Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | ||
Sep. 30, 2016 | Dec. 12, 2016 | Mar. 31, 2016 | |
Document Information [Line Items] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Sep. 30, 2016 | ||
Document Fiscal Year Focus | 2,016 | ||
Document Fiscal Period Focus | FY | ||
Entity Registrant Name | CHINA HGS REAL ESTATE INC. | ||
Entity Central Index Key | 1,158,420 | ||
Current Fiscal Year End Date | --09-30 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 23,842,132 | ||
Trading Symbol | HGSH | ||
Entity Common Stock, Shares Outstanding | 45,050,000 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 |
Current assets: | ||
Cash | $ 6,401,237 | $ 1,333,919 |
Restricted cash | 1,493,537 | 1,715,268 |
Cost and earnings in excess of billings | 11,891,230 | 11,825,036 |
Real estate property development completed | 113,185,929 | 75,391,512 |
Real estate property under development | 0 | 55,154,153 |
Other current assets | 2,722,036 | 228,223 |
Total current assets | 135,693,969 | 145,648,111 |
Property, plant and equipment, net | 792,650 | 780,038 |
Real estate property development completed, net of current portion | 1,657,055 | 2,140,271 |
Security deposits | 7,940,137 | 3,146,237 |
Real estate property under development, net of current portion | 207,384,015 | 143,660,781 |
Due from local government for real estate property development completed | 2,920,990 | 3,065,000 |
Total Assets | 356,388,816 | 298,440,438 |
Current liabilities: | ||
Bank loan | 0 | 6,292,474 |
Other loans | 6,125,753 | 5,674,239 |
Accounts payable | 30,574,497 | 41,501,682 |
Other payables | 5,200,807 | 12,676,362 |
Construction deposits | 1,911,158 | 1,959,706 |
Billings in excess of cost and earnings | 2,110,808 | 3,315,302 |
Customer deposits | 16,790,208 | 17,387,969 |
Shareholder loans | 2,709,523 | 1,810,000 |
Accrued expenses | 3,205,099 | 4,855,891 |
Taxes payable | 15,843,815 | 15,830,886 |
Total current liabilities | 84,471,668 | 111,304,511 |
Deferred tax liabilities | 5,107,887 | 4,711,161 |
Customer deposits, net of current portion | 10,687,272 | 8,246,004 |
Other loans, less current portion | 99,843,228 | 15,731,186 |
Construction deposits, net of current portion | 1,329,820 | 972,432 |
Total liabilities | 201,439,875 | 140,965,294 |
Commitments and Contingencies | ||
Stockholders' equity | ||
Common stock, $0.001 par value, 100,000,000 shares authorized, 45,050,000 shares issued and outstanding | 45,050 | 45,050 |
Additional paid-in capital | 129,793,572 | 17,764,316 |
Statutory surplus | 8,495,631 | 16,439,333 |
Retained earnings | 20,661,184 | 119,668,198 |
Accumulated other comprehensive income (loss) | (4,046,496) | 3,558,247 |
Total stockholders' equity | 154,948,941 | 157,475,144 |
Total Liabilities and Stockholders' Equity | $ 356,388,816 | $ 298,440,438 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2016 | Sep. 30, 2015 | Aug. 31, 2009 |
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 | 14,000,000 |
Common stock, shares outstanding | 45,050,000 | 45,050,000 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Real estate sales | $ 40,576,717 | $ 81,115,494 |
Less: Sales tax | 2,102,616 | 5,194,616 |
Cost of real estate sales | 28,670,778 | 39,258,557 |
Gross profit | 9,803,323 | 36,662,321 |
Operating expenses | ||
Selling and distribution expenses | 1,118,282 | 917,344 |
General and administrative expenses | 2,466,717 | 2,304,706 |
Total operating expenses | 3,584,999 | 3,222,050 |
Operating income | 6,218,324 | 33,440,271 |
Interest expense- net | (225,155) | (61,419) |
Other income - net | 459 | 0 |
Income before income taxes | 5,993,628 | 33,378,852 |
Provision for income taxes | 974,688 | 1,951,226 |
Net income | 5,018,940 | 31,427,626 |
Other comprehensive income (loss) | ||
Foreign currency translation adjustment | (7,604,743) | (5,186,242) |
Comprehensive income (loss) | $ (2,585,803) | $ 26,241,384 |
Basic and diluted income per common share | ||
Basic | $ 0.11 | $ 0.70 |
Diluted | $ 0.11 | $ 0.70 |
Weighted average common shares outstanding | ||
Basic | 45,050,000 | 45,050,000 |
Diluted | 45,050,000 | 45,052,252 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Total | Common Stock [Member] | Additional Paid-in Capital [Member] | Statutory Surplus [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Income [Member] | |
Beginning balance at Sep. 30, 2014 | $ 131,228,793 | $ 45,050 | $ 17,759,349 | $ 12,845,197 | $ 91,834,708 | $ 8,744,489 | |
Beginning balance (in Shares) at Sep. 30, 2014 | 45,050,000 | ||||||
Stock-based Compensation | 4,967 | 4,967 | |||||
Appropriation of statutory reserve | 0 | 3,594,136 | (3,594,136) | ||||
Net income for the year | 31,427,626 | 31,427,626 | |||||
Foreign currency translation adjustments | (5,186,242) | (5,186,242) | |||||
Ending Balance at Sep. 30, 2015 | 157,475,144 | $ 45,050 | 17,764,316 | 16,439,333 | 119,668,198 | 3,558,247 | |
Ending Balance (in Shares) at Sep. 30, 2015 | 45,050,000 | ||||||
Stock-based Compensation | 59,600 | 59,600 | |||||
Appropriation of statutory reserve | 0 | 516,314 | (516,314) | ||||
Net income for the year | 5,018,940 | 5,018,940 | |||||
Recapitalization of VIE (“Guangsha”) equity | [1] | 0 | 111,969,656 | (8,460,016) | (103,509,640) | ||
Foreign currency translation adjustments | (7,604,743) | (7,604,743) | |||||
Ending Balance at Sep. 30, 2016 | $ 154,948,941 | $ 45,050 | $ 129,793,572 | $ 8,495,631 | $ 20,661,184 | $ (4,046,496) | |
Ending Balance (in Shares) at Sep. 30, 2016 | 45,050,000 | ||||||
[1] | For the year ended September 30, 2016, Shaanxi Guangsha Investment and Development Group Co., Ltd (“Guangsha”), the VIE of the Company, had a recapitalization. The VIE’s accumulated retained earnings and statutory reserve were reclassified to additional paid in capital in the consolidated financial statements. |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities | ||
Net income | $ 5,018,940 | $ 31,427,626 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Deferred tax provision | 631,099 | 1,870,180 |
Depreciation | 74,723 | 83,701 |
Stock based compensation | 59,600 | 4,967 |
Changes in assets and liabilities: | ||
Advances to vendors | (60,480) | 0 |
Security deposits | (5,045,816) | 0 |
Cost and earnings in excess of billings | (634,893) | 118,861 |
Real estate property development completed | (41,816,677) | (71,332,340) |
Real estate property under development | (18,287,677) | 63,376,691 |
Other current assets | (2,496,811) | 1,171,630 |
Accounts payable | (9,166,316) | (14,428,567) |
Other payables | (7,024,872) | (684,063) |
Billings in excess of cost and earnings | (1,070,814) | 462,916 |
Customer deposits | 3,112,121 | (8,439,960) |
Construction deposits | 456,014 | 1,654,075 |
Accrued expenses | (1,468,888) | 1,201,727 |
Taxes payable | 772,684 | 3,765,165 |
Net cash (used in ) provided by operating activities | (76,948,063) | 10,252,609 |
Cash flow from investing activities | ||
Purchase of fixed assets | (125,023) | 0 |
Net cash used in investing activities | (125,023) | 0 |
Cash flow from financing activities | ||
Restricted cash | 144,112 | (181,392) |
Proceeds from other loans | 93,658,620 | 27,670,998 |
Repayment of other loans | (6,286,930) | (20,865,164) |
Repayment of bank loan | (6,123,137) | (12,975,849) |
Proceeds from shareholder loan | 3,236,078 | 11,642,580 |
Repayment of shareholder loan | (2,317,607) | (15,292,038) |
Net cash provided by (used in) financing activities | 82,311,136 | (10,000,865) |
Effect of changes of foreign exchange rate on cash | (170,732) | (43,370) |
Net increase in cash | 5,067,318 | 208,374 |
Cash, beginning of year | 1,333,919 | 1,125,545 |
Cash, end of year | 6,401,237 | 1,333,919 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 5,102,735 | 1,840,535 |
Income taxes paid | 424,970 | 144,742 |
Non-cash financing activities: | ||
Recapitalization of VIE (“Guangsha”) | $ 111,969,656 | $ 0 |
ORGANIZATION AND BASIS OF PRESE
ORGANIZATION AND BASIS OF PRESENTATION | 12 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BASIS OF PRESENTATION | NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION China HGS Real Estate Inc. (the “Company” or “China HGS” or “we”, “our”, “us”) is a corporation organized under the laws of the State of Florida. China HGS does not conduct any substantive operations of its own. Instead, through its subsidiary, Shaanxi HGS Management and Consulting Co., Ltd (“Shaanxi HGS”), it entered into certain exclusive contractual agreements with the management of the Company’s PRC operating subsidiary, Shaanxi Guangsha Investment and Development Group Co., Ltd (“Guangsha”). Pursuant to these agreements, Shaanxi HGS is obligated to absorb a majority of the risk of loss from Guangsha’s activities and entitles Shaanxi HGS to receive a majority of Guangsha’s expected residual returns. In addition, Guangsha’s shareholders have pledged their equity interest in Guangsha to Shaanxi HGS, irrevocably granted Shaanxi HGS an exclusive option to purchase, to the extent permitted under PRC Law, all or part of the equity interests in Guangsha and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by Shaanxi HGS. Based on these contractual arrangements, management believes that Guangsha should be considered a “Variable Interest Entity” (“VIE”) under ASC 810 “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51”, because the equity investors in Guangsha no longer have the characteristics of a controlling financial interest, and the Company, through Shaanxi HGS, is the primary beneficiary of Guangsha. Accordingly, Guangsha has been consolidated under ASC 810. The Company, through its subsidiaries and VIE, engages in real estate development, in the construction and sale of residential apartments, parking lots and commercial properties. Total assets and liabilities presented on the consolidated balance sheets and sales, cost of sales, net income presented on Consolidated Statement of Income and Comprehensive Income as well as the cash flow from operation, investing and financing activities presented on the Consolidated Statement of Cash Flows are substantially the financial position, operation and cash flow of Guangsha. The Company has not provided any financial support to Guangsha for the years ended September 30, 2016 and 2015. Balance as of September 30, September 30, Current assets $ 135,675,587 $ 145,628,992 Non-current assets 220,295,366 152,360,755 Total assets 355,970,953 297,989,747 Current liabilities 83,547,250 110,515,207 Non-current liabilities 116,968,207 29,660,783 Total liabilities $ 200,515,457 $ 140,175,990 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of China HGS Real Estate Inc. (the “Company” or “China HGS”), China HGS Investment Inc. (“HGS Investment”), Shaanxi HGS Management and Consulting Co., Ltd. (“Shaanxi HGS”) and its variable interest entity (“VIE”), Shaanxi Guangsha Investment and Development Group Co., Ltd. (“Guangsha”). All inter-company transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation. Percentage of Completion method Real estate sales for the long term real estate projects are recognized under percentage completion method in accordance with the provisions of ASC 360-20-40D “Sale of Condominium Units”. Revenue and profit from the sales of long term 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 condominium units sold and related costs are recognized over the course of the construction period, based on the completion progress of a project. 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. Full accrual method Revenue from the sales of short term development properties, where the construction period is expected to 18 months or less is recognized by the full accrual method at the time of the closing of an individual unit sale. This occurs when title to or possession of the property is transferred to the buyer. A sale is not considered consummated until (a) the parties are bound by the terms of a contract, (b) all consideration has been exchanged, (c) any permanent financing for which the seller is responsible has been arranged, (d) all conditions precedent to closing have been performed, (e) the seller does not have substantial continuing involvement with the property, and (f) the usual risks and rewards of ownership have been transferred to the buyer. Further, the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property. The Company provides “mortgage loan guarantees” only with respect to buyers who make down-payments of 30 50 For municipal road construction projects, fees are generally recognized by the full accrual method at the time of the projects are completed. 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, budgeted costs, share-based compensation and other similar charges. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates. Changes of estimated gross profit margins related to revenue recognized under the percentage of completion method are made in the period in which circumstances requiring the revisions become known. For the year end September 30, 2016, real estate development projects with gross profits recognized in 2015 had changes in their estimated revenue and related gross profit margins. The Company reduced its prior estimates related to selling prices and total estimated sales values which led to an increase in the recognized costs of sales under percentage completion revenue recognition approach. As a result of these changes in gross profit margins, net income for the year ended September 30, 2016 decreased by $ 3,940,964 1,500,119 0.09 0.03 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 on what assumptions the market participants would use in pricing the asset or liability based on the best available information. The carrying amounts of 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. The Company’s financial information is presented in U.S. dollars. The functional currency of the Company’s operating subsidiaries is Renminbi (“RMB”), the currency of the PRC. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830-30 “Translation of Financial Statements”. The financial information is first prepared in RMB and then is translated into U.S. dollars at year-end exchange rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in stockholders’ equity. 2016 2015 Year end RMB : USD exchange rate 6.6702 6.3568 Annual average RMB : USD exchange rate 6.5326 6.1653 The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation. Cash includes cash on hand and demand deposits in accounts maintained with commercial banks within the PRC. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company maintains bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs. The restricted cash is required by the banks as collateral for mortgage loans given to the home buyers before obtaining the certificates of ownership of the properties as collateral. In order to provide the banks with the certificates of ownership, the Company is required to complete certain procedures with the Chinese government, which normally takes six to twelve months. Because the banks provide the loan proceeds to the Company without obtaining certificates of ownership as loan collateral during this six to twelve months’ period, the mortgage banks require the Company to maintain, as restricted cash, 5 10 Advances to vendors consist of balances paid to contractors and vendors for services and materials that have not been provided or received and generally relate to the development and construction of residential and commercial units in the PRC. Advances to vendors are reviewed periodically to determine whether their carrying value has become impaired. Historically, the Company has not experienced any losses as a result of these advances. Security deposits for land use rights consist of the deposit held by the PRC government for the purchase of land use rights and the deposit held by an unrelated party to transfer its land use rights to the Company. The deposits will be reclassified to real estate property under development upon the transfers of legal title. Real estate property 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. In accordance with ASC 360, “Property, Plant and Equipment” (“ASC 360”), real estate property development completed and under development are subject to valuation adjustments when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets. The Company reviewed all of its real estate projects for future losses and impairment by comparing the estimated future undiscounted cash flows for each project to the carrying value of such project. For the years ended September 30, 2016 and 2015, the Company did not recognize any impairment for real estate property under development and completed. 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 expensed as a component of cost of real estate sales when related units are sold. All other interest is expensed as incurred. For the years ended September 30, 2016 and 2015, the total interest capitalized in the real estate property development was $ 3,410,529 3,064,621 Property, plant and equipment are recorded at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after the fixed assets have been put into operation, such as repairs and maintenance and overhaul costs, is normally expensed in the year in which it is incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, less any estimated residual value. Estimated useful lives of the assets are as follows: Buildings 39 years Machinery and office equipment 5-10 years Vehicles 8 years Any gain or loss on disposal or retirement of a fixed asset is recognized in the profit and loss account and is the difference between the net sales proceeds and the net carrying amount of the asset. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and the resulting profit or loss is reflected in income. Maintenance, repairs and minor renewals are charged directly to expense as incurred unless such expenditures extend the useful life or represent a betterment, in which case they are capitalized. In accordance with ASC 360, "Accounting for the Impairment or Disposal of Long-Lived Assets", the Company is required to review its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally determined by using the asset's expected future discounted cash flows or market value. The Company estimates fair value of the assets based on certain assumptions such as budgets, internal projections, and other available information as considered necessary. There is no impairment of long-lived assets for the years ended September 30, 2016 and 2015. Customer deposits consist of amounts received from customers relating to the sale of residential units in the PRC. In the PRC, customers will generally obtain permanent financing for the purchase of their residential unit prior to the completion of the project. The lending institution will provide the funding to the Company upon the completion of the financing rather than the completion of the project. The Company receives these funds and recognizes them as a liability until the revenue can be recognized. The Company provides its customers with warranties which cover major defects of building structure and certain fittings and facilities of properties sold. The warranty period varies from two years to five years, depending on different property components the warranty covers. The Company continually estimates potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a property. Reserves are determined based on historical data and trends with respect to similar property types and geographical areas. The Company continually monitors the warranty reserve and makes adjustments to its pre-existing warranties, if any, in order to reflect changes in trends and historical data as information becomes available. The Company may seek further recourse against its contractors or any related third parties if it can be proved that the faults are caused by them. In addition, the Company also withholds up to 2 Construction deposits are the warranty deposits the real estate contractors provide to the Company upon signing the construction contracts. The Company can use such deposits to reimburse customers in the event of customer claims due to construction defects. The remaining balance of the deposits are returned to the contractors when the terms of the after-sale property warranty expires, which normally occurs within two to five years after the date of the deposit. Share-based payment transactions are measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period, or vesting period. Forfeitures to be estimated at the time of grant and revised, if necessary, in the subsequent period if actual forfeitures differ from initial estimates. Forfeiture rate is estimated based on historical and future expectation of employee turnover rate and are adjusted to reflect future change in circumstances and facts, if any. Share-based compensation expense is recorded net of estimated forfeitures such that expense was recorded only for those stock options and common stock awards that are expected to vest. Deferred tax assets and liabilities are for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. ASC 740-10-25 prescribes a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. There are no material uncertain tax positions as of September 30, 2016 and 2015. The Company is a corporation organized under the laws of the State of Florida. However, all of the Company’s operations are conducted solely by its subsidiaries in the PRC. No income is earned in the United States and the management does not repatriate any earnings outside the PRC. As a result, the Company did not generate any U.S. taxable income for the years ended September 30, 2016 and 2015. As of September 30, 2016, the Chinese entities’ income tax returns filed in China for the years ended December 31, 2015, 2014, 2013, 2012 and 2011 are subject to examination by the Chinese taxing authorities. As of September 30, 2016, the tax years ended September 30, 2008 through September 30, 2016 for the Company’s PRC entities remain open for statutory examination by PRC tax authorities. The parent Company China HGS Real Estate Inc.’s tax years ended September 30, 2012 through September 30, 2016 remains open for statutory examination by U.S. tax authorities. In accordance with the relevant taxation laws in the PRC, the Company is subject to LAT based on progressive rates ranging from 30 60 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, Nandajie 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 0.5 In accordance with ASC 220-10-55, comprehensive income (loss) is defined as all changes in equity except those resulting from investments by owners and distributions to owners. The Company’s only components of comprehensive income (loss) for the years ended September 30, 2016 and 2015 were net income and foreign currency translation adjustments. Advertising costs are expensed as incurred. For the years ended September 30, 2016 and 2015, the Company recorded advertising expenses of $ 591,390 338,115 The Company computes earnings per share (“EPS”) in accordance with the ASC 260, “Earnings per share”, which requires companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. The following table presents a reconciliation of basic and diluted net income per share: For the years ended September 30, 2016 2015 Net income attributable to common share holders $ 5,018,940 $ 31,427,626 Weighted average common shares used in Basic computation 45,050,000 45,050,000 Effect of diluted stock options - 2,252 Weighted average common shares used in Diluted computation 45,050,000 45,052,252 Earnings per share - Basic $ 0.11 $ 0.70 Earnings per share - Diluted $ 0.11 $ 0.70 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 year ended September 30, 2016, two suppliers accounted for 22 17 23 21 17 In January 2016, the FASB has issued Accounting Standards Update (ASU) No. 2016-01, Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to existing U.S. GAAP by: (1) requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (2) Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; (3) Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and. (4) Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of this update on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company is currently evaluating the impact of this new standard on its consolidated financial statements. In April 2016, the FASB released ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, EPS, and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company is currently evaluating the impact of this new standard on its consolidated financial statements. In May 2016, FASB issued ASU No. 2016-12Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company is assessing the impact of the adoption of the ASU on its unaudited financial statements, disclosure requirements and methods of adoption. In August 2016, the FASB issued ASU No. 2016 15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures. In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interest Held through Related Parties That Are under Common Control, to provide guidance on the evaluation of whether a reporting entity is the primary beneficiary of a VIE by amending how a reporting entity, that is a single decision maker of a VIE, treats indirect interests in that entity held through related parties that are under common control. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures. In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows: Restricted Cash". The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of this new standard on its consolidated financial statements. |
REAL ESTATE PROPERTY COMPLETED
REAL ESTATE PROPERTY COMPLETED AND UNDER DEVELOPMENT | 12 Months Ended |
Sep. 30, 2016 | |
Real Estate [Abstract] | |
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT | NOTE 3. REAL ESTATE PROPERTY COMPLETED AND UNDER DEVELOPMENT Balance as of September 30, September 30, Development completed: Hanzhong City Mingzhu Garden Phase I $ 952,066 $ 1,146,277 Hanzhong City Mingzhu Garden Phase II 54,933,680 66,070,589 Hanzhong City Nan Dajie (Mingzhu Xinju) 1,371,633 1,439,257 Hanzhong City Oriental Pearl Garden (a) 50,643,258 - Yang County Yangzhou Pearl Garden Phase I 2,396,420 3,419,273 Yang County Yangzhou Pearl Garden Phase II 4,545,927 5,456,387 Real estate property development completed $ 114,842,984 $ 77,531,783 Less: Real estate property completed short-term 113,185,929 75,391,512 Real estate property completed long-term $ 1,657,055 $ 2,140,271 Under development: Hanzhong City Oriental Pearl Garden (a) $ - $ 55,154,153 Yang County Yangzhou Palace 76,618,856 47,843,166 Hanzhong City Shijin Project 7,261,811 7,619,829 Hanzhong City Liangzhou Road and related projects (b) 117,226,429 85,069,755 Hanzhong City Hanfeng Beiyuan East (c) 657,706 587,993 Hanzhong City Beidajie (e) 3,228,580 78,735 Yang County East 2 nd 2,390,633 2,461,303 Real estate property under development $ 207,384,015 $ 198,814,934 Less: Short-term portion - 55,154,153 Real estate property under development long-term $ 207,384,015 $ 143,660,781 (a) The Company recognized $ 18,777,470 12,168,108 (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 The Company’s development cost incurred on Liangzhou Road Project is treated as the Company’s deposit on purchasing the related land use rights, as agreed by the local government. As of September 30, 2016, the actual costs incurred by the Company were $ 117,226,429 85,069,755 9,439,183 (c) In September 2012, the Company was approved by the Hanzhong local government to construct four municipal roads with a total length of approximately 1,192 meters. The project was deferred and then restarted during the quarter ended March 31, 2014. As of September 30, 2016, the Company is waiting for the local government’s assessment and planning for the scope and budget for these projects. (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 and a budgeted price of approximately $ 25.2 168 4.75 5 (e) For the years ended September 30, 2016 and 2015, the Company received government’s subsidies in the amount of $ 3,153,544 As of September 30, 2016 and 2015, land use rights included in real estate property under development totaled $ 19,568,460 39,929,072 |
PROPERTY, PLANT AND EQUIPMENT,
PROPERTY, PLANT AND EQUIPMENT, NET | 12 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT, NET | NOTE 4. PROPERTY, PLANT AND EQUIPMENT, NET As of September 30, 2016 2015 Buildings $ 819,621 $ 860,030 Machinery 27,885 29,260 Office equipment - - Automobiles 545,640 444,060 Total 1,393,146 1,333,350 Less: accumulated depreciation 600,496 553,312 Property, plant and equipment, net $ 792,650 $ 780,038 Depreciation expense for the years ended September 30, 2016 and 2015 was $ 74,723 83,701 |
RECEIVABLE FROM LOCAL GOVERNMEN
RECEIVABLE FROM LOCAL GOVERNMENT - LONG-TERM | 12 Months Ended |
Sep. 30, 2016 | |
Accounts Receivable Additional Disclosures [Abstract] | |
Accounts Receivable Additional Disclosures | NOTE 5. RECEIVABLE FROM LOCAL GOVERNMENT LONG-TERM In June 2012, the Company was approved by Hanzhong local government to construct two municipal roads with total length of 1,064.09 meters. The budgeted price for these two municipal roads is approximately $ 2.9 2,920,990 3,065,000 |
SECURITY DEPOSITS
SECURITY DEPOSITS | 12 Months Ended |
Sep. 30, 2016 | |
Security Deposits For Land Use Rights [Abstract] | |
Land Use Rights Disclosure | NOTE 6. SECURITY DEPOSITS As of September 30, 2016 2015 Security deposit for land use right (1) $ 2,998,411 $ 3,146,237 Security deposits for other loan (2) 4,941,726 - Security deposits $ 7,940,137 $ 3,146,237 (1) In May 2011, the Company entered into a development agreement with the Hanzhong local government. Pursuant to the agreement, the Company will prepay the development cost of $ 17,945,489 119,700,000 2,998,411 3,146,237 20,000,000 (2) In connection with financing from Hanzhong Urban Construction Investment Development Co., Ltd ( See note 8), the Company was required to provide a security deposit for the loan received. As of September 30, 2016, the security deposit balances were $ 4,941,726 |
BANK LOAN
BANK LOAN | 12 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
BANK LOAN | NOTE 7. BANK LOAN On August 23, 2013, the Company entered into a project finance loan agreement (the "Loan Agreement") with China Construction Bank, Hanzhong Branch (the “Bank") for development of the Company’s Mingzhu Beiyuan project and was fully repaid as of September 30, 2016. The average interest rate of the loan was 5 137,962 |
OTHER LOANS
OTHER LOANS | 12 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
OTHER LOANS | NOTE 8. OTHER LOANS As of September 30, 2016 2015 Loan A (i) $ - $ 954,883 Loan B (ii) - 4,719,356 Loan C (iii) 93,975,338 15,731,186 Loan D (iv) 11,993,643 - 105,968,981 21,405,425 Less: current maturities of other loans 6,125,753 5,674,239 Other loans long-term portion $ 99,843,228 $ 15,731,186 (i) A working capital finance agreement with a local investment company in Hanzhong was fully repaid in fiscal 2016. The loan carried a fixed interest of 10 23,364 1,038,846 (ii) On May 6, 2015, the Company renewed a credit agreement with a financial institution. On May 22, 2015, the Company borrowed $ 4,497,616 30,000,000 20 50 107,055 755,097 (iii) 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 $ 116,188,420 775,000,000 4.245 93,975,338 76,618,856 4,941,726 2,949,185 77,909 Subsequent to September 30, 2016, the Company further received $7,032,773 (RMB 46,910,000) from Hanzhong Urban Construction Investment Development Co., Ltd. The combined loan repayment schedule assuming total loan proceeds are borrowed are listed below: Repayment in USD Repayment in RMB 29-May-2017 6,125,753 40,860,000 20-November-2017 6,125,753 40,860,000 20-April -2018 13,116,548 87,490,000 20-May-2018 6,232,197 41,570,000 20-November-2018 6,232,197 41,570,000 20-April-2019 13,116,548 87,490,000 20-May-2019 6,382,117 42,570,000 20-October-2019 13,116,548 87,490,000 29-November-2019 6,382,117 42,570,000 20-April-2020 13,121,046 87,520,000 20-October-2020 13,116,548 87,490,000 20-October-2021 13,121,046 87,520,000 Total 116,188,418 775,000,000 On January 8, 2016, the Company signed a loan agreement with Hanzhong Municipal Housing Provident Fund Management Center (“Housing Fund”) to borrow up to approximately $ 11,993,643 80,000,000 3.575 290,653 Repayment in USD Repayment in RMB Earlier of July 2018 or 60% sales completed 2,998,411 20,000,000 Earlier of October 2018 or 70% sales completed 4,497,616 30,000,000 Earlier of January 2019 or 75% sales completed 4,497,616 30,000,000 Total 11,993,643 80,000,000 |
CUSTOMER DEPOSITS
CUSTOMER DEPOSITS | 12 Months Ended |
Sep. 30, 2016 | |
Banking and Thrift [Abstract] | |
CUSTOMER DEPOSITS | NOTE 9. CUSTOMER DEPOSITS As of September 30, 2016 2015 Customer deposits by real estate projects Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) $ 9,150,119 $ 7,832,619 Oriental Pearl Garden 5,582,158 7,220,575 Liangzhou road and related projects 2,593,625 2,035,615 Yang County Pearl Garden 2,057,931 2,334,775 Yang County Palace 8,093,647 6,210,389 Total 27,477,480 25,633,973 Including: Customer deposits - short-term 16,790,208 17,387,969 Customer deposits - long-term $ 10,687,272 $ 8,246,004 Customer deposits are typically 10 20 30 50 1.5 1.7 |
RELATED PARTY LOANS
RELATED PARTY LOANS | 12 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
RELATED PARTY LOANS | NOTE 10. RELATED PARTY LOANS As of September 30, 2016 2015 Shareholder loan USD loan (a) $ 1,810,000 $ 1,810,000 Shareholder loan RMB loan (b) 899,523 - Total $ 2,709,523 $ 1,810,000 a. The Company has a one year loan agreement (“USD Loan Agreement”) with Mr. Xiaojun Zhu, our Chairman, CEO and major shareholder (“Mr. Zhu”), pursuant to which the Company borrowed $ 1,810,000 4 72,400 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 from Mr. Zhu 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 with a new expiration date of June 30, 2017, with at an interest rate of 4.35 899,523 40,172 240,687 |
STOCK OPTIONS
STOCK OPTIONS | 12 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK OPTIONS | NOTE 11. STOCK OPTIONS On August 22, 2015, the Company’s Board of Directors granted stock options to two new independent directors to repurchase up to an aggregate of 120,000 1.89 36.1 2.8 Options Risk-free interest rate 0.95 % Expected life of the options 3 year Expected volatility 143 % Expected dividend yield 0 % Fair value $ 178,800 The Company uses the Black-Scholes option-pricing model, which incorporates various assumptions including volatility, expected life and interest rates to determine fair value. The Company’s expected volatility assumption is based on the historical volatility of Company’s stock. The expected life assumption is primarily based on the simplified method due to the Company’s limited option exercise behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Number of Weighted Weighted Grant Date Outstanding, September 30, 2014 140,000 $ 2.39 0.89 44,207 Granted 120,000 $ 1.89 2.89 178,800 Forfeited (130,000) $ 2.39 - (31,093) Exercised - - - - Outstanding, September 30, 2015 130,000 $ 1.93 2.71 $ 191,914 Granted - - - - Forfeited * (10,000) $ 2.37 - (13,114) Exercised - - - - Outstanding, September 30, 2016 120,000 $ 1.89 1.89 $ 178,800 Exercisable, September 30, 2016 43,333 $ 1.89 1.89 $ 64,567 * options expired for the years ended September 30, 2016. Stock-based compensation expense recognized in the years ended September 30, 2016 and 2015 was $ 59,600 4,967 114,233 173,833 |
TAXES
TAXES | 12 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
TAXES | NOTE 12. TAXES (A) Business sales tax and VAT The Company is subject to a 5 13,453,236 13,306,414 5 (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 2.5 1.25 974,688 1,951,226 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. 2016 2015 Chinese statutory tax rate 25.0 % 25.0 % Valuation allowance change 0.7 % 0.1 % Net impact of Exemption rendered by local tax authorities and other adjustments (9.4) % (19.3) % Effective tax rate 16.3 % 5.8 % For the years ended September 30, 2016 2015 Current tax provision $ 343,589 $ 81,046 Deferred tax provision $ 631,099 $ 1,870,180 Income tax expense $ 974,688 $ 1,951,226 The parent Company China HGS Real Estate Inc. is incorporated in the United States. Net operating loss carry forwards for United States income tax purposes amounted to $ 533,160 401,160 2036 As of September 30, 2016 2015 Deferred tax assets: Deferred tax asset from net operating loss carry-forwards for parent company $ 181,274 $ 136,394 Valuation allowance (181,274) (136,394) Deferred tax asset - net $ - $ - Deferred tax liability: Revenue recognized based on percentage of completion $ 5,107,087 $ 4,711,161 Deferred tax liability long term $ 5,107,087 $ 4,711,161 Movement of valuation allowance: As of September 30, 2016 2015 Beginning Balance $ 136,394 $ 110,089 Current year additions 44,880 26,305 Ending Balance $ 181,274 $ 136,394 The valuation allowance increased $ 44,880 26,305 (C) Land appreciation tax (“LAT”) Since January 1, 1994, LAT has been applicable at progressive tax rates ranging from 30 60 0.5 1.0 As at September 30, 2016, the outstanding LAT payable balance was $ 1,049,401 752,664 (D) Taxes payable consisted of the following: September 30, September 30, CIT $ 677,734 $ 794,780 Business tax 13,453,236 13,306,414 Other taxes and fees 1,712,845 1,729,692 Total taxes payable $ 15,843,815 $ 15,830,886 |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE 13. STOCKHOLDERS’ EQUITY (a) Common stock Prior to the Share Exchange, the Company had 20,050,000 14,000,000 14,000,000 25,000,000 45,050,000 For the year ended September 30, 2016, in order to expand business in the large municipal market, which requires participants with significant paid in capital, the Company’s VIE Guangsha completed an equity recapitalization. The VIE’s accumulated retained earnings of $ 103,509,640 8,460,016 (b) Statutory surplus reserves The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory surplus reserve is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital 25 10 8,495,631 16,439,333 The discretionary surplus reserve may be used to acquire fixed assets or to increase the working capital to expend on production and operation of the business. The Company’s Board of Directors decided not to make an appropriation to this reserve for the years ended September 30, 2016 and 2015. |
CONTINGENCIES AND COMMITMENTS
CONTINGENCIES AND COMMITMENTS | 12 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 14. CONTINGENCIES AND COMMITMENTS From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company's management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate would have a material adverse impact on the Company's consolidated financial position, results of operations and cash flows. As an industry practice, the Company provides guarantees to PRC banks with respect to loans procured by the purchasers of the Company’s real estate properties for the total mortgage loan amount until the completion of obtaining the “Certificate of Ownership” of the properties from the government, which generally takes six to twelve months. Because the banks provide loan proceeds without getting the “Certificate of Ownership” as loan collateral during this six to twelve months’ period, the mortgage banks require the Company to maintain, as restricted cash, 5 10 1.5 1.7 |
SCHEDULE I
SCHEDULE I | 12 Months Ended |
Sep. 30, 2016 | |
Condensed Financial Information of Parent Company Only Disclosure [Abstract] | |
SCHEDULE I | CHINA HGS REAL ESTATE INC. SCHEDULE I- PARENT COMPANY BALANCE SHEETS (UNAUDITED) September 30, 2016 2015 ASSETS Investment in subsidiary $ 157,139,041 $ 159,592,844 Total Assets $ 157,139,041 $ 159,592,844 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accrued expenses 380,100 307,700 Shareholder loan 1,810,000 1,810,000 Total current liabilities 2,190,100 2,117,700 Stockholders' equity Common stock, $0.001 par value, 100,000,000 shares authorized, 45,050,000 shares issued and outstanding $ 45,050 $ 45,050 Additional paid-in capital 129,793,572 17,764,316 Statutory surplus 8,495,631 16,439,333 Retained earnings 20,661,184 119,668,198 Accumulated other comprehensive income (4,046,496) 3,558,247 Total stockholders' equity 154,948,941 157,475,144 Total Liabilities and Stockholders' Equity $ 157,139,041 $ 159,592,844 The accompanying notes are integral part of Schedule I CHINA HGS REAL ESTATE INC. SCHEDULE I - STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED SEPTEMBER 30, 2016 AND 2015 (UNAUDITED) 2016 2015 Equity in profit of subsidiary $ 5,150,940 $ 31,504,993 General and administrative expenses 59,600 4,967 Interest expense - net 72,400 72,400 Income before income taxes 5,018,940 31,427,626 Provision for income taxes - - Net income 5,018,940 31,427,626 Other comprehensive income Foreign currency translation adjustment (7,604,743) (5,186,242) Comprehensive income (loss) $ (2,585,803) $ 26,241,384 The accompanying notes are integral part of Schedule I CHINA HGS REAL ESTATE INC. SCHEDULE I - STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2016 AND 2015 (UNAUDITED) 2016 2015 Cash flows from operating activities Net income $ 5,018,940 $ 31,427,626 Adjustments to reconcile net income to net cash used in operating activities: Stock based compensation 59,600 4,967 Equity in profit of subsidiary (5,150,940) (31,504,993) Changes in assets and liabilities: Accrued expenses 72,400 72,400 Net cash used in operating activities $ - $ - Net increase (decrease) in cash - - Cash, beginning of year - - Cash, end of year $ - $ - Supplemental disclosures of cash flow information: Interest paid $ - $ - Income taxes paid $ - $ - The accompanying notes are integral part of Schedule I CHINA HGS REAL ESTATE INC. NOTES TO SCHEDULE I NOTE 1. BASIS OF PRESENTATION Certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been condensed or omitted. The Company’s investment in subsidiary and variable interest entity (“VIE”) is stated at cost plus equity in undistributed earnings of subsidiaries. NOTE 2. RESTRICTED ASSETS The Company’s PRC VIE and subsidiary are restricted in their ability to transfer a portion of their net assets to the Company. The payment of dividends by entities organized in China is subject to limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. The Company’s subsidiaries and its VIEs are also required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its statutory reserves account until the accumulative amount of such reserves reaches 50% of its respective registered capital. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. In addition, the Company’s operations and revenues are conducted and generated in China, all of the Company’s revenues being earned and currency received are denominated in RMB. RMB is subject to the foreign exchange control regulation in China, and, as a result, the Company may be unable to distribute any dividends outside of China due to PRC foreign exchange control regulations that restrict the Company’s ability to convert RMB into US Dollars. Schedule I of Article 5-04 of Regulation S-X requires the condensed financial information of registrant shall be filed when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. For purposes of the above test, restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiaries in the form of loans, advances or cash dividends without the consent of a third party. The condensed parent company financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the Company’s PRC subsidiary and VIE exceed 25% of the consolidated net assets of the Company. NOTE 3. COMMITMENTS The Company did not have any significant commitments or long-term obligations as at September 30, 2016 and 2015. |
SUMMARY OF SIGNIFICANT ACCOUN22
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Principles of consolidation | Principles of consolidation The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of China HGS Real Estate Inc. (the “Company” or “China HGS”), China HGS Investment Inc. (“HGS Investment”), Shaanxi HGS Management and Consulting Co., Ltd. (“Shaanxi HGS”) and its variable interest entity (“VIE”), Shaanxi Guangsha Investment and Development Group Co., Ltd. (“Guangsha”). All inter-company transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation. |
Revenue recognition | Revenue recognition Percentage of Completion method Real estate sales for the long term real estate projects are recognized under percentage completion method in accordance with the provisions of ASC 360-20-40D “Sale of Condominium Units”. Revenue and profit from the sales of long term 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 condominium units sold and related costs are recognized over the course of the construction period, based on the completion progress of a project. 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. Full accrual method Revenue from the sales of short term development properties, where the construction period is expected to 18 months or less is recognized by the full accrual method at the time of the closing of an individual unit sale. This occurs when title to or possession of the property is transferred to the buyer. A sale is not considered consummated until (a) the parties are bound by the terms of a contract, (b) all consideration has been exchanged, (c) any permanent financing for which the seller is responsible has been arranged, (d) all conditions precedent to closing have been performed, (e) the seller does not have substantial continuing involvement with the property, and (f) the usual risks and rewards of ownership have been transferred to the buyer. Further, the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property. The Company provides “mortgage loan guarantees” only with respect to buyers who make down-payments of 30 50 For municipal road construction projects, fees are generally recognized by the full accrual method at the time of the projects are completed. |
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, budgeted costs, share-based compensation and other similar charges. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates. |
EFFECT OF CHANGE IN ESTIMATE | EFFECT OF CHANGE IN ESTIMATE Changes of estimated gross profit margins related to revenue recognized under the percentage of completion method are made in the period in which circumstances requiring the revisions become known. For the year end September 30, 2016, real estate development projects with gross profits recognized in 2015 had changes in their estimated revenue and related gross profit margins. The Company reduced its prior estimates related to selling prices and total estimated sales values which led to an increase in the recognized costs of sales under percentage completion revenue recognition approach. As a result of these changes in gross profit margins, net income for the year ended September 30, 2016 decreased by $ 3,940,964 1,500,119 0.09 0.03 |
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 on what assumptions the market participants would use in pricing the asset or liability based on the best available information. The carrying amounts of cash, restricted cash and all other current assets, security deposits for land use rights, loans and all current liabilities approximate their fair value based on the short-term maturity of these instruments. The fair value of the long term customer, construction and security deposits approximate their carrying amounts because the deposits are received in cash. It was impractical to estimate the fair value of the amount due from the local government and the long term other loans payable. |
Foreign currency translation | Foreign currency translation The Company’s financial information is presented in U.S. dollars. The functional currency of the Company’s operating subsidiaries is Renminbi (“RMB”), the currency of the PRC. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830-30 “Translation of Financial Statements”. The financial information is first prepared in RMB and then is translated into U.S. dollars at year-end exchange rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in stockholders’ equity. 2016 2015 Year end RMB : USD exchange rate 6.6702 6.3568 Annual average RMB : USD exchange rate 6.5326 6.1653 The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation. |
Cash | Cash Cash includes cash on hand and demand deposits in accounts maintained with commercial banks within the PRC. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company maintains bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs. |
Restricted cash | Restricted Cash The restricted cash is required by the banks as collateral for mortgage loans given to the home buyers before obtaining the certificates of ownership of the properties as collateral. In order to provide the banks with the certificates of ownership, the Company is required to complete certain procedures with the Chinese government, which normally takes six to twelve months. Because the banks provide the loan proceeds to the Company without obtaining certificates of ownership as loan collateral during this six to twelve months’ period, the mortgage banks require the Company to maintain, as restricted cash, 5 10 |
Advances to vendors | Advances to vendors Advances to vendors consist of balances paid to contractors and vendors for services and materials that have not been provided or received and generally relate to the development and construction of residential and commercial units in the PRC. Advances to vendors are reviewed periodically to determine whether their carrying value has become impaired. Historically, the Company has not experienced any losses as a result of these advances. |
Security deposits for land use rights | Security deposits for land use rights Security deposits for land use rights consist of the deposit held by the PRC government for the purchase of land use rights and the deposit held by an unrelated party to transfer its land use rights to the Company. The deposits will be reclassified to real estate property under development upon the transfers of legal title. |
Real estate property development completed and under development | Real estate property development completed and under development Real estate property consists of finished residential unit sites, commercial offices and residential unit sites under development. The Company leases the land for the residential unit sites under land use right leases with various terms from the PRC government. The cost of land use rights is included in the development cost and allocated to each project. Real estate property development completed and real estate property under development are stated at the lower of cost or fair value. Expenditures for land development, including cost of land use rights, deed tax, pre-development costs, and engineering costs, exclusive of depreciation, are capitalized and allocated to development projects by the specific identification method. Costs are allocated to specific units within a project based on the ratio of the sales area of units to the estimated total sales area of the project (or phase of the project) multiplied by the total cost of the project (or phase of the project). Cost of amenities transferred to buyers is allocated to specific units as a component of total construction cost. The amenity cost includes landscaping, road paving, etc. Once the projects are completed, the amenities are under control of the property management companies. Real estate property development completed and real estate property under development are reclassified on the balance sheet into current and non-current portions based on the estimated date of construction completion and sales. The real estate property development completed classification is based on the estimated date that each property is expected to be sold within the Company’s normal operating cycle of the business and the Company’s sales plan. Real estate property development completed is classified as a current asset if the property is expected to be sold within the normal operating cycle of the business. Otherwise, it is classified as a non-current asset. The majority of real estate projects the Company has completed in the past were multi-layer or sub-high-rise real estate projects. The Company considers its normal operating cycle is 12 months. In accordance with ASC 360, “Property, Plant and Equipment” (“ASC 360”), real estate property development completed and under development are subject to valuation adjustments when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets. The Company reviewed all of its real estate projects for future losses and impairment by comparing the estimated future undiscounted cash flows for each project to the carrying value of such project. For the years ended September 30, 2016 and 2015, the Company did not recognize any impairment for real estate property under development and 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 expensed as a component of cost of real estate sales when related units are sold. All other interest is expensed as incurred. For the years ended September 30, 2016 and 2015, the total interest capitalized in the real estate property development was $ 3,410,529 3,064,621 |
Property, Plant and equipment, net | Property, Plant and equipment, net Property, plant and equipment are recorded at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after the fixed assets have been put into operation, such as repairs and maintenance and overhaul costs, is normally expensed in the year in which it is incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, less any estimated residual value. Estimated useful lives of the assets are as follows: Buildings 39 years Machinery and office equipment 5-10 years Vehicles 8 years Any gain or loss on disposal or retirement of a fixed asset is recognized in the profit and loss account and is the difference between the net sales proceeds and the net carrying amount of the asset. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and the resulting profit or loss is reflected in income. Maintenance, repairs and minor renewals are charged directly to expense as incurred unless such expenditures extend the useful life or represent a betterment, in which case they are capitalized. |
Impairment of long-lived assets | Impairment of long-lived assets In accordance with ASC 360, "Accounting for the Impairment or Disposal of Long-Lived Assets", the Company is required to review its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally determined by using the asset's expected future discounted cash flows or market value. The Company estimates fair value of the assets based on certain assumptions such as budgets, internal projections, and other available information as considered necessary. There is no impairment of long-lived assets for the years ended September 30, 2016 and 2015. |
Customer deposits | Customer deposits Customer deposits consist of amounts received from customers relating to the sale of residential units in the PRC. In the PRC, customers will generally obtain permanent financing for the purchase of their residential unit prior to the completion of the project. The lending institution will provide the funding to the Company upon the completion of the financing rather than the completion of the project. The Company receives these funds and recognizes them as a liability until the revenue can be recognized. |
Property warranty | Property warranty The Company provides its customers with warranties which cover major defects of building structure and certain fittings and facilities of properties sold. The warranty period varies from two years to five years, depending on different property components the warranty covers. The Company continually estimates potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a property. Reserves are determined based on historical data and trends with respect to similar property types and geographical areas. The Company continually monitors the warranty reserve and makes adjustments to its pre-existing warranties, if any, in order to reflect changes in trends and historical data as information becomes available. The Company may seek further recourse against its contractors or any related third parties if it can be proved that the faults are caused by them. In addition, the Company also withholds up to 2 |
Construction Deposits | Construction Deposits Construction deposits are the warranty deposits the real estate contractors provide to the Company upon signing the construction contracts. The Company can use such deposits to reimburse customers in the event of customer claims due to construction defects. The remaining balance of the deposits are returned to the contractors when the terms of the after-sale property warranty expires, which normally occurs within two to five years after the date of the deposit. |
Stock-based compensation | Stock-based compensation Share-based payment transactions are measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period, or vesting period. Forfeitures to be estimated at the time of grant and revised, if necessary, in the subsequent period if actual forfeitures differ from initial estimates. Forfeiture rate is estimated based on historical and future expectation of employee turnover rate and are adjusted to reflect future change in circumstances and facts, if any. Share-based compensation expense is recorded net of estimated forfeitures such that expense was recorded only for those stock options and common stock awards that are expected to vest. |
Income taxes | Income taxes Deferred tax assets and liabilities are for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. ASC 740-10-25 prescribes a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. There are no material uncertain tax positions as of September 30, 2016 and 2015. The Company is a corporation organized under the laws of the State of Florida. However, all of the Company’s operations are conducted solely by its subsidiaries in the PRC. No income is earned in the United States and the management does not repatriate any earnings outside the PRC. As a result, the Company did not generate any U.S. taxable income for the years ended September 30, 2016 and 2015. As of September 30, 2016, the Chinese entities’ income tax returns filed in China for the years ended December 31, 2015, 2014, 2013, 2012 and 2011 are subject to examination by the Chinese taxing authorities. As of September 30, 2016, the tax years ended September 30, 2008 through September 30, 2016 for the Company’s PRC entities remain open for statutory examination by PRC tax authorities. The parent Company China HGS Real Estate Inc.’s tax years ended September 30, 2012 through September 30, 2016 remains open for statutory examination by U.S. tax authorities. |
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 60 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, Nandajie 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 0.5 |
Comprehensive income | Comprehensive income In accordance with ASC 220-10-55, comprehensive income (loss) is defined as all changes in equity except those resulting from investments by owners and distributions to owners. The Company’s only components of comprehensive income (loss) for the years ended September 30, 2016 and 2015 were net income and foreign currency translation adjustments. |
Advertising expenses | Advertising expenses Advertising costs are expensed as incurred. For the years ended September 30, 2016 and 2015, the Company recorded advertising expenses of $ 591,390 338,115 |
Basic and diluted earnings per share | Basic and diluted earnings per share The Company computes earnings per share (“EPS”) in accordance with the ASC 260, “Earnings per share”, which requires companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. The following table presents a reconciliation of basic and diluted net income per share: For the years ended September 30, 2016 2015 Net income attributable to common share holders $ 5,018,940 $ 31,427,626 Weighted average common shares used in Basic computation 45,050,000 45,050,000 Effect of diluted stock options - 2,252 Weighted average common shares used in Diluted computation 45,050,000 45,052,252 Earnings per share - Basic $ 0.11 $ 0.70 Earnings per share - Diluted $ 0.11 $ 0.70 |
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 year ended September 30, 2016, two suppliers accounted for 22 17 23 21 17 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In January 2016, the FASB has issued Accounting Standards Update (ASU) No. 2016-01, Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to existing U.S. GAAP by: (1) requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (2) Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; (3) Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and. (4) Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of this update on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company is currently evaluating the impact of this new standard on its consolidated financial statements. In April 2016, the FASB released ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, EPS, and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company is currently evaluating the impact of this new standard on its consolidated financial statements. In May 2016, FASB issued ASU No. 2016-12Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company is assessing the impact of the adoption of the ASU on its unaudited financial statements, disclosure requirements and methods of adoption. In August 2016, the FASB issued ASU No. 2016 15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures. In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interest Held through Related Parties That Are under Common Control, to provide guidance on the evaluation of whether a reporting entity is the primary beneficiary of a VIE by amending how a reporting entity, that is a single decision maker of a VIE, treats indirect interests in that entity held through related parties that are under common control. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures. In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows: Restricted Cash". The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of this new standard on its consolidated financial statements. |
ORGANIZATION AND BASIS OF PRE23
ORGANIZATION AND BASIS OF PRESENTATION (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Variable Interest Entities | The following assets and liabilities of the consolidated VIE are included in the accompanying consolidated financial statements of the Company as of September 30, 2016 and 2015: Balance as of September 30, September 30, Current assets $ 135,675,587 $ 145,628,992 Non-current assets 220,295,366 152,360,755 Total assets 355,970,953 297,989,747 Current liabilities 83,547,250 110,515,207 Non-current liabilities 116,968,207 29,660,783 Total liabilities $ 200,515,457 $ 140,175,990 |
SUMMARY OF SIGNIFICANT ACCOUN24
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Currency Exchange Rate | 2016 2015 Year end RMB : USD exchange rate 6.6702 6.3568 Annual average RMB : USD exchange rate 6.5326 6.1653 |
Estimated Life Of Asset | Buildings 39 years Machinery and office equipment 5-10 years Vehicles 8 years |
Schedule of Earnings Per Share, Basic and Diluted | For the years ended September 30, 2016 2015 Net income attributable to common share holders $ 5,018,940 $ 31,427,626 Weighted average common shares used in Basic computation 45,050,000 45,050,000 Effect of diluted stock options - 2,252 Weighted average common shares used in Diluted computation 45,050,000 45,052,252 Earnings per share - Basic $ 0.11 $ 0.70 Earnings per share - Diluted $ 0.11 $ 0.70 |
REAL ESTATE PROPERTY DEVELOPMEN
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Real Estate [Abstract] | |
Components of Real Estate Property Completed and under Development | The following summarizes the components of real estate property completed and under development as of September 30, 2016 and 2015: Balance as of September 30, September 30, Development completed: Hanzhong City Mingzhu Garden Phase I $ 952,066 $ 1,146,277 Hanzhong City Mingzhu Garden Phase II 54,933,680 66,070,589 Hanzhong City Nan Dajie (Mingzhu Xinju) 1,371,633 1,439,257 Hanzhong City Oriental Pearl Garden (a) 50,643,258 - Yang County Yangzhou Pearl Garden Phase I 2,396,420 3,419,273 Yang County Yangzhou Pearl Garden Phase II 4,545,927 5,456,387 Real estate property development completed $ 114,842,984 $ 77,531,783 Less: Real estate property completed short-term 113,185,929 75,391,512 Real estate property completed long-term $ 1,657,055 $ 2,140,271 Under development: Hanzhong City Oriental Pearl Garden (a) $ - $ 55,154,153 Yang County Yangzhou Palace 76,618,856 47,843,166 Hanzhong City Shijin Project 7,261,811 7,619,829 Hanzhong City Liangzhou Road and related projects (b) 117,226,429 85,069,755 Hanzhong City Hanfeng Beiyuan East (c) 657,706 587,993 Hanzhong City Beidajie (e) 3,228,580 78,735 Yang County East 2 nd 2,390,633 2,461,303 Real estate property under development $ 207,384,015 $ 198,814,934 Less: Short-term portion - 55,154,153 Real estate property under development long-term $ 207,384,015 $ 143,660,781 (a) The Company recognized $ 18,777,470 12,168,108 (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 The Company’s development cost incurred on Liangzhou Road Project is treated as the Company’s deposit on purchasing the related land use rights, as agreed by the local government. As of September 30, 2016, the actual costs incurred by the Company were $ 117,226,429 85,069,755 9,439,183 (c) In September 2012, the Company was approved by the Hanzhong local government to construct four municipal roads with a total length of approximately 1,192 meters. The project was deferred and then restarted during the quarter ended March 31, 2014. As of September 30, 2016, the Company is waiting for the local government’s assessment and planning for the scope and budget for these projects. (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 and a budgeted price of approximately $ 25.2 168 4.75 5 (e) For the years ended September 30, 2016 and 2015, the Company received government’s subsidies in the amount of $ 3,153,544 |
PROPERTY, PLANT AND EQUIPMENT26
PROPERTY, PLANT AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | As of September 30, 2016 and 2015, property, plant and equipment was as follows: As of September 30, 2016 2015 Buildings $ 819,621 $ 860,030 Machinery 27,885 29,260 Office equipment - - Automobiles 545,640 444,060 Total 1,393,146 1,333,350 Less: accumulated depreciation 600,496 553,312 Property, plant and equipment, net $ 792,650 $ 780,038 |
SECURITY DEPOSITS (Tables)
SECURITY DEPOSITS (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Security Deposits For Land Use Rights [Abstract] | |
Schedule of Security Deposit | As of September 30, 2016 and 2015, security deposits were as follows: As of September 30, 2016 2015 Security deposit for land use right (1) $ 2,998,411 $ 3,146,237 Security deposits for other loan (2) 4,941,726 - Security deposits $ 7,940,137 $ 3,146,237 (1) In May 2011, the Company entered into a development agreement with the Hanzhong local government. Pursuant to the agreement, the Company will prepay the development cost of $ 17,945,489 119,700,000 2,998,411 3,146,237 20,000,000 (2) In connection with financing from Hanzhong Urban Construction Investment Development Co., Ltd ( See note 8), the Company was required to provide a security deposit for the loan received. As of September 30, 2016, the security deposit balances were $ 4,941,726 |
OTHER LOANS (Tables)
OTHER LOANS (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Hanzhong Municipal Housing Provident Fund Management Center [Member] | |
Schedule of Maturities of Long-term Debt | Repayment in USD Repayment in RMB Earlier of July 2018 or 60% sales completed 2,998,411 20,000,000 Earlier of October 2018 or 70% sales completed 4,497,616 30,000,000 Earlier of January 2019 or 75% sales completed 4,497,616 30,000,000 Total 11,993,643 80,000,000 |
OTHER LOANS [Member] | |
Schedule of Long-term Debt Instruments | As of September 30, 2016 2015 Loan A (i) $ - $ 954,883 Loan B (ii) - 4,719,356 Loan C (iii) 93,975,338 15,731,186 Loan D (iv) 11,993,643 - 105,968,981 21,405,425 Less: current maturities of other loans 6,125,753 5,674,239 Other loans long-term portion $ 99,843,228 $ 15,731,186 (i) A working capital finance agreement with a local investment company in Hanzhong was fully repaid in fiscal 2016. The loan carried a fixed interest of 10 23,364 1,038,846 (ii) On May 6, 2015, the Company renewed a credit agreement with a financial institution. On May 22, 2015, the Company borrowed $ 4,497,616 30,000,000 20 50 107,055 755,097 (iii) 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 $ 116,188,420 775,000,000 4.245 93,975,338 76,618,856 4,941,726 2,949,185 77,909 Subsequent to September 30, 2016, the Company further received $7,032,773 (RMB 46,910,000) from Hanzhong Urban Construction Investment Development Co., Ltd. The combined loan repayment schedule assuming total loan proceeds are borrowed are listed below: On January 8, 2016, the Company signed a loan agreement with Hanzhong Municipal Housing Provident Fund Management Center (“Housing Fund”) to borrow up to approximately $ 11,993,643 80,000,000 3.575 290,653 |
OTHER LOANS [Member] | Hanzhong Urban Construction Investment Development Co., Ltd [Member] | |
Schedule of Maturities of Long-term Debt | Repayment in USD Repayment in RMB 29-May-2017 6,125,753 40,860,000 20-November-2017 6,125,753 40,860,000 20-April -2018 13,116,548 87,490,000 20-May-2018 6,232,197 41,570,000 20-November-2018 6,232,197 41,570,000 20-April-2019 13,116,548 87,490,000 20-May-2019 6,382,117 42,570,000 20-October-2019 13,116,548 87,490,000 29-November-2019 6,382,117 42,570,000 20-April-2020 13,121,046 87,520,000 20-October-2020 13,116,548 87,490,000 20-October-2021 13,121,046 87,520,000 Total 116,188,418 775,000,000 |
CUSTOMER DEPOSITS (Tables)
CUSTOMER DEPOSITS (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Banking and Thrift [Abstract] | |
Customer Deposits from Pre-Sale of Residential Units | Customer deposits consist of amounts received from customers for the pre-sale of residential units in the PRC. The details of customer deposits are as follows: As of September 30, 2016 2015 Customer deposits by real estate projects Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) $ 9,150,119 $ 7,832,619 Oriental Pearl Garden 5,582,158 7,220,575 Liangzhou road and related projects 2,593,625 2,035,615 Yang County Pearl Garden 2,057,931 2,334,775 Yang County Palace 8,093,647 6,210,389 Total 27,477,480 25,633,973 Including: Customer deposits - short-term 16,790,208 17,387,969 Customer deposits - long-term $ 10,687,272 $ 8,246,004 |
RELATED PARTY LOANS (Tables)
RELATED PARTY LOANS (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Schedule of Shareholder Loan | As of September 30, 2016 2015 Shareholder loan USD loan (a) $ 1,810,000 $ 1,810,000 Shareholder loan RMB loan (b) 899,523 - Total $ 2,709,523 $ 1,810,000 a. The Company has a one year loan agreement (“USD Loan Agreement”) with Mr. Xiaojun Zhu, our Chairman, CEO and major shareholder (“Mr. Zhu”), pursuant to which the Company borrowed $ 1,810,000 4 72,400 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 from Mr. Zhu 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 with a new expiration date of June 30, 2017, with at an interest rate of 4.35 899,523 40,172 240,687 |
STOCK OPTIONS (Tables)
STOCK OPTIONS (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Assumptions used in Calculating Fair Value of Options Granted | The assumptions used in calculating the fair value of options granted using the Black-Scholes option pricing model are as follows: Options Risk-free interest rate 0.95 % Expected life of the options 3 year Expected volatility 143 % Expected dividend yield 0 % Fair value $ 178,800 |
Stock Option Activities | The following table summarizes the stock option activities of the Company: Number of Weighted Weighted Grant Date Outstanding, September 30, 2014 140,000 $ 2.39 0.89 44,207 Granted 120,000 $ 1.89 2.89 178,800 Forfeited (130,000) $ 2.39 - (31,093) Exercised - - - - Outstanding, September 30, 2015 130,000 $ 1.93 2.71 $ 191,914 Granted - - - - Forfeited * (10,000) $ 2.37 - (13,114) Exercised - - - - Outstanding, September 30, 2016 120,000 $ 1.89 1.89 $ 178,800 Exercisable, September 30, 2016 43,333 $ 1.89 1.89 $ 64,567 * options expired for the years ended September 30, 2016. |
TAXES (Tables)
TAXES (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Reconciliation of Statutory Rates to Effective Tax Rate | The following table reconciles the statutory rates to the Company’s effective tax rate for the years ended September 30, 2016, 2015 and 2014: 2016 2015 Chinese statutory tax rate 25.0 % 25.0 % Valuation allowance change 0.7 % 0.1 % Net impact of Exemption rendered by local tax authorities and other adjustments (9.4) % (19.3) % Effective tax rate 16.3 % 5.8 % |
Schedule of Components of Income Tax Expense (Benefit) | Income tax expense for the years ended September 30, 2016 and 2015 is summarized as follows: For the years ended September 30, 2016 2015 Current tax provision $ 343,589 $ 81,046 Deferred tax provision $ 631,099 $ 1,870,180 Income tax expense $ 974,688 $ 1,951,226 |
Components of Deferred Taxes | The components of deferred taxes as of September 30, 2016 and 2015 consist of the following: As of September 30, 2016 2015 Deferred tax assets: Deferred tax asset from net operating loss carry-forwards for parent company $ 181,274 $ 136,394 Valuation allowance (181,274) (136,394) Deferred tax asset - net $ - $ - Deferred tax liability: Revenue recognized based on percentage of completion $ 5,107,087 $ 4,711,161 Deferred tax liability long term $ 5,107,087 $ 4,711,161 |
Summary of Valuation Allowance | As of September 30, 2016 2015 Beginning Balance $ 136,394 $ 110,089 Current year additions 44,880 26,305 Ending Balance $ 181,274 $ 136,394 |
Taxes payable | September 30, September 30, CIT $ 677,734 $ 794,780 Business tax 13,453,236 13,306,414 Other taxes and fees 1,712,845 1,729,692 Total taxes payable $ 15,843,815 $ 15,830,886 |
ORGANIZATION AND BASIS OF PRE33
ORGANIZATION AND BASIS OF PRESENTATION (Schedule of Variable Interest Entities) (Details) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 |
Current assets | $ 135,675,587 | $ 145,628,992 |
Non-current assets | 220,295,366 | 152,360,755 |
Total assets | 355,970,953 | 297,989,747 |
Current liabilities | 83,547,250 | 110,515,207 |
Non-current liabilities | 116,968,207 | 29,660,783 |
Total liabilities | $ 200,515,457 | $ 140,175,990 |
SUMMARY OF SIGNIFICANT ACCOUN34
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Currency Exchange Rate) (Details) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Year end RMB : USD exchange rate | 6.6702 | 6.3568 |
Annual average RMB : USD exchange rate | 6.5326 | 6.1653 |
SUMMARY OF SIGNIFICANT ACCOUN35
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Estimated useful lives of the assets) (Details) | 12 Months Ended |
Sep. 30, 2016 | |
Buildings [Member] | |
Property, Plant and Equipment, Useful Life | 39 years |
Machinery and Equipment [Member] | Maximum [Member] | |
Property, Plant and Equipment, Useful Life | 10 years |
Machinery and Equipment [Member] | Minimum [Member] | |
Property, Plant and Equipment, Useful Life | 5 years |
Vehicles [Member] | |
Property, Plant and Equipment, Useful Life | 8 years |
SUMMARY OF SIGNIFICANT ACCOUN36
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule Of Earnings Per Share Basic And Diluted) (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Net income attributable to common share holders | $ 5,018,940 | $ 31,427,626 |
Weighted average common shares used in Basic computation | 45,050,000 | 45,050,000 |
Effect of diluted stock options | 0 | 2,252 |
Weighted average common shares used in Diluted computation | 45,050,000 | 45,052,252 |
Earnings per share - Basic | $ 0.11 | $ 0.70 |
Earnings per share - Diluted | $ 0.11 | $ 0.70 |
SUMMARY OF SIGNIFICANT ACCOUN37
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Narrative) (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Significant Accounting Policies [Line Items] | ||
Advertising Expense | $ 591,390 | $ 338,115 |
Percentage Of Contract Cost Withholds | 2.00% | |
Real Estate Property Plant And Equipment Interest Capitalization | $ 3,410,529 | 3,064,621 |
Decrease In Net Income | $ 3,940,964 | $ 1,500,119 |
Decrease In Basic Earnings Per Share | $ 0.09 | $ 0.03 |
Decrease In Diluted Earnings Per Share | $ 0.09 | $ 0.03 |
Supplier One [Member] | Project Expenditure [Member] | ||
Significant Accounting Policies [Line Items] | ||
Concentration Risk, Percentage | 22.00% | 23.00% |
Supplier Two [Member] | Project Expenditure [Member] | ||
Significant Accounting Policies [Line Items] | ||
Concentration Risk, Percentage | 17.00% | 21.00% |
Supplier Three [Member] | Project Expenditure [Member] | ||
Significant Accounting Policies [Line Items] | ||
Concentration Risk, Percentage | 17.00% | |
Hanzhong | ||
Significant Accounting Policies [Line Items] | ||
Land appreciation tax rate | 1.00% | |
Yang Country | ||
Significant Accounting Policies [Line Items] | ||
Land appreciation tax rate | 0.50% | |
Minimum | ||
Significant Accounting Policies [Line Items] | ||
Percentage of down payments to total purchase price of property to receive mortgage loan guarantees | 30.00% | |
Percentage Of Mortgage Proceeds As Security | 5.00% | |
Land appreciation tax rate | 30.00% | |
Maximum | ||
Significant Accounting Policies [Line Items] | ||
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 COMPLETE38
REAL ESTATE PROPERTY COMPLETED AND UNDER DEVELOPMENT (Components Of Real Estate) (Details) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 | |
Real Estate Properties [Line Items] | |||
Real estate property development completed | $ 114,842,984 | $ 77,531,783 | |
Less: Real estate property completed - short-term | 113,185,929 | 75,391,512 | |
Real estate property completed - long-term | 1,657,055 | 2,140,271 | |
Real estate property under development | 207,384,015 | 198,814,934 | |
Less: Short-term portion | 0 | 55,154,153 | |
Real estate property under development -long-term | 207,384,015 | 143,660,781 | |
Hanzhong City Mingzhu Garden Phase I | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 952,066 | 1,146,277 | |
Hanzhogn City Mingzhu Garden Phase II | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 54,933,680 | 66,070,589 | |
Hanzhong City Nan Dajie (Mingzhu Xinju) | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 1,371,633 | 1,439,257 | |
Yang County Yangzhou Pearl Garden Phase I | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 2,396,420 | 3,419,273 | |
Yang County Yangzhou Pearl Garden Phase II | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 4,545,927 | 5,456,387 | |
Hanzhong City Oriental Pearl Garden | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | [1] | 50,643,258 | 0 |
Real estate property under development | [1] | 0 | 55,154,153 |
Yang County Yangzhou Palace | |||
Real Estate Properties [Line Items] | |||
Real estate property under development | 76,618,856 | 47,843,166 | |
Hanzhong City Shijin Project | |||
Real Estate Properties [Line Items] | |||
Real estate property under development | 7,261,811 | 7,619,829 | |
Hanzhong City Liangzhou Road and related projects | |||
Real Estate Properties [Line Items] | |||
Real estate property under development | [2] | 117,226,429 | 85,069,755 |
Hanzhong City Hanfeng Beiyuan East | |||
Real Estate Properties [Line Items] | |||
Real estate property under development | [3] | 657,706 | 587,993 |
Hanzhong City Beidajie | |||
Real Estate Properties [Line Items] | |||
Real estate property under development | [4] | 3,228,580 | 78,735 |
Yang County East 2nd Ring Road | |||
Real Estate Properties [Line Items] | |||
Real estate property under development | [5] | $ 2,390,633 | $ 2,461,303 |
[1] | The Company recognized $18,777,470 of development cost in the cost of real estate sales under the percentage of completion method for the year ended September 30, 2016 (2015 - $12,168,108). The project was completed as of September 30, 2016. | ||
[2] | In September 2013, the Company entered into an agreement (“Liangzhou Agreement”) with the Hanzhong local government on the Liangzhou Road reformation and expansion project (Liangzhou Road Project”). Pursuant to the agreement, the Company is contracted to reform and expand the Liangzhou Road, a commercial street in downtown Hanzhong City, with a total length of 2,080 meters and width of 30 meters and to resettle the existing residences in the Liangzhou road area. The government’s original road construction budget was approximately $33 million in accordance with the Liangzhou Agreement. The Company, in return, is being compensated by the local government to have an exclusive right on acquiring at least 394.5 Mu land use rights in a specified location of Hanzhong City. The Liangzhou Road Project’s road construction started at the end of 2013. In 2014, the original scope and budget on the Liangzhou road reformation and expansion project was extended, because the local government included more area and resettlement residences into the project, which resulted in additional investments from the Company. In return, the Company is authorized by the local government to develop and manage the commercial and residential properties surrounding the Liangzhou Road project. Due to the extension, the Company expected the road construction to be completed and approved by the local government in the early 2017. | ||
[3] | In September 2012, the Company was approved by the Hanzhong local government to construct four municipal roads with a total length of approximately 1,192 meters. The project was deferred and then restarted during the quarter ended March 31, 2014. As of September 30, 2016, the Company is waiting for the local government’s assessment and planning for the scope and budget for these projects. | ||
[4] | For the years ended September 30, 2016 and 2015, the Company received government’s subsidies in the amount of $3,153,544 and $Nil for its Shanty Area Reform Project surrounding Beidajie Project located in Hantai District, Hanzhong City, respectively and the Company recorded the subsidies to offset against the development cost of Beidajie project. | ||
[5] | 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 and a budgeted price of approximately $25.2 million (or RMB 168 million), which was approved by the local Yang County government in March 2014. The local government is required to repay the Company’s project investment costs within 3 years with interest at the interest rate based on the commercial borrowing rate with the similar term published by China construction bank (September 30, 2016 - 4.75% and September 30, 2015 5%). The local government has approved a refund to the Company by reducing local surcharges or taxes otherwise required in the real estate development. The load construction is expected to be completed by 2017 |
REAL ESTATE PROPERTY COMPLETE39
REAL ESTATE PROPERTY COMPLETED AND UNDER DEVELOPMENT (Narrative) (Details) ¥ in Millions | 12 Months Ended | |||
Sep. 30, 2016USD ($) | Sep. 30, 2016CNY (¥) | Sep. 30, 2015USD ($) | Sep. 30, 2013USD ($) | |
Real Estate Properties [Line Items] | ||||
Land use right included in real estate property under development | $ 19,568,460 | $ 39,929,072 | ||
Hanzhong City Oriental Pearl Garden | ||||
Real Estate Properties [Line Items] | ||||
Construction and Development Costs, Total | 18,777,470 | 12,168,108 | ||
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 | 117,226,429 | $ 85,069,755 | ||
Yang County East 2nd Ring Road | ||||
Real Estate Properties [Line Items] | ||||
Budgeted Price For Municipal Roads | $ 25,200,000 | ¥ 168 | ||
Debt Instrument, Interest Rate, Stated Percentage | 4.75% | 5.00% | ||
Hanzhong City Beidajie | ||||
Real Estate Properties [Line Items] | ||||
Revenue from Grants | $ 3,153,544 | $ 0 | ||
Hanzhong City Liangzhou Road [Member] | ||||
Real Estate Properties [Line Items] | ||||
Revenue from Grants | $ 0 | $ 9,439,183 |
PROPERTY, PLANT AND EQUIPMENT40
PROPERTY, PLANT AND EQUIPMENT, NET (Components of Property, Plant and Equipment) (Details) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 |
Total | $ 1,393,146 | $ 1,333,350 |
Less: accumulated depreciation | 600,496 | 553,312 |
Property, plant and equipment, net | 792,650 | 780,038 |
Buildings | ||
Total | 819,621 | 860,030 |
Machinery | ||
Total | 27,885 | 29,260 |
Office equipment | ||
Total | 0 | 0 |
Automobiles | ||
Total | $ 545,640 | $ 444,060 |
PROPERTY, PLANT AND EQUIPMENT41
PROPERTY, PLANT AND EQUIPMENT, NET (Narrative) (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Depreciation, Total | $ 74,723 | $ 83,701 |
RECEIVABLE FROM LOCAL GOVERNM42
RECEIVABLE FROM LOCAL GOVERNMENT - LONG-TERM (Narrative) (Details) | 1 Months Ended | 12 Months Ended | |
Jun. 30, 2012USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | |
Real Estate Properties [Line Items] | |||
Number Of Municipal Road Construction | 2 | ||
Hanzhong Municipal Road Construction [Member] | |||
Real Estate Properties [Line Items] | |||
Budgeted Price For Municipal Roads | $ 2,900,000 | ||
Government Contract Receivable | $ 2,920,990 | $ 3,065,000 |
SECURITY DEPOSITS (Details)
SECURITY DEPOSITS (Details) | Sep. 30, 2016USD ($) | Sep. 30, 2016CNY (¥) | Sep. 30, 2015USD ($) | Sep. 30, 2015CNY (¥) | |||
Security Deposit | $ 7,940,137 | $ 3,146,237 | |||||
Other Loan [Member] | |||||||
Security Deposit | [1] | 4,941,726 | 0 | ||||
Land Use Rights One [Member] | |||||||
Security Deposit | $ 2,998,411 | [2] | ¥ 20,000,000 | $ 3,146,237 | [2] | ¥ 20,000,000 | |
[1] | In connection with financing from Hanzhong Urban Construction Investment Development Co., Ltd ( See note 8), the Company was required to provide a security deposit for the loan received. As of September 30, 2016, the security deposit balances were $4,941,726 (September 30, 2015 - $Nil) for other loan with Hanzhong Urban Construction Investment Development Co., Ltd. | ||||||
[2] | In May 2011, the Company entered into a development agreement with the Hanzhong local government. Pursuant to the agreement, the Company will prepay the development cost of $17,945,489 (RMB 119,700,000) to acquire certain land use rights through public bidding. The prepaid development cost will be deducted from the final purchase price of the land use rights. As of September 30, 2016, a deposit of $2,998,411 (RMB 20, 000,000) (2015 - $3,146,237 or RMB 20,000,000) was paid. The Company currently expects to make payment of the remaining development cost as the government’s work progresses. The Company classified the security deposits for land use rights as long term based on the Company’s development plan. |
SECURITY DEPOSITS (Narrative) (
SECURITY DEPOSITS (Narrative) (Details) | Sep. 30, 2016USD ($) | Sep. 30, 2016CNY (¥) | Sep. 30, 2015USD ($) | Sep. 30, 2015CNY (¥) | May 31, 2011USD ($) | May 31, 2011CNY (¥) | |||
Security Deposit | $ 7,940,137 | $ 3,146,237 | |||||||
Land Use Rights One [Member] | |||||||||
Security Deposit | 2,998,411 | [1] | ¥ 20,000,000 | 3,146,237 | [1] | ¥ 20,000,000 | |||
Expected Prepayment Development Costs | $ 17,945,489 | ¥ 119,700,000 | |||||||
Other Loan [Member] | |||||||||
Security Deposit | [2] | $ 4,941,726 | $ 0 | ||||||
[1] | In May 2011, the Company entered into a development agreement with the Hanzhong local government. Pursuant to the agreement, the Company will prepay the development cost of $17,945,489 (RMB 119,700,000) to acquire certain land use rights through public bidding. The prepaid development cost will be deducted from the final purchase price of the land use rights. As of September 30, 2016, a deposit of $2,998,411 (RMB 20, 000,000) (2015 - $3,146,237 or RMB 20,000,000) was paid. The Company currently expects to make payment of the remaining development cost as the government’s work progresses. The Company classified the security deposits for land use rights as long term based on the Company’s development plan. | ||||||||
[2] | In connection with financing from Hanzhong Urban Construction Investment Development Co., Ltd ( See note 8), the Company was required to provide a security deposit for the loan received. As of September 30, 2016, the security deposit balances were $4,941,726 (September 30, 2015 - $Nil) for other loan with Hanzhong Urban Construction Investment Development Co., Ltd. |
BANK LOAN (Narrative) (Details)
BANK LOAN (Narrative) (Details) - Loan Agreement [Member] - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Share Based Compensation Arrangement By Share Based Payment Award Options Weighted Average Remaining Contractual Term [Abstract] | ||
Debt instrument, weighted average interest rate | 5.00% | 5.50% |
Debt instrument, capitalized interest expense | $ 137,962 | $ 952,083 |
OTHER LOANS (Other Loans-Long T
OTHER LOANS (Other Loans-Long Term Portion) (Details) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 | |
Other loan | $ 105,968,981 | $ 21,405,425 | |
Less: current maturities of other loans | 6,125,753 | 5,674,239 | |
Other loans-long term portion | 99,843,228 | 15,731,186 | |
Loan A | |||
Other loan | [1] | 0 | 954,883 |
Loan B | |||
Other loan | [2] | 0 | 4,719,356 |
Loan C | |||
Other loan | [3] | 93,975,338 | 15,731,186 |
Loan D | |||
Other loan | [4] | $ 11,993,643 | $ 0 |
[1] | A working capital finance agreement with a local investment company in Hanzhong was fully repaid in fiscal 2016. The loan carried a fixed interest of 10% per year. For the years ended September 30, 2016 and 2015, total interest was $23,364 and $1,038,846, respectively, which was capitalized in to the development cost of Liangzhou road project. | ||
[2] | On May 6, 2015, the Company renewed a credit agreement with a financial institution. On May 22, 2015, the Company borrowed $4,497,616 (RMB 30,000,000) at a fixed interest rate of 20% per year for a six months period and the rate may up-float 50% if the loan proceeds were not used for the intended borrowing purpose. The loan was for the construction of Oriental Pearl Garden real estate project. The loan has been fully repaid as of September 30, 2016. For the years ended September 30, 2016 and 2015, total finance cost was $107,055 and $755,097, respectively, which was capitalized in the development cost of Oriental Pearl Garden real estate project. | ||
[3] | 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 $116,188,420 (RMB 775,000,000) for a long term loan at 4.245% interest per year to develop Liang Zhou Road Project. As of September 30, 2016, the Company borrowed $93,975,338 under this credit line. The loan is guaranteed by Hanzhong City Hantai District Municipal Government and pledged by the Company’s Yang County Palace project with carrying value of $76,618,856 as of September 30, 2016. In addition, the Company was required to provide a security deposit for the loan received (see note 6). As of September 30, 2016, the security deposit balances were $4,941,726 (2015- $Nil) for loan received. For the years ended September 30, 2016 and 2015, the interest was $2,949,185 and $77,909, respectively, which was capitalized in to the development cost of Liangzhou road project. Subsequent to September 30, 2016, the Company further received $7,032,773 (RMB 46,910,000) from Hanzhong Urban Construction Investment Development Co., Ltd. The combined loan repayment schedule assuming total loan proceeds are borrowed are listed below: | ||
[4] | On January 8, 2016, the Company signed a loan agreement with Hanzhong Municipal Housing Provident Fund Management Center (“Housing Fund”) to borrow up to approximately $11,993,643 (RMB 80,000,000) on development of Oriental Garden related projects. The loan carries interest at 3.575% per year and is due in January 2019. The Company’s major shareholder Mr. Xiaojun Zhu pledged his personal assets as collateral for the loan. As of September 30, 2016, the Company received all the proceeds from Housing Fund. The progress repayment is required based on certain sales milestones or a fixed repayment schedule starting in July 2018. The Housing Fund has rights to monitor the project’s future cash flow. For years ended September 30, 2016 and 2015, total interest was $290,653 and $Nil, respectively, which was capitalized in to the development cost of Oriental Garden project. The full amount of loan has following repayment schedule: |
OTHER LOANS (Schedule Of Repaym
OTHER LOANS (Schedule Of Repayment Loan) (Details) - 12 months ended Sep. 30, 2016 | USD ($) | CNY (¥) |
Debt Instrument Scheduled Repayment Amount | $ 116,188,418 | ¥ 775,000,000 |
May 29, 2017 | ||
Debt Instrument Scheduled Repayment Amount | 6,125,753 | 40,860,000 |
November 20, 2017 | ||
Debt Instrument Scheduled Repayment Amount | 6,125,753 | 40,860,000 |
April 20, 2018 | ||
Debt Instrument Scheduled Repayment Amount | 13,116,548 | 87,490,000 |
May 20, 2018 | ||
Debt Instrument Scheduled Repayment Amount | 6,232,197 | 41,570,000 |
November 20, 2018 | ||
Debt Instrument Scheduled Repayment Amount | 6,232,197 | 41,570,000 |
April 20, 2019 | ||
Debt Instrument Scheduled Repayment Amount | 13,116,548 | 87,490,000 |
May 20, 2019 | ||
Debt Instrument Scheduled Repayment Amount | 6,382,117 | 42,570,000 |
October 20, 2019 | ||
Debt Instrument Scheduled Repayment Amount | 13,116,548 | 87,490,000 |
November 29, 2019 | ||
Debt Instrument Scheduled Repayment Amount | 6,382,117 | 42,570,000 |
Apri 20, 2020 | ||
Debt Instrument Scheduled Repayment Amount | 13,121,046 | 87,520,000 |
October 20, 2020 | ||
Debt Instrument Scheduled Repayment Amount | 13,116,548 | 87,490,000 |
October 20, 2021 | ||
Debt Instrument Scheduled Repayment Amount | $ 13,121,046 | ¥ 87,520,000 |
OTHER LOANS (Schedule Of Full R
OTHER LOANS (Schedule Of Full Repayment Loan) (Details) - 12 months ended Sep. 30, 2016 - Other Short Term Loan 4 [Member] | USD ($) | CNY (¥) |
Debt Instrument, Periodic Payment, Total | $ 11,993,643 | ¥ 80,000,000 |
Earlier of July 2018 or 60% sales completed | ||
Debt Instrument, Periodic Payment, Total | 2,998,411 | 20,000,000 |
Earlier of October 2018 or 70% sales completed | ||
Debt Instrument, Periodic Payment, Total | 4,497,616 | 30,000,000 |
Earlier of January 2019 or 75% sales completed | ||
Debt Instrument, Periodic Payment, Total | $ 4,497,616 | ¥ 30,000,000 |
OTHER LOANS (Narrative) (Detail
OTHER LOANS (Narrative) (Details) | 2 Months Ended | 12 Months Ended | |||||||
Dec. 12, 2016USD ($) | Dec. 12, 2016CNY (¥) | Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2016CNY (¥) | Jan. 08, 2016USD ($) | Jan. 08, 2016CNY (¥) | May 22, 2015USD ($) | May 22, 2015CNY (¥) | |
Debt Instrument [Line Items] | |||||||||
Security Deposit | $ 7,940,137 | $ 3,146,237 | |||||||
Finance Agreement [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt Instrument, Interest Rate, Stated Percentage | 10.00% | 10.00% | |||||||
Interest Costs Capitalized | $ 23,364 | 1,038,846 | |||||||
Credit Agreement [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt Instrument, Face Amount | $ 4,497,616 | ¥ 30,000,000 | |||||||
Debt Instrument, Interest Rate, Stated Percentage | 20.00% | 20.00% | |||||||
Interest Costs Capitalized | $ 107,055 | 755,097 | |||||||
Debt Instrument Interest Rate Up Float Percentage | 50.00% | 50.00% | |||||||
Agreement Wth Hanzhong Urban Construction Investment Development Co Ltd [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt Instrument, Interest Rate, Stated Percentage | 4.245% | 4.245% | |||||||
Long-term Line of Credit | $ 93,975,338 | ||||||||
Line of Credit Facility, Maximum Borrowing Capacity | 116,188,420 | ¥ 775,000,000 | |||||||
Long-term Debt, Gross | 76,618,856 | ||||||||
Debt Instrument, Periodic Payment, Interest | 2,949,185 | 77,909 | |||||||
Security Deposit | 4,941,726 | 0 | |||||||
Agreement With Hanzhong Municipal Housing Provident Fund Management Center [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt Instrument, Interest Rate, Stated Percentage | 3.575% | 3.575% | |||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 11,993,643 | ¥ 80,000,000 | |||||||
Debt Instrument, Periodic Payment, Interest | $ 290,653 | $ 0 | |||||||
Subsequent Event [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Proceeds from Short-term Debt | $ 7,032,773 | ¥ 46,910,000 |
CUSTOMER DEPOSITS (Customer Dep
CUSTOMER DEPOSITS (Customer Deposits From Pre-Sale Of Residential Units) (Details) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 |
Customer deposits by real estate projects | ||
Total | $ 27,477,480 | $ 25,633,973 |
Including: Customer deposits - short-term | 16,790,208 | 17,387,969 |
Customer deposits - long-term | 10,687,272 | 8,246,004 |
Mingzhu Garden (Mingzhu Nanyuan & Mingzhu Beiyuan) | ||
Customer deposits by real estate projects | ||
Total | 9,150,119 | 7,832,619 |
Oriental Pearl Garden | ||
Customer deposits by real estate projects | ||
Total | 5,582,158 | 7,220,575 |
Liangzhou road and related projects | ||
Customer deposits by real estate projects | ||
Total | 2,593,625 | 2,035,615 |
Yang County Pearl Garden | ||
Customer deposits by real estate projects | ||
Total | 2,057,931 | 2,334,775 |
Yang County Palace | ||
Customer deposits by real estate projects | ||
Total | $ 8,093,647 | $ 6,210,389 |
CUSTOMER DEPOSITS (Narrative) (
CUSTOMER DEPOSITS (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Deposit Liabilities [Line Items] | ||
Mortgage loan guarantee amount | $ 1.5 | $ 1.7 |
Minimum | ||
Deposit Liabilities [Line Items] | ||
Percentage of customer deposit of unit price for cash purchase | 10.00% | |
Percentage of down payments to total purchase price of property to receive mortgage loan guarantees | 30.00% | |
Maximum | ||
Deposit Liabilities [Line Items] | ||
Percentage of customer deposit of unit price for cash purchase | 20.00% | |
Percentage of down payments to total purchase price of property to receive mortgage loan guarantees | 50.00% |
RELATED PARTY LOANS (Schedule o
RELATED PARTY LOANS (Schedule of Other Short-term Loans) (Details) | Sep. 30, 2016USD ($) | Sep. 30, 2016CNY (¥) | Sep. 30, 2015USD ($) | Sep. 30, 2015CNY (¥) | |
Shareholder Loans [Line Items] | |||||
Shareholder loan | $ 2,709,523 | $ 1,810,000 | |||
Shareholder USD Loan Agreement | |||||
Shareholder Loans [Line Items] | |||||
Shareholder loan | [1] | $ 1,810,000 | $ 1,810,000 | ||
Shareholder RMB Loan Agreement | |||||
Shareholder Loans [Line Items] | |||||
Shareholder loan | ¥ | [2] | ¥ 899,523 | ¥ 0 | ||
[1] | The Company has a one year loan agreement ("USD Loan Agreement") with Mr. Xiaojun Zhu, our Chairman, CEO and major shareholder ("Mr. Zhu"), 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, 2017. The Company recorded interest of $72,400 for each of the years ended September 30, 2016 and 2015. The Company has not yet paid this interest and it is recorded in accrued expenses in the accompanying consolidated balance sheets as of September 30, 2016 and 2015. | ||||
[2] | 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 from Mr. Zhu 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 with a new expiration date of June 30, 2017, with at an interest rate of 4.35% per year. The RMB loan balance as of September 30, 2016 and 2015 was $899,523 and $Nil, respectively. For the years ended September 30, 2016 and 2015, the interest was $40,172 and $240,687, respectively, which is capitalized in the development cost of Liangzhou road project. |
RELATED PARTY LOANS (Narrative)
RELATED PARTY LOANS (Narrative) (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | ||
Shareholder Loans [Line Items] | |||
Interest (expense) | $ 225,155 | $ 61,419 | |
Shareholder loan | 2,709,523 | 1,810,000 | |
Shareholder USD Loan Agreement | |||
Shareholder Loans [Line Items] | |||
Interest (expense) | $ 72,400 | 72,400 | |
Debt instrument, stated interest rate | 4.00% | ||
Shareholder loan | [1] | $ 1,810,000 | 1,810,000 |
Shareholder's RMB Loan Agreement | |||
Shareholder Loans [Line Items] | |||
Interest (expense) | $ 40,172 | $ 240,687 | |
Debt instrument, stated interest rate | 4.35% | ||
Shareholder loan | $ 899,523 | ||
[1] | The Company has a one year loan agreement ("USD Loan Agreement") with Mr. Xiaojun Zhu, our Chairman, CEO and major shareholder ("Mr. Zhu"), 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, 2017. The Company recorded interest of $72,400 for each of the years ended September 30, 2016 and 2015. The Company has not yet paid this interest and it is recorded in accrued expenses in the accompanying consolidated balance sheets as of September 30, 2016 and 2015. |
STOCK OPTIONS (Assumptions Used
STOCK OPTIONS (Assumptions Used In Calculating Fair Value Of Options Granted) (Details) | 1 Months Ended |
Aug. 31, 2015USD ($) | |
Risk-free interest rate | 0.95% |
Expected life of the options | 3 years |
Expected volatility | 143.00% |
Expected dividend yield | 0.00% |
Fair value | $ 178,800 |
STOCK OPTIONS (Stock Option Act
STOCK OPTIONS (Stock Option Activities) (Details) - USD ($) | 12 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | ||
Number of Options | ||||
Outstanding | 130,000 | 140,000 | ||
Granted | 0 | 120,000 | ||
Forfeited | (10,000) | [1] | (130,000) | |
Exercised | 0 | 0 | ||
Outstanding | 120,000 | 130,000 | 140,000 | |
Exercisable, September 30, 2016 | 43,333 | |||
Weighted Average Exercise Price | ||||
Outstanding | $ 1.93 | $ 2.39 | ||
Granted | 0 | 1.89 | ||
Forfeited | 2.37 | [1] | 2.39 | |
Exercised | 0 | 0 | ||
Outstanding | 1.89 | $ 1.93 | $ 2.39 | |
Exercisable, September 30, 2016 | $ 1.89 | |||
Weighted Average Remaining Life in Years | ||||
Outstanding | 1 year 10 months 20 days | 2 years 8 months 16 days | 10 months 20 days | |
Granted | 2 years 10 months 20 days | |||
Exercisable, September 30, 2016 | 1 year 10 months 20 days | |||
Grant Date Fair Value | ||||
Outstanding | $ 191,914 | $ 44,207 | ||
Granted | 0 | 178,800 | ||
Forfeited | (13,114) | [1] | (31,093) | |
Exercised | 0 | 0 | ||
Outstanding | 178,800 | $ 191,914 | $ 44,207 | |
Exercisable, September 30, 2016 | $ 64,567 | |||
[1] | options expired for the years ended September 30, 2016. |
STOCK OPTIONS (Narrative) (Deta
STOCK OPTIONS (Narrative) (Details) - USD ($) | 1 Months Ended | 12 Months Ended | |
Aug. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Options exercise price | $ 0 | $ 1.89 | |
Stock Based Compensation | $ 59,600 | $ 4,967 | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $ 114,233 | $ 173,833 | |
Stock Option Plan 2015 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock options granted | 120,000 | ||
Options exercise price | $ 1.89 | ||
Stock option vesting, percentage | 36.10% | 2.80% |
TAXES (Reconciliation Of Statut
TAXES (Reconciliation Of Statutory Rates To Effective Tax Rate) (Details) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Income Taxes [Line Items] | ||
Chinese statutory tax rate | 25.00% | 25.00% |
Valuation allowance change | 0.70% | 0.10% |
Net impact of Exemption rendered by local tax authorities and other adjustments | (9.40%) | (19.30%) |
Effective tax rate | 16.30% | 5.80% |
TAXES (Components of Income Tax
TAXES (Components of Income Tax Expenses) (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Income Taxes [Line Items] | ||
Current tax provision | $ 343,589 | $ 81,046 |
Deferred tax provision | 631,099 | 1,870,180 |
Income tax expense | $ 974,688 | $ 1,951,226 |
TAXES (Components Of Deferred T
TAXES (Components Of Deferred Taxes) (Details) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 |
Deferred tax assets: | |||
Deferred tax asset from net operating loss carry-forwards for parent company | $ 181,274 | $ 136,394 | |
Valuation allowance | (181,274) | (136,394) | $ (110,089) |
Deferred tax asset - net | 0 | 0 | |
Deferred tax liability: | |||
Revenue recognized based on percentage of completion | 5,107,087 | 4,711,161 | |
Deferred tax liability - long term | $ 5,107,087 | $ 4,711,161 |
TAXES (Movement of valuation al
TAXES (Movement of valuation allowance) (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Income Taxes [Line Items] | ||
Beginning Balance | $ 136,394 | $ 110,089 |
Current year additions | 44,880 | 26,305 |
Ending Balance | $ 181,274 | $ 136,394 |
TAXES (Taxes Payable) (Details)
TAXES (Taxes Payable) (Details) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 |
Income Taxes [Line Items] | ||
CIT | $ 677,734 | $ 794,780 |
Business tax | 13,453,236 | 13,306,414 |
Other tax and fees | 1,712,845 | 1,729,692 |
Total taxes payable | $ 15,843,815 | $ 15,830,886 |
TAXES (Narrative) (Details)
TAXES (Narrative) (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Income Taxes [Line Items] | ||
Business sales tax, rate | 5.00% | |
Business sales tax | $ 13,453,236 | $ 13,306,414 |
Income tax at statutory tax rate | 25.00% | 25.00% |
Net operating loss carry forwards | $ 533,160 | $ 401,160 |
Net operating loss carry forwards, expiration year | 2,036 | |
Provision for income taxes | $ 974,688 | 1,951,226 |
Land appreciation tax payable | 1,049,401 | 752,664 |
Valuation allowance, period additions | $ 44,880 | $ 26,305 |
Effective Value Added Tax Rate Percentage | 5.00% | |
Minimum | ||
Income Taxes [Line Items] | ||
Land appreciation tax rate | 30.00% | |
Maximum | ||
Income Taxes [Line Items] | ||
Land appreciation tax rate | 60.00% | |
Hanzhong | ||
Income Taxes [Line Items] | ||
Local income tax rate | 2.50% | |
Land appreciation tax rate | 1.00% | |
Yang Country | ||
Income Taxes [Line Items] | ||
Local income tax rate | 1.25% | |
Land appreciation tax rate | 0.50% |
STOCKHOLDERS' EQUITY (Narrative
STOCKHOLDERS' EQUITY (Narrative) (Details) - USD ($) | 1 Months Ended | 12 Months Ended | |
Aug. 31, 2009 | Sep. 30, 2016 | Sep. 30, 2015 | |
Common Stock Shares Issued | 14,000,000 | 45,050,000 | 45,050,000 |
Common Stock Shares Outstanding | 45,050,000 | 45,050,000 | |
Stock Issued During Period, Shares, New Issues | 25,000,000 | ||
Statutory Surplus Reserve Description | Appropriations to the statutory surplus reserve is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities registered capital | ||
Percentage Of Net Profits Statutory Surplus Reserve | 10.00% | ||
Statutory Accounting Practices, Statutory Capital and Surplus, Balance | $ 8,495,631 | $ 16,439,333 | |
Stock Repurchased During Period, Shares | 14,000,000 | ||
Adjustments to Additional Paid in Capital,Recapitalization of Accumulated Retained Earnings of Variable Interest Entity | 103,509,640 | ||
Adjustments to Additional Paid in Capital,Recapitalization of Statutory Reserve of Variable Interest Entity | $ 8,460,016 | ||
Prior To The Share Exchange [Member] | |||
Common Stock Shares Issued | 20,050,000 | ||
Common Stock Shares Outstanding | 20,050,000 | ||
Minimum [Member] | |||
Percentage Of Net Profits Statutory Surplus Reserve | 10.00% | ||
Percentage Of Statutory Surplus Reserve Before Conversion | 25.00% |
COMMITMENTS AND CONTINGENCY (Na
COMMITMENTS AND CONTINGENCY (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Commitments And Contingencies [Line Items] | ||
Security deposit provided for guarantee | $ 1.5 | $ 1.7 |
Minimum | ||
Commitments And Contingencies [Line Items] | ||
Percentage Of Mortgage Proceeds As Security | 5.00% | |
Maximum | ||
Commitments And Contingencies [Line Items] | ||
Percentage Of Mortgage Proceeds As Security | 10.00% |
SCHEDULE I (Parent Company Bala
SCHEDULE I (Parent Company Balance Sheets) (Details) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 |
ASSETS | |||
Total Assets | $ 356,388,816 | $ 298,440,438 | |
Current liabilities: | |||
Accrued expenses | 3,205,099 | 4,855,891 | |
Shareholder loans | 2,709,523 | 1,810,000 | |
Total current liabilities | 84,471,668 | 111,304,511 | |
Stockholders' equity | |||
Common stock, $0.001 par value, 100,000,000 shares authorized, 45,050,000 shares issued and outstanding | 45,050 | 45,050 | |
Additional paid-in capital | 129,793,572 | 17,764,316 | |
Statutory surplus | 8,495,631 | 16,439,333 | |
Retained earnings | 20,661,184 | 119,668,198 | |
Accumulated other comprehensive income | (4,046,496) | 3,558,247 | |
Total stockholders' equity | 154,948,941 | 157,475,144 | $ 131,228,793 |
Total Liabilities and Stockholders' Equity | 356,388,816 | 298,440,438 | |
Parent Company [Member] | |||
ASSETS | |||
Investment in subsidiary | 157,139,041 | 159,592,844 | |
Total Assets | 157,139,041 | 159,592,844 | |
Current liabilities: | |||
Accrued expenses | 380,100 | 307,700 | |
Shareholder loans | 1,810,000 | 1,810,000 | |
Total current liabilities | 2,190,100 | 2,117,700 | |
Stockholders' equity | |||
Common stock, $0.001 par value, 100,000,000 shares authorized, 45,050,000 shares issued and outstanding | 45,050 | 45,050 | |
Additional paid-in capital | 129,793,572 | 17,764,316 | |
Statutory surplus | 8,495,631 | 16,439,333 | |
Retained earnings | 20,661,184 | 119,668,198 | |
Accumulated other comprehensive income | (4,046,496) | 3,558,247 | |
Total stockholders' equity | 154,948,941 | 157,475,144 | |
Total Liabilities and Stockholders' Equity | $ 157,139,041 | $ 159,592,844 |
SCHEDULE I (Parent Company Ba66
SCHEDULE I (Parent Company Balance Sheets Parenthetical) (Details) - $ / shares | Sep. 30, 2016 | Sep. 30, 2015 | Aug. 31, 2009 |
Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 | |
Common Stock Shares Authorized | 100,000,000 | 100,000,000 | |
Common Stock, Shares, Issued | 45,050,000 | 45,050,000 | 14,000,000 |
Common Stock, Shares, Outstanding | 45,050,000 | 45,050,000 | |
Parent Company [Member] | |||
Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 | |
Common Stock Shares Authorized | 100,000,000 | 100,000,000 | |
Common Stock, Shares, Issued | 45,050,000 | 45,050,000 | |
Common Stock, Shares, Outstanding | 45,050,000 | 45,050,000 |
SCHEDULE I (Parent Company Stat
SCHEDULE I (Parent Company Statements Of Income And Comprehensive Income) (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Condensed Income Statements, Captions [Line Items] | ||
General and administrative expenses | $ 2,466,717 | $ 2,304,706 |
Income before income taxes | 5,993,628 | 33,378,852 |
Provision for income taxes | 974,688 | 1,951,226 |
Net income | 5,018,940 | 31,427,626 |
Other comprehensive income | ||
Foreign currency translation adjustment | (7,604,743) | (5,186,242) |
Comprehensive income (loss) | (2,585,803) | 26,241,384 |
Parent Company [Member] | ||
Condensed Income Statements, Captions [Line Items] | ||
Equity in profit of subsidiary | 5,150,940 | 31,504,993 |
General and administrative expenses | 59,600 | 4,967 |
Interest expense - net | 72,400 | 72,400 |
Income before income taxes | 5,018,940 | 31,427,626 |
Provision for income taxes | 0 | 0 |
Net income | 5,018,940 | 31,427,626 |
Other comprehensive income | ||
Foreign currency translation adjustment | (7,604,743) | (5,186,242) |
Comprehensive income (loss) | $ (2,585,803) | $ 26,241,384 |
SCHEDULE I (Parent Company St68
SCHEDULE I (Parent Company Statements Of Cash Flows) (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities | ||
Net income | $ 5,018,940 | $ 31,427,626 |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Stock based compensation | 59,600 | 4,967 |
Changes in assets and liabilities: | ||
Accrued expenses | 1,468,888 | (1,201,727) |
Net cash used in operating activities | (76,948,063) | 10,252,609 |
Net increase (decrease) in cash | 5,067,318 | 208,374 |
Cash, beginning of year | 1,333,919 | 1,125,545 |
Cash, end of year | 6,401,237 | 1,333,919 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 5,102,735 | 1,840,535 |
Income taxes paid | 424,970 | 144,742 |
Parent Company [Member] | ||
Cash flows from operating activities | ||
Net income | 5,018,940 | 31,427,626 |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Stock based compensation | 59,600 | 4,967 |
Equity in profit of subsidiary | (5,150,940) | (31,504,993) |
Changes in assets and liabilities: | ||
Accrued expenses | 72,400 | 72,400 |
Net cash used in operating activities | 0 | 0 |
Net increase (decrease) in cash | 0 | 0 |
Cash, beginning of year | 0 | 0 |
Cash, end of year | 0 | 0 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 0 | 0 |
Income taxes paid | $ 0 | $ 0 |