Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | ||
Sep. 30, 2021 | Jan. 13, 2022 | Mar. 31, 2021 | |
Document And Entity Information [Abstract] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Sep. 30, 2021 | ||
Document Transition Report | false | ||
Entity File Number | 001-34864 | ||
Entity Registrant Name | CHINA HGS REAL ESTATE INC. | ||
Entity Incorporation, State or Country Code | FL | ||
Entity Tax Identification Number | 33-0961490 | ||
Entity Address, Address Line One | 6 Xinghan Road, 19th Floor | ||
Entity Address, City or Town | Hanzhong City | ||
Entity Address, Country | CN | ||
Entity Address, Postal Zip Code | 723000 | ||
City Area Code | 86 | ||
Local Phone Number | 091-62622612 | ||
Title of 12(b) Security | Common Stock, par value $0.001 | ||
Trading Symbol | HGSH | ||
Security Exchange Name | NASDAQ | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 25,617,807 | ||
Entity Central Index Key | 0001158420 | ||
Current Fiscal Year End Date | --09-30 | ||
Document Fiscal Year Focus | 2021 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 9,877,807 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2021 | Sep. 30, 2020 |
ASSETS | ||
Cash | $ 170,001 | $ 457,699 |
Restricted cash | 3,295,188 | 3,409,837 |
Contract assets | 13,723,793 | 14,255,328 |
Real estate property development completed | 88,145,841 | 94,671,258 |
Other assets | 8,358,925 | 8,132,555 |
Property, plant and equipment, net | 558,086 | 571,330 |
Security deposits | 1,955,202 | 1,855,506 |
Real estate property under development | 265,769,721 | 227,741,017 |
Due from local government - development completed | 3,023,806 | 2,869,623 |
Total Assets | 385,000,563 | 353,964,153 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Construction loans | 119,636,222 | 109,937,408 |
Accounts payables | 18,259,151 | 25,415,352 |
Other payables | 6,430,992 | 4,028,048 |
Construction deposits | 3,344,917 | 3,202,730 |
Contract liabilities | 1,886,075 | 1,847,685 |
Customer deposits | 19,803,917 | 19,405,528 |
Accrued expenses | 1,987,567 | 1,920,370 |
Taxes payable | 22,954,011 | 19,881,211 |
Total liabilities | 194,302,852 | 185,638,332 |
Commitments and Contingencies | ||
Stockholders' equity: | ||
Common stock, $0.001 par value, 50,000,000 shares authorized, 25,617,807 and 22,525,693 shares issued and outstanding September 30, 2021 and 2020 | 25,617 | 22,525 |
Additional paid-in capital | 136,535,303 | 129,930,330 |
Statutory surplus | 11,095,939 | 10,458,395 |
Retained earnings | 40,691,955 | 34,954,061 |
Accumulated other comprehensive loss | 2,348,897 | (7,039,490) |
Total stockholders' equity | 190,697,711 | 168,325,821 |
Total Liabilities and Stockholders' Equity | $ 385,000,563 | $ 353,964,153 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2021 | Sep. 30, 2020 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 25,617,807 | 22,525,693 |
Common stock, shares outstanding | 25,617,807 | 22,525,693 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) | 12 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | ||
Real estate sales | $ 58,915,239 | $ 12,979,227 |
Less: Sales tax | (424,074) | (193,719) |
Impairment losses on real estate property completed | 0 | (2,703,031) |
Cost of real estate sales | (46,510,001) | (9,369,820) |
Gross profit | 11,981,164 | 712,657 |
Operating expenses | ||
Selling and distribution expenses | 186,886 | 580,639 |
General and administrative expenses | 2,691,170 | 2,324,057 |
Total operating expenses | 2,878,056 | 2,904,696 |
Operating income (loss) | 9,103,108 | (2,192,039) |
Interest income (expense), net | 5,690 | (65,535) |
Other (expense) income, net | (246,814) | 4,080,945 |
Income before income taxes | 8,861,984 | 1,823,371 |
Provision for income taxes | 2,486,546 | 841,933 |
Net income | 6,375,438 | 981,438 |
Other comprehensive income | ||
Foreign currency translation adjustment | 9,388,387 | 8,644,233 |
Comprehensive income | $ 15,763,825 | $ 9,625,671 |
Basic and diluted income per common share | ||
Basic per common share | $ 0.27 | $ 0.04 |
Diluted per common share | $ 0.27 | $ 0.04 |
Weighted average common shares outstanding | ||
Basic common shares outstanding | 23,944,328 | 22,525,000 |
Diluted common shares outstanding | 23,944,328 | 22,525,000 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) | Common Stock | Additional Paid-in Capital | Statutory Surplus | Retained Earnings | Accumulated Other Comprehensive Loss | Total | |
Beginning balance at Sep. 30, 2019 | $ 22,525 | $ 129,930,330 | $ 10,360,251 | $ 34,070,767 | $ (15,683,723) | $ 158,700,150 | |
Beginning balance (in Shares) at Sep. 30, 2019 | [1] | 22,525,693 | |||||
Appropriation to statutory reserve | 98,144 | (98,144) | |||||
Net income | 981,438 | 981,438 | |||||
Foreign currency translation adjustments | 8,644,233 | 8,644,233 | |||||
Ending balance at Sep. 30, 2020 | $ 22,525 | 129,930,330 | 10,458,395 | 34,954,061 | (7,039,490) | 168,325,821 | |
Ending balance (in Shares) at Sep. 30, 2020 | [1] | 22,525,693 | |||||
Appropriation to statutory reserve | 637,544 | (637,544) | |||||
Issuance of shares for debt settlement | $ 3,092 | 6,604,973 | 6,608,065 | ||||
Issuance of shares for debt settlement (in shares) | [1] | 3,092,114 | |||||
Net income | 6,375,438 | 6,375,438 | |||||
Foreign currency translation adjustments | 9,388,387 | 9,388,387 | |||||
Ending balance at Sep. 30, 2021 | $ 25,617 | $ 136,535,303 | $ 11,095,939 | $ 40,691,955 | $ 2,348,897 | $ 190,697,711 | |
Ending balance (in Shares) at Sep. 30, 2021 | [1] | 25,617,807 | |||||
[1] | Adjusted to give retroactive effect to a one-for-two reverse stock split effective on August 20, 2020. |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities: | |||
Net income | $ 6,375,438 | $ 981,438 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||
Depreciation | 43,510 | 72,748 | |
Impairment losses on real estate property development completed | 2,703,031 | ||
Gain on settlement of shareholder loan and payables with suppliers | (4,998,762) | ||
Changes in assets and liabilities: | |||
Security deposits | 0 | 6,335,525 | |
Contract assets | 1,284,745 | (889,901) | |
Real estate property development completed | (11,498,195) | (9,369,820) | |
Real estate property under development | (21,784,670) | (7,511,989) | |
Other assets | 208,522 | (398,747) | |
Accounts payables | (1,830,135) | (1,498,176) | |
Other payables | 2,165,081 | 23,918 | |
Contract liabilities | (60,288) | (155,809) | |
Customer deposits | (637,942) | 1,275,401 | |
Construction deposits | (29,601) | ||
Accrued expenses | (474,420) | ||
Taxes payables | 2,162,978 | (2,616,813) | |
Net cash (used in) provided by operating activities | (604,167) | 2,217,264 | |
Cash flow from financing activities: | |||
Repayment of construction loans | (2,415,924) | ||
Net cash (used in) financing activities | 2,415,924 | ||
Effect of changes in foreign exchange rate on cash | 201,820 | (135,921) | |
Net (decrease) in cash | 3,867,536 | $ (334,581) | |
Supplemental disclosures of cash flow information: | |||
Interest paid | 2,018,918 | 6,847,515 | |
Income taxes paid | 266,999 | 782,836 | |
Representing | |||
Cash | 170,001 | 457,699 | |
Restricted cash | 3,295,188 | 3,409,837 | |
Total cash and restricted cash | 3,465,189 | 3,867,536 | |
Non-cash financing activities: | |||
Reclassification of interest payable to construction loan | 5,024,385 | ||
Settlement of shareholder loan and related accrued interest | (3,402,313) | ||
Settlements of accounts payable with real estate property under development | (14,532,967) | ||
Issuance of stock for settlement of accounts payable | $ 6,608,065 | ||
Settlement of payables with suppliers | $ (3,415,572) |
ORGANIZATION AND BASIS OF PRESE
ORGANIZATION AND BASIS OF PRESENTATION | 12 Months Ended |
Sep. 30, 2021 | |
ORGANIZATION AND BASIS OF PRESENTATION | |
ORGANIZATION AND BASIS OF PRESENTATION | NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION China HGS Real Estate Inc. (the “Company” or “China HGS” or “we”, “our”, “us”) is a corporation organized under the laws of the State of Florida. China HGS does not conduct any substantive operations of its own. Instead, through its subsidiary, Shaanxi HGS Management and Consulting Co., Ltd (“Shaanxi HGS”), it entered into certain exclusive contractual agreements with the owners of the Company’s PRC operating subsidiary, Shaanxi Guangsha Investment and Development Group Co., Ltd (“Guangsha”). Pursuant to these agreements, Shaanxi HGS is obligated to absorb a majority of the risk of loss from Guangsha’s activities and entitles Shaanxi HGS to receive a majority of Guangsha’s expected residual returns. In addition, Guangsha’s shareholders have pledged their equity interest in Guangsha to Shaanxi HGS, irrevocably granted Shaanxi HGS an exclusive option to purchase, to the extent permitted under PRC Law, all or part of the equity interests in Guangsha and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by Shaanxi HGS. Based on these contractual arrangements, management believes that Guangsha should be considered a “Variable Interest Entity” (“VIE”) under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810 “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51”, because the equity investors in Guangsha no longer have the characteristics of a controlling financial interest, and the Company, through Shaanxi HGS, is the primary beneficiary of Guangsha. Accordingly, Guangsha has been consolidated. The Company, through its subsidiaries and VIE, engages in real estate development, in the construction and sale of residential apartments, parking lots and commercial properties. Total assets and liabilities presented on the consolidated balance sheets and sales, cost of sales, net income presented on Consolidated Statement of Income and Comprehensive Income (Loss) as well as the cash flows from operations, investing and financing activities presented on the Consolidated Statement of Cash Flows are substantially the financial position, operations and cash flow of Guangsha. The Company has not provided any financial support to Guangsha for the years ended September 30, 2021 and 2020. The following assets and liabilities of the consolidated VIE are included in the accompanying consolidated financial statements of the Company as of September 30, 2021 and 2020: Balance as of September 30, September 30, 2021 2020 Total assets $ 385,000,583 $ 353,600,159 Total liabilities $ 189,470,931 $ 181,104,861 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Sep. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation and basis of presentation The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of China HGS Real Estate Inc. (the “Company” or “China HGS”), China HGS Investment Inc. (“HGS Investment”), Shaanxi HGS Management and Consulting Co., Ltd. (“Shaanxi HGS”) and its variable interest entity (“VIE”), Shaanxi Guangsha Investment and Development Group Co., Ltd. (“Guangsha”). All inter-company transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation. The Company’s operations involve real estate development and sales. Starting from the year ended September 30, 2020, the Company has been involved in larger real estate property development with an extended development cycle. As a result, it is not possible to precisely measure the duration of its operating cycle. The accompanying consolidated balance sheets of the Company have been prepared on an unclassified basis in accordance with real estate industry practice. Liquidity In recent years, the Chinese government has implemented measures to control overheating residential and commercial property prices including but not limited to restrictions on home purchase, increasing the down-payment requirement against speculative buying, development of low-cost rental housing properties to help low-income groups while reducing the demand in the commercial housing market, increasing real estate property taxes to discourage speculation, control of the land supply and slowdown the construction land auction process, etc. In addition, in December 2019, a novel strain of coronavirus (COVID-19) surfaced. COVID-19 has spread rapidly throughout China and worldwide, which has caused significant volatility in the PRC and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the PRC and international economies. To reduce the spread of COVID-19, the Chinese government has employed measures including city lockdowns, quarantines, travel restrictions, suspension of business activities and school closures. Due to difficulties resulting from the COVID-19 outbreak, including, but not limited to, the temporary closure of the Company’s facilities and operations beginning in early February through early March 2020, limited support from the Company’s employees, delayed access to construction raw material supplies, reduced customer visits to the Company’s sales office, and inability to promote real estate property sales to customers on a timely basis, our revenues during the year ended September 30, 2020 were significantly lower. The Company is experiencing recovery of its real estate development business in fiscal 2021 due to increasing demand from the local real estate market. The Company had revenues of approximately $58.9 million for the year ended September 30, 2021, increased from $13.0 million in last year. Based on the assessment of the current economic environment, customer demand and sales trends, we believe that consumer spending has been restored in the local real estate market and real estate sales are expected to grow in the coming periods. On the other side, due to the negative impact from the COVID-19 outbreak and spread, the development period of real estate properties and our operating cycle has been extended and we may not be able to liquidate our large balance of completed real estate properties within the short term as we originally expected. In addition, as of September 30, 2021, we had large construction loans payable of approximately $119.6 million and large accounts payable of approximately $18.3 million to be paid to subcontractors. The extent of the impact of COVID-19 on the Company’s future financial results will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the local economy and real estate markets, among many other factors, all of which remain highly uncertain and unpredictable. Given this uncertainty, the Company is currently unable to quantify the expected impact of the COVID-19 pandemic on its future operations, financial condition, liquidity and results of operations if the current situation continues. The above mentioned facts raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date of this filing. In assessing its liquidity, management monitors and analyzes the Company’s cash on-hand, its ability to generate sufficient revenue sources in the future, and its operating and capital expenditure commitments. As of September 30, 2021, our total cash and restricted cash balance was approximately $3.5 million, a decrease from approximately $3.9 million as of September 30, 2020. With respect to capital funding requirements, the Company budgeted its capital spending based on ongoing assessments of needs to maintain adequate cash. As of September 30, 2021, we had approximately $88.1 million of completed residential apartments and commercial units available for sale to potential buyers. Although we reported approximately $18.3 million accounts payable as of September 30, 2021, due to the long-term relationship with our construction suppliers and subcontractors, we were able to effectively manage cash spending on construction and negotiate with them to adjust the payment schedule based on our cash on hand. In addition, most of our existing real estate development projects relate to the old town renovation which are supported by the local government. As of September 30, 2021, we reported approximately $119.6 million of construction loans borrowed from financial institutions controlled by the local government and such loans can only be used on the old town renovation related project development. We expect that we will be able to renew all of the existing construction loans upon their maturity and borrow additional new loans from local financial institutions, when necessary, based on our past experience and the Company’s good credit history. Also, the Company’s cash flows from pre-sales and current sales should provide financial support for our current development projects and operations. For the year ended September 30, 2021, we had six large ongoing construction projects (see Note 3, real estate properties under development) which were under the preliminary development stage due to delayed inspection and acceptance of the development plans by the local government. In June 2020, we completed the residence relocation surrounding the Liangzhou Road related projects and launched the construction of these projects in December 2020. For the other four projects, we expect we will be able to obtain the government’s approval of the development plans on these projects in the coming fiscal year and start the pre-sale of the real estate properties to generate cash when certain property development milestones have been achieved. Revenue recognition The Company follows FASB ASC Topic 606 “Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, Revenue from Contracts with Customers, revenue is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration that the Company expects to be entitled to for those goods and services. The Company determines revenue recognition through the following steps: ● identification of the contract, or contracts, with a customer; ● identification of the performance obligations in the contract; ● determination of the transaction price, including the constraint on variable consideration; ● allocation of the transaction price to the performance obligations in the contract; and ● recognition of revenue when (or as) the Company satisfies a performance obligation. Most of the Company’s revenue is derived from real estate sales of condominiums and commercial properties in the PRC. The majority of the Company’s contracts contain a single performance obligation involving significant real estate development activities that are performed together to deliver a real estate property to its customers. Revenues arising from real estate sales are recognized when or as the control of the asset is transferred to the customer. The control of the asset may transfer over time or at a point in time. For the sales of individual condominium units in a real estate development project, the Company has an enforceable right to payment for performance completed to date, revenue is recognized over time by measuring the progress towards complete satisfaction of that performance obligation (“percentage completion method”). Otherwise, revenue is recognized at a point in time when the customer obtains control of the asset. For the years ended September 30, 2021 and 2020, the Company did not have any construction in progress meet the revenue recognition under percentage completion method. Under the percentage completion method, revenue and profit from the sales of long-term real estate development properties is recognized by the percentage of completion method on the sale of individual units when all the following criteria are met: a. Construction is beyond a preliminary stage. b. The buyer is committed to the extent of being unable to require a refund except for non-delivery of the unit or interest. c. Sufficient units have already been sold to assure that the entire property will not revert to rental property. d. Sale prices are collectible. e. Aggregate sales proceeds and costs can be reasonably estimated. If any of the above criteria are not met, proceeds shall be accounted for as deposits until the criteria are met. Under the percentage of completion method, revenues from individual real estate condominium units sold under development and related costs are recognized over the course of the construction period, based on the completion progress of a project. The progress towards complete satisfaction of the performance obligation is measured based on the Company’s efforts or inputs to the satisfaction of the performance obligation, by reference to the contract costs incurred up to the end of reporting period as a percentage of total estimated costs for each contract. In relation to any project, revenue is determined by calculating the ratio of incurred costs, including land use rights costs and construction costs, to total estimated costs and applying that ratio to the contracted sales amounts. Cost of sales is recognized by determining the ratio of contracted sales during the period to total estimated sales value and applying that ratio to the incurred costs. Current period amounts are calculated based on the difference between the life-to-date project totals and the previously recognized amounts. Any changes in significant judgments and/or estimates used in determining construction and development revenue could significantly change the timing or amount of construction and development revenue recognized. Changes in total estimated project costs or losses, if any, are recognized in the period in which they are determined. Revenue from the sales of previously completed real estate condominium units is recognized at the time of the closing of an individual unit sale. This occurs when the customer obtains the physical possession, the legal title, or the significant risks and rewards of ownership of the property and the Company has the right to payment and the collection of the consideration is probable. For municipal road construction projects, revenues are generally recognized at the time the projects are completed. Disaggregation of Revenues Disaggregated revenues are as follows: For the years ended September 30, 2021 2020 Revenue recognized for completed condominium real estate projects, net of sales taxes $ 15,179,593 $ 12,785,508 Revenue recognized for completed condominium real estate projects sold to government, net of sales taxes 43,311,572 — Revenue recognized for condominium real estate projects under development, net of sales taxes — — Total revenue, net of sales taxes $ 58,491,165 $ 12,785,508 Contract balances Timing of revenue recognition may differ from the timing of billing and cash receipts from customers. The Company records a contract asset when revenue is recognized prior to invoicing, or a contract liability when cash is received in advance of recognizing revenue. A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets include billed and billable receivables, which are the Company’s unconditional rights to consideration other than the passage of time. Contract liabilities include cash collected in advance and in excess of revenue recognized. Customer deposits are excluded from contract liabilities. The Company has elected to apply the optional practical expedient for costs to obtain a contract which allows the Company to immediately expense sales commissions (included under selling expenses) because the amortization period of the asset that the Company otherwise would have used is one year or less. 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 Ownership has been issued by the relevant government authority, our loan guarantee terminates. If the buyer then defaults on his or her mortgage loan, the bank has the right to take the property back and sell it and use the proceeds to pay off the loan. The Company is not liable for any shortfall that the bank may incur in this event. To date, no buyer has defaulted on his or her mortgage payments during the Mortgage Loan Guarantee Period and the Company has not returned any loan proceeds pursuant to its mortgage loan guarantees. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes, and disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates are used for, but not limited to, the assumptions and estimates used by management in recognizing development revenue under the percentage of completion method, the selection of the useful lives of property and equipment, provision necessary for contingent liabilities, revenue recognition, taxes and budgeted costs. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates. Changes of estimated gross profit margins related to revenue recognized under the percentage of completion method are made in the period in which circumstances requiring the revisions become known. For the year ended September 30, 2021 and 2020, the Company did not change the estimated revenue and related gross profit margin. Fair value of financial instruments The Company follows the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures.” It clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows: Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions or what assumptions the market participants would use in pricing the asset or liability based on the best available information. The carrying amounts reported in the accompanying consolidated balance sheets for cash, restricted cash and all other current assets, security deposits for land use rights, loans and all current liabilities approximate their fair value based on the short-term maturity of these instruments. The fair value of the 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 other payables. Foreign currency translation The Company’s financial information is presented in U.S. dollars. The functional currency of the Company’s operating VIE is Renminbi (“RMB”), the currency of the PRC. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC Topic 830-30 “Translation of Financial Statements”. The financial information is first prepared in RMB and then is translated into U.S. dollars at year-end exchange rates as to assets and liabilities and average exchange rates as to revenue,expenses and cash flows. 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 (loss) in stockholders’ equity. 2021 2020 Year end RMB : USD exchange rate 6.4434 6.7896 Annual average RMB : USD exchange rate 6.5072 7.0056 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 large reputable 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. 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 month 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 certificate of ownership. These deposits are not covered by insurance. The Company has not experienced any losses in such accounts and management believes its restricted cash account is not exposed to any significant risks. Security deposits for land use rights Security deposits for land use rights consist of deposits held by the PRC government for the purchase of land use rights and the deposits 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 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 its 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 reviews all of its real estate projects for future losses and impairment by comparing the estimated future undiscounted cash flows for each project to the carrying value of such project. For the years ended September 30, 2021 and 2020, the Company recognized nil and $2,703,031 impairment loss for its real estate properties, respectively. Capitalization of interest Interest incurred during and directly related to real estate development projects is capitalized to the related real estate property under development during the active development period, which generally commences when borrowings are used to acquire real estate assets and ends when the properties are substantially complete or the property becomes inactive. Interest is capitalized based on the interest rate applicable to specific borrowings or the weighted average of the rates applicable to other borrowings during the period. Interest capitalized to real estate property under development is recorded as a component of cost of real estate sales when related units are sold. All other interest is expensed as incurred. For the years ended September 30, 2021 and 2020, the total interest capitalized in the real estate property development was $7,043,303 and $7,086,018, respectively. Property, plant and equipment, net Property, plant and equipment are recorded at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, less any estimated residual value. Estimated useful lives of the assets are as follows: Buildings 39 years Machinery and office equipment 5 - 10 years Vehicles 8 years Any gain or loss on disposal or retirement of a fixed asset is recognized in the profit and loss account and is the difference between the net sales proceeds and the net carrying amount of the asset. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and the resulting profit or loss is reflected in income (loss). Maintenance, repairs and minor renewals are charged directly to expense as incurred unless such expenditures extend the useful life or represent a betterment, in which case they are capitalized. Impairment of long-lived assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally determined by using the asset’s expected future discounted cash flows or market value. The Company estimates fair value of the assets based on certain assumptions such as budgets, internal projections, and other available information as considered necessary. There was no impairment of long-lived assets for the years ended September 30, 2021 and 2020. 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 warranties The Company provides its customers with warranties which cover major defects of the 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 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 Income taxes In accordance with FASB ASC Topic 740 “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. A valuation allowances is established, when necessary, to reduce net 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 positions taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. There are no material uncertain tax positions as of September 30, 2021 and September 30, 2020. The Company is a corporation organized under the laws of the State of Florida. However, all of the Company’s operations are conducted solely by its subsidiaries and VIE in the PRC. No income is earned in the United States and the management does not repatriate any earnings outside the PRC. As a result, the Company did not generate any U.S. taxable income for the years ended September 30, 2021 and 2020. As of September 30, 2021, the Chinese entities’ income tax returns filed in China for the years ended December 31, 2020, 2019, 2018, 2017 and 2016 are subject to examination by the Chinese taxing authorities. The parent Company, China HGS Real Estate Inc.’s both U.S. federal tax returns and Florida state tax returns are delinquent since 2009. Its tax years ended September 30, 2009 through September 30, 2021 remain open for statutory examination by U.S. federal and state tax authorities. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a U.S. corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. Due to the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded accrued amounts in our consolidated financial statements as of September 30, 2021 and 2020, including an approximately $2.3 million provision on the deemed repatriation of undistributed foreign earnings and an additional $0.8 million provision for delinquent U.S. and State tax fillings. The Company is in the process of engaging a tax professional to file its delinquent tax returns. Failure to furnish any income tax and information returns with respect to any foreign business entity required, within the time prescribed by the IRS, subjects the Company to civil penalties. 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 projects Mingzhu Garden, Nan Dajie and Centra |
REAL ESTATE PROPERTY DEVELOPMEN
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT | 12 Months Ended |
Sep. 30, 2021 | |
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT | |
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT | NOTE 3. REAL ESTATE PROPERTY COMPLETED AND UNDER DEVELOPMENT The following summarizes the components of real estate property completed and under development as of September 30, 2021 and 2020: Balance as of: September 30, September 30, 2021 2020 Development completed: Hanzhong City Mingzhu Garden Phase II $ 23,464,365 $ 22,801,439 Hanzhong City Oriental Pearl Garden 19,435,711 19,937,105 Yang County Yangzhou Pearl Garden Phase II 2,250,388 2,559,977 Yang County Yangzhou Palace 42,995,377 49,372,737 Real estate property development completed $ 88,145,841 $ 94,671,258 Under development: Hanzhong City Liangzhou Road and related projects (a) $ 180,389,654 $ 164,879,955 Hanzhong City Hanfeng Beiyuan East (b) 868,796 824,496 Hanzhong City Beidajie (b) 78,075,559 57,142,127 Yang County East 2 nd 6,435,712 4,894,439 Real estate property under development $ 265,769,721 $ 227,741,017 (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 a 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. The Company launched the construction of the Liangzhou Road related projects in December 2020. As of September 30, 2021, the main Liangzhou road construction is substantially completed. The Company’s development cost incurred on Liangzhou Road Project is treated as the Company’s deposit on purchasing the related land use rights, as agreed by the local government. As of September 30, 2021, the actual costs incurred by the Company were approximately $180.4 million (September 30, 2020 - $164.9 million) and the incremental cost related to residence resettlements approved by the local government. The Company determined that the Company’s Investment in the Liangzhou Road Project in exchange for interests in future land use rights is a barter transaction with commercial substance. (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 quarter ended June 30, 2014. As of September 30, 2021, the local government has not completed the budget for these projects therefore the delivery for these projects for the government’s acceptance and related settlement were extended to 2022. Due to delays in the government approval and slow development progress, in January 2021, the Company disposed of certain construction properties in the Beidajie project at carrying value to Hanzhong Guangsha Real Estate Development Inc. (“Hanzhong Guangsha”) an entity controlled by the Company’s former chairman and Chief executive officer, Mr. Xiaojun Zhu to settle the payable of approximately $28.2 million related to Hanzhong Guangsha in connection with the acquisition of the Hanzhong Nanyuan II Project disclosed below. On January 20, 2021, the Company entered into agreement with Hanzhong Guangsha, an entity controlled by Mr. Xiaojun Zhu, to acquire certain real estate under development in the Hanzhong Nanyuan II Project in the amount of approximately $28.2 million, for the local government’s residence reallocation related to the Liangzhou road and affiliated project. All the real estate property in Hanzhong Nanyuan II project was completed and sold to the local government for residence reallocation purposes by September 30, 2021. (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. 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 the China Construction Bank (September 30, 2021 and 2020 - 4.75% ). The local government has approved a refund to the Company by reducing local surcharges or taxes otherwise required in the real estate development. The road construction was substantially completed as of September 30, 2021 and is in process of the government’s review and approval. For the year ended September 30, 2021, the Company received the local government’s installment payments of approximately $2.3 million, which was included in the Company’s customer deposits as of September 30, 2021. |
PROPERTY, PLANT AND EQUIPMENT,
PROPERTY, PLANT AND EQUIPMENT, NET | 12 Months Ended |
Sep. 30, 2021 | |
PROPERTY, PLANT AND EQUIPMENT, NET | |
PROPERTY, PLANT AND EQUIPMENT, NET | NOTE 4. PROPERTY, PLANT AND EQUIPMENT, NET As of September 30, 2021 and 2020, property, plant and equipment was as follows: As of September 30, 2021 2020 Buildings $ 848,471 $ 805,208 Automobiles — 97,823 Total 848,471 903,031 Less: accumulated depreciation (290,385) (331,701) Property, plant and equipment, net $ 558,086 $ 571,330 Depreciation expense for the years ended September 30, 2021 and 2020 was $43,510 and $72,748, respectively. For the year ended September 30, 2021, the Company disposed of the automobile which was fully depreciated, with no gain or loss recognized. |
RECEIVABLE FROM LOCAL GOVERNMEN
RECEIVABLE FROM LOCAL GOVERNMENT | 12 Months Ended |
Sep. 30, 2021 | |
RECEIVABLE FROM LOCAL GOVERNMENT | |
RECEIVABLE FROM LOCAL GOVERNMENT | NOTE 5. RECEIVABLE FROM LOCAL GOVERNMENT In June 2012, the Company was approved by the Hanzhong local government to construct two municipal roads with a total length of 1,064 meters. The Company completed and delivered these two roads to the local government on March 21, 2014 with the local government’s approval. The Company recognized such revenue during the year ended September 30, 2014. As of September 30, 2021, a receivable balance from the Hanzhong local government was $3,023,806 (September 30, 2020 - $2,869,623) and the Company expects to realize the receivable to offset municipal surcharges from the local government for the Liangzhou Road related projects when the Company started the Liangzhou Road related real estate property construction in 2021 and later years. |
SECURITY DEPOSITS
SECURITY DEPOSITS | 12 Months Ended |
Sep. 30, 2021 | |
SECURITY DEPOSITS | |
SECURITY DEPOSITS | NOTE 6. SECURITY DEPOSITS As of September 30, 2021 and 2020, security deposits were as follows: As of September 30, 2021 2020 Security deposit for land use right (1) $ 1,955,202 $ 1,855,506 (1) In May 2011, the Company entered into a development agreement with the Hanzhong local government. Pursuant to the agreement, the Company prepaid $1,955,202 and $1,855,506 to Hanzhong Urban Construction Investment Development Co., Ltd to acquire certain land use rights through public bidding as of September 30, 2021 and 2020, respectively. The Company currently expects to make payment of the remaining development cost as the government’s work progresses. |
CONSTRUCTION LOANS
CONSTRUCTION LOANS | 12 Months Ended |
Sep. 30, 2021 | |
CONSTRUCTION LOANS | |
CONSTRUCTION LOANS | NOTE 7. CONSTRUCTION LOANS September 30, 2021 September 30, 2020 Loan A (i) $ 101,209,744 $ 92,450,491 Loan C (ii) 18,426,478 17,486,917 $ 119,636,222 $ 109,937,408 (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 $118.8 million (RMB775,000,000) for a long term loan with interest at 4.75% to the develop Liangzhou Road Project. As of September 30, 2021, the Company borrowed $101,209,744 under this credit line (September 30, 2020 - $92,450,491). Due to the local government’s delay in the reallocation of residences in the Liangzhou Road Project and related area, the Hanzhong Urban Construction Investment Development Co., Ltd has not released all the funds available to the Company and additional withdrawals will be based on the project’s development progress and the Company expects the loan will be extended upon maturity. The loan is guaranteed by Hanzhong City Hantai District Municipal Government and pledged by the Company’s Yang County Yangzhou Palace project with a carrying value of $42,995,377 as of September 30, 2021 (September 30, 2020- $49,372,737). For the year ended September 30, 2021, the interest was $6,488,162 (September 30, 2020 - $6,537,079), which was capitalized into the development cost of the Liangzhou Road Project. (ii) In December 2016, the Company signed a loan agreement with Hantai District Urban Construction Investment Development Co., Ltd, a state-owned Company, to borrow up to approximately $18.4 million (RMB 119,000,000 ) for the development of the Hanzhong City Liangzhou Road Project. The interest is 1.2% and due on June 20, 2031. The Company is required to repay the loan in equal annual principal repayments of approximately $3.3 million commencing from December 2027 through June 2031 with interest payable on an annual basis. The Company pledged the assets of the Liangzhou Road related projects with a carrying value of $180,389,654 as collateral for the loan. Total interest of $224,700 for the year ended September 30, 2021 was capitalized into the development cost of the Hanzhong City Liangzhou Road Project (September 30, 2020 - $213,827 ). Additionally, in September 2017, the Urban Development Center Co., Ltd. approved a construction loan for the Company in the amount of approximately $27.1 million (RMB175,000,000) with an annual interest rate of 1.2% per year in connection with the Liangzhou Road and related Project. The Company is required to repay the loan in equal annual principal repayment of approximately $5 million commencing from December 2027 through May 2031 with the interest payable on an annual basis. The amount of this loan is available to be drawn down as soon as the land use rights of the Liangzhou Road Project are approved and the construction starts, which is expected to be completed before the end of 2022. As of September 30, 2021 and 2020, the outstanding balance of the loan was Nil. Interest charges for the year ended September 30, 2021 and 2020 were $330,441 and $314,452, respectively, which was included in the construction capitalized costs. |
CUSTOMER DEPOSITS
CUSTOMER DEPOSITS | 12 Months Ended |
Sep. 30, 2021 | |
CUSTOMER DEPOSITS | |
CUSTOMER DEPOSITS | NOTE 8. CUSTOMER DEPOSITS Customer deposits consist of amounts received from customers for the pre-sale of residential units in the PRC. The details of customer deposits are as follows: As of September 30, 2021 2020 Customer deposits by real estate projects: Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) $ 8,210,839 $ 7,606,944 Oriental Pearl Garden 2,780,917 4,358,467 Liangzhou road related projects 617,686 888,123 Yang County Pearl Garden 827,426 1,243,137 Yang County East 2nd Ring Road 2,327,964 — Yangzhou Palace 5,039,085 5,308,857 Total $ 19,803,917 $ 19,405,528 Customer deposits are typically 10% - 20% of the unit selling price for those customers who purchase properties in cash and 30%-50% of the unit selling price for those customers who purchase properties with mortgages. |
TAXES
TAXES | 12 Months Ended |
Sep. 30, 2021 | |
TAXES | |
TAXES | NOTE 9. TAXES (A) Business sales tax and VAT The Company is subject to a 5% VAT for its existing real estate projects based on the local tax authority’s practice. As of September 30, 2021, the Company had business VAT tax payable of $5,660,149 (September 30, 2020 - $5,159,296), which is expected to be paid when the projects are completed and assessed by the local tax authority. (B) Corporate income taxes (“CIT”) The Company’s PRC subsidiary and VIE are governed by the Income Tax Law of the People’s Republic of China concerning the privately run enterprises, which are generally subject to income tax on income reported in the statutory financial statements after appropriate tax adjustments. The Company’s CIT rate is 25% on taxable income. Although the possibility exists for reinterpretation of the application of the tax regulations by higher tax authorities in the PRC, potentially overturning the decision made by the local tax authority, the Company has not experienced any reevaluation of the income taxes for prior years. The PRC tax rules are different from the local tax rules and the Company is required to comply with local tax rules. The difference between the two tax rules will not be a liability of the Company. There will be no further tax payments for the difference. As of September 30, 2021 and September 30, 2020, the Company’s total income tax payable amounted to $14,326,646 and $12,213,470, respectively, which included the income tax payable balances in the PRC of $10,761,646 and $8,342,537, respectively and the Company expects to pay this income tax payable balance when the related real estate projects are completely sold. The following table reconciles the statutory rates to the Company’s effective tax rate for the years ended September 30, 2021 and 2020: For the years ended September 30, 2021 2020 Chinese statutory tax rate 25.0 % 25.0 % Valuation allowance change* 0 % 18.7 % Net impact of tax exemption and other adjustments 3.1 % 2.5 % Effective tax rate 28.1 % 46.2 % * Valuation allowance change for the year ended September 30, 2020 were primarily related to valuation allowance changes on historical losses. For years ended September 30, 2021 and 2020, the change in valuation allowance of nil and $24,616, respectively. Income tax expense for the years ended September 30, 2021 and 2020 is summarized as follows: For the years ended September 30, 2021 2020 Current tax provision $ 2,486,546 $ 841,933 Deferred tax provision — — Income tax expense $ 2,486,546 $ 841,933 Recent U.S. federal tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “U.S. Tax Reform”), was signed into law on December 22, 2017. The U.S. Tax Reform significantly modified the U.S. Internal Revenue Code by, among other things, reducing the statutory U.S. federal corporate income tax rate from 35% to 21% for taxable years beginning after December 31, 2017; limiting and/or eliminating many business deductions; migrating the U.S. to a territorial tax system with a one-time transition tax on a mandatory deemed repatriation of previously deferred foreign earnings of certain foreign subsidiaries; subject to certain limitations, generally eliminating U.S. corporate income tax on dividends from foreign subsidiaries; and providing for new taxes on certain foreign earnings. Taxpayers may elect to pay the one-time transition tax over eight years or in a single lump sum. The U.S. Tax Reform also includes provisions for a new tax on Global Intangible Low-Taxed Income (“GILTI”) effective for tax years of foreign corporations beginning after December 31, 2017. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of controlled foreign corporations (“CFCs”), subject to the possible use of foreign tax credits and a deduction equal to 50 percent to offset the income tax liability, subject to some limitations. As of September 30, 2021 and 2020, the Company’s GILTI tax payable was Nil. For the year ended September 30, 2018, the Company recognized a one-time transition toll tax of approximately $2.3 million that represented management’s estimate of the amount of U.S. corporate income tax based on the deemed repatriation to the United States of the Company’s share of previously deferred earnings of certain non-U.S. subsidiaries and VIE of the Company mandated by the U.S. Tax Reform. The Company’s estimate of the onetime transition toll Tax is subject to the finalization of management’s analysis related to certain matters, such as developing interpretations of the provisions of the Tax Act and amounts related to the earnings and profits of certain foreign VIEs and the filing of our tax returns. U.S. Treasury regulations, administrative interpretations or court decisions interpreting the Tax Act may require further adjustments and changes in our estimates. As of September 30, 2021 and 2020, the Company provided an additional $0.9 million provision due to delinquent U.S. tax return fillings. (C) Land appreciation tax (“LAT”) Since January 1, 1994, LAT has been applicable at progressive tax rates ranging from 30% to 60% on the appreciation of land values, with an exemption provided for the sales of ordinary residential properties if the appreciation values do not exceed certain thresholds specified in the relevant tax laws. However, the Company’s local tax authority in Hanzhong City has not imposed the regulation on real estate companies in its area of administration. Instead, the local tax authority has levied the LAT at the rate of 0.5% in Yang County and 1.0% in Hanzhong against total cash receipts from sales of real estate properties, rather than according to the progressive rates. As at September 30, 2021 and 2020, the outstanding LAT payable balance was Nil with respect to completed real estate properties sold up to September 30, 2021 and 2020, respectively. (D) Taxes payable consisted of the following: September 30, September 30, 2021 2019 CIT $ 14,326,646 $ 12,213,470 Business tax 5,660,149 5,159,296 Other taxes and fees 2,967,216 2,508,445 Total taxes payables $ 22,954,011 $ 19,881,211 |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Sep. 30, 2021 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | NOTE 10. STOCKHOLDERS’ EQUITY (a) Common stock On August 19, 2020, the Company filed an Amendment to the Company’s Articles of Incorporation (the “Certificate of Amendment”) with the Florida Secretary of State to affect a one-for-two reverse split of the Company’s authorized and issued and outstanding shares of common stock (the “Reverse Stock Split”). The Reverse Stock Split became effective in accordance with the terms of the Certificate of Amendment on August 20, 2020 (the “Effective Time”). At the Effective Time, every two shares of the Company’s common stock authorized issued and outstanding were automatically combined into one share of common stock, without any change in the par value per share. The Company will not issue any fractional shares in connection with the Reverse Stock Split. Instead, fractional shares will be rounded up to the nearest full share. The Company had a total of 45,050,000 shares of common stock issued and outstanding reflects the effect of the reverse split, was 25,617,807 and 22,525,693, respectively. The financial statements give retroactive effect to this reverse stock split. On April 19, 2021 (the “Closing Date”), pursuant to the terms of the Equity Acquisition Agreement between the “Company and Shaanxi Tianhao Construction Engineer Co., Ltd (“Shaanxi Tianhao”) (the “Purchaser”) (the “Equity Acquisition Agreement”), the Company issued 3,092,114 shares of common stock to the Purchaser in exchange for the settlement of its accounts payable balance. In accordance with the Equity Acquisition Agreement, the Purchaser received on a pro rata basis the Company’s common stock equivalent consideration of approximately $6.6 million (RMB 43 million) based on a conversion price of $2.13 which was the average price of the Company’s stock during the five (5) trading days preceding to the Closing Date. On September 25, 2012, our shareholders approved the Company’s 2012 Omnibus Securities and Incentive Plan (the “2012 Plan”). The 2012 Plan provides for the grant of awards which are distribution equivalent rights, incentive stock options, non-qualified stock options, performance shares, performance units, restricted shares of common stock, restricted stock units, stock appreciation rights (“SARs”), tandem stock appreciation rights, unrestricted shares of common stock or any combination of the foregoing, to key management employees and nonemployee directors of, and nonemployee consultants of, the Company or any of its subsidiaries (each a “participant”). We have reserved a total of 1,000,000 shares of common stock for issuance under the 2012 Plan. The number of shares of common stock for which awards which are options or SARs may be granted to a participant under the 2012 Plan during any calendar year is limited to 500,000. There were no options granted and outstanding as of and during the years ended September 30, 2021 and 2020. (b) Statutory surplus reserves The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory surplus reserve is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors. The statutory surplus reserve fund is non-discretionary other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of shares currently held by them, provided that the remaining statutory surplus reserve balance after such issue is not less than 25% of the registered capital before the conversion. The Company is required to appropriate 10% of its net profits as statutory surplus reserve. As of September 30, 2021 and 2020, the balance of statutory surplus reserve was $11,095,939 and $10,458,395, respectively. The discretionary surplus reserve may be used to acquire fixed assets or to increase the working capital to expend on production and operations of the business. The Company’s Board of Directors decided not to make an appropriation to this reserve for the years ended September 30, 2021 and 2020. |
CONTINGENCIES AND COMMITMENTS
CONTINGENCIES AND COMMITMENTS | 12 Months Ended |
Sep. 30, 2021 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 11. CONTINGENCIES AND COMMITMENTS From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company’s management does not believe the 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 buyer obtains 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 the six to twelve month period, the mortgage banks require the Company to maintain, as restricted cash of at least 5% of the mortgage proceeds as security for the Company’s obligations under such guarantees. If a purchaser defaults on its payment obligations, the mortgage bank may deduct the delinquent mortgage payment from the security deposit and require the Company to pay the excess amount if the delinquent mortgage payments exceed the security deposit. If the delinquent mortgage payments exceed the security deposit, the banks may require us to pay the excess amount. If multiple purchasers’ default on their payment obligations at around the same time, we will be required to make significant payments to the banks to satisfy our guarantee obligations. If we are unable to resell the properties underlying defaulted mortgages on a timely basis or at prices higher than the amounts of our guarantees and related expenses, we will suffer financial losses. The Company has the required reserves in its restricted cash account to cover any potential mortgage defaults as required by the mortgage lenders. Since inception through the release of this report, the Company has not experienced any delinquent mortgage loans and has not experienced any losses related to these guarantees. As of September 30, 2021 and 2020, our outstanding guarantees in respect of our customers’ mortgage loans amounted to approximately $66 million and $68 million, respectively. As of September 30, 2021 and 2020, the amount of restricted cash reserved for these guarantees was approximately $3.3 million and $3.4 million, respectively, and the Company believes that such reserves are sufficient. |
SCHEDULE I
SCHEDULE I | 12 Months Ended |
Sep. 30, 2021 | |
SCHEDULE I | |
SCHEDULE I | CHINA HGS REAL ESTATE INC. SCHEDULE I- PARENT COMPANY BALANCE SHEETS (UNAUDITED) September 30, 2021 2020 ASSETS Investment in subsidiary $ 194,262,711 $ 171,622,821 Total assets $ 194,262,711 $ 171,622,821 LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES Tax payable $ 3,565,000 $ 3,297,000 Total liabilities 3,565,000 3,297,000 Stockholders’ equity*: Common stock, $0.001 par value, 50,000,000 shares authorized, 25,617,807 and 22,525,693 shares issued and outstanding September 30, 2021 and 2020 25,617 22,525 Additional paid-in capital 136,535,303 129,930,330 Statutory surplus 11,095,939 10,458,395 Retained earnings 40,691,955 34,954,061 Accumulated other comprehensive income (loss) 2,348,897 (7,039,490) Total stockholders' equity 190,697,711 168,325,821 Total Liabilities and Stockholders' Equity $ 194,262,711 $ 171,622,821 *Adjusted to give retroactive effect to a one-for-two reverse stock split effective on August 20, 2020. The accompanying notes are integral part of Schedule I CHINA HGS REAL ESTATE INC. SCHEDULE I – PARENT COMPANY STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED SEPTEMBER 30, 2021 AND 2020 (UNAUDITED) 2021 2020 Equity in profit of subsidiary and VIE $ 6,643,438 $ 1,321,838 General and administrative expenses — — Interest expense — 72,400 Income before income taxes 6,643,438 1,249,438 Provision for income taxes 268,000 268,000 Net income 6,375,438 981,438 Other comprehensive loss Foreign currency translation adjustment 9,388,387 8,644,233 Comprehensive loss $ 15,763,825 $ 9,625,671 The accompanying notes are integral part of Schedule I CHINA HGS REAL ESTATE INC. SCHEDULE I -PARENT COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2021 AND 2020 (UNAUDITED) 2021 2020 Cash flows from operating activities Net income $ 6,375,438 $ 981,438 Adjustments to reconcile net income to net cash used in operating activities: Stock based compensation — — Equity in profit of subsidiary (6,643,438) (1,321,838) Changes in assets and liabilities: Taxes payable 268,000 268,000 Accrued expenses — 72,400 Net cash used in operating activities — — Net increase (decrease) in cash — — Cash, beginning of year — — Cash, end of year $ — $ — Supplemental disclosures of cash flow information: Interest paid $ — $ — Income taxes paid $ — $ — The accompanying notes are integral part of Schedule I CHINA HGS REAL ESTATE INC. NOTES TO SCHEDULE I NOTE 1. BASIS OF PRESENTATION Certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been condensed or omitted. The Company’s investment in subsidiary and variable interest entity (“VIE”) is stated at cost plus equity income (loss) in undistributed earnings (loss) of subsidiaries and VIE. NOTE 2. RESTRICTED ASSETS The Company’s PRC VIE and subsidiary are restricted in their ability to transfer a portion of their net assets to the Company. The payment of dividends by entities organized in China is subject to limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. The Company’s subsidiary and its VIE are also required to set aside at least 10% of their after-tax profit based on PRC accounting standards each year to their statutory reserve accounts until the accumulated amount of such reserves reaches 50% of their respective registered capital. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. In addition, the Company’s operations and revenues are conducted and generated in China, all of the Company’s revenues being earned and currency received are denominated in RMB. RMB is subject to the foreign exchange control regulations in China, and, as a result, the Company may be unable to distribute any dividends outside of China due to PRC foreign exchange control regulations that restrict the Company’s ability to convert RMB into US Dollars. Schedule I of Article 5-04 of Regulation S-X requires the condensed financial information of registrant shall be filed when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. For purposes of the above test, restricted net assets of consolidated subsidiaries and VIEs shall mean that amount of the registrant’s proportionate share of net assets of consolidated subsidiaries and VIEs (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiaries and VIEs in the form of loans, advances or cash dividends without the consent of a third party. The condensed parent company financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the Company’s PRC subsidiary and VIE exceed 25% of the consolidated net assets of the Company. NOTE 3. COMMITMENTS The Company did not have any significant commitments or long-term obligations as at September 30, 2021 and 2020. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Sep. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Principles of consolidation and basis of presentation | Principles of consolidation and basis of presentation The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of China HGS Real Estate Inc. (the “Company” or “China HGS”), China HGS Investment Inc. (“HGS Investment”), Shaanxi HGS Management and Consulting Co., Ltd. (“Shaanxi HGS”) and its variable interest entity (“VIE”), Shaanxi Guangsha Investment and Development Group Co., Ltd. (“Guangsha”). All inter-company transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation. The Company’s operations involve real estate development and sales. Starting from the year ended September 30, 2020, the Company has been involved in larger real estate property development with an extended development cycle. As a result, it is not possible to precisely measure the duration of its operating cycle. The accompanying consolidated balance sheets of the Company have been prepared on an unclassified basis in accordance with real estate industry practice. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes, and disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates are used for, but not limited to, the assumptions and estimates used by management in recognizing development revenue under the percentage of completion method, the selection of the useful lives of property and equipment, provision necessary for contingent liabilities, revenue recognition, taxes and budgeted costs. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates. Changes of estimated gross profit margins related to revenue recognized under the percentage of completion method are made in the period in which circumstances requiring the revisions become known. For the year ended September 30, 2021 and 2020, the Company did not change the estimated revenue and related gross profit margin. |
Fair value of financial instruments | Fair value of financial instruments The Company follows the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures.” It clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows: Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions or what assumptions the market participants would use in pricing the asset or liability based on the best available information. The carrying amounts reported in the accompanying consolidated balance sheets for cash, restricted cash and all other current assets, security deposits for land use rights, loans and all current liabilities approximate their fair value based on the short-term maturity of these instruments. The fair value of the 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 other payables. |
Liquidity | Liquidity In recent years, the Chinese government has implemented measures to control overheating residential and commercial property prices including but not limited to restrictions on home purchase, increasing the down-payment requirement against speculative buying, development of low-cost rental housing properties to help low-income groups while reducing the demand in the commercial housing market, increasing real estate property taxes to discourage speculation, control of the land supply and slowdown the construction land auction process, etc. In addition, in December 2019, a novel strain of coronavirus (COVID-19) surfaced. COVID-19 has spread rapidly throughout China and worldwide, which has caused significant volatility in the PRC and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the PRC and international economies. To reduce the spread of COVID-19, the Chinese government has employed measures including city lockdowns, quarantines, travel restrictions, suspension of business activities and school closures. Due to difficulties resulting from the COVID-19 outbreak, including, but not limited to, the temporary closure of the Company’s facilities and operations beginning in early February through early March 2020, limited support from the Company’s employees, delayed access to construction raw material supplies, reduced customer visits to the Company’s sales office, and inability to promote real estate property sales to customers on a timely basis, our revenues during the year ended September 30, 2020 were significantly lower. The Company is experiencing recovery of its real estate development business in fiscal 2021 due to increasing demand from the local real estate market. The Company had revenues of approximately $58.9 million for the year ended September 30, 2021, increased from $13.0 million in last year. Based on the assessment of the current economic environment, customer demand and sales trends, we believe that consumer spending has been restored in the local real estate market and real estate sales are expected to grow in the coming periods. On the other side, due to the negative impact from the COVID-19 outbreak and spread, the development period of real estate properties and our operating cycle has been extended and we may not be able to liquidate our large balance of completed real estate properties within the short term as we originally expected. In addition, as of September 30, 2021, we had large construction loans payable of approximately $119.6 million and large accounts payable of approximately $18.3 million to be paid to subcontractors. The extent of the impact of COVID-19 on the Company’s future financial results will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the local economy and real estate markets, among many other factors, all of which remain highly uncertain and unpredictable. Given this uncertainty, the Company is currently unable to quantify the expected impact of the COVID-19 pandemic on its future operations, financial condition, liquidity and results of operations if the current situation continues. The above mentioned facts raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date of this filing. In assessing its liquidity, management monitors and analyzes the Company’s cash on-hand, its ability to generate sufficient revenue sources in the future, and its operating and capital expenditure commitments. As of September 30, 2021, our total cash and restricted cash balance was approximately $3.5 million, a decrease from approximately $3.9 million as of September 30, 2020. With respect to capital funding requirements, the Company budgeted its capital spending based on ongoing assessments of needs to maintain adequate cash. As of September 30, 2021, we had approximately $88.1 million of completed residential apartments and commercial units available for sale to potential buyers. Although we reported approximately $18.3 million accounts payable as of September 30, 2021, due to the long-term relationship with our construction suppliers and subcontractors, we were able to effectively manage cash spending on construction and negotiate with them to adjust the payment schedule based on our cash on hand. In addition, most of our existing real estate development projects relate to the old town renovation which are supported by the local government. As of September 30, 2021, we reported approximately $119.6 million of construction loans borrowed from financial institutions controlled by the local government and such loans can only be used on the old town renovation related project development. We expect that we will be able to renew all of the existing construction loans upon their maturity and borrow additional new loans from local financial institutions, when necessary, based on our past experience and the Company’s good credit history. Also, the Company’s cash flows from pre-sales and current sales should provide financial support for our current development projects and operations. For the year ended September 30, 2021, we had six large ongoing construction projects (see Note 3, real estate properties under development) which were under the preliminary development stage due to delayed inspection and acceptance of the development plans by the local government. In June 2020, we completed the residence relocation surrounding the Liangzhou Road related projects and launched the construction of these projects in December 2020. For the other four projects, we expect we will be able to obtain the government’s approval of the development plans on these projects in the coming fiscal year and start the pre-sale of the real estate properties to generate cash when certain property development milestones have been achieved. |
Revenue recognition | Revenue recognition The Company follows FASB ASC Topic 606 “Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, Revenue from Contracts with Customers, revenue is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration that the Company expects to be entitled to for those goods and services. The Company determines revenue recognition through the following steps: ● identification of the contract, or contracts, with a customer; ● identification of the performance obligations in the contract; ● determination of the transaction price, including the constraint on variable consideration; ● allocation of the transaction price to the performance obligations in the contract; and ● recognition of revenue when (or as) the Company satisfies a performance obligation. Most of the Company’s revenue is derived from real estate sales of condominiums and commercial properties in the PRC. The majority of the Company’s contracts contain a single performance obligation involving significant real estate development activities that are performed together to deliver a real estate property to its customers. Revenues arising from real estate sales are recognized when or as the control of the asset is transferred to the customer. The control of the asset may transfer over time or at a point in time. For the sales of individual condominium units in a real estate development project, the Company has an enforceable right to payment for performance completed to date, revenue is recognized over time by measuring the progress towards complete satisfaction of that performance obligation (“percentage completion method”). Otherwise, revenue is recognized at a point in time when the customer obtains control of the asset. For the years ended September 30, 2021 and 2020, the Company did not have any construction in progress meet the revenue recognition under percentage completion method. Under the percentage completion method, revenue and profit from the sales of long-term real estate development properties is recognized by the percentage of completion method on the sale of individual units when all the following criteria are met: a. Construction is beyond a preliminary stage. b. The buyer is committed to the extent of being unable to require a refund except for non-delivery of the unit or interest. c. Sufficient units have already been sold to assure that the entire property will not revert to rental property. d. Sale prices are collectible. e. Aggregate sales proceeds and costs can be reasonably estimated. If any of the above criteria are not met, proceeds shall be accounted for as deposits until the criteria are met. Under the percentage of completion method, revenues from individual real estate condominium units sold under development and related costs are recognized over the course of the construction period, based on the completion progress of a project. The progress towards complete satisfaction of the performance obligation is measured based on the Company’s efforts or inputs to the satisfaction of the performance obligation, by reference to the contract costs incurred up to the end of reporting period as a percentage of total estimated costs for each contract. In relation to any project, revenue is determined by calculating the ratio of incurred costs, including land use rights costs and construction costs, to total estimated costs and applying that ratio to the contracted sales amounts. Cost of sales is recognized by determining the ratio of contracted sales during the period to total estimated sales value and applying that ratio to the incurred costs. Current period amounts are calculated based on the difference between the life-to-date project totals and the previously recognized amounts. Any changes in significant judgments and/or estimates used in determining construction and development revenue could significantly change the timing or amount of construction and development revenue recognized. Changes in total estimated project costs or losses, if any, are recognized in the period in which they are determined. Revenue from the sales of previously completed real estate condominium units is recognized at the time of the closing of an individual unit sale. This occurs when the customer obtains the physical possession, the legal title, or the significant risks and rewards of ownership of the property and the Company has the right to payment and the collection of the consideration is probable. For municipal road construction projects, revenues are generally recognized at the time the projects are completed. Disaggregation of Revenues Disaggregated revenues are as follows: For the years ended September 30, 2021 2020 Revenue recognized for completed condominium real estate projects, net of sales taxes $ 15,179,593 $ 12,785,508 Revenue recognized for completed condominium real estate projects sold to government, net of sales taxes 43,311,572 — Revenue recognized for condominium real estate projects under development, net of sales taxes — — Total revenue, net of sales taxes $ 58,491,165 $ 12,785,508 Contract balances Timing of revenue recognition may differ from the timing of billing and cash receipts from customers. The Company records a contract asset when revenue is recognized prior to invoicing, or a contract liability when cash is received in advance of recognizing revenue. A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets include billed and billable receivables, which are the Company’s unconditional rights to consideration other than the passage of time. Contract liabilities include cash collected in advance and in excess of revenue recognized. Customer deposits are excluded from contract liabilities. The Company has elected to apply the optional practical expedient for costs to obtain a contract which allows the Company to immediately expense sales commissions (included under selling expenses) because the amortization period of the asset that the Company otherwise would have used is one year or less. 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 Ownership has been issued by the relevant government authority, our loan guarantee terminates. If the buyer then defaults on his or her mortgage loan, the bank has the right to take the property back and sell it and use the proceeds to pay off the loan. The Company is not liable for any shortfall that the bank may incur in this event. To date, no buyer has defaulted on his or her mortgage payments during the Mortgage Loan Guarantee Period and the Company has not returned any loan proceeds pursuant to its mortgage loan guarantees. |
Foreign currency translation | Foreign currency translation The Company’s financial information is presented in U.S. dollars. The functional currency of the Company’s operating VIE is Renminbi (“RMB”), the currency of the PRC. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC Topic 830-30 “Translation of Financial Statements”. The financial information is first prepared in RMB and then is translated into U.S. dollars at year-end exchange rates as to assets and liabilities and average exchange rates as to revenue,expenses and cash flows. 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 (loss) in stockholders’ equity. 2021 2020 Year end RMB : USD exchange rate 6.4434 6.7896 Annual average RMB : USD exchange rate 6.5072 7.0056 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 large reputable 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. |
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 month 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 certificate of ownership. These deposits are not covered by insurance. The Company has not experienced any losses in such accounts and management believes its restricted cash account is not exposed to any significant risks. |
Security deposits for land use rights | Security deposits for land use rights Security deposits for land use rights consist of deposits held by the PRC government for the purchase of land use rights and the deposits 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 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 its 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 reviews all of its real estate projects for future losses and impairment by comparing the estimated future undiscounted cash flows for each project to the carrying value of such project. For the years ended September 30, 2021 and 2020, the Company recognized nil and $2,703,031 impairment loss for its real estate properties, respectively. |
Capitalization of Interest | Capitalization of interest Interest incurred during and directly related to real estate development projects is capitalized to the related real estate property under development during the active development period, which generally commences when borrowings are used to acquire real estate assets and ends when the properties are substantially complete or the property becomes inactive. Interest is capitalized based on the interest rate applicable to specific borrowings or the weighted average of the rates applicable to other borrowings during the period. Interest capitalized to real estate property under development is recorded as a component of cost of real estate sales when related units are sold. All other interest is expensed as incurred. For the years ended September 30, 2021 and 2020, the total interest capitalized in the real estate property development was $7,043,303 and $7,086,018, respectively. |
Property, plant and equipment, net | Property, plant and equipment, net Property, plant and equipment are recorded at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, less any estimated residual value. Estimated useful lives of the assets are as follows: Buildings 39 years Machinery and office equipment 5 - 10 years Vehicles 8 years Any gain or loss on disposal or retirement of a fixed asset is recognized in the profit and loss account and is the difference between the net sales proceeds and the net carrying amount of the asset. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and the resulting profit or loss is reflected in income (loss). Maintenance, repairs and minor renewals are charged directly to expense as incurred unless such expenditures extend the useful life or represent a betterment, in which case they are capitalized. |
Impairment of long-lived assets | Impairment of long-lived assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally determined by using the asset’s expected future discounted cash flows or market value. The Company estimates fair value of the assets based on certain assumptions such as budgets, internal projections, and other available information as considered necessary. There was no impairment of long-lived assets for the years ended September 30, 2021 and 2020. |
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 warranties | Property warranties The Company provides its customers with warranties which cover major defects of the 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 |
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 |
Income taxes | Income taxes In accordance with FASB ASC Topic 740 “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. A valuation allowances is established, when necessary, to reduce net 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 positions taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. There are no material uncertain tax positions as of September 30, 2021 and September 30, 2020. The Company is a corporation organized under the laws of the State of Florida. However, all of the Company’s operations are conducted solely by its subsidiaries and VIE in the PRC. No income is earned in the United States and the management does not repatriate any earnings outside the PRC. As a result, the Company did not generate any U.S. taxable income for the years ended September 30, 2021 and 2020. As of September 30, 2021, the Chinese entities’ income tax returns filed in China for the years ended December 31, 2020, 2019, 2018, 2017 and 2016 are subject to examination by the Chinese taxing authorities. The parent Company, China HGS Real Estate Inc.’s both U.S. federal tax returns and Florida state tax returns are delinquent since 2009. Its tax years ended September 30, 2009 through September 30, 2021 remain open for statutory examination by U.S. federal and state tax authorities. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a U.S. corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. Due to the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded accrued amounts in our consolidated financial statements as of September 30, 2021 and 2020, including an approximately $2.3 million provision on the deemed repatriation of undistributed foreign earnings and an additional $0.8 million provision for delinquent U.S. and State tax fillings. The Company is in the process of engaging a tax professional to file its delinquent tax returns. Failure to furnish any income tax and information returns with respect to any foreign business entity required, within the time prescribed by the IRS, subjects the Company to civil penalties. |
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 projects Mingzhu Garden, Nan Dajie and Central Plaza are located, implements this tax rule by requiring real estate companies prepay the LAT based upon customer deposits received. The tax rate in Hanzhong is 1%. Yang County, where the Yangzhou Pearl Garden and Yangzhou Palace projects are located, has 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 years ended September 30, 2021 and 2020 were net income and foreign currency translation adjustments. |
Advertising expenses | Advertising expenses Advertising costs are expensed as incurred. For the years ended September 30, 2021 and 2020, the Company recorded advertising expenses of $59,481 and $271,811, respectively. |
Basic and diluted earnings (loss) per share | Basic and diluted earnings (loss) per share The Company computes earnings (loss) per share (“EPS”) in accordance with the FASB ASC Topic 260, “Earnings per share,” which requires companies to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There were no dilutive shares for the years ended September 30, 2021 and 2020. |
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 remittances 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. The Company’s cash and restricted cash were on deposit at financial institutions in the PRC, which the management believes are of high credit quality. In May, 2015, China’s new Deposit Insurance Regulation came into effect, pursuant to which banking financial institutions, such as commercial banks, established in China are required to purchase deposit insurance for deposits in RMB and in foreign currency placed with them. Such Deposit Insurance Regulation would not be effective in providing complete protection for the Company’s accounts, as its aggregate deposits are much higher than the compensation limit of RMB500,000 (approximately $77,599). However, the Company believes that the risk of failure of any of these Chinese banks is remote. Bank failure is uncommon in China and the Company believes that the Chinese banks that hold the Company’s cash and restricted cash are financially sound based on public available information. The Company has not experienced any losses in its bank accounts. For the year ended September 30, 2021, the Company had real estate sales revenue of $43,625,590 related to sales to the local government for residence reallocation purposes, representing 74.0% of the Company’s total real estate sales revenue for the year ended September 30, 2021. For the years ended September 30, 2021 and 2020, the Company did not have any individual customer with over 10% of the Company real estate sales revenue for the related periods. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In October 2018, the FASB issued ASU No. 2018-17 (“ASU 2018-17”), Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. The updated guidance requires entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety when determining whether a decision-making fee is a variable interest. The amendments in this update are effective for non-public business entities for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted. These amendments should be applied retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements. Management has considered all other recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements. |
ORGANIZATION AND BASIS OF PRE_2
ORGANIZATION AND BASIS OF PRESENTATION (Tables) | 12 Months Ended |
Sep. 30, 2021 | |
ORGANIZATION AND BASIS OF PRESENTATION | |
Schedule of variable Interest Entities | Balance as of September 30, September 30, 2021 2020 Total assets $ 385,000,583 $ 353,600,159 Total liabilities $ 189,470,931 $ 181,104,861 |
Schedule of Disaggregated revenues | For the years ended September 30, 2021 2020 Revenue recognized for completed condominium real estate projects, net of sales taxes $ 15,179,593 $ 12,785,508 Revenue recognized for completed condominium real estate projects sold to government, net of sales taxes 43,311,572 — Revenue recognized for condominium real estate projects under development, net of sales taxes — — Total revenue, net of sales taxes $ 58,491,165 $ 12,785,508 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Sep. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of Currency exchange rate | 2021 2020 Year end RMB : USD exchange rate 6.4434 6.7896 Annual average RMB : USD exchange rate 6.5072 7.0056 |
Schedule Of Estimated Life Of Asset | Buildings 39 years Machinery and office equipment 5 - 10 years Vehicles 8 years |
REAL ESTATE PROPERTY DEVELOPM_2
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT (Tables) | 12 Months Ended |
Sep. 30, 2021 | |
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT | |
Schedule of components of real estate property development completed and under development | Balance as of: September 30, September 30, 2021 2020 Development completed: Hanzhong City Mingzhu Garden Phase II $ 23,464,365 $ 22,801,439 Hanzhong City Oriental Pearl Garden 19,435,711 19,937,105 Yang County Yangzhou Pearl Garden Phase II 2,250,388 2,559,977 Yang County Yangzhou Palace 42,995,377 49,372,737 Real estate property development completed $ 88,145,841 $ 94,671,258 Under development: Hanzhong City Liangzhou Road and related projects (a) $ 180,389,654 $ 164,879,955 Hanzhong City Hanfeng Beiyuan East (b) 868,796 824,496 Hanzhong City Beidajie (b) 78,075,559 57,142,127 Yang County East 2 nd 6,435,712 4,894,439 Real estate property under development $ 265,769,721 $ 227,741,017 (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 a 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. The Company launched the construction of the Liangzhou Road related projects in December 2020. As of September 30, 2021, the main Liangzhou road construction is substantially completed. The Company’s development cost incurred on Liangzhou Road Project is treated as the Company’s deposit on purchasing the related land use rights, as agreed by the local government. As of September 30, 2021, the actual costs incurred by the Company were approximately $180.4 million (September 30, 2020 - $164.9 million) and the incremental cost related to residence resettlements approved by the local government. The Company determined that the Company’s Investment in the Liangzhou Road Project in exchange for interests in future land use rights is a barter transaction with commercial substance. (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 quarter ended June 30, 2014. As of September 30, 2021, the local government has not completed the budget for these projects therefore the delivery for these projects for the government’s acceptance and related settlement were extended to 2022. Due to delays in the government approval and slow development progress, in January 2021, the Company disposed of certain construction properties in the Beidajie project at carrying value to Hanzhong Guangsha Real Estate Development Inc. (“Hanzhong Guangsha”) an entity controlled by the Company’s former chairman and Chief executive officer, Mr. Xiaojun Zhu to settle the payable of approximately $28.2 million related to Hanzhong Guangsha in connection with the acquisition of the Hanzhong Nanyuan II Project disclosed below. On January 20, 2021, the Company entered into agreement with Hanzhong Guangsha, an entity controlled by Mr. Xiaojun Zhu, to acquire certain real estate under development in the Hanzhong Nanyuan II Project in the amount of approximately $28.2 million, for the local government’s residence reallocation related to the Liangzhou road and affiliated project. All the real estate property in Hanzhong Nanyuan II project was completed and sold to the local government for residence reallocation purposes by September 30, 2021. (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. 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 the China Construction Bank (September 30, 2021 and 2020 - 4.75% ). The local government has approved a refund to the Company by reducing local surcharges or taxes otherwise required in the real estate development. The road construction was substantially completed as of September 30, 2021 and is in process of the government’s review and approval. For the year ended September 30, 2021, the Company received the local government’s installment payments of approximately $2.3 million, which was included in the Company’s customer deposits as of September 30, 2021. |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Sep. 30, 2021 | |
PROPERTY, PLANT AND EQUIPMENT, NET | |
Property, Plant and Equipment | As of September 30, 2021 and 2020, property, plant and equipment was as follows: As of September 30, 2021 2020 Buildings $ 848,471 $ 805,208 Automobiles — 97,823 Total 848,471 903,031 Less: accumulated depreciation (290,385) (331,701) Property, plant and equipment, net $ 558,086 $ 571,330 |
CONSTRUCTION LOANS (Tables)
CONSTRUCTION LOANS (Tables) | 12 Months Ended |
Sep. 30, 2021 | |
Schedule of long-term debt instruments | September 30, 2021 September 30, 2020 Loan A (i) $ 101,209,744 $ 92,450,491 Loan C (ii) 18,426,478 17,486,917 $ 119,636,222 $ 109,937,408 (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 $118.8 million (RMB775,000,000) for a long term loan with interest at 4.75% to the develop Liangzhou Road Project. As of September 30, 2021, the Company borrowed $101,209,744 under this credit line (September 30, 2020 - $92,450,491). Due to the local government’s delay in the reallocation of residences in the Liangzhou Road Project and related area, the Hanzhong Urban Construction Investment Development Co., Ltd has not released all the funds available to the Company and additional withdrawals will be based on the project’s development progress and the Company expects the loan will be extended upon maturity. The loan is guaranteed by Hanzhong City Hantai District Municipal Government and pledged by the Company’s Yang County Yangzhou Palace project with a carrying value of $42,995,377 as of September 30, 2021 (September 30, 2020- $49,372,737). For the year ended September 30, 2021, the interest was $6,488,162 (September 30, 2020 - $6,537,079), which was capitalized into the development cost of the Liangzhou Road Project. |
Hanzhong Urban Construction Investment Development Co., Ltd [Member] | |
Schedule of Maturities of Long-term Debt | (ii) In December 2016, the Company signed a loan agreement with Hantai District Urban Construction Investment Development Co., Ltd, a state-owned Company, to borrow up to approximately $18.4 million (RMB 119,000,000 ) for the development of the Hanzhong City Liangzhou Road Project. The interest is 1.2% and due on June 20, 2031. The Company is required to repay the loan in equal annual principal repayments of approximately $3.3 million commencing from December 2027 through June 2031 with interest payable on an annual basis. The Company pledged the assets of the Liangzhou Road related projects with a carrying value of $180,389,654 as collateral for the loan. Total interest of $224,700 for the year ended September 30, 2021 was capitalized into the development cost of the Hanzhong City Liangzhou Road Project (September 30, 2020 - $213,827 ). |
CUSTOMER DEPOSITS (Tables)
CUSTOMER DEPOSITS (Tables) | 12 Months Ended |
Sep. 30, 2021 | |
CUSTOMER DEPOSITS | |
Schedule of customer deposits from pre-sale of residential units | Customer deposits consist of amounts received from customers for the pre-sale of residential units in the PRC. The details of customer deposits are as follows: As of September 30, 2021 2020 Customer deposits by real estate projects: Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) $ 8,210,839 $ 7,606,944 Oriental Pearl Garden 2,780,917 4,358,467 Liangzhou road related projects 617,686 888,123 Yang County Pearl Garden 827,426 1,243,137 Yang County East 2nd Ring Road 2,327,964 — Yangzhou Palace 5,039,085 5,308,857 Total $ 19,803,917 $ 19,405,528 |
TAXES (Tables)
TAXES (Tables) | 12 Months Ended |
Sep. 30, 2021 | |
TAXES | |
Schedule of Income tax expenses | Income tax expense for the years ended September 30, 2021 and 2020 is summarized as follows: For the years ended September 30, 2021 2020 Current tax provision $ 2,486,546 $ 841,933 Deferred tax provision — — Income tax expense $ 2,486,546 $ 841,933 |
Schedule of components of deferred taxes | For the years ended September 30, 2021 2020 Chinese statutory tax rate 25.0 % 25.0 % Valuation allowance change* 0 % 18.7 % Net impact of tax exemption and other adjustments 3.1 % 2.5 % Effective tax rate 28.1 % 46.2 % * Valuation allowance change for the year ended September 30, 2020 were primarily related to valuation allowance changes on historical losses. For years ended September 30, 2021 and 2020, the change in valuation allowance of nil and $24,616, respectively. |
Schedule of taxes payable | September 30, September 30, 2021 2019 CIT $ 14,326,646 $ 12,213,470 Business tax 5,660,149 5,159,296 Other taxes and fees 2,967,216 2,508,445 Total taxes payables $ 22,954,011 $ 19,881,211 |
ORGANIZATION AND BASIS OF PRE_3
ORGANIZATION AND BASIS OF PRESENTATION - Schedule of Variable Interest Entities (Details) - USD ($) | Sep. 30, 2021 | Sep. 30, 2020 |
Total assets | $ 385,000,563 | $ 353,964,153 |
Total liabilities | 194,302,852 | 185,638,332 |
Variable Interest Entity, Primary Beneficiary [Member] | ||
Total assets | 385,000,583 | 353,600,159 |
Total liabilities | $ 189,470,931 | $ 181,104,861 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue recognition (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Revenue recognized for completed condominium real estate projects, net of sales taxes | $ 15,179,593 | $ 12,785,508 |
Revenue recognized for completed condominium real estate projects sold to government, net of sales taxes | 43,311,572 | |
Revenue recognized for condominium real estate projects under development, net of sales taxes | 0 | |
Total revenue, net of sales taxes | $ 58,491,165 | $ 12,785,508 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Currency Exchange Rate (Details) - ¥ / $ | 12 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Year end RMB : USD exchange rate | 6.4434 | 6.7896 |
Annual average RMB : USD exchange rate | 6.5072 | 7.0056 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Estimated useful lives of the assets (Details) | 12 Months Ended |
Sep. 30, 2021 | |
Buildings. | |
Property, Plant and Equipment, Useful Life | 39 years |
Machinery and Equipment | Maximum | |
Property, Plant and Equipment, Useful Life | 10 years |
Machinery and Equipment | Minimum | |
Property, Plant and Equipment, Useful Life | 5 years |
Vehicles | |
Property, Plant and Equipment, Useful Life | 8 years |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) | 1 Months Ended | 12 Months Ended | 24 Months Ended | |||
Dec. 22, 2017 | Sep. 30, 2021USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2021CNY (¥) | |
Significant Accounting Policies [Line Items] | ||||||
Net income | $ 6,375,438 | $ 981,438 | ||||
Accounts payable to subcontractors | 18,300,000 | $ 18,300,000 | ||||
Cash and restricted cash | 3,295,188 | 3,409,837 | 3,295,188 | |||
Construction loans | 119,636,222 | 109,937,408 | 119,636,222 | |||
Impairment loss on real estate property | 0 | 2,703,031 | 2,703,031 | |||
Real Estate Property Plant And Equipment Interest Capitalization | 7,043,303 | 7,086,018 | ||||
Impairment of long lived assets | $ 0 | $ 0 | ||||
Percentage Of Contract Cost Withholds | 2.00% | |||||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 25.00% | 25.00% | ||||
Effective Income Tax Rate Reconciliation, Repatriation of Foreign Earnings, Amount | $ 2,300,000 | $ 2,300,000 | $ 2,300,000 | |||
Effective Income Tax Rate Reconciliation Provision For Delinquent Tax Filings | 800,000 | 800,000 | ||||
Advertising Expense | 59,481 | 271,811 | ||||
Aggregate deposits | 77,599 | 77,599 | ¥ 500,000 | |||
Real estate sales revenue | 58,915,239 | 12,979,227 | ||||
Variable Interest Entity, Primary Beneficiary [Member] | ||||||
Significant Accounting Policies [Line Items] | ||||||
Loan Payable maturity less than one year | 119,600,000 | |||||
Accounts payable to subcontractors | 18,300,000 | 18,300,000 | ||||
Residential and commercial units | ||||||
Significant Accounting Policies [Line Items] | ||||||
Net income | 58,900,000 | 13,000,000 | ||||
Units available for sale to potential buyers | 88,100,000 | 88,100,000 | ||||
Accounting Standards Update 2016-18 | ||||||
Significant Accounting Policies [Line Items] | ||||||
Cash and restricted cash | 3,500,000 | $ 3,900,000 | $ 3,500,000 | |||
Sales Revenue | Customer | ||||||
Significant Accounting Policies [Line Items] | ||||||
Real estate sales revenue | $ 43,625,590 | |||||
Concentration Risk Threshold Percentage | 74 | |||||
Hanzhong | ||||||
Significant Accounting Policies [Line Items] | ||||||
Land appreciation tax rate | 1.00% | |||||
Yang County | ||||||
Significant Accounting Policies [Line Items] | ||||||
Land appreciation tax rate | 0.50% | |||||
Minimum | ||||||
Significant Accounting Policies [Line Items] | ||||||
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% | |||||
Warranty period | 2 years | 2 years | 2 years | |||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | |||||
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% | |||||
Warranty period | 5 years | 5 years | 5 years | |||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 35.00% | |||||
Land appreciation tax rate | 60.00% |
REAL ESTATE PROPERTY DEVELOPM_3
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT - Components of Real Estate (Details) - USD ($) | Sep. 30, 2021 | Sep. 30, 2020 |
Real Estate Properties [Line Items] | ||
Real estate property development completed | $ 88,145,841 | $ 94,671,258 |
Real estate property under development -long-term | 265,769,721 | 227,741,017 |
Hanzhong City Mingzhu Garden Phase II | ||
Real Estate Properties [Line Items] | ||
Real estate property development completed | 23,464,365 | 22,801,439 |
Hanzhong City Oriental Pearl Garden | ||
Real Estate Properties [Line Items] | ||
Real estate property development completed | 19,435,711 | 19,937,105 |
Yang County Yangzhou Pearl Garden Phase II | ||
Real Estate Properties [Line Items] | ||
Real estate property development completed | 2,250,388 | 2,559,977 |
Yang County Yangzhou Palace | ||
Real Estate Properties [Line Items] | ||
Real estate property development completed | 42,995,377 | 49,372,737 |
Hanzhong City Liangzhou Road and related projects | ||
Real Estate Properties [Line Items] | ||
Real estate property under development -long-term | 180,389,654 | 164,879,955 |
Hanzhong City Hanfeng Beiyuan East | ||
Real Estate Properties [Line Items] | ||
Real estate property under development -long-term | 868,796 | 824,496 |
Hanzhong City Beidajie | ||
Real Estate Properties [Line Items] | ||
Real estate property under development -long-term | 78,075,559 | 57,142,127 |
Yang County East 2nd Ring Road. | ||
Real Estate Properties [Line Items] | ||
Real estate property under development -long-term | $ 6,435,712 | $ 4,894,439 |
REAL ESTATE PROPERTY DEVELOPM_4
REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT - Additional Information (Details) - USD ($) $ in Millions | 12 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Mr. Xiaojun Zhu | ||
Real Estate Properties [Line Items] | ||
Settlement Payable to business acquisition | $ 28.2 | |
Hanzhong City Liangzhou Road and related projects | ||
Real Estate Properties [Line Items] | ||
Budgeted Price For Municipal Roads | 33 | |
Land use right included in real estate property under development | 394.5 | |
Actual Construction And Development Costs Incurred | $ 180.4 | $ 164.9 |
Yang County East 2nd Ring Road. | ||
Real Estate Properties [Line Items] | ||
Debt Instrument, Interest Rate, Stated Percentage | 4.75% | 4.75% |
Installment payment received | $ 2.3 | |
Hanzhong City Nanyuan II project | ||
Real Estate Properties [Line Items] | ||
Payments to acquire real estate development properties | $ 28.2 |
PROPERTY, PLANT AND EQUIPMENT_3
PROPERTY, PLANT AND EQUIPMENT, NET - Components of Property, Plant and Equipment (Details) - USD ($) | Sep. 30, 2021 | Sep. 30, 2020 |
Total | $ 848,471 | $ 903,031 |
Less: accumulated depreciation | (290,385) | (331,701) |
Property, plant and equipment, net | 558,086 | 571,330 |
Buildings | ||
Total | $ 848,471 | 805,208 |
Automobiles | ||
Total | $ 97,823 |
PROPERTY, PLANT AND EQUIPMENT_4
PROPERTY, PLANT AND EQUIPMENT, NET - Additional Details (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
PROPERTY, PLANT AND EQUIPMENT, NET | ||
Depreciation | $ 43,510 | $ 72,748 |
RECEIVABLE FROM LOCAL GOVERNM_2
RECEIVABLE FROM LOCAL GOVERNMENT (Details) | 12 Months Ended | |
Sep. 30, 2021USD ($)item | Sep. 30, 2020USD ($) | |
Number Of Municipal Road Construction | item | 2 | |
Hanzhong Municipal Road Construction [Member] | ||
Government Contract Receivable | $ | $ 3,023,806 | $ 2,869,623 |
SECURITY DEPOSITS (Details)
SECURITY DEPOSITS (Details) - USD ($) | Sep. 30, 2021 | Sep. 30, 2020 |
Security Deposit | $ 1,955,202 | $ 1,855,506 |
Land Use Rights [Member] | ||
Security Deposit | $ 1,955,202 | $ 1,855,506 |
SECURITY DEPOSITS - Additional
SECURITY DEPOSITS - Additional Details (Details) - USD ($) | Sep. 30, 2021 | Sep. 30, 2020 |
Security Deposit | $ 1,955,202 | $ 1,855,506 |
Land Use Rights [Member] | ||
Security Deposit | 1,955,202 | 1,855,506 |
Prepaid Royalties | $ 1,955,202 | $ 1,855,506 |
CONSTRUCTION LOANS - Other Loan
CONSTRUCTION LOANS - Other Loans-Long Term Portion (Details) - USD ($) | Sep. 30, 2021 | Sep. 30, 2020 |
Total construction loans | $ 119,636,222 | $ 109,937,408 |
Loan A | ||
Total construction loans | 101,209,744 | 92,450,491 |
Loan C | ||
Total construction loans | $ 18,426,478 | $ 17,486,917 |
CONSTRUCTION LOANS - Additional
CONSTRUCTION LOANS - Additional Information (Details) | 12 Months Ended | |||||||
Sep. 30, 2021USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2021CNY (¥) | Sep. 30, 2019USD ($) | Sep. 30, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | |
Debt Instrument [Line Items] | ||||||||
Debt Instrument, Face Amount | $ 180,389,654 | |||||||
Security deposits | 1,955,202 | $ 1,855,506 | ||||||
Hantai District Urban Construction Investment Development Co., Ltd [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Interest Costs Capitalized | 224,700 | |||||||
Debt Instrument, Periodic Payment, Interest | 213,827 | |||||||
Debt Instrument, Periodic Payment, Principal | $ 3,300,000 | |||||||
Urban Development Center Co., Ltd [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Line of Credit Facility, Maximum Borrowing Capacity | 0 | $ 0 | ||||||
Agreement With Hanzhong Urban Construction Investment Development Co Ltd [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt Instrument, Interest Rate, Stated Percentage | 4.75% | 4.75% | ||||||
Long-term Line of Credit | $ 101,209,744 | 92,450,491 | ||||||
Line of Credit Facility, Maximum Borrowing Capacity | 118,800,000 | ¥ 775,000,000 | ||||||
Long-term Debt, Gross | 42,995,377 | 49,372,737 | ||||||
Debt Instrument, Periodic Payment, Interest | $ 6,488,162 | 6,537,079 | ||||||
Agreement With Hanzhong Municipal Housing Provident Fund Management Center [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt Instrument, Interest Rate, Stated Percentage | 1.20% | 1.20% | ||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 18,400,000 | ¥ 119,000,000 | ||||||
Construction Loan [Member] | Urban Development Center Co., Ltd [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt Instrument, Face Amount | $ 27,100,000 | ¥ 175,000,000 | ||||||
Debt Instrument, Interest Rate, Stated Percentage | 1.20% | 1.20% | ||||||
Interest Costs Capitalized | $ 330,441 | $ 314,452 | ||||||
Debt Instrument, Periodic Payment, Principal | $ 5,000,000 |
CUSTOMER DEPOSITS - Customer De
CUSTOMER DEPOSITS - Customer Deposits From Pre-Sale Of Residential Units (Details) - USD ($) | Sep. 30, 2021 | Sep. 30, 2020 |
Customer deposits by real estate projects: | ||
Total | $ 19,803,917 | $ 19,405,528 |
Mingzhu Garden (Mingzhu Nanyuan and Mingzhu Beiyuan) | ||
Customer deposits by real estate projects: | ||
Total | 8,210,839 | 7,606,944 |
Oriental Pearl Garden | ||
Customer deposits by real estate projects: | ||
Total | 2,780,917 | 4,358,467 |
Liangzhou road related projects | ||
Customer deposits by real estate projects: | ||
Total | 617,686 | 888,123 |
Yang County Pearl Garden | ||
Customer deposits by real estate projects: | ||
Total | 827,426 | 1,243,137 |
Yang County East 2nd Ring Road | ||
Customer deposits by real estate projects: | ||
Total | 2,327,964 | |
Yangzhou Palace | ||
Customer deposits by real estate projects: | ||
Total | $ 5,039,085 | $ 5,308,857 |
CUSTOMER DEPOSITS - Additional
CUSTOMER DEPOSITS - Additional Information (Details) - Customer deposits [Member] | 12 Months Ended |
Sep. 30, 2021 | |
Minimum | |
Deposit Liabilities [Line Items] | |
Percentage of customer deposit of unit price for cash purchase | 10.00% |
Percentage of customer deposit to unit price for mortgage properties | 30.00% |
Maximum | |
Deposit Liabilities [Line Items] | |
Percentage of customer deposit of unit price for cash purchase | 20.00% |
Percentage of customer deposit to unit price for mortgage properties | 50.00% |
TAXES - Reconciliation Of Statu
TAXES - Reconciliation Of Statutory Rates To Effective Tax Rate (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
TAXES | ||
Chinese statutory tax rate | 25.00% | 25.00% |
Valuation allowance change | 0.00% | 18.70% |
Net impact of tax exemption and other adjustments | 3.10% | 2.50% |
Effective tax rate | 28.10% | 46.20% |
Valuation allowance | $ 0 | $ 24,616 |
TAXES - Components of Income Ta
TAXES - Components of Income Tax Expenses (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
TAXES | ||
Current tax provision | $ 2,486,546 | $ 841,933 |
Income tax expense | $ 2,486,546 | $ 841,933 |
TAXES - Taxes Payable (Details)
TAXES - Taxes Payable (Details) - USD ($) | Sep. 30, 2021 | Sep. 30, 2020 |
TAXES | ||
CIT | $ 14,326,646 | $ 12,213,470 |
Business tax | 5,660,149 | 5,159,296 |
Other taxes and fees | 2,967,216 | 2,508,445 |
Tax payable | $ 22,954,011 | $ 19,881,211 |
TAXES - Additional Information
TAXES - Additional Information (Details) - USD ($) | 1 Months Ended | 12 Months Ended | |||
Dec. 22, 2017 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Taxes [Line Items] | |||||
Effective Value Added Tax Rate Percentage | 5.00% | ||||
Business sales tax | $ 5,660,149 | $ 5,159,296 | |||
Local income tax rate | 25.00% | ||||
Income tax payable | $ 14,326,646 | $ 12,213,470 | |||
Income tax at statutory tax rate | 25.00% | 25.00% | |||
Effective Income Tax Rate Reconciliation, Deduction, Percent | 50.00% | ||||
GILTI tax payable | $ 0 | $ 0 | |||
Effective Income Tax Rate Reconciliation, Repatriation of Foreign Earnings, Amount | $ 2,300,000 | 2,300,000 | $ 2,300,000 | ||
Additional Provision for Tax | 900,000 | $ 900,000 | |||
Land appreciation tax payable | 0 | $ 0 | |||
Minimum | |||||
Income Taxes [Line Items] | |||||
Income tax at statutory tax rate | 21.00% | ||||
Land appreciation tax rate | 30.00% | ||||
Maximum | |||||
Income Taxes [Line Items] | |||||
Income tax at statutory tax rate | 35.00% | ||||
Land appreciation tax rate | 60.00% | ||||
Hanzhong. | |||||
Income Taxes [Line Items] | |||||
Land appreciation tax rate | 1.00% | ||||
Yang County | |||||
Income Taxes [Line Items] | |||||
Income tax payable | $ 14,326,646 | 12,213,470 | |||
Land appreciation tax rate | 0.50% | ||||
PRC | |||||
Income Taxes [Line Items] | |||||
Income tax payable | $ 10,761,646 | $ 8,342,537 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) $ / shares in Units, ¥ in Millions | Apr. 19, 2021USD ($)item$ / sharesshares | Sep. 25, 2012shares | Sep. 30, 2021USD ($)shares | Apr. 19, 2021CNY (¥) | Sep. 30, 2020USD ($)shares | Aug. 20, 2020shares | Aug. 19, 2020item |
Number of Reverse Stock Split | item | 1 | ||||||
Number of common stock authorized issued | 2 | ||||||
Number of changes in common stock | 1 | ||||||
Common Stock, Shares, Issued Before Reverse Stock Split Effect | 45,050,000 | ||||||
Common Stock, Shares, Outstanding Before Reverse Stock Split Effect | 45,050,000 | ||||||
Common Stock, Shares, Outstanding | 25,617,807 | 22,525,693 | |||||
Number of common stock issued | 3,092,114 | ||||||
Accounts payable satisfied by issuance of shares | $ 6,600,000 | ¥ 43 | |||||
Conversion price | $ / shares | $ 2.13 | ||||||
Number of trading days | item | 5 | ||||||
Common stock issuance | 1,000,000 | ||||||
Granted | 500,000 | ||||||
No Shares granted and outstanding | 0 | 0 | |||||
Statutory Surplus Reserve Description | Appropriations to the statutory surplus reserve is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital | ||||||
Percentage Of Net Profits Statutory Surplus Reserve | 10.00% | ||||||
Statutory Accounting Practices, Statutory Capital and Surplus, Balance | $ | $ 11,095,939 | $ 10,458,395 | |||||
Minimum | |||||||
Percentage Of Statutory Surplus Reserve Before Conversion | 25.00% | ||||||
Percentage Of Net Profits Statutory Surplus Reserve | 10.00% |
CONTINGENCIES AND COMMITMENTS (
CONTINGENCIES AND COMMITMENTS (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Commitments And Contingencies [Line Items] | ||
Outstanding guarantees of customers' mortgage loans | $ 66,000,000 | $ 68,000,000 |
Restricted cash | $ 3,295,188 | $ 3,409,837 |
Minimum | ||
Commitments And Contingencies [Line Items] | ||
Percentage of mortgage proceeds as security | 5.00% |
SCHEDULE I - Parent Company Bal
SCHEDULE I - Parent Company Balance Sheets (Details) - USD ($) | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2019 | |
ASSETS | ||||
Total assets | $ 385,000,563 | $ 353,964,153 | ||
LIABILITIES | ||||
Tax payable | 22,954,011 | 19,881,211 | ||
Total liabilities | 194,302,852 | 185,638,332 | ||
Stockholders' equity | ||||
Common stock, $0.001 par value, 50,000,000 shares authorized, 25,617,807 and 22,525,693 shares issued and outstanding September 30, 2021 and 2020 | 25,617 | 22,525 | ||
Additional paid-in capital | 136,535,303 | 129,930,330 | ||
Statutory surplus | 11,095,939 | 10,458,395 | ||
Retained earnings | 40,691,955 | 34,954,061 | ||
Accumulated other comprehensive income (loss) | 2,348,897 | (7,039,490) | ||
Total stockholders' equity | 190,697,711 | 168,325,821 | $ 158,700,150 | |
Total Liabilities and Stockholders' Equity | 385,000,563 | 353,964,153 | ||
Reportable Legal Entities [Member] | Parent Company [Member] | ||||
ASSETS | ||||
Investment in subsidiary | 194,262,711 | 171,622,821 | ||
Total assets | 194,262,711 | 171,622,821 | ||
LIABILITIES | ||||
Tax payable | 3,565,000 | 3,297,000 | ||
Total liabilities | 3,565,000 | 3,297,000 | ||
Stockholders' equity | ||||
Common stock, $0.001 par value, 50,000,000 shares authorized, 25,617,807 and 22,525,693 shares issued and outstanding September 30, 2021 and 2020 | [1] | 25,617 | 22,525 | |
Additional paid-in capital | [1] | 136,535,303 | 129,930,330 | |
Statutory surplus | [1] | 11,095,939 | 10,458,395 | |
Retained earnings | [1] | 40,691,955 | 34,954,061 | |
Accumulated other comprehensive income (loss) | [1] | 2,348,897 | (7,039,490) | |
Total stockholders' equity | [1] | 190,697,711 | 168,325,821 | |
Total Liabilities and Stockholders' Equity | $ 194,262,711 | $ 171,622,821 | ||
[1] | Adjusted to give retroactive effect to a one-for-two reverse stock split effective on August 20, 2020. |
SCHEDULE I - Parent Company B_2
SCHEDULE I - Parent Company Balance Sheets Parenthetical (Details) - $ / shares | Sep. 30, 2021 | Sep. 30, 2020 |
Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Common Stock, Shares, Issued | 25,617,807 | 22,525,693 |
Common Stock, Shares, Outstanding | 25,617,807 | 22,525,693 |
Reportable Legal Entities [Member] | Parent Company [Member] | ||
Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Common Stock, Shares, Issued | 25,617,807 | 25,525,693 |
Common Stock, Shares, Outstanding | 25,617,807 | 22,525,693 |
SCHEDULE I - PARENT COMPANY STA
SCHEDULE I - PARENT COMPANY STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2018 | |
Condensed Income Statements, Captions [Line Items] | |||
General and administrative expenses | $ 2,691,170 | $ 2,324,057 | |
Interest income (expense), net | 5,690 | (65,535) | |
Income before income taxes | 8,861,984 | 1,823,371 | |
Provision for income taxes | 2,486,546 | 841,933 | |
Net income | 6,375,438 | 981,438 | |
Other comprehensive income | |||
Foreign currency translation adjustments | 9,388,387 | 8,644,233 | $ 8,644,233 |
Comprehensive loss | 15,763,825 | 9,625,671 | |
Reportable Legal Entities [Member] | Parent Company [Member] | |||
Condensed Income Statements, Captions [Line Items] | |||
Equity in profit of subsidiary and VIE | 6,643,438 | 1,321,838 | |
General and administrative expenses | 0 | 0 | |
Interest income (expense), net | 72,400 | ||
Income before income taxes | 6,643,438 | 1,249,438 | |
Provision for income taxes | 268,000 | 268,000 | |
Net income | 6,375,438 | 981,438 | |
Other comprehensive income | |||
Foreign currency translation adjustments | 9,388,387 | 8,644,233 | |
Comprehensive loss | $ 15,763,825 | $ 9,625,671 |
SCHEDULE I - PARENT COMPANY S_2
SCHEDULE I - PARENT COMPANY STATEMENTS OF CASH FLOWS (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Cash flows from operating activities: | ||
Net income | $ 6,375,438 | $ 981,438 |
Changes in assets and liabilities: | ||
Taxes payable | 2,162,978 | (2,616,813) |
Accrued expenses | (474,420) | |
Net cash used in operating activities | (604,167) | 2,217,264 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 2,018,918 | 6,847,515 |
Income taxes paid | 266,999 | 782,836 |
Reportable Legal Entities [Member] | Parent Company [Member] | ||
Cash flows from operating activities: | ||
Net income | 6,375,438 | 981,438 |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Stock based compensation | 0 | 0 |
Equity in profit of subsidiary | (6,643,438) | (1,321,838) |
Changes in assets and liabilities: | ||
Taxes payable | 268,000 | 268,000 |
Accrued expenses | 0 | 72,400 |
Net cash used in operating activities | 0 | 0 |
Net increase (decrease) in cash | 0 | 0 |
Cash, beginning of year | 0 | 0 |
Cash, end of year | 0 | 0 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 0 | 0 |
Income taxes paid | $ 0 | $ 0 |