when determining whether fees paid to decision makers and service providers are variable interests. Such indirect interests were previously treated the same as direct interests. The consideration of indirect interests on a proportional basis is consistent with how indirect interests held through related parties under common control are treated when determining if a reporting entity within a related party group is the primary beneficiary of a VIE. The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Retrospective adoption is required. Early adoption is permitted, including adoption in an interim period. The Company does not expect this new guidance to have a material impact on our financial position and results of operations. In February 2016, the FASB issued guidance which requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, including operating leases, with a term in excess of 12 months. The guidance also expands the quantitative and qualitative disclosure requirements. The guidance is effective in fiscal year 2020, with early adoption permitted, and must be applied using a modified retrospective approach. In July 2018, the FASB issued updates to the lease standard making transition requirements less burdensome. The update provides an option to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in the company’s financial statements. The new guidance requires the lessee to record operating leases on the balance sheet with a right-of-use asset and corresponding liability for future payment obligations. FASB further issued ASU 2018‑11 “Target Improvement” and ASU 2018‑20 “Narrow-scope Improvements for Lessors” The company will adopt the standard effective October 1, 2019. We are currently evaluating the impact of adopting this new guidance on our Consolidated Financial Statements. Excepts as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of income and comprehensive loss, stockholders’ equity and cash flow. |
ORGANIZATION AND BASIS OF PRE_2
ORGANIZATION AND BASIS OF PRESENTATION (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
ORGANIZATION AND BASIS OF PRESENTATION | |
Schedule of Variable Interest Entities | Balance as of September 30, September 30, 2019 2018 Current assets $ 119,703,792 $ 139,877,361 Non-current assets 227,832,570 228,136,549 Total assets 347,536,362 368,013,910 Current liabilities 145,194,165 126,047,028 Non-current liabilities 39,743,543 77,107,143 Total liabilities $ 184,937,708 $ 203,154,171 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of Disaggregated revenues | For the years ended September 30, 2019 2018 Revenue recognized for completed condominium real estate projects $ 13,400,491 $ 28,833,383 Revenue recognized for condominium real estate projects under development 26,564,065 36,653,913 Total $ 39,964,556 $ 65,487,296 |
Schedule of Currency exchange rate | 2019 2018 Year end RMB : USD exchange rate 7.1477 6.8680 Annual average RMB : USD exchange rate 6.8753 6.5368 |
Schedule Of Estimated Life Of Asset | Buildings years Machinery and office equipment - 10 years Vehicles years |
REAL ESTATE PROPERTY COMPLETE_2
REAL ESTATE PROPERTY COMPLETED AND UNDER DEVELOPMENT (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
REAL ESTATE PROPERTY COMPLETED AND UNDER DEVELOPMENT | |
Components of Real Estate Property Completed and under Development | Balance as of September 30, September 30, 2019 2018 Development completed: Hanzhong City Mingzhu Garden Phase I $ 530,314 $ 655,268 Hanzhong City Mingzhu Garden Phase II 24,264,216 31,096,125 Hanzhong City Nan Dajie (Mingzhu Xinju) 1,157,554 1,204,695 Hanzhong City Oriental Pearl Garden 19,070,129 21,397,560 Yang County Yangzhou Pearl Garden Phase I 1,514,241 1,673,351 Yang County Yangzhou Pearl Garden Phase II 3,054,412 4,189,829 Yang County Yangzhou Palace (a) 52,342,164 — Real estate property development completed 101,933,030 60,216,828 Less: Real estate property completed – short-term 100,817,944 58,999,178 Real estate property completed – long-term $ 1,115,086 $ 1,217,650 Under development: Yang County Yangzhou Palace (a) $ — $ 60,128,554 Hanzhong City Shijin Project 6,776,688 7,052,669 Hanzhong City Liangzhou Road and related projects (b) 146,958,903 135,011,975 Hanzhong City Hanfeng Beiyuan East (c) 706,194 734,953 Hanzhong City Beidajie 56,654,212 67,793,750 Yang County East 2 nd Ring Road (d) 4,649,228 4,838,568 Real estate property under development 215,745,225 275,560,469 Less: Short-term portion — 60,128,554 Real estate property under development –long-term $ 215,745,225 $ 215,431,915 (a) The Company recognized $21,353,638 of development cost in the cost of real estate sales under the percentage of completion method for the year ended September 30, 2019 (2018 - $28,657,703). (b) In September 2013, the Company entered into an agreement (“Liangzhou Agreement”) with the Hanzhong local government on the Liangzhou Road reformation and expansion project (Liangzhou Road Project”). Pursuant to the agreement, the Company is contracted to reform and expand the Liangzhou Road, a commercial street in downtown Hanzhong City, with a total length of 2,080 meters and width of 30 meters and to resettle the existing residences in the Liangzhou road area. The government’s original road construction budget was approximately $33 million in accordance with the Liangzhou Agreement. The Company, in return, is being compensated by the local government to have an exclusive right on acquiring at least 394.5 Mu land use rights in a specified location of Hanzhong City. The Liangzhou Road Project’s road construction started at the end of 2013. In 2014, the original scope and budget on the Liangzhou road reformation and expansion project was extended, because the local government included more area and resettlement residences into the project, which resulted in additional investments from the Company. In return, the Company is authorized by the local government to develop and manage the commercial and residential properties surrounding the Liangzhou Road project. As of September 30, 2019, the main Liangzhou road construction is substantially completed, due to the complicated multiple level of government review process, the Company expected to the government’s acceptance to be completed before the end of fiscal 2020. The Company’s development cost incurred on Liangzhou Road Project is treated as the Company’s deposit on purchasing the related land use rights, as agreed by the local government. As of September 30, 2019, the actual costs incurred by the Company were $146,958,903 (September 30, 2018 - $135,011,975) and the incremental cost related to residence resettlement approved by the local government. The Company determined that the Company’s Investment in Liangzhou Road Project in exchange for interests in future land use rights is a barter transaction with commercial substance. (c) In September 2012, the Company was approved by the Hanzhong local government to construct four municipal roads with a total length of approximately 1,192 meters. The project was deferred and then restarted during the quarter ended March 31, 2014. As of September 30, 2019, the local government has not completed the budget for these projects therefore the delivery to these projects for government's acceptance and related settlement were extended to fiscal 2020. (d) The Company was engaged by the Yang County local government to construct the East 2nd Ring Road with a total length of 2.15 km. The local government is required to repay the Company’s project investment costs within 3 years with interest at the interest rate based on the commercial borrowing rate with the similar term published by China construction bank (September 30, 2019 and 2018 - 4.75%). The local government has approved a refund to the Company by reducing local surcharges or taxes otherwise required in the real estate development. The road construction was substantially completed as of September 30, 2019 and in process of government review and approval. |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
PROPERTY, PLANT AND EQUIPMENT, NET | |
Property, Plant and Equipment | As of September 30, 2019 and 2018, property, plant and equipment was as follows: As of September 30, 2019 2018 Buildings $ 764,867 $ 796,016 Automobiles 207,186 243,478 Total 972,053 1,039,494 Less: accumulated depreciation 358,045 321,128 Property, plant and equipment, net $ 614,008 $ 718,366 |
SECURITY DEPOSITS (Tables)
SECURITY DEPOSITS (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
SECURITY DEPOSITS | |
Schedule of Security Deposit | As of September 30, 2019 and 2018, security deposits were as follows: As of September 30, 2019 2018 Security deposit for land use right (1) $ 2,798,103 $ 2,912,056 Security deposits for other loan (2) 5,174,014 5,384,726 Security deposits $ 7,972,117 $ 8,296,782 (1) In May 2011, the Company entered into a development agreement with the Hanzhong local government. Pursuant to the agreement, the Company prepaid $2,798,103 and $2,912,056 to acquire certain land use rights through public bidding as of September 30, 2019 and 2018, respectively. The Company currently expects to make payment of the remaining development cost as the government’s work progresses. The Company classified the security deposits for land use rights as long term based on the Company’s development plan. (2) In connection with financing from Hanzhong Urban Construction Investment Development Co., Ltd (See note 7), the Company provided a security deposit for the loan received. As of September 30, 2019, the security deposit balances were $5,174,014 (September 30, 2018 - $5,384,726) for other loan with Hanzhong Urban Construction Investment Development Co., Ltd. |
CONSTRUCTION LOANS (Tables)
CONSTRUCTION LOANS (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
Schedule of Long-term Debt Instruments | September 30, 2019 September 30, 2018 Loan A (i) $ 90,186,614 $ 96,472,714 Loan B (ii) — 8,736,168 Loan C (iii) 16,610,822 17,287,299 106,797,436 122,496,181 Less: current maturities of other loans 77,332,569 55,610,803 Other loans – long-term portion $ 29,464,867 $ 66,885,378 (i) On June 26, 2015 and March 10, 2016, the Company signed phase I and Phase II agreements with Hanzhong Urban Construction Investment Development Co., Ltd, a state owned Company, to borrow up to approximately $15.8 million (RMB 775,000,000) for a long term loan at 4.75% interest per year to develop Liangzhou Road Project. As of September 30, 2019, the Company borrowed $90,186,614 under this credit line (September 30, 2018 - $96,472,714) with final due date in October 2021. The loan is guaranteed by Hanzhong City Hantai District Municipal Government and pledged by the Company’s Yang County Yangzhou Palace project with carrying value of $52,342,164 as of September 30, 2019 (September 30, 2018‑ $60,128,554). In addition, the Company was required to provide a security deposit for the loan received (see note 6). As of September 30, 2019, the security deposits paid were $5,174,014 (2018 -$5,384,726) for loans received. For the years ended September 30, 2019 and 2018, the interest paid was $6,617,720 and $5,672,717, respectively, which was capitalized in to the development cost of Liangzhou road project. Due to local government’s delay in reallocation of residence in Liangzhou Road and related area, the Hanzhong Urban Construction Investment Development Co., Ltd has not released all the funds available in this loan to the Company and the Company’s withdraw will be based on the project’s development progress. The total required loan repayment schedule assuming total loan proceeds are borrowed are listed below: |
Hanzhong Urban Construction Investment Development Co., Ltd [Member] | |
Schedule of Maturities of Long-term Debt | For the years ending: Repayment in USD Repayment in RMB September 30, 2020 77,332,569 552,750,000 September 30, 2021 12,240,301 87,490,000 September 30, 2022 613,744 4,386,860 Total 90,186,614 644,626,860 |
CUSTOMER DEPOSITS (Tables)
CUSTOMER DEPOSITS (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
CUSTOMER DEPOSITS | |
Schedule of Customer deposits from pre-sale of residential units | Customer deposits consist of amounts received from customers for the pre-sale of residential units in the PRC. The details of customer deposits are as follows: As of September 30, 2019 2018 Customer deposits by real estate projects Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) $ 7,029,356 $ 8,246,058 Oriental Pearl Garden 4,182,454 4,648,784 Liangzhou road related projects 1,043,692 1,914,677 Yang County Pearl Garden 1,163,407 997,312 Yangzhou Palace 3,764,355 6,341,918 Total 17,183,264 22,148,749 Less: Customer deposits - short-term 16,139,572 20,234,072 Customer deposits - long-term $ 1,043,692 $ 1,914,677 |
SHAREHOLDERS LOANS (Tables)
SHAREHOLDERS LOANS (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
SHAREHOLDERS LOANS | |
Schedule of Shareholder's Loans | As of September 30, 2019 2018 Shareholder loan – USD loan (a) $ 1,810,000 $ 1,810,000 Shareholder loan – RMB loan (b) 319,114 332,110 Total $ 2,129,114 $ 2,142,110 a. The Company has a one year loan agreement (“USD Loan Agreement”) with our Chairman, CEO and major shareholder”), pursuant to which the Company borrowed $1,810,000 to make a capital injection into Shaanxi HGS, the Company’s subsidiary. The interest rate for the loan is 4% per annum and the loan matured on July 19, 2014. The Company entered into the amendments to the USD Loan Agreement to extend the term until July 31, 2020 and the loan is due on demand. The Company recorded interest of $72,400 for each of the years ended September 30, 2019 and 2018. The Company has not yet paid this interest. As of September 30, 2019 and 2018, the interest payable amounted to $597,300 and $524,900, respectively, and included in the accrued expense in the accompanying consolidated balance sheets. b. On December 31, 2013, Shaanxi Guangsha Investment and Development Group Co., Ltd. (the “Guangsha”), the Company’s PRC operating subsidiary, entered into a loan agreement with the Chairman (the “Shareholder RMB Loan Agreement”), pursuant to which Guangsha is able to borrow funds from the Chairman in order to support the Company’s Liangzhou Road construction project development and the Company’s working capital needs. The Loan Agreement has a one-year term, and has been renewed upon maturity to September 25, 2020, with at an interest rate of 4.35% per year. For years ended September 30, 2019 and 2018, the interest was $20,403 and $28,586, respectively, which is capitalized in the development cost of Liangzhou road project. As of September 30, 2019 and 2018, the interest payable amounted to $537,651 and $539,122, respectively, and included in the accrued expense in the accompanying consolidated balance sheets. |
STOCK OPTIONS (Tables)
STOCK OPTIONS (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
STOCK OPTIONS | |
Assumptions used in Calculating Fair Value of Options Granted | Options granted in August 2015 Risk-free interest rate 0.95 % Expected life of the options 3 year Expected volatility 143 % Expected dividend yield % Fair value $ 178,800 |
Stock Option Activities | Weighted Weighted Average Average Remaining Number of Exercise Life in Grant Date options Price Years Fair Value Outstanding, September 30, 2017 120,000 $ 1.89 1.89 $ 178,800 Granted — — — — Forfeited (12,000) — — — Exercised — — — — Outstanding, September 30, 2018 — $ — — $ — Granted — — — — Forfeited — — — — Exercised — — — — Outstanding, September 30, 2019 — $ — — — Exercisable, September 30, 2019 — $ — — — |
TAXES (Tables)
TAXES (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
TAXES | |
Schedule of reconciliation of statutory rates to the Company's effective tax rate | For the years ended September 30, 2019 2018 Chinese statutory tax rate 25.0 % 25.0 % Valuation allowance change 0.2 % 0.2 % Transition toll tax and others — % 23.9 % Net impact of Exemption rendered by local tax authorities and other adjustments 10.1 % 0.1 % Effective tax rate 35.3 % 49.2 % |
Schedule of Income tax expenses | For the years ended September 30, 2019 2018 Current tax provision $ 719,437 $ 3,073,659 Deferred tax provision 1,302,606 1,999,052 Income tax expense $ 2,022,043 $ 5,072,711 |
Schedule of components of deferred taxes | As of September 30, 2019 2018 Deferred tax liability: Revenue recognized based on percentage of completion* $ — $ 2,068,257 * For the year ended September 30, 2019, the Company reclassified the previous recognized deferred tax liabilities to income tax payable due to the completion of the related real estate project. The Company expects to fully settle the income tax payable when related real estate projects are sold. |
Schedule of Taxes payable | September 30, September 30, 2019 2018 CIT $ 11,720,848 $ 8,331,026 Business tax 7,819,884 9,871,794 Other taxes and fees 2,349,086 2,250,861 Total taxes payables 21,889,818 20,453,681 Less: current portion 13,882,875 15,492,902 Tax payable – long term * $ 8,006,943 $ 4,960,779 * The Company reclassified the previous recognized deferred tax liabilities to income tax payable in fiscal 2019 due to the completion of the related real estate project. The Company expects to fully settle the income tax payable when related real estate projects are sold. |
ORGANIZATION AND BASIS OF PRE_3
ORGANIZATION AND BASIS OF PRESENTATION - Schedule of Variable Interest Entities (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 |
Total Assets | $ 347,893,213 | $ 368,396,678 |
Total liabilities | 189,193,063 | 206,718,842 |
Variable Interest Entity, Primary Beneficiary [Member] | ||
Current assets | 119,703,792 | 139,877,361 |
Non-current assets | 227,832,570 | 228,136,549 |
Total Assets | 347,536,362 | 368,013,910 |
Current liabilities | 145,194,165 | 126,047,028 |
Non-current liabilities | 39,743,543 | 77,107,143 |
Total liabilities | $ 184,937,708 | $ 203,154,171 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue recognition (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Revenue recognized for completed condominium real estate projects | $ 13,400,491 | $ 28,833,383 |
Revenue recognized for condominium real estate projects under development | 26,564,065 | 36,653,913 |
Total | $ 39,964,556 | $ 65,487,296 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Currency Exchange Rate (Details) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Year end RMB : USD exchange rate | 7.1477 | 6.8680 |
Annual average RMB : USD exchange rate | 6.8753 | 6.5368 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Estimated useful lives of the assets (Details) | 12 Months Ended |
Sep. 30, 2019 | |
Buildings | |
Property, Plant and Equipment, Useful Life | 39 years |
Machinery and Equipment | Maximum | |
Property, Plant and Equipment, Useful Life | 10 years |
Machinery and Equipment | Minimum | |
Property, Plant and Equipment, Useful Life | 5 years |
Vehicles | |
Property, Plant and Equipment, Useful Life | 8 years |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Dec. 22, 2017 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 | |
Significant Accounting Policies [Line Items] | ||||
Working Capital | $ 29,700,000 | |||
Total cash and restricted cash | 4,202,117 | $ 6,775,577 | $ 4,716,604 | |
Real Estate Property Plant And Equipment Interest Capitalization | $ 7,158,391 | 6,248,513 | ||
Percentage Of Contract Cost Withholds | 2.00% | |||
Increase In Net income | $ 3,278,037 | |||
Increase In Basic Earnings Per Share | $ 0.07 | |||
increase In Diluted Earnings Per Share | $ 0.07 | |||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 25.00% | 25.00% | ||
Effective Income Tax Rate Reconciliation, Repatriation of Foreign Earnings, Amount | $ 2,300,000 | $ 2,300,000 | ||
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount | 800,000 | 800,000 | ||
Advertising Expense | $ 57,448 | $ 164,355 | ||
Project Expenditure [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Concentration Risk, Percentage | 10.00% | |||
Supplier One [Member] | Project Expenditure [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Concentration Risk, Percentage | 10.00% | |||
Hanzhong | ||||
Significant Accounting Policies [Line Items] | ||||
Land appreciation tax rate | 1.00% | |||
Yang County | ||||
Significant Accounting Policies [Line Items] | ||||
Land appreciation tax rate | 0.50% | |||
Minimum | ||||
Significant Accounting Policies [Line Items] | ||||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | |||
Percentage of down payments to total purchase price of property to receive mortgage loan guarantees | 20.00% | |||
Percentage Of Mortgage Proceeds As Security | 5.00% | |||
Land appreciation tax rate | 30.00% | |||
Maximum | ||||
Significant Accounting Policies [Line Items] | ||||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 35.00% | |||
Percentage of down payments to total purchase price of property to receive mortgage loan guarantees | 50.00% | |||
Percentage Of Mortgage Proceeds As Security | 10.00% | |||
Land appreciation tax rate | 60.00% |
REAL ESTATE PROPERTY COMPLETE_3
REAL ESTATE PROPERTY COMPLETED AND UNDER DEVELOPMENT - Components Of Real Estate (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 | |
Real Estate Properties [Line Items] | |||
Real estate property development completed | $ 101,933,030 | $ 60,216,828 | |
Less: Real estate property completed - short-term | 100,817,944 | 58,999,178 | |
Real estate property completed - long-term | 1,115,086 | 1,217,650 | |
Real estate property under development | 215,745,225 | 275,560,469 | |
Less: Short-term portion | 60,128,554 | ||
Real estate property under development -long-term | 215,745,225 | 215,431,915 | |
Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 530,314 | 655,268 | |
Hanzhong City Mingzhu Garden Phase II | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 24,264,216 | 31,096,125 | |
Hanzhong City Nan Dajie (Mingzhu Xinju) | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 1,157,554 | 1,204,695 | |
Hanzhong City Oriental Pearl Garden | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | [1] | 19,070,129 | 21,397,560 |
Yang County Yangzhou Pearl Garden Phase I | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 1,514,241 | 1,673,351 | |
Yang County Yangzhou Pearl Garden Phase II | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 3,054,412 | 4,189,829 | |
Yang County Yangzhou Palace | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 52,342,164 | ||
Real estate property under development | 60,128,554 | ||
Hanzhong City Shijin Project | |||
Real Estate Properties [Line Items] | |||
Real estate property under development | 6,776,688 | 7,052,669 | |
Hanzhong City Liangzhou Road and related projects | |||
Real Estate Properties [Line Items] | |||
Real estate property under development | [2] | 146,958,903 | 135,011,975 |
Hanzhong City Hanfeng Beiyuan East | |||
Real Estate Properties [Line Items] | |||
Real estate property under development | [3] | 706,194 | 734,953 |
Hanzhong City Beidajie | |||
Real Estate Properties [Line Items] | |||
Real estate property under development | 56,654,212 | 67,793,750 | |
Yang County East 2nd Ring Road | |||
Real Estate Properties [Line Items] | |||
Real estate property under development | [4] | $ 4,649,228 | $ 4,838,568 |
[1] | The Company recognized $21,353,638 of development cost in the cost of real estate sales under the percentage of completion method for the year ended September 30, 2019 (2018 - $28,657,703). | ||
[2] | In September 2013, the Company entered into an agreement (“Liangzhou Agreement”) with the Hanzhong local government on the Liangzhou Road reformation and expansion project (Liangzhou Road Project”). Pursuant to the agreement, the Company is contracted to reform and expand the Liangzhou Road, a commercial street in downtown Hanzhong City, with a total length of 2,080 meters and width of 30 meters and to resettle the existing residences in the Liangzhou road area. The government’s original road construction budget was approximately $33 million in accordance with the Liangzhou Agreement. The Company, in return, is being compensated by the local government to have an exclusive right on acquiring at least 394.5 Mu land use rights in a specified location of Hanzhong City. The Liangzhou Road Project’s road construction started at the end of 2013. In 2014, the original scope and budget on the Liangzhou road reformation and expansion project was extended, because the local government included more area and resettlement residences into the project, which resulted in additional investments from the Company. In return, the Company is authorized by the local government to develop and manage the commercial and residential properties surrounding the Liangzhou Road project. As of September 30, 2019, the main Liangzhou road construction is substantially completed, due to the complicated multiple level of government review process, the Company expected to the government’s acceptance to be completed before the end of fiscal 2020.The Company’s development cost incurred on Liangzhou Road Project is treated as the Company’s deposit on purchasing the related land use rights, as agreed by the local government. As of September 30, 2019, the actual costs incurred by the Company were $146,958,903 (September 30, 2018 - $135,011,975) and the incremental cost related to residence resettlement approved by the local government. The Company determined that the Company’s Investment in Liangzhou Road Project in exchange for interests in future land use rights is a barter transaction with commercial substance. | ||
[3] | In September 2012, the Company was approved by the Hanzhong local government to construct four municipal roads with a total length of approximately 1,192 meters. The project was deferred and then restarted during the quarter ended March 31, 2014. As of September 30, 2019, the local government has not completed the budget for these projects therefore the delivery to these projects for government's acceptance and related settlement were extended to fiscal 2020. | ||
[4] | The Company was engaged by the Yang County local government to construct the East 2nd Ring Road with a total length of 2.15 km. The local government is required to repay the Company’s project investment costs within 3 years with interest at the interest rate based on the commercial borrowing rate with the similar term published by China construction bank (September 30, 2019 and 2018 - 4.75%). The local government has approved a refund to the Company by reducing local surcharges or taxes otherwise required in the real estate development. The road construction was substantially completed as of September 30, 2019 and in process of government review and approval. |
REAL ESTATE PROPERTY COMPLETE_4
REAL ESTATE PROPERTY COMPLETED AND UNDER DEVELOPMENT - Additional Information (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2013 |
Real Estate Properties [Line Items] | ||||
Land use right included in real estate property under development | $ 6,773,158 | $ 14,749,085 | $ 14,749,085 | |
Yang County Yangzhou Palace | ||||
Real Estate Properties [Line Items] | ||||
Actual Construction And Development Costs Incurred | 21,353,638 | $ 28,657,703 | ||
Hanzhong City Liangzhou Road and related projects | ||||
Real Estate Properties [Line Items] | ||||
Budgeted Price For Municipal Roads | $ 33,000,000 | |||
Actual Construction And Development Costs Incurred | $ 146,958,903 | $ 135,011,975 | ||
Yang County East 2nd Ring Road | ||||
Real Estate Properties [Line Items] | ||||
Debt Instrument, Interest Rate, Stated Percentage | 4.75% | 4.75% | 4.75% |
PROPERTY, PLANT AND EQUIPMENT_3
PROPERTY, PLANT AND EQUIPMENT, NET - Components of Property, Plant and Equipment (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 |
Total | $ 972,053 | $ 1,039,494 |
Less: accumulated depreciation | 358,045 | 321,128 |
Property, plant and equipment, net | 614,008 | 718,366 |
Buildings | ||
Total | 764,867 | 796,016 |
Automobiles | ||
Total | $ 207,186 | $ 243,478 |
PROPERTY, PLANT AND EQUIPMENT_4
PROPERTY, PLANT AND EQUIPMENT, NET - Additional Details (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
PROPERTY, PLANT AND EQUIPMENT, NET | ||
Depreciation | $ 79,270 | $ 85,788 |
RECEIVABLE FROM LOCAL GOVERNM_2
RECEIVABLE FROM LOCAL GOVERNMENT (Details) | 12 Months Ended | |
Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | |
Number Of Municipal Road Construction | 2 | |
Hanzhong Municipal Road Construction [Member] | ||
Government Contract Receivable | $ 2,725,854 | $ 2,836,865 |
SECURITY DEPOSITS (Details)
SECURITY DEPOSITS (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 | |
Security Deposit | $ 7,972,117 | $ 8,296,782 | |
Land Use Rights [Member] | |||
Security Deposit | [1] | 2,798,103 | 2,912,056 |
Other Loan [Member] | |||
Security Deposit | [2] | $ 5,174,014 | $ 5,384,726 |
[1] | In May 2011, the Company entered into a development agreement with the Hanzhong local government. Pursuant to the agreement, the Company prepaid $2,798,103 and $2,912,056 to acquire certain land use rights through public bidding as of September 30, 2019 and 2018, respectively. The Company currently expects to make payment of the remaining development cost as the government’s work progresses. The Company classified the security deposits for land use rights as long term based on the Company’s development plan. | ||
[2] | In connection with financing from Hanzhong Urban Construction Investment Development Co., Ltd (See note 7), the Company provided a security deposit for the loan received. As of September 30, 2019, the security deposit balances were $5,174,014 (September 30, 2018 - $5,384,726) for other loan with Hanzhong Urban Construction Investment Development Co., Ltd. |
SECURITY DEPOSITS - Additional
SECURITY DEPOSITS - Additional Details (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 | |
Security Deposit | $ 7,972,117 | $ 8,296,782 | |
Other Loan [Member] | |||
Security Deposit | [1] | 5,174,014 | 5,384,726 |
Land Use Rights [Member] | |||
Security Deposit | [2] | 2,798,103 | 2,912,056 |
Prepaid Royalties | $ 2,798,103 | $ 2,912,056 | |
[1] | In connection with financing from Hanzhong Urban Construction Investment Development Co., Ltd (See note 7), the Company provided a security deposit for the loan received. As of September 30, 2019, the security deposit balances were $5,174,014 (September 30, 2018 - $5,384,726) for other loan with Hanzhong Urban Construction Investment Development Co., Ltd. | ||
[2] | In May 2011, the Company entered into a development agreement with the Hanzhong local government. Pursuant to the agreement, the Company prepaid $2,798,103 and $2,912,056 to acquire certain land use rights through public bidding as of September 30, 2019 and 2018, respectively. The Company currently expects to make payment of the remaining development cost as the government’s work progresses. The Company classified the security deposits for land use rights as long term based on the Company’s development plan. |
CONSTRUCTION LOANS - Other Loan
CONSTRUCTION LOANS - Other Loans-Long Term Portion (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 |
Construction loans | $ 106,797,436 | $ 122,496,181 |
Less: current maturities of other loans | 77,332,569 | 55,610,803 |
Other loans - long-term portion | 29,464,867 | 66,885,378 |
Loan A | ||
Construction loans | 90,186,614 | 96,472,714 |
Loan B | ||
Construction loans | 8,736,168 | |
Loan C | ||
Construction loans | $ 16,610,822 | $ 17,287,299 |
CONSTRUCTION LOANS - Schedule O
CONSTRUCTION LOANS - Schedule Of Repayment Loan (Details) - 12 months ended Sep. 30, 2019 | CNY (¥) | USD ($) |
Debt Instrument Scheduled Repayment Amount | ¥ 644,626,860 | $ 90,186,614 |
September 30, 2020 | ||
Debt Instrument Scheduled Repayment Amount | 552,750,000 | 77,332,569 |
September 30, 2021 | ||
Debt Instrument Scheduled Repayment Amount | 87,490,000 | 12,240,301 |
September 30, 2022 | ||
Debt Instrument Scheduled Repayment Amount | ¥ 4,386,860 | $ 613,744 |
CONSTRUCTION LOANS - Additional
CONSTRUCTION LOANS - Additional Information (Details) | 12 Months Ended | ||||||||||
Sep. 30, 2019CNY (¥) | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2017CNY (¥) | Sep. 30, 2017USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Jan. 08, 2016CNY (¥) | Jan. 08, 2016USD ($) | |
Debt Instrument [Line Items] | |||||||||||
Debt Instrument, Face Amount | $ 146,958,903 | ||||||||||
Security Deposit | $ 8,296,782 | $ 7,972,117 | |||||||||
Hantai District Urban Construction Investment Development Co., Ltd [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Interest Costs Capitalized | $ 157,506 | 221,490 | |||||||||
Debt Instrument, Periodic Payment, Principal | 3,300,000 | ||||||||||
Urban Development Center Co., Ltd [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Repayment of construction loans | ¥ 270,829 | 37,890 | |||||||||
Agreement With Hanzhong Urban Construction Investment Development Co Ltd [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 4.75% | 4.75% | |||||||||
Long-term Line of Credit | 96,472,714 | $ 90,186,614 | |||||||||
Line of Credit Facility, Maximum Borrowing Capacity | ¥ 775,000,000 | 15,800,000 | |||||||||
Long-term Debt, Gross | 60,128,554 | 52,342,164 | |||||||||
Debt Instrument, Periodic Payment, Interest | 6,617,720 | 5,672,717 | |||||||||
Security Deposit | 5,384,726 | $ 5,174,014 | |||||||||
Agreement With Hanzhong Municipal Housing Provident Fund Management Center [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 1.20% | 1.20% | |||||||||
Line of Credit Facility, Maximum Borrowing Capacity | ¥ 119,000,000 | $ 16,600,000 | ¥ 80,000,000 | $ 11,100,000 | |||||||
Debt Instrument, Periodic Payment, Principal | 61,097 | 425,779 | |||||||||
Construction Loan [Member] | Urban Development Center Co., Ltd [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt Instrument, Face Amount | ¥ 175,000,000 | ¥ 175,000,000 | $ 24,500,000 | ||||||||
Debt Instrument, Interest Rate, Stated Percentage | 1.20% | 1.20% | |||||||||
Interest Costs Capitalized | $ 4,900,000 | ||||||||||
Debt Instrument, Periodic Payment, Interest | $ 231,626 | $ 325,270 |
CUSTOMER DEPOSITS - Customer De
CUSTOMER DEPOSITS - Customer Deposits From Pre-Sale Of Residential Units (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 |
Customer deposits by real estate projects | ||
Total | $ 17,183,264 | $ 22,148,749 |
Less: Customer deposits - short-term | 16,139,572 | 20,234,072 |
Customer deposits - long-term | 1,043,692 | 1,914,677 |
Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) | ||
Customer deposits by real estate projects | ||
Total | 7,029,356 | 8,246,058 |
Oriental Pearl Garden | ||
Customer deposits by real estate projects | ||
Total | 4,182,454 | 4,648,784 |
Liangzhou road and related projects | ||
Customer deposits by real estate projects | ||
Total | 1,043,692 | 1,914,677 |
Yang County Yangzhou Pearl Garden Phase I | ||
Customer deposits by real estate projects | ||
Total | 1,163,407 | 997,312 |
Yang County Palace | ||
Customer deposits by real estate projects | ||
Total | $ 3,764,355 | $ 6,341,918 |
CUSTOMER DEPOSITS - Additional
CUSTOMER DEPOSITS - Additional Information (Details) - USD ($) $ in Millions | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Deposit Liabilities [Line Items] | ||
Mortgage loan guarantee amount | $ 3.9 | $ 3.5 |
Minimum | Customer deposits [Member] | ||
Deposit Liabilities [Line Items] | ||
Percentage of customer deposit of unit price for cash purchase | 10.00% | |
Percentage of customer deposit to unit price for mortgage properties | 30.00% | |
Maximum | Customer deposits [Member] | ||
Deposit Liabilities [Line Items] | ||
Percentage of customer deposit of unit price for cash purchase | 20.00% | |
Percentage of customer deposit to unit price for mortgage properties | 50.00% |
SHAREHOLDERS LOANS - Schedule o
SHAREHOLDERS LOANS - Schedule of Other Short-term Loans (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 |
Shareholder Loans [Line Items] | ||
Shareholder loan | $ 2,129,114 | $ 2,142,110 |
Shareholder USD Loan Agreement | ||
Shareholder Loans [Line Items] | ||
Shareholder loan | 1,810,000 | 1,810,000 |
Shareholder RMB Loan Agreement | ||
Shareholder Loans [Line Items] | ||
Shareholder loan | $ 319,114 | $ 332,110 |
SHAREHOLDERS LOANS - Additional
SHAREHOLDERS LOANS - Additional Information (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Shareholder Loans [Line Items] | ||
Interest (expense) | $ 131,270 | $ 499,855 |
Shareholder loan | 2,129,114 | 2,142,110 |
Shareholder USD Loan Agreement | ||
Shareholder Loans [Line Items] | ||
Interest (expense) | $ 72,400 | 72,400 |
Debt instrument, stated interest rate | 4.00% | |
Shareholder loan | $ 1,810,000 | 1,810,000 |
Shareholder USD Loan Agreement | Accrued expense | ||
Shareholder Loans [Line Items] | ||
Interest payable | 597,300 | 524,900 |
Shareholder RMB Loan Agreement | ||
Shareholder Loans [Line Items] | ||
Interest (expense) | $ 20,403 | 28,586 |
Debt instrument, stated interest rate | 4.35% | |
Shareholder loan | $ 319,114 | 332,110 |
Shareholder RMB Loan Agreement | Accrued expense | ||
Shareholder Loans [Line Items] | ||
Interest payable | $ 537,651 | $ 539,122 |
STOCK OPTIONS - Assumptions Use
STOCK OPTIONS - Assumptions Used In Calculating Fair Value Of Options Granted (Details) | 1 Months Ended |
Aug. 31, 2015USD ($) | |
STOCK OPTIONS | |
Risk-free interest rate | 0.95% |
Expected life of the options | 3 years |
Expected volatility | 143.00% |
Expected dividend yield | 0.00% |
Fair value | $ 178,800 |
STOCK OPTIONS - Stock Option Ac
STOCK OPTIONS - Stock Option Activities (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 | |
Number of Options | |||
Outstanding | 0 | 120,000 | |
Granted | 0 | 0 | |
Forfeited | (12,000) | ||
Exercised | 0 | 0 | |
Outstanding | 0 | 0 | 120,000 |
Exercisable, September 30, 2018 | 0 | ||
Weighted Average Exercise Price | |||
Outstanding | $ 0 | $ 1.89 | |
Granted | 0 | 0 | |
Forfeited | 0 | 0 | |
Exercised | 0 | 0 | |
Outstanding | 0 | $ 0 | $ 1.89 |
Exercisable, September 30, 2018 | $ 0 | ||
Weighted Average Remaining Life in Years | |||
Outstanding | 1 year 10 months 21 days | ||
Grant Date Fair Value | |||
Outstanding | $ 0 | $ 178,800 | |
Granted | 0 | 0 | |
Forfeited | 0 | 0 | |
Exercised | 0 | 0 | |
Outstanding | 0 | $ 0 | $ 178,800 |
Exercisable, September 30, 2018 | $ 0 |
STOCK OPTIONS - Additional Info
STOCK OPTIONS - Additional Information (Details) - USD ($) | 1 Months Ended | 12 Months Ended | |
Aug. 22, 2015 | Sep. 30, 2019 | Sep. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Options exercise price | $ 0 | $ 0 | |
Share-based Compensation | $ 0 | $ 54,633 | |
Stock option awards expected to recognized | $ 0 | $ 0 | |
Stock Option Plan 2015 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock options granted | 120,000 | ||
Options exercise price | $ 1.89 |
TAXES - Reconciliation Of Statu
TAXES - Reconciliation Of Statutory Rates To Effective Tax Rate (Details) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
TAXES | ||
Chinese statutory tax rate | 25.00% | 25.00% |
Valuation allowance change | 0.20% | 0.20% |
Transition toll tax and others | 0.00% | 23.90% |
Net impact of Exemption rendered by local tax authorities and other adjustments | 10.10% | 0.10% |
Effective tax rate | 35.30% | 49.20% |
TAXES - Components of Income Ta
TAXES - Components of Income Tax Expenses (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
TAXES | ||
Current tax provision | $ 719,437 | $ 3,073,659 |
Deferred tax provision | 1,302,606 | 1,999,052 |
Income tax expense | $ 2,022,043 | $ 5,072,711 |
TAXES - Components Of Deferred
TAXES - Components Of Deferred Taxes (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 |
Deferred tax liability: | ||
Revenue recognized based on percentage of completion | $ 0 | $ 2,068,257 |
TAXES - Taxes Payable (Details)
TAXES - Taxes Payable (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 |
TAXES | ||
CIT | $ 11,720,848 | $ 8,331,026 |
Business tax | 7,819,884 | 9,871,794 |
Other taxes and fees | 2,349,086 | 2,250,861 |
Total taxes payable | 21,889,818 | 20,453,681 |
Less: current portion | 13,882,875 | 15,492,902 |
Tax payable - long term | $ 8,006,943 | $ 4,960,779 |
TAXES - Additional Information
TAXES - Additional Information (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Dec. 22, 2017 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Taxes [Line Items] | ||||
Business sales tax, rate | 5.00% | |||
Business sales tax | $ 7,819,884 | $ 9,871,794 | ||
Income tax at statutory tax rate | 25.00% | 25.00% | ||
Local income tax rate | 25.00% | |||
Income tax payable | $ 11,720,848 | $ 8,331,026 | ||
Land appreciation tax payable | $ 0 | $ 1,292,527 | ||
Effective Value Added Tax Rate Percentage | 5.00% | 5.00% | ||
Effective Income Tax Rate Reconciliation, Repatriation of Foreign Earnings, Amount | $ 2,300,000 | $ 2,300,000 | ||
Additional Provision for Tax | $ 800,000 | |||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 25.00% | 25.00% | ||
Minimum | ||||
Income Taxes [Line Items] | ||||
Income tax at statutory tax rate | 21.00% | |||
Land appreciation tax rate | 30.00% | |||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | |||
Maximum | ||||
Income Taxes [Line Items] | ||||
Income tax at statutory tax rate | 35.00% | |||
Land appreciation tax rate | 60.00% | |||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 35.00% | |||
Hanzhong | ||||
Income Taxes [Line Items] | ||||
Local income tax rate | 2.50% | |||
Land appreciation tax rate | 1.00% | |||
Yangxian | ||||
Income Taxes [Line Items] | ||||
Local income tax rate | 1.25% | |||
Yang County | ||||
Income Taxes [Line Items] | ||||
Land appreciation tax rate | 0.50% | |||
Income tax payable | $ 11,720,848 | $ 8,331,026 | ||
PRC | ||||
Income Taxes [Line Items] | ||||
Income tax payable | $ 8,691,848 | $ 5,872,026 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Common Stock, Shares, Issued | 45,050,000 | 45,050,000 |
Common Stock, Shares, Outstanding | 45,050,000 | 45,050,000 |
Statutory Surplus Reserve Description | Appropriations to the statutory surplus reserve is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities' registered capital | |
Percentage Of Net Profits Statutory Surplus Reserve | 10.00% | |
Statutory Accounting Practices, Statutory Capital and Surplus, Balance | $ 10,360,251 | $ 9,925,794 |
Minimum | ||
Percentage Of Statutory Surplus Reserve Before Conversion | 25.00% | |
Percentage Of Net Profits Statutory Surplus Reserve | 10.00% |
CONTINGENCIES AND COMMITMENTS (
CONTINGENCIES AND COMMITMENTS (Details) - USD ($) $ in Millions | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Commitments And Contingencies [Line Items] | ||
Outstanding guarantees of customers' mortgage loans | $ 78 | $ 70 |
Security deposit provided for guarantee | $ 3.9 | $ 3.5 |
Minimum | ||
Commitments And Contingencies [Line Items] | ||
Percentage Of Mortgage Proceeds As Security | 5.00% | |
Maximum | ||
Commitments And Contingencies [Line Items] | ||
Percentage Of Mortgage Proceeds As Security | 10.00% |
SCHEDULE I - Parent Company Bal
SCHEDULE I - Parent Company Balance Sheets (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 |
ASSETS | |||
Total Assets | $ 347,893,213 | $ 368,396,678 | |
Current liabilities: | |||
Accrued expenses | 3,026,023 | 3,006,150 | |
Tax payable | 13,882,875 | 15,492,902 | |
Shareholder loans | 2,129,114 | 2,142,110 | |
Total current liabilities | 149,449,520 | 129,611,698 | |
Stockholders' equity | |||
Common stock, $0.001 par value, 100,000,000 shares authorized, 45,050,000 shares issued and outstanding | 45,050 | 45,050 | |
Additional paid-in capital | 129,907,805 | 129,907,805 | |
Statutory surplus | 10,360,251 | 9,925,794 | |
Retained earnings | 34,070,767 | 30,803,052 | |
Accumulated other comprehensive loss | (15,683,723) | (9,003,865) | |
Total stockholders' equity | 158,700,150 | 161,677,836 | $ 161,889,366 |
Total Liabilities and Stockholders' Equity | 347,893,213 | 368,396,678 | |
Reportable Legal Entities [Member] | Parent Company [Member] | |||
ASSETS | |||
Investment in subsidiary | 164,136,450 | 166,471,736 | |
Total Assets | 164,136,450 | 166,471,736 | |
Current liabilities: | |||
Accrued expenses | 597,300 | 524,900 | |
Tax payable | 3,029,000 | 2,459,000 | |
Shareholder loans | 1,810,000 | 1,810,000 | |
Total current liabilities | 5,436,300 | 4,793,900 | |
Stockholders' equity | |||
Common stock, $0.001 par value, 100,000,000 shares authorized, 45,050,000 shares issued and outstanding | 45,050 | 45,050 | |
Additional paid-in capital | 129,907,805 | 129,907,805 | |
Statutory surplus | 10,360,251 | 9,925,794 | |
Retained earnings | 34,070,767 | 30,803,052 | |
Accumulated other comprehensive loss | (15,683,723) | (9,003,865) | |
Total stockholders' equity | 158,700,150 | 161,677,836 | |
Total Liabilities and Stockholders' Equity | $ 164,136,450 | $ 166,471,736 |
SCHEDULE I - Parent Company B_2
SCHEDULE I - Parent Company Balance Sheets Parenthetical (Details) - $ / shares | Sep. 30, 2019 | Sep. 30, 2018 |
Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 100,000,000 | 100,000,000 |
Common Stock, Shares, Issued | 45,050,000 | 45,050,000 |
Common Stock, Shares, Outstanding | 45,050,000 | 45,050,000 |
Reportable Legal Entities [Member] | Parent Company [Member] | ||
Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 100,000,000 | 100,000,000 |
Common Stock, Shares, Issued | 45,050,000 | 45,050,000 |
Common Stock, Shares, Outstanding | 45,050,000 | 45,050,000 |
SCHEDULE I - Parent Company Sta
SCHEDULE I - Parent Company Statements Of Income And Comprehensive Loss (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Condensed Income Statements, Captions [Line Items] | ||
General and administrative expenses | $ 2,661,578 | $ 2,530,269 |
Income before income taxes | 5,724,215 | 10,315,628 |
Provision for income taxes | 2,022,043 | 5,072,711 |
Net income | 3,702,172 | 5,242,917 |
Other comprehensive loss | ||
Foreign currency translation adjustment | (6,679,858) | (5,509,080) |
Comprehensive loss | (2,977,686) | (266,163) |
Reportable Legal Entities [Member] | Parent Company [Member] | ||
Condensed Income Statements, Captions [Line Items] | ||
Equity in profit of subsidiary | 4,344,572 | 7,828,950 |
General and administrative expenses | 0 | 54,633 |
Interest expense | 72,400 | 72,400 |
Income before income taxes | 4,272,172 | 7,701,917 |
Provision for income taxes | 570,000 | 2,459,000 |
Net income | 3,702,172 | 5,242,917 |
Other comprehensive loss | ||
Foreign currency translation adjustment | (6,679,858) | (5,509,080) |
Comprehensive loss | $ (2,977,686) | $ (266,163) |
SCHEDULE I - Parent Company S_2
SCHEDULE I - Parent Company Statements Of Cash Flows (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities | ||
Net income | $ 3,702,172 | $ 5,242,917 |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Stock based compensation | 0 | 54,633 |
Changes in assets and liabilities: | ||
Tax payable | (1,166,158) | (1,413,508) |
Accrued expenses | 118,734 | (74,789) |
Net cash used in operating activities | 8,937,581 | 3,382,233 |
Cash, beginning of year | 3,267,020 | |
Cash, end of year | 263,139 | 3,267,020 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 7,199,086 | 6,643,169 |
Income taxes paid | 347,675 | 772,337 |
Reportable Legal Entities [Member] | Parent Company [Member] | ||
Cash flows from operating activities | ||
Net income | 3,702,172 | 5,242,917 |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Stock based compensation | 0 | 54,633 |
Equity in profit of subsidiary | (4,344,572) | (7,828,950) |
Changes in assets and liabilities: | ||
Tax payable | 570,000 | 2,459,000 |
Accrued expenses | 72,400 | 72,400 |
Net cash used in operating activities | 0 | 0 |
Net increase (decrease) in cash | 0 | 0 |
Cash, beginning of year | 0 | 0 |
Cash, end of year | 0 | 0 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 0 | 0 |
Income taxes paid | $ 0 | $ 0 |