CHINA HGS REAL ESTATE INC. Administration report and evaluation of monetary circumstances and working outcomes. (Kind 10-Okay)

The next dialogue and evaluation of monetary situation and outcomes of
operations pertains to the operations and monetary situation reported within the
monetary statements of China HGS Actual Property Inc. for the fiscal years ended
September 30, 2021 and 2020 and ought to be learn together with such
monetary statements and associated notes included on this report.

Preliminary notice concerning forward-looking statements.

We make forward-looking statements in Administration's Dialogue and Evaluation of
Monetary Situation and Outcomes of Operations and elsewhere on this report primarily based
on the beliefs and assumptions of our administration and on data presently
accessible to us. Ahead-looking statements embody details about our
potential or assumed future outcomes of operations which observe below the headings
"Enterprise and Overview," "Liquidity and Capital Sources," and different statements
all through this report preceded by, adopted by or that embody the phrases
"believes," "expects," "anticipates," "intends," "plans," "estimates" or comparable
expressions.

Ahead-looking statements are topic to plenty of dangers and uncertainties
that would trigger precise outcomes to vary materially from these expressed in
these forward-looking statements, together with the dangers and uncertainties
described under and different components we describe now and again in our periodic
filings with the SEC. We subsequently warning you to not rely unduly on any
forward-looking statements. The forward-looking statements on this report converse
solely as of the date of this report, and we undertake no obligation to replace or
revise any forward-looking assertion, whether or not because of new

                                       43



data, future developments or in any other case. These forward-looking statements embody, amongst different issues, statements regarding:

? our potential to help the event of our tasks

? our potential to acquire further land use rights at favorable costs;

? the actual property market in Tier 3 and Tier 4 cities and counties;

? our potential to boost further capital in future years to fund our

growth; The place

? related financial, political, regulatory, authorized and foreign money dangers

   with our operations.


Our Enterprise Overview

We conduct considerably all of our enterprise by Shaanxi Guangsha Funding
and Growth Group Co., Ltd, in Hanzhong, Shaanxi Province. Because the
initiation of our enterprise, we've been targeted on increasing our enterprise in
sure Tier 3 and Tier 4 cities and counties in China.

For fiscal 2021, our gross sales and internet revenue have been roughly $58.9 million and
$6.4 million, respectively, representing a rise of roughly 353.9% and
549.6% from fiscal 2020, respectively. The rise in income, gross revenue and
internet revenue was primarily resulting from extra GFA offered throughout fiscal 2021.

For fiscal 2021, our common promoting worth ("ASP") for actual property tasks
situated in Yang County was roughly $585.7 per sq. meter, decreased from
ASP of $718 per sq. meter in fiscal 2020 resulting from much less business items offered in
Yangzhou Palace throughout fiscal 2021. The ASP of our Hanzhong actual property tasks
was roughly $638 per sq. meter for fiscal 2021, in comparison with the ASP of
$419 per sq. meter for fiscal 2020 because of the elevated market worth in
the
Hangzhong space.

Market Outlook

The Chinese language authorities is predicted to proceed implementing measures to chill
down the actual property market. These measures might embody restrictions on residence
buy, enhance the down-payment requirement in opposition to speculative shopping for,
encourage the event of low-cost rental housing property to assist low-income
teams whereas decreasing the demand within the business housing market, enhance the
actual property property tax to discourage hypothesis, and management of the land
provide and slowdown the development land public sale course of. The stress on residence
gross sales and costs might be particularly apparent in third and fourth-tier cities,
whereas the property market within the first and second-tier cities is predicted to be
resilient.

The Firm intends to stay targeted on our present development tasks in Hanzhong Metropolis and Yang County, deepening our institutional gross sales community, bettering our price and working synergies, bettering our money move and strengthening our stability sheet.

The Firm has began the development of the Liangzhou Highway associated tasks after the native authorities approval of the street. These tasks embody residences for finish customers and valuers, buying malls in addition to serviced flats and workplaces to fulfill completely different market calls for.

In December 2019, a novel pressure of coronavirus (COVID-19) surfaced. COVID-19
has unfold quickly to many components of the PRC and different components of the world within the
first quarter of 2020, which has triggered important volatility within the PRC and
worldwide markets. There's important uncertainty across the breadth and
length of enterprise disruptions associated to COVID-19, in addition to its influence on
the PRC and worldwide economies. For the 12 months ended September 30, 2021, the
COVID-19 pandemic didn't have a cloth internet influence on the Firm's monetary
place and working outcomes. The extent of the influence on the Firm's future
monetary outcomes might be depending on future developments such because the size
and severity of the disaster, the potential resurgence of the pandemic, future
authorities actions in response to the pandemic and the general influence of the
COVID-19 pandemic on the native financial system and actual property markets, amongst many different
components, all of which stay extremely unsure and unpredictable. Given this
uncertainty, the Firm is presently unable to quantify

                                       44



the longer term influence of the COVID-19 pandemic on its future enterprise, monetary situation, liquidity and outcomes of operations if the present scenario continues.

Liangzhou Highway Associated Initiatives

In September 2013, the Firm entered into an settlement ("Liangzhou Settlement")
with the Hanzhong native authorities on the Liangzhou Highway reformation and
growth undertaking ("Liangzhou Highway Venture"). Pursuant to the Liangzhou
Settlement, the Firm was contracted to reform and increase the Liangzhou Highway, a
business road in downtown Hanzhong Metropolis, with a complete size of two,080 meters
and width of 30 meters and to resettle the present residents within the Liangzhou
Highway space. The federal government's unique street development price range was roughly
$33 million in accordance with the Liangzhou Settlement. The Firm, in return,
is being compensated by the native authorities to have an unique proper on
buying a minimum of 394.5 Mu (roughly 65 acres) land use rights in a
specified residential zone of Hanzhong Metropolis. The Liangzhou Highway Venture's street
development began on the finish of 2013. In 2014, the unique scope and price range
on the Liangzhou Highway reformation and growth undertaking was prolonged, as a result of
the native authorities included extra space and resettlement residences into the
undertaking, which resulted in further investments from the Firm. In return,
the Firm was approved by the native authorities to develop and handle the
business and residential properties surrounding the Liangzhou Highway undertaking.

From September 30, 2021, the precise prices incurred by the Firm have been roughly $180.4 million (September 30, 2020$164.9 million). Liangzhou Highway associated tasks primarily encompass Oriental Backyard Part II,
Liangzhou Mansion and Pearl Buying and selling Sq. round Liangzhou street space:




Oriental Backyard Part II

Oriental Backyard Part II undertaking is
deliberate to encompass 8 high-rise               [[Image Removed: Graphic]]
residential buildings and 6 business
buildings with complete deliberate GFA of
370,298 sq. meters. The undertaking will
additionally embody a farmer's market.









Liangzhou Mansion                            [[Image Removed: Graphic]]

Liangzhou Mansion undertaking is
deliberate to consist of seven high-rise
constructing and business outlets on
the primary ground with complete deliberate
GFA of 160,000 sq. meters.
 Pearl Industrial Plaza                      [[Image Removed: Graphic]]

Pearl Industrial Plaza is deliberate
to consist one workplace constructing, one
service condominium (or resort),
classical structure type of
Chinese language conventional homes and
buying malls with complete deliberate
GFA of 124,191 sq. meters.




                                       45



The Firm plans to begin these three actual property tasks in 2022 after the
street development passes the native authorities's inspection and approval. These
associated tasks might take 2-3 years to be absolutely accomplished.

street development

Different street development tasks primarily included the Yang County East 2nd Ring
Highway development undertaking. The Firm was engaged by the Yang County native
authorities to assemble the East 2nd Ring Highway with a complete size of two.15 km.
The native authorities is required to repay the Firm's undertaking funding prices
inside 3 years after completion of the undertaking with curiosity on the curiosity
fee primarily based on the business borrowing fee with the same time period printed by
the China Building Financial institution (which as of September 30, 2021 -was 4.75%). The
native authorities's reimbursement could possibly be utilized by the Firm to cut back native
surcharges or taxes in any other case required in the actual property growth. The street
development was considerably accomplished as of September 30, 2021 and is within the
course of of presidency evaluate and approval. For the 12 months ended September 30,
2021, the Firm acquired native authorities' installment funds of
roughly $2.3 million and the ultimate cost roughly of $5 million is
pending the native authorities's approval. The installment acquired was included
within the Firm's buyer deposits as of September 30, 2021.

In September 2012, the Firm was authorized by the Hanzhong native authorities to
assemble 4 municipal roads with a complete size of roughly 1,192
meters. The undertaking was deferred after which restarted throughout the quarter ended
March 31, 2014. As of September 30, 2021, the native authorities was nonetheless within the
technique of assessing the price range for these tasks, which is predicted to be
accomplished in fiscal 2022




Underneath growth:                      Estimated Completion time of development
                                          The street development was considerably
Hanzhong Metropolis Hanfeng Beiyuan         accomplished and is pending native authorities's
East Highway                                                             acceptance.
                                          The street development was considerably
Hanzhong Metropolis Liangzhou Highway          accomplished and is pending native authorities's
associated tasks                                                      acceptance.
                                       Underneath strategy planning stage and ready for native
Hanzhong Metropolis Beidajie undertaking                           authorities's zoning plan
                                          The street development was considerably
                                      accomplished and is pending native authorities's
Yang County East 2nd Ring Highway                                        acceptance.




RESULTS OF OPERATIONS


Yr ended September 30, 2021 in comparison with the 12 months ended September 30, 2020


Revenues



The next is a breakdown of income for the years ended September 30, 2021
and 2020:




                                                                For the years ended September 30,
                                                                   2021                  2020

Turnover recorded for accomplished condominium actual property tasks,

                                                    $      58,915,239     $      12,979,227
Much less: gross sales tax                                                      (424,074)             (193,719)
Income internet of gross sales tax                                     $      58,491,165     $      12,785,508



Acknowledged income for accomplished condominium tasks

The next desk summarizes our revenues generated by completely different tasks:



                                                 For the Years Ended September 30,
                                       2021                  2020                           Variance
                                  Income       %       Income       %       Variance         %
Initiatives:
Yangzhou Pearl Backyard Part
I and II                        $   564,758    1.0 %  $ 1,312,921    10.1 %  $ (748,163)      (57.0) %
Oriental Pearl Backyard             2,186,355    3.7 %      187,284     1.4 %    1,999,071     1,067.4 %


                                       46



Nanyuan II Venture               43,625,590   74.0 %             -      -       43,625,590      100 %
Mingzhu Backyard (Nanyuan and
Beiyuan) Part I and II             768,494    1.3 %     3,500,750   27.0 %    (2,732,256)   (78.0) %
Yangzhou Palace                  11,770,042   20.0 %     7,978,272   61.5        3,791,770     47.5 %
Complete Income                    58,915,239    100 %    12,979,227    100 %     45,936,012    353.9 %
Gross sales Tax                         (424,074)      -       (193,719)      -        (230,355)    118.9 %
Income internet of gross sales tax       $ 58,491,165           $ 12,785,508           $  45,705,657    357.5 %



Our revenues are derived from the sale of residential buildings, business
store-fronts and parking areas in tasks that we've developed. In comparison with
final 12 months, revenues earlier than gross sales tax elevated by $45.9 million to roughly
$58.9 million for the 12 months ended September 30, 2021 from roughly $13.0
million in final 12 months. For the 12 months ended September 30, 2021, we offered all
residential items within the Nanyuan II undertaking to the native authorities for
residence reallocation functions with complete income of roughly $43.6
million, which represented 74% of our income.  The whole GFA offered for the
remaining actual property tasks throughout the 12 months September 30, 2021 and 2020 was
25,687 sq. meters and 21,735 sq. meters, respectively. The gross sales tax for
the years ended September 30, 2021 was roughly $0.4 million, elevated by
118.9% from fiscal 2020, in line with the elevated income in fiscal 2021.
The share of enhance in gross sales taxes was lower than the expansion fee in
income was resulting from the truth that gross sales tax charged was primarily based on the shoppers'
funds, the placement of the properties and different components.

Value of gross sales

The next desk units forth a breakdown of our price of revenues for the years
indicated.




                                                       For the Years Ended September 30,
                                         2021                         2020
                                                                                                         Variance
                                  Value        Proportion       Value        Proportion      Variance          %
Land use rights               $  4,418,450           9.5 %  $   843,284           9.0 %  $  3,575,166        424.0 %
Building prices              42,091,551          90.5 %    8,526,536          91.0 %    33,565,015        393.7 %
Complete                         $ 46,510,001           100 %  $ 9,369,820           100 %  $ 37,140,181        396.4 %




Our price of gross sales consists primarily of prices related to land use rights
and development prices. Value of gross sales are capitalized and allotted to
growth tasks utilizing a selected identification methodology. Prices are allotted
to particular items inside a undertaking primarily based on the ratio of the gross sales space of items
to the estimated complete gross sales space of the undertaking or part of the undertaking occasions
the overall price of the undertaking or part of the undertaking.

Value of gross sales was roughly $46.5 million for the 12 months ended September 30,
2021 in comparison with $9.4 million for final 12 months. The $36.7 million enhance in price
of gross sales was primarily attributable to extra GFA offered for the 12 months ended September
30, 2021, which led to extra price of gross sales.

Land use rights price: The price of land use rights contains the land premium we
pay to accumulate land use rights for our property growth websites, plus taxes.
Our land use rights price varies for various tasks based on the dimensions and
location of the positioning and the minimal land premium set for the positioning, all of which
are influenced by authorities insurance policies, in addition to prevailing market circumstances.
Prices for land use rights for the 12 months ended September 30, 2021 have been
roughly $4.4 million, as in comparison with roughly $0.8 million for fiscal
2020, representing a rise of roughly $3.6 million from the identical
interval of final 12 months. The rise was in line with the truth that complete GFA
offered in fiscal 2021 was considerably elevated from final 12 months.

Building price: We outsource the development of all of our tasks to 3rd
occasion contractors, whom we choose by a aggressive tender course of. Our
development contracts present a hard and fast cost which covers considerably all
labor, supplies and tools prices, topic to changes for some varieties of
extra, equivalent to design modifications throughout development or modifications in
government-suggested metal costs. Our development prices consist primarily of
the funds to our third-party contractors, that are paid over the
development interval primarily based on specified milestones. As well as, we buy and
provide a restricted vary of fittings and tools, together with elevators, window
frames and door frames. Our development

                                       47



prices for the 12 months ended September 30, 2021 have been roughly $42.1 million as
in comparison with roughly $8.5 million for final 12 months, representing a rise
of roughly $33.6 million. The rise in development price was resulting from
extra actual property property items offered throughout fiscal 2020.

As well as, for the 12 months ended September 30, 2020, we acknowledged about
$2.7 million depreciation of sure sluggish actual property developments carried out.

Gross income

Gross revenue was roughly $12.0 million for the 12 months ended September 30,
2021 as in comparison with gross revenue of roughly $0.7 million within the prior
12 months, representing a rise of $11.3 million, which was primarily attributable
to roughly $8.6 million gross revenue from the gross sales of the Nanyuan II
undertaking to the native authorities and no impairment cost acknowledged for the actual
property property accomplished throughout fiscal 2021. The gross margin was 20.3% in
fiscal 2021 as in comparison with gross margin of 5.5% in final 12 months. For 12 months ended
September 30, 2020, we acknowledged roughly $2.7 million impairment losses
for sure sluggish shifting actual property property growth accomplished. For the 12 months
ended September 30, 2021, the ASP for our actual property tasks situated in Yang
County was roughly $585.7 per sq. meter, decreased from the ASP of $719
per sq. meter resulting from much less business items offered in Yangzhou Palace and
Yangzhou Pearl Backyard Part II undertaking throughout fiscal 2021.  For the years ended
September 30,2021 and 2020,  the Firm offered business items at  common ASP
of roughly $1,500 per sq. meter within the Yang County space with increased
margin evaluating to the residential items.  The ASP of our Hanzhong actual property
tasks (excluding gross sales of parking areas) was roughly $638 per sq.
meter for the 12 months ended September, 30, 2021, elevated from the ASP of $419 per
sq. meter for fiscal 2020 resulting from rising actual property costs within the native
market and extra business items offered in fiscal 2021.



The general gross revenue as a proportion of actual property gross sales was 20.3% for the
12 months ended September 30, 2021, elevated from 5.5% for the 12 months ended September
30, 2020, was primarily resulting from no impairment losses acknowledged in fiscal 2021.


                                                       For the Yr Ended September 30
                                        2021                       2020
                                  Gross        Gross         Gross         Gross                      Variance
          Venture                 Revenue       Margin        Revenue        Margin      Variance           %
Yangzhou Pearl Backyard Part
I and II                       $    122,007         22 %  $     289,032        22 %  $   (167,025)       (57.8) %
Yangzhou Palace                   2,822,485         24 %      2,424,864        30 %        397,621        16.4) %
Mingzhu Backyard (Mingzhu
Nanyuan and Beiyuan) Part
I and II                            211,825         28 %        842,776        24 %      (630,951)       (74.9) %
Nanyuan II undertaking                8,619,750         20 %              -         -        8,619,750          100 %
Oriental Backyard                     629,171         29 %         52,735        28 %        576,436       1093.1 %
Gross sales Tax                         (424,074)          0        (193,719)         -        (230,355)      (118.9) %
Impairment losses on actual
property property growth
accomplished                                 0                 (2,703,031)                (2,703,031)          100 %
Complete Gross Revenue             $ 11,981,164       20.3 %  $     712,657       5.5 %  $  11,268,507         1581 %




Working bills



Complete working bills remained pretty fixed at roughly $2.9 million
for every of the 12 months sended September 30, 2021 and 2020, because of
will increase normally administrative bills of roughly $0.4 million
offset with a lower in promoting bills of $0.4 million. The Firm incurred
extra advertising and marketing expense in fiscal 2020 to advertise the gross sales in Yangzhou Palace
undertaking, which resulted increased promoting expense in final 12 months. The $0.4 million
enhance normally and administrative expense was resulting from extra consulting and
skilled charges incurred for the 12 months ended September 30, 2021.




                                          For the years ended September 30,
                                             2021                  2020
Basic and administrative bills    $       2,691,170     $       2,324,057


                                       48



Promoting bills                             186,886        580,639
Complete Working bills                 $ 2,878,056    $ 2,904,696
Proportion of Income earlier than gross sales tax           4.9 %         22.4 %




Curiosity expense, internet


Web curiosity expense was lower than $0.1 million for the 12 months ended September 30, 2021 and 2020.

Different revenue, internet

For the 12 months ended September 30, 2020, the Firm had internet different revenue of $4.1
million resulting from the truth that the Firm disposed sure actual property properties
within the present actual property property accomplished and under-development to
suppliers with settlement of their associated payables. For the 12 months ended
September 30, 2021, the Firm incurred internet different expense of $0.2 million for
sure non-operating associated expenditures.

Revenue taxes



PRC Taxes

Our Firm is ruled by the Enterprise Revenue Tax Regulation of the Folks's
Republic of China regarding private-run enterprises, that are usually
topic to tax at a statutory fee of 25% on revenue reported within the statutory
monetary statements after applicable tax changes. For the years ended
September 30, 2021 and 2020, the Firm is topic to revenue tax fee of 25% on
taxable revenue. Though the chance exists for reinterpretation of the
software of the tax laws by increased tax authorities within the PRC,
doubtlessly overturning the choice made by the native tax authority, the
Firm has not skilled any reevaluation of the revenue taxes for prior
years. The PRC tax guidelines are completely different from the native tax guidelines and the Firm
is required to adjust to native tax guidelines. The distinction between the 2 tax
guidelines won't be a legal responsibility of the Firm. There might be no additional tax
funds for the distinction. For the years ended September 30, 2021, the
Firm's efficient revenue tax fee was 28%, decreased from efficient revenue tax
fee of 46% for the 12 months ended September 30, 2020. The upper efficient revenue
tax fee in fiscal 2020 was brought on by further tax accruals out of PRC.

Web income



We reported internet revenue of roughly $6.4 million for the 12 months ended
September 30, 2021, as in comparison with roughly $1.0 million for fiscal 2020.
The rise of $5.4 million in our internet revenue was primarily resulting from extra income
reported for fiscal 2021 as mentioned above below Revenues and Gross Revenue

The opposite prolonged end result



We function primarily within the PRC and the purposeful foreign money of our working
subsidiary is the Chinese language Renminbi ("RMB"). The RMB just isn't freely convertible
into overseas foreign money and all overseas trade transactions should happen
by approved establishments. No illustration is made that the RMB quantities
may have been, or could possibly be, transformed into USD on the charges utilized in
translation.

Translation changes amounted to roughly $9.4 million and $8.6 million
for the years ended September 30, 2021 and 2020, respectively. The stability sheet
quantities aside from fairness at September 30, 2021 have been translated at
RMB6.4434 to 1.00 USD as in comparison with 6.7896 RMB to 1.00 USD at September 30,
2020. The fairness accounts have been acknowledged at their historic fee. The common
translation charges utilized to the revenue statements accounts for the years ended
September 30, 2021 and 2020 have been 6.5072 RMB to 1.00 USD and 7.0056 RMB to 1.00
USD, respectively.

                                       49


Money and capital assets



Our principal want for liquidity and capital assets is to keep up working
capital enough to help our operations and to make capital expenditures to
finance the expansion of our enterprise. Traditionally we primarily financed our
operations primarily by money flows from operations and borrowings from our
principal shareholder.

In recent times, the Chinese language authorities has applied measures to manage
overheating residential and business property costs together with however not restricted
to restrictions on residence buy, rising the down-payment requirement
in opposition to speculative shopping for, growth of low-cost rental housing properties to
assist low-income teams whereas decreasing the demand within the business housing
market, rising actual property property taxes to discourage hypothesis, management
of the land provide and slowdown the development land public sale course of, and so on. In
addition, in December 2019, a novel pressure of coronavirus (COVID-19) surfaced.
COVID-19 has unfold quickly all through China and worldwide, which has triggered
important volatility within the PRC and worldwide markets. There's
important uncertainty across the breadth and length of enterprise disruptions
associated to COVID-19, in addition to its influence on the PRC and worldwide
economies. To cut back the unfold of the COVID-19, the Chinese language authorities has
employed measures together with metropolis lockdowns, quarantines, journey restrictions,
suspension of enterprise actions and faculty closures. Because of difficulties
ensuing from the COVID-19 pandemic, together with, however not restricted to, the
short-term closure of the Firm's amenities and operations starting in early
February by early March 2020, restricted help from the Firm's workers,
delayed entry to development uncooked materials provides, lowered buyer visits to
the Firm's gross sales workplace, and incapability to advertise actual property property gross sales
to clients on a well timed foundation, our income throughout the 12 months ended September 30,
2020 have been considerably decrease. The Firm is experiencing restoration of its actual
property growth enterprise in fiscal 2021 resulting from rising demand from the
native actual property market. The Firm had income of roughly $58.9 million
for the 12 months ended September 30, 2021, elevated from $13.0 million in final
12 months. Based mostly on the evaluation of present financial surroundings, buyer demand
and gross sales traits, we consider that shopper spending has been restored within the
native actual property market and the actual property gross sales are anticipated to develop within the
coming durations. On the opposite aspect, because of the detrimental influence from the COVID-19
pandemic and unfold, the event interval of actual property properties and our
working cycle has been prolonged and we might not have the ability to liquidate our giant
stability of accomplished actual property property inside the brief time period as we initially
anticipated. As well as, as of September 30, 2021, we had giant development loans
payable of roughly $119.6 million and huge accounts payable of
roughly $18.3 million to be paid to subcontractors. The extent of the
influence of COVID-19 on the Firm's future monetary outcomes might be dependent
on future developments such because the size and severity of the disaster, the
potential resurgence of the disaster, future authorities actions in response to the
disaster and the general influence of the COVID-19 pandemic on the native financial system and
actual property markets, amongst many different components, all of which stay extremely
unsure and unpredictable. Given this uncertainty, the Firm is presently
unable to quantify the anticipated influence of the COVID-19 pandemic on its future
operations, monetary situation, liquidity and outcomes of operations if the
present scenario continues. The above- talked about details elevate substantial doubt
in regards to the Firm's potential to proceed as a going concern from the date of this
submitting.

In assessing its liquidity, administration screens and analyzes the Firm's money
on-hand, its potential to generate enough income sources sooner or later, and
its working and capital expenditure commitments. As of September 30, 2021, our
complete money stability was roughly $0.2 million decreased from roughly
$0.5 million as of September 30, 2020. With respect to capital funding
necessities, the Firm budgeted its capital spending primarily based on ongoing
assessments of wants to keep up sufficient money. As of September 30, 2021, we had
roughly $88.1 million of accomplished residential flats and business
items accessible on the market to potential patrons. Though we reported roughly
$18.3 million accounts payable as of September 30, 2021, because of the long-term
relationship with our development suppliers and subcontractors, we have been in a position to
successfully handle money spending on development and negotiate with them to
regulate the cost schedule primarily based on our money available. As well as, most of our
present actual property growth tasks relate to the outdated city renovation
that are supported by the native authorities. As of September 30, 2021, we
reported roughly $119.6 million of development loans borrowed from
monetary establishments managed by the native authorities and such loans can
solely be used on the outdated city renovation associated undertaking growth. We anticipate
that we will renew all the present development loans upon their
maturity and borrow further new loans from native monetary establishments, when
crucial, primarily based on our previous expertise and the Firm's good credit score historical past.
Additionally, the Firm's money flows from pre-sales and present gross sales ought to present
monetary help for our present developments and operations. For the 12 months
ended September 30, 2021, we had six giant ongoing development tasks, which
have been below the preliminary growth stage resulting from delayed inspection and
acceptance of the event plans by the native

                                       50



authorities. In June 2020, we accomplished the residence relocation surrounding the
Liangzhou Highway associated tasks and launched the development of those tasks
in December 2020. For the opposite 4 tasks, we anticipate we will
receive the federal government's approval of the event plans on these tasks in
the approaching fiscal 12 months and begin the pre-sale of the actual property properties to
generate money when sure property growth milestones have been achieved.

Money Circulate


Yr ended September 30, 2021 in comparison with the 12 months ended September 30, 2020

Comparability of money move outcomes for the 12 months ended September 30, 2021
and the 12 months ended September 30, 2020 are summarized as follows:



                                                          For the years ended September 30,
                                                             2021                  2020              Variance

Web money (utilized in) offered by working actions ($604,167) $2,217,264 $(2,821,431)
Web money (used) from financing actions $

              0     $       (2,415,924)    $   2,415,924
Impact of modifications of overseas trade fee on money     $        201,820    
$         (135,921)    $     337,741
Web (lower) in money                                 $      (402,347)     $         (334,581)    $    (67,766)




Working actions


Web money utilized in working actions throughout fiscal 2021 was roughly $0.6
million, consisting of internet revenue of roughly $6.4 million, noncash
changes of roughly $0.04 million and internet modifications in our working
property and liabilities, which primarily included a lower in actual property property
accomplished of roughly $11.5 million because of the gross sales of actual property
properties, a $2.2 million enhance in different payables to suppliers and an
enhance of $2.2 million in tax payables, offset by the continual spending on
actual property property below growth of $21.8 million.

Web money offered by working actions throughout fiscal 2020 was roughly
$2.2 million, consisting of internet revenue of roughly $1.0 million, noncash
changes of roughly $2.7 million impairment on the actual property property
accomplished and deficit of $5.0 million resulting from acquire on settlement of sure
payables with suppliers and settlements on shareholder loans and internet modifications in
our working property and liabilities, which primarily included a lower in actual
property property accomplished of roughly $9.4 million because of the gross sales of actual
property properties, a lower of safety deposit with authorities of $6.3
million resulting from the truth that the Firm began the development of Liangzhou
street and affiliated tasks in September 2020 and the native authorities refunded
such deposits to help the Firm's working capital and a rise of $1.3
million in clients deposit acquired from patrons, offset by the continual
spending on actual property property below growth of $7.5 million, a discount
of accounts payable of $1.5 million resulting from funds to suppliers primarily based on
growth progress and a discount of tax payable of $2.6 million.

Fundraising actions

Web money from financing actions in fiscal 2021 was nil.

Web money utilized in financing actions was roughly $2.4 million for fiscal
2020, primarily representing the reimbursement of development mortgage of $2.4 million
throughout fiscal 2020.

Off-balance sheet preparations

Now we have no off-balance sheet preparations.

As an trade apply, the Firm supplies ensures to PRC banks with
respect to loans procured by the purchasers of the Firm's actual property
properties for the overall mortgage mortgage quantity till the completion of acquiring
the "Certificates of Possession" of the properties from the federal government, which
usually takes six to 12 months. As a result of the banks present mortgage proceeds
with out getting the "Certificates of Possession" as mortgage collateral throughout the six
to 12 months' interval, the mortgage banks require the Firm to keep up, as
safety for the Firm's obligations below such

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ensures, restricted money of a minimum of 5% of the mortgage proceeds. If a
purchaser defaults on its cost obligations, the mortgage financial institution might deduct the
delinquent mortgage cost from the safety deposit and require the Firm to
pay the surplus quantity if the delinquent mortgage funds exceed the safety
deposit. If the delinquent mortgage funds exceed the safety deposit, the
banks might require us to pay the surplus quantity. If a number of purchasers default on
their cost obligations at across the identical time, we might be required to make
important funds to the banks to fulfill our assure obligations. If we
are unable to resell the properties underlying defaulted mortgages on a well timed
foundation or at costs increased than the quantities of our ensures and associated
bills, we'll endure monetary losses. The Firm has made crucial
reserves in its restricted money account to cowl any potential mortgage defaults
as required by the mortgage lenders. The Firm has not skilled any
delinquent mortgage loans and has not skilled any losses associated to this
assure. As of September 30, 2021 and September 30, 2020, our excellent
ensures in respect of our clients' mortgage loans amounted to roughly
$66 million and $68 million, respectively. As of September 30, 2021 and
September 30, 2020, the quantity of safety deposits offered for these
ensures was roughly $3.3 million and $3.4 million, respectively, and
the Firm believes that such reserves are enough.

Inflation

Inflation has not had a cloth influence on our enterprise and we don’t anticipate inflation to have a cloth influence on our enterprise within the close to future.

Important Accounting Insurance policies and Administration Estimates


Income recognition



The Firm adopted FASB ASC Matter 606 Income from Contracts with Prospects
("ASC 606") on October 1, 2018 utilizing the modified retrospective strategy. Underneath
ASC 606, Income from Contracts with Prospects, income is acknowledged in
accordance with the switch of products and companies to clients at an quantity
that displays the consideration that the Firm expects to be entitled to for
these items and companies. The Firm determines income recognition by the
following steps:

? identification of the contract(s) with a buyer;

? identification of efficiency obligations within the contract;

? dedication of the transaction worth, together with the constraint on the

consideration;

? allocation of the transaction worth to the efficiency obligations within the

Contract; and

? recognition of income when (or as and when) the Group satisfies a efficiency obligation.


A lot of the Firm's income is derived from actual property gross sales of condominiums
and business property within the PRC. The vast majority of the Firm's contracts
include a single efficiency obligation involving important actual property
growth actions which might be carried out collectively to ship an actual property
property to clients. Revenues arising from actual property gross sales are acknowledged
when or because the management of the asset is transferred to the shopper. The management
of the asset might switch over time or at a cut-off date. For the gross sales of
particular person condominium items in an actual property growth tasks, the Firm
has an enforceable proper to cost for efficiency accomplished so far, income
is acknowledged over time by measuring the progress in direction of full satisfaction
of that efficiency obligation ("proportion completion methodology"). In any other case,
income is acknowledged at a cut-off date when the shopper obtains management of
the asset.

Underneath the stage of completion methodology, income and income from gross sales of long-term actual property growth properties are acknowledged below the stage of completion methodology on the sale of particular person items when all the following standards are met:

a. Building is past a preliminary stage.

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b. The customer agrees to the extent of not with the ability to demand reimbursement

besides non-delivery of the share or curiosity.

vs. Sufficient items have already been offered to make sure that your entire property

won’t revert to the rental property.

D. Sale costs are collectable.

e. The proceeds and complete prices of gross sales could be moderately estimated.

If any of the above standards will not be met, proceeds might be counted as deposits till the standards are met.

Underneath the share of completion methodology, revenues from particular person actual property
condominium items offered below growth and associated prices are acknowledged over
the course of the development interval, primarily based on the completion progress of a
undertaking. The progress in direction of full satisfaction of the efficiency
obligation is measured primarily based on the Firm's efforts or inputs to the
satisfaction of the efficiency obligation, by reference to the contract prices
incurred as much as the tip of reporting interval as a proportion of complete estimated
prices for every contract. In relation to any undertaking, income is decided by
calculating the ratio of incurred prices, together with land use rights prices and
development prices, to complete estimated prices and making use of that ratio to the
contracted gross sales quantities. Value of gross sales is acknowledged by figuring out the ratio
of contracted gross sales throughout the interval to complete estimated gross sales worth and
making use of that ratio to the incurred prices. Present interval quantities are calculated
primarily based on the distinction between the life-to-date undertaking totals and the
beforehand acknowledged quantities.

Any modifications in important judgments and/or estimates utilized in figuring out
development and growth income may considerably change the timing or
quantity of development and growth income acknowledged. Modifications in complete
estimated undertaking prices or losses, if any, are acknowledged within the interval wherein
they're decided.

Income from the gross sales of accomplished actual property condominium items is acknowledged
on the time of the closing of a person unit sale. This happens when the
buyer obtains the bodily possession, the authorized title, or the numerous
dangers and rewards of possession of the property and the Firm has current proper
to cost and the gathering of the consideration is possible. For municipal
street development tasks, charges are usually acknowledged on the time of the
tasks are accomplished.

Contract balances

Timing of income recognition might differ from the timing of billing and money
receipts from clients. The Firm information a contract asset when income is
acknowledged previous to invoicing, or a contract legal responsibility when money is acquired in
advance of recognizing income. A contract asset is a proper to consideration
that's conditional upon components aside from the passage of time. Contract property
embody billed and billable receivables, that are the Firm's unconditional
rights to consideration aside from to the passage of time. Contract liabilities
embody money collected in extra of revenues. Buyer deposits are excluded
from contract liabilities.

The Firm has elected to use the optionally available sensible expedient for prices to
receive a contract which permits the Firm to right away expense gross sales
commissions (included below promoting bills) as a result of the amortization interval of
the asset that the Firm in any other case would have used is one 12 months or much less.
Contract property and liabilities are usually labeled as present primarily based on our
contract working cycle.

The Firm supplies "mortgage mortgage ensures" solely with respect to patrons who
make down-payments of 20%-50% of the overall buy worth of the property. The
interval of the mortgage mortgage assure begins on the date the financial institution approves the
purchaser's mortgage and we obtain the mortgage proceeds in our checking account and ends
on the date the "Certificates of Possession" evidencing that title to the property
has been transferred to the customer. The procedures to acquire the Certificates of
Possession take six to 12 months (the "Mortgage Mortgage Assure Interval"). If,
after investigation of the customer's revenue and different related components, the financial institution
decides to not grant the mortgage mortgage, our mortgage-loan primarily based gross sales contract
terminates and there might be no assure obligation. If, throughout the Mortgage
Mortgage Assure Interval, the customer defaults on his or her month-to-month mortgage cost
for 3 consecutive months, we're required to return the mortgage proceeds again
to the financial institution, though we've the precise to maintain the shopper's deposit and
resell the property to a 3rd occasion. As soon as the Certificates of Property has been
issued by the related authorities authority, our mortgage assure terminates.
If
the customer

                                       53



then defaults on his or her mortgage mortgage, the financial institution has the precise to take the
property again and promote it and use the proceeds to repay the mortgage. The Firm
just isn't accountable for any shortfall that the financial institution might incur on this occasion. To this point,
no purchaser has defaulted on his or her mortgage funds throughout the Mortgage Mortgage
Assure Interval and the Firm has not returned any mortgage proceeds pursuant to
its mortgage mortgage ensures.

Use of estimates



The preparation of monetary statements in conformity with U.S. GAAP requires
administration to make estimates and assumptions that have an effect on the quantities reported in
the consolidated monetary statements and accompanying notes, and disclosure of
contingent liabilities on the date of the consolidated monetary statements.
Estimates are used for, however not restricted to, the assumptions and estimates used
by administration in recognizing growth income below the share of
completion methodology, the choice of the helpful lives of property and tools,
provision crucial for contingent liabilities, income recognition, taxes and
budgeted prices. Administration believes that the estimates utilized in getting ready its
consolidated monetary statements are cheap and prudent. Precise outcomes
may differ from these estimates.

Actual property promotion accomplished and below growth



Actual property property consists of completed residential unit websites, business
workplaces and residential unit websites below growth. The Firm leases the
land for the residential unit websites below land use proper leases with numerous
phrases from the PRC authorities. The price of land use rights is included within the
growth price and allotted to every undertaking. Actual property property growth
accomplished and actual property property below growth are acknowledged on the decrease of
price or truthful worth.

Expenditures for land growth, together with price of land use rights, deed tax,
pre-development prices, and engineering prices, unique of depreciation, are
capitalized and allotted to growth tasks by the precise identification
methodology. Prices are allotted to particular items inside a undertaking primarily based on the
ratio of the gross sales space of items to the estimated complete gross sales space of the
undertaking (or part of the undertaking) multiplied by the overall price of the undertaking
(or part of the undertaking).

The price of facilities transferred to patrons is allotted to particular items as a element of the overall development price. The price of facilities contains landscaping, street paving, and so on. As soon as the tasks are accomplished, the developments are below the management of the property administration corporations.

Actual property property growth accomplished and below growth are topic to
valuation changes when the carrying quantity exceeds truthful worth. An impairment
loss is acknowledged provided that the carrying quantity of the asset just isn't recoverable
and exceeds truthful worth. The carrying quantity just isn't recoverable if it exceeds the
sum of the undiscounted money flows anticipated to be generated by the asset. The
Firm reviewed all of its actual property tasks for future losses and
impairment by evaluating the estimated future undiscounted money flows for every
undertaking to the carrying worth of such undertaking. For the years ended September 30,
2021, the Firm didn't acknowledge any impairment for actual property property
below growth or accomplished. For the years ended September 30, 2020, the
Firm acknowledged roughly $2.7 million impairment for actual property
property below growth or accomplished.

Capitalization of curiosity



Curiosity incurred throughout and straight associated to actual property growth
tasks is capitalized to the associated actual property property below growth
throughout the energetic growth interval, which usually commences when borrowings
are used to accumulate actual property property and ends when the properties are
considerably full or the property turns into inactive. Curiosity is capitalized
primarily based on the rate of interest relevant to particular borrowings or the weighted
common of the charges relevant to different borrowings throughout the interval. Curiosity
capitalized to actual property property below growth is recorded as a element
of price of actual property gross sales when associated items are offered. All different curiosity is
expensed as incurred.

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