10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10−Q/A

(Amendment No.1)

(Mark One) 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  For the transition period from_______ to ________

Commission File Number: 001-34864

CHINA HGS REAL ESTATE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Florida	33-0961490
(State or Other Jurisdiction of Incorporation)	(I.R.S. Employer Identification Number)

6 Xinghan Road, 19th Floor, Hanzhong City

Shaanxi Province, PRC 723000

 (Address of Principal Executive Offices, Zip Code)

+(86) 091 - 62622612

(Registrant’s Telephone Number, including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of each of the issuer’s classes of common equity, as of August 10, 2012 is as follows:

Class of Securities	Shares Outstanding
Common Stock, $0.001 par value	45,050,000

Explanatory Note

This Amendment No. 1 (“Amendment No. 1”) to the Quarterly Report on Form 10-Q of China HGS Real Estate Inc. for the fiscal quarter ended June 30, 2012 as filed with the Securities and Exchange Commission (the “SEC”) on August 13, 2012 (the “Third Quarter 10-Q”) is being filed solely for the purposes to submit its interactive data exhibit that includes detailed tagging of the footnotes and schedules to the financial statements. This Amendment No. 1 does not affect any other portion of the Third Quarter 10-Q.

Item 6. Exhibits

Exhibit No. Description

101 The following financial statements from China HGS Real Estate Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Income and Comprehensive Income; (iii) the Condensed Consolidated Statements of Cash Flows; and (iv) the Notes to Condensed Consolidated Financial Statements, tagged in detail.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	China HGS Real Estate, Inc.
August 30, 2012	By:	/s/ Xiaojun Zhu
		Xiaojun Zhu
		Chief Executive Officer

By:	/s/ Wei Shen
	Wei Shen
	Chief Financial Officer

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Contingency and Commitments - Additional Information (Detail)			9 Months Ended		1 Months Ended
	Jun. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Jun. 30, 2012 Minimum	Jun. 30, 2012 Maximum	May 28, 2012 Chief Financial Officer USD ($)	May 28, 2012 Chief Financial Officer CNY	May 28, 2012 Chief Financial Officer Maximum USD ($)	May 28, 2012 Chief Financial Officer Maximum CNY	Jun. 30, 2012 Development agreement with local government USD ($)	Jun. 30, 2012 Development agreement with local government CNY	May 31, 2011 Development agreement with local government USD ($)	May 31, 2011 Development agreement with local government CNY	Jun. 30, 2012 Land use rights USD ($)	Jun. 30, 2012 Land use rights CNY	Nov. 18, 2011 Land use rights USD ($)	Nov. 18, 2011 Land use rights CNY	Jul. 04, 2012 Land use rights Subsequent Event USD ($)	Jul. 04, 2012 Land use rights Subsequent Event CNY
Commitments and Contingencies Disclosure [Line Items]
Mortgage loan guarantee period			6 months	12 months
Percentage of mortgage proceeds maintained as restricted cash			5.00%	10.00%
Expected prepayment for development cost											$ 18,940,773	119,700,000
Security deposits for land use right	18,065,984	6,254,691							3,164,708	20,000,000			7,636,691	48,261,600			1,424,118	9,000,000
Consideration and bidding commission for land use rights															12,596,522	79,606,242
Number of parcels of land acquired															2	2
Percentage of consideration remained to pay															40.00%	40.00%
Monthly salary for the next one year					9,500	60,000
Contract term					1 year	1 year
Annual bonus subject continuing employment							$ 28,000	180,000
Restricted common stock subject continuing employment					100,000	100,000

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Stock Option Activities (Detail) (USD $)	9 Months Ended	12 Months Ended
	Jun. 30, 2012	Sep. 30, 2011
Number of Options
Outstanding at beginning of period	68,000
Granted
Forfeited
Exercised
Outstanding at end of period	68,000	68,000
Exercisable at end of period	61,200
Weighted Average Exercise Price
Outstanding at beginning of period	$ 2.49
Granted
Forfeited
Exercised
Outstanding at end of period	$ 2.49	$ 2.49
Exercisable at end of period	$ 2.50
Weighted Average Remaining Contractual Life in years
Outstanding at end of period	3 years 44 days	3 years 318 days
Exercisable at end of period	3 years 18 days
Aggregate Fair Value
Outstanding at end of period	$ 121,747	$ 121,747
Exercisable at end of period	$ 112,830

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Currency Exchange Rate (Detail)	9 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Sep. 30, 2011
Significant Accounting Policies [Line Items]
Period end RMB : USD exchange rate	6.3197	6.4635	6.3952
Nine month average RMB : USD exchange rate	6.3428	6.5796

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Taxes Payable (Detail) (USD $)	Jun. 30, 2012	Sep. 30, 2011
Income Taxes [Line Items]
CIT	$ 677,277	$ 604,665
Business tax	3,021,025	3,333,941
Other tax and fees	94,722	85,092
Total taxes payable	$ 3,793,024	$ 4,023,698

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REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT

9 Months Ended

Jun. 30, 2012

REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT

NOTE 4. REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT

The following summarizes the components of real estate property development completed and under development as of June 30, 2012 and September 30, 2011:

	June 30, 2012		September 30, 2011
Development completed:
Hanzhong  City Mingzhu Garden (Mingzhu Nanyuan & Mingzhu Beiyuan)	$	11,250,358	$	2,950,520
Hanzhong  City Nan Dajie (Mingzhu Xinju)		3,806,403		4,048,911
Hanzhong  City Central Plaza		596,292		596,664
Yang County Yangzhou Pearl Garden		11,556,672		11,290,390
Real estate property development completed	$	27,209,725	$	18,886,485
Under development:
Hanzhong  City Mingzhu Garden (Mingzhu Nanyuan & Mingzhu Beiyuan)	$	18,108,937	$	25,403,633
Hanzhong  City Oriental Mingzhu Garden		31,376,904		28,717,247
Yang County Yangzhou Pearl Garden		14,298,985		9,596,641
Real estate property under development	$	63,784,826	$	63,717,521
Less: Short Term portion	$	11,340,016	$	16,707,423
Real estate property under development - Long Term	$	52,444,810	$	47,010,098

As of June 30, 2012 and September 30, 2011, land use rights included in real estate property under development totaled $42,217,384 and $46,793,742, respectively.

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Customer Deposits from Pre-Sale of Residential Units (Detail) (USD $)	Jun. 30, 2012	Sep. 30, 2011
Customer deposits by real estate projects
Customer deposits	$ 30,243,291	$ 21,985,518
Less: Short Term portion	16,451,695	11,564,868
Customer deposits - Long Term	13,791,596	10,420,650
Hanzhong City Mingzhu Garden (Mingzhu Nanyuan & Mingzhu Beiyuan)
Customer deposits by real estate projects
Customer deposits	15,313,889	12,860,399
Yang County Yangzhou Pearl Garden
Customer deposits by real estate projects
Customer deposits	$ 14,929,402	$ 9,125,119

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Real Estate Property Completed and Under Development - Additional Information (Detail) (USD $)	Jun. 30, 2012	Sep. 30, 2011
Real Estate Properties [Line Items]
Land use right included in real estate property under development	$ 42,217,384	$ 46,793,742

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Customer Deposits - Additional Information (Detail)	9 Months Ended
	Jun. 30, 2012
Minimum
Deposit Liabilities [Line Items]
Percentage of customer deposit of unit price for cash purchase	10.00%
Percentage of down payments to total purchase price of property to receive mortgage loan guarantees	30.00%
Mortgage loan guarantee period	6 months
Maximum
Deposit Liabilities [Line Items]
Percentage of customer deposit of unit price for cash purchase	20.00%
Percentage of down payments to total purchase price of property to receive mortgage loan guarantees	50.00%
Mortgage loan guarantee period	12 months

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Stock Options - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended			1 Months Ended	9 Months Ended	12 Months Ended	1 Months Ended			9 Months Ended	12 Months Ended	1 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Sep. 30, 2011	Mar. 16, 2011 Stock Option Plan 2011	Jun. 30, 2012 Stock Option Plan 2011	Sep. 30, 2011 Stock Option Plan 2011	Mar. 16, 2011 Stock Option Plan 2011 Maximum	Jan. 31, 2010 Stock Option Plan 2010	Jan. 06, 2010 Stock Option Plan 2010	Jun. 30, 2012 Stock Option Plan 2010	Sep. 30, 2011 Stock Option Plan 2010	Jan. 31, 2010 Stock Option Plan 2010 Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options granted									34,000					34,000
Stock options granted, exercisable percentage on the grant date						20.00%				20.00%
Stock options granted, exercisable percentage over the next eight quarters						80.00%				80.00%
Options expiration date						Mar. 16, 2016				Jan. 06, 2015
Options exercise price						$ 2.37				$ 2.60
Stock option vesting, percentage							80.00%	50.00%				100.00%	90.00%
Quarterly options vesting percentage							10.00%
Stock options granted, fair value						$ 44,590					$ 77,157
Stock Based Compensation	4,459	7,716	21,093	36,524
Unrecognized compensation cost related to stock option awards	8,918		8,918
Unrecognized compensation cost related to stock option awards, recognition period			6 months
Aggregate intrinsic value for stock options outstanding

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SECURITY DEPOSITS FOR LAND USE RIGHTS

9 Months Ended

Jun. 30, 2012

SECURITY DEPOSITS FOR LAND USE RIGHTS

NOTE 3. SECURITY DEPOSITS FOR LAND USE RIGHTS

In May 2011, the Company entered into a development agreement with the local government. Pursuant to the agreement, the Company will prepay the development cost of $18,940,773 (RMB119,700,000) and the Company has the right to acquire the land use rights through public bidding unless another company wins the bidding. The prepaid development cost will be deducted from the final purchase price of the land use rights or refunded to the Company plus profit earned if the Company does not win the bidding. As of June 30, 2012, a deposit of $3,164,708 (RMB20,000,000) was paid by the Company. The Company currently expects to make payment of the remaining development cost within the next twelve months based on government’s current work in process.

In August 2011, the Company entered into a land transfer agreement with Hanzhong Shijin Real Estate Development Limited (“Shijin”). Pursuant to the agreement, Shijin agreed to transfer certain land use rights to the Company for a total price of $7,120,591 (RMB45,500,000). As of June 30, 2012, a deposit of $7,264,585 (the full contract amount of RMB45,500,000 including a commission of RMB 410,000) was paid by the Company. The Company is in the process of applying for the land use rights certificate.

On November 18, 2011, the Company won two bids for the land use rights by auction to obtain two parcels of land in Yang county for total consideration and the bidding commission of $12,596,522 (RMB 79,606,242). As of June 30, 2012, the Company has paid $7,636,691 (RMB48,261,600) in accordance with the bid terms. The Company was required to make payment of the remaining 40% of the total consideration before January 20, 2012. The Company received a letter from the local Land Management Bureau (“LMB”) agreeing to postpone the payment date to June 30, 2012. On July 4, 2012, the Company paid $1,424,118 (RMB 9,000,000). On July 24, 2012, the Company received approval from LMB to postpone the payment date to September 30, 2012.

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Assumptions used in Calculating Fair Value of Options Granted (Detail)	1 Months Ended
	Mar. 16, 2011	Jan. 06, 2010
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	1.87%	2.60%
Expected life of the options	5 years	5 years
Expected volatility	65.00%	133.00%
Expected dividend yield	0.00%	0.00%

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Subsequent Events - Additional Information (Detail)	1 Months Ended		9 Months Ended
	Nov. 14, 2011 USD ($)	Nov. 14, 2011 CNY	Jul. 30, 2011	Jun. 30, 2011 USD ($)	Jun. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)
Subsequent Event [Line Items]
Shareholder loan	$ 3,164,707	20,000,000		$ 1,810,000	$ 1,810,000	$ 1,810,000
Related party, interest rate	15.00%	15.00%	4.00%	4.00%

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CONDENSED CONSOLIDATED BALANCE SHEETS(USD ($))	Jun. 30, 2012	Sep. 30, 2011
Current assets:
Cash	$ 1,797,997	$ 8,837,795
Restricted cash	1,144,035	885,678
Advance to vendors	1,902,779	5,931,149
Loans to outside parties, net	1,514,903	2,571,651
Security deposit for land use rights	18,065,984	6,254,691
Real estate property development completed	27,209,725	18,886,485
Real estate property under development	11,340,016	16,707,423
Other current assets	219,099	85,423
Total current assets	63,194,538	60,160,295
Property, plant and equipment, net	1,062,525	1,113,032
Real estate property under development-net of current portion	52,444,810	47,010,098
Total assets	116,701,873	108,283,425
Current liabilities:
Accounts payable	2,873,418	7,440,593
Other payables	1,010,593	324,298
Construction deposits	468,959	469,084
Customer deposits	16,451,695	11,564,868
Shareholder loan	1,810,000	1,810,000
Accrued expenses	2,023,292	2,003,913
Taxes payable	3,793,024	4,023,698
Total current liabilities	28,430,981	27,636,454
Customer deposits - net of current portion	13,791,596	10,420,650
Construction deposits - net of current portion	633,966	577,423
Total liabilities	42,856,543	38,634,527
Commitments and Contingencies
Stockholders' equity
Common stock, $0.001 par value, 100,000,000 shares authorized, 45,050,000 shares issued and outstanding as of June 30, 2012 and September 30, 2011	45,050	45,050
Additional paid-in capital	17,745,178	17,724,085
Statutory surplus	5,945,384	5,945,384
Retained earnings	43,631,148	40,322,106
Accumulated other comprehensive income	6,478,570	5,612,273
Total stockholders' equity	73,845,330	69,648,898
Total Liabilities and Stockholders'Equity	$ 116,701,873	$ 108,283,425

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ORGANIZATION AND BASIS OF PRESENTATION

9 Months Ended

Jun. 30, 2012

ORGANIZATION AND BASIS OF PRESENTATION

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

China HGS Real Estate Inc. (“China HGS” or the “Company” or “we”, “us”, “our”), through its subsidiaries and variable interest entity (“VIE”), engages in real estate development, and the construction and sales of residential apartments, parking space and commercial properties in Tier 3 and Tier 4 cities and counties in China.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended June 30, 2012 and 2011 are not necessarily indicative of the results that may be expected for the full year. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2011.

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Reconciliation of Statutory Rates to Effective Tax Rate (Detail)	3 Months Ended		9 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Reconciliation of Statutory Federal Tax Rate [Line Items]
Chinese statutory tax rate	25.00%	25.00%	25.00%	25.00%
Exemption rendered by local tax authorities	(20.00%)	(21.60%)	(20.20%)	(20.50%)
Effective tax rate	5.00%	3.40%	4.80%	4.50%

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TAXES (Tables)

9 Months Ended

Jun. 30, 2012

Reconciliation of Statutory Rates to Effective Tax Rate

The following table reconciles the statutory rates to the Company’s effective tax rate for the three and nine months ended June 30, 2012 and 2011:

	Three months ended June 30,						Nine months ended June 30,
	2012			2011			2012			2011
Chinese statutory tax rate		25.0	%		25.0	%		25.0	%		25.0	%
Exemption rendered by local tax authorities		(20.0	)%		(21.6	)%		(20.2	)%		(20.5	)%
Effective tax rate		5.0	%		3.4	%		4.8	%		4.5	%

Components of Deferred Taxes

The components of deferred taxes as of June 30, 2012 and September 30, 2011 consist of the following:

	As of
	June 30, 2012			September 30, 2011
Net operating loss carry-forwards for parent company	$	49,885		$	24,252
Valuation allowance		(49,885	)		(24,252	)
Net deferred tax asset	$	-		$	-

Taxes Payable

(D) Taxes payable consisted of the following:

	June 30, 2012		September 30, 2011
CIT	$	677,277	$	604,665
Business tax		3,021,025		3,333,941
Other tax and fees		94,722		85,092
Total taxes payable	$	3,793,024	$	4,023,698

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Components of Deferred Taxes (Detail) (USD $)	Jun. 30, 2012	Sep. 30, 2011
Schedule of Deferred Tax Assets and Liabilities [Line Items]
Net operating loss carry-forwards for parent company	$ 49,885	$ 24,252
Valuation allowance	(49,885)	(24,252)
Net deferred tax asset

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Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)	9 Months Ended
	Jun. 30, 2012	Sep. 30, 2011
Significant Accounting Policies [Line Items]
Consecutive periods mortgage payments should default to refund loan proceeds back to bank	3 months
Allowance for losses on loans to outside parties	$ 7,595	$ 7,505
Hanzhong
Significant Accounting Policies [Line Items]
Land appreciation tax rate	1.00%
Yangxian
Significant Accounting Policies [Line Items]
Land appreciation tax rate	0.50%
Minimum
Significant Accounting Policies [Line Items]
Percentage of down payments to total purchase price of property to receive mortgage loan guarantees	30.00%
Mortgage loan guarantee period	6 months
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%
Mortgage loan guarantee period	12 months
Land appreciation tax rate	60.00%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Jun. 30, 2012

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The unaudited condensed consolidated financial statements include the financial statements of China HGS Real Estate Inc. (the “Company” or “China HGS”), China HGS Investment Inc. (“HGS Investment”), Shaanxi HGS Management and Consulting Co., Ltd. (“Shaanxi HGS”) and its variable interest entity (“VIE”), Shaanxi Guangsha Investment and Development Group Co., Ltd. (“Guangsha”). All inter-company transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, and disclosure of contingent liabilities at the date of the condensed consolidated financial statements. Estimates are used for, but not limited to, the selection of the useful lives of property and equipment, collectability of loans, fair value of stock based compensation, revenue recognition, deferred taxes, costs to complete real estate development and other similar charges. Management believes that the estimates utilized in preparing its condensed consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates.

Fair value of financial instruments

The Company follows the provisions of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. It clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions.

The carrying amounts reported in the accompanying unaudited condensed consolidated balance sheets for cash, restricted cash, advance to vendors, loans to outside parties, security deposits for land use rights, other current assets, accounts payable, customer deposits, other payables, accrued expenses, and taxes payable, approximate their fair value based on the short-term nature of these instruments. The fair value of the long term customer and construction deposits approximate their carrying amounts because the deposits are received in cash.

Revenue recognition

Real estate sales are recognized in accordance with ASC 360-20 “Real Estate Sales”.

Revenue from the sales of development properties is recognized by the full accrual method at the time of the closing of an individual unit sale. This occurs when title to or possession of the property is transferred to the buyer. A sale is not considered consummated until (a) the parties are bound by the terms of a contract, (b) all consideration has been exchanged, (c) any permanent financing of which the seller is responsible has been arranged, (d) all conditions precedent to closing have been performed, (e) the seller does not have substantial continuing involvement with the property, and (f) the usual risks and rewards of ownership have been transferred to the buyer. Further, the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property, and the buyer’s receivable, if any, is not subject to future subordination.

The Company provides “mortgage loan guarantees” only with respect to buyers who make down-payments of 30%-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, the Company’s mortgage-loan based sales contract terminates and there is 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 refund 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, the Company’s 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 had to refund any loan proceeds pursuant to its mortgage loan guarantees.

Foreign currency translation

The Company’s financial information is presented in U.S. dollars. The functional currency of the Company’s operating subsidiaries is Renminbi (“RMB”), the currency of the PRC. The financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830-30 “Translation of Financial Statements”. The financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in stockholders’ equity.

	For nine months ended June 30,				September 30,
	2012		2011		2011
Period end RMB : USD exchange rate		6.3197		6.4635		6.3952
Nine month average RMB : USD exchange rate		6.3428		6.5796

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.

Advances to vendors

Advances to vendors consist of balances paid to contractors and vendors for services and materials that have not been provided or received and generally relate to the development and construction of residential units in the PRC. Advances to vendors are reviewed periodically to determine whether their carrying value has become impaired. Historically, the Company has not experienced any losses as a result of these advances.

Loans to outside parties

Loans to outside parties consist of various cash advances to unrelated companies and individuals with which the Company has business relationships. Loans to outside parties are reviewed periodically as to whether their carrying value has become impaired. The Company considers the assets to be impaired if the collectability of the balances becomes doubtful. As of June 30, 2012 and September 30, 2011, the allowance for losses on loans to outside parties was $7,595 and $7,505, respectively.

Security deposits for land use rights

Security deposits for land use rights consist of the deposit held by the PRC government for the purchase of land use rights in Hanzhong City and the deposit held by an unrelated party to transfer its land use rights in Hanzhong City to the Company. The deposits will be reclassified to real estate property under development upon the transfers of legal title.

Real estate property development completed and under development

Real estate property consists of finished residential and commercial unit sites and residential and commercial unit sites under development. The Company leases the land for the residential and commercial units 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. In accordance with GAAP, real estate property development completed and under development is subject to impairment when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets.

Management evaluates, on a yearly basis, the impairment of the Company’s real estate developments based on a community level. Each community is assessed as an individual project. The evaluation takes into account several factors including, but not limited to, physical condition, inventory holding period, management’s plans for future operations, prevailing market prices for similar properties and projected cash flows.  There were no impairment losses for the three and nine months ended June 30, 2012 and 2011.

Customer deposits

Customer deposits consist of prepayments received from customers relating to the sale of residential units in the PRC. The Company receives these funds and recognizes them as a liability until the revenue can be recognized. The classification of customer deposits as current liabilities or long term liabilities is subject to management’s estimation on whether the Company expects to be able to recognize these deposits as revenue within one year of the balance sheet date. The Company converts the customer deposits to revenue when the homebuyers or banks pay off the balance, and the certificates of the ownership are delivered to the homebuyers or the banks.

Stock-based compensation

The Company accounted for share-based compensation in accordance with ASC Topic 718, Compensation - Stock compensation, which requires that share-based payment transactions be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period, or vesting period.

ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in the subsequent period if actual forfeitures differ from initial estimates. Forfeiture rate is estimated based on historical and future expectation of employee turnover rate and are adjusted to reflect future change in circumstances and facts, if any. Share-based compensation expense is recorded net of estimated forfeitures such that expense was recorded only for those stock options and common stock awards that are expected to vest.

Income taxes

The Company utilizes ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC 740-10-25 prescribes a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. There are no material uncertain tax positions as of June 30, 2012 and September 30, 2011.

The Company is a corporation organized under the laws of the State of Florida. However, all of the Company’s operations are conducted solely by its subsidiaries in the PRC.  No income is earned in the United States and the management does not repatriate any earnings outside the PRC.  As a result, the Company did not generate any U.S. taxable income for the three months and nine months ended June 30, 2012, and 2011.

Land appreciation tax (“LAT”)

In accordance with the relevant taxation laws in the PRC, the Company is subject to LAT based on progressive rates ranging from 30% to 60% on the appreciation of land value, which is calculated as the proceeds of sales of properties less deductible expenditures including borrowing costs and all property development expenditures. LAT is exempted if the appreciation values do not exceed certain thresholds specified in the relevant tax laws.

The whole project must be completed before the LAT obligation can be assessed. Accordingly, the Company should record the liability and the total related expense at the completion of a project unless the tax authorities impose an assessment at an earlier date.  The methods to implement this tax law vary among different geographic areas. Hanzhong, where the project Mingzhu Garden, NanDajie 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%. Yangxian, where the project Yangzhou Pearl Garden is located, requires a tax rate of 0.5%.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2012	Sep. 30, 2011
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	45,050,000	45,050,000
Common stock, shares outstanding	45,050,000	45,050,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Jun. 30, 2012

Principles of consolidation

Principles of consolidation

The unaudited condensed consolidated financial statements include the financial statements of China HGS Real Estate Inc. (the “Company” or “China HGS”), China HGS Investment Inc. (“HGS Investment”), Shaanxi HGS Management and Consulting Co., Ltd. (“Shaanxi HGS”) and its variable interest entity (“VIE”), Shaanxi Guangsha Investment and Development Group Co., Ltd. (“Guangsha”). All inter-company transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation.

Use of estimates

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, and disclosure of contingent liabilities at the date of the condensed consolidated financial statements. Estimates are used for, but not limited to, the selection of the useful lives of property and equipment, collectability of loans, fair value of stock based compensation, revenue recognition, deferred taxes, costs to complete real estate development and other similar charges. Management believes that the estimates utilized in preparing its condensed consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates.

Fair value of financial instruments

Fair value of financial instruments

The Company follows the provisions of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. It clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions.

The carrying amounts reported in the accompanying unaudited condensed consolidated balance sheets for cash, restricted cash, advance to vendors, loans to outside parties, security deposits for land use rights, other current assets, accounts payable, customer deposits, other payables, accrued expenses, and taxes payable, approximate their fair value based on the short-term nature of these instruments. The fair value of the long term customer and construction deposits approximate their carrying amounts because the deposits are received in cash.

Revenue recognition

Revenue recognition

Real estate sales are recognized in accordance with ASC 360-20 “Real Estate Sales”.

Revenue from the sales of development properties is recognized by the full accrual method at the time of the closing of an individual unit sale. This occurs when title to or possession of the property is transferred to the buyer. A sale is not considered consummated until (a) the parties are bound by the terms of a contract, (b) all consideration has been exchanged, (c) any permanent financing of which the seller is responsible has been arranged, (d) all conditions precedent to closing have been performed, (e) the seller does not have substantial continuing involvement with the property, and (f) the usual risks and rewards of ownership have been transferred to the buyer. Further, the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property, and the buyer’s receivable, if any, is not subject to future subordination.

The Company provides “mortgage loan guarantees” only with respect to buyers who make down-payments of 30%-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, the Company’s mortgage-loan based sales contract terminates and there is 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 refund 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, the Company’s 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 had to refund any loan proceeds pursuant to its mortgage loan guarantees.

Foreign currency translation

Foreign currency translation

The Company’s financial information is presented in U.S. dollars. The functional currency of the Company’s operating subsidiaries is Renminbi (“RMB”), the currency of the PRC. The financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830-30 “Translation of Financial Statements”. The financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in stockholders’ equity.

	For nine months ended June 30,				September 30,
	2012		2011		2011
Period end RMB : USD exchange rate		6.3197		6.4635		6.3952
Nine month average RMB : USD exchange rate		6.3428		6.5796

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.

Advances to vendors

Advances to vendors

Advances to vendors consist of balances paid to contractors and vendors for services and materials that have not been provided or received and generally relate to the development and construction of residential units in the PRC. Advances to vendors are reviewed periodically to determine whether their carrying value has become impaired. Historically, the Company has not experienced any losses as a result of these advances.

Loans to outside parties

Loans to outside parties

Loans to outside parties consist of various cash advances to unrelated companies and individuals with which the Company has business relationships. Loans to outside parties are reviewed periodically as to whether their carrying value has become impaired. The Company considers the assets to be impaired if the collectability of the balances becomes doubtful. As of June 30, 2012 and September 30, 2011, the allowance for losses on loans to outside parties was $7,595 and $7,505, respectively.

Security deposits for land use rights

Security deposits for land use rights

Security deposits for land use rights consist of the deposit held by the PRC government for the purchase of land use rights in Hanzhong City and the deposit held by an unrelated party to transfer its land use rights in Hanzhong City to the Company. The deposits will be reclassified to real estate property under development upon the transfers of legal title.

Real estate property development completed and under development

Real estate property development completed and under development

Real estate property consists of finished residential and commercial unit sites and residential and commercial unit sites under development. The Company leases the land for the residential and commercial units 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. In accordance with GAAP, real estate property development completed and under development is subject to impairment when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets.

Management evaluates, on a yearly basis, the impairment of the Company’s real estate developments based on a community level. Each community is assessed as an individual project. The evaluation takes into account several factors including, but not limited to, physical condition, inventory holding period, management’s plans for future operations, prevailing market prices for similar properties and projected cash flows.  There were no impairment losses for the three and nine months ended June 30, 2012 and 2011.

Customer deposits

Customer deposits

Customer deposits consist of prepayments received from customers relating to the sale of residential units in the PRC. The Company receives these funds and recognizes them as a liability until the revenue can be recognized. The classification of customer deposits as current liabilities or long term liabilities is subject to management’s estimation on whether the Company expects to be able to recognize these deposits as revenue within one year of the balance sheet date. The Company converts the customer deposits to revenue when the homebuyers or banks pay off the balance, and the certificates of the ownership are delivered to the homebuyers or the banks.

Stock-based compensation

Stock-based compensation

The Company accounted for share-based compensation in accordance with ASC Topic 718, Compensation - Stock compensation, which requires that share-based payment transactions be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period, or vesting period.

ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in the subsequent period if actual forfeitures differ from initial estimates. Forfeiture rate is estimated based on historical and future expectation of employee turnover rate and are adjusted to reflect future change in circumstances and facts, if any. Share-based compensation expense is recorded net of estimated forfeitures such that expense was recorded only for those stock options and common stock awards that are expected to vest.

Income taxes

Income taxes

The Company utilizes ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC 740-10-25 prescribes a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. There are no material uncertain tax positions as of June 30, 2012 and September 30, 2011.

The Company is a corporation organized under the laws of the State of Florida. However, all of the Company’s operations are conducted solely by its subsidiaries in the PRC.  No income is earned in the United States and the management does not repatriate any earnings outside the PRC.  As a result, the Company did not generate any U.S. taxable income for the three months and nine months ended June 30, 2012, and 2011.

Land appreciation tax ("LAT")

Land appreciation tax (“LAT”)

In accordance with the relevant taxation laws in the PRC, the Company is subject to LAT based on progressive rates ranging from 30% to 60% on the appreciation of land value, which is calculated as the proceeds of sales of properties less deductible expenditures including borrowing costs and all property development expenditures. LAT is exempted if the appreciation values do not exceed certain thresholds specified in the relevant tax laws.

The whole project must be completed before the LAT obligation can be assessed. Accordingly, the Company should record the liability and the total related expense at the completion of a project unless the tax authorities impose an assessment at an earlier date.  The methods to implement this tax law vary among different geographic areas. Hanzhong, where the project Mingzhu Garden, NanDajie 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%. Yangxian, where the project Yangzhou Pearl Garden is located, requires a tax rate of 0.5%.

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Document and Entity Information	9 Months Ended
	Jun. 30, 2012	Aug. 09, 2012
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Trading Symbol	HGSH
Entity Registrant Name	CHINA HGS REAL ESTATE INC.
Entity Central Index Key	0001158420
Current Fiscal Year End Date	--09-30
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		45,050,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Jun. 30, 2012

Currency Exchange Rate

The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in stockholders’ equity.

	For nine months ended June 30,				September 30,
	2012		2011		2011
Period end RMB : USD exchange rate		6.3197		6.4635		6.3952
Nine month average RMB : USD exchange rate		6.3428		6.5796

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $)	3 Months Ended		9 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Real estate sales	$ 4,882,304	$ 12,697,723	$ 10,262,731	$ 39,056,523
Sales tax	(297,536)	(723,011)	(667,020)	(2,236,650)
Cost of real estate sales	(2,718,411)	(6,015,126)	(4,739,640)	(19,786,543)
Gross profit	1,866,357	5,959,586	4,856,071	17,033,330
Operating expenses
Selling and distribution expenses	88,326	180,088	170,199	344,628
General and administrative expenses	369,969	421,827	1,183,614	746,432
Total operating expenses	458,295	601,915	1,353,813	1,091,060
Operating income	1,408,062	5,357,671	3,502,258	15,942,270
Interest income	2,013	11,142	16,013	30,033
Interest (expense)	(18,100)		(54,300)
Government subsidy income	12,613		12,613
Other income (expenses) - net		3,012		(1,486)
Income before income taxes	1,404,588	5,371,825	3,476,584	15,970,817
Provision for income taxes	71,259	181,218	167,542	716,828
Net income	1,333,329	5,190,607	3,309,042	15,253,989
Other comprehensive income
Foreign currency translation adjustment	61,848	955,421	866,297	2,075,308
Comprehensive income	$ 1,395,177	$ 6,146,028	$ 4,175,339	$ 17,329,297
Basic and diluted income per common share
Basic	$ 0.03	$ 0.12	$ 0.07	$ 0.34
Diluted	$ 0.03	$ 0.12	$ 0.07	$ 0.34
Weighted average common shares outstanding
Basic	45,050,000	45,050,000	45,050,000	45,050,000
Diluted	45,050,000	45,050,000	45,050,000	45,053,145

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TAXES

9 Months Ended

Jun. 30, 2012

TAXES

NOTE 7. TAXES

(A) Business sales tax

The Company is subject to a 5% business sales tax on revenue.

B) Corporate income taxes (“CIT”)

The Company’s PRC subsidiaries and VIE are governed by the Income Tax Law of the People’s Republic of China concerning private-run enterprises, which are generally subject to income tax at a statutory rate of 25%, on income reported in the statutory financial statements after appropriate tax adjustments.

However, as approved by the local tax authority of Hanzhong City, the Company’s CIT was assessed annually at a pre-determined fixed rate as an incentive to stimulate the local economy and encourage entrepreneurship. The local income tax rate in Hanzhong is 2.5% and in Yangxian is 1.25% on revenue.

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.

The following table reconciles the statutory rates to the Company’s effective tax rate for the three and nine months ended June 30, 2012 and 2011:

	Three months ended June 30,						Nine months ended June 30,
	2012			2011			2012			2011
Chinese statutory tax rate		25.0	%		25.0	%		25.0	%		25.0	%
Exemption rendered by local tax authorities		(20.0	)%		(21.6	)%		(20.2	)%		(20.5	)%
Effective tax rate		5.0	%		3.4	%		4.8	%		4.5	%

 The parent Company China HGS Real Estate Inc. is incorporated in the United States. Net operating loss carry forwards for United States income tax purposes amounted to $146,721 and $71,328 as of June 30, 2012 and September 30, 2011, respectively, which are available to reduce future years’ taxable income. These carry forwards will expire in 2032. However, the change in control resulting from the reverse merger in 2009 limits the amount of loss to be utilized each year. Management doesn’t expect to remit any of its net income back to the United States in the foreseeable future. Accordingly, the Company recorded a full valuation allowance for the tax benefit from the net operating losses as of June 30, 2012 and September 30, 2011. The components of deferred taxes as of June 30, 2012 and September 30, 2011 consist of the following:

	As of
	June 30, 2012			September 30, 2011
Net operating loss carry-forwards for parent company	$	49,885		$	24,252
Valuation allowance		(49,885	)		(24,252	)
Net deferred tax asset	$	-		$	-

(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% or 1.0% against total cash receipts from sales of real estate properties, rather than according to the progressive rates.

For the three and nine months ended June 30, 2012 and 2011, the Company has made full payment for LAT with respect to properties sold in accordance with the requirements of the local tax authorities.

(D) Taxes payable consisted of the following:

	June 30, 2012		September 30, 2011
CIT	$	677,277	$	604,665
Business tax		3,021,025		3,333,941
Other tax and fees		94,722		85,092
Total taxes payable	$	3,793,024	$	4,023,698

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STOCK OPTIONS

9 Months Ended

Jun. 30, 2012

STOCK OPTIONS

NOTE 6. STOCK OPTIONS

Under the fair value recognition provisions of ASC Topic 718, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized on a straight-line basis as expense over the vesting period. Additionally, the Company is required to use judgment in estimating the amount of stock-based awards that are expected to be forfeited. If actual forfeitures differ significantly from the original estimate, stock-based compensation expense and the results of operations could be impacted.

In January 2010, the Company’s Board of Directors granted stock options to three newly appointed independent directors to purchase up to 34,000 shares of the Company’s common stock (“2010 Stock Options). 20% of the shares underlying the options were exercisable on the grant date and the remaining 80% of the shares underlying the options become exercisable over the next eight quarters at the rate of 10% at the end of every quarter. The exercise price of the options is $2.60 per share and the options expire on January 6, 2015. As of June 30, 2012 and September 30, 2011, 100% and 90% of the option awards have vested, respectively.

On March 16, 2011, the Company’s Board of Directors granted stock options to three independent directors to purchase up to an aggregate of 34,000 shares of the Company’s common stock (“2011 Stock Options). Twenty percent (20%) of the shares underlying the options were exercisable on the grant date and the remaining 80% of the shares underlying the options become vested over the next eight quarters at the rate of 10% at the end of every quarter. The exercise price of the options is $2.37 per share and the options expire on March 16, 2016. As of June 30, 2012 and September 30, 2011, 80% and 50% of the option awards have vested, respectively.

The assumptions used in calculating the fair value of options granted using the Black-Scholes option pricing model are as follows:

	Options granted on			Options granted on
	March 16, 2011			January 6, 2010
Risk-free interest rate		1.87	%		2.6	%
Expected life of the options		5 years			5 years
Expected volatility		65	%		133	%
Expected dividend yield		0	%		0	%

The fair value of the 2011 Stock Options granted was $44,590 utilizing the Black Scholes model (2010 Stock Options $77,157). The Company uses the Black-Scholes option-pricing model, which incorporates various assumptions including volatility, expected life and interest rates to determine fair value. The Company`s expected volatility assumption is based on the historical volatility of Company`s stock. The expected life assumption is primarily based on the simplified method due to the Company’s limited option exercise behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The following table summarizes the stock option activities of the Company:

	Outstanding		Weighted Average Exercise Price	Weighted Average Remaining Contractual Life (Years)		Aggregate Fair Value
Outstanding at September 30, 2011	68,000	$	2.49	3.87	$	121,747
Granted	-		-	-		-
Forfeited	-		-	-		-
Exercised	-		-	-		-
Outstanding at June 30, 2012	68,000	$	2.49	3.12	$	121,747
Exercisable at June 30, 2012	61,200	$	2.50	3.05	$	112,830

Stock-based compensation expense recognized in the three months ended June 30, 2012 and 2011 was $4,459 and $7,716, respectively. Stock-based compensation expense recognized in the nine months ended June 30, 2012 and 2011 was $21,093 and $36,524, respectively. As of June 30, 2012, there was $8,918 of unrecognized compensation cost related to stock option awards that is expected to be recognized as expense over the next six months. The aggregate intrinsic value for stock options outstanding at June 30, 2012 was $Nil (September 30, 2011 - $Nil).

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RESTATEMENT OF JUNE 30, 2011 FINANCIAL RESULTS (Tables)

9 Months Ended

Jun. 30, 2012

Impact of Restatement on Consolidated Financial Statement

The impact of these restatements on the consolidated financial statements as previously reported is summarized below:

	Balance Sheet as of June 30, 2011
	As previously reported-		As restated -
Real estate property under development	$	18,675,151	$	15,847,757

	For the three months ended June 30, 2011				For the nine months ended June 30, 2011
	As previously reported-		As restated -		As previously reported-		As restated -
Cost of real estate sales	$	4,803,185		6,015,126		16,959,149		19,786,543
Gross profit		7,171,527		5,959,586		19,860,724		17,033,330
Net income		6,402,548		5,190,607		18,081,383		15,253,989
Basic and diluted income per common share
Basic		0.14		0.12		0.40		0.34
Diluted		0.14		0.12		0.40		0.34

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REAL ESTATE PROPERTY DEVELOPMENT COMPLETED AND UNDER DEVELOPMENT (Tables)

9 Months Ended

Jun. 30, 2012

Components of Real Estate Property Completed and under Development

The following summarizes the components of real estate property development completed and under development as of June 30, 2012 and September 30, 2011:

	June 30, 2012		September 30, 2011
Development completed:
Hanzhong  City Mingzhu Garden (Mingzhu Nanyuan & Mingzhu Beiyuan)	$	11,250,358	$	2,950,520
Hanzhong  City Nan Dajie (Mingzhu Xinju)		3,806,403		4,048,911
Hanzhong  City Central Plaza		596,292		596,664
Yang County Yangzhou Pearl Garden		11,556,672		11,290,390
Real estate property development completed	$	27,209,725	$	18,886,485
Under development:
Hanzhong  City Mingzhu Garden (Mingzhu Nanyuan & Mingzhu Beiyuan)	$	18,108,937	$	25,403,633
Hanzhong  City Oriental Mingzhu Garden		31,376,904		28,717,247
Yang County Yangzhou Pearl Garden		14,298,985		9,596,641
Real estate property under development	$	63,784,826	$	63,717,521
Less: Short Term portion	$	11,340,016	$	16,707,423
Real estate property under development - Long Term	$	52,444,810	$	47,010,098

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SUBSEQUENT EVENTS

9 Months Ended

Jun. 30, 2012

SUBSEQUENT EVENTS

NOTE 10. SUBSEQUENT EVENTS

On June 28, 2011, the Company entered into a one-year loan agreement (“USD Loan Agreement”) with Mr. Xiaojun Zhu, the major shareholder and Chairman of the Board of Directors, pursuant to which the Company borrowed $1,810,000 from Mr. Xiaojun Zhu to make a capital injection into Shaanxi HGS, the Company’s subsidiary. The interest rate for the loan is 4% per annum. Subsequent to June 30, 2012, the Company entered into an amendment to the USD Loan Agreement to extend the term for an additional one year.

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SHAREHOLDER LOAN AND RELATED PARTY TRANSACTIONS

9 Months Ended

Jun. 30, 2012

SHAREHOLDER LOAN AND RELATED PARTY TRANSACTIONS

NOTE 8. SHAREHOLDER LOAN AND RELATED PARTY TRANSACTIONS

On June 28, 2011, the Company entered into a one-year loan agreement (“USD Loan Agreement”) with Mr. Xiaojun Zhu, the major shareholder and Chairman of the Board of Directors, pursuant to which the Company borrowed $1,810,000 from Mr. Xiaojun Zhu to make a capital injection into Shaanxi HGS, the Company’s subsidiary. The interest rate for the loan is 4% per annum. Subsequent to June 30, 2012, the Company entered into an amendment to the USD Loan Agreement to extend the term to an additional one year.

In connection with the land use rights auctions, the Company borrowed an additional $3,164,707 (RMB 20, 000,000) from Mr. Xiaojun Zhu on November 14, 2011 to fund the deposits for the land use rights bids. The shareholder loan was interest-free for the first month and had an annual interest rate of 15% thereafter. The Company repaid the full amount to Mr. Xiaojun Zhou on December 7, 2011.

The Company recorded interest expense of $18,100 and $54,300 for the three and nine months ended June 30, 2012, respectively.

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CONTINGENCY AND COMMITMENTS

9 Months Ended

Jun. 30, 2012

CONTINGENCY AND COMMITMENTS

NOTE 9. CONTINGENCY AND COMMITMENTS

As an industry practice, the Company provides guarantees to PRC banks with respect to loans procured by the purchasers of the Company’s real estate properties for the total mortgage loan amount until the completion of obtaining the “Certificate of Ownership” of the properties from the government, which generally takes six to twelve months. Because the banks provide loan proceeds without getting the “Certificate of Ownership” as loan collateral during this six to twelve months’ period, the mortgage banks require the Company to maintain, as restricted cash, 5% to 10% of the mortgage proceeds as security for the Company’s obligations under such guarantees. If a purchaser defaults on its payment obligations, the mortgage bank may deduct the delinquent mortgage payment from the security deposit and require the Company to pay the excess amount if the delinquent mortgage payments exceed the security deposit. The Company has made necessary reserves in its restricted cash account to cover any potential mortgage defaults as required by the mortgage lenders. The Company has not experienced any losses related to this guarantee and believes that such reserves are sufficient.

In May 2011, the Company entered into a development agreement with the local government. Pursuant to the agreement, the Company will prepay the development cost of $18,940,773 (RMB119,700,000) and the Company has the right to acquire the land use rights through public bidding unless another company wins the bidding. The prepaid development cost will be deducted from the final purchase price of the land use rights or refunded to the Company plus profit earned if the Company does not win the bidding. As of June 30, 2012, a deposit of $3,164,708 (RMB20,000,000) was paid by the Company. The Company currently expects to make payment of the remaining development cost within the next twelve months based on government’s current work in process.

On November 18, 2011, the Company won two bids for the land use rights by auction to obtain two parcels of land in Yang county for total consideration and the bidding commission of $12,596,522 (RMB 79,606,242). As of June 30, 2012, the Company has paid $7,636,691 (RMB48,261,600) in accordance with the bid terms. The Company was required to make payment of the remaining 40% of the total consideration before January 20, 2012. The Company received a letter from the local Land Management Bureau (“LMB”) agreeing to postpone the payment date to June 30, 2012. On July 4, 2012, the Company paid $1,424,118 (RMB 9,000,000). On July 24, 2012, the Company received approval from LMB to postpone the payment date to September 30, 2012.

On May 28, 2012, the Company signed a new Chief Financial Officer (“CFO”) contract. The term of the contract is for one year. The CFO will receive a monthly salary of RMB60,000 (approximately US$9,500) and an annual bonus of up to RMB180,000 (approximately US$28,000). The CFO is also entitled to 100,000 shares of restricted common stock of the Company at the end of the term. The annual bonus and restricted stock bonus are subject to his continuing employment with the Company and the board’s approval.

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RESTATEMENT OF JUNE 30, 2011 FINANCIAL RESULTS

9 Months Ended

Jun. 30, 2012

RESTATEMENT OF JUNE 30, 2011 FINANCIAL RESULTS

NOTE 11. RESTATEMENT OF JUNE 30, 2011 FINANCIAL RESULTS

As previously reported, the Company discovered an error in inconsistently allocating certain construction costs between real estate property development completed and real estate property under development in the prior quarterly filings. This affects the unaudited condensed consolidated financial statements for the three and nine months periods ended June 30, 2011.

The impact of these restatements on the consolidated financial statements as previously reported is summarized below:

	Balance Sheet as of June 30, 2011
	As previously reported-		As restated -
Real estate property under development	$	18,675,151	$	15,847,757

	For the three months ended June 30, 2011				For the nine months ended June 30, 2011
	As previously reported-		As restated -		As previously reported-		As restated -
Cost of real estate sales	$	4,803,185		6,015,126		16,959,149		19,786,543
Gross profit		7,171,527		5,959,586		19,860,724		17,033,330
Net income		6,402,548		5,190,607		18,081,383		15,253,989
Basic and diluted income per common share
Basic		0.14		0.12		0.40		0.34
Diluted		0.14		0.12		0.40		0.34

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Taxes - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Sep. 30, 2011
Income Taxes [Line Items]
Business sales tax, rate			5.00%
Income tax at statutory tax rate	25.00%	25.00%	25.00%	25.00%
Net operating loss carry forwards	$ 146,721		$ 146,721		$ 71,328
Net operating loss carry forwards, expiration year			2032		2032
Minimum
Income Taxes [Line Items]
Land appreciation tax rate			30.00%
Maximum
Income Taxes [Line Items]
Land appreciation tax rate			60.00%
Hanzhong
Income Taxes [Line Items]
Local income tax rate			2.50%
Land appreciation tax rate			1.00%
Yangxian
Income Taxes [Line Items]
Local income tax rate			1.25%
Land appreciation tax rate			0.50%

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STOCK OPTIONS (Tables)

9 Months Ended

Jun. 30, 2012

Assumptions used in Calculating Fair Value of Options Granted

The assumptions used in calculating the fair value of options granted using the Black-Scholes option pricing model are as follows:

	Options granted on			Options granted on
	March 16, 2011			January 6, 2010
Risk-free interest rate		1.87	%		2.6	%
Expected life of the options		5 years			5 years
Expected volatility		65	%		133	%
Expected dividend yield		0	%		0	%

Stock Option Activities

The following table summarizes the stock option activities of the Company:

	Outstanding		Weighted Average Exercise Price	Weighted Average Remaining Contractual Life (Years)		Aggregate Fair Value
Outstanding at September 30, 2011	68,000	$	2.49	3.87	$	121,747
Granted	-		-	-		-
Forfeited	-		-	-		-
Exercised	-		-	-		-
Outstanding at June 30, 2012	68,000	$	2.49	3.12	$	121,747
Exercisable at June 30, 2012	61,200	$	2.50	3.05	$	112,830

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Security Deposits for Land Use Rights - Additional Information (Detail)							9 Months Ended
	Jun. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Jun. 30, 2012 Development agreement with local government USD ($)	Jun. 30, 2012 Development agreement with local government CNY	May 31, 2011 Development agreement with local government USD ($)	May 31, 2011 Development agreement with local government CNY	Jun. 30, 2012 Hanzhong Shijin Real Estate Development Limited CNY	Jun. 30, 2012 Hanzhong Shijin Real Estate Development Limited USD ($)	Aug. 31, 2011 Hanzhong Shijin Real Estate Development Limited USD ($)	Aug. 31, 2011 Hanzhong Shijin Real Estate Development Limited CNY	Jun. 30, 2012 Land use rights in Yang county USD ($)	Jun. 30, 2012 Land use rights in Yang county CNY	Nov. 18, 2011 Land use rights in Yang county USD ($)	Nov. 18, 2011 Land use rights in Yang county CNY	Jul. 04, 2012 Land use rights in Yang county Subsequent Event USD ($)	Jul. 04, 2012 Land use rights in Yang county Subsequent Event CNY
Other Assets, Current [Line Items]
Expected prepayment for development cost					$ 18,940,773	119,700,000			$ 7,120,591	45,500,000
Security deposits for land use right	18,065,984	6,254,691	3,164,708	20,000,000			45,500,000	7,264,585			7,636,691	48,261,600			1,424,118	9,000,000
Commissions Paid							410,000
Number of parcels of land acquired													2	2
Consideration and bidding commission for land use rights													$ 12,596,522	79,606,242
Percentage of consideration remained to pay													40.00%	40.00%

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Impact of Restatement on Consolidated Financial Statement (Detail) (USD $)	3 Months Ended		9 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Sep. 30, 2011
Real Estate Properties [Line Items]
Real estate property under development	$ 11,340,016	$ 15,847,757	$ 11,340,016	$ 15,847,757	$ 16,707,423
Cost of real estate sales	2,718,411	6,015,126	4,739,640	19,786,543
Gross profit	1,866,357	5,959,586	4,856,071	17,033,330
Net income	1,333,329	5,190,607	3,309,042	15,253,989
Basic and diluted income per common share
Basic	$ 0.03	$ 0.12	$ 0.07	$ 0.34
Diluted	$ 0.03	$ 0.12	$ 0.07	$ 0.34
As previously reported
Real Estate Properties [Line Items]
Real estate property under development		18,675,151		18,675,151
Cost of real estate sales		4,803,185		16,959,149
Gross profit		7,171,527		19,860,724
Net income		$ 6,402,548		$ 18,081,383
Basic and diluted income per common share
Basic		$ 0.14		$ 0.40
Diluted		$ 0.14		$ 0.40

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	9 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities
Net income	$ 3,309,042	$ 15,253,989
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation	63,572	54,008
Stock Based Compensation	21,093	36,524
Changes in assets and liabilities:
Restricted cash	(246,873)	(271,388)
Advances to vendors	4,084,292	(15,198,492)
Loans to outside parties	1,083,510	5,014,420
Security deposits for land use rights	(11,693,808)
Real estate property development completed	(8,068,104)	(2,499,118)
Real estate property under development	691,386	(32,541,323)
Other current assets	(132,172)	(39,855)
Accounts payables	(4,639,102)	1,585,903
Other payables	679,934	(908,922)
Customer deposits	7,965,987	11,420,206
Construction Deposits	43,755	710,302
Accrued expenses	(4,130)	41,476
Taxes payable	(277,728)	455,363
Net cash used in operating activities	(7,119,346)	(16,866,907)
Cash flow from investing activities
Purchase of equipment		(20,257)
Net cash used in investing activities		(20,257)
Cash flow from financing activities
Proceeds from shareholder loan	3,142,332	6,685,210
Repayment of shareholder loan	(3,142,332)
Net cash provided by financing activities		6,685,210
Effect of changes of foreign exchange rate on cash	79,548	241,997
Net decrease in cash	(7,039,798)	(9,980,267)
Cash, beginning of period	8,837,795	12,621,845
Cash, end of period	1,797,997	2,641,578
Supplemental disclosures of cash flow information:
Interest paid
Income taxes paid	$ 24,137	$ 363,514

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CUSTOMER DEPOSITS

9 Months Ended

Jun. 30, 2012

CUSTOMER DEPOSITS

NOTE 5. CUSTOMER DEPOSITS

Customer deposits consist of amounts received from customers for the pre-sale of residential units in the PRC. The detail of customer deposits is as follows:

	June 30, 2012		September 30, 2011
Customer deposits by real estate projects
Hanzhong  City Mingzhu Garden (Mingzhu Nanyuan & Mingzhu Beiyuan)	$	15,313,889	$	12,860,399
Yang County Yangzhou Pearl Garden		14,929,402		9,125,119
Total	$	30,243,291	$	21,985,518
Less: Short Term portion	$	16,451,695	$	11,564,868
Customer deposits – Long Term	$	13,791,596	$	10,420,650

Customer deposits are typically 10%-20% of the unit price for those customers who purchase properties in cash and 30%-50% of the unit price for those customers who purchase properties with mortgages. The banks provide the balance of the funding to the Company upon consummation of the sales. The banks hold the properties as collateral for customers’ mortgage loans. If the customers default, the bank will repossess the collateral properties. Except during the Mortgage Loan Guarantee Period of approximately six to twelve months, the banks have no recourse to the Company for customers’ defaults.

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Components of Real Estate Property Completed and under Development (Detail) (USD $)	Jun. 30, 2012	Sep. 30, 2011	Jun. 30, 2011
Real Estate Properties [Line Items]
Real estate property development completed	$ 27,209,725	$ 18,886,485
Real estate property under development	63,784,826	63,717,521
Less: Short Term portion	11,340,016	16,707,423	15,847,757
Real estate property under development - Long Term	52,444,810	47,010,098
Hanzhong City Mingzhu Garden (Mingzhu Nanyuan & Mingzhu Beiyuan)
Real Estate Properties [Line Items]
Real estate property development completed	11,250,358	2,950,520
Real estate property under development	18,108,937	25,403,633
Hanzhong City Nan Dajie (Mingzhu Xinju)
Real Estate Properties [Line Items]
Real estate property development completed	3,806,403	4,048,911
Hanzhong City Central Plaza
Real Estate Properties [Line Items]
Real estate property development completed	596,292	596,664
Yang County Yangzhou Pearl Garden
Real Estate Properties [Line Items]
Real estate property development completed	11,556,672	11,290,390
Real estate property under development	14,298,985	9,596,641
Hanzhong City Oriental Mingzhu Garden
Real Estate Properties [Line Items]
Real estate property under development	$ 31,376,904	$ 28,717,247

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Shareholder Loan and Related Party Transactions - Additional Information (Detail)	1 Months Ended		3 Months Ended	9 Months Ended
	Nov. 14, 2011 USD ($)	Nov. 14, 2011 CNY	Jun. 30, 2012 USD ($)	Jun. 30, 2012 USD ($)	Jul. 30, 2011	Jun. 30, 2011 USD ($)	Sep. 30, 2011 USD ($)
Stockholders Equity Note [Line Items]
Shareholder loan	$ 3,164,707	20,000,000	$ 1,810,000	$ 1,810,000		$ 1,810,000	$ 1,810,000
Related party, interest rate	15.00%	15.00%			4.00%	4.00%
Interest (expense)			$ 18,100	$ 54,300

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CUSTOMER DEPOSITS (Tables)

9 Months Ended

Jun. 30, 2012

Customer Deposits from Pre-Sale of Residential Units

Customer deposits consist of amounts received from customers for the pre-sale of residential units in the PRC. The detail of customer deposits is as follows:

	June 30, 2012		September 30, 2011
Customer deposits by real estate projects
Hanzhong  City Mingzhu Garden (Mingzhu Nanyuan & Mingzhu Beiyuan)	$	15,313,889	$	12,860,399
Yang County Yangzhou Pearl Garden		14,929,402		9,125,119
Total	$	30,243,291	$	21,985,518
Less: Short Term portion	$	16,451,695	$	11,564,868
Customer deposits – Long Term	$	13,791,596	$	10,420,650