Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Dec. 31, 2019 | Feb. 03, 2020 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Dec. 31, 2019 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | CHINA HGS REAL ESTATE INC. | |
Entity Central Index Key | 0001158420 | |
Current Fiscal Year End Date | --09-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Trading Symbol | HGSH | |
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 ($) | Dec. 31, 2019 | Sep. 30, 2019 |
Current assets: | ||
Cash | $ 660,414 | $ 263,139 |
Restricted Cash | 4,025,327 | 3,938,978 |
Contract assets | 12,489,790 | 12,668,925 |
Real estate property development completed | 71,968,879 | 100,817,944 |
Other current assets | 2,796,320 | 2,031,937 |
Total current assets | 91,940,730 | 119,720,923 |
Property, plant and equipment, net | 611,414 | 614,008 |
Real estate property development completed, net of current portion | 31,196,057 | 1,115,086 |
Security deposits | 6,569,714 | 7,972,117 |
Real estate property under development, net of current portion | 222,479,582 | 215,745,225 |
Deferred tax asset | 57,154 | 0 |
Due from local government for real estate property development completed | 2,798,642 | 2,725,854 |
Total Assets | 355,653,293 | 347,893,213 |
Current liabilities: | ||
Construction loans | 89,820,880 | 77,332,569 |
Accounts payables | 28,489,542 | 27,368,510 |
Other payables | 5,428,747 | 5,289,176 |
Construction deposits | 1,862,246 | 1,814,232 |
Contract liabilities | 1,926,363 | 1,907,828 |
Customer deposits | 18,229,686 | 16,139,572 |
Shareholder loans | 2,137,635 | 2,129,114 |
Accrued expenses | 3,080,313 | 3,585,644 |
Taxes payable | 13,630,957 | 13,882,875 |
Total current liabilities | 164,606,369 | 149,449,520 |
Tax payable - long term | 8,220,751 | 8,006,943 |
Customer deposits, net of current portion | 1,057,198 | 1,043,692 |
Construction loans, less current portion | 17,684,511 | 29,464,867 |
Construction deposits, net of current portion | 1,260,833 | 1,228,041 |
Total liabilities | 192,829,662 | 189,193,063 |
Commitments and Contingencies | ||
Stockholders' equity | ||
Common stock, $0.001 par value, 100,000,000 shares authorized, 45,050,000 shares issued and outstanding December 31, 2019 and September 30, 2019 | 45,050 | 45,050 |
Additional paid-in capital | 129,907,805 | 129,907,805 |
Statutory surplus | 10,360,251 | 10,360,251 |
Retained earnings | 33,813,386 | 34,070,767 |
Accumulated other comprehensive loss | (11,302,861) | (15,683,723) |
Total stockholders' equity | 162,823,631 | 158,700,150 |
Total Liabilities and Stockholders' Equity | $ 355,653,293 | $ 347,893,213 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2019 | Sep. 30, 2019 |
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 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||
Real estate sales | $ 2,304,244 | $ 7,737,196 |
Less: Sales tax | 39,233 | 142,111 |
Cost of real estate sales | 1,705,612 | 5,923,184 |
Gross profit | 559,399 | 1,671,901 |
Operating expenses | ||
Selling and distribution expenses | 200,168 | 169,974 |
General and administrative expenses | 588,839 | 470,932 |
Total operating expenses | 789,007 | 640,906 |
Operating income | (229,608) | 1,030,995 |
Interest expense, net | (17,253) | (105,231) |
Other income (expense), net | 0 | (273,153) |
Income before income taxes | (246,861) | 652,611 |
Provision for income taxes | 10,520 | 168,401 |
Net income | (257,381) | 484,210 |
Other Comprehensive income (loss) | ||
Foreign currency translation adjustment | 4,380,862 | (178,758) |
Comprehensive income | $ 4,123,481 | $ 305,452 |
Basic and diluted income per common share | ||
Basic and diluted | $ (0.01) | $ 0.01 |
Weighted average common shares outstanding | ||
Basic and diluted | 45,050,000 | 45,050,000 |
CONDENSED CONSOLIDATED STATEM_2
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, 2018 | $ 45,050 | $ 129,907,805 | $ 9,925,794 | $ 30,803,052 | $ (9,003,865) | $ 161,677,836 |
Beginning balance (in Shares) at Sep. 30, 2018 | 45,050,000 | |||||
Net income for the period | $ 0 | 0 | 0 | 484,210 | 0 | 484,210 |
Foreign currency translation adjustment | 0 | 0 | 0 | 0 | (178,758) | (178,758) |
Ending balance at Dec. 31, 2018 | $ 45,050 | 129,907,805 | 9,925,794 | 31,287,262 | (9,182,623) | 161,983,288 |
Ending balance (in Shares) at Dec. 31, 2018 | 45,050,000 | |||||
Beginning balance at Sep. 30, 2019 | $ 45,050 | 129,907,805 | 10,360,251 | 34,070,767 | (15,683,723) | 158,700,150 |
Beginning balance (in Shares) at Sep. 30, 2019 | 45,050,000 | |||||
Net income for the period | $ 0 | 0 | 0 | (257,381) | 0 | (257,381) |
Foreign currency translation adjustment | 0 | 0 | 0 | 0 | 4,380,862 | 4,380,862 |
Ending balance at Dec. 31, 2019 | $ 45,050 | $ 129,907,805 | $ 10,360,251 | $ 33,813,386 | $ (11,302,861) | $ 162,823,631 |
Ending balance (in Shares) at Dec. 31, 2019 | 45,050,000 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cash flows from operating activities | ||
Net (loss) income | $ (257,381) | $ 484,210 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Deferred tax provision (benefit) | (56,480) | 168,401 |
Depreciation | 18,767 | 19,869 |
Changes in operating assets and liabilities: | ||
Contract assets | 511,335 | 1,626,468 |
Real estate property development completed | 1,472,443 | 571,816 |
Real estate property under development | (961,873) | 2,423,593 |
Other current assets | (701,760) | (159,357) |
Security deposit | 1,596,250 | 0 |
Accounts payables | 385,617 | (89,978) |
Other payables | (1,646) | 136,739 |
Contract liabilities | (32,028) | 362,900 |
Customer deposits | 1,625,398 | (1,842,581) |
Construction deposits | (426) | 0 |
Accrued expenses | (578,021) | (79,484) |
Taxes payables | (534,574) | (552,602) |
Net cash provided by operating activities | 2,485,621 | 3,069,994 |
Cash flow from financing activities | ||
Net proceeds (repayments) of shareholder loans | 0 | 485,552 |
Repayments of construction loans | (2,118,584) | (5,261,559) |
Net cash used in financing activities | (2,118,584) | (4,776,007) |
Effect of changes of foreign exchange rate on cash | 116,587 | (283,390) |
Net increase (decrease) in cash | 483,624 | (1,989,403) |
Cash and restricted cash , beginning of period | 4,202,117 | 6,775,577 |
Cash and restricted cash, end of period | 4,685,741 | 4,786,174 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 1,722,840 | 1,786,958 |
Income taxes paid | 26,001 | 102,591 |
Representing | ||
Cash | 660,414 | 1,020,954 |
Restricted | 4,025,327 | 3,765,220 |
Total cash and restricted cash | $ 4,685,741 | $ 4,786,174 |
ORGANIZATION AND BASIS OF PRESE
ORGANIZATION AND BASIS OF PRESENTATION | 3 Months Ended |
Dec. 31, 2019 | |
ORGANIZATION AND BASIS OF PRESENTATION | |
ORGANIZATION AND BASIS OF PRESENTATION | NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION China HGS Real Estate, Inc. (“China HGS” or the “Company” or “we”, “us”, “our”), through its subsidiaries and variable interest entity (“VIE”), engages in real estate development, and the construction and sales of residential apartments, parking space and commercial properties in Tier 3 and Tier 4 cities and counties in China. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended December 31, 2019 and 2018 are not necessarily indicative of the results that may be expected for the full year. The information included in this Form 10‑Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in the Company’s Annual Report on Form 10‑K for the fiscal year ended September 30, 2019 filed with the SEC on January 14, 2020. Liquidity Recently, the Chinese government has implemented measures to control overheating residential and commercial property prices including but not limited to restriction on home purchase, increase the down-payment requirement against speculative buying, development of low-cost rental housing property to help low-income groups while reducing the demand in the commercial housing market, increase the real estate property tax to discourage speculation, and control of the land supply and slowdown the construction land auction process, etc. We are affected by recent Chinese government actions and as a result our revenue decreased by approximately $5.4 million during three months ended December 31, 2019 as compared to the same period of 2018 due to decreased sales volume of both residential and commercial properties developed by us, as a result, we reported a net loss of approximately $0.3 million for the three months ended December 31, 2019. In addition, as of December 31, 2019, we had an approximately $72.7 million working capital deficit. The deficit increased by $43.0 million as compared to a deficit of $29.7 million as of September 30, 2019, which was affected by large construction loans payable balance of approximately $89.8 million with maturity less than one year and large accounts payable balance of approximately $28.5 million to be paid to subcontractors within one year. In assessing its liquidity, management monitors and analyzes the Company’s cash on-hand, its ability to generate sufficient revenue sources in the future, and its operating and capital expenditure commitments. As of December 31, 2019, our total cash and restricted cash balance increased to approximately $4.7 million as compared to approximately $4.2 million as of September 30, 2019. With respect to capital funding requirements, the Company budgeted our capital spending based on ongoing assessments of needs to maintain adequate cash. As of December 31, 2019, we had approximately $103.2 million completed residential apartments and commercial units available for sale to potential buyers when needed (including approximately $72 million current portion and approximately $31.2 million non-current portion of real estate property development completed). For the current portion of $72 million completed residential apartments and commercial units, we estimate we will be able to substantially sell them within one year to generate cash to be used in our operations and funding our other real estate projects under development. Although we reported approximately $28.5 million accounts payable as of December 31, 2019, due to the long term relationship with our construction suppliers and subcontractors, we were able to effectively manage cash spending on construction and negotiate with them to adjust the payment schedule based on our cash on hand. In addition, most of our existing real estate development projects related to old town renovation which are supported by local government. As of December 31, 2019, we reported approximately $89.8 million short-term construction loans and approximately $17.7 million long-term construction loans borrowed from financial institutions controlled by local government and such loans can only be used on old town renovation related project development. We expect that we will be able to renew all of the existing construction loans upon their maturity and borrow additional new loans from local financial institutions when necessary, based on our past experience and the Company’s good credit history. Also, the Company’s cash flows from pre-sales and current sales should provide financial support for our current developments and operations. As of December 31, 2019, we had approximately $18.2 million customer deposits representing cash advance from buyers for pre-sales of our residential units and we believe such cash advance can be used to fund our ongoing construction projects whenever necessary. As of December 31, 2019, we had five large ongoing construction projects (see Note 3, real estate property under development) which are currently under preliminary development stage due to delayed inspection and acceptance of the development plans by local government. We expect we will be able to obtain government’s approval of the development plans on these projects by before the end of fiscal year 2020, and start the pre-sale of the real estate property to generate cash when certain property development milestones have been achieved. For the three months ended December 31, 2019 and 2018, the Company had positive cash flow from operating activities. In addition, our principal shareholder, Mr. Xiaojun Zhu has been providing and has committed to continue to provide his personal funds to support the Company’s operation whenever necessary. Currently, we are working to improve our liquidity and capital sources primarily through financial support from our principal shareholder and debt or equity financing. 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. No assurance can be given that additional financing, if required, would be available on favorable terms or at all. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Dec. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The unaudited condensed consolidated financial statements include the financial statements 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. 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. 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 condensed 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. 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 the 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 three months ended December 31, 2019 2018 Revenue recognized for completed condominium real estate projects $ 2,304,244 $ 749,833 Revenue recognized for condominium real estate projects under development — 6,987,363 Total $ 2,304,244 $ 7,737,196 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. 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 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. For three months ended December 31, September 30, 2019 2018 2019 Period end RMB : USD exchange rate 6.9618 6.8755 7.1477 Period average RMB : USD exchange rate 7.0448 6.9143 6.8753 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. 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 three months ended December 31, 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 three months ended December 31, 2019 and 2018, the total interest capitalized in the real estate property development was $1,748,417 and $1,757,265, respectively 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 during the three months ended December 31, 2019 and 2018. 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 December 31, 2019 and September 30, 2019 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 three months ended December 31, 2019 and 2018. As of December 31, 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 December 31, 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 remains 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 December 31, 2019 and September 30, 2019, including an approximately $2.3 million provision on the deemed repatriation of undistributed foreign earnings and an additional $0.9 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 In accordance with ASC 220-10-55, comprehensive income 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 income for the three months ended December 31, 2019 and 2018 were net income (loss) and foreign currency translation adjustments. Basic and diluted earnings (loss) per share The Company computes earnings (loss) 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 (loss) 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. There was no anti-dilutive share for the three months ended December 31, 2019 and 2018. 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. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts The Company is dependent on third-party sub-contractors, manufacturers, and distributors for all construction services and supply of construction materials. For the three months ended December 31, 2019, no single supplier accounted for more than 10% of the Company's total project expenditures. For the three months ended December 31, 2018, one supplier accounted for over 14% of the Company's total project expenditures. Recent Accounting Pronouncements In June 2016, the FASB amended guidance related to the impairment of financial instruments as part of ASU2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarified that receivables from operating leases are not within the scope of Topic 326 and instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842. The Company is evaluating the impact this ASU will have on its consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, which is fiscal 2022 for us, with early adoption permitted. The Company does not expect adoption of the new guidance to have a significant impact on our financial statements. |
REAL ESTATE PROPERTY DEVELOPMEN
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT | 3 Months Ended |
Dec. 31, 2019 | |
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT | |
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT | NOTE 3. REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT The following summarizes the components of real estate property development completed and under development as of December 31, 2019 and September 30, 2019: Balance as of December 31, 2019 September 30, 2019 Development completed: Hanzhong City Mingzhu Garden Phase I $ 544,475 $ 530,314 Hanzhong City Mingzhu Garden Phase II 24,780,052 24,264,216 Hanzhong City Nan Dajie (Mingzhu Xinju) 1,188,464 1,157,554 Hanzhong City Oriental Pearl Garden 19,791,404 19,070,129 Yang County Yangzhou Pearl Garden Phase I 1,554,675 1,514,241 Yang County Yangzhou Pearl Garden Phase II 3,128,391 3,054,412 Yang County Yangzhou Palace (a) 52,177,474 52,342,164 Real estate property development completed 103,164,936 101,933,030 Less: Real estate property completed – short-term 71,968,879 100,817,944 Real estate property completed – long-term $ 31,196,057 $ 1,115,086 Under development: Hanzhong City Shijin Project $ 6,957,645 $ 6,776,688 Hanzhong City Liangzhou Road and related projects (b) 152,103,764 146,958,903 Hanzhong City Hanfeng Beiyuan East (c) 732,233 706,194 Hanzhong City Beidajie (e) 57,912,565 56,654,212 Yang County East 2 nd Ring Road (d) 4,773,375 4,649,228 Real estate property under development $ 222,479,582 $ 215,745,225 (a) The Company recognized Nil of development cost in cost of real estate sales under the percentage of completion method for the three months ended December 31, 2019 (2018 - $5,254,253) (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 December 31, 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. Due to historical delays in government's approval and acceptance, the Company included such balance in real estate property under development as non-current assets. 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 December 31, 2019, the actual costs incurred by the Company were $152,103,764 (September 30, 2019 - $146,958,903) 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 December 31, 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. Due to historical delays in government's approval and acceptance, the Company included such balance in real estate property under development as non-current assets. (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 (December 31, 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 December 31, 2019 and in process of government review and approval. Due to historical delays in government's approval and acceptance, the Company included such balance in real estate property under development as non-current assets. |
CONSTRUCTION LOANS
CONSTRUCTION LOANS | 3 Months Ended |
Dec. 31, 2019 | |
CONSTRUCTION LOANS | |
CONSTRUCTION LOANS | NOTE 4. CONSTRUCTION LOANS December 31, September 30, 2019 2019 Loan A (i) $ 90,451,013 $ 90,186,614 Loan B (ii) 17,054,378 16,610,822 107,505,391 106,797,436 Less: current maturities of construction loans 89,820,880 77,332,569 Construction loans – long-term portion $ 17,684,511 $ 29,464,867 (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 $111 million (RMB 775,000,000) for a long term loan at 4.75% interest per year to develop Liangzhou Road Project. As of December 31, 2019, the Company borrowed $90,451,013 under this credit line (September 30, 2019‑ $90,186,614) 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 $52,177,474 as of December 31, 2019 (September 30, 2019‑ $52,342,164). In addition, the Company was required to provide a security deposit for the loan received. As of December 31, 2019, the security deposits paid were $3,696,894 (September 30, 2019 - $5,174,014) for loans received. For the three months ended December 31, 2019 and 2018, interest paid was $1,615,281 and $1,607,998, 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 periods ended: Repayment in USD Repayment in RMB December 31, 2020 89,820,880 625,315,000 December 31, 2021 630,133 4,386,860 Total 90,451,013 629,701,860 (ii) 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 $17 million (RMB 119,000,000) for the development of Hanzhong City Liangzhou Road project. As of December 31, 2019 the balance of loan was $17,054,378 (September 30, 2019 -$16,610,822). 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 $3.4 million from December 2027 through June 2031. The Company pledged the assets of Liangzhou Road related projects with carrying value of $152,103,764 as collateral for the loan. Total interest of $51,850 and $52,260 for the three months ended December 31, 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 $25 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 $5 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 three months ended December 31, 2019 and 2018 was $76,249 and $76,773, respectively, which was included in the construction capitalized costs. |
CUSTOMER DEPOSITS
CUSTOMER DEPOSITS | 3 Months Ended |
Dec. 31, 2019 | |
CUSTOMER DEPOSITS | |
CUSTOMER DEPOSITS | NOTE 5. CUSTOMER DEPOSITS Customer deposits consist of amounts received from customers for the pre-sale of residential units in the PRC. The detail of customer deposits is as follows: December 31, September 30, 2019 2019 Customer deposits by real estate projects Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) $ 7,211,802 $ 7,029,356 Oriental Pearl Garden 4,376,921 4,182,454 Liangzhou road and related projects 1,057,198 1,043,692 Yangzhou Pearl Garden 1,338,554 1,163,407 Yangzhou Palace 5,302,409 3,764,355 Total 19,286,884 17,183,264 Less: Customer deposits - short-term 18,229,686 16,139,572 Customer deposits - long-term $ 1,057,198 $ 1,043,692 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 December 31, 2019 and September 30, 2019, approximately $4.0 million and $3.9 million was guaranteed by the Company, respectively. |
SHAREHOLDER'S LOANS
SHAREHOLDER'S LOANS | 3 Months Ended |
Dec. 31, 2019 | |
SHAREHOLDER'S LOANS | |
SHAREHOLDER'S LOANS | NOTE 6. SHAREHOLDER’S LOANS As of December 31, September 30, 2019 2019 Shareholder loan – USD loan (a) $ 1,810,000 $ 1,810,000 Shareholder loan – RMB loan (b) 327,635 319,114 Total $ 2,137,635 $ 2,129,114 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. The Company recorded interest of $18,100 for each of the three months ended December 31, 2019 and 2018. The Company has not yet paid this interest and it is recorded in accrued expenses in the accompanying condensed consolidated balance sheets as of December 31, 2019 and September 30, 2019, respectively. 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 in order to support the Company’s Liang Shan 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 the three months ended December 31, 2019 and 2018, the interest was $5,037 and $20,288, respectively, which is capitalized in the development cost of Liangzhou road project. |
TAXES
TAXES | 3 Months Ended |
Dec. 31, 2019 | |
TAXES | |
TAXES | NOTE 7. 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 December 31, 2019, the Company had business sales tax payable of $7,470,015 (September 30, 2019 - $7,819,884), 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 for the year ended September 30, 2017. Starting from fiscal 2019, 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. As of December 31, 2019 and September 30, 2019, the Company’s income tax payable balances were $11,963,004 and $11,720,848, respectively. There was no interest and penalty accrued as of December 31, 2019 because the Company has not received any penalty and interest charge notice from local tax authorities. The Company expects to pay off the income tax payable balance when the related real estate projects are completely sold. As of December 31, 2019, the deferred tax asset balance amounted to $57,154 related to the loss incurred during the three months ended December 31, 2019. As of September 30, 2019, the deferred tax asset balance was Nil. The following table reconciles the statutory rates to the Company’s effective tax rate for the three months ended December 31, 2019 and 2018 For the three months ended December 31, 2019 2018 Chinese statutory tax rate 25 % $ 25 % Valuation allowance change and other adjustments* (29.3) % 0.7 % Effective tax rate (4.3) % $ 25.7 % * for three months ended December 31, 2019, it mainly included an adjustment related to tax interest and penalty accrual, representing 27.1% of the effective income tax rate. Income tax expense for the three months ended December 31, 2019 and 2018 is summarized as follows: For the three months ended December 31, 2019 2018 Current tax provision $ 67,000 $ — Deferred tax provision (56,480) 168,401 Income tax provision $ 10,520 $ 168,401 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. As of December 31, 2019 and September 30, 2019, the Company recognized a one-time transition toll tax liability 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 one-time 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. The Company provided an additional $0.9 million tax 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 December 31, 2019 and September 30,2019, the outstanding LAT payable balance was Nil with respect to completed real estate properties sold up to December 31, 2019. (D) Taxes payable consisted of the following: December 31, September 30, 2019 2019 CIT $ 11,963,004 $ 11,720,848 Business tax 7,470,015 7,819,884 Other taxes and fees 2,418,689 2,349,086 Total taxes payable 21,851,708 21,889,818 Less: current portion 13,630,957 13,882,875 Tax payable – long term $ 8,220,751 $ 8,006,943 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Dec. 31, 2019 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 8. COMMITMENTS AND CONTINGENCIES 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. The Company has not experienced any delinquent mortgage loans and has not experienced any losses related to this guarantee. As of December 31, 2019 and September 30, 2019, our outstanding guarantees in respect of our customers' mortgage loans amounted to approximately $80 million and $78 million, respectively. As of December 31, 2019 and September 30, 2019, the amount of security deposits provided for these guarantees was approximately $4.0 million and $3.9 million respectively and the Company believes that such reserves are sufficient. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Dec. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Principles of consolidation | Principles of consolidation The unaudited condensed consolidated financial statements include the financial statements 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. |
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. |
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 condensed 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. |
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 the 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 three months ended December 31, 2019 2018 Revenue recognized for completed condominium real estate projects $ 2,304,244 $ 749,833 Revenue recognized for condominium real estate projects under development — 6,987,363 Total $ 2,304,244 $ 7,737,196 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. |
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 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. For three months ended December 31, September 30, 2019 2018 2019 Period end RMB : USD exchange rate 6.9618 6.8755 7.1477 Period average RMB : USD exchange rate 7.0448 6.9143 6.8753 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. |
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 three months ended December 31, 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 three months ended December 31, 2019 and 2018, the total interest capitalized in the real estate property development was $1,748,417 and $1,757,265, respectively |
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 during the three months ended December 31, 2019 and 2018. |
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 December 31, 2019 and September 30, 2019 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 three months ended December 31, 2019 and 2018. As of December 31, 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 December 31, 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 remains 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 December 31, 2019 and September 30, 2019, including an approximately $2.3 million provision on the deemed repatriation of undistributed foreign earnings and an additional $0.9 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 | Comprehensive income In accordance with ASC 220-10-55, comprehensive income 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 income for the three months ended December 31, 2019 and 2018 were net income (loss) and foreign currency translation adjustments. |
Basic and diluted earnings (loss) per share | Basic and diluted earnings (loss) per share The Company computes earnings (loss) 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 (loss) 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. There was no anti-dilutive share for the three months ended December 31, 2019 and 2018. |
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. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts The Company is dependent on third-party sub-contractors, manufacturers, and distributors for all construction services and supply of construction materials. For the three months ended December 31, 2019, no single supplier accounted for more than 10% of the Company's total project expenditures. For the three months ended December 31, 2018, one supplier accounted for over 14% of the Company's total project expenditures. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2016, the FASB amended guidance related to the impairment of financial instruments as part of ASU2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarified that receivables from operating leases are not within the scope of Topic 326 and instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842. The Company is evaluating the impact this ASU will have on its consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, which is fiscal 2022 for us, with early adoption permitted. The Company does not expect adoption of the new guidance to have a significant impact on our financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of Disaggregated revenues | For the three months ended December 31, 2019 2018 Revenue recognized for completed condominium real estate projects $ 2,304,244 $ 749,833 Revenue recognized for condominium real estate projects under development — 6,987,363 Total $ 2,304,244 $ 7,737,196 |
Schedule of Currency exchange rate | For three months ended December 31, September 30, 2019 2018 2019 Period end RMB : USD exchange rate 6.9618 6.8755 7.1477 Period average RMB : USD exchange rate 7.0448 6.9143 6.8753 |
REAL ESTATE PROPERTY DEVELOPM_2
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT | |
Components of components of real estate property development completed and under development | Balance as of December 31, 2019 September 30, 2019 Development completed: Hanzhong City Mingzhu Garden Phase I $ 544,475 $ 530,314 Hanzhong City Mingzhu Garden Phase II 24,780,052 24,264,216 Hanzhong City Nan Dajie (Mingzhu Xinju) 1,188,464 1,157,554 Hanzhong City Oriental Pearl Garden 19,791,404 19,070,129 Yang County Yangzhou Pearl Garden Phase I 1,554,675 1,514,241 Yang County Yangzhou Pearl Garden Phase II 3,128,391 3,054,412 Yang County Yangzhou Palace (a) 52,177,474 52,342,164 Real estate property development completed 103,164,936 101,933,030 Less: Real estate property completed – short-term 71,968,879 100,817,944 Real estate property completed – long-term $ 31,196,057 $ 1,115,086 Under development: Hanzhong City Shijin Project $ 6,957,645 $ 6,776,688 Hanzhong City Liangzhou Road and related projects (b) 152,103,764 146,958,903 Hanzhong City Hanfeng Beiyuan East (c) 732,233 706,194 Hanzhong City Beidajie (e) 57,912,565 56,654,212 Yang County East 2 nd Ring Road (d) 4,773,375 4,649,228 Real estate property under development $ 222,479,582 $ 215,745,225 (a) The Company recognized Nil of development cost in cost of real estate sales under the percentage of completion method for the three months ended December 31, 2019 (2018 - $5,254,253) (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 December 31, 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. Due to historical delays in government's approval and acceptance, the Company included such balance in real estate property under development as non-current assets. 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 December 31, 2019, the actual costs incurred by the Company were $152,103,764 (September 30, 2019 - $146,958,903) 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 December 31, 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. Due to historical delays in government's approval and acceptance, the Company included such balance in real estate property under development as non-current assets. (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 (December 31, 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 December 31, 2019 and in process of government review and approval. Due to historical delays in government's approval and acceptance, the Company included such balance in real estate property under development as non-current assets. |
CONSTRUCTION LOANS (Tables)
CONSTRUCTION LOANS (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Schedule of Long-term Debt Instruments | December 31, September 30, 2019 2019 Loan A (i) $ 90,451,013 $ 90,186,614 Loan B (ii) 17,054,378 16,610,822 107,505,391 106,797,436 Less: current maturities of construction loans 89,820,880 77,332,569 Construction loans – long-term portion $ 17,684,511 $ 29,464,867 (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 $111 million (RMB 775,000,000) for a long term loan at 4.75% interest per year to develop Liangzhou Road Project. As of December 31, 2019, the Company borrowed $90,451,013 under this credit line (September 30, 2019‑ $90,186,614) 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 $52,177,474 as of December 31, 2019 (September 30, 2019‑ $52,342,164). In addition, the Company was required to provide a security deposit for the loan received. As of December 31, 2019, the security deposits paid were $3,696,894 (September 30, 2019 - $5,174,014) for loans received. For the three months ended December 31, 2019 and 2018, interest paid was $1,615,281 and $1,607,998, 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. (ii) 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 $17 million (RMB 119,000,000) for the development of Hanzhong City Liangzhou Road project. As of December 31, 2019 the balance of loan was $17,054,378 (September 30, 2019 -$16,610,822). 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 $3.4 from December 2027 through June 2031. The Company pledged the assets of Liangzhou Road related projects with carrying value of $152,103,764 as collateral for the loan. Total interest of $51,850 and $52,260 for the three months ended December 31, 2019 and 2018, respectively, were capitalized in to the development cost of Hanzhong City Liangzhou Road project. |
Hanzhong Urban Construction Investment Development Co., Ltd [Member] | |
Schedule of Maturities of Long-term Debt | For the periods ended: Repayment in USD Repayment in RMB December 31, 2020 89,820,880 625,315,000 December 31, 2021 630,133 4,386,860 Total 90,451,013 629,701,860 |
CUSTOMER DEPOSITS (Tables)
CUSTOMER DEPOSITS (Tables) | 3 Months Ended |
Dec. 31, 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 detail of customer deposits is as follows: December 31, September 30, 2019 2019 Customer deposits by real estate projects Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) $ 7,211,802 $ 7,029,356 Oriental Pearl Garden 4,376,921 4,182,454 Liangzhou road and related projects 1,057,198 1,043,692 Yangzhou Pearl Garden 1,338,554 1,163,407 Yangzhou Palace 5,302,409 3,764,355 Total 19,286,884 17,183,264 Less: Customer deposits - short-term 18,229,686 16,139,572 Customer deposits - long-term $ 1,057,198 $ 1,043,692 |
SHAREHOLDER'S LOANS (Tables)
SHAREHOLDER'S LOANS (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
SHAREHOLDER'S LOANS | |
Schedule of Shareholder's Loans | As of December 31, September 30, 2019 2019 Shareholder loan – USD loan (a) $ 1,810,000 $ 1,810,000 Shareholder loan – RMB loan (b) 327,635 319,114 Total $ 2,137,635 $ 2,129,114 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. The Company recorded interest of $18,100 for each of the three months ended December 31, 2019 and 2018. The Company has not yet paid this interest and it is recorded in accrued expenses in the accompanying condensed consolidated balance sheets as of December 31, 2019 and September 30, 2019, respectively. 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 in order to support the Company’s Liang Shan 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 the three months ended December 31, 2019 and 2018, the interest was $5,037 and $20,288, respectively, which is capitalized in the development cost of Liangzhou road project. |
TAXES (Tables)
TAXES (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
TAXES | |
Schedule of reconciliation of statutory rates to the Company's effective tax rate | For the three months ended December 31, 2019 2018 Chinese statutory tax rate 25 % $ 25 % Valuation allowance change and other adjustments* (29.3) % 0.7 % Effective tax rate (4.3) % $ 25.7 % * for three months ended December 31, 2019, it mainly included an adjustment related to tax interest and penalty accrual, representing 27.1% of the effective income tax rate. |
Schedule of Income tax expenses | Income tax expense for the three months ended December 31, 2019 and 2018 is summarized as follows: For the three months ended December 31, 2019 2018 Current tax provision $ 67,000 $ — Deferred tax provision (56,480) 168,401 Income tax provision $ 10,520 $ 168,401 |
Schedule of Taxes payable | (D) Taxes payable consisted of the following: December 31, September 30, 2019 2019 CIT $ 11,963,004 $ 11,720,848 Business tax 7,470,015 7,819,884 Other taxes and fees 2,418,689 2,349,086 Total taxes payable 21,851,708 21,889,818 Less: current portion 13,630,957 13,882,875 Tax payable – long term $ 8,220,751 $ 8,006,943 |
ORGANIZATION AND BASIS OF PRE_2
ORGANIZATION AND BASIS OF PRESENTATION - Schedule of Variable Interest Entities (Details) | 3 Months Ended | |||
Dec. 31, 2019USD ($)project | Dec. 31, 2018USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | |
Net (loss) income | $ (257,381) | $ 484,210 | ||
Revenues | (5,400,000) | |||
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | 4,685,741 | $ 4,786,174 | $ 4,202,117 | $ 6,775,577 |
Variable Interest Entity, Primary Beneficiary [Member] | ||||
Net (loss) income | 300,000 | |||
Working capital deficit | 72,700,000 | |||
Increased Working Capital Deficit | 43,000,000 | 29,700,000 | ||
Loan Payable maturity less than one year | 89,800,000 | |||
Loan Payable maturity within one year | 28,500,000 | |||
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | 4,700,000 | $ 4,200,000 | ||
Residential and Commercial Unit for Sale | 103,200,000 | |||
Residential And Commercial Unit For Sale Current | 72,000,000 | |||
Residential And Commercial Unit For Sale Non-Current | 31,200,000 | |||
Account Payable to Suppliers and Subcontractors | 28,500,000 | |||
Short Term Construction Loan | 89,800,000 | |||
Long Term Construction Loan | 17,700,000 | |||
Customer Deposits | $ 18,200,000 | |||
Number of Ongoing Project | project | 5 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue recognition (Details) - USD ($) | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Revenue recognized for completed condominium real estate projects | $ 2,304,244 | $ 749,833 |
Revenue recognized for condominium real estate projects under development | 6,987,363 | |
Total | $ 2,304,244 | $ 7,737,196 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Currency Exchange Rate (Details) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Period end RMB : USD exchange rate | 6.9618 | 6.8755 | 7.1477 |
Period average RMB : USD exchange rate | 7.0448 | 6.9143 | 6.8753 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) - USD ($) | Dec. 22, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2019 |
Significant Accounting Policies [Line Items] | ||||
Real Estate Property Plant And Equipment Interest Capitalization | $ 1,748,417 | $ 1,757,265 | ||
Impairment of long lived assets | 0 | $ 0 | ||
Effective Income Tax Rate Reconciliation Provision For Delinquent Tax Filings | $ 2,300,000 | $ 900,000 | ||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 25.00% | 25.00% | ||
Anti-dilutive shares | 0 | 0 | ||
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 | 14.00% | |||
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 DEVELOPM_3
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT - Components of Real Estate (Details) - USD ($) | Dec. 31, 2019 | Sep. 30, 2019 |
Real Estate Properties [Line Items] | ||
Real estate property development completed | $ 103,164,936 | $ 101,933,030 |
Less: Real estate property completed - short-term | 71,968,879 | 100,817,944 |
Real estate property completed - long-term | 31,196,057 | 1,115,086 |
Real estate property under development | 222,479,582 | 215,745,225 |
Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) | ||
Real Estate Properties [Line Items] | ||
Real estate property development completed | 544,475 | 530,314 |
Hanzhong City Mingzhu Garden Phase II | ||
Real Estate Properties [Line Items] | ||
Real estate property development completed | 24,780,052 | 24,264,216 |
Hanzhong City Nan Dajie (Mingzhu Xinju) | ||
Real Estate Properties [Line Items] | ||
Real estate property development completed | 1,188,464 | 1,157,554 |
Hanzhong City Oriental Pearl Garden | ||
Real Estate Properties [Line Items] | ||
Real estate property development completed | 19,791,404 | 19,070,129 |
Yangzhou Pearl Garden | ||
Real Estate Properties [Line Items] | ||
Real estate property development completed | 1,554,675 | 1,514,241 |
Yang County Yangzhou Pearl Garden Phase II | ||
Real Estate Properties [Line Items] | ||
Real estate property development completed | 3,128,391 | 3,054,412 |
Yang County Yangzhou Palace | ||
Real Estate Properties [Line Items] | ||
Real estate property development completed | 52,177,474 | 52,342,164 |
Hanzhong City Shijin Project | ||
Real Estate Properties [Line Items] | ||
Real estate property under development | 6,957,645 | 6,776,688 |
Hanzhong City Liangzhou Road and related projects | ||
Real Estate Properties [Line Items] | ||
Real estate property under development | 152,103,764 | 146,958,903 |
Hanzhong City Hanfeng Beiyuan East | ||
Real Estate Properties [Line Items] | ||
Real estate property under development | 732,233 | 706,194 |
Hanzhong City Beidajie | ||
Real Estate Properties [Line Items] | ||
Real estate property under development | 57,912,565 | 56,654,212 |
Yang County East 2nd Ring Road | ||
Real Estate Properties [Line Items] | ||
Real estate property under development | $ 4,773,375 | $ 4,649,228 |
REAL ESTATE PROPERTY DEVELOPM_4
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT - Additional Information (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2019 | |
Hanzhong City Oriental Pearl Garden | |||
Real Estate Properties [Line Items] | |||
Actual Construction And Development Costs Incurred | $ 0 | $ 5,254,253 | |
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 | $ 152,103,764 | $ 146,958,903 | |
Yang County East 2nd Ring Road | |||
Real Estate Properties [Line Items] | |||
Debt Instrument, Interest Rate, Stated Percentage | 4.75% | 4.75% |
CONSTRUCTION LOANS - Other Loan
CONSTRUCTION LOANS - Other Loans-Long Term Portion (Details) - USD ($) | Dec. 31, 2019 | Sep. 30, 2019 |
Construction loans | $ 107,505,391 | $ 106,797,436 |
Less: current maturities of other loans | 89,820,880 | 77,332,569 |
Construction loans - long-term portion | 17,684,511 | 29,464,867 |
Loan A | ||
Construction loans | 90,451,013 | 90,186,614 |
Loan B | ||
Construction loans | $ 17,054,378 | $ 16,610,822 |
CONSTRUCTION LOANS - Schedule O
CONSTRUCTION LOANS - Schedule Of Repayment Loan (Details) - 3 months ended Dec. 31, 2019 | CNY (¥) | USD ($) |
Debt Instrument Scheduled Repayment Amount | ¥ 629,701,860 | $ 90,451,013 |
December 31, 2020 | ||
Debt Instrument Scheduled Repayment Amount | 625,315,000 | 89,820,880 |
December 31, 2021 | ||
Debt Instrument Scheduled Repayment Amount | ¥ 4,386,860 | $ 630,133 |
CONSTRUCTION LOANS - Additional
CONSTRUCTION LOANS - Additional Information (Details) | 3 Months Ended | 12 Months Ended | ||||||||
Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2017USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2017CNY (¥) | Sep. 30, 2017USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | |
Debt Instrument [Line Items] | ||||||||||
Debt Instrument, Face Amount | $ 152,103,764 | |||||||||
Security Deposit | 6,569,714 | $ 7,972,117 | ||||||||
Debt Instrument, Periodic Payment, Principal | $ 3,400,000 | |||||||||
Hantai District Urban Construction Investment Development Co., Ltd [Member] | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Interest Costs Capitalized | 51,850 | $ 52,260 | ||||||||
Urban Development Center Co., Ltd [Member] | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Line of Credit Facility, Remaining Borrowing Capacity | $ 17,054,378 | 16,610,822 | ||||||||
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 | $ 90,451,013 | 90,186,614 | ||||||||
Line of Credit Facility, Maximum Borrowing Capacity | ¥ 775,000,000 | 111,000,000 | ||||||||
Long-term Debt, Gross | 52,177,474 | 52,342,164 | ||||||||
Debt Instrument, Periodic Payment, Interest | 1,615,281 | 1,607,998 | ||||||||
Security Deposit | $ 3,696,894 | $ 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 | $ 17,000,000 | ||||||||
Construction Loan [Member] | Urban Development Center Co., Ltd [Member] | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt Instrument, Face Amount | ¥ 175,000,000 | $ 25,000,000 | ||||||||
Debt Instrument, Interest Rate, Stated Percentage | 1.20% | 1.20% | ||||||||
Interest Costs Capitalized | $ 5,000,000 | |||||||||
Debt Instrument, Periodic Payment | $ 76,249 | $ 76,773 |
CUSTOMER DEPOSITS - Customer De
CUSTOMER DEPOSITS - Customer Deposits From Pre-Sale Of Residential Units (Details) - USD ($) | Dec. 31, 2019 | Sep. 30, 2019 |
Customer deposits by real estate projects | ||
Total | $ 19,286,884 | $ 17,183,264 |
Less: Customer deposits - short-term | 18,229,686 | 16,139,572 |
Customer deposits - long-term | 1,057,198 | 1,043,692 |
Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) | ||
Customer deposits by real estate projects | ||
Total | 7,211,802 | 7,029,356 |
Oriental Pearl Garden | ||
Customer deposits by real estate projects | ||
Total | 4,376,921 | 4,182,454 |
Liangzhou road and related projects | ||
Customer deposits by real estate projects | ||
Total | 1,057,198 | 1,043,692 |
Yangzhou Pearl Garden | ||
Customer deposits by real estate projects | ||
Total | 1,338,554 | 1,163,407 |
Yangzhou Palace | ||
Customer deposits by real estate projects | ||
Total | $ 5,302,409 | $ 3,764,355 |
CUSTOMER DEPOSITS - Additional
CUSTOMER DEPOSITS - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2019 | Sep. 30, 2019 | |
Deposit Liabilities [Line Items] | ||
Mortgage loan guarantee amount | $ 4 | $ 3.9 |
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 ($) | Dec. 31, 2019 | Sep. 30, 2019 |
Shareholder Loans [Line Items] | ||
Shareholder loan | $ 2,137,635 | $ 2,129,114 |
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 | $ 327,635 | $ 319,114 |
SHAREHOLDER'S LOANS - Additiona
SHAREHOLDER'S LOANS - Additional Information (Details) - USD ($) | 3 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2019 | |
Shareholder Loans [Line Items] | |||
Interest (expense) | $ 17,253 | $ 105,231 | |
Shareholder loan | 2,137,635 | $ 2,129,114 | |
Shareholder USD Loan Agreement | |||
Shareholder Loans [Line Items] | |||
Interest (expense) | $ 18,100 | 18,100 | |
Debt instrument, stated interest rate | 4.00% | ||
Shareholder loan | $ 1,810,000 | $ 1,810,000 | |
Shareholder's RMB Loan Agreement | |||
Shareholder Loans [Line Items] | |||
Interest (expense) | $ 5,037 | $ 20,288 | |
Debt instrument, stated interest rate | 4.35% |
TAXES - Reconciliation Of Statu
TAXES - Reconciliation Of Statutory Rates To Effective Tax Rate (Details) | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
TAXES | ||
Chinese statutory tax rate | 25.00% | 25.00% |
Valuation allowance change and other adjustments | (29.30%) | 0.70% |
Effective tax rate | (4.30%) | 25.70% |
TAXES - Components of Income Ta
TAXES - Components of Income Tax Expenses (Details) - USD ($) | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
TAXES | ||
Current tax provision | $ 67,000 | |
Deferred tax provision | (56,480) | $ 168,401 |
Income tax expense | $ 10,520 | $ 168,401 |
TAXES - Taxes Payable (Details)
TAXES - Taxes Payable (Details) - USD ($) | Dec. 31, 2019 | Sep. 30, 2019 |
TAXES | ||
CIT | $ 11,963,004 | $ 11,720,848 |
Business tax | 7,470,015 | 7,819,884 |
Other taxes and fees | 2,418,689 | 2,349,086 |
Total taxes payable | 21,851,708 | 21,889,818 |
Less: current portion | 13,630,957 | 13,882,875 |
Tax payable - long term | $ 8,220,751 | $ 8,006,943 |
TAXES - Additional Information
TAXES - Additional Information (Details) - USD ($) | Dec. 31, 2019 | Dec. 22, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2019 | Sep. 30, 2017 |
Income Taxes [Line Items] | ||||||
Business sales tax, rate | 5.00% | |||||
Business sales tax | $ 7,470,015 | $ 7,470,015 | $ 7,819,884 | |||
Deferred Income Tax Assets, Net | 57,154 | $ 57,154 | 0 | |||
Income tax at statutory tax rate | 25.00% | 25.00% | ||||
Income tax payable | 11,963,004 | $ 11,963,004 | 11,720,848 | |||
Land appreciation tax payable | $ 0 | $ 0 | ||||
Effective Value Added Tax Rate Percentage | 5.00% | 5.00% | 5.00% | |||
Effective Income Tax Rate Reconciliation, Deduction, Percent | 50.00% | |||||
Effective Income Tax Rate Reconciliation, Repatriation of Foreign Earnings, Amount | $ 2,300,000 | 2,300,000 | ||||
Additional Provision for Tax | $ 900,000 | |||||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 25.00% | 25.00% | ||||
Effective Income Tax Rate Reconciliation At Federal Statutory Income Tax Rate Including Interest And Penalty | 27.10% | |||||
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% | |||||
Yang County | ||||||
Income Taxes [Line Items] | ||||||
Local income tax rate | 1.25% | |||||
Land appreciation tax rate | 0.50% | |||||
Income tax payable | $ 11,963,004 | $ 11,963,004 | $ 11,720,848 |
CONTINGENCIES AND COMMITMENTS (
CONTINGENCIES AND COMMITMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2019 | Sep. 30, 2019 | |
Commitments And Contingencies [Line Items] | ||
Outstanding guarantees of customers' mortgage loans | $ 80 | $ 78 |
Security deposit provided for guarantee | $ 4 | $ 3.9 |
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% |