Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Jun. 30, 2018 | Aug. 14, 2018 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | CHINA HGS REAL ESTATE INC. | |
Entity Central Index Key | 1,158,420 | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Smaller Reporting Company | |
Trading Symbol | HGSH | |
Entity Common Stock, Shares Outstanding | 45,050,000 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2018 | Sep. 30, 2017 |
Current assets: | ||
Cash | $ 2,723,332 | $ 2,109,043 |
Restricted cash | 3,431,474 | 2,607,561 |
Cost and earnings in excess of billings | 13,519,955 | 12,673,349 |
Real estate property development completed | 61,451,304 | 79,233,948 |
Real estate property under development | 69,580,498 | 87,126,402 |
Other current assets | 1,674,707 | 1,529,698 |
Total current assets | 152,381,270 | 185,280,001 |
Property, plant and equipment, net | 766,442 | 825,833 |
Real estate property development completed, net of current portion | 1,394,138 | 1,386,552 |
Security deposits | 8,611,371 | 8,564,517 |
Real estate property under development, net of current portion | 211,951,789 | 180,667,276 |
Due from local government for real estate property development completed | 2,944,430 | 2,928,410 |
Total Assets | 378,049,440 | 379,652,589 |
Current liabilities: | ||
Other loans | 60,982,213 | 28,545,233 |
Accounts payable | 17,781,036 | 24,047,980 |
Other payables | 4,748,593 | 3,897,093 |
Construction deposits | 1,973,848 | 1,966,115 |
Billings in excess of cost and earnings | 5,499,949 | 4,247,477 |
Customer deposits | 22,358,550 | 24,613,864 |
Shareholder loan | 2,154,703 | 2,304,632 |
Accrued expenses | 2,997,285 | 3,158,432 |
Taxes payable | 15,926,272 | 17,259,202 |
Total current liabilities | 134,422,449 | 110,040,028 |
Deferred tax liabilities | 1,471,508 | 170,950 |
Tax payable - long term | 5,148,876 | 5,120,862 |
Customer deposits, net of current portion | 2,093,062 | 2,314,641 |
Other long term loan payable, less current portion | 64,333,176 | 98,797,447 |
Construction deposits, net of current portion | 1,297,457 | 1,319,295 |
Total liabilities | 208,766,528 | 217,763,223 |
Commitments and Contingencies | ||
Stockholders' equity | ||
Common stock, $0.001 par value, 100,000,000 shares authorized, 45,050,000 shares issued and outstanding June 30, 2018 and September 30, 2017 | 45,050 | 45,050 |
Additional paid-in capital | 129,897,872 | 129,853,172 |
Statutory surplus | 9,142,899 | 9,142,899 |
Retained earnings | 32,967,401 | 26,343,030 |
Accumulated other comprehensive loss | (2,770,310) | (3,494,785) |
Total stockholders' equity | 169,282,912 | 161,889,366 |
Total Liabilities and Stockholders' Equity | $ 378,049,440 | $ 379,652,589 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2018 | Sep. 30, 2017 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 45,050,000 | 45,050,000 |
Common stock, shares outstanding | 45,050,000 | 45,050,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Real estate sales | $ 14,551,834 | $ 15,715,091 | $ 50,905,772 | $ 35,726,739 |
Less: Sales tax | (63,611) | (213,183) | (153,891) | (679,221) |
Cost of real estate sales | (9,183,145) | (12,696,093) | (39,302,376) | (28,011,749) |
Gross profit | 5,305,078 | 2,805,815 | 11,449,505 | 7,035,769 |
Operating expenses | ||||
Selling and distribution expenses | 153,563 | 147,082 | 655,898 | 425,167 |
General and administrative expenses | 523,055 | 651,773 | 1,535,262 | 2,275,336 |
Total operating expenses | 676,618 | 798,855 | 2,191,160 | 2,700,503 |
Operating income | 4,628,460 | 2,006,960 | 9,258,345 | 4,335,266 |
Interest expense | (130,166) | (125,750) | (384,851) | (370,320) |
Other expense | (4,943) | 0 | (4,943) | 0 |
Income before income taxes | 4,493,351 | 1,881,210 | 8,868,551 | 3,964,946 |
Provision for income taxes | 1,113,422 | 306,406 | 2,244,180 | 804,928 |
Net income | 3,379,929 | 1,574,804 | 6,624,371 | 3,160,018 |
Other comprehensive income (loss) | ||||
Foreign currency translation gain (loss) | (9,348,988) | 2,377,825 | 724,475 | (2,490,781) |
Comprehensive income (loss) | $ (5,969,059) | $ 3,952,629 | $ 7,348,846 | $ 669,237 |
Basic and diluted income per common share | ||||
Basic and diluted | $ 0.08 | $ 0.03 | $ 0.15 | $ 0.07 |
Weighted average common shares outstanding | ||||
Basic and diluted | 45,050,000 | 45,050,000 | 45,050,000 | 45,050,000 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | 9 Months Ended | |
Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | |
Cash flows from operating activities | ||
Net income | $ 6,624,371 | $ 3,160,018 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Deferred tax provision | 1,334,056 | 86,471 |
Stock based compensation | 44,700 | 44,700 |
Depreciation | 437,241 | 38,433 |
Changes in assets and liabilities: | ||
Restricted cash | (831,101) | 259,829 |
Advances to vendors | (211,246) | 0 |
Cost and earnings in excess of billings | (797,870) | (952,473) |
Real estate property development completed | 18,698,758 | 21,602,071 |
Real estate property under development | (12,598,796) | (42,106,890) |
Other current assets | 70,984 | 600,966 |
Accounts payables | (6,568,036) | (5,720,568) |
Other payables | 852,178 | (1,190,529) |
Billings in excess of cost and earnings | 1,261,805 | 1,214,641 |
Customer deposits | (2,693,740) | 1,376,497 |
Construction deposits | (32,928) | (428,185) |
Accrued expenses | (182,051) | (1,049,391) |
Taxes payable | (1,465,169) | 586,314 |
Net cash provided by (used in) operating activities | 3,943,156 | (22,478,096) |
Cash flow from investing activities | ||
Purchases of fixed assets | (371,640) | (89,579) |
Net cash used in investing activities | (371,640) | (89,579) |
Cash flow from financing activities | ||
Proceeds from shareholder loan | 0 | 4,067,944 |
Repayment of shareholder loan | (156,679) | (4,942,772) |
Repayment of bank loans | (2,796,115) | 0 |
Proceeds from other loans | 0 | 26,470,159 |
Repayments of other loans | 0 | (5,997,059) |
Net cash (used in) provided by financing activities | (2,952,794) | 19,598,272 |
Effect of changes of foreign exchange rate on cash | (4,433) | (137,706) |
Net increase (decrease) in cash | 614,289 | (3,107,109) |
Cash, beginning of period | 2,109,043 | 6,401,237 |
Cash, end of period | 2,723,332 | 3,294,128 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 4,821,443 | 4,243,756 |
Income taxes paid | $ 979,093 | $ 681,772 |
ORGANIZATION AND BASIS OF PRESE
ORGANIZATION AND BASIS OF PRESENTATION | 9 Months Ended |
Jun. 30, 2018 | |
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. (“China HGS” or the “Company” or “we”, “us”, “our”), through its subsidiaries and variable interest entity (“VIE”), engages in real estate development, and the construction and sales of residential apartments, parking space and commercial properties in Tier 3 and Tier 4 cities and counties in People’s Republic of China (“China” or “PRC”). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the requirement of Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended June 30, 2018 and 2017 are not necessarily indicative of the results that may be expected for the full year. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017 filed with the SEC on January 3, 2018. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The unaudited condensed consolidated financial statements include the financial statements of China HGS Real Estate Inc. (the “Company” or “China HGS”), China HGS Investment Inc. (“HGS Investment”), Shaanxi HGS Management and Consulting Co., Ltd. (“Shaanxi HGS”) and its variable interest entity (“VIE”), Shaanxi Guangsha Investment and Development Group Co., Ltd. (“Guangsha”). All inter-company transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes, and disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates are used for, but not limited to, the assumptions and estimates used by management in recognizing development revenue under the percentage of completion method, the selection of the useful lives of property and equipment, , revenue recognition, taxes, budgeted costs, share-based compensation and other similar charges. Management believes that the estimates utilized in preparing its condensed consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates. Fair value of financial instruments The Company follows the provisions of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. It clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows: Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions or what assumptions the market participants would use in pricing the asset or liability based on the best available information. The carrying amounts reported in the accompanying condensed consolidated balance sheets for cash, restricted cash and all other current assets, security deposits for land use rights, loans and all current liabilities approximate their fair value based on the short-term maturity of these instruments. The fair value of the long term customer, construction and security deposits approximate their carrying amounts because the deposits are received in cash. It was impractical to estimate the fair value of the amount due from the local government and the long term other loans payable. Revenue recognition 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 be 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 20%-50% of the total purchase price of the property. The period of the mortgage loan guarantee begins on the date the bank approves the buyer’s mortgage and we receive the loan proceeds in our bank account and ends on the date the “Certificate of Ownership” evidencing that title to the property has been transferred to the buyer. The procedures to obtain the Certificate of Ownership take six to twelve months (the “Mortgage Loan Guarantee Period”). If, after investigation of the buyer’s income and other relevant factors, the bank decides not to grant the mortgage loan, our mortgage-loan based sales contract terminates and there will be no guarantee obligation. If, during the Mortgage Loan Guarantee Period, the buyer defaults on his or her monthly mortgage payment for three consecutive months, we are required to return the loan proceeds back to the bank, although we have the right to keep the customer's deposit and resell the property to a third party. Once the Certificate of Property has been issued by the relevant government authority, our loan guarantee terminates. If the buyer then defaults on his or her mortgage loan, the bank has the right to take the property back and sell it and use the proceeds to pay off the loan. The Company is not liable for any shortfall that the bank may incur in this event. To date, no buyer has defaulted on his or her mortgage payments during the Mortgage Loan Guarantee Period and the Company has not returned any loan proceeds pursuant to its mortgage loan guarantees. For municipal road construction projects, fees are generally recognized by the full accrual method at the time of the projects are completed. Foreign currency translation The Company’s financial information is presented in U.S. dollars. The functional currency of the Company’s operating subsidiaries is Renminbi (“RMB”), the currency of the PRC. The financial information is first prepared in RMB and then is translated into U.S. dollars at year-end exchange rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in stockholders’ equity. For nine months ended June 30, September 30, 2018 2017 2017 Period end RMB: USD exchange rate 6.6171 6.7793 6.6533 Period average RMB: USD exchange rate 6.4463 6.8585 6.8104 The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation. Cash Cash includes cash on hand and demand deposits in accounts maintained with commercial banks within the PRC. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company maintains bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs. Restricted Cash The restricted cash is required by the banks as collateral for mortgage loans given to the home buyers before obtaining the certificates of ownership of the properties as collateral. In order to provide the banks with the certificates of ownership, the Company is required to complete certain procedures with the Chinese government, which normally takes six to twelve months. Because the banks provide the loan proceeds to the Company without obtaining certificates of ownership as loan collateral during this six to twelve months’ period, the mortgage banks require the Company to maintain, as restricted cash, 5% to 10% of the mortgage proceeds as security for the Company’s obligations under such guarantees. The restricted cash is released by the banks once they receive the certificates of ownership. These deposits are not covered by insurance. The Company has not experienced any losses in such accounts and management believes its restricted cash account is not exposed to any risks. Advances to vendors Advances to vendors consist of balances paid to contractors and vendors for services and materials that have not been provided or received and generally relate to the development and construction of residential and commercial units in the PRC. Advances to vendors are reviewed periodically to determine whether their carrying value has become impaired. Historically, the Company has not experienced any losses as a result of these advances. Security deposits for land use rights Security deposits for land use rights consist of the deposits held by the PRC government for the purchase of land use rights and other 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 transfer of legal title. Real estate property development completed and under development Real estate property consists of finished residential unit sites, commercial offices and residential unit sites under development. The Company leases the land for the residential unit sites under land use right leases with various terms from the PRC government. The cost of land use rights is included in the development cost and allocated to each project. Real estate property development completed and real estate property under development are stated at the lower of cost or fair value. Expenditures for land development, including cost of land use rights, deed tax, pre-development costs, and engineering costs, exclusive of depreciation, are capitalized and allocated to development projects by the specific identification method. Costs are allocated to specific units within a project based on the ratio of the sales area of units to the estimated total sales area of the project (or phase of the project) multiplied by the total cost of the project (or phase of the project). Cost of amenities transferred to buyers is allocated to specific units as a component of total construction cost. The amenity cost includes landscaping, road paving, etc. Once the projects are completed, the amenities are under control of the property management companies. Real estate property development completed and real estate property under development are reclassified on the balance sheet into current and non-current portions based on the estimated date of construction completion and sales. The real estate property development completed classification is based on the estimated date that each property is expected to be sold within the Company’s normal operating cycle of the business and the Company’s sales plan. Real estate property development completed is classified as a current asset if the property is expected to be sold within the normal operating cycle of the business. Otherwise, it is classified as a non-current asset. Real estate property under development is classified as a current asset, if the property is reasonably expected to be completed within the Company’s normal operating cycle of the business. Otherwise, it is classified as a non-current asset. The majority of real estate projects the Company has completed in the past were multi-layer or sub-high-rise real estate projects. The Company considers its normal operating cycle is 12 months. Real estate property development completed and under development are subject to valuation adjustments when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets. The Company reviewed all of its real estate projects for future losses and impairment by comparing the estimated future undiscounted cash flows for each project to the carrying value of such project. For the three and nine months ended June 30, 2018 and 2017, the Company did not recognize any impairment for real estate property under development and completed. Capitalization of Interest Interest incurred during and directly related to real estate development projects is capitalized to the related real estate property under development during the active development period, which generally commences when borrowings are used to acquire real estate assets and ends when the properties are substantially complete or the property becomes inactive. Interest is capitalized based on the interest rate applicable to specific borrowings or the weighted average of the rates applicable to other borrowings during the period. Interest capitalized to real estate property under development is expensed as a component of cost of real estate sales when related units are sold. All other interest is expensed as incurred. For the three and nine months ended June 30, 2018, the total interest capitalized in the real estate property development was $1,701,643 and $4,501,913, respectively. For the three and nine months ended June 30, 2017, the total interest capitalized in the real estate property development was $1,355,697 and $3,958,242, respectively. Impairment 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 during the three and nine months ended June 30, 2018 and 2017 Customer deposits Customer deposits consist of amounts received from customers relating to the sale of residential units in the PRC. In the PRC, customers will generally obtain permanent financing for the purchase of their residential unit prior to the completion of the project. The lending institution will provide the funding to the Company upon the completion of the financing rather than the completion of the project. The Company receives these funds and recognizes them as a liability until the revenue can be recognized. Property warranty The Company provides its customers with warranties which cover major defects of building structure and certain fittings and facilities of properties sold. The warranty period varies from two years to five years, depending on different property components the warranty covers. The Company continually estimates potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a property. Reserves are determined based on historical data and trends with respect to similar property types and geographical areas. The Company continually monitors the warranty reserve and makes adjustments to its pre-existing warranties, if any, in order to reflect changes in trends and historical data as information becomes available. The Company may seek further recourse against its contractors or any related third parties if it can be proved that the faults are caused by them. In addition, the Company also withholds up to 2% of the contract cost from sub-contractors for periods of two to five years. These amounts are included in construction deposits, and are only paid to the extent that there has been no warranty claim against the Company relating to the work performed or materials supplied by the subcontractors. For the three and nine months ended June 30, 2018 and 2017, the Company had not recognized any warranty costs in excess of the amount retained from subcontractors and therefore, no warranty reserve is considered necessary at the balance sheet dates. 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. Share-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 are 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 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 June 30, 2018 and September 30, 2017. 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 VIE in the PRC. No income is earned in the Company and the Company’s subsidiaries and the management does not repatriate any earnings from VIE outside the PRC. As a result, the Company did not generate any U.S. taxable income for the three and nine months ended June 30, 2018 and 2017. As of June 30, 2018, the Chinese entities’ income tax returns filed in China for the years ended December 31, 2013 through 2017 are subject to examination by the Chinese taxing authorities. As of June 30, 2018, the parent Company China HGS Real Estate Inc.’s tax years ended September 30, 2013 through September 30, 2017 remains open for statutory examination by U.S. tax authorities. Land appreciation tax (“LAT”) In accordance with the relevant taxation laws in the PRC, the Company is subject to LAT based on progressive rates ranging from 30% to 60% on the appreciation of land value, which is calculated as the proceeds of sales of properties less deductible expenditures including borrowing costs and all property development expenditures. LAT is exempted if the appreciation values do not exceed certain thresholds specified in the relevant tax laws. The whole project must be completed before the LAT obligation can be assessed. Accordingly, the Company should record the liability and the total related expense at the completion of a project unless the tax authorities impose an assessment at an earlier date. The methods to implement this tax law vary among different geographic areas. Hanzhong, where the project Mingzhu Garden, Nandajie, Central Plaza and Oriental Pearl Garden are located, implements this tax rule by requiring real estate companies prepay the LAT based upon customer deposits received. The tax rate in Hanzhong is 1%. Yang County, where the project Yangzhou Pearl Garden and Yangzhou Palace are located, requires a tax rate of 0.5%. Comprehensive income (loss) In accordance with ASC 220-10-55, comprehensive income (loss) is defined as all changes in equity except those resulting from investments by owners and distributions to owners. The Company’s only components of comprehensive income (loss) for the three and nine months ended June 30, 2018 and 2017 were net income and foreign currency translation adjustments. Basic and diluted earnings per share The Company computes earnings per share (“EPS”) in accordance with the ASC 260, “Earnings per share”, which requires companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. Concentration risk The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC's economy. The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. All of the Company’s cash is maintained with state-owned banks within the People’s Republic of China of which no deposits are covered by insurance. 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 nine months ended June 30, 2018, no supplier accounted f or over 10% of the Company’s the project expenditures. For the nine months ended June 30, 2017, two suppliers accounted for 23% and 10% of the Company’s the project expenditures, respectively. For the three months ended June 30, 2018, no supplier accounted for ov er 10% of the Company’s total project expenditures. For the three months ended June 30, 2017, five suppliers accounted for over 20%, 15%, 13%, 12% and 10% of the Company’s total project expenditures, respectively. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. Generally Accepted Accounting Principles when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In August 2015, the FASB issued ASU No. 2015-14, “Deferral of the Effective Date” (“ASU 2015-14”), which defers the effective date for ASU 2014-09 by one year. the guidance in ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods), which means it will be effective for the Company’s fiscal year beginning October 1, 2018. In March 2016, the FASB issued ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue versus Net)” (“ASU 2016-08”), which clarifies the implementation guidance on principal versus agent considerations in the new revenue recognition standard. In April 2016, the FASB issued ASU No. 2016-10, “Identifying Performance Obligations and Licensing” (“ASU 2016-10”), which reduces the complexity when applying the guidance for identifying performance obligations and improves the operability and understandability of the license implementation guidance. In May 2016, the FASB issued ASU No. 2016-12 “Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”), which amends the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. In December 2016, the FASB further issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” (“ASU 2016-20”), which makes minor corrections or minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments are intended to address implementation and provide additional practical expedients to reduce the cost and complexity of applying the new revenue standard. These amendments have the same effective date as the new revenue standard. Preliminarily, we will adopt Topic 606 in the first quarter of our fiscal 2019 using the modified retrospective transition method, and are continuing to evaluate the impact our pending adoption of Topic 606 will have on our unaudited condensed consolidated financial statements. The Company’s current percentage completion revenue recognition method is not allowed under the new revenue recognition standards set forth in ASU 2014-09. Potential adjustments might have material impacts on the company’s condensed consolidated financial statement upon adoption of the new guidance at the time of adoption based upon outstanding contracts at that time. In March 2018, the FASB issued ASU 2018-05 — Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”), which amends the FASB Accounting Standards Codification and XBRL Taxonomy based on the Tax Cuts and Jobs Act (the “Act”) that was signed into law on December 22, 2017 and Staff Accounting Bulletin No. 118 (“SAB 118”) that was released by the Securities and Exchange Commission. The Act changes numerous provisions that impact U.S. corporate tax rates, business-related exclusions, and deductions and credits and may additionally have international tax consequences for many companies that operate internationally. The Company does not believe this guidance will have a material impact on its condensed consolidated financial statements. On June 20, 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under ASU No. 2018-07, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The new standard is effective for us on January 1, 2019. Early adoption is permitted, including in interim periods, and should be applied to all new awards granted after the date of adoption. The Company does not believe this guidance will have a material impact on its condensed consolidated financial statements. Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the unaudited condensed consolidated financial position, statements of operations and cash flows. |
REAL ESTATE PROPERTY DEVELOPMEN
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT | 9 Months Ended |
Jun. 30, 2018 | |
Real Estate [Abstract] | |
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT | NOTE 3. REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT The following summarizes the components of real estate property development completed and under development as of June 30, 2018 and September 30, 2017: Balance as of June 30, 2018 September 30, 2017 Development completed: Hanzhong City Mingzhu Garden Phase I $ 827,822 $ 823,319 Hanzhong City Mingzhu Garden Phase II 32,578,817 42,274,715 Hanzhong City Nan Dajie (Mingzhu Xinju) 1,313,818 1,306,669 Hanzhong City Oriental Pearl Garden 21,885,560 29,969,640 Yang County Yangzhou Pearl Garden Phase I 1,890,730 1,880,443 Yang County Yangzhou Pearl Garden Phase II 4,348,695 4,365,714 Real estate property development completed 62,845,442 80,620,500 Less: Real estate property completed – short-term 61,451,304 79,233,948 Real estate property completed – long-term $ 1,394,138 $ 1,386,552 Under development: Yang County Yangzhou Palace $ 69,580,498 $ 87,126,402 Hanzhong City Shijin Project 7,320,083 7,280,256 Hanzhong City Liangzhou Road and related projects (a) 138,028,285 133,941,504 Hanzhong City Hanfeng Beiyuan East (b) 762,821 758,670 Hanzhong City Beidajie (d) 60,818,568 36,335,231 Yang County East 2 nd 5,022,032 2,351,615 Real estate property under development 281,532,287 267,793,678 Less: Short-term portion 69,580,498 87,126,402 Real estate property under development –long-term $ 211,951,789 $ 180,667,276 (a) In September 2013, the Company entered into an agreement (“Liangzhou Agreement”) with the Hanzhong local government on the Liangzhou Road reformation and expansion project (Liangzhou Road Project”). Pursuant to the agreement, the Company is contracted to reform and expand the Liangzhou Road, a commercial street in downtown Hanzhong City, with a total length of 2,080 meters and width of 30 meters and to resettle the existing residences in the Liangzhou road area. The government’s original road construction budget was approximately $33 million in accordance with the Liangzhou Agreement. The Company, in return, is being compensated by the local government to have an exclusive right on acquiring at least 394.5 Mu land use rights in a specified location of Hanzhong City. The Liangzhou Road Project’s road construction started at the end of 2013. In 2014, the original scope and budget on the Liangzhou road reformation and expansion project was extended, because the local government included more area and resettlement residences into the project, which resulted in additional investments from the Company. In return, the Company is authorized by the local government to develop and manage the commercial and residential properties surrounding the Liangzhou Road project. As of June 30, 2018, the main Liangzhou road construction is substantially completed and is expected to be approved by the local government in December 2018. 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 June 30, 2018, the actual costs incurred by the Company were $138,028,285 (September 30, 2017 - $133,941,504) and the incremental cost related to residence resettlement approved by the local government. The Company determined that the Company’s Investment in Liangzhou Road Project in exchange for interests in future land use rights is a barter transaction with commercial substance. For the three and nine months ended June 30, 2018 and 2017, the Company did not receive government’s subsidies for its Shanty Area Reform Project surrounding Liang Zhou Road located in Hantai District, Hanzhong City, respectively and the Company recorded the subsidies to offset against the development cost of Liangzhou Road Project. (b) 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 year ended September 30, 2014. As of June 30, 2018, the local government was still in the process of assessing the budget for these projects. (c) 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 $25.4 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 (June 30, 2018 – 4.75% and September 30, 2017 – 4.75%). The local government has approved a refund to the Company by reducing local surcharges or taxes otherwise required in the real estate development. The road construction is expected to be completed by 2019. (d) For the three and nine months ended June 30, 2018 and 2017, the Company did not received government’s subsidies for its Shanty Area Reform Project surrounding Beidajie Project located in Hantai District, Hanzhong City. As of June 30, 2018 and September 30, 2017, land use rights included in real estate property under development totaled $16,132,138 and $ 18,040,624, respectively. |
OTHER LOANS
OTHER LOANS | 9 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
OTHER LOANS | NOTE 4. OTHER LOANS June , 2018 September 30, 2017 Loan A (i) $ 95,282,720 $ 97,473,417 Loan B (ii) 12,089,888 12,024,108 Loan C (iii) 17,942,781 17,845,155 125,315,389 127,342,680 Less: current maturities of other loans 60,982,213 28,545,233 Other loans – long-term portion $ 64,333,176 $ 98,797,447 (i) On June 26, 2015 and March 10, 2016, the Company signed phase I and Phase II agreements with Hanzhong Urban Construction Investment Development Co., Ltd, a state owned Company, to borrow up to approximately $117.1 million (or RMB 775 million) for a long term loan at 4.245% interest per year to develop Liangzhou Road Project. The Company repaid $8,898,852 (RMB 58,884,596) prior to June 30, 2018. As of June 30, 2018, the Company borrowed $95,282,720 under this credit line (September 30, 2017 - $97,473,417). 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 $69,580,498 as of June 30, 2018 (September 30, 2017 - $87,126,402). In addition, the Company was required to provide a security deposit for the loan received. As of June 30, 2018, the security deposits paid were $5,588,898 (September 30, 2017 - $5,558,490) for loans received and included in the long term security deposit. For the three and nine months ended June 30, 2018, interest paid was $1,557,004 and $4,069,968 (2017 - $1,224,244 and $3,537,430), respectively, which was capitalized in to the development cost of Liangzhou road project. Due to local government’s delay in reallocation of residence in Liangzhou Road and related area, the Hanzhong Urban Construction Investment Development Co., Ltd has not released all the funds available in this loan to the Company and the Company’s withdraw will be based on the project’s development progress. The total required loan repayment schedule assuming total loan proceeds are borrowed are listed below: For the twelve months ended: Repayment in USD Repayment in RMB June 30, 2019 $ 48,892,324 $ 323,525,404 June 30, 2020 32,881,474 217,580,000 June 30, 2021 13,221,804 87,490,000 June 30, 2022 13,226,338 87,520,000 Total $ 108,221,940 $ 716,115,404 (ii) On January 8, 2016, the Company signed a loan agreement with Hanzhong Municipal Housing Provident Fund Management Center (“Housing Fund”) to borrow up to approximately $12.1 million (RMB 80 million) related to 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 June 30, 2018, the Company received all the proceeds from Housing Fund. The progress repayment is required based on certain sales milestones or a fixed repayment schedule which started in July 2018. The Housing Fund has rights to monitor the project’s future cash flow. For the three months and nine months ended June 30, 2018, total interest was $114,620 and $336,446 (2017 - $106,564 and $316,226), respectively. As of June 30, 2018, The full amount of loan has following repayment schedule: Repayment in USD Repayment in RMB Earlier of July 2018 or 60% sales completed * $ 3,022,472 $ 20,000,000 Earlier of October 2018 or 70% sales completed 4,533,708 30,000,000 Earlier of January 2019 or 75% sales completed 4,533,708 30,000,000 Total $ 12,089,888 $ 80,000,000 * (iii) In December 2016, the Company signed a loan agreement with Hantai District Urban Construction Investment Development Co., Ltd, a state owned Company, to borrow up to approximately $18 million (RMB 119 million) for the development of Hanzhong City Liangzhou Road project. As of June 30, 2018, the Company received all the proceeds and repaid unused fund of $43,177 (RMB 270,829). The loan carries interest at a fixed interest of 1.2% and is due on June 20, 2031. The Company pledged the assets of Liangzhou Road and related projects as collateral for the loan, The carrying value of the Liangzhou Road and related projects amounted to $138,028,285 and $133,941,504 as of June 30, 2018 and September 30, 2017, respectively. Total financing costs of $57,230 and $167,988 for the three and nine months ended June 30, 2018 (2017- $131,454 and $390,100), respectively, were capitalized in to the development cost of Hanzhong City Liangzhou Road project. Additionally, in September 2017, the Urban Development Center Co., Ltd. approved a construction loan for the Company in the amount of approximately $26.4 million (RMB 175 million) with an annual interest rate of 1.2% per year in connection with the Liangzhou Road and related Project. The Company is required to repay the loan by equal annual principal repayment of approximately $5.4 million from December 2027 through May 2031. The amount of this loan is available to be drawn down as soon as the land use right of the Liangzhou Road is approved and the construction starts, which is expected to begin in December 2018. Interest for the three and nine months ended June 30, 2018 was $84,161 and $247,041, respectively, which was included in the construction capitalized costs (2017 – Nil). |
CUSTOMER DEPOSITS
CUSTOMER DEPOSITS | 9 Months Ended |
Jun. 30, 2018 | |
Banking and Thrift [Abstract] | |
CUSTOMER DEPOSITS | NOTE 5. CUSTOMER DEPOSITS Customer deposits consist of amounts received from customers for the pre-sale of residential units in the PRC. The detail of customer deposits is as follows: June 30, 2018 September 30, 2017 Customer deposits by real estate projects Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) $ 8,403,327 $ 9,931,120 Oriental Pearl Garden 6,597,619 6,342,632 Liangzhou road and related projects 2,093,062 2,314,641 Yang County Pearl Garden 1,563,894 934,557 Yang County Palace 5,793,710 7,405,555 Total 24,451,612 26,928,505 Less: Customer deposits - short-term 22,358,550 24,613,864 Customer deposits - long-term $ 2,093,062 $ 2,314,641 Customer deposits are typically 10%-20% of the unit price for those customers who purchase properties in cash and 30%-50% of the unit price for those customers who purchase properties with mortgages. Buyers with mortgage loans pay customer deposits. The banks provide the balance of the funding to the Company upon consummation of the sales. The banks hold the properties as collateral for customers’ mortgage loans. If the customers default, the bank will repossess the collateral properties. Except during the Mortgage Loan Guarantee Period of approximately six to twelve months, the banks have no recourse to the Company for customers’ defaults. As of June 30, 2018 and September 30, 2017, approximately $3.4 million and $2.6 million were guaranteed by the Company, respectively. |
RELATED PARTY LOANS
RELATED PARTY LOANS | 9 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY LOANS | NOTE 6. RELATED PARTY LOANS As of June 30, 2018 September 30, 2017 Shareholder loan – USD loan (a) $ 1,810,000 $ 1,810,000 Shareholder loan – RMB loan (b) 344,703 494,632 Total $ 2,154,703 $ 2,304,632 a. The Company has a one year loan agreement (“USD Loan Agreement”) with Mr. Xiaojun Zhu, the Chairman, CEO and major shareholder, pursuant to which the Company borrowed $1,810,000 to make a capital injection into Shaanxi HGS, the Company’s subsidiary. The interest rate for the loan is 4% per annum and the loan matured on July 19, 2014. The Company entered into the amendments to the USD Loan Agreement to extend the term until July 31, 2019. The Company recorded interest expense of $18,100 and $36,200 for three months and nine months ended June 30, 2018 (2017- $18,100 and $54,300), respectively. The Company has not yet paid this interest and it is recorded in accrued expenses. b. On December 31, 2013, Shaanxi Guangsha Investment and Development Group Co., Ltd. (the “Guangsha”) 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 upon maturity, with at an interest rate of 4.35% per year. The RMB loan balance as of June 30, 2018 and September 30, 2017 was $344,703 and $494,632, respectively. For the three and nine months ended June 30, 2018, the interest was $3,248 and $16,916 (2017 - $Nil and $30,712), respectively, which is capitalized in the development cost of Liangzhou road project. |
STOCK OPTIONS
STOCK OPTIONS | 9 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK OPTIONS | NOTE 7. 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 shares of the Company’s common stock (“2015 Stock Options”). The shares underlying the options become excisable during the following 36 months period at the end of each quarter. The exercise price of the options is $1.89 per share. As of June 30, 2018 and September 30, 2017, 94.4% and 69.4% of the option awards have vested, respectively. The assumptions used in calculating the fair value of options granted using the Black-Scholes option pricing model are as follows: Options granted in August 2015 Risk-free interest rate 0.95 % Expected life of the options 3 year Expected volatility 143 % Expected dividend yield 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. The following table summarizes the stock option activities of the Company: Number of options Weighted Average Exercise Price Weighted Average Remaining Life in Years Grant Date Fair Value Outstanding, September 30, 2017 120,000 $ 1.89 0.89 $ 178,800 Granted - - - - Forfeited - - - - Exercised - - - - Outstanding, June 30, 2018 120,000 $ 1.89 0.14 $ 178,800 Exercisable, June 30, 2018 113,333 $ 1.89 0.14 $ 168,866 The Company recorded $14,900 and $44,700 stock-based compensation expense for the three and nine months ended June 30, 2018, respectively. Since the average share price for the three and nine months ended June 30, 2018 was below the exercise price of the above options, these options were anti-dilutive at June 30, 2018 and therefore would not be included in the diluted shares calculation |
TAXES
TAXES | 9 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
TAXES | NOTE 8. TAXES (A) Business sales tax The Company is subject to a 5% business sales tax on revenue. It is the Company’s continuing practice to recognize the 5% business sales tax based on revenue as a cost of sales as the revenue is recognized. As of June 30, 2018, the Company had business sales tax payable of $12,574,806 (September 30, 2017- $14,143,444), which is expected to be paid when the projects are completed and assessed by the local tax authority. In May of 2016, the Business Tax has been incorporated into Value Added Tax in China, which means there will be no more Business Tax and accordingly some business operations previously taxed in the name of Business Tax will be taxed in the manner of VAT thereafter. The Company is subject to 5% of VAT for its entire exiting real estate project based on the local tax authority’s practice. ( B) Corporate income taxes (“CIT”) The Company and its subsidiaries had operating losses since inception and the Company recorded a full valuation allowance against those tax losses. All the Company’s consolidated earnings are generated by the Company’ VIE in PRC. The Company’s VIE are governed by the Income Tax Law of the People’s Republic of China concerning the privately run enterprises, which are generally subject to income tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments. However, prior to October 1, 2017, as approved by the local tax authority of Hanzhong City, the Company’s CIT was assessed annually at a pre-determined fixed rate as an incentive to stimulate the local economy and encourage entrepreneurship. The local income tax rate in Hanzhong is 2.5% and in Yang County is 1.25% on revenue. Starting from October 1, 2017, the Company is subject to income tax rate of 25% on taxable income in fiscal 2018 and afterwards. The change in the income tax policy could negatively affect the Company’s net income. For the three and nine months ended June 30, 2018 and 2017, the Company’s income taxes were $1,113,422 and 2,244,180 (2017 - $306,406 and $804,928), respectively. Although the possibility exists for reinterpretation of the application of the tax regulations by higher tax authorities in the PRC for the Company’s tax filling prior to October 1, 2017, 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. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a U.S. corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Company has determined that the Company’s VIE in PRC does not qualify as a reportable controlled foreign corporation (“CFC”) in accordance with its understanding of the Act and guidance available as of the date of this filing and as a result the Company assessed there was no significant income tax impact during the period in which the legislation was enacted. On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, the Company has determined that the Company’s VIE in PRC does not qualify as a reportable CFC, therefore it is not necessary to record any income tax provision in connection with the transition tax on the mandatory deemed repatriation of foreign earnings at December 31, 2017. Any subsequent adjustment to these amounts will be recorded to current tax expense in fiscal 2018 when the analysis is complete. The following table reconciles the statutory rates to the Company’s effective tax rate for the three and nine months ended June 30, 2018 and 2017: Three months ended June 30, Nine months ended June 30, 2018 2017 2018 2017 Chinese statutory tax rate 25 % 25 % 25 % 25 % Net impact of Exemption rendered by local tax authorities (0.4 )% (8.8 )% 0.2 % (5.8 )% Valuation allowance change and other adjustments 0.2 % 0.1 % 0.1 % 1.1 % Effective tax rate 24.8 % 16.3 % $ 25.3 % 20.3 % Income tax expense for the three and nine months ended June 30, 2018 and 2017 is summarized as follows: Three months ended June 30, Nine months ended June 30, 2018 2017 2018 2017 Current tax provision $ 160,154 $ 219,935 $ 910,124 $ 718,457 Deferred tax provision 953,268 86,471 1,334,056 86,471 Income tax provision $ 1,113,422 $ 306,406 $ 2,244,180 $ 804,928 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 approximated to $764,160 and $665,160 as of June 30, 2018 and September 30, 2017, respectively, which are available to reduce future years’ taxable income. These carry forwards will expire in 2037. Management doesn’t expect to remit any of its net income back to the United States in the foreseeable future. Accordingly, the Company recorded a full valuation allowance as of June 30, 2018 and September 30, 2017. The components of deferred taxes as of June 30, 2018 and September 30, 2017 consist of the following: June 30, 2018 September 30, 2017 Deferred tax assets: Deferred tax asset from net operating loss carry-forwards for parent company $ 246,944 $ 226,154 Valuation allowance (246,944 ) (226,154 ) Deferred tax asset - net $ - $ - Deferred tax liability: Revenue recognized based on percentage of completion $ 1,471,508 $ 170,950 Deferred tax liability – long term $ 1,471,508 $ 170,950 Movement of valuation allowance: Three months ended June 30, Nine months ended June 30, 2018 2017 2018 2017 Beginning Balance $ 240,014 $ 203,714 $ 226,154 $ 181,274 Current period additions 6,930 11,220 20,790 33,660 Ending Balance $ 246,944 $ 214,934 $ 246,944 $ 214,934 The valuation allowance increased $6,930 and $20,790 for the three and nine months ended June 30, 2018 (2017 - $11,220 and $33,660), respectively. (C) Land Appreciation Tax (“LAT”) Since January 1, 1994, LAT has been applicable at progressive tax rates ranging from 30% to 60% on the appreciation of land values, with an exemption provided for the sales of ordinary residential properties if the appreciation values do not exceed certain thresholds specified in the relevant tax laws. However, the Company’s local tax authority in Hanzhong City has not imposed the regulation on real estate companies in its area of administration. Instead, the local tax authority has levied the LAT at the rate of 0.5% in Yang County and 1.0% in Hanzhong against total cash receipts from sales of real estate properties, rather than according to the progressive rates. As at June 30, 2018, the outstanding LAT payable was $1,299,598 with respect to completed real estate properties sold up to June 30, 2018. As at September 30, 2017, the outstanding LAT payable balance was $1,292,527 with respect to completed real estate properties sold up to September 30, 2017. (D) Taxes payable consisted of the following: June 30, 2018 September 30, 2017 CIT $ 6,374,564 $ 6,216,432 Business tax 12,574,806 14,143,444 Other taxes and fees 2,125,778 2,020,188 Total taxes payable 21,075,148 22,380,064 Less: current portion 15,926,272 17,259,202 Tax payable – long term $ 5,148,876 $ 5,120,862 |
COMMITMENTS AND CONTINGENCY
COMMITMENTS AND CONTINGENCY | 9 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCY | NOTE 9. COMMITMENTS AND CONTINGENCY From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company's management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate would have a material adverse impact on the Company's consolidated financial position, results of operations and cash flows. As an industry practice, the Company provides guarantees to PRC banks with respect to loans procured by the purchasers of the Company’s real estate properties for the total mortgage loan amount until the completion of obtaining the “Certificate of Ownership” of the properties from the government, which generally takes six to twelve months. Because the banks provide loan proceeds without getting the “Certificate of Ownership” as loan collateral during this six to twelve months’ period, the mortgage banks require the Company to maintain, as restricted cash, 5% to 10% of the mortgage proceeds as security for the Company’s obligations under such guarantees. If a purchaser defaults on its payment obligations, the mortgage bank may deduct the delinquent mortgage payment from the security deposit and require the Company to pay the excess amount if the delinquent mortgage payments exceed the security deposit. The Company has made necessary reserves in its restricted cash account to cover any potential mortgage defaults as required by the mortgage lenders. The Company has not experienced any losses related to this guarantee and believes that such reserves are sufficient. As of June 30, 2018 and September 30, 2017, the amount of security deposit provided for these guarantees was approximately $3.4 million and $2.6 million respectively. |
SUMMARY OF SIGNIFICANT ACCOUN15
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Principles of consolidation | Principles of consolidation The unaudited condensed consolidated financial statements include the financial statements of China HGS Real Estate Inc. (the “Company” or “China HGS”), China HGS Investment Inc. (“HGS Investment”), Shaanxi HGS Management and Consulting Co., Ltd. (“Shaanxi HGS”) and its variable interest entity (“VIE”), Shaanxi Guangsha Investment and Development Group Co., Ltd. (“Guangsha”). All inter-company transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes, and disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates are used for, but not limited to, the assumptions and estimates used by management in recognizing development revenue under the percentage of completion method, the selection of the useful lives of property and equipment, , revenue recognition, taxes, budgeted costs, share-based compensation and other similar charges. Management believes that the estimates utilized in preparing its condensed consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates. |
Fair value of financial instruments | Fair value of financial instruments The Company follows the provisions of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. It clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows: Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions or what assumptions the market participants would use in pricing the asset or liability based on the best available information. The carrying amounts reported in the accompanying condensed consolidated balance sheets for cash, restricted cash and all other current assets, security deposits for land use rights, loans and all current liabilities approximate their fair value based on the short-term maturity of these instruments. The fair value of the long term customer, construction and security deposits approximate their carrying amounts because the deposits are received in cash. It was impractical to estimate the fair value of the amount due from the local government and the long term other loans payable. |
Revenue recognition | Revenue recognition 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 be 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 20%-50% of the total purchase price of the property. The period of the mortgage loan guarantee begins on the date the bank approves the buyer’s mortgage and we receive the loan proceeds in our bank account and ends on the date the “Certificate of Ownership” evidencing that title to the property has been transferred to the buyer. The procedures to obtain the Certificate of Ownership take six to twelve months (the “Mortgage Loan Guarantee Period”). If, after investigation of the buyer’s income and other relevant factors, the bank decides not to grant the mortgage loan, our mortgage-loan based sales contract terminates and there will be no guarantee obligation. If, during the Mortgage Loan Guarantee Period, the buyer defaults on his or her monthly mortgage payment for three consecutive months, we are required to return the loan proceeds back to the bank, although we have the right to keep the customer's deposit and resell the property to a third party. Once the Certificate of Property has been issued by the relevant government authority, our loan guarantee terminates. If the buyer then defaults on his or her mortgage loan, the bank has the right to take the property back and sell it and use the proceeds to pay off the loan. The Company is not liable for any shortfall that the bank may incur in this event. To date, no buyer has defaulted on his or her mortgage payments during the Mortgage Loan Guarantee Period and the Company has not returned any loan proceeds pursuant to its mortgage loan guarantees. For municipal road construction projects, fees are generally recognized by the full accrual method at the time of the projects are completed. |
Foreign currency translation | Foreign currency translation The Company’s financial information is presented in U.S. dollars. The functional currency of the Company’s operating subsidiaries is Renminbi (“RMB”), the currency of the PRC. The financial information is first prepared in RMB and then is translated into U.S. dollars at year-end exchange rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in stockholders’ equity. For nine months ended June 30, September 30, 2018 2017 2017 Period end RMB: USD exchange rate 6.6171 6.7793 6.6533 Period average RMB: USD exchange rate 6.4463 6.8585 6.8104 The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation. |
Cash | Cash Cash includes cash on hand and demand deposits in accounts maintained with commercial banks within the PRC. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company maintains bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs. |
Restricted cash | Restricted Cash The restricted cash is required by the banks as collateral for mortgage loans given to the home buyers before obtaining the certificates of ownership of the properties as collateral. In order to provide the banks with the certificates of ownership, the Company is required to complete certain procedures with the Chinese government, which normally takes six to twelve months. Because the banks provide the loan proceeds to the Company without obtaining certificates of ownership as loan collateral during this six to twelve months’ period, the mortgage banks require the Company to maintain, as restricted cash, 5% to 10% of the mortgage proceeds as security for the Company’s obligations under such guarantees. The restricted cash is released by the banks once they receive the certificates of ownership. These deposits are not covered by insurance. The Company has not experienced any losses in such accounts and management believes its restricted cash account is not exposed to any risks. |
Advances to vendors | Advances to vendors Advances to vendors consist of balances paid to contractors and vendors for services and materials that have not been provided or received and generally relate to the development and construction of residential and commercial units in the PRC. Advances to vendors are reviewed periodically to determine whether their carrying value has become impaired. Historically, the Company has not experienced any losses as a result of these advances. |
Security deposits for land use rights | Security deposits for land use rights Security deposits for land use rights consist of the deposits held by the PRC government for the purchase of land use rights and other 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 transfer 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. Real estate property under development is classified as a current asset, if the property is reasonably expected to be completed within the Company’s normal operating cycle of the business. Otherwise, it is classified as a non-current asset. The majority of real estate projects the Company has completed in the past were multi-layer or sub-high-rise real estate projects. The Company considers its normal operating cycle is 12 months. Real estate property development completed and under development are subject to valuation adjustments when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets. The Company reviewed all of its real estate projects for future losses and impairment by comparing the estimated future undiscounted cash flows for each project to the carrying value of such project. For the three and nine months ended June 30, 2018 and 2017, 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 three and nine months ended June 30, 2018, the total interest capitalized in the real estate property development was $1,701,643 and $4,501,913, respectively. For the three and nine months ended June 30, 2017, the total interest capitalized in the real estate property development was $1,355,697 and $3,958,242, respectively. |
Impairment of long-lived assets | Impairment 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 during the three and nine months ended June 30, 2018 and 2017 |
Customer deposits | Customer deposits Customer deposits consist of amounts received from customers relating to the sale of residential units in the PRC. In the PRC, customers will generally obtain permanent financing for the purchase of their residential unit prior to the completion of the project. The lending institution will provide the funding to the Company upon the completion of the financing rather than the completion of the project. The Company receives these funds and recognizes them as a liability until the revenue can be recognized. |
Property warranty | Property warranty The Company provides its customers with warranties which cover major defects of building structure and certain fittings and facilities of properties sold. The warranty period varies from two years to five years, depending on different property components the warranty covers. The Company continually estimates potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a property. Reserves are determined based on historical data and trends with respect to similar property types and geographical areas. The Company continually monitors the warranty reserve and makes adjustments to its pre-existing warranties, if any, in order to reflect changes in trends and historical data as information becomes available. The Company may seek further recourse against its contractors or any related third parties if it can be proved that the faults are caused by them. In addition, the Company also withholds up to 2% of the contract cost from sub-contractors for periods of two to five years. These amounts are included in construction deposits, and are only paid to the extent that there has been no warranty claim against the Company relating to the work performed or materials supplied by the subcontractors. For the three and nine months ended June 30, 2018 and 2017, the Company had not recognized any warranty costs in excess of the amount retained from subcontractors and therefore, no warranty reserve is considered necessary at the balance sheet dates. |
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. |
Share-based compensation | Share-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 are 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 June 30, 2018 and September 30, 2017. 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 VIE in the PRC. No income is earned in the Company and the Company’s subsidiaries and the management does not repatriate any earnings from VIE outside the PRC. As a result, the Company did not generate any U.S. taxable income for the three and nine months ended June 30, 2018 and 2017. As of June 30, 2018, the Chinese entities’ income tax returns filed in China for the years ended December 31, 2013 through 2017 are subject to examination by the Chinese taxing authorities. As of June 30, 2018, the parent Company China HGS Real Estate Inc.’s tax years ended September 30, 2013 through September 30, 2017 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% to 60% on the appreciation of land value, which is calculated as the proceeds of sales of properties less deductible expenditures including borrowing costs and all property development expenditures. LAT is exempted if the appreciation values do not exceed certain thresholds specified in the relevant tax laws. The whole project must be completed before the LAT obligation can be assessed. Accordingly, the Company should record the liability and the total related expense at the completion of a project unless the tax authorities impose an assessment at an earlier date. The methods to implement this tax law vary among different geographic areas. Hanzhong, where the project Mingzhu Garden, Nandajie, Central Plaza and Oriental Pearl Garden are located, implements this tax rule by requiring real estate companies prepay the LAT based upon customer deposits received. The tax rate in Hanzhong is 1%. Yang County, where the project Yangzhou Pearl Garden and Yangzhou Palace are located, requires a tax rate of 0.5%. |
Comprehensive income (loss) | Comprehensive income (loss) In accordance with ASC 220-10-55, comprehensive income (loss) is defined as all changes in equity except those resulting from investments by owners and distributions to owners. The Company’s only components of comprehensive income (loss) for the three and nine months ended June 30, 2018 and 2017 were net income and foreign currency translation adjustments. |
Basic and diluted earnings per share | Basic and diluted earnings per share The Company computes earnings per share (“EPS”) in accordance with the ASC 260, “Earnings per share”, which requires companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. |
Concentration risk | Concentration risk The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC's economy. The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. All of the Company’s cash is maintained with state-owned banks within the People’s Republic of China of which no deposits are covered by insurance. 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 nine months ended June 30, 2018, no supplier accounted f or over 10% of the Company’s the project expenditures. For the nine months ended June 30, 2017, two suppliers accounted for 23% and 10% of the Company’s the project expenditures, respectively. For the three months ended June 30, 2018, no supplier accounted for ov er 10% of the Company’s total project expenditures. For the three months ended June 30, 2017, five suppliers accounted for over 20%, 15%, 13%, 12% and 10% of the Company’s total project expenditures, respectively. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. Generally Accepted Accounting Principles when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In August 2015, the FASB issued ASU No. 2015-14, “Deferral of the Effective Date” (“ASU 2015-14”), which defers the effective date for ASU 2014-09 by one year. the guidance in ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods), which means it will be effective for the Company’s fiscal year beginning October 1, 2018. In March 2016, the FASB issued ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue versus Net)” (“ASU 2016-08”), which clarifies the implementation guidance on principal versus agent considerations in the new revenue recognition standard. In April 2016, the FASB issued ASU No. 2016-10, “Identifying Performance Obligations and Licensing” (“ASU 2016-10”), which reduces the complexity when applying the guidance for identifying performance obligations and improves the operability and understandability of the license implementation guidance. In May 2016, the FASB issued ASU No. 2016-12 “Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”), which amends the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. In December 2016, the FASB further issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” (“ASU 2016-20”), which makes minor corrections or minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments are intended to address implementation and provide additional practical expedients to reduce the cost and complexity of applying the new revenue standard. These amendments have the same effective date as the new revenue standard. Preliminarily, we will adopt Topic 606 in the first quarter of our fiscal 2019 using the modified retrospective transition method, and are continuing to evaluate the impact our pending adoption of Topic 606 will have on our unaudited condensed consolidated financial statements. The Company’s current percentage completion revenue recognition method is not allowed under the new revenue recognition standards set forth in ASU 2014-09. Potential adjustments might have material impacts on the company’s condensed consolidated financial statement upon adoption of the new guidance at the time of adoption based upon outstanding contracts at that time. In March 2018, the FASB issued ASU 2018-05 — Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”), which amends the FASB Accounting Standards Codification and XBRL Taxonomy based on the Tax Cuts and Jobs Act (the “Act”) that was signed into law on December 22, 2017 and Staff Accounting Bulletin No. 118 (“SAB 118”) that was released by the Securities and Exchange Commission. The Act changes numerous provisions that impact U.S. corporate tax rates, business-related exclusions, and deductions and credits and may additionally have international tax consequences for many companies that operate internationally. The Company does not believe this guidance will have a material impact on its condensed consolidated financial statements. On June 20, 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under ASU No. 2018-07, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The new standard is effective for us on January 1, 2019. Early adoption is permitted, including in interim periods, and should be applied to all new awards granted after the date of adoption. The Company does not believe this guidance will have a material impact on its condensed consolidated financial statements. Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the unaudited condensed consolidated financial position, statements of operations and cash flows. |
SUMMARY OF SIGNIFICANT ACCOUN16
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Currency Exchange Rate | The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in stockholders’ equity. For nine months ended June 30, September 30, 2018 2017 2017 Period end RMB: USD exchange rate 6.6171 6.7793 6.6533 Period average RMB: USD exchange rate 6.4463 6.8585 6.8104 |
REAL ESTATE PROPERTY DEVELOPM17
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Real Estate [Abstract] | |
Components of Real Estate Property Completed and under Development | The following summarizes the components of real estate property development completed and under development as of June 30, 2018 and September 30, 2017: Balance as of June 30, 2018 September 30, 2017 Development completed: Hanzhong City Mingzhu Garden Phase I $ 827,822 $ 823,319 Hanzhong City Mingzhu Garden Phase II 32,578,817 42,274,715 Hanzhong City Nan Dajie (Mingzhu Xinju) 1,313,818 1,306,669 Hanzhong City Oriental Pearl Garden 21,885,560 29,969,640 Yang County Yangzhou Pearl Garden Phase I 1,890,730 1,880,443 Yang County Yangzhou Pearl Garden Phase II 4,348,695 4,365,714 Real estate property development completed 62,845,442 80,620,500 Less: Real estate property completed – short-term 61,451,304 79,233,948 Real estate property completed – long-term $ 1,394,138 $ 1,386,552 Under development: Yang County Yangzhou Palace $ 69,580,498 $ 87,126,402 Hanzhong City Shijin Project 7,320,083 7,280,256 Hanzhong City Liangzhou Road and related projects (a) 138,028,285 133,941,504 Hanzhong City Hanfeng Beiyuan East (b) 762,821 758,670 Hanzhong City Beidajie (d) 60,818,568 36,335,231 Yang County East 2 nd 5,022,032 2,351,615 Real estate property under development 281,532,287 267,793,678 Less: Short-term portion 69,580,498 87,126,402 Real estate property under development –long-term $ 211,951,789 $ 180,667,276 (a) In September 2013, the Company entered into an agreement (“Liangzhou Agreement”) with the Hanzhong local government on the Liangzhou Road reformation and expansion project (Liangzhou Road Project”). Pursuant to the agreement, the Company is contracted to reform and expand the Liangzhou Road, a commercial street in downtown Hanzhong City, with a total length of 2,080 meters and width of 30 meters and to resettle the existing residences in the Liangzhou road area. The government’s original road construction budget was approximately $33 million in accordance with the Liangzhou Agreement. The Company, in return, is being compensated by the local government to have an exclusive right on acquiring at least 394.5 Mu land use rights in a specified location of Hanzhong City. The Liangzhou Road Project’s road construction started at the end of 2013. In 2014, the original scope and budget on the Liangzhou road reformation and expansion project was extended, because the local government included more area and resettlement residences into the project, which resulted in additional investments from the Company. In return, the Company is authorized by the local government to develop and manage the commercial and residential properties surrounding the Liangzhou Road project. As of June 30, 2018, the main Liangzhou road construction is substantially completed and is expected to be approved by the local government in December 2018. 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 June 30, 2018, the actual costs incurred by the Company were $138,028,285 (September 30, 2017 - $133,941,504) and the incremental cost related to residence resettlement approved by the local government. The Company determined that the Company’s Investment in Liangzhou Road Project in exchange for interests in future land use rights is a barter transaction with commercial substance. For the three and nine months ended June 30, 2018 and 2017, the Company did not receive government’s subsidies for its Shanty Area Reform Project surrounding Liang Zhou Road located in Hantai District, Hanzhong City, respectively and the Company recorded the subsidies to offset against the development cost of Liangzhou Road Project. (b) 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 year ended September 30, 2014. As of June 30, 2018, the local government was still in the process of assessing the budget for these projects. (c) 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 $25.4 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 (June 30, 2018 – 4.75% and September 30, 2017 – 4.75%). The local government has approved a refund to the Company by reducing local surcharges or taxes otherwise required in the real estate development. The road construction is expected to be completed by 2019. (d) For the three and nine months ended June 30, 2018 and 2017, the Company did not received government’s subsidies for its Shanty Area Reform Project surrounding Beidajie Project located in Hantai District, Hanzhong City. |
OTHER LOANS (Tables)
OTHER LOANS (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Schedule of Long-term Debt Instruments | June , 2018 September 30, 2017 Loan A (i) $ 95,282,720 $ 97,473,417 Loan B (ii) 12,089,888 12,024,108 Loan C (iii) 17,942,781 17,845,155 125,315,389 127,342,680 Less: current maturities of other loans 60,982,213 28,545,233 Other loans – long-term portion $ 64,333,176 $ 98,797,447 (i) On June 26, 2015 and March 10, 2016, the Company signed phase I and Phase II agreements with Hanzhong Urban Construction Investment Development Co., Ltd, a state owned Company, to borrow up to approximately $117.1 million (or RMB 775 million) for a long term loan at 4.245% interest per year to develop Liangzhou Road Project. The Company repaid $8,898,852 (RMB 58,884,596) prior to June 30, 2018. As of June 30, 2018, the Company borrowed $95,282,720 under this credit line (September 30, 2017 - $97,473,417). 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 $69,580,498 as of June 30, 2018 (September 30, 2017 - $87,126,402). In addition, the Company was required to provide a security deposit for the loan received. As of June 30, 2018, the security deposits paid were $5,588,898 (September 30, 2017 - $5,558,490) for loans received and included in the long term security deposit. For the three and nine months ended June 30, 2018, interest paid was $1,557,004 and $4,069,968 (2017 - $1,224,244 and $3,537,430), respectively, which was capitalized in to the development cost of Liangzhou road project. Due to local government’s delay in reallocation of residence in Liangzhou Road and related area, the Hanzhong Urban Construction Investment Development Co., Ltd has not released all the funds available in this loan to the Company and the Company’s withdraw will be based on the project’s development progress. The total required loan repayment schedule assuming total loan proceeds are borrowed are listed below: (ii) On January 8, 2016, the Company signed a loan agreement with Hanzhong Municipal Housing Provident Fund Management Center (“Housing Fund”) to borrow up to approximately $12.1 million (RMB 80 million) related to 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 June 30, 2018, the Company received all the proceeds from Housing Fund. The progress repayment is required based on certain sales milestones or a fixed repayment schedule which started in July 2018. The Housing Fund has rights to monitor the project’s future cash flow. For the three months and nine months ended June 30, 2018, total interest was $114,620 and $336,446 (2017 - $106,564 and $316,226), respectively. As of June 30, 2018, The full amount of loan has following repayment schedule: (iii) In December 2016, the Company signed a loan agreement with Hantai District Urban Construction Investment Development Co., Ltd, a state owned Company, to borrow up to approximately $18 million (RMB 119 million) for the development of Hanzhong City Liangzhou Road project. As of June 30, 2018, the Company received all the proceeds and repaid unused fund of $43,177 (RMB 270,829). The loan carries interest at a fixed interest of 1.2% and is due on June 20, 2031. The Company pledged the assets of Liangzhou Road and related projects as collateral for the loan, The carrying value of the Liangzhou Road and related projects amounted to $138,028,285 and $133,941,504 as of June 30, 2018 and September 30, 2017, respectively. Total financing costs of $57,230 and $167,988 for the three and nine months ended June 30, 2018 (2017- $131,454 and $390,100), respectively, were capitalized in to the development cost of Hanzhong City Liangzhou Road project. |
Hanzhong Urban Construction Investment Development Co., Ltd [Member] | |
Schedule of Maturities of Long-term Debt | For the twelve months ended: Repayment in USD Repayment in RMB June 30, 2019 $ 48,892,324 $ 323,525,404 June 30, 2020 32,881,474 217,580,000 June 30, 2021 13,221,804 87,490,000 June 30, 2022 13,226,338 87,520,000 Total $ 108,221,940 $ 716,115,404 |
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 * $ 3,022,472 $ 20,000,000 Earlier of October 2018 or 70% sales completed 4,533,708 30,000,000 Earlier of January 2019 or 75% sales completed 4,533,708 30,000,000 Total $ 12,089,888 $ 80,000,000 * |
CUSTOMER DEPOSITS (Tables)
CUSTOMER DEPOSITS (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
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 detail of customer deposits is as follows: June 30, 2018 September 30, 2017 Customer deposits by real estate projects Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) $ 8,403,327 $ 9,931,120 Oriental Pearl Garden 6,597,619 6,342,632 Liangzhou road and related projects 2,093,062 2,314,641 Yang County Pearl Garden 1,563,894 934,557 Yang County Palace 5,793,710 7,405,555 Total 24,451,612 26,928,505 Less: Customer deposits - short-term 22,358,550 24,613,864 Customer deposits - long-term $ 2,093,062 $ 2,314,641 |
RELATED PARTY LOANS (Tables)
RELATED PARTY LOANS (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Loans | As of June 30, 2018 September 30, 2017 Shareholder loan – USD loan (a) $ 1,810,000 $ 1,810,000 Shareholder loan – RMB loan (b) 344,703 494,632 Total $ 2,154,703 $ 2,304,632 a. The Company has a one year loan agreement (“USD Loan Agreement”) with Mr. Xiaojun Zhu, the Chairman, CEO and major shareholder, pursuant to which the Company borrowed $1,810,000 to make a capital injection into Shaanxi HGS, the Company’s subsidiary. The interest rate for the loan is 4% per annum and the loan matured on July 19, 2014. The Company entered into the amendments to the USD Loan Agreement to extend the term until July 31, 2019. The Company recorded interest expense of $18,100 and $36,200 for three months and nine months ended June 30, 2018 (2017- $18,100 and $54,300), respectively. The Company has not yet paid this interest and it is recorded in accrued expenses. b. On December 31, 2013, Shaanxi Guangsha Investment and Development Group Co., Ltd. (the “Guangsha”) 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 upon maturity, with at an interest rate of 4.35% per year. The RMB loan balance as of June 30, 2018 and September 30, 2017 was $344,703 and $494,632, respectively. For the three and nine months ended June 30, 2018, the interest was $3,248 and $16,916 (2017 - $Nil and $30,712), respectively, which is capitalized in the development cost of Liangzhou road project. |
STOCK OPTIONS (Tables)
STOCK OPTIONS (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
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 granted in August 2015 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 options Weighted Average Exercise Price Weighted Average Remaining Life in Years Grant Date Fair Value Outstanding, September 30, 2017 120,000 $ 1.89 0.89 $ 178,800 Granted - - - - Forfeited - - - - Exercised - - - - Outstanding, June 30, 2018 120,000 $ 1.89 0.14 $ 178,800 Exercisable, June 30, 2018 113,333 $ 1.89 0.14 $ 168,866 |
TAXES (Tables)
TAXES (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
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 three and nine months ended June 30, 2018 and 2017: Three months ended June 30, Nine months ended June 30, 2018 2017 2018 2017 Chinese statutory tax rate 25 % 25 % 25 % 25 % Net impact of Exemption rendered by local tax authorities (0.4 )% (8.8 )% 0.2 % (5.8 )% Valuation allowance change and other adjustments 0.2 % 0.1 % 0.1 % 1.1 % Effective tax rate 24.8 % 16.3 % $ 25.3 % 20.3 % |
Schedule of Components of Income Tax Expense (Benefit) | Income tax expense for the three and nine months ended June 30, 2018 and 2017 is summarized as follows: Three months ended June 30, Nine months ended June 30, 2018 2017 2018 2017 Current tax provision $ 160,154 $ 219,935 $ 910,124 $ 718,457 Deferred tax provision 953,268 86,471 1,334,056 86,471 Income tax provision $ 1,113,422 $ 306,406 $ 2,244,180 $ 804,928 |
Components of Deferred Taxes | The components of deferred taxes as of June 30, 2018 and September 30, 2017 consist of the following: June 30, 2018 September 30, 2017 Deferred tax assets: Deferred tax asset from net operating loss carry-forwards for parent company $ 246,944 $ 226,154 Valuation allowance (246,944 ) (226,154 ) Deferred tax asset - net $ - $ - Deferred tax liability: Revenue recognized based on percentage of completion $ 1,471,508 $ 170,950 Deferred tax liability – long term $ 1,471,508 $ 170,950 |
Summary of Valuation Allowance | Three months ended June 30, Nine months ended June 30, 2018 2017 2018 2017 Beginning Balance $ 240,014 $ 203,714 $ 226,154 $ 181,274 Current period additions 6,930 11,220 20,790 33,660 Ending Balance $ 246,944 $ 214,934 $ 246,944 $ 214,934 |
Taxes payable | June 30, 2018 September 30, 2017 CIT $ 6,374,564 $ 6,216,432 Business tax 12,574,806 14,143,444 Other taxes and fees 2,125,778 2,020,188 Total taxes payable 21,075,148 22,380,064 Less: current portion 15,926,272 17,259,202 Tax payable – long term $ 5,148,876 $ 5,120,862 |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Currency Exchange Rate) (Details) | 9 Months Ended | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | Sep. 30, 2017 | |
Period end RMB : USD exchange rate | 6.6171 | 6.7793 | 6.6533 |
Period average RMB : USD exchange rate | 6.4463 | 6.8585 | 6.8104 |
SUMMARY OF SIGNIFICANT ACCOUN24
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Narrative) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Significant Accounting Policies [Line Items] | ||||
Percentage Of Contract Cost Withholds | 2.00% | |||
Real Estate Property Plant And Equipment Interest Capitalization | $ 1,701,643 | $ 1,355,697 | $ 4,501,913 | $ 3,958,242 |
Project Expenditure [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Concentration Risk, Percentage | 10.00% | |||
Supplier One [Member] | Project Expenditure [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Concentration Risk, Percentage | 20.00% | 10.00% | 23.00% | |
Supplier Two [Member] | Project Expenditure [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Concentration Risk, Percentage | 15.00% | 10.00% | ||
Supplier Three [Member] | Project Expenditure [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Concentration Risk, Percentage | 13.00% | |||
Supplier Four [Member] | Project Expenditure [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Concentration Risk, Percentage | 12.00% | |||
Supplier Five [Member] | Project Expenditure [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Concentration Risk, Percentage | 10.00% | |||
Hanzhong | ||||
Significant Accounting Policies [Line Items] | ||||
Land appreciation tax rate | 1.00% | |||
Yang 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 | 20.00% | |||
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 DEVELOPM25
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT (Components Of Real Estate) (Details) - USD ($) | Jun. 30, 2018 | Sep. 30, 2017 | |
Real Estate Properties [Line Items] | |||
Real estate property development completed | $ 62,845,442 | $ 80,620,500 | |
Less: Real estate property completed - short-term | 61,451,304 | 79,233,948 | |
Real estate property completed - long-term | 1,394,138 | 1,386,552 | |
Real estate property under development | 281,532,287 | 267,793,678 | |
Less: Short-term portion | 69,580,498 | 87,126,402 | |
Real estate property under development -long-term | 211,951,789 | 180,667,276 | |
Hanzhong City Mingzhu Garden Phase I | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 827,822 | 823,319 | |
Hanzhogn City Mingzhu Garden Phase II | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 32,578,817 | 42,274,715 | |
Hanzhong City Nan Dajie (Mingzhu Xinju) | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 1,313,818 | 1,306,669 | |
Hanzhong City Oriental Pearl Garden | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 21,885,560 | 29,969,640 | |
Yang County Yangzhou Pearl Garden Phase I | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 1,890,730 | 1,880,443 | |
Yang County Yangzhou Pearl Garden Phase II | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 4,348,695 | 4,365,714 | |
Yang County Yangzhou Palace | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 69,580,498 | 87,126,402 | |
Hanzhong City Shijin Project | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | 7,320,083 | 7,280,256 | |
Hanzhong City Liangzhou Road and related projects | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | [1] | 138,028,285 | 133,941,504 |
Hanzhong City Hanfeng Beiyuan East | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | [2] | 762,821 | 758,670 |
Hanzhong City Beidajie | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | [3] | 60,818,568 | 36,335,231 |
Yang County East 2nd Ring Road | |||
Real Estate Properties [Line Items] | |||
Real estate property development completed | [4] | $ 5,022,032 | $ 2,351,615 |
[1] | In September 2013, the Company entered into an agreement (“Liangzhou Agreement”) with the Hanzhong local government on the Liangzhou Road reformation and expansion project (Liangzhou Road Project”). Pursuant to the agreement, the Company is contracted to reform and expand the Liangzhou Road, a commercial street in downtown Hanzhong City, with a total length of 2,080 meters and width of 30 meters and to resettle the existing residences in the Liangzhou road area. The government’s original road construction budget was approximately $33 million in accordance with the Liangzhou Agreement. The Company, in return, is being compensated by the local government to have an exclusive right on acquiring at least 394.5 Mu land use rights in a specified location of Hanzhong City. The Liangzhou Road Project’s road construction started at the end of 2013. In 2014, the original scope and budget on the Liangzhou road reformation and expansion project was extended, because the local government included more area and resettlement residences into the project, which resulted in additional investments from the Company. In return, the Company is authorized by the local government to develop and manage the commercial and residential properties surrounding the Liangzhou Road project. As of June 30, 2018, the main Liangzhou road construction is substantially completed and is expected to be approved by the local government in December 2018. 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 June 30, 2018, the actual costs incurred by the Company were $138,028,285 (September 30, 2017 - $133,941,504) and the incremental cost related to residence resettlement approved by the local government. The Company determined that the Company’s Investment in Liangzhou Road Project in exchange for interests in future land use rights is a barter transaction with commercial substance. For the three and nine months ended June 30, 2018 and 2017, the Company did not receive government’s subsidies for its Shanty Area Reform Project surrounding Liang Zhou Road located in Hantai District, Hanzhong City, respectively and the Company recorded the subsidies to offset against the development cost of Liangzhou Road Project. | ||
[2] | 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 year ended September 30, 2014. As of June 30, 2018, the local government was still in the process of assessing the budget for these projects. | ||
[3] | For the three and nine months ended June 30, 2018 and 2017, the Company did not received government’s subsidies for its Shanty Area Reform Project surrounding Beidajie Project located in Hantai District, Hanzhong City. | ||
[4] | The Company was engaged by the Yang County local government to construct the East 2nd Ring Road with a total length of 2.15 km and a budgeted price of approximately $25.4 million (or RMB 168 million), which was approved by the local Yang County government in March 2014. The local government is required to repay the Company’s project investment costs within 3 years with interest at the interest rate based on the commercial borrowing rate with the similar term published by China construction bank (June 30, 2018 – 4.75% and September 30, 2017 – 4.75%). The local government has approved a refund to the Company by reducing local surcharges or taxes otherwise required in the real estate development. The road construction is expected to be completed by 2019. |
REAL ESTATE PROPERTY DEVELOPM26
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT (Narrative) (Details) ¥ in Millions | 9 Months Ended | 12 Months Ended | ||
Jun. 30, 2018USD ($) | Jun. 30, 2018CNY (¥) | Sep. 30, 2013USD ($) | Sep. 30, 2017USD ($) | |
Real Estate Properties [Line Items] | ||||
Land use right included in real estate property under development | $ 16,132,138 | $ 18,040,624 | ||
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 | 138,028,285 | $ 133,941,504 | ||
Yang County East 2nd Ring Road | ||||
Real Estate Properties [Line Items] | ||||
Budgeted Price For Municipal Roads | $ 25,400,000 | ¥ 168 | ||
Debt Instrument, Interest Rate, Stated Percentage | 4.75% | 4.75% |
OTHER LOANS (Other Loans-Long T
OTHER LOANS (Other Loans-Long Term Portion) (Details) - USD ($) | Jun. 30, 2018 | Sep. 30, 2017 | |
Other loan | $ 125,315,389 | $ 127,342,680 | |
Less: current maturities of other loans | 60,982,213 | 28,545,233 | |
Other loans - long-term portion | 64,333,176 | 98,797,447 | |
Loan A | |||
Other loan | [1] | 95,282,720 | 97,473,417 |
Loan B | |||
Other loan | [2] | 12,089,888 | 12,024,108 |
Loan C | |||
Other loan | [3] | $ 17,942,781 | $ 17,845,155 |
[1] | On June 26, 2015 and March 10, 2016, the Company signed phase I and Phase II agreements with Hanzhong Urban Construction Investment Development Co., Ltd, a state owned Company, to borrow up to approximately $117.1 million (or RMB 775 million) for a long term loan at 4.245% interest per year to develop Liangzhou Road Project. The Company repaid $8,898,852 (RMB 58,884,596) prior to June 30, 2018. As of June 30, 2018, the Company borrowed $95,282,720 under this credit line (September 30, 2017 - $97,473,417). 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 $69,580,498 as of June 30, 2018 (September 30, 2017 - $87,126,402). In addition, the Company was required to provide a security deposit for the loan received. As of June 30, 2018, the security deposits paid were $5,588,898 (September 30, 2017 - $5,558,490) for loans received and included in the long term security deposit. For the three and nine months ended June 30, 2018, interest paid was $1,557,004 and $4,069,968 (2017 - $1,224,244 and $3,537,430), respectively, which was capitalized in to the development cost of Liangzhou road project. Due to local government’s delay in reallocation of residence in Liangzhou Road and related area, the Hanzhong Urban Construction Investment Development Co., Ltd has not released all the funds available in this loan to the Company and the Company’s withdraw will be based on the project’s development progress. The total required loan repayment schedule assuming total loan proceeds are borrowed are listed below: | ||
[2] | 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 $12.1 million (RMB 80 million) related to 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 June 30, 2018, the Company received all the proceeds from Housing Fund. The progress repayment is required based on certain sales milestones or a fixed repayment schedule which started in July 2018. The Housing Fund has rights to monitor the project’s future cash flow. For the three months and nine months ended June 30, 2018, total interest was $114,620 and $336,446 (2017 - $106,564 and $316,226), respectively. As of June 30, 2018, The full amount of loan has following repayment schedule: | ||
[3] | In December 2016, the Company signed a loan agreement with Hantai District Urban Construction Investment Development Co., Ltd, a state owned Company, to borrow up to approximately $18 million (RMB 119 million) for the development of Hanzhong City Liangzhou Road project. As of June 30, 2018, the Company received all the proceeds and repaid unused fund of $43,177 (RMB 270,829). The loan carries interest at a fixed interest of 1.2% and is due on June 20, 2031. The Company pledged the assets of Liangzhou Road and related projects as collateral for the loan, The carrying value of the Liangzhou Road and related projects amounted to $138,028,285 and $133,941,504 as of June 30, 2018 and September 30, 2017, respectively. Total financing costs of $57,230 and $167,988 for the three and nine months ended June 30, 2018 (2017- $131,454 and $390,100), respectively, were capitalized in to the development cost of Hanzhong City Liangzhou Road project. Additionally, in September 2017, the Urban Development Center Co., Ltd. approved a construction loan for the Company in the amount of approximately $26.4 million (RMB 175 million) with an annual interest rate of 1.2% per year in connection with the Liangzhou Road and related Project. The Company is required to repay the loan by equal annual principal repayment of approximately $5.4 million from December 2027 through May 2031. The amount of this loan is available to be drawn down as soon as the land use right of the Liangzhou Road is approved and the construction starts, which is expected to begin in December 2018.. Interest for the three and nine months ended June 30, 2018 was $84,161 and $247,041, respectively, which was included in the construction capitalized costs (2017 – Nil). |
OTHER LOANS (Schedule Of Repaym
OTHER LOANS (Schedule Of Repayment Loan) (Details) - 9 months ended Jun. 30, 2018 | USD ($) | CNY (¥) |
Debt Instrument Scheduled Repayment Amount | $ 108,221,940 | ¥ 716,115,404 |
June 30, 2019 | ||
Debt Instrument Scheduled Repayment Amount | 48,892,324 | 323,525,404 |
June 30, 2020 | ||
Debt Instrument Scheduled Repayment Amount | 32,881,474 | 217,580,000 |
June 30, 2021 | ||
Debt Instrument Scheduled Repayment Amount | 13,221,804 | 87,490,000 |
June 30, 2022 | ||
Debt Instrument Scheduled Repayment Amount | $ 13,226,338 | ¥ 87,520,000 |
OTHER LOANS (Schedule Of Full R
OTHER LOANS (Schedule Of Full Repayment Loan) (Details) - 9 months ended Jun. 30, 2018 - Other Short Term Loan 4 [Member] | USD ($) | CNY (¥) | |
Debt Instrument, Periodic Payment | $ 12,089,888 | ¥ 80,000,000 | |
Earlier of July 2018 or 60% sales completed | |||
Debt Instrument, Periodic Payment | [1] | 3,022,472 | 20,000,000 |
Earlier of October 2018 or 70% sales completed | |||
Debt Instrument, Periodic Payment | 4,533,708 | 30,000,000 | |
Earlier of January 2019 or 75% sales completed | |||
Debt Instrument, Periodic Payment | $ 4,533,708 | ¥ 30,000,000 | |
[1] | The Company repaid $3,022,472 (or RMB 20 million) on July 16, 2018 following the above repayment schedule. |
OTHER LOANS (Narrative) (Detail
OTHER LOANS (Narrative) (Details) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||||
Jul. 16, 2018USD ($) | Jul. 16, 2018CNY (¥) | Sep. 30, 2017USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2018CNY (¥) | Jun. 30, 2017USD ($) | Sep. 30, 2017USD ($) | Jun. 30, 2018CNY (¥) | Sep. 30, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | Jan. 08, 2016USD ($) | Jan. 08, 2016CNY (¥) | |
Debt Instrument [Line Items] | |||||||||||||||
Debt Instrument, Face Amount | $ 133,941,504 | $ 138,028,285 | $ 138,028,285 | $ 133,941,504 | |||||||||||
Security Deposit | 8,564,517 | 8,611,371 | 8,611,371 | 8,564,517 | |||||||||||
Repayments of Other Debt | 0 | ¥ 270,829 | $ 5,997,059 | ||||||||||||
Hantai District Urban Construction Investment Development Co., Ltd [Member] | |||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||
Interest Costs Capitalized | $ 57,230 | $ 131,454 | $ 167,988 | 390,100 | |||||||||||
Agreement Wth Hanzhong Urban Construction Investment Development Co Ltd [Member] | |||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 4.245% | 4.245% | 4.245% | ||||||||||||
Long-term Line of Credit | 97,473,417 | $ 95,282,720 | $ 95,282,720 | 97,473,417 | |||||||||||
Line of Credit Facility, Maximum Borrowing Capacity | 117,100,000 | 117,100,000 | |||||||||||||
Long-term Debt, Gross | 87,126,402 | 69,580,498 | 69,580,498 | 87,126,402 | |||||||||||
Debt Instrument, Periodic Payment, Interest | 1,224,244 | 4,069,968 | 3,537,430 | ||||||||||||
Security Deposit | 5,558,490 | 5,588,898 | 5,588,898 | 5,558,490 | |||||||||||
Debt Instrument, Periodic Payment | $ 8,898,852 | ¥ 58,884,596 | |||||||||||||
Debt Instrument, Periodic Payment, Principal | $ 1,557,004 | ||||||||||||||
Agreement With Hanzhong Municipal Housing Provident Fund Management Center [Member] | |||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 1.20% | 1.20% | 1.20% | 3.575% | 3.575% | ||||||||||
Line of Credit Facility, Maximum Borrowing Capacity | ¥ 775,000,000 | $ 18,000,000 | ¥ 119,000,000 | $ 12,100,000 | ¥ 80,000,000 | ||||||||||
Debt Instrument, Periodic Payment, Interest | $ 114,620 | $ 106,564 | $ 336,446 | $ 316,226 | |||||||||||
Construction Loan [Member] | Urban Development Center Co., Ltd [Member] | |||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||
Debt Instrument, Face Amount | $ 26,400,000 | $ 26,400,000 | ¥ 175,000,000 | ||||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 1.20% | 1.20% | 1.20% | ||||||||||||
Debt Instrument, Periodic Payment, Interest | $ 84,161 | $ 247,041 | $ 0 | ||||||||||||
Debt Instrument, Periodic Payment, Principal | $ 5,400,000 | ||||||||||||||
Subsequent Event [Member] | |||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||
Repayments of Long-term Debt | $ 3,022,472 | ¥ 20,000,000 |
CUSTOMER DEPOSITS (Customer Dep
CUSTOMER DEPOSITS (Customer Deposits From Pre-Sale Of Residential Units) (Details) - USD ($) | Jun. 30, 2018 | Sep. 30, 2017 |
Customer deposits by real estate projects | ||
Total | $ 24,451,612 | $ 26,928,505 |
Less: Customer deposits - short-term | 22,358,550 | 24,613,864 |
Customer deposits - long-term | 2,093,062 | 2,314,641 |
Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) | ||
Customer deposits by real estate projects | ||
Total | 8,403,327 | 9,931,120 |
Oriental Pearl Garden | ||
Customer deposits by real estate projects | ||
Total | 6,597,619 | 6,342,632 |
Liangzhou road and related projects | ||
Customer deposits by real estate projects | ||
Total | 2,093,062 | 2,314,641 |
Yang County Pearl Garden | ||
Customer deposits by real estate projects | ||
Total | 1,563,894 | 934,557 |
Yang County Palace | ||
Customer deposits by real estate projects | ||
Total | $ 5,793,710 | $ 7,405,555 |
CUSTOMER DEPOSITS (Narrative) (
CUSTOMER DEPOSITS (Narrative) (Details) - USD ($) $ in Millions | 9 Months Ended | |
Jun. 30, 2018 | Sep. 30, 2017 | |
Deposit Liabilities [Line Items] | ||
Mortgage loan guarantee amount | $ 3.4 | $ 2.6 |
Minimum | ||
Deposit Liabilities [Line Items] | ||
Percentage of down payments to total purchase price of property to receive mortgage loan guarantees | 20.00% | |
Minimum | Customer deposits [Member] | ||
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 down payments to total purchase price of property to receive mortgage loan guarantees | 50.00% | |
Maximum | Customer deposits [Member] | ||
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) | Jun. 30, 2018USD ($) | Jun. 30, 2018CNY (¥) | Sep. 30, 2017USD ($) | Sep. 30, 2017CNY (¥) | |
Shareholder Loans [Line Items] | |||||
Shareholder loan | $ 2,154,703 | $ 2,304,632 | |||
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] | ¥ 344,703 | ¥ 494,632 | ||
[1] | The Company has a one year loan agreement (“USD Loan Agreement”) with Mr. Xiaojun Zhu, the Chairman, CEO and major shareholder, pursuant to which the Company borrowed $1,810,000 to make a capital injection into Shaanxi HGS, the Company’s subsidiary. The interest rate for the loan is 4% per annum and the loan matured on July 19, 2014. The Company entered into the amendments to the USD Loan Agreement to extend the term until July 31, 2019. The Company recorded interest expense of $18,100 and $36,200 for three months and nine months ended June 30, 2018 (2017- $18,100 and $54,300), respectively. The Company has not yet paid this interest and it is recorded in accrued expenses. | ||||
[2] | On December 31, 2013, Shaanxi Guangsha Investment and Development Group Co., Ltd. (the “Guangsha”) 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 upon maturity, with at an interest rate of 4.35% per year. The RMB loan balance as of June 30, 2018 and September 30, 2017 was $344,703 and $494,632, respectively. For the three and nine months ended June 30, 2018, the interest was $3,248 and $16,916 (2017 - $Nil and $30,712), respectively, which is capitalized in the development cost of Liangzhou road project. |
RELATED PARTY LOANS (Narrative)
RELATED PARTY LOANS (Narrative) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Sep. 30, 2017 | ||
Shareholder Loans [Line Items] | ||||||
Interest (expense) | $ 130,166 | $ 125,750 | $ 384,851 | $ 370,320 | ||
Shareholder loan | 2,154,703 | 2,154,703 | $ 2,304,632 | |||
Shareholder USD Loan Agreement | ||||||
Shareholder Loans [Line Items] | ||||||
Interest (expense) | $ 18,100 | 18,100 | $ 36,200 | 54,300 | ||
Debt instrument, stated interest rate | 4.00% | 4.00% | ||||
Shareholder loan | [1] | $ 1,810,000 | $ 1,810,000 | 1,810,000 | ||
Shareholder's RMB Loan Agreement | ||||||
Shareholder Loans [Line Items] | ||||||
Interest (expense) | $ 3,248 | $ 0 | $ 16,916 | $ 30,712 | ||
Debt instrument, stated interest rate | 4.35% | 4.35% | ||||
Shareholder loan | $ 344,703 | $ 344,703 | $ 494,632 | |||
[1] | The Company has a one year loan agreement (“USD Loan Agreement”) with Mr. Xiaojun Zhu, the Chairman, CEO and major shareholder, pursuant to which the Company borrowed $1,810,000 to make a capital injection into Shaanxi HGS, the Company’s subsidiary. The interest rate for the loan is 4% per annum and the loan matured on July 19, 2014. The Company entered into the amendments to the USD Loan Agreement to extend the term until July 31, 2019. The Company recorded interest expense of $18,100 and $36,200 for three months and nine months ended June 30, 2018 (2017- $18,100 and $54,300), respectively. The Company has not yet paid this interest and it is recorded in accrued expenses. |
STOCK OPTIONS (Assumptions Used
STOCK OPTIONS (Assumptions Used In Calculating Fair Value Of Options Granted) (Details) | 1 Months Ended |
Aug. 31, 2015USD ($) | |
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 ($) | 9 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Sep. 30, 2017 | |
Number of Options | ||
Outstanding, September 30, 2017 | 120,000 | |
Granted | 0 | |
Forfeited | 0 | |
Exercised | 0 | |
Outstanding, June 30, 2018 | 120,000 | 120,000 |
Exercisable, June 30, 2018 | 113,333 | |
Weighted Average Exercise Price | ||
Outstanding, September 30, 2017 | $ 1.89 | |
Granted | 0 | |
Forfeited | 0 | |
Exercised | 0 | |
Outstanding, June 30, 2018 | 1.89 | $ 1.89 |
Exercisable, June 30, 2018 | $ 1.89 | |
Weighted Average Remaining Life in Years | ||
Outstanding | 1 month 20 days | 10 months 20 days |
Granted | 0 years | |
Forfeited | 0 years | |
Exercised | 0 years | |
Exercisable, June 30, 2018 | 1 month 20 days | |
Grant Date Fair Value | ||
Outstanding, September 30, 2017 | $ 178,800 | |
Granted | 0 | |
Forfeited | 0 | |
Exercised | 0 | |
Outstanding, June 30, 2018 | 178,800 | $ 178,800 |
Exercisable, June 30, 2018 | $ 168,866 |
STOCK OPTIONS (Narrative) (Deta
STOCK OPTIONS (Narrative) (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Aug. 22, 2015 | Jun. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Sep. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Options exercise price | $ 0 | ||||
Share-based Compensation | $ 14,900 | $ 44,700 | $ 44,700 | ||
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 | 94.40% | 69.40% |
TAXES (Reconciliation Of Statut
TAXES (Reconciliation Of Statutory Rates To Effective Tax Rate) (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Sep. 30, 2017 | |
Income Taxes [Line Items] | |||||
Chinese statutory tax rate | 25.00% | 25.00% | 25.00% | 25.00% | 35.00% |
Net impact of Exemption rendered by local tax authorities | (0.40%) | (8.80%) | 0.20% | (5.80%) | |
Valuation allowance change and other adjustments | 0.20% | 0.10% | 0.10% | 1.10% | |
Effective tax rate | 24.80% | 16.30% | 25.30% | 20.30% |
TAXES (Components of Income Tax
TAXES (Components of Income Tax Expenses) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Taxes [Line Items] | ||||
Current tax provision | $ 160,154 | $ 219,935 | $ 910,124 | $ 718,457 |
Deferred tax provision | 953,268 | 86,471 | 1,334,056 | 86,471 |
Income tax provision | $ 1,113,422 | $ 306,406 | $ 2,244,180 | $ 804,928 |
TAXES (Components Of Deferred T
TAXES (Components Of Deferred Taxes) (Details) - USD ($) | Jun. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Sep. 30, 2016 |
Deferred tax assets: | ||||||
Deferred tax asset from net operating loss carry-forwards for parent company | $ 246,944 | $ 226,154 | ||||
Valuation allowance | (246,944) | $ (240,014) | (226,154) | $ (214,934) | $ (203,714) | $ (181,274) |
Deferred tax asset - net | 0 | 0 | ||||
Deferred tax liability: | ||||||
Revenue recognized based on percentage of completion | 1,471,508 | 170,950 | ||||
Deferred tax liability - long term | $ 1,471,508 | $ 170,950 |
TAXES (Movement of valuation al
TAXES (Movement of valuation allowance) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Taxes [Line Items] | ||||
Beginning Balance | $ 240,014 | $ 203,714 | $ 226,154 | $ 181,274 |
Current period additions | 6,930 | 11,220 | 20,790 | 33,660 |
Ending Balance | $ 246,944 | $ 214,934 | $ 246,944 | $ 214,934 |
TAXES (Taxes Payable) (Details)
TAXES (Taxes Payable) (Details) - USD ($) | Jun. 30, 2018 | Sep. 30, 2017 |
Income Taxes [Line Items] | ||
CIT | $ 6,374,564 | $ 6,216,432 |
Business tax | 12,574,806 | 14,143,444 |
Other taxes and fees | 2,125,778 | 2,020,188 |
Total taxes payable | 21,075,148 | 22,380,064 |
Less: current portion | 15,926,272 | 17,259,202 |
Tax payable - long term | $ 5,148,876 | $ 5,120,862 |
TAXES (Narrative) (Details)
TAXES (Narrative) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Taxes [Line Items] | ||||||
Business sales tax, rate | 5.00% | |||||
Business sales tax | $ 12,574,806 | $ 12,574,806 | $ 14,143,444 | |||
Income tax at statutory tax rate | 25.00% | 25.00% | 25.00% | 25.00% | 35.00% | |
Net operating loss carry forwards | $ 764,160 | $ 764,160 | $ 665,160 | |||
Net operating loss carry forwards, expiration year | 2,037 | |||||
Provision for income taxes | 1,113,422 | $ 306,406 | $ 2,244,180 | $ 804,928 | ||
Land appreciation tax payable | 1,299,598 | 1,299,598 | $ 1,292,527 | |||
Valuation allowance, period additions | $ 6,930 | $ 11,220 | $ 20,790 | $ 33,660 | ||
Effective Value Added Tax Rate Percentage | 5.00% | 5.00% | ||||
Scenario, Plan [Member] | ||||||
Income Taxes [Line Items] | ||||||
Income tax at statutory tax rate | 21.00% | |||||
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% | |||||
Yangxian | ||||||
Income Taxes [Line Items] | ||||||
Local income tax rate | 1.25% | |||||
Yang Country | ||||||
Income Taxes [Line Items] | ||||||
Land appreciation tax rate | 0.50% |
COMMITMENTS AND CONTINGENCY (Na
COMMITMENTS AND CONTINGENCY (Narrative) (Details) - USD ($) $ in Millions | 9 Months Ended | |
Jun. 30, 2018 | Sep. 30, 2017 | |
Commitments And Contingencies [Line Items] | ||
Security deposit provided for guarantee | $ 3.4 | $ 2.6 |
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% |