Yangtze River Port & Logistics Ltd - FORM 10-Q

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EX-31.1 - CERTIFICATION - Yangtze River Port & Logistics Ltd	f10q0915ex31i_kirininter.htm
EX-32.1 - CERTIFICATION - Yangtze River Port & Logistics Ltd	f10q0915ex32i_kirininter.htm
EX-32.2 - CERTIFICATION - Yangtze River Port & Logistics Ltd	f10q0915ex32ii_kirininter.htm
EX-31.2 - CERTIFICATION - Yangtze River Port & Logistics Ltd	f10q0915ex31ii_kirininter.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2015

☐ 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: 333-166343

KIRIN INTERNATIONAL HOLDING, INC.

(Exact name of registrant as specified in its charter)

Nevada		27-1636887
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

1528 Brookhollow Drive, Suite 100 Santa Ana, CA		92705
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (714) 581-4335

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ☐ 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ 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	☐	Smaller reporting company	☒
(Do not check if a smaller reporting company)

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

The registrant had 20,596,546 shares of common stock, $0.0001 per share, outstanding at December 18, 2015.

KIRIN INTERNATIONAL HOLDING, INC.

QUARTERLY REPORT ON FORM 10-Q

September 30, 2015

TABLE OF CONTENTS

		PAGE

PART I	FINANCIAL INFORMATION	4

Item 1.	Financial Statements (Unaudited)	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54

Item 4.	Controls and Procedures	54

PART II	OTHER INFORMATION	54

Item 1.	Legal Proceedings	55

Item 1A.	Risk Factors	55

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

Item 3.	Defaults Upon Senior Securities	55

Item 4.	Mine Safety Disclosures	55

Item 5.	Other Information	55

Item 6.	Exhibits	55

SIGNATURES		56

Financial Statements:

SPECIAL NOTE REGARDING VOLUNTARY FILER STATUS

Kirin International Holding, Inc. is a “voluntary filer” with the U.S. Securities and Exchange Commission. This means that the Company is not required to file Current and Periodic Reports with the U.S. Securities and Exchange Commission. Furthermore, the Company is not subject to the going private rules and certain tender offer regulations, and the beneficial holders of the Company’s securities do not need to report on acquisitions or depositions of the Company’s securities or their plans regarding their influence and control over the Company. Therefore the Company’s status a voluntary filer reduces investors’ rights to access significant information regarding the Company and its controlling shareholders.

The Company’s voluntary filer status may lead to its removal from the over the counter bulletin board, as Rule 6530 of the Financial Industry Regulatory Authority provides that issuers must be required to file reports pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 in order to remain listed.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements”. Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about the following subjects:

●	business strategies;
●	growth opportunities;
●	competitive position;
●	market outlook;
●	expected financial position;
●	expected results of operations;
●	future cash flows;
●	financing plans;
●	plans and objectives of management;
●	tax treatment of the March 2011 acquisition of Kirin China Holding, Ltd.; and
●	any other statements regarding future growth, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

CERTAIN TERMS USED IN THIS REPORT

In this Report, unless otherwise noted or as the context otherwise requires: “the Company,” “Kirin,” “we,” “us,” and “our” refers to the combined company Kirin International Holding, Inc. and its subsidiaries and Variable Interest Entities.

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

KIRIN INTERNATIONAL HOLDING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,		December 31,
	2015		2014
	(Unaudited)		(Revised)
ASSETS

Cash and cash equivalents	$	12,178,321	$	22,004,479
Restricted cash		13,648,713		6,785,042
Short-term investment		471,416		487,527
Accounts receivable		5,061,087		58,202
Notes receivable from a related party		600,000		600,000
Revenue in excess of billings		19,076,999		13,586,442
Prepayments		15,223,406		26,448,654
Prepayment for entrust investment		4,000,000		-
Other receivables		29,629,450		28,549,244
Other receivable for entrust investment		6,000,000		-
Receivable from a trust equity owner		2,410,897		5,415,488
Loan to related parties		64,592,484		48,353,101
Real estate property completed		19,064,124		1,441,194
Real estate properties and land lots under development		147,857,192		187,445,154
Long-term investments		7,614,108		7,850,402
Property and equipment, net		2,602,773		7,477,607
Deferred tax assets		3,686,204		5,791,051

Total assets	$	353,717,174	$	362,293,587

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities
Notes payable to a related party	$	2,800,000	$	-
Accounts payable		102,280,112		102,265,749
Income taxes payable		2,124,135		1,904,666
Other taxes payable		1,026,765		2,263,163
Entrust investment from a related party		9,772,942		-
Other payables and accrued liabilities		20,012,067		23,455,757
Customer deposits		69,133,304		83,522,070
Loans payable		81,381,894		92,313,136
Deferred tax liabilities		1,277,735		266,003

Total liabilities		289,808,954		305,990,544

Commitments and contingencies

Stockholders’ equity
Preferred stock at $0.0001 par value; 100,000,000 shares authorized; none issued or outstanding		-		-
Common stock at $0.0001 par value; 500,000,000 shares authorized; 20,596,546 shares issued and outstanding		2,060		2,060
Additional paid-in capital		38,816,266		37,149,630
Statutory reserve		1,403,154		1,403,154
Retained earnings		15,598,554		8,967,841
Accumulated other comprehensive income		6,648,677		8,110,120
Total Kirin International Holding, Inc.’s equity		62,468,711		55,632,805
Non-controlling interest		1,439,509		670,238
Total Stockholders’ equity		63,908,220		56,303,043
Total liabilities and stockholders’ equity	$	353,717,174	$	362,293,587

See notes to the unaudited condensed consolidated financial statements

All of the assets of the VIEs can be used only to settle obligations of the consolidated VIEs. Conversely, all liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets (Note 3).

KIRIN INTERNATIONAL HOLDING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	Nine Months Ended September 30,						Three Months Ended September 30,
	2015			2014			2015			2014
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
				(Revised)						(Revised)

Revenue, net	$	100,693,548		$	82,263,479		$	42,339,003		$	34,621,648
Cost of sales		80,210,964			70,402,868			31,453,385			30,593,245
Gross profit		20,482,584			11,860,611			10,885,618			4,028,403

Operating expenses
Selling expenses		2,476,160			2,794,450			930,151			1,129,324
General and administrative expenses		5,304,295			6,525,672			1,855,485			1,734,583

Total operating expenses		7,780,455			9,320,122			2,785,636			2,863,907

Income from operations		12,702,129			2,540,489			8,099,982			1,164,496

Other income (expenses)
Investment income (loss)		786,806			504,548			-			-
Interest income		5,619,986			3,721,344			2,139,175			1,251,621
Interest expense		(7,198,617	)		(8,029,790	)		(2,383,685	)		(2,736,939	)
Other non-operating income (loss)		2,598,487			(390,840	)		443,195			(562,091	)

Total other income (expenses)		1,806,662			(4,194,738	)		198,685			(2,047,409	)

Income (loss) before income taxes		14,508,791			(1,654,249	)		8,298,667			(882,913	)

Income taxes expense		7,107,968			1,479,121			3,806,223			671,076

Net income (loss)		7,400,823			(3,133,370	)		4,492,444			(1,553,989	)
Less: net income (loss) attributable to non-controlling interest		770,110			(70,912	)		9,332			(26,857	)
Net income (loss) attributable to stockholder of Kirin International Holding, Inc.	$	6,630,713		$	(3,062,458	)	$	4,483,112		$	(1,527,132	)
Net income (loss)		7,400,823			(3,133,370	)		4,492,444			(1,553,989	)

Other comprehensive income (loss)
Foreign currency translation adjustment		(1,461,443	)		(411,022	)		(1,786,263	)		13,392
Total comprehensive income (loss)		5,939,380			(3,544,392	)		2,706,181			(1,540,597	)
Less: other comprehensive income (loss) attributable to non-controlling interest		770,110			(70,912	)		9,332			(26,857	)
Comprehensive income (loss) attributable to stockholder of Kirin International Holding, Inc.	$	5,169,270		$	(3,473,480	)	$	2,696,849		$	(1,513,740	)

Basic and diluted income (loss) per share	$	0.32		$	(0.15	)	$	0.22		$	(0.07	)
Basic and diluted weighted average shares outstanding		20,596,546			20,596,546			20,596,546			20,596,546

See notes to the unaudited condensed consolidated financial statements

KIRIN INTERNATIONAL HOLDING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine months Ended September 30,
	2015			2014
	(Unaudited)			(Unaudited) (Revised)
Cash flows from operating activities:
Net income (loss)	$	7,400,823		$	(3,133,370	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		111,355			171,441
Gain on disposal of land		(2,688,811	)		(171,251	)
Interest income from related parties		(5,606,467	)		(3,721,344	)
Deferred tax expense (benefit)		3,024,437			(938,040	)
Investment income		(786,806	)		(504,548	)

Changes in operating assets and liabilities
Restricted cash		(7,306,379	)		(5,168,414	)
Accounts receivable		(5,159,620	)		102,488
Revenue in excess of billings		(6,122,626	)		1,586,253
Prepayments		10,067,102			(2,867,472	)
Other receivables		(3,487,918	)		(22,503,679	)
Receivable from a trust equity owner		2,693,433			(619,651	)
Real estate property completed		(18,215,256	)		530,370
Real estate properties and land lots under development		34,806,125			(12,149,045	)
Accounts payable		3,512,828			22,745,416
Income taxes payable		291,117			(44,644	)
Other taxes payable		(1,191,159	)		(670,595	)
Other payables and accrued liabilities		477,679			6,871,532
Customer deposits		(11,254,381	)		2,539,525

Net cash provided by (used in) operating activities		565,476			(17,945,028	)

Cash flows from investing activities:
Purchases of equipment		(432,044	)		(2,945,221	)
Proceeds from disposal of land		7,831,017			598,626
Repayment of loans from related parties		15,467,123			1,138,169
Loans to related parties		(28,247,769	)		(5,975,387	)
Repayment of short-term loan from related parties		-			12,178,406
Notes receivable from a related party		-			812,978
Payment of short-term investment		(1,619,827	)		-
Repayment of short-term investment		1,619,827			-
Cash outflow from disposal of subsidiary		(180,175	)		-
Cash paid for investment at cost		-			(783,042	)
Cash received from investment income		786,806			504,548

Net cash provided by (used in) investing activities		(4,775,042	)		5,529,077

Cash flows from financing activities:
Proceeds from financial institution loans		35,271,726			42,274,842
Repayment of financial institution loans		(43,395,284	)		(40,161,100	)
Proceeds from Notes payable to a related party		2,800,000			-
Proceeds from entrust investment from a related party		10,074,196			-
Prepayment for entrust investment		(4,000,000	)		-
Other receivable for entrust investment		(6,000,000	)		-
Distribution to non-controlling stockholder of Greenfield		(838	)		-

Net cash provided by (used in) financing activities		(5,250,200	)		2,113,742

Effect of exchange rate changes on cash and cash equivalents		(366,392	)		(124,208	)
Net decrease in cash and cash equivalents		(9,826,158	)		(10,426,417	)

Cash and cash equivalents - beginning of the period		22,004,479			23,407,551

Cash and cash equivalents - end of the period	$	12,178,321		$	12,981,134

Supplementary cash flow information
Cash paid for income tax	$	1,092,849		$	1,338,986
Cash paid for interest expense	$	6,405,953		$	6,077,980

See notes to the unaudited condensed consolidated financial statements

KIRIN INTERNATIONAL HOLDING, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, as of September 30, 2015)

Note 1 – Organization and Description of Business

Kirin International Holding, Inc. (the “Company”) was incorporated on December 23, 2009 under the laws of the State of Nevada. The Company and its subsidiaries, Variable Interest Entities (“VIEs”) and VIEs’ subsidiaries are engaged in the development and sales of residential and commercial real estate properties, and development of land lots in Xingtai city, Hebei province, People’s Republic of China (“China”, or the “PRC”).

As at September 30, 2015, the Company had following wholly-owned entities, VIEs and VIEs’ subsidiaries:

	Place of Incorporation	Date of Incorporation	Principal Activities

Subsidiaries
Kirin China Holding Limited (“Kirin China”)	British Virgin Islands	July 6, 2010	Investment holding
Kirin Huaxia Development Limited (“Kirin Development”)	Hong Kong, China	July 27, 2010	Investment holding
Shijiazhuang Kirin Management Consulting Co., Ltd. (“Kirin Management”)	Shijiazhuang, Hebei province, China	December 22, 2010	Primary beneficiary of VIEs
Spectrum International Enterprise, LLC	State of California, United States of America.	January 11, 2013	Property holding
Brookhollow Lake, LLC	State of California, United States of America	February 8, 2013	Property holding
Greenfield International Corporation *	State of California, United States of America	August 12, 2013	Whole sale Agent of Food & Grocery
Kirin Hopkins Real Estate Group, LLC	State of California, United States of America	July 23, 2013	Real estate development
Newport Property Holding, LLC	State of California, United States of America	July 11, 2013	Real estate investment and management
Kirin Alamo, LLC	State of California, United States of America	December 09, 2013	Real Estate development
Archway Development Group LLC	State of California, United States of America	April 30, 2014	Real Estate development
HHC-6055 Centre Drive, LLC	State of California, United States of America	April 30, 2014	Real Estate development
Parasol Co. (formerly named as Applecrate, INC)	State of California, United States of America	November 11, 2014	E-Commerce Retail/Wholesale
VIEs
HebeiZhongding Real Estate Development Co., Ltd. (“HebeiZhongding”)	Xingtai, Hebei province, China	July 16, 2007	Real estate development
XingtaiZhongdingJiye Real Estate Development Co., Ltd. (“ZhongdingJiye”, “XingtaiZhongding”)	Xingtai, Hebei province, China	August 7, 2008	Real estate development

Subsidiaries of VIEs Subsidiaries of HebeiZhongding
XingtaiZhongding Construction Project Management Co., Ltd.	Xingtai, Hebei province, China	September 3, 2007	Dormant
Subsidiaries of XingtaiZhongding
XingtaiZhongding Kirin Real Estate Development Co., Ltd. (formerly named as XingtaiZhongding Business Service Co., Ltd., “Business Service”, “Zhongding Kirin”)	Xingtai, Hebei province, China	July 29, 2008	Real estate development
Huaxia Kirin (Beijing) Garden Project Co., Ltd.	Beijing, China	January 19, 2010	Garden design and planting
Xingtai Zhongding Hetai Real Estate Development Co., Ltd (formerly named as XingtaiHetai Real Estate Development Co., Ltd.)	Xingtai, Hebei province, China	December 6, 2010	Real estate development
Huaxia Kirin (Beijing) Property Management Co., Ltd.** (“Beijing Property”)	Beijing, China	December 19, 2011	Property management
HebeiZhongding Property Service Co., Ltd.** (“Hebei Property”)	Xingtai, Hebei province, China	December 19, 2011	Property management

* In January 2015, Greenfield International Corporation was closed.

** On September 30, 2015, these two subsidiaries were disposed.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements for the nine months and three months ended September 30, 2015 and 2014 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations. Accordingly, the reader of this Form 10-Q is referred to Kirin International Holding, Inc. (“the Company”) Form 10-K for the year ended December 31, 2014 for further information. In the opinion of management of the Company, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position at September 30, 2015, the results of operations for the nine months and three months ended September 30, 2015 and 2014, and cash flows for the nine months ended September 30, 2015 and 2014. The results of operations for the nine months and three months ended September 30, 2015 are not necessarily indicative of the operating results for the year. The unaudited condensed consolidated balance sheets as of September 30, 2015 and consolidated balance sheet as of December 31, 2014, the unaudited condensed consolidated statements of operations and comprehensive income (loss) for the nine months and three months ended September 30, 2015 and 2014, and cash flows for the nine months ended September 30, 2015 and 2014 include those of the Company, its subsidiaries and VIEs, and subsidiaries of VIEs. All material intercompany transactions and balances have been eliminated in consolidation.

The unaudited condensed consolidated balance sheets are presented unclassified because the time required to complete real estate projects and the Company’s working capital considerations usually stretch for more than one-year period.

Reclassifications

Certain amounts in the September 30, 2014 unaudited condensed consolidated financial statement and December 31, 2014 consolidated financial statements have been reclassified to conform to the September 30, 2015 presentation.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include percentage-of-completion of properties under construction and related revenue and costs recognized, allowance for doubtful accounts, recoverability of deferred tax assets, and the assessment of impairment of long-lived assets. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.

Fair Value of Financial Instruments

The Company applies the provisions of ASC Subtopic 820-10, Fair Value Measurements, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC Subtopic 820-10 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

ASC Subtopic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

ASC Subtopic 820-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC Subtopic 820-10 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

●	Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

●	Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

●	Level 3 inputs are unobservable inputs for the asset or liability.

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

Reporting Currency and Foreign Currency Translation

The functional currency of the Company, Kirin China, Kirin Development and Kirin Management is the United States dollar (“US$”). The functional currency of the Company’s VIEs and subsidiaries of VIEs in the PRC is Renminbi (“RMB”). The Company’s reporting currency is US$. The assets and liabilities of the Company’s VIEs and subsidiaries of VIEs in China are translated at the exchange rate on the balance sheet dates, stockholders’ equity is translated at the historical rates and the revenues and expenses are translated at the weighted average exchange rates for the periods. The resulting translation adjustments are reported under accumulated other comprehensive income in the condensed consolidated statements of operations and comprehensive income (loss) in accordance with ASC 220, comprehensive income.

Revenue Recognition

Real estate sales are reported in accordance with the provisions of ASC 360-20, Property, Plant and Equipment, Real Estate Sales.

Revenue from the sales of completed properties and properties where the construction period is twelve months or less is recognized by the full accrual method when (a) sale is consummated; (b) the buyer’s initial and continuing involvements are adequate to demonstrate a commitment to pay for the property; (c) the receivable is not subject to future subordination; (d) the Company has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property. A sale is not considered consummated until (a) the parties are bound by the terms of a contract or agreement, (b) all consideration has been exchanged, (c) any permanent financing for which the seller is responsible has been arranged, (d) all conditions precedent to closing have been performed. Fair value of buyer’s payments to be received in future periods pursuant to sales contract is classified under accounts receivable. Sales transactions not meeting all the conditions of the full accrual method are accounted for using the deposit method of accounting. Under the deposit method, all costs are capitalized as incurred, and payments received from the buyer are recorded as a deposit liability.

Revenue and profit from the sale of development properties where the construction period is more than twelve months is recognized by the percentage-of-completion method on the sale of individual units when the following conditions are met: (a) construction is beyond a preliminary stage; (b) the buyer is committed to the extent of being unable to require a refund except for non-delivery of the unit; (c) sufficient units have already been sold to assure that the entire property will not revert to rental property; (d) sales prices are collectible and (e) aggregate sales proceeds and costs can be reasonably estimated. If any of these criteria are not met, proceeds are accounted for as deposits until the criteria are met and/or the sale consummated.

Under the percentage of completion method, revenues from units sold and related costs are recognized over the course of the construction period, based on the completion progress of a project. In relation to any project, revenue is determined by calculating the ratio of completion and applying that ratio to the contracted sales amounts. The Company uses a cost-to-cost method to measure the ratio of completion. Qualified construction quality supervision firms are engaged by the Company, as required by relevant laws and regulations in the PRC, to determine that pieces of construction completed by contractors have met predetermined quality and safety standards, and are eligible to be counted towards costs. Cost of sales is recognized by multiplying the ratio by the total budgeted costs. Changes to total estimated contract costs or losses, if any, are recognized in the period in which they are determined. Revenue recognized to date in excess of amounts received from customers is classified under revenue in excess of billings. Amounts received from customers in excess of revenue recognized to date are classified under customer deposits. Any losses incurred or identified on real estate transactions are recognized in the period in which the losses are identified.

Except for the down payment, the remaining contract price can be settled by several installments or financed by mortgage. The Company requires customers to pay a non-refundable cash down payment equivalent to no less than 20% of the contract price upon the execution of sale or pre-sale contracts prior to recognizing revenue under either full-accrual method or percentage-of-completion method. The cash down payment collected from customers subordinates to no claims. If buyer’s purchase is financed by mortgage the Company does not recognize revenue until the application for the mortgage loan has been filed and the Company reasonably believes the mortgage will be approved. The Company provides guarantees for mortgage loans from financial institutions to customers (see “Restricted cash”). Such guarantees expire when customers have obtained a House Ownership Certificate for their purchased properties and the mortgage has been registered in favor of the financial institutions. Because guarantees of mortgage do not cover any portion of the non-refundable cash down payment received by the Company from customers, the Company does not consider guarantees when determining recognizing revenues under either full-accrual method or percentage-of-completion method.

A project’s revenue and cost estimates have an inherent nature of uncertainty throughout its multiple-year development period. Factors that potentially affect a project’s total revenue and cost estimates (including a salable unit’s allocated cost), include, but are not limited to: (1) changes in government’s land-use planning, building density, plot ratio and other quotas; which lead to changes of total gross floor area available for sale and per-unit cost estimate; (2) the Company’s voluntary modification of design to enhance attractiveness and competiveness of an on-going project; (3) fluctuation of commodity prices and government-regulated labor cost rates; (4) contractors’ request to renegotiate consideration of fixed-price agreements, for which the Company’s preference of complete the discussion early to avoid unfavorable impact on construction progress; (5) unforeseeable geological and engineering difficulties causing modifications of a project’s construction plan; (6) government agencies’ compliance inspections in the late stage of the construction, which may lead to modification of design; (7) major prospective property buyers’ request to alter specifications of the property to be delivered; and (8) contractors’ claims throughout the construction period.

The Company enters into non-cancellable, fixed-price pre-sale contracts with homebuyers. Under certain circumstances, for example, changes in floor size or floor plan of a property due to legal compliance requirements, or change of deliverable standards upon request of major customers, the Company may agree to revise the pre-sale contract price to match conditions of the properties to be delivered to customers. Furthermore, the Company is subject to a penalty payable to homebuyers in the event the property is delivered later than the date specified in the pre-sale contracts, and usually such penalty constitutes only an insignificant amount compared to the contract value. These adjustments to contract price are recorded as a reduction of revenue in the current period on a cumulative catch-up basis.

With regard to a project’s cost estimate, the Company’s in-house cost estimators work in collaboration with a committee also comprising the Company’s engineers, project managers, financial professionals, and senior management staff, to prepare at least two versions of the cost estimate. The first version is a Preliminary Cost Estimate, prepared in schematic design stage, which is before commencement of excavation and recognition of revenue. Preliminary Cost Estimate utilizes top-down approach. It projects major cost components at higher level using a project’s planned parameters (e.g., building density, by-category gross floor area) and standard per-unit cost from past experience (e.g., concrete cost, measured at US$ per square meter). Preliminary Cost Estimate is intrinsically less accurate; it heavily relies on the Company’s historical information accumulated in the development of similar types of construction in similar municipal region. The second version is Detailed Cost Estimate, prepared after receiving construction documents from the architect. Ideally Detailed Cost Estimate can be available before commencement of excavation and recognition of revenue; however, in order to suit the pre-sale progress and to maximize flexibility, construction documents are provided in several batches as the construction processes. It is likely that a project’s Detailed Cost Estimate is finalized only in late stage of the construction. Detailed Cost Estimate utilizes bottom-up approach. Based on construction documents and assisted by the Company’s computerized Building Information Modeling system, Detailed Cost Estimate is able to sum up cost at element level of a real estate property, taking into consideration of quantitative consumption and on-going rate of materials, labor, machinery and overheads. For the purpose of preparing the Company’s condensed consolidated financial statements, a project’s cost estimate is reviewed by in-house cost estimators at each year-end and adjusted for material developments in the interval. Changes in estimates of a project’s revenue and cost of sales are recognized on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a project’s percentage of completion. When a project’s total cost estimate to be incurred exceeds total estimated revenue to be earned, a provision for the entire loss on the project is recorded in the period the loss is determined. In addition to our existing monthly detailed cost estimate upon receiving construction data from the architects, we have hired additional competent professionals to ensure early identification of variances from prior estimated project revenue and cost, to reduce the likelihood of significant changes to the estimates.

Real Estate Capitalization and Cost Allocation

Real estate property completed and Real estate properties and land lots under development consist of residential and commercial units under construction and units completed. Properties under development or completed are stated at cost or estimated net realizable value, whichever is lower. Costs include costs of land use rights, direct development costs, interest on indebtedness, construction overhead and indirect project costs. The Company acquires land use rights with lease terms ranging from 40 to 70 years through government-organized auctions, private sale transactions or capital contributions from shareholders. Land use rights are divided and transferred to customers after the Company delivers properties. The Company capitalizes payments for obtaining the land use rights, and allocates to specific units within a project based on units’ gross floor area. Costs of land use rights for the purpose of property development are not amortized. Other costs are allocated to units within a project based on the ratio of the sales value of units to the estimated total sales value.

Government Grant

Government grants related to real estate projects developed by the Company are recognized as other income when the Company has complied with the conditions attached to the grant and the grant’s collection is reasonably assured.

In 2008, XingtaiZhongding was entitled to a government grant of RMB 160,000,000 (approximately $22,981,000 translated at historical exchange rate) related to Kirin County project to subsidize the modernization of the neighborhood where the real estate project is situated, and control of property price volatility. The Company believes the government’s demands associated with the grant are gradually fulfilled as the construction and pre-sale of Kirin County make progress, and accordingly recognizes grant income at the percentage of construction completed during the year of the total grant amount. All government grants related to Kirin County have been recognized through 2009 to 2012 as the construction of Kirin County goes on during the years. The local government has arranged a lump sum payment of the grant to XingtaiJiye Business Investment Co., Ltd. (“Business Investment”), a related party of the Company, prior to the grant’s conditions being met out of financial consideration because it lacked managing staff and concerned that the funds would be re-assigned or invalidated without an immediate recipient. Pursuant to the arrangement, Business Investment provides this grant money to XingtaiZhongding in proportion to the percentage of the project completed as a measure to ensure that the project satisfies the grant’s guidelines. The grant does not have refund conditions and the Company believes government will not revoke the grant or claw back cash remitted to the escrow account unless the construction and sale of Kirin County project is cancelled by the Company. As of September 30, 2015, the Company didn’t receive any request from the government demanding revocation and/or partial refund of the grant previously given, and the Company expects no development relating to the Kirin County project will cause the government to request the grant’s refund in next twelve months.

Capitalization of Interest

In accordance with ASC 360, Property, Plant and Equipment, interest incurred during construction is capitalized to properties under development. As of September 30, 2015 and December 31, 2014, $nil and $124,921 were capitalized as properties under development, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company maintains the majority of its bank accounts in the PRC. Cash includes cash on hand and demand deposits in accounts maintained with state-owned and commercial financial institutions within the PRC. China does not have a deposit insurance system; however, the credit risk on bank balances is limited because the Company conducts transactions and deposits balances with several state-owned banks with high credit ratings assigned by international credit rating agencies.

Restricted Cash

There are two important timings for mortgage business of PRC banks: (1) Execution of mortgage agreement: PRC banks grant mortgage loans to home purchasers and will credit the full amount to the Company account once the bank and the purchaser enter into mortgage agreement, which generally will be before the completion of the construction of projects. (2) Issuance of House Ownership Certificate to the purchasers. At the time of execution of mortgage agreement, there are no House Ownership Certificate therefore the purchaser has no legal right to the house and therefore they cannot mortgage the house to banks. Banks will ask the developer to provide guarantee to the loan instead. When the House Ownership Certificate is issued, banks will release the guarantee ability of the developer and mortgage the house in question. If the condominiums are not completed and the new homebuyers have no House Ownership Certificate, to secure the loan, as a common practice in China, the banks will release only 95% loan to the Company and will require that the Company open a separate account with the bank and deposit and freeze the remaining 5% of the mortgage amount to further secure the bank’s interests before the mortgage of the house with House Ownership Certificate. Because bank requires the freeze of the 5% deposit, the amount therein shall be classified on the balance sheet as restricted cash. Interest earned on the restricted cash is credited to the Company’s normal bank account. The bank will release the restricted cash after homebuyers have obtained the House Ownership Certificate and mortgage the house to bank. Total restricted cash amounted to $13,648,713 (unaudited) and $6,785,042 as of September 30, 2015 and December 31, 2014, respectively. These deposits are not covered by insurance. The Company has not experienced any losses in such accounts and management believes it is not exposed to any risks on its cash in bank accounts. Besides this, deposits for bank acceptance notes required by PRC banks are also disclosed as restricted cash.

Short-term Investments

The classification of investment securities is based on the Company’s intent, which is re-evaluated at each balance sheet date, with respect to those securities. Short-term investments refer to the securities that the Company has positive intent and ability to hold to maturity and stated at amortized cost. The Company received $117,842 (unaudited) as dividend for the nine months ended September 30, 2015.

Long-term Investments

Investments in securities of private companies the Company does not have a controlling interest and is unable to exercise significant influence are accounted for using cost method of accounting. The Company evaluates at each period end whether an event or change in circumstances has occurred in that period that may have a significant adverse effect on the fair value of the investments. If a decline in fair value is determined to be other than temporary, an impairment loss is recognized to reduce an investment’s cost to its fair value. The Company received $662,833 (unaudited) and $504,548 (unaudited) as dividend for the nine months ended September 30, 2015 and 2014, respectively.

Property and Equipment, Net

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

			Estimated Useful Lives
Fixtures, furniture and office equipment			2~10 years
Building and warehouse			20 years
Electronic equipment			2~5 years
Nonresidential real estate property			39 years

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. 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.

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

According to the Income Tax Laws of the PRC for real estate developers, income tax of the Company is calculated by project when all units of a project are sold, tax authorities will assess the tax due on the project and issue a tax due notification to the Company. The Company has to pay the tax by the due date on the notification. If the Company does not pay the tax by the due date, the tax authorities will charge the Company interest. The Company includes any interest and penalties in general and administrative expenses.

Unrecognized tax benefits represent the difference the benefits recognized for the financial statement purposes and tax positions taken or expected to be taken in a tax return.

The Company recognizes that virtually all tax positions in the PRC are not free of some degree of uncertainty due to tax law and policy changes by the PRC government.

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 prepaid at 1% to 2% of the pre-sales proceeds each year as required by the local tax authorities, and is settled generally after the construction of the real estate project is completed and majority of the units are sold. The Company provides LAT as expensed when the related revenue is recognized based on estimate of the full amount of applicable LAT for the real estate projects in accordance with the requirements set forth in the relevant PRC laws and regulations. LAT was included in Income tax expense in the condensed consolidated statements of operations and comprehensive income (loss).

Accumulated Other Comprehensive Income

Accumulated other comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. The Company’s only component of other comprehensive income (loss) during the nine months and three months ended September 30, 2015 and 2014 was the foreign currency translation adjustment.

Earnings per Share

The Company reports earnings per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts, such as warrants and convertible preferred stock, were exercised or converted into common stock. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation.

Advertising Expenses

Advertising costs are expensed as incurred, or the first time the advertising takes place, in accordance with ASC 720-35, Advertising Costs. For the nine months ended September 30, 2015 and 2014, the Company recorded an advertising expense of $1,300,918 (unaudited) and $1,789,192 (unaudited), respectively. For the three months ended September 30, 2015 and 2014, the Company recorded an advertising expense of $540,780 (unaudited) and $791,467 (unaudited), respectively.

Property Warranty

The Company provides customers with warranties which cover major defects of building structure and certain fittings and facilities of properties sold as stipulated in the relevant sales contracts. The warranty period varies from two to five years, depending on different property components the warranty covers.

The Company constantly estimates potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a property. Reserves are determined based on historical data and trends with respect to similar property types and geographical areas. The Company monitors the warranty reserve and makes adjustments to its pre-existing warranties, if any, in order to reflect changes in trends and historical data as information becomes available. The Company may seek further recourse against its contractors or any related third parties if it can be proved that the faults are caused by them. In addition, the Company withholds up to 5% of the contract total payment from contractors for periods of two to five years. These amounts are included in liabilities, and are only paid to the extent that there have been no warranty claims against the Company relating to the work performed or materials supplied by the contractors. As of September 30, 2015 and December 31, 2014, the Company retained $103,397 (unaudited) and $117,218 contract payment to contractors, and the Company didn’t experience any incidences where the withheld amounts were less than the amounts the Company had to pay for the defects of properties. The Company didn’t provide any warranty reserve as prospective expenditure amount on property warranty by the Company is insignificant. For the nine months and three months ended September 30, 2015 and 2014, the Company didn’t incur incidental costs in addition to the amount retained from contractors.

Impairment Losses

Completed real estate properties and land lots are reported in the balance sheet at the lower of their carrying amount or fair value less costs to sell. Land to be developed or under development is assessed for impairment when management believes that events or changes in circumstances indicate that its carrying amount may not be recoverable. Based on this assessment, a property that is considered impaired is written down to its fair value less costs to sell. Impairment losses are recognized through a charge to expense. No impairment of completed real estate properties or land lots was recognized for the nine months and three months ended September 30, 2015 and 2014.

Stock-Based Compensation

The Company adopted ASC 718 Stock Compensation. Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period. The fair value estimate is based on the share price and other pertinent factors. The Company estimates forfeitures at the time of grant and to revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company used a mix of historical data and future assumptions to estimate pre-vesting forfeitures and to record stock-based compensation expense only for those awards that are expected to vest.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers”. For a public entity, the amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The amendments in ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g. insurance contracts or lease contracts). This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance, and creates a Topic 606 Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

In August 2014, the FASB issued Accounting Standards Update (ASU) No.2014-15, “Presentation of Financial Statements-Going Concern”. Effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The amendments in ASU 2014-15 are intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. Under GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. Currently, GAAP lacks guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern or to provide related footnote disclosures. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes.

On April, 2015, the FASB issued Accounting Standards Update (ASU) 2015-03, entitled Simplifying the Presentation of Debt Issuance Costs. The ASU amends the guidance in the FASB Accounting Standards Codification (FASB ASC) Topic 835, entitled Interest-Imputation of Interest. The objective of the amendments in this Update is to require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The amendments in ASU 2015-03 are intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU.

The Company is currently in the process of evaluation the impact of the adoption of ASU 2014-09, ASU 2014-15 and ASU 2015-03 on its consolidated financial statements.

Correction of Prior Period Financial Statements

During the three months ended March 31, 2015, management determined that service fee incurred in connection with obtaining the loans should be deferred and amortized over the period of the related loans under straight-line method. In prior years, the Company had deferred the service fee and expensed when the loans are due. The Company has adjusted its December 31, 2014 consolidated balance sheet and its condensed consolidated statements of operations comprehensive income (loss) for the nine months and three months ended September 30, 2014.

The following tables detail the corrections and impact to condensed consolidated balance sheet at December 31, 2014:

	December 31, 2014
	As Previously					As Currently
	Reported		Adjustment			Reported
Assets

Prepayments	$	25,983,191	$	465,463		$	26,448,654
Other receivables		30,206,838		(1,657,594	)		28,549,244
Deferred tax assets		5,493,018		298,033			5,791,051

Total assets		363,187,685		(894,098	)		362,293,587

Stockholders’ equity

Retained earnings		9,857,778		(889,937	)		8,967,841
Accumulated other comprehensive income		8,114,281		(4,161	)		8,110,120

Total Stockholders' equity	$	57,197,141	$	(894,098	)	$	56,303,043

The following tables detail the corrections and impact to the condensed consolidated statements of operations comprehensive income (loss) for the nine months and three months ended September 30, 2014

	For the Nine months Ended September 30, 2014									For the Three Months Ended September 30, 2014
	As Previously Reported			Adjustment			As Currently Reported			As Previously Reported			Adjustment			As Currently Reported
Interest expense	$	(7,573,694	)		(456,096	)	$	(8,029,790	)	$	(2,581,794	)	$	(155,145	)	$	(2,736,939	)
Total other expense		(3,738,642	)		(456,096	)		(4,194,738	)		(1,892,264	)		(155,145	)		(2,047,409	)
Loss before income taxes		(1,198,153	)		(456,096	)		(1,654,249	)		(727,768	)		(155,145	)		(882,913	)
Income taxes expense (benefit)		1,593,145			(114,024	)		1,479,121			709,862			(38,786	)		671,076
Net loss		(2,791,298	)		(342,072	)		(3,133,370	)		(1,437,630	)		(116,359	)		(1,553,989	)
Net income (loss) attributable to stockholder of Kirin International Holding, Inc.		(2,720,386	)		(342,072	)		(3,062,458	)		(1,410,773	)		(116,359	)		(1,527,132	)
Foreign currency translation adjustment		(414,423	)		3,401			(411,022	)		13,692			(300	)		13,392
Total comprehensive loss		(3,205,721	)		(338,671	)		(3,544,392	)		(1,423,938	)		(116,659	)		(1,540,597	)
Comprehensive loss attributable to stockholder of Kirin International Holding, Inc.		(3,134,809	)		(338,671	)		(3,473,480	)		(1,397,081	)		(116,659	)		(1,513,740	)
Basic and diluted loss per share		(0.14	)		(0.01	)		(0.15	)		(0.07	)		(0.00	)		(0.07	)

In accordance with SEC Staff Accounting Bulletin Nos. 99 and 108 (“SAB 99” and “SAB 108”), the Company has evaluated these errors, based on an analysis of quantitative and qualitative factors, as to whether they were material to each of the prior reporting periods affected and if amendments of previously filed registration statements with the SEC are required. The Company has determined that the impact is not material to prior periods and the understatement of expenses would not have influenced an investor’s decision making process. In accordance with SAB 108, the Company will include this revised financial information when it files subsequent reports on Form 10-Q and Form 10-K or files a registration statement under the Securities Act of 1933, as amended.

Note 3 – Variable Interest Entities

In accordance with the VIE Agreements entered into between Kirin Management and each of Operating Companies and their respective shareholders. As a result of the VIE Agreements, Kirin Management has the power to direct the VIEs’ activities that most significantly impact the VIEs’ economic performance and the obligation to absorb the VIEs’ losses that could be significant to the VIEs and the right to receive benefits from the VIEs that could be significant to the VIEs. Therefore Kirin Management is deemed to have a controlling financial interest in the VIEs, is considered the primary beneficiary of and consolidates with the VIEs.

Risks in Relation to the VIE Structure

The Ministry of Commerce of PRC (“MOFCOM”) published a discussion draft of the proposed Foreign Investment Law (the “Draft”) in January 2015 aiming to, upon its enactment, replace the trio of existing laws regulating foreign investment in China. The Draft embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments.

The MOFCOM is currently soliciting comments on the Draft and substantial uncertainties exist with respect to its enactment timetable, interpretation and implementation. The Draft, if enacted as proposed, may materially impact the viability of our current corporate structure, corporate governance and business operations. The Draft expands the definition of foreign investment and introduces the principle of "actual control" in determining whether a company is considered a Foreign Investment Enterprise (“FIE”).

Under the Draft, Variable Interest Entities (“VIEs”) that are controlled via contractual arrangement would be deemed as FIEs, if they are ultimately "controlled" by foreign investors. Therefore, for any companies with a VIE structure in an industry category that falls under restricted to foreign investment or prohibited from foreign investment, the VIE structure may be deemed legitimate only if the ultimate controlling persons) is/are of PRC nationality (either PRC companies or PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the VIEs will be treated as FIEs and any operation in the industry category falls under restricted to foreign investment or prohibited from foreign investment, without market entry clearance may be considered as illegal. Moreover, for the enterprises which are not incorporated under the laws of China (foreign investors) but are "controlled" by Chinese investors, they may submit documentary evidence to apply for identifying their investment as the investment by Chinese investors when they applying for the market entry clearance to engage in any investment as set out in industries restricted to foreign investment or prohibited from foreign investment in China. The competent authorities of foreign investment will grant the review opinion on whether the said investment is identified as the investment by Chinese investors.

In conclusion, if the Draft enacted as proposed, it is possible that the Company's conduct of certain of its operations and businesses through the VIEs could be found by PRC authorities to be in violation of PRC laws and regulations prohibiting or restricting foreign ownership of companies that engage in such operations and businesses. If such a finding were made, regulatory authorities with jurisdiction over the licensing and operation of such businesses would have broad discretion in dealing with such a violation, including levying fines, confiscating the Company's income, revoking the business or operating licenses of the affected businesses, requiring the Company to restructure its ownership structure or operations, or requiring the Company to discontinue all or any portion of its operations. Any of these actions could cause significant disruption to the Company's business operations, and have a material adverse impact on the Company's cash flows, financial position and operating performance. The Company's management considers the possibility of such a finding by PRC regulatory authorities to be remote.

These contractual arrangements may not be as effective in providing the Company with control over the VIEs as direct ownership. Due to its VIE structure, the Company has to rely on contractual rights to effect control and management of the VIEs, which exposes it to the risk of potential breach of contract by the shareholders of the VIEs for a number of reasons. For example, their interests as shareholders of the VIEs and the interests of the Company may conflict and the Company may fail to resolve such conflicts; the shareholders may believe that breaching the contracts will lead to greater economic benefit for them; or the shareholders may otherwise act in bad faith. If any of the foregoing were to happen, the Company may have to rely on legal or arbitral proceedings to enforce its contractual rights, including specific performance or injunctive relief, and claiming damages. Such arbitral and legal proceedings may cost substantial financial and other resources, and result in a disruption of its business, and the Company cannot assure that the outcome will be in its favor. In addition, as all of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or litigation in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could further limit the Company’s ability to enforce these contractual arrangements. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event that the Company is unable to enforce any of these agreements, the Company would not be able to exert effective control over the affected VIEs and consequently, the results of operations, assets and liabilities of the affected VIEs and their subsidiaries would not be included in the Company's condensed consolidated financial statements. If such were the case, the Company's cash flows, financial position and operating performance would be materially adversely affected.

The Company's agreements with respect to its consolidated VIEs are approved and in place. The Company's management believes that such agreements are enforceable, and considers it a remote possibility that PRC regulatory authorities with jurisdiction over the Company's operations and contractual relationships would find the agreements to be unenforceable under existing laws.

Summary information regarding consolidated VIEs is as follows:

	September 30,		December 31,
	2015		2014
	(Unaudited)		(Revised)
ASSETS

Cash and cash equivalents	$	7,319,377	$	21,084,446
Restricted cash		13,648,713		6,785,042
Short-term Investment		471,416		487,527
Accounts receivable		5,061,087		58,202
Revenue in excess of billings		19,076,999		13,586,442
Prepayments		15,223,406		26,448,654
Other receivables		50,172,637		42,314,953
Receivable from a trust equity owner		8,848,522		11,853,261
Loan to related parties		64,592,484		48,353,101
Real estate property completed		19,064,124		1,441,194
Real estate properties and land lots under development		136,398,278		178,040,195
Investment at cost		6,914,108		7,150,402
Property and equipment, net		302,842		466,557
Deferred tax assets		3,686,204		5,791,051

Total assets	$	350,780,197	$	363,861,027

LIABILITIES

Accounts payable	$	102,280,112	$	102,265,749
Income taxes payable		2,124,135		1,904,666
Other taxes payable		1,026,765		2,263,163
Entrust investment from a related party		9,772,942		-
Other payables and accrued liabilities		19,085,763		23,325,237
Customer deposits		69,133,304		83,507,580
Financial institution loans		81,381,894		92,313,136
Deferred tax liabilities		1,277,735		266,003

Total liabilities	$	286,082,650	$	305,845,534

For the nine months and three months ended September 30, 2015 and 2014, the financial performance of VIEs is as follows:

	Nine Months Ended September 30,					Three Months Ended September 30,
	2015		2014			2015		2014
	(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)
				(Revised)					(Revised)

Revenue, net	$	100,693,548	$	82,156,034		$	42,339,003	$	34,581,348
Cost of sales	$	80,210,964	$	70,402,868		$	31,453,385	$	30,593,245
Operation expenses	$	5,240,700	$	7,805,389		$	1,709,980	$	2,494,436
Net income (loss)	$	7,197,687	$	(1,893,836	)	$	4,997,911	$	(1,221,321	)

Note 4 – Short-term Investments

On December 15, 2014 and February 15, 2015, the Company invested RMB 3,000,000 (approximately $488,000 at historical exchange rate, maturing in one year) and RMB 10,000,000 (approximately $1,637,000, historical exchange rate, matured in three months and repaid on April 30, 2015), respectively, in a financial instrument managed by Xingtai Small and Micro Enterprises Investment Association. The company received $117,842 (unaudited) and nil investment income for the nine and three months ended September 30, 2015, respectively.

Note 5 – Accounts Receivable

Accounts receivable consists of property management fee receivable and balances due from completed properties, the Company recognizes related revenue after customers have made sufficient down payment.

As of September 30, 2015 and December 31, 2014, accounts receivable due from complete properties represents billed balances of Kirin County project, No.79 Courtyard Phase I, Phase II, Phase III and Kirin Bay Phase I as the construction is completed and related condominium units are available for delivery to customers. The customers will pay the remaining balance in three to six months.

Receivables from sales of condominium units are collateralized by underlying properties’ Ownership Certificates and bear no interest.

	September 30,		December 31,
	2015		2014
	(Unaudited)

Receivable from sales of condominium units	$	5,061,087	$	55,375
Receivable from property management		-		2,827

	$	5,061,087	$	58,202

Note 6 – Notes Receivable from a related party

	September 30,		December 31,
	2015		2014
	(Unaudited)

Receivable from individual (Promissory note)	$	600,000	$	600,000

The Promissory note with original principle amount of $600,000 will be due on August 16, 2016, at the rate of 3% per annum; it is due from a shareholder of Hopkins Kirin Facilities Group, LLC.

Note 7 – Revenue in Excess of Billings

Revenue in excess of billings represents the amount revenue recognized for certain residential and commercial units in Kirin Plaza, No. 79 Courtyard and Kirin Bay in accordance with the percentage-of-completion method over the cumulative payments received from respective customers. Pursuant to sales contracts, customers are required to pay a minimum 20% of the full contract amount as a down payment, and pay the remaining balances before delivery of the properties by the Company, which is expected to be within the next 12 to 36 months, depending on construction progress of related real estate properties. As of September 30, 2015 and December 31, 2014, revenue in excess of billings is $19,076,999 (unaudited) and $13,586,442, respectively.

Note 8 – Prepayments

Prepayments consisted of the following:

	September 30,		December 31,
	2015		2014
	(Unaudited)		(Revised)

Advances to suppliers and contractors	$	1,217,291	$	1,250,734
Prepaid financing service fees		1,529,966		1,291,465
Excessive business tax and LAT liabilities		6,471,409		8,873,569
Prepayments-related parties		6,004,740		15,032,886

	$	15,223,406	$	26,448,654

Pursuant to financing service contracts entered into between the Company, Xingtai Rural Commercial Bank and Industrial and Commercial Bank of China, Xingtai Branch, the Company paid service fees for the origination of several long-term loans before they were released to the Company. Pursuant to service contracts entered into between the Company and HebeiPufa Investment Development Co., Ltd (“Pufa”), the Company paid service fees to Pufa for the origination and extension of several loans from Industrial and Commercial Bank of China, Xingtai Branch. These financing service fees are regarded as prepaid financing service fees and amortized over the respective terms of the loans.

Business tax and LAT are payable each year at 5% and 1% - 2% of customer deposits received. The Company recognizes sales-related business tax and LAT in the income statement to the extent that they are proportionate to the revenue recognized each period. Any excessive amounts of business and LAT liabilities recognized at period-end pursuant to tax laws and regulations over the amounts recognized in the income statement are capitalized in prepayments and will be expensed in subsequent periods.

The prepayments to related parties are regarding to construction contract. In certain area, the related parties have more bargain power with the construction contractors. These related parties will pay contractors on behalf of the Company according to contract terms. The construction contractors will provide construction service to the Company, and then the prepayments are recorded in costs over the course of construction period, based on the completion progress of a project. The balance of Prepayments-related parties represents the amount these related parties are yet to pay to contractors.

Note 9 – Other Receivables

The components of other receivables were as follows:

	September 30,		December 31,
	2015		2014
	(Unaudited)		(Revised)

Working capital borrowed by contractors	$	19,057,111	$	20,209,181
Loan from a related party supplier		5,184,333		5,361,511
Due from minority shareholders		1,912,400		-
Deposit		849,287		1,693,773
Staff allowance		1,399,568		1,069,379
Receivable for disposal of Beijing Property		157,139		-
Receivables of housing maintenance funds		149,393		204,651
Others		920,219		10,749

	$	29,629,450	$	28,549,244

Working capital borrowings by contractors are unsecured, bear no interest and become payable before the completion of the related construction and program. There was no allowance for doubtful accounts as at September 30, 2015 and December 31, 2014.

On April 10, 2014, the Company entered into a loan agreement with HebeiYoerma Business Service Co.,Ltd (“HebeiYoerma”), a related party ultimately controlled by Jianfeng Guo, Chairman of the Company’s Board of Directors, and the controlling stockholder of the Company, with no interest, the original amount is RMB 32,992,060 (approximately $5,184,000 (unaudited) as of September 30, 2015 and $5,362,000 as of December 31, 2014) and has a term of two years. As of September 30, 2015 and December 31, 2014, there is RMB 18,211,330 (approximately $2,862,000 (unaudited)) and RMB 18,211,330 (approximately $2,960,000) working capital borrowed by HebeiYoerma, respectively.

On March 3, 2015, Newport Property Holding, LLC (“Newport”) entered into a land sales agreement with a contract price of $3,550,000. On September 24, 2015, Newport received $1,638,000 from the buyer, the rest amount ($1,912,000) was paid to the minority shareholders of Newport by the buyer.

On September 30, 2015, Xingtai Zhongding signed an agreement with Hebei Yoerma to sell its 100% equity interests in Beijing Property and its subsidiary Hebei Property, the contract price is RMB 1,000,000 (approximately $157,000). See Note 25(4).

Note 10 – Real Estate Properties and Land Lots under Development

The components of real estate properties and land lots under development were as follows:

	September 30,		December 31,
	2015		2014
Properties under development	(Unaudited)
Kirin Plaza
Costs of land use rights	$	1,205,188	$	1,153,179
Other development costs		451,306		483,486
No. 79 Courtyard
Costs of land use rights		38,982,821		45,263,421
Other development costs		13,127,776		22,400,751
Kirin Bay
Costs of land use rights		9,033,070		24,579,507
Other development costs		10,586,158		22,547,288
Archway HHC Apartment
Costs of land use rights		8,737,954		8,730,454
Other development costs		2,720,960		674,505

Land lots under development		63,011,959		61,612,563

	$	147,857,192	$	187,445,154

The Company acquires land use rights with lease terms ranging from 40 to 70 years through government-organized auctions, private sale transactions or capital contributions from shareholders, all related cost are recorded in Costs of land use rights. Other development costs include direct development costs, interest on indebtedness, construction overhead and indirect project costs.

Land use rights are divided and transferred to customers after the Company delivers properties. The Company capitalizes payments for obtaining the land use rights, and allocates to specific units within a project based on units’ gross floor area. Costs of land use rights for the purpose of property development are not amortized. Other development costs are allocated to units within a project based on the ratio of the sales value of units to the estimated total sales value.

As of September 30, 2015, the Company has obtained certificates representing titles of the land use rights used for the development of Kirin County, No. 79 Courtyard, Kirin Plaza and Kirin Bay projects. All our land use rights are assigned to real estate projects.

Part of Company’s real estate held for development and land lots under development were pledged as collateral for financial institution loans (Note 19).

The Residential buildings of Kirin County are fully completed in December, 2012, the Residential building of No.79 Courtyard Phase I are fully completed in March, 2015, the Residential building of Kirin Bay Phase I are fully completed in June, 2015 and the Residential building of No.79 Courtyard Phase II and Phase III are fully completed in September, 2015. As of September 30, 2015 and December 31, 2014, the account balance of the real estate property completed is $19,064,124 (unaudited) and $1,441,194 respectively.

Archway HHC Apartment is a proposed apartment located in Howard Hughes Center Site 4, Los Angeles, California, which will have 109 units apartment and 187 parking spaces. As of September 30, 2015, the Company paid land cost and incurred some other development cost.

Kong Village Relocation Program

Pursuant to incentive policies issued by Xingtai local government encouraging modernization of villages situated in urban vicinity, the Company participated in Kong Village Relocation Program in which the Company constructs a real property and transfers to local government at no costs, and reimburses costs incurred by local government compensating villagers and zoning and developing vacated land lots. In exchange for the financing, the Company will be invited to bid for vacated land parcels for residential and commercial use at public auction at market price, and majority of the proceeds received by local government will be refunded to the Company. The Company capitalizes all expenditures attributable to Kong Village Relocation Program under land lots under development. The Company secures land use rights through the auditions and use acquired land use rights for the development of Kirin Bay and other projects. In July 2011 the Company obtained the certificate of land use rights for a piece of land covered by the program through the aforementioned public auction, and used it for the development of Kirin Bay project. Other land lots covered by the program are expected to be auctioned and obtained by the Company in the near future. As at September 30, 2015 and December 31, 2014, residual expenditures under Kong Village Relocation Program, representing accumulated costs of the land use rights to be obtained by the Company in the future, were capitalized in land lots under development in amount of $63,011,959 and $61,612,563, respectively.

On March 31, 2015, Xingtai Qiaoxi District Government filed an application to Xingtai Municipal Government for a refund of RMB 125,512,500 (approximately $19,723,000 Relocation Program, the refund is expected to be approved and received in 201 6) on behalf of the Company under the Kong Village.

Note 11 – Long-term Investments

Long term Investments include the Company’s equity interest in HebeiXingtai Rural Commercial Bank Co., Ltd. (“Xingtai RC Bank”), a private financial institution. In June 2011, the Company agreed to become a stockholder of Xingtai RC Bank and paid RMB 20,000,000, or approximately $3,142,000 (translated at historical exchange rate) to subscribe to 16,000,000 shares, or 6.96%, of the common stock of the financial institution. The establishment of Xingtai RC Bank is based on restructured business of XingtaiChengjiao Rural Credit Cooperative Union Association. On December 12, 2012, Xingtai RC Bank obtained required approvals from China banking regulatory agencies and completed all registration procedures.

The Xingtai RC Bank increased paid in capital from RMB 240,000,000, or approximately $38,207,000 (translated at historical exchange rate) to RMB 500,000,000, or approximately $79,598,000 (translated at historical exchange rate) on April 26, 2013. The Company paid approximately RMB 24,000,000, or approximately $3,841,000 to keep its stockholder position.

As of September 30, 2015 and December 31, 2014, the balance of Long term investment for Xingtai RC Bank was $6,914,108 (unaudited) and $7,150,402, consisting 31,000,000 shares, or 5.03%, of the common stock of Xingtai RC Bank.

The Company used the cost method of accounting to record its investment in Xingtai RC Bank since the Company does not have the ability to exercise significant influence over the operating and financing activities of Xingtai RC Bank.

As of September 30, 2015 and December 31, 2014, the Company has deposit balances (including restricted cash) of approximately $4,534,000 (unaudited) and approximately $5,818,000 in Xingtai RC Bank, respectively.

In November 2013, the Company invested $700,000 to Hopkins Kirin Facilities Group, LLC (“Hopkins”) to obtain 22.5% share.

The Company used the equity method of accounting to record its investment in Hopkins. There is limited operation of Hopkins Kirin Facilities till now. The Company plans to recoup all of the investment for Hopkins Kirin Facilities Group LLC in late 2015 or early 2016.

As of September 30, 2015 and December 31, 2014, the ending balance in long-term investment was $7,614,108 (unaudited) and $7,850,402. The Company determined that there was no impairment on its long-term investment at September 30, 2015.

On September 10, 2015, the Company announced the execution of a Memorandum of Understanding ("MOU") with privately held corporations Jasper Lakes Holdings Limited (“Jasper Lake”) and Crestlake Holdings Limited (“Crestlake”), to acquire a 100% interest in Wuhan Yangtze River New Port Logistics Co., the owner of Wuhan Yangtze River Newport Logistics Center. Pursuant to the MOU, the Company plans to acquire 51% and 49% equity in the Wuhan Yangtze River Newport Logistics Center from Jasper Lakes Holdings Limited and Crestlake Holdings Limited, respectively, in this acquisition from Jasper Lake and Crestlake.

Note 12 – Notes Payable to a related party

	September 30,		December 31,
	2015		2014
		(Unaudited)
Notes Payables (Promissory note)	$	2,800,000	$	-

The Promissory note payable to a related party with original principle amount of $2,800,000 will be due at January 22, 2017, at the rate of 10% per annum.

Note 13 – Accounts Payable

	September 30,		December 31,
	2015		2014
	(Unaudited)
Payables in relation to acquisitions of land use rights	$	3,678,651	$	3,804,371
Construction contractors		98,601,461		98,461,378

	$	102,280,112	$	102,265,749

In March 2011, the Company entered into a supplementary agreement with Huada Mining Co., Ltd. in relation to the acquisition of land use rights for the development of No. 79 Courtyard project. The Company agreed to increase the land use rights’ purchase price in the original contract, to compensate Huada Mining Co., Ltd. for its inability to realize the appreciation of the transferred land use rights during the substantially prolonged contract closing period of three years. The Company has unconditionally received the title of the land use rights in 2010 before the commencement of the supplementary agreement negotiation. In accordance with the supplementary agreement, the Company and Huada Mining Co., Ltd. will not pursue any adjustments of the land use rights’ transfer price. As of September 30, 2015, payable to Huada Mining Co., Ltd. was $1,321,569. The Company and Huada Mining Co., Ltd. have agreed that remaining balance will be repaid in an unspecific near future period, taking into accounts of the Company’s liquidity. Unpaid balance does not bear interest.

In May 2011, the Company entered into an agreement with Xingtai Kong Village Real Properties Co., Ltd., a company controlled by Kong Village Committee. The Company agreed to pay $22,649,880 (translated as historical rate) to compensate additional costs incurred by Kong Village Committee for the Kong Village Relocation Program. At September 30, 2015, unpaid balance plus accrued interest was $2,357,082. The Company capitalized the additional consideration in the costs land lots under development.

Note 14 – Entrust Investment from a related party, Prepayment for Entrust Investment and Other receivable for Entrust Investment

In July, 2015, the Company entered into an Entrust Investment Agreement with Shuzhen Zhang, mother-in-law of Jianfeng Guo, Chairman of the Company’s Board of Directors, and the controlling stockholder of the Company, the amount is RMB 62,193,050 ($10,000,000 at historical exchange rate). The scope of entrust investment is real estate development in the United States of American . All investment income will be paid to Shuzhen Zhang on the agreement expiry date, which is December 31, 2018. If the entrusted investment losses, Shuzhen Zhang shall bear all losses. And the developer can charge typical management fee and profit sharing.

On June 1, 2015, the Company entered into a purchase agreement with LCS Consulting Group LLC (“seller”), a California limited liability company for purchase 100% interest of Pasadena DM Loft LLC, which owns a real property in Pasadena, California, for a purchase price of $4,000,000. The payment was made on July 10, 2015. There was an Amendment Agreement entered into on August 15, 2015, which provided that LCS Consulting Group LLC shall assist the Company to conduct transfer of construction loan with Evertrust Bank (“lender”), and the Company will have until December 31, 2015 to transfer the construction loan from seller to the Company’s designated entity, and if transfer of construction loan is denied by lender, the Company shall have right to terminate the transaction within 3 days and fund will be returned within 3 days to the Company. The Company considers the Amendment Agreement having provided a new closing condition, and without the fulfill of the condition or Company’s waver of the condition, the purchase of Pasadena DM Loft LLC shall not be regarded as closed, even as a temporary method that the Company still owns the membership of Pasadena DM Loft LLC. Therefore, the Company booked the above $4,000,000 as Prepayment for Entrust Investment. The Amendment Agreement was entered into because per the previous understanding and mutual oral agreement, that DM Loft LLC shall be able to automatically inherit the construction loan approved by lender, but it turned out that lender needs to go through a new approval procedure. Knowing that it is key factor for developers to secure bank financing, LCS Consulting Group LLC agreed to the Company the above terms, and agree to complete the closing only after the construction loan is approved.

$6,000,000 of the entrust investment is paid to LV Enterprise LLC, a LLC wholly owned by the Jianfeng Guo’s wife, Liping Bi. The purpose of this arrangement is to separate the fund of the Company and entrusted fund to someone that Shuzhen Zhang know of. There was an Escrow Agreement signed between Spectrum International Enterprise LLC and LV Enterprise LLC, providing that LV Enterprise LLC will act as the temporary escrow account manager for the $6,000,000, until it has received notice from Spectrum International Enterprise LLC that there is new investment to be made.

Note 15 – Other Payables and Accrued Liabilities

The components of other payables and accrued liabilities were as follows:

	September 30,		December 31,
	2015		2014
	(Unaudited)
Unrecognized tax benefit (Note 17(2))	$	6,285,553	$	6,500,366
Deposits from customers on behalf of utility operators		11,893,295		8,195,227
Car park deposits from customers		-		1,732,347
Due to a related party supplier		-		6,500,366
Deposit from a contractor		103,397		117,218
Accrued loan interest		169,710		175,510
Estimated penalty		605,117		-
Others		954,995		234,723

	$	20,012,067	$	23,455,757

On December 30, 2014, the Company entered into RMB 40,000,000 (approximately $6,550,000) loan agreement with HebeiYoerma, a related party ultimately controlled by Jianfeng Guo, Chairman of the Company’s Board of Directors, and the controlling stockholder of the Company, with no interest and the loan was due on March 30, 2015, the Company repaid the loan on January 28, 2015.

The Company enters into non-cancellable, fixed-price pre-sale contracts with homebuyers. The Company is subject to a penalty payable to homebuyers in the event the property is delivered later than the date specified in the pre-sale contracts, and usually such penalty constitutes only an insignificant amount compared to the contract value. These adjustments to contract price are recorded as a reduction of revenue in the current period on a cumulative catch-up basis. As of September 30, 2015, $605,117 estimated penalty is reasonably estimated for Kirin Plaza, Kirin Bay and No. 79 Courtyard and probably will occur in future. The Company will record the liability when such penalty can be reasonably estimated.

Note 16 – Customer Deposits

Customer deposits consist of amounts received from customers relating to the sale of residential and commercial units. In the PRC, customers generally obtain financing for the purchase of their residential unit prior to the completion of the project. The lending institutions will provide the funds to the Company upon the completion of the financing rather than the completion of the project. The Company receives these funds and recognizes them as a liability until the revenue can be recognized. As of September 30, 2015 and December 31, 2014, the Company received $69,133,304 (unaudited) and $83,522,070 deposits from customers, respectively.

Note 17 – Income Taxes

(1) Corporate income tax

The Company is incorporated in the State of Nevada in the United States of America (“U.S.”) and is subject to a progressive U.S. federal corporate income tax of 15% to 35%. The State of Nevada does not impose any corporate state income tax. Kirin China is incorporated in the British Virgin Islands. Under the current laws of the British Virgin Islands, Kirin China is not subject to tax on income or capital gains. In addition, no British Virgin Islands withholding tax is imposed upon payments of dividends by Kirin China. Kirin Development is incorporated in Hong Kong. Kirin Development did not earn any income that was derived in Hong Kong for the period from its date of incorporation to March 31, 2015 and therefore was not subject to Hong Kong Profits Tax. The payments of dividends by Hong Kong companies are not subject to any Hong Kong withholding tax.

The Company’s subsidiaries Spectrum International Enterprise, LLC, Brookhollow Lake, LLC, Greenfield International Corporation (closed in January 2015), Kirin Hopkins Real Estate Group LLC, Newport Property Holding, LLC, Parasol Co., Archway Development Group LLC, HHC-6055 Centre Drive, LLC and Kirin Alamo, LLC were incorporated in State of California, U.S. and are subject to California taxes.

The Company’s subsidiaries, VIEs and subsidiaries of VIEs in China are subject to PRC Enterprise Income Tax (EIT) on taxable income. According to PRC tax laws and regulations, China subsidiary and VIEs are subject to EIT with the tax rate 25% since January 1, 2008, except that deemed profit method is applied to XingtaiZhongding Construction Project Management Co., Ltd., which local tax authorities levy income tax based on deemed profit of 10% of revenue. A withholding income tax rate of 5% is applied if Kirin Management, the wholly-owned foreign enterprise, distributes dividends to its immediate holding company, Kirin Development. The Company has not recorded tax provision for U.S. tax purposes as they have no assessable profits arising in or derived from the United States and intends to permanently reinvest accumulated earnings in the PRC operations in the foreseeable future.

Income tax expenses (benefit) for the nine months and three months ended September 30, 2015 and 2014 are summarized as follows:

	Nine Months Ended September 30,					Three Months Ended September 30,
	2015		2014			2015		2014
	(Unaudited)		(Unaudited) (Revised)			(Unaudited)		(Unaudited) (Revised)
Current
EIT expense	$	1,383,966	$	1,298,342		$	367,527	$	638,348
LAT expense		2,699,565		1,118,819			2,178,748		356,765
Deferred tax expense/( benefit) - EIT		3,024,437		(938,040	)		1,259,948		(324,037	)

	$	7,107,968	$	1,479,121		$	3,806,223	$	671,076

A reconciliation between taxes computed at the PRC statutory rate of 25% and the Company’s effective tax rate for the nine months ended September 30, 2015 and 2014 is as follows:

	Nine Months Ended September 30,
	2015			2014
	(Unaudited)			(Unaudited)
				(Revised)
EIT at the PRC statutory rate of 25%	$	3,627,198		$	(413,562	)
LAT expense		2,699,565			1,118,819
EIT benefit of LAT		(674,891	)		(279,705	)
Change in Deferred tax valuation allowance		647,879			272,839
Permanent items		808,217			780,730

	$	7,107,968		$	1,479,121

(2) Liability for unrecognized tax benefit

A reconciliation of the beginning and ending amount of liability associated with unrecognized tax benefit for the nine months ended September 30, 2015 and 2014 is as follows:

	Nine Months Ended September 30,
	2015			2014
	(Unaudited)			(Unaudited)
Unrecognized tax benefit, as the January 1	$	6,500,366		$	6,542,362
Movement in current period due to foreign exchange rate fluctuation		(214,813	)		(44,636	)

Unrecognized tax benefit, as of September 30	$	6,285,553		$	6,497,726

The liability for unrecognized tax benefit is related to the government grant earned by the Company for the development of Kirin County project. Because the grant is given by local government which received proceeds of the related land use rights through public auction, it is prevailing practice that the entities receive such grants do not include earned grant in taxable income. The Company believes that the possibility exists for local or higher tax authorities re-evaluate this tax position and reverse current practice. The unrecognized tax benefit, if ultimately recognized, will impact the effective tax rate. The Company did not accrue potential penalties and interest related to the unrecognized tax benefit on the basis that tax authorities would unlikely levy penalties and interest. The Company does not expect changes in unrecognized tax benefit as of September 30, 2015 to be material in the next twelve months.

In accordance with PRC tax administration law and regulations, tax authorities generally have up to five years to claw back underpaid tax plus penalties and interests. In the case of tax evasion, which is not clearly defined in the law, there is no limitation on the tax years open for investigation. Accordingly, the Company’s PRC subsidiary and VIEs tax years from 2010 to 2014 remains subject to examination by tax authorities.

(3) Deferred tax assets /liabilities

The tax effects of temporary differences that give rise to the following deferred tax assets and liabilities as of September 30, 2015 and December 31, 2014 are presented below.

	September 30,			December 31,
	2015			2014
	(Unaudited)			(Revised)
Deferred tax assets/liabilities
Operating loss carry forward	$	4,626,254		$	4,892,926
Excess of interest expense		4,981,999			3,929,488
Revenue recognized based on percentage-of-completion		(283,661	)		2,021,035
Interest income from related parties		(2,815,412	)		(1,505,458	)
Accrued expenses		421,438			298,033
		6,930,618			9,636,024

Valuation allowance		(4,522,149	)		(4,110,976	)

Net deferred tax assets/liabilities	$	2,408,469		$	5,525,048

Deferred taxes and liabilities are evaluated on individual subsidiary, VIE and subsidiary of VIE basis. In assessing the ability to realize the deferred tax assets, the Company considers availability of future taxable income during the periods in which those temporary differences become deductible. The Company records a valuation allowance to reduce deferred tax assets to a net amount that management believes is more-likely-than-not of being realizable based on the weight of all available evidence.

Deferred taxes and liabilities associated with application of revenue recognized pursuant to percentage-of-completion will reverse when the construction progress of related projects proceeds to completion, which is expected to be December 2017 for No. 79 Courtyard and December 2016 for Kirin Bay projects, when the difference between accumulated revenue and cost of sales recognized based on percentage-of-completion method and enterprise income tax accrued pursuant to tax laws, converges. Enterprise income tax comprises multiple interim prepayments determined predominately by periodic customer deposits collected and deemed profit ratio when a real estate project is under construction, followed by a closing to adjust to actual profit realized, after the construction is complete. Deferred taxes and liabilities associated with application of revenue recognized pursuant to percentage-of-completion will also increase or decrease when the Company reevaluates and makes upward or downward adjustments to a project’s total revenue or cost estimate. The Company believes deferred tax assets related to revenue recognized based on percentage-of-completion and excess of interest expense will be fully realizable.

Entities established in the PRC had net operating losses carry forward of $10,540,125 as of September 30, 2015 which will expire on various dates between December 31, 2015 and December 31, 2019. Entities established out of the PRC had net operation losses carry forward of $5,445,467 as of September 30, 2015.

Note 18 – Other Taxes Payable

Other taxes payable consisted of the following:

	September 30,		December 31,
	2015		2014
	(Unaudited)

Business tax and related urban construction tax and education surcharge	$	811,471	$	2,060,115
Land Appreciation Tax		215,294		203,048

	$	1,026,765	$	2,263,163

Note 19 – Loans Payable

Loans payable consisted of the following:

	September 30,		December 31,
	2015		2014
	(Unaudited)

Loans from Industrial and Commercial Bank of China, XingtaiYejin Branch (“ICBC 2013 Loans” )
Original loan due January 30, 2015, RMB 50,000,000($7,856,941) maturity extended to March 30, 2016, RMB 18,000,000($2,828,500) maturity extended to June 30, 2016) , at 9.84% per annum		10,685,441		11,050,621
Original loan due May 30, 2015, RMB 2,000,000 ($314,277) maturity extended to June 30, 2016, RMB 46,000,000 ($7,228,386) maturity extended to September 30, 2016, at 9.84% per annum		7,542,663		7,800,439
Original loan due September 30, 2015, RMB 4,000,000 ($628,555) maturity extended to September 30, 2016, RMB 30,000,000 ($4,714,165) maturity extended to December 30, 2016, RMB 14,000,000 ($2,199,943) maturity extended to March 30, 2017, at 9.84% per annum		7,542,663		7,800,439
Original loan due January 30, 2016, RMB 26,000,000 ($4,085,609) maturity extended to March 30, 2017, RMB 22,000,000 ($3,457,054) maturity extended to June 30, 2017, at 9.84% per annum		7,542,663		7,800,439
Original loan due May 30, 2016, RMB 28,000,000 ($4,399,887) maturity extended to June 30, 2017, RMB 20,000,000 ($3,142,776) maturity extended to July 30, 2017, at 9.84% per annum		7,542,663		7,800,439
		40,856,093		42,252,377
Loans from Industrial and Commercial Bank of China, XingtaiYejin Branch (“ICBC 2012 Loans”)
Due September 18, 2015, at 9.225% per annum		-		6,500,366
Due May 19, 2015, at 9.225% per annum		-		4,875,274
Due January 19, 2015, at 9.225% per annum		-		4,875,274
				16,250,914
Loans from HebeiXingtai Rural Commercial Bank
Due April 24, 2015, at 12.56% per annum (“Credit Union 2014 Short-term loan”)		-		3,250,183
Due May 8, 2015, at 12.036% per annum (“Syndicated Loans 2014”)		-		8,125,457
Due July 24, 2015, at 11.46% per annum (“Zhongding Kirin 2014 Loan”)		-		7,514,241
Due June 26, 2015, at 11.46% per annum (“Short-term 2014 Loan”)		-		3,250,183
Due October 16, 2017, at 7.38% per annum (“Garden 2014 Loan”)		4,714,164		4,875,274
Due November 12, 2015, at 15% per annum (“Entrust Loan 2014”) (note (a))		1,855,809		1,919,233
Due July 3, 2015, at 11.79% per annum (“Zhongding Kirin Loan 2014”)		-		4,875,274
Due February 6, 2016, at 15% per annum (“Entrust Loan 2015”)		2,003,520		-
Due February 8, 2017, at 7% per annum (“Syndicated Loans 2015”)		7,856,941		-
Due April 21, 2016, at 15.46% per annum (“Credit Union 2015 Short-term loan”)		3,142,776		-
Due May 14, 2016, at 13.01% per annum (“Garden 2015 Loan”)		2,828,499		-
Due May 7, 2016, at 13.11% per annum (“HebeiZhongding Loans 2015”)		7,071,247		-
Due June 10, 2016, at 13.99% per annum (“Zhongding Kirin Loan 2015-1”)		6,810,097		-
Due June 23, 2016, at 13.01% per annum (“Zhongding Kirin Loan 2015-2”)		4,242,748		-
		40,525,801		33,809,845

	$	81,381,894	$	92,313,136

Note (a): This loan was repaid in full when it became mature subsequent to balance sheet date.

ICBC 2012 Loans and ICBC 2013 Loans are floating rate loans whose rates are set at 10% above 1-to-3 year base borrowing rate stipulated by the People’s Bank of China at the date of each drawdown, and are subject to revision every 12 months. The Company also paid financing service fees for ICBC 2012 Loans, ICBC 2013 Loans Syndicated Loans 2014, Short-term 2014 Loan, Zhongding Kirin Loan 2014, Garden 2015 Loan, HebeiZhongding Loans 2015 Zhongding Kirin Loan 2015-1 and Zhongding Kirin Loan 2015-2. The financing service fees were paid prior to financial institution releasing loans to the Company as prepaid interest, and have been included in the determination of respective loans’ effective interest rates. Credit Union 2015 Short-term Loan was guaranteed by HebeiYoerma and Zhongding Kirin Loan 2014 was guaranteed by an unrelated party company as arranged by the financial institution. The Company did not pay for the guarantees. ICBC 2013 Loans were extended and the Company increased the mortgaged property with carry value of approximately $7,132,000 (unaudited).

As of September 30, 2015 and December 31, 2014, ICBC 2012 Loans, ICBC 2013 Loans, HebeiZhongding Loans 2015 and Zhongding Kirin Loan 2015 were secured by the Company’s real estate held for development and land use right with carrying value of approximately $87,082,775 (unaudited) and $132,360,000, respectively.

As of September 30, 2015 and December 31, 2014, Garden 2014 Loan and Syndicated Loans 2015 were secured by land use right owned by Zhenjiang Huaxia Kirin Real Estate Co., Ltd with carry value of approximately $30,642,000 (unaudited) and $12,280,000, respectively. As of September 30, 2015, Garden 2015 Loan was secured by HebeiYoerma’s Land use right and property right with carrying value of approximately $6,076,000.

On November 14, 2014, the Company entered into a series of entrust loan agreements with Xingtai Rural Commercial bank and individuals with amount RMB 11,810,000 (approximately $1,856,000, “Entrust Loan 2014”), and borne an annual effective interest rate of 15%, including loan of RMB 1,100,000 due to managements of the Company, with the remaining balance due to third party individuals.

On February 10, 2015, the Company entered into a series of entrust loan agreements with Xingtai Rural Commercial bank and individuals with amount RMB 12,750,000 (approximately $2,004,000, “Entrust Loan 2015”), and borne an annual effective interest rate of 15%, including loan of RMB 1,400,000 due to managements of the Company, with the remaining balance due to third party individuals.

The aggregate maturities of loans payable for each of years subsequent to September 30, 2015 are as follows:

Twelve months Ending September 30	Amount

2016	$	46,811,354
2017		29,856,376
2018		4,714,164

Loans payable	$	81,381,894

Note 20 – Restricted Stock Compensation

In accordance with the Employment Agreements approved by the Board of the Directors, the Company granted certain employees restricted common stock (“Restricted Stock Awards”). Restricted Stock Awards are issued to the employees in five even installments at the beginning or in the interim of each year of five-year employment period. Shares issued under Restricted Stock Awards in each year of the employment period cannot be disposed of or pledged until they are fully vested, which is the last day of the full service year and the employment is not terminated. Unvested shares maybe reacquired by the Company for no consideration following the employee’s termination of service.

The fair value of the Restricted Stock Awards is based on the market value of the Company’s common stock on the date of grant. Pre-vesting forfeiture is expected to be nil. The Company records compensation costs for the Restricted Stock Awards on a straight-line basis over the employment period for the entire award.

There are 146,120 unvested shares outstanding at September 30, 2015 and December 31, 2014, as all related employees have terminated service with the Company, all unvested shares will not be vested to related employees. The Company did not recognize of share-based compensation expense related to the Restricted Stock Awards for the nine months and three months ended September 30, 2015 and 2014, respectively.

Note 21 – Revenue

The Company’s revenue is recognized under percentage-of-completion methods for the nine months and three months ended September 30, 2015 and 2014 from pre-sale of real estate projects. Revenue recognized for each real estate project, including adjustments made pursuant to change of estimates for the nine months and three months ended September 30, 2015 and 2014 was as follows:

	Nine Months Ended September 30,				Three Months Ended September 30,
	2015		2014		2015		2014
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Kirin County	$	5,406,033	$	577,955	$	5,404,196	$	(142,758	)
No.79 Courtyard		25,560,207		22,034,298		5,509,694		9,330,227
Kirin Bay		69,187,007		59,278,370		31,196,874		25,286,128
Property Service		540,301		372,856		228,239		148,051

	$	100,693,548	$	82,263,479	$	42,339,003	$	34,621,648

Note 22 – Other non-operating income (loss)

Other non-operating income (loss) is mainly the gain from the disposal of parcels of land in the United States, the Company recognized the gain from land’ sales of $2,289,910 (unaudited) and nil in the nine months ended September 30, 2015 and 2014, $438,638(unaudited) and nil in the three months ended September 30, 2015 and 2014.

Note 23 – Income (loss) per Share

Basic net income (loss) per share is computed using the weighted average number of common shares outstanding during the period. Diluted net earnings per share are computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period.

Note 24 – Non-controlling interest

Non-controlling interests represent the non-controlling interest stockholders’ proportionate share of the equity of Brookhollow Lake, LLC, Greenfield International Corporation, Newport Property Holding, LLC and Kirin Alamo, LLC. The non-controlling interests in 2015 and 2014 are summarized as below:

	September 30,			December 31,
	2015			2014
	(Unaudited)
Brookhollow Lake, LLC	10		%	10		%
Greenfield International Corporation		closed			30	%
Newport Property Holding, LLC		50	%		50	%
Kirin Alamo, LLC		40	%		-

The non-controlling interests in Brookhollow Lake, LLC, Greenfield International Corporation, Newport Property Holding, LLC and Kirin Alamo, LLC that are not owned by the Company are shown as “non-controlling interests” in the condensed consolidated balance sheets as of September 30, 2015 and December 31, 2014 and “net income (loss) attributable to non-controlling interests” in the condensed consolidated statements of operations and comprehensive income (loss) for the nine months and three months ended September 30, 2015 and 2014.

Note 25 – Related Party Transactions and Balances

(1) Loan to related parties consisted of the following:

	September 30,		December 31,
	2015		2014
	(Unaudited)
HuaxiaHuifeng Ventures Capital Management (Beijing) Co., Ltd (“HuaxiaHuifeng”, note(a))
Due October 14, 2015, at 18% per annum, maturity extended to December 31, 2016	$	15,713,882	$	27,626,554
Due October 14, 2015, no interest, maturity extended to December 31, 2016		2,042,805		4,532,380
		17,756,687		32,158,934

Zhuolu Huada Real Estate Development Co., Ltd
Originally loan due August 5, 2015, maturity extended to August 5, 2016, at 20% per annum		4,674,880		4,834,647

Zhenjiang Huaxia Kirin Real Estate Development Co., Ltd
Due October 16, 2017, at 7.92% per annum		4,714,164		4,875,274
Due February 8, 2017, at 8.90% per annum		7,856,941		-
Due December 31, 2015, at 15% per annum		7,455,860		-
		20,026,965		4,875,274

Langfang Hualin Real Estate Development Co., Ltd
Due February 9, 2016, at 15% per annum		13,357		-
Due March 18, 2016, at 15% per annum		23,571		-
Due May 13, 2016, at 15% per annum		40,856		-
Due July 9, 2016, at 15% per annum		7,857		-
		85,641		-

Huaxia Kirin (Beijing) Investment Co., Ltd
Due December 31, 2016, at 18% per annum		5,499,859		-

Huaxia Brother (Beijing) Investment Management Co., Ltd
Due December 31, 2016, at 18% per annum		3,215,060		-

Beijing Huaxia Kirin Investment Development Co., Ltd
Due December 31, 2016, at 18% per annum		2,335,083		-

Interest income receivables		10,998,309		6,484,246

	$	64,592,484	$	48,353,101

Note (a): On February 11, 2015, the Company received RMB 84,890,000 (approximately $13,660,000, at historical exchange rate) from HuaxiaHuifeng.

The Company notes that the loans made to a related party all are in violation to the Sarbanes-Oxley Act of 2002, including Section 402’s prohibition against personal loans to directors and executive officers, either directly or indirectly. The loans may subject us and our officers and directors to possible criminal, civil or administrative sanction, penalties, or investigations, in addition to potential private securities litigation. Management is aware of the violation, and has committed to remediating it by collecting the outstanding balance according to loan contract.

(2) Government grant escrowed by Business Investment (Receivable from a Trust Equity Owner)

In 2008, a VIE of the Company, XingtaiZhongding, was entitled to a government grant associated with its development of Kirin County project of RMB 160,000,000 (approximately $22,981,000, translated at historical exchange rate). Cash representing the grant has been remitted to Business Investment, a trust equity owner of XingtaiZhongding in June 2008. Business Investment originally acquired the land use rights of Kirin County project, and contributed the land use rights to XingtaiZhongding as paid-in capital to develop the project. Based on the arrangement between Business Investment and XingtaiZhongding, which has been sanctioned by local government, the benefit of the government grant is to be transferred from Business Investment to XingtaiZhongding. Specifically, Business Investment acts as an escrow agent but also is nominally responsible for XingtaiZhongding’s progress. Earned portions of the government grant become available to XingtaiZhongding based on percentage of completion.

For the years ended December 31, 2012, 2011, 2010 and 2009, XingtaiZhongding was entitled to receive RMB2,800,000, RMB43,000,000, RMB63,000,000, and RMB51,200,000, respectively ($443,049, $6,642,455, $9,293,749, and $7,484,417, respectively, translated at respective years’ historical rates) earned government grant from Business Investment, representing total amount of the government grant. The Company has the right to determine how to utilize the earned government grant. As at September 30, 2015 and December 31, 2014, accumulated earned government grant of RMB160,000,000 and RMB160,000,000 ($25,142,211 and $26,001,463) was used to repay working capital provided by Jianfeng Guo for the support of other real estate projects’ development. As of September 30, 2015, the Company had a remaining $2,410,897 earned government grant available for future drawdown after repaid working capital provided by Jianfeng Guo, which is included in “Receivable from a trust equity owner” in condensed consolidated balance sheet.

(3) Working capital provided by Jianfeng Guo

Jianfeng Guo, the controlling stockholder of the Company, through various affiliate companies and individuals, provides working capital to the VIEs (hereafter, including subsidiaries of VIEs) of the Company. In addition to repaying borrowings directly, the Company’s VIEs may also provide working capital to affiliate companies and individuals as designated by Jianfeng Guo. Balances received or provided by the Company’s VIEs are unsecured, interest-free and did not have specific repayment dates.

At each balance sheet date, affiliate companies and individuals who have working capital transactions with the Company’s VIEs assigned their balances to Jianfeng Guo pursuant to the pre-existing arrangements, as recited by multi-party agreements entered into between Jianfeng Guo, related affiliate companies and individuals, and the Company’s VIEs. XingtaiZhongding also chooses to use its accumulated government grant receivable from Business Investment, to repay working capital provided by Jianfeng Guo. Accordingly, the Company is entitled to present netted balance with Jianfeng Guo on its condensed consolidated balance sheets.

Gross amount of working capital provided by and to affiliate companies and individuals designated by Jianfeng Guo as of September 30, 2015 and December 31, 2014 were as follows:

	September 30,			December 31,
	2015			2014
	(unaudited)
Gross of working capital received from affiliate companies and individuals designated by Jianfeng Guo	$	(62,419,255	)	$	(42,278,247	)
Gross of working capital provided to affiliate companies and individuals designated by Jianfeng Guo		39,687,941			21,692,272
Gross earned government grant held by a related party		25,142,211			26,001,463

Receivable from a trust equity owner	$	2,410,897		$	5,415,488

(4) Disposal of subsidiaries to a related party

On September 30, 2015, XingtaiZhongding signed an agreement with Hebei Yoerma to sell its 100% equity interest in Beijing Property and its subsidiary Hebei Property, the contract price is RMB 1,000,000 (approximately $157,000, (Note 9). The difference between the contract price and book value of Beijing Property and Hebei Property is RMB 10,288,978 (approximately $1,617,000) which is recorded in Additional paid-in capital.

(5) Prepayment to related party

Please see Note 8 – Prepayments.

	September 30,		December 31,
	2015		2014
	(Unaudited)
Mr. Wu Hui	$	4,033,355	$	5,663,264
Kirin Huaxia Development Co., Ltd.		1,971,385		2,038,759
Huaxia Kirin (Beijing) Investment Co., Ltd.		-		5,687,820
Beijing Huaxia Kirin Investment Development Co., Ltd.		-		1,643,043

	$	6,004,740	$	15,032,886

(6) Loan related to related party

Please see Note 19 Credit Union 2014 and 2015 Short-term Loan, Entrusted loan 2014 and 2015, Garden 2014 and 2015 Loan, Syndicated loans 2015.

(7) Balances with related parties

Please see Note 9 – Other receivables and Note 15 – Other Payables and Accrued liabilities.

(8) Service fee

For nine months ended September 30, 2015 and 2014, the Company recorded service fee with an amount of RMB 1,200,000 (approximately $194,000) and RMB 3,600,000 (approximately $586,000), respectively. For three months ended September 30, 2015 and 2014, the Company recorded service fee with an amount of RMB nil and RMB 1,200,000 (approximately $194,000), respectively. The service was received from affiliate companies designated by Jianfeng Guo.

(9) Notes Receivable

Please see Note 6- Notes Receivable from a related party.

(10) Notes Payable

Please see Note12 – Notes Payable to a related party.

(11) Entrust Investment from a related party

Please see Note 14 – Entrust Investment from a related party.

Note 26 – Contingencies and Commitments

As at September 30, 2015 and December 31, 2014, the Company provided $162,204,500 (unaudited) and $132,308,930 guarantees to mortgage bank loans granted to homebuyers of the Company’s real estate properties. Guarantees commence when the banks release mortgage to the Company and end when House Ownership Certificates are issued and pledged to banks instead. The fair value of the guarantees is insignificant because the possibility of the homebuyers’ default is remote, and in case of default, the Company can repossess the related properties to cover repayments of outstanding principal, interest and penalty to mortgage banks, and accordingly, the Company did not recognize fair value of these guarantees.

Note 27 – Subsequent event

The Company evaluated subsequent events up until the time the financial statement were filed with SEC, there is no subsequent event except disclosed in Note 19.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the results of operations and financial condition for the nine months and three months ended September 30, 2015 and 2014 should be read in conjunction with the financial statements and the notes to those financial statements, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, previously filed with the SEC (the “2014 Form 10-K”). Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See “Forward-Looking Statements.”

Overview

We are a non-state-owned real estate development company focused on residential and commercial real estate development in “tier-three” cities in the PRC. Since 2012, we have started real estate development and investment in the United States, aiming to diversify our investment portfolio. Our projects are currently concentrated in Xingtai City, Hebei Province in China, and in the United States, our investment in real estate is focused on southern California Area.

We have completed our Ming Shi Hua Ting, Wancheng New World and Kirin County projects in Xingtai City. Our current projects include Kirin Plaza, Kirin Bay and No.79 Courtyard, which collectively call for the development of more than 7,000 homes over the next five years in Xingtai City. We intend to expand into the Bohai Sea Surrounding Area, comprised of Beijing, Tianjin, Hebei Province, Liaoning Province and Shandong Province, and begin additional projects in the next three to five years.

We focus on middle-income customers in tier-three cities and strive to offer affordable homes. We believe that we are able to keep up with growth relying on: (i) our experience in developing real estate projects; (ii) our experienced management team; (iii) our expertise in conducting real estate sales; (iv) our reputation in the local markets we serve; and (v) our strong working relationship with local government.

In the United States, we experienced various investments in commercial retail estate, single family residential development and multifamily development, and now we are focusing on multifamily development, including apartments and condos. In the second quarter of 2015, we sold a parcel of empty lot in Greenville, South Carolina, and in third quarter of 2015, we sold a project in the north of Los Angeles area that has 18 single family lots for ready for development. We now have Archway HHC Apartment project under development. It is an apartment project located in Howard Hughes Center Site 4, Los Angeles, California, which will have 109 units apartment and 187 parking spaces.

From a geographic point view, our business is still mainly based in China. We will gradually increase our business in the United States in the coming years.

Recent Developments

At September 30, 2015, we have the following projects under development:

POC

Construction
beginning

Completion/
Estimated
Completion

Kirin County

100

September 2011

Late 2012

Kirin Plaza

86.7

September 2011

Late 2015

No.79 Courtyard (Phase I)

100

September 2011

Early 2015

No.79 Courtyard (Phase II)

100

September 2012

Late 2015

No.79 Courtyard (Phase III)

100

April 2013

Late 2015

No.79 Courtyard (Phase IV)

61.1

July 2014

Late 2017

Kirin Bay (Phase I)

100

October 2011

Mid 2015

Kirin Bay (Phase II)

93.5

March 2013

late 2015

Kirin Bay ( Phase III)

77.0

May 2013

Mid-to-late 2016

Kirin Bay (Phase IV)

63.5

April 2014

Late 2016

Financial Performance Highlights

The following summarizes certain key financial information for the nine months ended September 30, 2015.

●

Total revenue was $100.7 million for the nine months ended September 30, 2015, an increase of $18.4 million or 22.4%, from $82.3 million for the same period of 2014. Our revenue stream has shifted from No.79 Courtyard Phase I, Phase II, Phase III and Kirin Bay Phase I, which were completed as of September 30, 2015, to No. 79 Courtyard Phase IV and Kirin Bay (Phase II, Phase III and Phase IV).

●	Gross profit was $20.5 million for the nine months ended September 30, 2015, an increase of 8.6 million, or 72.7%, from $11.9 million for the same period of 2014. Gross margin ratio was 20.3% and 14.4% for the nine months ended September 30, 2015 and 2014.

●	Net income was $7.4 million for the nine months ended September 30, 2015, an increase of $10.5 million, or approximately 336.2%, from net loss of $3.1 million for the same period of last year.

Proposed Acquisition of Wuhan Yangtze River Newport Logistics Center

As of the date of quarterly report, the proposed transaction is under negotiation and subject to execution of definitive documents between the parties and there can be no assurance that we will be able to complete this transaction.

Factors Affecting our Operating Results

Growth of China’s Economy. We operate and derive all of our revenue from sales in China. Economic conditions in China, therefore, affect our operations, including the demand for our properties and the availability and prices of our raw materials among other expenses. China has experienced significant economic growth with recorded Gross Domestic Product growth rates at 7.8% in 2012, 7.7% in 2013, 7.4% in 2014 and 6.9% in nine months ended 2015. China is expected to experience continued growth in all areas of investment and consumption. However, if the Chinese economy were to become significantly affected by a negative stimulus, China’s growth rate would likely to fall and our revenue could correspondingly decline.

Government Regulations. Our business and results of operations are subject to PRC government policies and regulations regarding the following:

●

Land Use Right — According to the Land Administration Law of the PRC and Interim Regulations of the People’s Republic of China Concerning the Assignment and Transfer of the Right to the Use of the State-owned Land in the Urban Areas, individuals and companies are permitted to acquire rights to use urban land or land use rights for specific purposes, including residential, industrial and commercial purposes. We acquire land use rights from local governments and/or other entities for development of residential and commercial real estate projects.

●

Land Development — According to the Urban Real Estate Development and Operation Administration Regulation, the Urban Real Estate Development and Operation Administration Rules of Hebei Province promulgated by the government of the Hebei Province, and the Real Estate Development Enterprise Qualification Administration Regulation, a real estate development enterprise shall obtain a Real Estate Development Enterprise Qualification Certificate. We obtained the related certificates and seek to ensure that each phase of our projects complies with our certificates.

●

Project Financing — According to the Land Administration Law and the Property Law of the PRC, the land use rights, residential housing and other buildings still in process of construction may be pledged and mortgaged. From time to time, we pledge and mortgage our land use rights and real properties to lenders in order to obtain project financing.

●

Property Sales and Transfers — For each project we develop, pursuant to the Commodity Houses Sale Administration Regulation, effective of June 1, 2001, we are required to obtain permits before commencing project sales or presales of such project. Local governments act on the region’s interests by helping private companies streamline such projects and often coordinate with regional housing developers to allow for preliminary presales while Pre-Sales Permits are being processed. The local government in Xingtai has recognized the financial cost the Company assumed in administering the resident removal process and offered us permission to collect non-refundable deposits. This is a local practice enacted by the Xingtai local government to encourage project development. By collecting deposits from this type of buyer, we can offer a contractually fixed price to our consumers and ensure them a preference in housing selection. We may not obtain such approval in other cities if we expand beyond Xingtai.

Government Controls on Real Estate Industry. The State Council on March 1, 2013 issued five policies and measures to regulate and control the country's soaring real estate market, of which the most significant and also the most controversial point is that 20-percent individual income tax would be levied on capital gains by home sellers whose families own more than one apartment.

The five policies and measures are designed to: 1) Improve and maintain the stability of house prices. Municipalities under the auspices of central government, cities specifically designated in the State plan, and provincial capital cities excluding Lhasa must follow the principle of maintaining basic price stability. They must also compile and publish annual new commercial house price control targets and establish an effective system of accountability for assessing price stability; 2) Curb speculative investments seen in the housing market and implement strict commercial housing purchase limitation measures. For those municipalities under the auspices of the central government, cities specifically designated in the State plan and provincial capital cities that have already implemented housing purchase limitation measures, they must improve limitation measures in the fields of housing areas, housing types, and purchase qualification examinations according to the unified criteria. As for those cities where house prices continue to rise too rapidly, provincial-level governments should request that local-level officials implement purchase limitation measures, as well as enforce differential housing credit policies and expand the range of experimental areas for individual housing property tax reform. An individual income tax of 20 percent would be levied on capital gains made by those home sellers whose families own more than one apartment. 3) Increase the supply of ordinary commercial housing and land and accelerate the supply of land, construction and listing of small- and medium-sized ordinary commercial housing projects, rapidly ensuring an effective supply. In 2013, the total supply of land for housing is lower than the average supply over the past five years in principle. 4) Accelerate the planning and construction of affordable housing projects and ensure the projects to build 4.7 million sets of affordable housing and begin the construction of 6.3 million sets. Supporting facilities should be planned, constructed, and delivered for use within the same time frame as the affordable housing projects. The entry and exit system should also be improved in order to ensure equal distribution. By the end of 2013, prefecture-level cities and above must include into local housing guarantee coverage those migrant workers who meet the requirements. 5) Strengthen market supervision. Strengthen the management of commercial housing sales in advance, strictly implement a clear house price system, tighten enterprise credit management, and severely punish any illegal behavior among intermediaries. The urban individual housing information system should also be promoted and, in addition, market monitoring and publishing management should be strengthened.

The State Council also emphasized the importance of accelerating the implementation of an enduring and effective mechanism to guide the healthy development of the real estate market.

Interest Rate and Inflation Challenges. We are subject to market risks due to fluctuations in interest rates and refinancing of mid-term debt. Higher interest rates may also affect our revenues, gross profits and our ability to raise and service debt and to finance our developments.

According to the National Bureau of Statistics of China, China’s national inflation rate was 2.6% in 2012, 2.6% in 2013, 2.0% in 2014 and 1.4% for the first half year of 2015. Inflation could result in increases in the price of raw materials and labor costs. We do not believe that inflation or deflation has affected our business materially.

Acquisitions of Land Use Rights and Associated Costs. We acquire land for development through the governmental auction process and by obtaining land use rights from third parties through negotiation, acquisition of entities, co-development or other joint venture arrangements.

Our ability to secure sufficient financing for land use rights acquisitions and property development depends on internal cash flows in addition to lenders’ perceptions of our credit reliability, market conditions in the capital markets, investors’ perception of our securities, the PRC economy and the PRC government regulations that affect the availability and cost of financing real estate companies or property purchasers.

Customer geographic analysis

We derive a significant amount of revenue from Xingtai City, due to the situation that out major projects are all located in Xingtai City. Our clients are widely spread over Xingtai City, including the counties that are up to 200 Kilometers from Xingtai City.

Most of clients only buy one unit (or, a condo) of our project. However, there are also some rare occasions that a client buys more than one unit. Therefore, the top five or top ten customers will only compose of a very small portion of our total revenue. This is same for most of China similar real estate developers.

We did derived revenue from sell of two projects in California and South Carolina in United State. These sells are not ready to use real estate products to end users but to real estate developers. In the future, our multi-family project will have two scenarios: for rent apartment and for sell condos. The for rent apartment will be sold as a whole project, while the condos will be sold separately to each individual users.

Significant Accounting Policies

There have been no significant changes in our critical accounting policies and estimates during the nine months ended September 30, 2015 compared with those contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Result of operations” included in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with SEC on April 15, 2015.

Recently Issued Accounting Pronouncements

The Company is currently in the process of evaluation the impact of the adoption of ASU 2014-09, ASU 2014-15 and ASU 2015-03 on its consolidated financial statements.

Results of Operations

Comparison of Nine and Three Months Ended September 30, 2015 and 2014

	Nine Months Ended September 30,												Three Months Ended September 30,
	2015						2014						2015						2014
	(Unaudited)						(Unaudited) (Revised)						(Unaudited)						(Unaudited) (Revised)
				% of Revenue						% of Revenue						% of Revenue						% of Revenue

Revenue, net	$	100,693,548			100	%	$	82,263,479			100	%	$	42,339,003			100	%	$	34,621,648			100	%
Cost of sales		80,210,964			79.7	%		70,402,868			85.6	%		31,453,385			74.3	%		30,593,245			88.4	%
Gross profit		20,482,584			20.3	%		11,860,611			14.4	%		10,885,618			25.7	%		4,028,403			11.6	%
Selling expenses		2,476,160			2.5	%		2,794,450			3.4	%		930,151			2.2	%		1,129,324			3.3	%
General and administrative expenses		5,304,295			5.3	%		6,525,672			7.9	%		1,855,485			4.4	%		1,734,583			5.0	%
Income from operations		12,702,129			12.6	%		2,540,489			3.1	%		8,099,982			19.1	%		1,164,496			3.4	%
Investment income (Loss)		786,806			0.8	%		504,548			0.6	%		-			0.0	%		-			0.0	%
Interest income		5,619,986			5.6	%		3,721,344			4.5	%		2,139,175			5.1	%		1,251,621			3.6	%
Interest expense		(7,198,617	)		-7.1	%		(8,029,790	)		-9.8	%		(2,383,685	)		-5.6	%		(2,736,939	)		-7.9	%
Other non-operating income (loss)		2,598,487			2.6	%		(390,840	)		-0.5	%		443,195			1.0	%		(562,091	)		-1.6	%
Total other income (expenses)		1,806,662			1.8	%		(4,194,738	)		-5.1	%		198,685			0.5	%		(2,047,409	)		-5.9	%
Income (loss) before income taxes expense		14,508,791			14.4	%		(1,654,249	)		-2.0	%		8,298,667			19.6	%		(882,913	)		-2.6	%
Income taxes expense		7,107,968			7.1	%		1,479,121			1.8	%		3,806,223			9.0	%		671,076			1.9	%
Net income (loss)	$	7,400,823			7.3	%	$	(3,133,370	)		-3.8	%	$	4,492,444			10.6	%	$	(1,553,989	)		-4.5	%

Our net income for the nine months ended September 30, 2015 was $7.4 million, an increase of $10.5 million, from net loss of $3.1 million for the nine months ended September 30, 2014. Net income increased because gross profit increased by $8.6 million, the other income increased by $6.0 million and the operating and administrative expense decreased by $1.5 million, meanwhile income tax expense increased by $5.6 million for the nine months ended September 30, 2015 as compared to the same period of 2014.

Our net income for the three months ended September 30, 2015 was $4.5 million, an increase of $6.1 million, from net loss of $1.6 million for the three months ended September 30, 2014. Net income increase because in the three months ended September 30, 2015, the gross profit increased by $6.9 million, the other income increased by $2.2 million, meanwhile income tax expense increased by $3.1 million as compared to the same period of 2014.

A project’s revenue and cost estimates are of inherent nature of uncertainty throughout its multiple-year development period. Factors that potentially affect a project’s total revenue and cost estimates (including a salable unit’s allocated cost), include, but are not limited to: (1) changes in government’s land-use planning, building density, plot ratio and other quotas; which lead to changes of total gross floor area available for sale and per-unit cost estimate; (2) the Company’s voluntary modification of design to enhance attractiveness and competiveness of an on-going project; (3) fluctuation of commodity prices and government-regulated labor cost rates; (4) contractors’ request to renegotiate consideration of fixed-price agreements, for which the Company’s preference of complete the discussion early to avoid unfavorable impact on construction progress; (5) unforeseeable geological and engineering difficulties causing modifications of a project’s construction plan; (6) government agencies’ compliance inspections in the late stage of the construction, which may lead to modification of design; (7) major prospective property buyers’ request to alter specifications of the property to be delivered; and (8) contractors’ claims throughout the construction period.

The Company enters into non-cancellable, fixed-price pre-sale contracts with homebuyers. Under certain circumstances, for example, changes in floor size or floor plan of a property due to legal compliance requirements, or change of deliverable standards upon request of major customers, we may agree to revise the pre-sale contract price to match conditions of the properties to be delivered to customers. Furthermore, the Company is subject to a penalty payable to homebuyers in the event the property is delivered later than the date specified in the pre-sale contracts, and usually such penalty usually constitutes only an insignificant amount compared to the contract value. These adjustments made to contract price are recorded as reduction of revenue in the current period on a cumulative catch-up basis.

With regard to a project’s cost estimate, the Company’s in-house cost estimating staffs, work in collaboration with a committee comprising the Company’s engineers, project managers, financial professionals, and senior management staff, prepare at least two versions of cost estimate. The first version is Preliminary Cost Estimate, prepared in schematic design stage, which is before commencement of excavation and recognition of revenue. Preliminary Cost Estimate utilizes top-down approach. It projects major cost components at higher level using a project’s planned parameters (e.g., building density, by-category gross floor area) and standard per-unit cost from past experience (e.g., concrete cost, measured at US$ per square meter). Preliminary Cost Estimate is intrinsically less accurate; it heavily relies on the Company’s historical information accumulated in the development of similar types of construction in similar municipal region. The second version is Detailed Cost Estimate, prepared after receiving construction documents from the architect. Ideally Detailed Cost Estimate can be available before commencement of excavation and recognition of revenue; however, in order to suit the pre-sale progress and to maximize flexibility, construction documents are provided in several batches as the construction processes. It is likely that a project’s Detailed Cost Estimate is finalized only in late stage of the construction. Detailed Cost Estimate utilizes bottom-up approach. Based on construction documents and assisted by the Company’s computerized Building Information Modeling system, Detailed Cost Estimate is able to sum up cost at element level of a real estate property, taking into consideration of quantitative consumption and on-going rate of materials, labor, machinery and overheads. For the purpose of preparing the Company’s condensed consolidated financial statements, a project’s cost estimate is reviewed by in-house cost estimators at each year-end and adjusted for material developments in the interval. Changes in estimates of a project’s revenue and cost of sales are recognized on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a project’s percentage of completion. When a project’s total cost estimate to be incurred exceeds total estimated revenue to be earned, a provision for the entire loss on the project is recorded in the period the loss is determined. In addition to our existing monthly detailed cost estimated upon receiving construction data from the architects, we have hired additional competent professionals to ensure early identification of variances from prior estimated project revenue and cost, to reduce the likelihood of significant changes to the estimates.

Revenues and Gross Profit

	Nine Months Ended September 30,												Three Months Ended September 30,
	2015						2014						2015						2014
				% of Revenue						% of Revenue						% of Revenue						% of Revenue

Revenue, net	$	100,693,548			100	%	$	82,263,479			100	%	$	42,339,003			100	%	$	34,621,648			100	%
-No.79 Courtyard (Phase I)		4,123,951			4.1	%		2,245,537			2.7	%		-283,771			-0.7	%		1,012,137			2.9	%
-No.79 Courtyard (Phase II)		1,797,829			1.8	%		7,210,167			8.8	%		52,562			0.1	%		3,147,174			9.1	%
-No.79 Courtyard (Phase III)		7,334,093			7.3	%		12,578,594			15.3	%		1,098,333			2.6	%		5,170,915			14.9	%
-No.79 Courtyard (Phase IV)		12,304,334			12.2	%		-			-			4,642,570			11.0	%		-			-
-Kirin Bay (Phase I)		15,099,985			15.0	%		13,841,275			16.8	%		13,041,764			30.8	%		4,525,420			13.1	%
-Kirin Bay (Phase II)		5,526,177			5.5	%		20,269,892			24.6	%		-211,733			-0.5	%		9,972,008			28.8	%
-Kirin Bay (Phase III)		36,993,895			36.7	%		23,781,384			28.9	%		10,257,512			24.2	%		10,681,410			30.9	%
-Kirin Bay (Phase IV)		11,566,950			11.5	%		1,385,819			1.7	%		8,109,331			19.2	%		107,291			0.3	%
-Kirin County		5,406,033			5.4	%		577,955			0.7	%		5,404,196			12.8	%		(142,758	)		-0.4	%
-Property Service		540,301			0.5	%		372,856			0.5	%		228,239			0.5	%		148,051			0.4	%
Cost of sales		80,210,964			79.7	%		70,402,868			85.6	%		31,453,385			74.3	%		30,593,245			88.4	%
-No.79 Courtyard (Phase I)		3,856,595			3.8	%		1,647,079			2.0	%		-268,570			-0.6	%		757,226			2.2	%
-No.79 Courtyard (Phase II)		1,704,814			1.7	%		7,098,123			8.6	%		22,154			0.1	%		2,985,520			8.6	%
-No.79 Courtyard (Phase III)		5,149,206			5.1	%		7,997,292			9.7	%		794,351			1.9	%		3,425,699			9.9	%
-No.79 Courtyard (Phase IV)		9,502,899			9.4	%		-			-			3,200,656			7.6	%		-			-
-Kirin Bay (Phase I)		7,916,444			7.9	%		12,994,935			15.8	%		6,126,775			14.5	%		5,063,628			14.6	%
-Kirin Bay (Phase II)		6,203,359			6.2	%		18,964,025			23.1	%		666,087			1.6	%		9,567,262			27.6	%
-Kirin Bay (Phase III)		29,931,172			29.7	%		19,065,450			23.2	%		8,581,495			20.3	%		8,679,428			25.1	%
-Kirin Bay (Phase IV)		10,347,793			10.3	%		1,248,577			1.5	%		7,468,103			17.6	%		108,487			0.3	%
-Kirin County		4,539,778			4.5	%		959,118			1.2	%		4,502,135			10.6	%		(153,540	)		-0.4	%
-Property Service		1,058,904			1.1	%		428,269			0.5	%		360,199			0.9	%		159,535			0.5	%
Gross profit		20,482,584			20.3	%		11,860,611			14.4	%		10,885,618			25.7	%		4,028,403			11.6	%
-No.79 Courtyard (Phase I)		267,356			0.3	%		598,458			0.7	%		-15,201			0.0	%		254,911			0.7	%
-No.79 Courtyard (Phase II)		93,015			0.1	%		112,044			0.1	%		30,408			0.1	%		161,654			0.5	%
-No.79 Courtyard (Phase III)		2,184,887			2.2	%		4,581,302			5.6	%		303,982			0.7	%		1,745,216			5.0	%
-No.79 Courtyard (Phase IV)		2,801,435			2.8	%		-			-			1,441,914			3.4	%		-			-
-Kirin Bay (Phase I)		7,183,541			7.1	%		846,340			1.0	%		6,914,989			16.3	%		(538,208	)		-1.6	%
-Kirin Bay (Phase II)		(677,182	)		-0.7	%		1,305,867			1.6	%		-877,820			-2.1	%		404,746			1.2	%
-Kirin Bay (Phase III)		7,062,723			7.0	%		4,715,934			5.7	%		1,676,017			4.0	%		2,001,982			5.8	%
-Kirin Bay (Phase IV)		1,219,157			1.2	%		137,242			0.2	%		641,228			1.5	%		(1,196	)		0.0	%
-Kirin County		866,255			0.9	%		(381,163	)		-0.5	%		902,061			2.1	%		10,782			0.0	%
-Property Service		(518,603	)		-0.5	%		(55,413	)		-0.1	%		-131,960			-0.3	%		(11,484	)		0.0	%
Gross Profit rate		20.3	%					14.4	%					25.7	%					11.6	%
-No.79 Courtyard (Phase I)		6.5	%					26.7	%					5.4	%					25.2	%
-No.79 Courtyard (Phase II)		5.2	%					1.6	%					57.9	%					5.1	%
-No.79 Courtyard (Phase III)		29.8	%					36.4	%					27.7	%					33.8	%
-No.79 Courtyard (Phase IV)		22.8	%					-						31.1	%					-
-Kirin Bay (Phase I)		47.6	%					6.1	%					53.0	%					-11.9	%
-Kirin Bay (Phase II)		-12.3	%					6.4	%					414.6	%					4.1	%
-Kirin Bay (Phase III)		19.1	%					19.8	%					16.3	%					18.7	%
-Kirin Bay (Phase IV)		10.5	%					9.9	%					7.9	%					-1.1	%
-Kirin County		16.0	%					-66.0	%					16.7	%					-7.6	%
-Property Service		-96.0	%					-14.9	%					-57.8	%					-7.8	%

*Negative gross profit ratio is a result of sales return in this period, which is solitary instance, there is positive gross profit ration for the project as whole.

Revenue, net. Real estate sales represent revenue from the pre-sale of properties under development. For the nine months and three months ended September 30, 2015 and 2014, revenue was derived from the pre-sale of No.79 Courtyard (Phase I, Phase II, Phase III and Phase IV), Kirin Bay (Phase I, Phase II, Phase III and Phase IV) and property service. Under the percentage-of-completion method, revenue is the percentage of completed construction at a point in time is multiplied by total value of contracts signed up to that same point.

Our revenue for the nine months ended September 30, 2015 was $100.7 million, an increase of $18.4 million, or approximately 22.4%, compared to $82.3 million for the same period of 2014. The revenue increased because of the sales of new phases: revenue from Phase IV of No. 79 Courtyard is $12.3 million in the nine months ended September 30, 2015, while nil for nine months ended September 30, 2014, revenue from Phase III and Phase IV of Kirin Bay is $48.6 million in the nine months ended September 30, 2015, increased by $23.4 million as compared with $25.2 million in the nine months ended September 30, 2014. Meanwhile, revenue from Phase I, Phase II and Phase III of No.79 Courtyard is $13.3 million in the nine months ended September 30, 2015, decreased by $8.7 million as compared with $22.0 million in the nine months ended September 30, 2014, revenue from Phase I and Phase II of Kirin Bay is $20.6 million in the nine months ended September 30, 2015, decreased by $13.5 million as compared with $34.1 million in the same period of 2014.

Revenue from the pre-sale of No.79 Courtyard (Phase I), No.79 Courtyard (Phase II), No.79 Courtyard (Phase III), No.79 Courtyard (Phase IV), Kirin Bay (Phase I), Kirin Bay (Phase II), Kirin Bay (Phase III) and Kirin Bay (Phase IV) was $4.1 million, $1.8 million, $7.3 million, $12.3 million, $15.1 million, $5.5 million, $37.0 million and $11.6 million respectively, representing 4.1%, 1.8%, 7.3%, 12.2%, 15.0%, 5.5%, 36.7% and 11.5% of total revenue earned in the nine months ended September 30, 2015. For the nine months ended September 30, 2015, revenue from of Kirin County was $5.4 million, increased by $4.8 million as compared with $0.6 million in the nine months ended September 30, 2014, representing 5.4% of total revenue earned in the nine months ended September 30, 2015. For the nine months ended September 30, 2015, revenue of property service increased by $0.2 million as compared with the same period of 2014.

Our revenue from the pre-sale of real estate properties for the three months ended September 30, 2015 was $42.3 million, an increase of $7.7 million, or approximately 22.3%, compared to $34.6 million for the same period of year 2014. Revenue from the pre-sale of No.79 Courtyard (Phase I), No.79 Courtyard (Phase II), No.79 Courtyard (Phase III), No.79 Courtyard (Phase IV), Kirin Bay (Phase I), Kirin Bay (Phase II), Kirin Bay (Phase III) and Kirin Bay ( Phase IV) was $-0.3 million, $0.1 million, $1.1 million, $4.6 million, $13.0 million, $-0.2 million, $10.3 million and $8.1 million respectively, representing -0.7%,0.1%, 2.6%, 11.0%, 30.8%, -0.5%, 24.2% and 19.2% of total revenue earned in the three months ended September 30, 2015. For the three months ended September 30, 2015, revenue from of Kirin County was $5.4 million, increased by $5.5 million as compared with $-0.1 million in the three months ended September 30, 2014, representing 12.8% of total revenue earned in three months ended September 30, 2015.

The following tables set forth the percentage-of-completion (POC) by project for the period ended September 30, 2015 and 2014 and year ended December 31, 2014 and 2013:

	As at September 30, 2015			As at December 31, 2014			As at September 30, 2014			As at December 31, 2013
No.79 Courtyard Phase I		100	%		96.1	%		96.1	%		95.3	%
No.79 Courtyard Phase II		100	%		88.0	%		78.3	%		59.1	%
No.79 Courtyard Phase III		100	%		86.3	%		70.9	%		53.6	%
No.79 Courtyard Phase IV		61.1	%		44.9	%		-			-
Kirin Bay Phase I		100	%		98.3	%		97.4	%		85.0	%
Kirin Bay Phase II		93.5	%		88.7	%		84.7	%		61.0	%
Kirin Bay Phase III		77.0	%		55.4	%		52.3	%		35.9	%
Kirin Bay Phase IV		63.5	%		22.9	%		9.9	%		-
Kirin County		100	%		100	%		100	%		100	%
Kirin Plaza		86.7	%		85.8	%		84.6	%		82.9	%

Kirin Bay is a four-phase, master-planned community built on a land area of approximately 660,000 square meters. Positioned as a mid-market residential development, Kirin Bay also features kindergarten, a primary school, hotel, office buildings and apartments. As of issuance date of the Company’s Form 10-Q for the quarter ended September 30, 2015, (“the Form 10-Q”), we have obtained necessary government approvals. For Kirin Bay (Phase I), we acquired Land Use Rights Certificates (issued on July 7, 2011), Construction Land Planning Permit (issued on June 9, 2011), Construction Work Planning Permit (issued on August 10, 2011), Work Commencement Permit (issued on September 29, 2011) and Pre-Sales Permit (issued on September 30, 2011); for Kirin Bay (Phase II), we acquired Construction Land Planning Permit (issued on June 9, 2011), Construction Work Planning Permit (issued on July 31, 2012), Work Commencement Permit (issued On November 22, 2012) and Pre-Sales Permit (issued on March 26, 2013); for Kirin Bay (Phase III), we obtained Construction Land Planning Permit (issued On June 9, 2011), Construction Work Planning Permit (issued on January 15, 2013), Work Commencement Permit (issued on March 26, 2013) and Pre-sales Permit (issued on September 18, 2013); and for Kirin Bay (Phase IV), we obtained Construction Land Planning Permit (issued On June 9, 2011), Construction Work Planning Permit (issued on January 15, 2013), Work Commencement permit (issued on April 9, 2014) and Pre-sales Permit (issued on May 27, 2014).

No. 79 Courtyard is a project positioned as a high-end residential development with some mixed commercial use, which covers a land area of over 290,000 square meters and a total building area of approximately 520,000 square meters. As of issuance date of the Form 10-Q, we have obtained necessary government approvals. For No. 79 Courtyard (Phase I) we acquired Land Use Rights Certificate (issued on November 9, 2010), Construction Land Planning Permit (issued on January 14, 2011), Construction Work Planning Permit (issued on September 1, 2011), Work Commencement Permit (issued on November 2, 2011) and Pre-Sales Permit (issued on November 2, 2011); for No.79 Courtyard (Phase II), we acquired Construction Land Planning Permit (issued on January 14, 2011), Construction Work Planning Permit (issued on July 20, 2012), Work Commencement Permit (issued on September 1, 2012) and Pre-Sales Permit (issued on September 27, 2012); for No.79 Courtyard (Phase III), Construction Land Planning Permit (issued on January 14, 2011), Construction Work Planning Permit (issued on January 16, 2013), Work Commencement Permit (issued on April 3, 2013) and Pre-sales Permit (issued on August 12, 2013); for No.79 Courtyard (Phase IV), Construction Land Planning Permit (issued on January 14, 2011), Construction Work Planning Permit (issued on December 12, 2013), Work Commencement Permit (issued on July 1, 2014) and Pre-sales Permit (issued on September 29, 2014).

We bought the land use right of No. 79 Courtyard in 2007 and incurred land use right acquisition cost from year 2008 to 2011. We also started the land cleanup preparation work such as the demolishment and relocation in 2010 and early 2011, which resulted relevant cost as well. We also incurred cost related to the planning of the project as well as government levied tax and fees prior to the fourth quarter of 2011.

For Kirin Bay Project, we have obtained the land use right pursuant to our participation in the Kong Village Relocation Program.

We have obtained necessary government approvals, including Land Use Rights Certificates, Construction Land Planning Permits, Construction Work Planning Permits, Work Commencement Permits and Pre-Sales Permits, for our No. 79 Courtyard (Phase I, Phase II, Phase III and Phase IV) and Kirin Bay (Phase I, Phase II, Phase III and Phase IV). We also commenced to construct Kirin County’s shopping arcade from year 2011, which is supposed to complement Kirin County project, and provide convenience to the residents of Kirin County. However, due to the regional planning by the local authority, we have not obtain the Construction Land Planning Permits in a timely manner so far, and therefore, the construction shopping arcade part of Kirin County, is suspended temporarily from January 2012. We have communicated with the competent authority and received a notice called “Xingtai City Administrative Notice of Punishment” from the competent authority. According to the Notice, the government will issue the necessary approvals and permits for the shopping arcade in the near future, and we expect to receive the related permits in late 2015. Our current design of the shopping arcade, including but not limited to, salable gross floor area, is not disputed by local government agencies.

The following table summarizes the key pre-sale information of our projects (in thousands dollars):

	Cumulative contract value of pre-sale as of September 30, 2015		Cumulative Customer deposits collected as of September 30, 2015		Contract value of pre-sale for the nine months ended September 30, 2015		Customer deposits collected for the nine months ended September 30, 2015
No.79 Courtyard Phase I	$	127,997		127,664		-184		-14
No.79 Courtyard Phase II		38,075		37,079		314		531
No.79 Courtyard Phase III		61,187		56,058		4,674		8,985
No.79 Courtyard Phase IV		40,014		35,939		14,405		17,596
Kirin Bay Phase I		107,143		93,858		14,530		3,472
Kirin Bay Phase II		72,302		70,172		2,310		3,196
Kirin Bay Phase III		110,881		104,619		28,378		29,611
Kirin Bay Phase IV		27,212		24,408		11,934		10,505
Kirin County (including Kirin Plaza)		114,113		113,437		5,956		807

Cost. Cost of real estate sales consist of land use rights costs, construction and installation costs. Our costs of real estate sales for the nine months ended September 30, 2015 were $80.2 million, an increase of $9.8 million, or 13.9 %, compared to $70.4 million for the same period of 2014. Our costs of real estate sales for the three months ended September 30, 2015 were $31.5 million, an increase of $0.9 million, or approximately 2.8%, compared to $30.6 million for the same period of year 2014. Our total cost of real estate sales increased in relation to the increase of revenue. As under the percentage of completion method, revenue from units sold and related costs are recognized over the course of the construction period, based on the completion progress of a project.

Gross Profit. Gross profit was $20.5 million for the nine months ended September 30, 2015 (gross profit ratio: 20.3 %), increased by $8.6 million as compared to gross profit of $11.9 million (gross profit ratio: 14.4%) for the nine months ended September 30, 2014, due to the higher gross margin ratio of the commercial units of Kirin Bay Phase I and Phase III, which contributed $14.2 million gross profit in the nine months ended September 30, 2015, and the gross profit ratio is 27.3%.

Gross profit for the three months ended September 30, 2015 was $10.9 million (gross profit ratio: 25.7%), increased by $6.9 million as compared with gross profit of $4.0 million (gross profit ratio: 11.6%) for the same period of year 2014, due to the higher gross margin ratio of the commercial units of Kirin Bay Phase I and Phase III, which contributed $8.6 million gross profit in the three months ended September 30, 2015.

The following tables set forth the aggregate Gross Floor Area (GFA) and the percentage-of-completion (POC) and Contract sold by project for the nine months ended September 30, 2015 and 2014:

	Total		POC cumulative accomplished for the nine months ended September 30,						Contract value of units sold for the nine months ended September 30,					Revenue recognized for the nine months ended September 30,
	GFA		2015			2014			2015			2014		2015		2014
No.79 Courtyard (Phase I)		130,067		100	%		96.1	%	$	(183,828	)	$	1,464,941	$	4,123,951	$	2,245,537
No.79 Courtyard (Phase II)		45,122		100	%		78.3	%		313,560			510,292		1,797,829		7,210,167
No.79 Courtyard (Phase III)		47,960		100	%		70.9	%		4,673,788			8,642,494		7,334,093		12,578,594
No.79 Courtyard (Phase IV)		40,767		61.1	%		-			14,404,810			-		12,304,334		-
Kirin Bay (Phase I)		163,607		100	%		97.4	%		14,529,706			4,683,330		15,099,985		13,841,275
Kirin Bay (Phase II)		92,043		93.5	%		84.7	%		2,309,529			8,837,687		5,526,177		20,269,892
Kirin Bay (Phase III)		130,734		77.0	%		52.3	%		28,378,372			32,825,384		36,993,895		23,781,384
Kirin Bay (Phase IV)		51,512		63.5	%		9.9	%		11,933,551			14,159,223		11,566,950		1,385,819
Kirin County (including Kirin Plaza)		183,313		98.5	%		98.3	%		5,956,207			511,363		5,406,033	$	577,955

Total		885,125							$	82,315,695		$	71,634,714	$	100,153,247	$	81,890,623

The following tables set forth the consolidated square meters sold and average selling price per square meter by each project for the nine months ended September 30, 2015 and 2014:

	2015								2014
	Contract Sales(1)			Square Meters Sold(2)			Average Selling Price(3)		Contract Sales(1)		Square Meters Sold(2)		Average Selling Price(3)
No.79 Courtyard Phase I
-residential	$	(258,195	)		(252	)	$	1,025	$	803,841		545	$	1,475
-commercial		260			-			-		18,035		-		-
-garage		74,107			111			668		643,065		888		724
No.79 Courtyard Phase II
-One elevator and four suites		8,587			-			-		369,972		292		1,267
-Parking lots		304,973			216			1,412		140,320		96		1,462
No.79 Courtyard Phase III
-residential		3,246,488			2,816			1,153		7,774,748		5,557		1,399
-commercial		1,003,131			357			2,810		473,891		123		3,853
-garage		424,169			519			817		393,855		346		1,138
No.79 Courtyard Phase IV
-residential		14,404,810			10,697			1,347		-		-		-
Kirin Bay Phase I
-residential		415,113			429			968		797,286		829		962
-commercial		14,030,978			6,818			2,058		1,992,228		737		2,703
-garage		83,615			90			929		1,893,816		3,445		550
Kirin Bay Phase II
-residential		1,568,208			1,685			931		8,510,868		6,971		1,221
-garage		741,321			1,503			493		326,819		526		621
Kirin Bay Phase III
-residential		28,144,583			31,290			899		31,932,109		35,199		907
-garage		233,789			353			662		893,275		1,222		731
Kirin Bay Phase IV
-residential		11,874,265			13,511			879		14,159,223		15,744		899
-garage		59,286			110			539		-				-
Kirin County
-residential		(183,979	)		(263	)		700		2,868		-		-
-commercial		6,067,994			4,863			1,248		329,451		1,030		320
-garage		72,192			319			226		179,044		807		222

Total	$	82,315,695			75,172		$	1,095	$	71,634,714		74,359	$	963

The following tables set forth the consolidated square meters sold and average selling price per square meter by each project for the three months ended September 30, 2015 and 2014:

	2015						2014
	Contract Sales(1)		Square Meters Sold(2)		Average Selling Price(3)		Contract Sales(1)			Square Meters Sold(2)			Average Selling Price(3)
No.79 Courtyard Phase I
-residential	$	(274,531)		(252)	$	1,089	$	-			-		$	-
-commercial		260		-		-		-			-			-
-garage		18,600		(34)		(547)		223,146			232			962
No.79 Courtyard Phase II
-One elevator and four suites		(68)		-		-		185,839			149			1,247
-Parking lots		79,224		60		1,320		35,179			24			1,466
No.79 Courtyard Phase III
-residential		504,153		402		1,254		2,828,105			2,100			1,347
-commercial		470,459		142		3,313		-			-			-
-garage		315,735		368		858		85,967			65			1,323
No.79 Courtyard Phase IV
-residential		4,554,750		3,139		1,451		-			-			-
Kirin Bay Phase I
-residential		(3,260)		-		-		96,066			87			1,104
-commercial		13,083,034		6,536		2,002		603,875			237			2,543
-garage		26,107		20		1,305		140,576			344			409
Kirin Bay Phase II
-residential		(547,389)		(251)		2,181		3,282,670			2,791			1,176
-garage		377,550		551		685		(21,247	)		(31	)		685
Kirin Bay Phase III
-residential		3,567,041		3,882		919		8,562,698			9,205			930
-garage		(192,371)		(217)		887		199,383			272			733
Kirin Bay Phase IV
-residential		7,947,735		9,088		875		1,257,625			1,087			1,157
-garage		(21,427)		(37)		579		-			-			-
Kirin County
-residential		(183,979)		(263)		700		-			-			-
-commercial		6,213,046		4,667		1,331		(300,244	)		236			(1,272	)
-garage		(567)		-		-		14,236			69			206

Total	$	35,934,102		27,801	$	1,293	$	17,193,874			16,867		$	1,019

(1)	This column reflects the aggregate amount of all contracts entered into during the applicable period.
(2)	This column reflects the total square meters sold during the applicable period.
(3)	This column reflects the average price per square meter for all properties sold during the applicable period.

Operating Expenses. Operating expenses for the nine months ended September 30, 2015 were $7.8 million, a decrease of $1.5 million, or 16.6%, from $9.3 million for the nine months ended September 30, 2014. The decrease was because our overall operating expenses in staff salaries decreased by $0.3 million, advertising expenses decreased by $0.5 million and professional fee decreased by $0.8 million for the nine months ended September 30, 2015 as compared to the same period of 2014.

Operating expenses for the three months ended September 30, 2015 were $2.8 million, a decrease of $0.1 million, or 2.9%, from $2.9 million for the three months ended September 30, 2014.

	Nine Months Ended September 30,										Three Months Ended September 30,
	2015					2014					2015					2014
			% of Expenses					% of Expenses					% of Expenses					% of Expenses
Operating expenses	$	7,780,455		100	%	$	9,320,122		100	%	$	2,785,636		100	%	$	2,863,907		100	%
Selling expenses		2,476,160		31.8	%		2,794,450		30.0	%		930,151		33.4	%		1,129,324		39.4	%
Advertising expense		1,300,918		16.7	%		1,789,192		19.2	%		540,780		19.4	%		791,467		27.6	%
Staff salaries		531,539		6.8	%		384,017		4.1	%		179,260		6.4	%		165,358		5.8	%
Office and Administrative expenses		643,703		8.3	%		621,241		6.7	%		210,111		7.6	%		172,499		6.0	%
General and administrative expenses		5,304,295		68.2	%		6,525,672		70.0	%		1,855,485		66.6	%		1,734,583		60.6	%
Staff salaries		1,902,210		24.4	%		2,303,659		24.7	%		622,430		22.3	%		562,740		19.7	%
Professional expenses		1,529,699		19.7	%		2,299,221		24.7	%		613,579		22.0	%		578,426		20.2	%
Office and Administrative expenses		1,872,386		24.1	%		1,922,792		20.6	%		619,476		22.2	%		593,417		20.7	%

●

Advertising Expenses. Our advertising expenses decreased from $1.8 million for the nine months ended September 30, 2014 to $1.3 million for the same period of 2015. Such decrease was mainly a result of our No.79 Courtyard and Kirin Bay projects are well-known projects in Xingtai City, no much additional advertising fee spent on promoting projects.

●	Professional and related Expense. Our professional expense decreased from $2.3 million for the nine months ended September 30, 2014 to $1.5 million for the nine months ended September 30, 2015. The decrease was due to consulting fee of related party decreased by $1.4 million, meanwhile the legal expense and service fee from a third party increased by $0.7 million.

●	Staff salaries. Our staff salaries decreased from $2.7 million for the nine months ended September 30, 2015 to $2.4 million for the nine months ended September 30, 2015 as a result of staff number decrease.

Interest Expense, net. Our net interest expense was $1.6 million for the nine months ended September 30, 2015, a decrease of $2.7 million, or 63.4%, from $4.3 million for the same period of 2014. The decrease was due to: 1) the interest expense for the nine months ended September 30, 2015 decreased from $8.0 million for the same period of 2014 to $7.2 million, decreased by $0.8 million, the company repaid more loans to financial institution in the nine months ended September 30, 2015. 2) The Company recognizes interest income from loans to related parties, which was $5.6 million for the nine months ended September 30, 2015, increased by $1.9 million as compared to $3.7 million interest income for the nine months ended September 30, 2014.

Our net interest expense was $0.2 million and $1.5 million for the three months ended September 30, 2015 and 2014, respectively. The decrease was due to the company recognized interest income from loans to related parties, which was $2.1 million for the three months ended September 30, 2015, increased by $ 0.8 million as compared to $1.3 million interest income for the three months ended September 30, 2014.

Other non - operating income (loss). Other non-operating income was $2.6 million for the nine months ended September 30, 2015, an increase of $3.0 million, or 764.8%, from Other non-operating loss $0.4 million for the same period of 2014. Other non-operating income was mainly the gain from the disposal of two parcels of land in the United States, the Company recognized the gain from land’ sales at the amount of $2.3 million in the nine months ended September 30, 2015.

Income Taxes. Income taxes expense for the nine months ended September 30, 2015 totaled $7.1 million, an increase of $5.6 million or 380.6% from income taxes expense of $1.5 million for the nine months ended September 30, 2014. Income taxes increased because: 1) Deferred tax expense increased by $4.0 million mainly due to deferred tax liabilities arose from interest income and revenue recognition; 2) Current income tax expense increased by $0.1 million; 3) LAT expense increased by $1.6 million as compare for the same period of 2014, mainly due to the Company sold many commercial units of Kirin Bay Phase I and Phase III in the nine months ended September 30, 2015. Income taxes expense for the three months ended September 30, 2015 totaled $3.8 million, an increase of $3.1 million from income taxes expense of $0.7 million for the three months ended September 30, 2014.

Net Income (Loss). Net income for the nine months ended September 30, 2015 was $7.4 million, an increase of $10.5 million or 336.2%, from net loss of $3.1 million for the nine months ended September 30, 2014. Net income increased because gross profit increased by $8.6 million, the other income increased by $6.0 million and the operating and administrative expense decreased by $1.5 million, meanwhile income tax expense increased by $5.6 million for the nine months ended September 30, 2015 as compared to the same period of 2014.

Net income for the three months ended September 30, 2015 was $4.5 million, an increase of $6.1 million, from net loss of $1.6 million for the three months ended September 30, 2014. Net income increase because in the three months ended September 30, 2015, the gross profit increased by $6.9 million, the other income increased by $2.2 million, meanwhile income tax expense increased by $3.1 million as compared to the same period of 2014.

Liquidity and Capital Resources

The following table sets forth a summary of our cash flows for the periods indicated:

	Nine Months Ended September 30,
	2015			2014
	(Unaudited)			(Unaudited)
Net cash provided by (used in) operating activities	$	565,476		$	(17,945,028	)
Net cash provided by (used in) investing activities		(4,775,042	)		5,529,077
Cash flows provided by (used in) financing activities		(5,250,200	)		2,113,742
Effect of exchange rate changes on cash and cash equivalent		(366,392	)		(124,208	)
Net decrease in cash and cash equivalents		(9,826,158	)		(10,426,417	)
Cash and cash equivalents - beginning of period		22,004,479			23,407,551
Cash and cash equivalents - end of period		12,178,321			12,981,134

We had a balance of cash and cash equivalents of $12.2 million as of September 30, 2015 compared with a balance $13.0 million as of September 30, 2014. We have historically funded our working capital needs through advance payments from customers, bank borrowings, and capital from stockholders. Our working capital requirements are influenced by the state and level of our operations, and the timing of capital needed for projects.

Operating Activities. Net cash inflow provided by operating activities was $0.6 million for the nine months ended September 30, 2015, compared to net cash outflow used in operating activities of $17.9 million for the nine months ended September 30, 2014, an increase of $18.5 million. The increase in net cash inflows provided by operating activities was primarily due to the following:

●	We had $7.4 net income in the nine months ended September 30, 2015. In the same period of 2014, we had net loss of $3.1 million, which led to a $10.5 million increase in net cash inflow from operating activities.

●	We had $20.1 million cash inflow from real estate property completed and real estate property under development (combination of accounts payable) for the nine months ended September 30, 2015. In the same period of 2014, we had $11.1 million on our projects, this accounted for $9.0 million increase in the net cash inflow from operating activities;

●	Changes in customer deposit provided $11.3 million cash outflow for the nine months ended September 30, 2015. In the same period of 2014, changes in customer deposit contributed $2.5 million cash inflow, which led to a $13.8 million increase in the net cash outflow from operating activities.

●	Changes in account receivable provided $5.2 million cash outflow for the nine months ended September 30, 2015. In the same period of 2014, changes in account receivable contributed $0.1 million cash inflow, which led to a $5.3 million increase in the net cash outflow from operating activities.

●	Changes in prepayments provided $10.1 million cash inflow for the nine months ended September 30, 2015. In the same period of 2014, changes in prepayments contributed $2.9 million cash outflow, which led to a $13.0 million increase in the net cash inflow from operating activities.

●	Revenue in excess of billing provided $6.1 million cash outflow for the nine months ended September 30, 2015. In the same period of 2014, revenue in excess of billing contributed $1.6 million cash inflow, which led to a $7.7 million decrease in the net cash inflow from operating activities.

●	Changes in other receivable provided $3.5 million cash outflow for the nine months ended September 30, 2015. In the same period of 2014, changes in other receivable provided $22.5 million cash outflow, which led to a $19.0 million decrease in net cash outflow from operating activities.

●	Changes in other payable provided $0.5 million cash inflow for the nine months ended September 30, 2015. In the same period of 2014, changes in other payable provided $6.9 million cash inflow, which led to a $6.4 million decrease in net cash inflow from operating activities.

Investing Activities. Net cash outflow used in investing activities was $4.8 million for the nine months ended September 30, 2015, compared to net cash inflow of $5.5 million provided by investing activities for the nine months ended September 30, 2014, representing an increase of $10.3 million in the net cash outflow from investing activities. The Company loans repaid by related parties increased by $14.3 million, meanwhile, loans paid to related party increased by $22.3 million in the nine months ended September 30, 2015 as compared with the same period of 2014. Disposal of lands resulted in the increase of cash inflow of $7.2 million, and purchase of equipment led to a $2.5 million decrease in the net cash outflow from investing activities. And there was $12.2 million short-term loan repaid from related parties in the nine months ended September 30, 2014, while it was nil in the same period of year 2015.

Financing Activities. Net cash outflow used in financing activities was $5.3 million for the nine months ended September 30, 2015, compared to $2.1 million cash inflows provided by financing activities for the nine months ended September 30, 2014, a decrease of cash inflows of $7.4 million. This was mainly due to an increase of repayment of financial institution loan of $3.2 million in the nine months ended September 30, 2015 as compared with the same period of 2014, and a decrease of $7.0 million of financial institution loan received in the nine months ended September 30, 2015 as compared with same period of 2014, meanwhile, the Company received $2.8 million cash inflow from note payable. $10.0 million cash inflow from entrusted investment in the nine months ended September 30, 2015, and the Company paid $4.0 million for the entrust investment to purchase land and $6.0 million to a related party based on escrow agreement.

Contractual Obligations

Long-term debt obligations, costs of land use rights and non-cancellable construction contract obligations for the nine months ended of September 30, 2015

	Payments due by period
			less than		1-3
in thousands of US Dollars	Total		1 year		years
Loans payable	$	81,382	$	46,811	$	34,571
Costs of land use rights		3,679		3,679		-
Non-cancellable construction contract obligations		115,159		115,159		-

Total		200,220		165,649		34,571

Customers’ down payments and installments provide a significant portion of our cash inflows. We may also acquire additional cash by raising funds through new borrowings, refinancing of existing borrowings, public or private sales of equity securities, or a combination of one or more of the above; however, there can be no absolute assurance that our internally generated cash flows and external financing will be sufficient to meet our contractual and financing obligations in a timely manner.

As of September 30, 2015, we entered into non-cancellable agreements with several contractors for our on-going business of constructing residential and commercial properties. The total amount we committed to pay contractors as outlined in these non-cancellable construction agreements aggregates approximately $115.2 million.

Material Financial Obligations

Loans Payable

As of September 30, 2015 our total loan balance was $87.2 million.

	September 30,		December 31,
	2015		2014
	(Unaudited)

Loans from Industrial and Commercial Bank of China, XingtaiYejin Branch (“ICBC 2013 Loans”)
Original loan due January 30, 2015, RMB 50,000,000($7,856,941) maturity extended to March 30, 2016, RMB 18,000,000($2,828,500) maturity extended to June 30, 2016) , at 9.84% per annum		10,685,441		11,050,621
Original loan due May 30, 2015, RMB 2,000,000 ($314,277) maturity extended to June 30, 2016, RMB 46,000,000($7,228,386) maturity extended to September 30, 2016, at 9.84% per annum		7,542,663		7,800,439
Original loan due September 30, 2015, RMB 4,000,000 ($628,555) maturity extended to September 30, 2016, RMB 30,000,000 ($4,714,165) maturity extended to December 30, 2016, RMB 14,000,000 ($2,199,943) maturity extended to March 30, 2017, at 9.84% per annum		7,542,663		7,800,439
Original loan due January 30, 2016, RMB 26,000,000 ($4,085,609) maturity extended to March 30, 2017, RMB 22,000,000 ($3,457,054) maturity extended to June 30, 2017, at 9.84% per annum		7,542,663		7,800,439
Original loan due May 30, 2016, RMB 28,000,000 ($4,399,887) maturity extended to June 30, 2017, RMB 20,000,000 ($3,142,776) maturity extended to July 30, 2017, at 9.84% per annum		7,542,663		7,800,439
		40,856,093		42,252,377
Loans from Industrial and Commercial Bank of China, XingtaiYejin Branch (“ICBC 2012 Loans”)
Due September 18, 2015, at 9.225% per annum		-		6,500,366
Due May 19, 2015, at 9.225% per annum		-		4,875,274
Due January 19, 2015, at 9.225% per annum		-		4,875,274
		-		16,250,914
Loans from HebeiXingtai Rural Commercial Bank
Due April 24, 2015, at 12.56% per annum (“Credit Union 2014 Short-term loan”)		-		3,250,183
Due May 8, 2015, at 12.036% per annum (“Syndicated Loans 2014”)		-		8,125,457
Due July 24, 2015, at 11.46% per annum (“Zhongding Kirin 2014 Loan”)		-		7,514,241
Due June 26, 2015, at 11.46% per annum (“Short-term 2014 Loan”)		-		3,250,183
Due October 16, 2017, at 7.38% per annum (“Garden 2014 Loan”)		4,714,164		4,875,274
Due November 12, 2015, at 15.00% per annum (“Entrust Loan 2014”) (note(a))		1,855,809		1,919,233
Due July 3, 2015, at 11.79% per annum (“Zhongding Kirin Loan 2014”)		-		4,875,274
Due February 6, 2016, at 15% per annum (“Entrust Loan 2015”)		2,003,520		-
Due February 8, 2017, at 7% per annum (“Syndicated Loans 2015”)		7,856,941		-
Due April 21, 2015, at 15.46% per annum (“Credit Union 2015 Short-term loan”)		3,142,776		-
Due May 14, 2016, at 13.01% per annum (“Garden 2015 Loan”)		2,828,499		-
Due May 7, 2016, at 13.11% per annum (“HebeiZhongding Loans 2015”)		7,071,247		-
Due June 10, 2016, at 13.99% per annum (“Zhongding Kirin Loan 2015-1”)		6,810,097		-
Due June 23, 2016, at 13.01% per annum (“Zhongding Kirin Loan 2015-2”)		4,242,748		-
		40,525,801		33,809,845

	$	81,381,894	$	92,313,136

Note (a): This loan was repaid in full when it became mature subsequent to balance sheet date.

ICBC 2012 Loans and ICBC 2013 Loans are floating rate loans whose rates are set at 10% above 1-to-3 year base borrowing rate stipulated by the People’s Bank of China at the date of each drawdown, and are subject to revision every 12 months. The Company also paid financing service fees for ICBC 2012 Loans, ICBC 2013 Loans Syndicated Loans 2014, Short-term 2014 Loan, Zhongding Kirin Loan 2014, Garden 2015 Loan, HebeiZhongding Loans 2015 and Zhongding Kirin Loan 2015-1 and Zhongding Kirin Loan 2015-2. The financing service fees were paid prior to financial institution releasing loans to the Company as prepaid interest, and have been included in the determination of respective loans’ effective interest rates. Credit Union 2015 Short-term Loan was guaranteed by HebeiYoerma and Zhongding Kirin Loan 2014 was guaranteed by an unrelated party company as arranged by the financial institution. The Company did not pay for the guarantees. ICBC 2013 Loans were extended and the Company increased the mortgaged property with carry value of approximately $7,132,446 (unaudited).

Related Party Transactions and Balances

(1) Loan to related parties consisted of the following:

	September 30,		December 31,
	2015		2014
	(Unaudited)
HuaxiaHuifeng Ventures Capital Management (Beijing) Co., Ltd(note(a))
Due October 14, 2015, at 18% per annum, maturity extended to December 31, 2016	$	15,713,882	$	27,626,554
Due October 14, 2015, no interest, maturity extended to December 31, 2016		2,042,805		4,532,380
		17,756,687		32,158,934
Zhuolu Huada Real Estate Development Co., Ltd
Original loan due August 5, 2015, maturity extended to August 5, 2016, at 20% per annum		4,674,880		4,834,647

Zhenjiang Huaxia Kirin Real Estate Development Co., Ltd
Due October 16, 2017, at 7.92% per annum		4,714,164		4,875,274
Due February 8, 2017, at 8.90% per annum		7,856,941		-
Due December 31, 2015, at 15% per annum		7,455,860		-
		20,026,965		4,875,274
Langfang Hualin Real Estate Development Co., Ltd
Due February 9, 2016, at 15% per annum		13,357		-
Due March 18, 2016, at 15% per annum		23,571		-
Due May 13, 2016, at 15% per annum		40,856		-
Due July 9, 2016, at 15% per annum		7,857		-
		85,641		-
Huaxia Kirin (Beijing) Investment Co., Ltd
Due December 31, 2016, at 18% per annum		5,499,859		-

Huaxia Brother (Beijing) Investment Management Co., Ltd
Due December 31, 2016, at 18% per annum		3,215,060		-

Beijing Huaxia Kirin Investment Development Co., Ltd
Due December 31, 2016, at 18% per annum		2,335,083		-

Interest income receivables		10,998,309		6,484,246

	$	64,592,484	$	48,353,101

Note (a): On February 11, 2015, the Company received RMB 84,890,000 (approximately $13,660,000, at historical exchange rate) from HuaxiaHuifeng.

(2) Government grant escrowed by Business Investment (Receivable from a Trust Equity Owner)

In 2008, a VIE of the Company, XingtaiZhongding, was entitled to a government grant associated with its development of Kirin County project of RMB 160,000,000 (approximately $22,981,000), translated at historical exchange rate). Cash representing the grant has been remitted to Business Investment, a trust equity owner of XingtaiZhongding in June 2008. Business Investment originally acquired the land use rights of Kirin County project, and contributed the land use rights to XingtaiZhongding as paid-in capital to develop the project. Based on the arrangement between Business Investment and XingtaiZhongding, which has been sanctioned by local government, the benefit of the government grant is to be transferred from Business Investment to XingtaiZhongding. Specifically, Business Investment acts as an escrow agent but also is nominally responsible for XingtaiZhongding’s progress. Earned portions of the government grant become available to XingtaiZhongding based on percentage of completion.

For the years ended December 31, 2012, 2011, 2010 and 2009, XingtaiZhongding was entitled to receive RMB2,800,000, RMB43,000,000, RMB63,000,000, and RMB51,200,000, respectively ($443,049, $6,642,455, $9,293,749, and $7,484,417, respectively, translated at respective years’ historical rates) earned government grant from Business Investment, representing total amount of the government grant. The Company has the right to determine how to utilize the earned government grant. As at September 30, 2015 and December 31, 2014, accumulated earned government grant of RMB160,000,000 and RMB160,000,000 ($25,142,211 and $26,001,463) was used to repay working capital provided by Jianfeng Guo for the support of other real estate projects’ development. As at September 30, 2015, the Company had a remaining $2,410,897 earned government grant available for future drawdown after repaid working capital provided by Jianfeng Guo, which is included in “Receivable from a trust equity owner” in condensed consolidated balance sheet.

(3) Working capital provided by Jianfeng Guo

Gross amount of working capital provided by and to affiliate companies and individuals designated by Jianfeng Guo as at September 30, 2015 and December 31, 2014 were as follows:

	September 30,			December 31,
	2015			2014

Gross of working capital received from affiliate companies and individuals designated by Jianfeng Guo	$	(62,419,255	)	$	(42,278,247	)
Gross of working capital provided to affiliate companies and individuals designated by Jianfeng Guo		39,687,941			21,692,272
Gross earned government grant held by a related party		25,142,211			26,001,463

Receivable from a trust equity owner	$	2,410,897		$	5,415,488

(4) Disposal of subsidiaries to a related party

(5) Prepayment to related party

Please see Note 8 – Prepayments.

	September 30,		December 31,
	2015		2014
	(Unaudited)
Mr. Wu Hui	$	4,033,355	$	5,663,264
Kirin Huaxia Development Co., Ltd.		1,971,385		2,038,759
Huaxia Kirin (Beijing) Investment Co., Ltd.		-		5,687,820
Beijing Huaxia Kirin Investment Development Co. ,Ltd.		-		1,643,043

	$	6,004,740	$	15,032,886

(6) Loan related to related party

Please see Note 19 Credit Union 2014 and 2015 Short-term Loan, Entrusted loan 2014 and 2015, Garden 2014 and 2015 Loan, Syndicated loans 2015.

(7) Balances with related parties

Please see Note 9 – Other receivables and Note 15 – Other Payables and Accrued liabilities.

(8) Service fee

(9) Notes Receivable

Please see Note 6 – Notes Receivable from a related party.

(10) Notes Payable

Please see Note 12- Notes Payable to a related party.

(11) Entrust Investment from a related party

Please see Note 14 – Entrust Investment from a related party.

Relocation Program of Kong Village

Local government did not have enough funds to pay for the relocation and new accommodations of Kong Village’s residents prior to the sale of the village’s land-use right. Consequently, the Company funded the local government by building new complexes and compensating and accommodating the villagers for and during the relocation. The government will repay our costs (a form of financing provided to government) when it sells the land use rights on which the previous villagers were removed. In exchange for such financing, the Company is assured the vacated land use right in public auction; (we will be refunded according to the sale price of the land so the bidding process is noncompetitive). We will construct 1,818 units for Kong Village, or about 280,000 square meters in housing. We will get repaid as the parcels of land use rights are sold. We will attend all the auction and bidding process and acquire the vacated land.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements.

The Company is currently in the process of evaluation the impact of the adoption of ASU 2014-09, ASU 2014-15 and ASU 2015-03 on its consolidated financial statements.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Smaller reporting companies are not required to provide the information required by this item.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) (the Company’s principal executive officer) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, for the reasons set forth below, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. For the material weakness described below, management concluded that our internal controls over financial reporting were not effective as of September 30, 2015.

●	We do not have a functional audit committee; and

●	We lack of sufficient knowledge or resources of and ability to uniformly apply U.S. GAAP reporting by our existing key accounting staff; and

●

We have substantial related party transactions and have no corporate governance policies in place to review, authorize and approve such transactions. Specially the Company made loans to related parties which is in violation to the Sarbanes-Oxley Act of 2002, including Section 402’s prohibition against personal loans to directors and executive officers, either directly or indirectly. The loans may subject us and our officers and directors to possible criminal, civil or administrative sanction, penalties, or investigations, in addition to potential private securities litigation. Management is aware of the violation, and has committed to remediating it by collecting the outstanding balance according to loan agreement and implementing controls that will prevent this type of violation from happening in the future.

The Company is still determining what steps it will take to remedy these material weaknesses.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the third quarter of 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, the material weakness described above resulted in the Company having another repeated violation under Section 402of the Sarbanes-Oxley Act of 2002 in the past quarter.

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings.

To the best of our knowledge, there are no materials pending legal proceedings to which we are a party or of which any of our property is the subject. However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

Item 1A.

Risk Factors.

Smaller reporting companies are not required to provide the information required by this item.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

None.

Item 6.

Exhibits.

Exhibit Number		Description

31.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Schema
101.CAL		XBRL Taxonomy Calculation Linkbase
101.DEF		XBRL Taxonomy Definition Linkbase
101.LAB		XBRL Taxonomy Label Linkbase
101.PRE		XBRL Taxonomy Presentation Linkbase

In accordance with SEC Release 33-8238, Exhibits 32.1 and Exhibit 32.2 are being furnished and not filed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	KIRIN INTERNATIONAL HOLDING, INC.

Dated: December 18, 2015	By:	/s/ Jianfeng Guo
		Jianfeng Guo
		Chief Executive Officer

Dated: December 18, 2015	By:	/s/ Cindy Zheng
		Cindy Zheng
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Attached files

Yangtze River Port & Logistics Ltd Reports

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