Yangtze River Port & Logistics Ltd - Quarter Report: 2013 September (Form 10-Q)

f10q0913_kirininternational.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2013

o 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.)

12thFloor,Building F, Phoenix Plaza, No.A5, Shuguang Xili, Chaoyang District, Beijing, 100028 People’s Republic of China		100028
(Address of principal executive offices)		(Zip Code)

+86 10 8455 4001

(Registrant’s telephone number, including area code)

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, and (2) has been subject to such filing requirements for the past 90 days.

Yes o No x

Indicate by a check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 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 x No o

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 o	Accelerated Filer o	Non-Accelerated Filer o	Smaller Reporting Company x
		(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 Exchange Act. Yes o No x

The registrant had 20,596,546 shares of common stock, $0.0001 per share, outstanding at November 19, 2013.

KIRIN INTERNATIONAL HOLDING, INC.

QUARTERLY REPORT ON FORM 10-Q

September 30, 2013

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION		PAGE

Item 1.	Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	45

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults Upon Senior Securities	46

Item 4.	Mine Safety Disclosures	46

Item 5.	Other Information	46

Item 6.	Exhibits	46

SIGNATURES		47

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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.

CONSOLIDATED BALANCE SHEETS

	September 30,		December 31,
	2013		2012
	(Unaudited)
ASSETS

Cash and cash equivalents	$	18,129,430	$	24,098,688
Restricted cash		8,894,284		6,924,572
Accounts receivable		695,976		1,826,930
Revenue in excess of billings		4,627,757		8,080,156
Prepayments		30,231,924		15,615,001
Other receivables		15,719,774		6,172,152
Receivable from a related party		3,088,960		3,041,130
Loan to a related party		35,952,791		15,832,555
Real estate property completed		6,177,474		6,958,177
Real estate properties and land lots under development		181,753,590		184,839,907
Investment at cost		7,152,843		3,166,511
Property and equipment, net		3,409,829		436,041
Deferred tax assets		6,702,866		3,817,260
Total assets	$	322,537,498	$	280,809,080

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities
Accounts payable	$	49,937,993	$	50,684,036
Income taxes payable		2,581,293		1,592,766
Other taxes payable		3,223,440		2,054,768
Other payables and accrued liabilities		15,056,348		14,619,565
Customer deposits		116,116,623		87,184,895
Loans payable		81,282,310		68,871,614
Total liabilities		268,198,007		225,007,644

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 on September 30, 2013 and December 31, 2012, respectively		2,060		2,060
Additional paid-in capital		37,149,630		37,149,630
Statutory reserve		1,070,804		1,070,804
Retained earnings		7,781,848		10,890,595
Accumulated other comprehensive income		8,065,149		6,688,347
Total Kirin International Holding, Inc.’s equity		54,069,491		55,801,436

Non-controlling interest		270,000		-
Total stockholders’ equity		54,339,491		55,801,436
Total liabilities and stockholders’ equity	$	322,537,498	$	280,809,080

See notes to the consolidated financial statements

* Certain of the assets of the VIEs can be used only to settle obligations of the consolidated VIEs. Conversely, 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.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

	Nine Months Ended September 30,						Three Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Revenue from real estate sales, net	$	102,314,315		$	41,421,119		$	36,900,545		$	22,404,249
Cost of real estate sales		91,164,755			40,569,589			33,641,375			18,665,744
Gross profit		11,149,560			851,530			3,259,170			3,738,505

Operating expenses
Selling expenses		3,248,828			2,141,027			1,054,420			893,456
General and administrative expenses		5,033,034			4,213,331			1,528,347			1,643,832

Total operating expenses		8,281,862			6,354,358			2,582,767			2,537,288

Income (loss) from operations		2,867,698			(5,502,828	)		676,403			1,201,217

Other income (expenses)
Investment income		205,738			-			90,500			-
Interest expense		(6,282,089	)		(4,368,809	)		(2,400,120	)		(3,016,584	)

Total other expenses		(6,076,351	)		(4,368,809	)		(2,309,620	)		(3,016,584	)

loss before income taxes		(3,208,653	)		(9,871,637	)		(1,633,217	)		(1,815,367	)

Income taxes expense (benefit)		(99,906	)		(2,397,532	)		180,217			(388,861	)

Net loss	$	(3,108,747	)	$	(7,474,105	)	$	(1,813,434	)	$	(1,426,506	)
Less: net loss attributable to non-controlling interest					-						-
Net loss attributable to stockholder of Kirin International Holding, Inc.	$	(3,108,747	)	$	(7,474,105	)	$	(1,813,434	)	$	(1,426,506	)

Other comprehensive income
Foreign currency translation adjustment		1,376,802			405,430			316,431			(175,449	)
Comprehensive loss		(1,731,945	)		(7,068,675	)		(1,497,003	)		(1,601,953	)
Less: other comprehensive income (loss) attributable to non-controlling interest					-						-
Comprehensive loss attributable to stockholder of Kirin International Holding, Inc.	$	(1,731,945	)	$	(7,068,675	)	$	(1,497,003	)	$	(1,601,953	)

Basic and diluted loss per share	$	(0.15	)	$	(0.36	)	$	(0.09	)	$	(0.07	)
Basic and diluted weighted average shares outstanding		20,596,546			20,560,016			20,596,546			20,560,016

See notes to the consolidated financial statements

KIRIN INTERNATIONAL HOLDING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended September30,
	2013			2012
	(Unaudited)			(Unaudited)

Cash flows from operating activities:
Net loss	$	(3,108,747	)	$	(7,474,105	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation		82,150			73,392
Stock-based compensation					402,000
Deferred tax benefit		(2,752,031	)		(3,698,032	)

Changes in operating assets and liabilities
Restricted cash		(1,764,200	)		(6,146,266	)
Accounts receivable		1,166,572			432,402
Revenue in excess of billings		3,627,391			1,242,180
Prepayments		(14,063,607	)		(1,829,608	)
Other receivables		(9,216,738	)		(3,947,525	)
Receivable from a trust equity owner		33,216			919,806
Real estate property completed		956,106			-
Real estate properties and land lots under development		7,944,731			(11,041,397	)
Accounts payable		(2,079,374	)		1,661,905
Income taxes payable		935,220			1,586,560
Other taxes payable		1,101,105			(2,418,739	)
Other payables and accrued liabilities		58,871			4,110,449
Customer deposits		26,297,637			36,287,542

Net cash provided by operating activities		9,218,302			10,159,582

Cash flows from investing activities:
Purchases of equipment		(329,013	)		(280,974	)
Purchases of property in US		(2,714,377	)		-
Repayment of loans from a related party		24,109,864			-
Loans to a related party		(43,584,205	)		-
Payment in investment at cost		(3,857,578	)		-

Net cash used in investing activities		(26,375,309	)		(280,974	)

Cash flows from financing activities:
Proceeds from loans		22,502,540			23,706,232
Repayment of loans		(12,054,932	)		(13,591,573	)
Proceeds from non-controlling stockholder		270,000

Net cash provided by financing activities		10,717,608			10,114,659

Effect of exchange rate changes on cash and cash equivalents		470,141			22,142
Net increase(decrease) in cash and cash equivalents		(5,969,258	)		20,015,409

Cash and cash equivalents - beginning of the period		24,098,688			10,602,165

Cash and cash equivalents - end of the period	$	18,129,430		$	30,617,574

Supplementary cash flow information
Cash paid for income tax	$	2,014,759		$	-
Cash paid for interest expense	$	5,819,940		$	4,725,558

See notes to the consolidated financial statements

KIRIN INTERNATIONAL HOLDING, INC.

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

Note 1 – Organization and Description of Business

Kirin International Holding, Inc. (the “Company”, formerly known as Ciglarette, Inc.) 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 of September 30, 2013, the Company had following wholly-owned entities:

	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

VIEs
Hebei Zhongding Real Estate Development Co., Ltd. (“Hebei Zhongding”)	Xingtai, Hebei province, China	July 16, 2007	Real estate development
Xingtai Zhongding Jiye Real Estate Development Co., Ltd.	Xingtai, Hebei province, China	August 7, 2008	Real estate development

Subsidiaries of VIEs
Xingtai Zhongding Construction Project Management Co., Ltd.	Xingtai, Hebei province, China	September 3, 2007	Dormant
Xingtai Zhongding Kirin Real Estate Development Co., Ltd. (formerly known as Xingtai Zhongding Business Service Co., Ltd., “Business Service”)	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 Hetai Real Estate Development Co., Ltd.	Xingtai, Hebei province, China	December 6, 2010	Real estate development
Huaxia Kirin (Beijing) Property Management Co., Ltd.	Beijing, China	December 19, 2011	Property management
Hebei Zhongding Property Service Co., Ltd.	Xingtai, Hebei province, China	December 19, 2011	Property management
Langfang City Huading Chengmei Real Estate Development Co., Ltd. (“Huading Chengmei”)	Langfang, Hebei province, China	July 27, 2012	Real estate development
Baoding City Heda Kirin Science and Technology Park Investment Co., Ltd. (“Heda Kirin”)	Baoding, Hebei province, China	September 3, 2012	Investment holding
Baoding City Heda Kirin Real Estate Development Co., Ltd.	Baoding, Hebei province, China	November 28, 2012	Real estate development

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements for the three months and nine months ended September 30, 2013 and 2012 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, 2012 for further information. In the opinion of management of the Company, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position at September 30, 2013, the results of operations for the three month and nine months periods ended September 30, 2013 and cash flows for the three month and nine months periods ended September 30, 2013 and 2012. The results of operations for the three month and nine months periods ended September 30, 2013 are not necessarily indicative of the operating results for the year. The consolidated balance sheets as of September 30, 2013 and December 31, 2012, and the consolidated statements of operations and comprehensive loss and cash flows for the three months and nine months periods ended September 30, 2013 and 2012 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 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.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. 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 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 consolidated statements of income and comprehensive income in accordance with ASC 220,

Comprehensive Income

Since July 2005, the RMB is no longer pegged to the US$. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the US$ in the medium-to-long term. Moreover, it is possible that in the future, PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market. PRC exchange control regulations may also restrict the Company’s ability to convert RMB into foreign currencies.

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 of 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.

The Company adopts the percentage-of-completion method of accounting for revenue recognition for all building construction projects in progress in which the construction period was expected to be more than twelve months at that date.

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 transaction are recognized in the period in which the transaction occurs.

Except for the down payment, remaining contract price can be settled by several installments or financed by mortgage. The Company requires customers to pay 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 can be approved. The Company provides guarantees for mortgage loans from financial institutions to customers (see “Restricted cash”). Such guarantees expire when customers have obtained House Ownership Certificate of 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 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 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 constitutes only an insignificant amount compared to the contract value. These adjustments 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 estimators work in collaboration with a committee also 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 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.

Real Estate Capitalization and Cost Allocation

Properties under development or completed 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 grant 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, Xingtai Zhongding was entitled to a government grant of approximately $25,138,655 related to Kirin County project to subsidize the modernization of the neighborhood where the real estate project 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. For the three months and nine months ended September 30, 2013 and 2012, the Company did not recognize any grant income, respectively. All government grant related to Kirin County has been recognized as of December 31, 2012 as the construction of Kirin County completed during the year. The local government has arranged a lump sum payment of the grant to Xingtai Jiye 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 Xingtai Zhongding 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 at September 30, 2013, the Company didn’t receive any request from 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 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. For the nine months ended September 30, 2013 and 2012, $nil and $356,749 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 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 are 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 $8,894,284and $6,924,572 as at September 30, 2013 and December 31, 2012, 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.

Investment at Cost

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 $ 205,738 as dividend for the nine months ended September 30, 2013.

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	5 years
Property in US	39 years

As of September 30, 2013, the Company’s offshore subsidiary Brookhollow Lake, LLC purchased a property as a new office which fair value is $2,051,874. The fair value increased to $2,687,531 after the leasehold improvement on this property and the improvement process is still going on.

Income Taxes

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

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.

Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and it prescribes a recognition threshold and measurement attributable for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognizing, classification, interest and penalties, accounting in interim periods, disclosures and transitions.

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 borrowings 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.

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 components of comprehensive income during the three months and nine months ended September 30, 2013 and 2012 were net income and 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, to issue common stock were exercised and converted into common stock. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation. The company had loss exclude all dilutive securities for the nine months ended September 30, 2013 and income for the three months ended September 30, 2013.

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 three months ended September 30, 2013 and 2012, the Company recorded an advertising expense of $668,035 and $318,702 respectively. For the nine months ended September 30, 2013 and 2012, the Company recorded an advertising expense of $1,886,130 and $703,528, 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 at September 30, 2013 and December 31, 2012, the Company retained $144,683 and $205,823 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 three months and nine months ended September 30, 2013 and 2012, 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 three months and nine months ended September 30, 2013 and 2012.

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 February 2013, the Financial Accounting Standards Board ("FASB") issued amendments under ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (Topic 220). The amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.

The FASB has issued Accounting Standards Update (ASU) No. 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date. ASU 2013-04 provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this ASU is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2014, and interim periods and annual periods thereafter. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

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.

The VIE Agreements are summarized below:

Entrusted Management Agreement

Pursuant to the Entrusted Management Agreement between Kirin Management, the Hebei Zhongding Real Estate Development Corporation Limited and Xingtai Zhongding Jiye Real Estate Development Company Limited (the “Operating Companies”) and the shareholders of the Operating Companies, the Operating Companies and their shareholders agreed to entrust the business operations of the Operating Companies and its management to Kirin Management until Kirin Management acquires all of the assets or equity of the Operating Companies. Kirin Management has the full and exclusive right to manage and control all cash flow and assets of the Operating Companies and to control and administrate the financial affairs and daily operation of the Operating Companies. In exchange, Kirin Management is entitled to the Operating Companies’ earnings before tax as a management fee which depends on the before-tax profit of the Operating Companies and does not have a minimum requirement. No management fee has been paid to date. Kirin Management is also obligated to pay all of the Operating Companies’ debts to the extent the Operating Companies are unable to pay such debts. Specifically, if the Operating Companies do not have sufficient cash to repay their debts when they become due and are unable to obtain any extension of, or borrow new loans to repay, such debts, Kirin Management will be responsible for paying those debts on behalf of the Operating Companies to the extent that the Operating Companies are unable to pay such debts. Likewise, if the Operating Companies’ net assets are lower than their registered capital, Kirin Management will be responsible for funding the deficit. The Entrusted Management Agreement does not specify how Kirin Management and the Operating Companies will determine Operating Company debt and the respective Operating Companies’ ability to pay that debt. There is no existing written or oral arrangement or agreement regarding any aspect of the calculation or payment of the debts of the Operating Companies except the Entrusted Management Agreement. Due to the lack of binding guidance as to such matters, there may be ambiguity in the future regarding Kirin Management’s responsibility to pay the debt obligations of the Operating Companies. To date, Kirin Management has not paid any of the Operating Companies’ respective debts. There is no renewing clause in the Entrusted Management Agreement. Unless otherwise specified or legally prohibited, any newly signed agreement shall be deemed as a new and independent agreement. The term of the Entrusted Management Agreement shall be from the effective date of it to the earlier of the following: (1) the winding up of the Operating Companies, or (2) the date on which Kirin Management completes the acquisition of the Operating Companies. Pursuant to the Entrusted Management Agreement, the Operating Companies and their shareholders have the obligation to not terminate this Agreement unilaterally for any reason whatsoever.

Shareholders’ Voting Proxy Agreement

Pursuant to the Shareholders’ Voting Proxy Agreement between Kirin Management and the shareholders of the Operating Companies, the Operating Companies’ shareholders irrevocably and exclusively appointed the board of directors of Kirin Management as their proxy to vote on all matters that require the approval of the Operating Companies shareholders. Mr. Guo is the sole member of the board of directors of Kirin Management. There is no renewing clause in the Shareholders’ Voting Proxy Agreement. Unless otherwise specified or legally prohibited, any newly signed agreement shall be deemed as a new and independent agreement. Pursuant to the Shareholders’ Voting Proxy Agreement, it shall become effective upon the execution by Kirin Management and the shareholders of the Operating Companies and shall not be terminated prior to the completion of acquisition of all of the shares in, or all assets or business of, the Operating Companies by Kirin Management.

Exclusive Option Agreement

Under the Exclusive Option Agreement between Kirin Management, the Operating Companies and the shareholders of the Operating Companies, the Operating Companies’ shareholders granted to Kirin Management an irrevocable exclusive purchase option to purchase all or part of the shares or assets of the Operating Companies to the extent that such purchase does not violate any PRC law or regulations then in effect. If Kirin Management exercises its option, Kirin Management and the Operating Companies’ shareholders shall enter into further agreements regarding the exercise of the option, including the exercise price, which such additional agreements shall take into consideration factors such as the then applicable PRC laws and the then appraisal value of the Operating Companies. The exercise price shall be refunded to Kirin Management or the Operating Companies at no consideration in a manner decided by Kirin Management, in its reasonable discretion. Since Kirin Management controls and receives the economic benefits of the Operating Companies through the Contractual Arrangements, exercising the option at this point will not result in any immediate additional benefit to the Company. Kirin Management will exercise the option when the Company believes that exercising the option would be more beneficial to it. The Exclusive Option Agreement was set up in this manner as currently foreign invested real estate enterprises are strictly controlled and heavily regulated by the PRC authorities. The Company thinks it will be subject to complex procedural requirements if it attempts to obtain approval for the acquisition of share equity or assets of the Operating Companies under the current PRC regulations. There is no renewing clause in the Exclusive Option Agreement. Unless otherwise specified or legally prohibited, any newly signed agreement shall be deemed as a new and independent agreement. Pursuant to the Exclusive Option Agreement, it shall be effective upon the execution by Kirin Management, the Operating Companies and the shareholders of the Operating Companies, and shall remain effective thereafter; the Exclusive Option Agreement may not be terminated without the unanimous consent of Kirin Management, the Operating Companies and the shareholders of the Operating Companies, except that Kirin Management may, by giving thirty days prior notice to the Operating Companies and the shareholders of the Operating Companies, terminate it.

These agreements are governed by the PRC laws and regulations. PRC laws and regulations concerning the validity of the VIE Agreements are uncertain, as many of these laws and regulations are relatively new and may be subject to change, and their official interpretation and enforcement by the PRC government may involve substantial uncertainty. Further, these VIE Agreements are governed by PRC laws and provide for the resolution of disputes through arbitration proceedings pursuant to PRC laws. If Hebei Zhongding or Xingtai Zhongding or their respective stockholders fail to perform their obligations under the VIE Agreements, the Company may have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, and there is a risk that the Company may be unable to obtain these remedies. Therefore the VIE Agreements may not be as effective in providing control over Hebei Zhongding and Xingtai Zhongding as direct ownership. Because the Company relies on Hebei Zhongding and Xingtai Zhongding for revenue, any termination of or disruption to these VIE Agreements could detrimentally affect the business of the Company.

The Company’s revenues are earned by Kirin Management. However, PRC regulations restrict the ability of the PRC subsidiary to make dividends and other payments to its offshore parent company. PRC legal restrictions permit payments of dividend by the PRC subsidiary only out of its accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Kirin Management is also required under PRC laws and regulations to allocate at least 10% of the annual after-tax profits determined in accordance with PRC GAAP to a statutory general reserve fund until the amounts in such fund reaches 50% of its registered capital. Kirin Management cannot distribute the profits or pay dividends out of China before it sets aside such statutory fund unless the amounts in such fund reaches 50% of its registered capital. Kirin Management has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation. Although the statutory reserves can be used to, among other things, increase the registered capital and eliminate future losses in excess of retained earnings of Kirin Management, these reserves are not distributable as cash dividends. These statutory reserves may only be applied to the development of Kirin Management; consequently funds distributable up the corporate structure made available by Kirin Management may be limited. Kirin Management have the discretion to allocate a portion of their after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation. Since the statutory reserves and the staff welfare and bonus funds cannot be distributed to the shareholder except in the event of liquidation, allocation of the statutory reserves and the staff welfare and bonus funds will limit the funds available to Kirin Management that are distributable up the corporate chain.

In addition, the PRC Income Tax Law also imposes a 10% withholding income tax on dividends generated on or after January 1, 2008 and distributed by a resident enterprise to its foreign investors, if such foreign investors are considered as non-resident enterprise without any establishment or place within China or if the received dividends have no connection with such foreign investors’ establishment or place within China, unless such foreign investors’ jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement.

Summary information regarding consolidated VIEs is as follows:

	September 30,		December 31,
	2013		2012
	(Unaudited)

ASSETS

Cash and cash equivalents	$	16,083,714	$	23,217,301
Restricted cash		8,894,284		6,924,572
Accounts receivable		695,976		1,826,930
Revenue in excess of billings		4,627,757		8,080,156
Prepayments		28,031,924		15,615,001
Other receivables		21,050,768		6,159,022
Receivable from a trust equity owner		3,088,960		3,041,130
Loan to a related party		35,952,791		15,832,555
Real estate property completed		6,177,474		6,958,177
Real estate properties and land lots under development		181,753,590		184,839,907
Investment at cost		7,152,843		3,166,511
Property and equipment, net		622,989		363,578
Deferred tax assets		6,702,866		3,817,260
Total assets	$	320,835,936	$	279,842,100

LIABILITIES

Accounts payable	$	49,937,993	$	50,684,036
Income taxes payable		2,581,293		1,592,766
Other taxes payable		3,223,440		2,054,768
Other payables and accrued liabilities		13,814,198		14,617,665
Customer deposits		116,116,623		87,184,895
Long-term loans		81,282,310		68,871,614
Total liabilities	$	266,955,857	$	225,005,744

For the nine months ended September 30, 2013 and 2012, the financial performance of VIEs reported in the consolidated statements of income and comprehensive income includes sales of approximately $ 102.3 million and $41.4million, respectively, cost of sales of approximately $91.2 million and $40.6 million, respectively, operating expenses of approximately $7.5 million and $5.4 million, respectively, and net loss of approximately $2.4 million and net loss of approximately $6.5 million, respectively.

Note 4 – Accounts Receivable

	September 30,		December 31,
	2013		2012
	(Unaudited)
Receivables from sales of condominium units	$	265,180	$	1,407,367
Receivable from sales of land use rights		430,796		419,563

	$	695,976	$	1,826,930

Accounts receivable consists of balances due from customers for the sales of land use rights and completed properties in accordance with full accrual method, under which the Company recognizes related revenue after customers have made sufficient down payment.

As at September 30, 2013, accounts receivable also include receivables of Kirin County project as the construction is completed and related condominium units are available for delivery to customers.

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

Note 5 – Revenue in Excess of Billings

Revenue in excess of billings represents the amount revenue recognized for certain residential and commercial units in commercial building of Kirin County, No.79 Courtyard and Kirin Bay projects 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 24 months, depending on construction progress of related real estate properties.

Note 6 – Prepayments

Prepayments consisted of the following:

	September 30,		December 31,
	2013		2012
	(Unaudited)
Advances to suppliers and contractors	$	4,232,422	$	1,900,658
Financing service fees charged as prepaid interests		2,112,640		1,754,727
Excessive business tax and LAT liabilities		11,505,818		7,940,645
Prepayments-related party		12,381,044		4,018,971

	$	30,231,924	$	15,615,001

The advance to suppliers and contractors represent the company prepaid certain amount based on negotiation to suppliers because the constructions of our projects usually stretch more than one year.

Pursuant to financing service contracts entered into between the Company, Xingtai Chengjiao Rural Credit Cooperative Union Association, 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. The financing service fees are regarded as prepaid loan interest 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 prepayment to related party is regarding to construction contract. In certain area, the related parties have more bargain power with the construction contractors. The construction contractors will provide construction service.

Note 7 – Other Receivables

The components of other receivables were as follows:

	September 30,		December 31,
	2013		2012
	(Unaudited)
Working capital borrowed by contractors	$	14,442,501	$	4,610,707
Working capital borrowed by Xingtai RC Bank		-		1,191,875
Receivables of housing maintenance funds		650,279		-
Others		626,994		369,570

	$	15,719,774	$	6,172,152

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, 2013 and December 31, 2012.

Note 8 – 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,
	2013		2012
	(Unaudited)
Properties under development
Kirin County
Costs of land use rights	$	1,268,791	$	987,290
Other development costs		540,197		159,515
No. 79 Courtyard
Costs of land use rights		63,129,541		78,739,610
Other development costs		14,361,184		6,787,664
Kirin Bay
Costs of land use rights		41,503,508		47,157,690
Other development costs		7,119,818		4,211,915

		53,830,551		46,796,223

	$	181,753,590	$	184,839,907

As at September 30, 2013, the Company has obtained certificates representing titles of the land use rights used for the development of Kirin County, No. 79 Courtyard 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 15).

The Residential buildings of Kirin Country are fully completed in December, 2012. As of September 30, 2013 and December 31, 2012, the real estate property completed is 6,177,474 and 6,958,177 separately.

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 expects to secure land use rights through the auditions and will use acquired land use rights for the development of Kirin Bay and other project. 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 and December 31, 2012 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 $133,524,000 and $46,796,000, respectively.

Note 9 – Investment at Cost

Investment at cost represents the Company’s interest in Hebei Xingtai 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 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 Xingtai Chengjiao 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 company received $205,738 as dividend from its investment in Xingtai RC Bank for the nine months ended September 30, 2013.

The Xingtai Rural Commercial Bank increased paid in capital from approximately $38,207,000 (RMB 240 million) to $79,598,000 (RMB 500 million) on April 26, 2013. The Company paid approximately $3,841,000 (RMB 24,000,000) to keep its stockholder position.

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. The Company determined that there was no impairment on this investment during period ended September 30, 2013.

As of September 30, 2013 and December 31, 2012, the Company has deposit balances (including restricted cash) of $5,852,326 and $18,697,000 in Xingtai RC Bank, respectively.

Note 10 – Accounts Payable

	September 30,		December 31,
	2013		2012
	(Unaudited)
Payables in relation to acquisitions of land use rights	$	3,705,839	$	6,397,965
Construction contractors		46,232,154		44,286,071

	$	49,937,993	$	50,684,036

Note 11 – Other Payables and Accrued Liabilities

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

	September 30,		December 31,
	2013		2012
	(Unaudited)
Unrecognized tax benefit (Note 13(2))	$	6,502,585	$	6,333,022
Deposits from customers on behalf of utility operators		4,055,852		4,195,152
Car park deposits from customers		2,150,262		2,227,547
Deposit from a contractor		144,683		791,628
Accrued loan interest		526,709		683,996
Others		1,676,257		388,220

	$	15,056,348	$	14,619,565

Note 12 – 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, 2013 and December 31, 2012, the Company received $116,116,623 and $87,184,895 deposits from customers, respectively.

Note 13 – Income Taxes

(1) Corporate income tax

The Company is incorporated in the State of Nevada in the 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 September 30, 2013 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 and Greenfield International Corporation were incorporated in State of California, United States of America and are subject to California taxes.

The Company’s subsidiary and 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 Xingtai Zhongding Construction Project Management Co., Ltd., which local tax authorities levy income tax based on deemed profit of 8% 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 for the nine months and three months ended September 30, 2013 and 2012 are summarized as follows:

	Nine Months Ended September 30,								Three Months Ended September 30,
	2013				2012				2013				2012
	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Current
EIT expense		$	2,973,391			$	1,587,948			$	875,327			$	881,803
LAT expense			182,441				(287,448	)			60,039				133,076
Deferred tax benefit - EIT			(3,255,738	)			(3,698,032	)			(755,149	)			(1,403,740	)

		$	(99,906	)		$	(2,397,532	)		$	180,217			$	(388,861	)

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, 2013 and 2012 is as follows:

	Nine Months Ended September 30,
	2013			2012
	(Unaudited)			(Unaudited)
EIT at the PRC statutory rate of 25%	$	(426,549	)	$	(2,467,909	)
LAT expense (credit)		182,441			(287,448	)
EIT deficit of LAT		(45,610	)		71,862
Deferred tax valuation allowance		406,539			204,036
Permanent items		56,935			81,927
	$	(99,906	)	$	(2,397,532	)

(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, 2013 and 2012 is as follows:

	Nine Months Ended September 30,
	2013		2012
	(Unaudited)		(Unaudited)
Unrecognized tax benefit, as the January 1	$	6,333,022	$	6,174,682
Movement in current year due to foreign exchange rate fluctuation		169,563		29,928

Unrecognized tax benefit, as of September 30	$	6,502,585	$	6,204,610

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, 2013 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 2008 to 2012 remains subject to examination by tax authorities. The Company’s offshore subsidiaries also are subjected to examination by IRS.

(3) Deferred tax

The tax effects of temporary differences that give rise to the following approximate deferred tax assets and liabilities as of September 30, 2013 and December 31, 2012 are presented below.

	September 30,			December 31,
	2013			2012
	(Unaudited)
Deferred tax assets
Operating loss carry forward	$	3,944,391		$	2,405,198
Excess of interest expense		1,573,301			736,034
Revenue recognized based on percentage-of-completion		4,348,554			2,440,329
		9,866,246			5,581,561

Valuation allowance		(3,163,380	)		(1,764,301	)

Net deferred tax assets	$	6,702,866		$	3,817,260

Deferred taxes assets 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 2014 for No. 79 Courtyard (Phase I) and Kirin Bay (Phase I) 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 total deferred tax assets associated with net operating loss carry forward of $3,944,000 as of September 30, 2013 which will expire on various dates between September 30, 2013 and September 30, 2018. The Company provided a valuation allowance of $3,163,000 based on projected future revenue available to utilize net operating loss carried forward. Entities established out of the PRC had total deferred tax assets associated with operating loss carry forward of $722,000 and a 100% valuation allowance has been provided.

Note 14 – Other Taxes Payable

Other taxes payable consisted of the following:

	September 30,		December 31,
	2013		2012
	(Unaudited)
Business tax and related urban construction tax and education surcharge	$	2,740,743	$	1,877,756
Land Appreciation Tax		482,697		177,012

	$	3,223,440	$	2,054,768

Note 15 – Loans Payable

Loans payable as of September 30, 2013 and December 31, 2012 consisted of the following:

	September 30,		December
	2013		2012
	(Unaudited)
Loans from Industrial and Commercial Bank of China, Xingtai Yejin Branch (“ICBC 2010 Loans”)
Due March 8, 2013, at 7.79% per annum		-		3,483,162
Due March 8, 2013, at 7.79% per annum		-		4,433,115
		-		7,916,277

Loans from Association of Xingtai Chengjiao Rural Credit Cooperative Union Association
Due June 27, 2013, at 12.62% per annum		-		3,008,185
		-		3,008,185

Loan from Association of Xingtai Chengjiao Rural Credit Cooperative Union Association (“Credit Union 2012 Short-term Loan”)
Due December 21, 2013, at 13.12% per annum		-		949,953
		-		949,953

Loan from Xingtai Rural Commercial Bank
Due April 24, 2014, at 7.20% per annum		3,251,292		-
		3,251,292		-

Loan from Kong Village Committee
Due December 29, 2013, at 14.4% per annum		4,876,939		4,749,766
		4,876,939		4,749,766

Syndicated loans arranged by Xingtai Chengjiao Rural Credit Cooperative Union Association (“Syndicated Loans 2012”)
Due March 29, 2014, at 11.38% per annum		2,438,469		2,374,883
Due April 29, 2014, at 11.38% per annum		2,438,469		2,374,883
Due May 29, 2014, at 11.38% per annum		3,251,292		3,166,511
Due June 29, 2014, at 11.38% per annum		3,251,292		3,166,511
Due July 29, 2014, at 11.38% per annum		4,876,939		4,749,766
Due August 29, 2014, at 11.38% per annum		8,128,233		7,916,277
		24,384,694		23,748,831

Loans from Industrial and Commercial Bank of China, Xingtai Yejin Branch (“ICBC 2012 Loans”)
Due January 1, 2015, at 11.30% per annum		5,689,762		-
Due May 30, 2015, at 11.30% per annum		4,064,115		-
Due September 30, 2015, at 11.30% per annum		4,064,115		-
Due January 30, 2016, at 11.30% per annum		3,251,292		-
Due May 30, 2016, at 11.30% per annum		2,438,469		-
		19,507,753		-

Loans from Industrial and Commercial Bank of China, Xingtai Yejin Branch (“ICBC 2012 Loans”)
Due September 9, 2015, at 9.84% per annum		3,251,292		3,166,516
Due September 9, 2015, at 9.84% per annum		3,251,292		3,166,511
Due May 19, 2015, at 9.84% per annum		4,876,939		4,749,766
Due January 19, 2015, at 9.84% per annum		4,876,939		4,749,766
Due September 19, 2014, at 9.84% per annum		4,876,939		4,749,766
Due May 19, 2014, at 9.84% per annum		4,876,939		4,749,766
Due January 31, 2014, at 9.84% per annum		3,251,294		3,166,511
		29,261,634		28,498,602

	$	81,282,310	$	68,871,614

As of September 30, 2013 and December 31, 2012, ICBC 2012 Loans and Syndicated Loans 2012 were secured by the Company’s real estate held for development with carrying value of approximately $133,524,000 and $87,900,000, respectively.

The aggregate maturities of loans payable for each of years subsequent to September 30, 2013 are as follows:

Nine Months Ending September 30,	Amount

2014	$	45,518,093
2015		30,074,456
2016		5,689,761
Loans payable	$	81,282,310

Note 16 – 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.

Restricted Stock Awards activity as of and for the nine months ended September 30, 2013 is as follows:

	Shares		Weighted Average Grant Date Fair Value Per Share

Outstanding at the beginning of the period		146,120	$	0.12
Granted		-	$	-
Vested		-	$	-
Forfeited		-	$	-
Outstanding at the end of the period		146,120	$	0.12

The Company recognized $nil and $402,000 of share-based compensation expense related to the Restricted Stock Awards for the nine months ended September 30, 2013 and 2012, respectively.

Note 17 – Revenue

The Company’s revenue is recognized under percentage-of-completion methods for the nine months and three months ended at September 30, 2013 and 2012 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 and three months ended September 30, 2013 and 2012 was as follows:

	Nine Months Ended September 30,					Three Months Ended September 30,
	2013		2012			2013		2012
	(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)
Kirin County	$	2,065,600	$	(5,288,840	)	$	1,032,626	$	(3,297,638	)
No.79 Courtyard		57,281,766		26,280,742			21,908,286		13,526,465
Kirin Bay		42,543,969		20,429,217			13,843,172		12,175,422
Property Service		422,980		-			116,461		-

	$	102,314,315	$	41,421,119		$	36,900,545	$	22,404,249

Note 18 – Loss per Share

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares comprise shares issuable upon the exercise of Series A Warrants, Series B Warrants, Agent Warrants and unvested and unissued Restricted Stock Award, using the treasury stock method.

	Nine Months Ended September 30,								Three Months Ended September 30,
	2013				2012				2013				2012
	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Net loss		$	(3,108,747	)		$	(7,474,105	)		$	(1,813,434	)		$	(1,426,506	)
Basic and diluted loss per share		$	(0.15	)		$	(0.36	)		$	(0.09	)		$	(0.07	)
Basic and diluted weighted average shares outstanding			20,596,546				20,560,016				20,596,546				20,560,016

Series A Warrants, Series B Warrants and Agent Warrants to acquire 392,090 shares of common stock, and unvested and unissued Restricted Stock Award were not included in the computation of diluted EPS because the effect would have been anti-dilutive. Series A Warrants, Series B Warrants and Agent Warrants were still outstanding as of September 30, 2013.

Note 19 – Non-controlling interest

Non-controlling interests represent the non-controlling interest stockholders’ proportionate share of the equity of Brookhollow Lake, LLC and Greenfield International Corporation. The non-controlling interests in 2013 and 2012 are summarized as below:

	As of September 30
	2013			2012
	(Unaudited)			(Unaudited)
Brookhollow Lake, LLC		10.0	%		-
Greenfield International Corporation		30.0	%

The non-controlling interests in Brookhollow Lake, LLC and Greenfield International Corporation that are not owned by the Company are shown as “non-controlling interests” in the consolidated balance sheets as of September 30, 2013 and “net income attributable to non-controlling interests” in the consolidated statements of operations and comprehensive loss for the period ended September 30, 2013.

Note 20 – Related Party Transactions and Balances

(1) Loan to a related party

In August 2013, Kirin entered into a loan agreement with Huaxia Huifeng Ventures Capital Management (Beijing) Co., Ltd. (“Huaxia Huifeng”), a related company ultimately controlled by Jianfeng Guo, Chairman of the Kirin’s Board of Directors, and the controlling stockholder of Kirin. According to the agreement, Kirin made a loan to Huaxia Huifeng for 35,953,000 USD. As of September 30, 2013, the outstanding balance of the loan was 35.953,000 USD (221,160,000 RMB). On October 15, 2013, the Company signed a supplement loan agreement in amount of 27,636,000 USD (170,000,000 RMB) which bears 18% interest rate and has a term of one year. Subsequently, 3,902,000 USD (24,000,000 RMB) was repaid on October 16, 2013 and 4,415,000 USD (27,160,000 RMB) is expected to be repaid before December, 2013.

As of December 31, 2012, the balance of the loan to Huaxia Huifeng was 15,833,000 USD (100,000,000 RMB) which was collected in February, 2013. On January 20, 2013, Kirin loaned 4,877,000 USD (30,000,000 RMB) to Huaxia Huifeng, which was collected in March, 2013. On June 30, 2013, Kirin loaned 3.251,000 USD (20,000,000 RMB) to Huaxia Huifeng, which was collected in July, 2013.

We note 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 sanctions, 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 the loan agreement.

(2) Government grant escrowed by Business Investment

In 2008, a VIE of the Company, Xingtai Zhongding, was entitled to a government grant associated with its development of Kirin County project of RMB160,000,000 ($22,981,000), translated at historical exchange rate). Cash representing the grant has been remitted to Business Investment, a trust equity owner of Xingtai Zhongding in June 2008. Business Investment originally acquired the land use rights of Kirin County project, and contributed the land use rights to Xingtai Zhongding as paid-in capital to develop the project. Based on the arrangement between Business Investment and Xingtai Zhongding, which has been sanctioned by local government, the benefit of the government grant is to be transferred from Business Investment to Xingtai Zhongding. Specifically, Business Investment acts as an escrow agent but also is nominally responsible for Xingtai Zhongding’s progress. Earned portions of the government grant become available to Xingtai Zhongding based on percentage of completion.

For the years ended December 31, 2012, 2011, 2010 and 2009, Xingtai Zhongding 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 December 31, 2012 and September 30, 2013, accumulated earned government grant of RMB160,000,000 and RMB160,000,000 ($25,332,088 and $26,010,339, translated at respective historical rates) was used to repay working capital provided by Jianfeng Guo for the support of other real estate projects’ development. As at September 30, 2013, the Company had a remaining $3,088,960 earned government grant available for future drawdown after repaid working capital provided by Jianfeng Guo, which is included in “Receivable from a related party” in 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. Xingtai Zhongding also chooses to use its accumulated government grant receivable from Business Investment, to repay working capital provided by Jianfeng Guo. As at December 31, 2012 and September 30, 2013, the working capital provided by Jianfeng Guo was RMB140,791,920 and RMB140,998,571 ($22,290,958 and $22,921,379, translated at respective historical rates). Accordingly, the Company is entitled to present netted balance with Jianfeng Guo on its consolidated balance sheets.

The working capital provided by Jianfeng Guo for three months and nine months ended at September 30, 2013 was $101,630 and $630,421.

Gross amount of working capital provided by and to affiliate companies and individuals designated by Jianfeng Guo as at September 30, 2013 and December 31, 2012 were as follows:

	September 30,			December 31,
	2013			2012
	(Unaudited)
Gross of working capital received from affiliate companies and individuals designated by Jianfeng Guo	$	(39,508,494	)	$	(41,635,538	)
Gross of working capital provided to affiliate companies and individuals designated by Jianfeng Guo		16,587,115			19,344,580
Working capital provided by Jianfeng Guo in total		(22,921,379	)		(22,290,958	)
Gross earned government grant held by a related party		26,010,339			25,332,088
Receivable from a related party	$	3,088,960		$	3,041,130

(4) Prepayment to related party

Please see Note 6 – Prepayments

Note 21 – Contingencies and Commitments

As at September, 2013 and December 31, 2012, the Company provided approximately $64,211,000 and $42,885,000 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 22 – Subsequent Events

On October 15, 2013, the Company signed a supplement loan agreement in amount of 27,636,000 USD (170,000,000 RMB) and bears 18% interest rate and expected to be collected within one year. 3,902,000 USD (24,000,000 RMB) has been repaid on October 16, 2013 and the remaining 4,415,000 USD (27,160,000 RMB) is expected to be repaid before December, 2013.

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 ended September 30, 2013 and 2012 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Report. 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.”

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. Our projects are currently concentrated in Xingtai City, Hebei Province.

We have completed our Ming Shi Hua Ting, Wancheng New World and Kirin County projects in Xingtai City. Our current projects include 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.

Recent Developments

At September 30, 2013, we have the following projects under development:

Kirin

County

No.79

Courtyard

(Phase I)

No.79

Courtyard

(Phase II)

Kirin Bay

(Phase I)

Kirin Bay

(Phase II)

Construction beginning

September, 2011

September 2011

March 2013

December 2011

March 2013

percentage-of-completion as of September 30, 2013

99.0%

91.2%

38.8%

70.6%

44.5%

Estimated Completion

late 2013

Early 2015

late 2014

Early 2015

Furthermore, at September 30, 2013, we started the constructions of No. 79 Courtyard (Phase III) and Kirin Bay (Phase III);

Financial Performance Highlights

The following summarizes certain key financial information for the nine months ended September 30, 2013.

●	Total revenue was $102.3 million for the nine months ended September 30, 2013, an increase of $60.9 million, or 147.0%, from $41.4 million for the same period of 2012. Our revenue stream has shifted from the Kirin County project, which was completed in 2012, to No. 79 Courtyard (Phase I and Phase II) and Kirin Bay (Phase I and Phase II), which are expected to generate the majority of our revenue in the upcoming 12 to 18 months;

●	Gross profit was $11.1 million for the nine months ended September 30, 2013 as compared to a gross profit of $0.9 million for the same period of last year. Gross margin ratio was 10.9% for the nine months ended September 30, 2013 as compared to the gross margin ratio of 2.1% for the same period of 2012. The increase of gross profit was contributed by construction progress and sales of No.79 Courtyard (Phase I and Phase II) and Kirin Bay (Phase I and Phase II) for the nine months ended September 30, 2013 and cost estimates changes which caused decrease of gross profit for the nine months ended September 30, 2012.

●	Net loss was $3.1 million for the nine months ended September 30, 2013, a decrease of $4.4 million, or approximately 58.4%, from net loss of $7.5 million for the same period of last year, a result of the increased gross profit contributed by the sales of No.79 Courtyard (Phase I and Phase II) and Kirin Bay (Phase I and Phase II) netting off increased selling, general and administrative and interest, accompanying to the development of multiple projects and the borrowing of a higher number of loans simultaneously.

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 10.3% in 2010, 9.2% in 2011 and 7.8% in 2012. 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 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 3.3% in 2010, 5.4% in 2011 and 2.6% in 2012. 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.

Significant Accounting Policies

Use of Estimates

Fair Value of Financial Instruments

●	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.

As of September 30, 2013 and December 31, 2012, none of the Company’s financial assets or liabilities was measured at fair value on a recurring basis. The Company did not have any nonfinancial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012.

Reporting Currency and Foreign Currency Translation

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 .

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, 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 quantitate consumption and on-going rate of materials, labor, machinery and overheads. For the purpose of preparing the Company’s 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.

Real Estate Capitalization and Cost Allocation

Government Grant

In 2008, Xingtai Zhongding was entitled to a government grant of approximately $25,138,655 related to Kirin County project to subsidize the modernization of the neighborhood where the real estate project 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. For the three months and nine months ended September 30, 2013 and 2012, the Company did not recognize any grant income, respectively. All government grants related to Kirin County have been recognized as of December 31, 2012 as the construction of Kirin County completed during the year. The local government has arranged a lump sum payment of the grant to Xingtai Jiye 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 Xingtai Zhongding 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 at September 30, 2013, the Company didn’t receive any request from 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 government to request the grant’s refund in next twelve months.

Capitalization of Interest

Cash and Cash Equivalents

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 $ 8,894,284 and $6,924,572 as at September 30, 2013 and December 31, 2012, 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.

Investment at Cost

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 $205,738 as dividend for the nine months ended September 30, 2013.

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	5 years
US Properties	39 years

As of September 30, 2013, one of the Company’s offshore subsidiaries Brookhollow Lake purchased a property for rent and the booking value was $2,051,874. The fair value increased to $2,687,531 after the fitment work on this property and the improvement process is still going on.

Income Taxes

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”)

Accumulated Other Comprehensive Income

Earnings per Share

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 three months ended September 30, 2013 and 2012, the Company recorded an advertising expense of $668,035 and $318,702, respectively. For the nine months ended September 30, 2013 and 2012, the Company recorded an advertising expense of $1,886,130 and $703,528, respectively.

Property Warranty

Impairment Losses

Stock-Based Compensation

Recently Issued Accounting Pronouncements

Results of Operations

Comparison of Nine and Three Months Ended September 30, 2013 and 2012

	Nine Months Ended September 30,												Three Months Ended September 30,
	2013						2012						2013						2012
				% of Revenue						% of Revenue						% of Revenue						% of Revenue

Revenue from real estate sales, net	$	102,314,315			100.0	%	$	41,421,119			100.0	%	$	36,900,545			100.0	%	$	22,404,249			100.0%	%
Cost of real estate sales		91,164,755			89.1	%		40,569,589			97.9	%		33,641,375			91.2	%		18,665,744			83.3%	%
Gross profit		11,149,560			10.9	%		851,530			2.1	%		3,259,170			8.8	%		3,738,505			16.7%	%
Selling expenses		3,248,828			3.2	%		2,141,027			5.2	%		1,054,420			2.9	%		893,456			4.0%	%
Operating and administrative expenses		5,033,034			4.9	%		4,213,331			10.2	%		1,528,347			4.1	%		1,643,832			7.3%	%
Income (loss) from operations		2,867,698			2.8	%		(5,502,828	)		-13.3	%		676,403			1.8	%		1,201,217			5.4%	%
Investment income		205,738			0.2	%		-			-			90,500			0.2	%					-
Interest expense		(6,282,089	)		-6.1	%		(4,368,809	)		-10.5	%		(2,400,120			-6.5	%		(3,016,584	)		-13.5%	%
Total other expenses		(6,076,351	)		-5.9	%		(4,368,809	)		-10.5	%		(2,309,620			-6.3	%		(3,016,584	)		-13.5%	%
Loss before income taxes expense		(3,208,653	)		-3.1	%		(9,871,637	)		-23.8	%		(1,633,217	)		-3.1	%		(1,815,367	)		-8.1%	%
Income taxes benefit		(99,906	)		-0.1	%		(2,397,532	)		-5.8	%		180,217			0.2	%		(388,861	)		-1.7%	%
Net loss		(3,108,747	)		-3.0	%		(7,474,105	)		-18.0	%		(1,813,434	)		-3.3	%		(1,426,506	)		-6.4%	%

Our net loss for the nine months ended September 30, 2013 was $3.1 million, a decrease of $4.4 million, from net loss of $7.5 million for the nine months ended September 30, 2012. Net Loss decreased because of the following reasons: 1) in the first half of year 2013, Kirin Bay Phase I and Phase II, No.79 Courtyard Phase I and Phase II became the main revenue resource and contributed most of the increased revenue and gross profit; 2) in the first quarter of 2012, there was a reassessment of Kirin County project’s expected revenue, budgeted costs, and percentage-of-completion which increased the cost of real estate sales for the nine months ended September 30, 2012; 3) for the nine months ended September 30, 2013, the interest increased substantially due to substantially increased average outstanding bank loan balance and higher interest rate of new loans borrowed in third and fourth quarter of 2012 and first half of year 2013.

Our net loss for the three months ended September 30, 2013 was $1.8 million, a decrease of $0.4 million, from net loss of $1.4 million for the three months ended September 30, 2012. Net loss decreased because in the first half of year 2013, Kirin Bay Phase I and Phase II, No.79 Courtyard Phase I and Phase II became the main revenue resource and contributed most of the increased revenue and gross profit.

In line with the construction and pre-sale of No.79 Courtyard (Phase I and Phase II) and Kirin Bay (Phase I and Phase II), and preparation works for prospective projects, our overall operating expenses in advertising, staff salaries, and administration increased $1.1 million, or 51.7% and $0.2 million, or 18.0% for the nine and three months ended September 30, 2013 compared to the same period of 2012. Also, our interest expenses increased mainly due to an increased average outstanding bank loans for the nine months and three months ended September 30, 2013 compared to those for the same period of 2012.

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 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 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.

Revenues and Gross Profit

	Nine Months Ended September 30,												Three Months Ended September 30,
	2013						2012						2013						2012
				% of Revenue						% of Revenue						% of Revenue						% of Revenue
Revenue from real estate, net	$	102,314,315			100	%	$	41,421,119			100	%	$	36,900,545			100	%	$				%
-No.79 Courtyard (Phase I)		43,877,017			42.9	%		26,280,742			63.4	%		15,857,230			43.0	%		13,526,465		60.4	%
-No.79 Courtyard (Phase II)		13,404,749			13.1	%								6,051,056			16.4	%				-
-Kirin Bay (Phase I)		22,341,840			21.8	%		20,429,217			49.3	%		8,287,842			22.5	%		12,175,422		54.3	%
-Kirin Bay (Phase II)		20,202,129			19.7	%								5,555,330			15.1	%				-
-Kirin County		2,065,600			2.0	%		(5,288,840	)		-12.8	%		1,032,626			2.8	%		(3,297,638	)	-14.7	%
-Property Service		422,980			0.4	%								116,461			0.2	%				-
Cost of real estate sales		91,164,754			89.1	%		40,569,589			97.9	%		33,641,375			91.2	%		18,665,744		83.3	%
-No.79 Courtyard (Phase I)		35,938,835			35.1	%		17,547,514			42.4	%		13,012,888			35.3	%		7,961,719		35.5	%
-No.79 Courtyard (Phase II)		13,450,148			13.1	%								5,886,968			16.0	%				-
-Kirin Bay (Phase I)		22,006,787			21.5	%		16,230,457			39.2	%		8,749,820			23.7	%		9,185,735		41.0	%
-Kirin Bay (Phase II)		17,512,732			17.1	%								5,034,215			13.6	%				-
-Kirin County		1,961,351			1.9	%		6,791,618			16.4	%		873,395			2.4	%		1,518,290		6.8	%
-Property Service		294,902			0.3	%								84,089			0.2	%				-
Gross profit		11,149,560			10.9	%		851,530			2.1	%		3,259,170			8.8	%		3,738,505		16.7	%
-No.79 Courtyard (Phase I)		7,938,182			7.8	%		8,733,228			21.1	%		2,844,342			7.7	%		5,564,746		24.8	%
-No.79 Courtyard (Phase II)		(45,399	)		-0.0	%								164,088			0.4	%				-
-Kirin Bay (Phase I)		335,053			0.3	%		4,198,760			10.1	%		(461,978	)		-1.3	%		2,989,687		13.3	%
-Kirin Bay (Phase II)		2,689,397			2.6	%								521,115			1.4	%				-
-Kirin County		104,249			0.1	%		(12,080,458	)		-29.2	%		159,231			0.4	%		(4,815,928	)	-21.5	%
-Property Service		128,078			0.1	%								32,372			0.1	%		-		-
Profit margin		10.9	%					2.1	%					8.8	%					16.7	%
-No.79 Courtyard (Phase I)		18.1	%					33.2	%					17.9	%					41.1	%
-No.79 Courtyard (Phase II)		-0.3	%					-						2.7	%					-
-Kirin Bay (Phase I)		1.5	%					20.6	%					-5.6	%					24.6	%
-Kirin Bay (Phase II)		13.3	%					-						9.4	%					-
-Kirin County		5.0	%					288.4	%					15.4	%					146.0	%
-Property Service		30.3	%						%					27.8	%					-	%

Revenue from Real Estate, net. Real estate sales represent revenue from the pre-sale of properties under development. For the nine months and three months ended September 30, 2013 and 2012, revenue was derived from the pre-sale of No.79 Courtyard (Phase I), No.79 Courtyard (Phase II), Kirin Bay (Phase I), Kirin Bay (Phase II), Kirin County (including adjacent shopping arcade) 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 from the pre-sale of real estate properties for the nine months ended September 30, 2013 was $102.3 million, an increase of $60.9 million, or approximately 147.0%, compared to $41.4 million for the same period of 2012. Revenue from the pre-sale of No.79 Courtyard (Phase I), No.79 Courtyard (Phase II), Kirin Bay (Phase I) and Kirin Bay (Phase II) was $43.9 million, $13.4 million, $22.3 million and $20.2 million respectively, representing 42.9%, 13.1%, 21.8% and 19.7% of total revenue earned in the nine months ended September 30, 2013. For the nine months ended September 30, 2013, Hebei Zhongding Property Service Co., Ltd. commenced to provide property service to Kirin County and began to recognized revenue from this period and contributed $0.4 million of the revenue.

Our revenue from the pre-sale of real estate properties for the three months ended September 30, 2013 was $36.9 million, an increase of $14.5 million, or approximately 64.7%, compared to $22.4 million for the same period of 2012. Revenue from the pre-sale of No.79 Courtyard (Phase I), No.79 Courtyard (Phase II), Kirin Bay (Phase I) and Kirin Bay (Phase II) was $15.9 million, $6.1 million, $8.3 million and $5.6 million respectively, representing 43.0%, 16.4%, 22.5% and 15.1% of total revenue earned in the three months ended September 30, 2013.

The increment of revenue for the nine months ended at September 30, 2013 was primarily due to the progress we made on the construction of No.79 Courtyard (Phase I) and Kirin Bay (Phase I) both of which were in the middle and later periods of the construction, and No.79 Courtyard (Phase II) and Kirin Bay (Phase II) were in the middle construction stage. Comparatively, for the nine months ended at September, 2012, No.79 Courtyard (Phase I) and Kirin Bay (Phase I) were at the beginning of the construction. The following table shows the percentage-of-completion of each project as at comparable period end:

	As at September 30, 2013			As at December 31, 2012			As at September 30, 2012			As at December 31, 2011
No.79 Courtyard Phase I		91.2	%		65.5	%		69.9	%		57.4	%
No.79 Courtyard Phase II		38.8	%		-			-			-
Kirin Bay Phase I		70.6	%		56.1	%		46.1	%		24.9	%
Kirin Bay Phase II		44.5	%		-			-			-
Kirin County		99.4	%		96.1	%		94.8	%		88.9	%

Kirin Bay is a three-phase, master-planned community built on a land of approximately 660,000 square meters. Positioned as a mid-market residential development, Kirin Bay will also feature kindergarten, a primary school, hotel, office buildings and apartments. As of this Report, we have obtained necessary government approvals, including 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 I). 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).

No. 79 Courtyard is positioned as a high-end residential development with some mixed commercial use, which covers a land of over 290,000 square meters and a total building area of approximately 520,000 square meters. As of this Report, we have obtained necessary government approvals, including 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 79 Courtyard (Phase I). 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 11, 2012) and Pre-Sales Permit (issued on September 27, 2012).

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.

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 and Phase II) and Kirin Bay (Phase I and Phase II). 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 2013. 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, 2013		Cumulative Customer deposits collected as of September 30, 2013		Contract value of pre-sale for the nine months ended September 30, 2013		Customer deposits collected for the nine months ended nine 30, 2013
No.79 Courtyard Phase I	$	125,567		126,430		21,582		33,494
No.79 Courtyard Phase II		36,493		32,126		36,493		17,348
Kirin Bay Phase I		87,247		89,117		18,746		13,200
Kirin Bay Phase II		40,609		47,322		40,609		39,119
Kirin County		107,034		115,282		787		2,315
Others phases of Kirin Bay and No. 79 Courtyard	$			35,054				34,659

Cost of Real Estate Sales. 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, 2013 were $91.2 million, an increase of $50.6 million, or approximately 124.7%, compared to $40.6 million for the same period of 2012. Our total cost of real estate sales increased in relation to the construction of these projects: No.79 Courtyard (Phase I and Phase II) Kirin Bay (Phase I and Phase II), and both of the No.79 Courtyard (Phase I) and Kirin Bay (Phase I) projects were at the peak of expenditures, in accordance with our construction plans, and both of the No.79 Courtyard (Phase II) and Kirin Bay (Phase II) projects were at beginning state.

Our costs of real estate sales for the three months ended September 30, 2013 were $33.6 million, an increase of $15.0 million, or approximately 80.2%, compared to $18.7 million for the same period of 2012. Our total cost of real estate sales increased in relation to the construction of these projects: No.79 Courtyard (Phase I and Phase II) Kirin Bay (Phase I and Phase II), and both of the No.79 Courtyard (Phase I) and Kirin Bay (Phase I) projects were at the peak of expenditures, in accordance with our construction plans. We commenced the construction of the No.79 Courtyard (Phase II) and Kirin Bay (Phase II) in the second quarter of year 2013.

Gross Profit (Loss). Gross income for the nine months ended September 30, 2013 was $11.1 million (gross income ratio: 10.9%) compared to gross income $0.8 million (gross income ratio: 2.1%), for the same period of 2012, due to the increased presales and the percentage-of-completion (POC) of No.79 Courtyard (Phase I and Phase II) and Kirin Bay (Phase I and Phase II) in the first three quarters of year 2013, the Kirin County project’s modification of several pre-sale contracts, and change to the total estimated costs (including upgraded building exterior decoration standard, construction materials and labor price changes, and contractors’ claims) in the first three quarters of 2012.

Gross income for the three months ended September 30, 2013 was $3.3 million (gross income ratio: 8.8%) compared to gross income $3.7 million (gross income ratio: 16.7%), for the same period of 2012, due to the increased presales and the percentage-of-completion (POC) of No.79 Courtyard (Phase I and Phase II) and Kirin Bay (Phase I and Phase II) in the first three quarter of year.

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, 2013 and 2012:

	Total GFA		POC cumulative accomplished				Contract value of units sold for the nine months ended September 30,				Revenue recognized for the nine months ended September 30,
			2013		2012		2013		2012		2013		2012
No.79 Courtyard (Phase I)		130,033		91.2%		69.9%	$	21,581,804	$	35,937,403	$	43,877,017	$	26,280,742
No.79 Courtyard (Phase II)		45,122		38.8%		-		36,493,239		-		13,404,749
Kirin Bay (Phase I)		164,124		70.6%		46.1%		18,746,091		41,540,795		22,341,840		20,429,217
Kirin Bay (Phase II)		67,491		44.5%				40,608,941		-		20,202,129
Kirin County		182,789		99.4%		94.8%		786,621		(7,303,899)		2,065,600		(5,288,840)
Total		589,559					$	118,216,696	$	70,174,299	$	101,891,335	$	41,421,119

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, 2013 and 2012:

	Nine Months Ended September 30,
	2013								2012
	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	$	16,832,535		15,422		$	1,091		$	27,194,935			24,711		$	1,101
-commercial		2,023,408		374			5,406			5,471,534			1,203			4,547
-garage		2,725,861		4,372			623			3,270,934			4,623			707
No.79 Courtyard Phase II
-One elevator and four suites		34,373,500		41,351			831
-Parking lots		2,119,739		1,656			1,280
Kirin Bay Phase I
-residential		17,711,068		24,628			719			39,814,449			59,002			675
-garage		1,035,023		2,777			373			1,726,346			5,404			319
Kirin Bay Phase II
-residential		39,164,248		38,666			1,013
-garage		1,444,693		2,241			645
Kirin County
-residential		17,386		99			176			1,983,442			2,971			668
-commercial		663,473		(571	)		(1,163	)		(9,261,171	)		(1,982	)		4,672
-garage		105,762		250			423			(26,170	)		(108	)		242
Total	$	118,216,696		131,265		$	901		$	70,174,299			95,825		$	732

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, 2013 and 2012:

	Three Months Ended September 30,
	2013						2012
	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	$	2,227,816		1,883	$	1,183	$	13,706,878			12,681		$	1,081
-commercial		974,539		180		5,416		2,239,435			499			4,488
-garage		427,343		740		577		1,398,881			2,019			693
No.79 Courtyard Phase II
-One elevator and four suites		5,429,940		5,841		930		-			-			-
-Parking lots		533,936		372		1,435		-			-			-
Kirin Bay Phase I
-residential		253,068		211		1,199		19,844,883			28,429			698
-garage		381,568		976		391		519,618			1,651			315
Kirin Bay Phase II
-residential		4,488,411		2,995		1,498		-			-			-
-garage		774,801		1,197		647		-			-			-
Kirin County
-residential		27,329		45		606		135,188			275			492
-commercial		550,246		91		6,041		(6,651,926	)		(2,696	)		2467
-garage		19,334		35		552		(22,718	)		(142	)		160
Total	$	16,088,331		14,566	$	1,104	$	31,170,239			42,716		$	730

(1)	This column reflects the aggregate amount of all contracts entered into as of the end of 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, 2013 were $8.3 million, an increase of $1.9 million, or 30.3%, from $6.4 million for the nine months ended September 30, 2012. Corresponding to sales in our No.79 Courtyard (Phase I and Phase II), Kirin Bay (Phase I and Phase II) and Kirin County projects, our overall operating expenses in advertising, staff salaries, and maintenance increased substantially in the first three quarters of year 2013 compared with the same period of 2012.

Operating expenses for the three months ended September 30, 2013 were $2.6 million, an increase of $0.1 million, or 1.8%, from $2.5 million for the three months ended September 30, 2012.

We expect our selling and marketing expenses to increase in the near future in connection with pre-sale and construction of Kirin Bay and No.79 Courtyard’s new phases and development of new projects.

	Nine Months Ended September 30,										Three Months Ended September 30,
	2013					2012					2013					2012
			% of Expenses					% of Expenses					% of Expenses					% of Expenses
Operating expenses	$	8,281,862		100.0	%	$	6,354,358		100.0	%	$	2,582,767		100.0	%	$	2,537,288		100.0	%
Selling expenses		3,248,828		39.2	%		2,141,027		33.7	%		1,054,420		40.8	%		893,456		35.2	%
Advertising expense		1,886,130		22.8	%		703,528		11.1	%		668,035		25.9	%		318,702		12.6	%
Staff salaries		579,748		7.0	%		442,660		7.0	%		164,969		6.4	%		47,155		1.9	%
Office and Administrative expenses		782,950		9.5	%		994,839		15.7	%		221,416		8.6	%		527,599		20.8	%
General and administrative expenses		5,033,034		60.8	%		4,213,331		66.3	%		1,528,347		59.2	%		1,643,832		64.8	%
Staff salaries		2,247,461		27.1	%		1,774,033		27.9	%		824,760		31.9	%		453,550		17.9	%
Professional expenses		310,758		3.8	%		197,793		3.1	%		88,067		3.4	%		11,681		0.5	%
Office and Administrative expenses		2,474,815		29.9	%		2,241,505		35.3	%		615,520		23.8	%		1,178,601		46.5	%

●

Advertising Expenses. Our advertising expenses increased from $0.7 million for the nine months ended September 30, 2012 to $1.9 million for the same period of 2013. This reflects new advertising campaigns to promote the pre-sale of our No.79 Courtyard (Phase I and Phase II) and Kirin Bay (Phase I and Phase II), both of which are currently in their construction stage. The advertising expenses are expected to further increase as we advance to next phase of our No.79 Courtyard and Kirin Bay projects.

Our advertising expenses increased from $0.3 million for the three months ended September 30, 2012 to $0.7 million for the same period of 2013. This reflects new advertising campaigns to promote the pre-sale of our No.79 Courtyard (Phase I and Phase II) and Kirin Bay (Phase I and Phase II), both of which are currently in their construction stage.

●

Staff Salaries. For the nine months ended September 30, 2013 and 2012 our selling and administrative staff expenses were $2.8 million and $2.2 million respectively. This increase is mostly related to more sales champion for our No.79 Courtyard and Kirin Bay projects. As we gradually increase the scope and size of our projects, there is an increasing demand for more administrative and sales staff necessary for meeting satisfactory operation standards. We also recruited several professional managers to help with project management and sales. These expenses are expected to increase in the near future as sales and construction of other phases of the No.79 Courtyard and Kirin Bay projects continue.

For the three months ended September 30, 2013 and 2012 our selling and administrative staff expenses were $1.0 million and $0.5 million respectively. This moderate increase is mostly related to sales champion for our No.79 Courtyard and Kirin Bay projects. As we gradually increase the scope and size of our projects, there is an increasing demand for more administrative and sales staff necessary for meeting satisfactory operation standards.

●

Office and Administrative Expenses. Office and administrative expenses increased from $3.2 million to $3.3 million for the nine months ended September 30, 2012 to 2013, a result of additional expenses such as office supplies costs, traveling, and communication fees and service expenses by third parties.

Office and administrative expenses decreased from $1.7 million to $0.8 million for the three months ended September 30, 2012 to 2013.

Interest Expense. Our interest expense was $6.3 million for the nine months ended September 30, 2013, an increase of $1.9 million, or 43.8%, from $4.4 million for the same period of 2012. Our interest expense was $2.4 million for the three months ended September 30, 2013, a decrease of $0.6 million, or 20.0%, from $3.0 million for the same period of 2012. The decrease was primarily due to substantially decreased average outstanding bank loan balance and repayment of some bank loans in the third quarter of 2013, however we expect that there will be an increase of interest expense in the near future when we have additional projects in development.

Income Taxes. Income taxes benefit for the nine months ended September 30, 2013 totaled negative $0.1million, a decrease of $2.3 million or 95.8% from income taxes expenses of $2.4 million for the nine months ended September 30, 2012. Income taxes loss for the three months ended September 30, 2013 totaled $0.2 million, an increase of $0.6 million or 146.3% from income taxes expenses of negative $0.4 million for the three months ended September 30, 2012. The changes in our income taxes were mainly due to downward adjustment to land appreciation tax liability and deferred tax liabilities in relation to revenue recognition caused by increased total project estimated costs for the nine months ended September 30, 2012.

Net Loss. Net loss for the nine months ended September 30, 2013 was $3.1 million compared to net loss of $7.5 million in the nine months ended September 30, 2012, a decrease of $4.4 million or 58.4%. This decrease was principally a result of the increased gross profit contributed by the sales of No.79 Courtyard (Phase I and Phase II) and Kirin Bay (Phase I and Phase II) and the increased selling, general and administrative expenses and interest expenses, accompanying to the development of multiple projects and the increased interest expenses relating to the borrowing of a higher number of loans within the comparable periods.

Net loss for the three months ended September 30, 2013 was $1.8 million compared to net loss of $1.4 million in the three months ended September 30, 2012, an increase of $0.4 million or 6.4%.

Liquidity and Capital Resources

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

	Nine Months Ended September 30,
	2013			2012
Net cash generated from operating activities	$	9,218,302		$	10,159,582
Net cash used in investing activities		(26,375,309	)		(280,974	)
Cash flows provided by financing activities		10,717,608			10,114,659
Effect of exchange rate changes on cash and cash equivalent		470,141			22,142
Net increase(decrease) in cash and cash equivalents		(5,969,258	)		20,015,409
Cash and cash equivalents - beginning of period		24,098,688			10,602,165
Cash and cash equivalents - end of period		18,129,430			30,617,574

We had a balance of cash and cash equivalents of $18.1 million as of September 30, 2013 compared with a balance $30.6 million as of September 30, 2012. 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 from operating activities was $9.2 million for the nine months ended September 30, 2013, compared to net cash provided from operating activities of $10.2 million for the nine months ended September 30, 2012, a decrease of $1.0 million. The decrease in net cash flows from operating activities was primarily due to the following:

●	We received $29.9 million from customers as down payments and subsequent installments (combination of revenue in excess of billings and customer deposits) in the nine months ended September 30, 2013, compared to $37.5 million received in the nine months ended September 30, 2012, which led to a $7.6 million decrease in net cash inflow from operating activities;
●	We invested $5.9 million in real properties and land lots under development (net of accounts payable) in the nine months ended September 30, 2013. In the same period of 2012, we spent $9.4 million on our projects, part of which was payment of land lot cost for No.79 Courtyard and Kirin Bay. This accounted for $15.2 million saving in cash outflow from operating activities;
●	Changes in prepayments (combination of others receivables) provided $23.2 million cash outflow for the nine months ended September 30, 2013. In the same period of 2012, changes in prepayments contributed $5.8 million cash outflow.

Investing Activities. Net cash provided used in investing activities was $26.3 million for the nine months ended September 30, 2013, compared to net cash of $0.3 million used in investing activities for the nine months ended September 30, 2012, represented an increase of $26.0 million. The increase was a result of a RMB 100 million short-term loan repaid by a related party and a $36.0 million mid-term loan to the related party for the period. We also increased our investment by $3.9 million in Xingtai Rural Commercial Bank which led to an increase of the cash flow out.

Financing Activities. Net cash inflow from financing activities was $10.7 million for the nine months ended September 30, 2013, compared to $10.1 million cash inflows for the nine months ended September 30, 2012, an increase of cash outflows of $0.6 million. This was mainly due to increase of new loan was more than repayment of expired bank loans for this period.

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, 2013

	Payments due by period
in thousands of US Dollars			less than		1-3
	Total		1 year		years
Loans payable	$	81,282	$	45,518	$	35,764
Costs of land use rights		3,806		3,806		-
Non-cancellable construction contract obligations		56,507		56,025		482
Total		141,595		105,349		36,246

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, 2013, we entered into non-cancellable agreements with several suppliers 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 $141.6 million.

Material Financial Obligations

Loans Payable

As of September 30, 2013 our total loan balance was $81.3 million.

●	In December 2012, one of our group companies, Xingtai Zhongding Kirin Real Estate Development Co., Ltd., entered into a loan contract to totaling $4,876,939 with Kong Village Committee with a 12 month term, with an interest rate of 14.4% per annum. This loan is not collateralized.

●

In August 2012, one of our group companies, Xingtai Zhongding Kirin Real Estate Development Co., Ltd., entered into a long-term loan contract totaling RMB 150,000,000 (approximately $ 24,384,000) with Xingtai Chengjiao Rural Credit Cooperative Union Association. The loan provides terms ranging from maximums of 18 to 24 months and is designated for propagating the development of the Kirin Bay Project. The loan is collateralized with the Kirin Bay land use rights. As of September 30, 2013, these loans’ effective interest rate was 11.38% per annum.

●

On September 17, 2012, the Company entered into a loan contract with Industrial and Commercial Bank of China, Xingtai Yejin Branch for a series of loans with a maximum principle amount of RMB188,000,000 (approximately $29,088,000). These loans were collateralized by partial of the Company’s No. 79 Courtyard land use rights and properties under development, due in several installments through May 19, 2014, and borne an annual interest rate of 9.84%.

●

On April 24, 2013, Hebei Youerma Business Service Co.,Ltd., a subsidiary of the Company, entered into a loan contract with Xingtai Rural Commercial Bank with amount of RMB20,000,000 (approximately $3,251,292) through a third party company. This loan was credit loan, and borne an annual effective interest rate of 7.2%. The principal amount of the loan is due on April 24, 2014.

●

On May 15, 2013, Hebei Zhongding Real Estate Development Co., our subsidiary, entered into a loan contract with Industrial and Commercial Bank of China, Xingtai Yejin Branch for a series of loans with a maximum principle amount of RMB270,000,000 (approximately $43,892,447). These loans were partially collateralized by the Company’s No. 79 Courtyard land use, and borne an annual effective interest rate of 11.30%. As of September 30, 2013, the Company has drawn RMB 120,000,000 from the bank. The term of the loan is for 36 months, which will start from the actual withdrawal date. RMB70,000,000 shall be repaid by January 30, 2014. RMB50,000,000 shall be repaid by September 30, 2015. RMB50,000,000 shall be repaid by January 30, 2016. RMB50,000,000 shall be repaid by May 30, 2016. The subsidiary agreed to pay RMB3,800,000 to the lender as a financing service charge under the loan.

Related Party Transactions and Balances

(1) Loan to a related party

In August 2013, Kirin entered into a loan agreement with Huaxia Huifeng Ventures Capital Management (Beijing) Co., Ltd. (“Huaxia Huifeng”), a related company ultimately controlled by Jianfeng Guo, Chairman of the Kirin’s Board of Directors, and the controlling stockholder of Kirin. According to the agreement, Kirin made a loan to Huaxia Huifeng for 35,953,000 USD. As of September 30, 2013, the outstanding balance of the loan was 35,953,000 USD (221,160,000 RMB). On October 15, 2013, the Company signed a supplement loan agreement in amount of 27,636,000 USD (170,000,000 RMB) which bears 18% interest rate and has a term of one year. Subsequently, 3,902,000 USD (24,000,000 RMB) was repaid on October 16, 2013 and 4,415,000 USD (27,160,000 RMB) is expected to be repaid before December, 2013.

As of December 31, 2012, the balance of the loan to Huaxia Huifeng was 15,833,000 USD (100,000,000 RMB) which was collected in February, 2013. On January 20, 2013, Kirin loaned 4,877,000 USD (30,000,000 RMB) to Huaxia Huifeng, which was collected in March, 2013. On June 30, 2013, Kirin loaned 3,251,000 USD (20,000,000 RMB) to Huaxia Huifeng, which was collected in July, 2013.

(2) Government grant escrowed by Business Investment

For the years ended December 31, 2012, 2011, 2010 and 2009, Xingtai Zhongding 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 December 31, 2012 and September 30, 2013, accumulated earned government grant of RMB160,000,000 and RMB160,000,000 ($25,332,088 and $26,010,339, translated at respective years’ historical rates) was used to repay working capital provided by Jianfeng Guo for the support of other real estate projects’ development (see Note 20 (3)). As at September 30, 2013, the Company had a remaining $3,088,960 earned government grant available for future drawdown after repaid working capital provided by Jianfeng Guo, which is included in “Receivable from a related party” in consolidated balance sheet.

(3) Working capital provided by Jianfeng Guo

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. Xingtai Zhongding also chooses to use its accumulated government grant receivable from Business Investment, to repay working capital provided by Jianfeng Guo. As at December 31, 2012 and September 30, 2013, the working capital provided by Jianfeng Guo was RMB140,791,920 and RMB140,998,571 ($22,290,958 and $22,921,379, translated at respective years’ historical rates). Accordingly, the Company is entitled to present netted balance with Jianfeng Guo on its consolidated balance sheets.

The working capital provided by Jianfeng Guo for three months and nine months ended at September 30, 2013 was $101,630 and $630,421.

Gross amount of working capital provided by and to affiliate companies and individuals designated by Jianfeng Guo as at September 30, 2013 and December 31, 2012 were as follows:

	September 30,			December 31,
	2013			2012
	(Unaudited)
Gross of working capital received from affiliate companies and individuals designated by Jianfeng Guo	$	(39,508,494	)	$	(41,635,538	)
Gross of working capital provided to affiliate companies and individuals designated by Jianfeng Guo		16,587,115			19,344,580
Working capital provided by Jianfeng Guo in total		(22,921,379	)		(22,290,958	)
Gross earned government grant held by a related party		26,010,339			25,332,088
Receivable from a related party	$	3,088,960		$	3,041,130

(4) Prepayment to related party

Please see Financial statements Note 6 – Prepayments

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.

Recently Issued Accounting Pronouncements

FASB issued several ASUs during the period, which are not expected to have a material impact on the consolidated financial statements upon adoption.

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, 2013.

●	We do not have a functional audit committee; and

●

We have substantial related party transactions and have no corporate governance policies in place to review, authorize and approve such transactions. Specifically the Company made loans to related party companies 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 sanctions, penalties, or investigations, in addition to potential shareholder lawsuits. Management is aware of the violation, and has committed to remediating it by collecting the outstanding balance according to the 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 quarter of September 30, 2013 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 402 of 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 material 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

10.1		Loan Agreement dated August 15, 2013 between Hebei Zhongding Real Estate Development Co., Ltd.and Huaxia Huifeng Ventures Capital Management (Beijing) Co., Ltd.
10.2		Supplemental Loan Agreement dated October 15, 2013 between Hebei Zhongding Real Estate Development Co., Ltd.and Huaxia Huifeng Ventures Capital Management (Beijing) Co., Ltd.
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.
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 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: November 19, 2013	By:	/s/ Longlin Hu
		Longlin Hu
		President and Chief Executive Officer (Principal Executive Officer)

Dated: November 19, 2013	By:	/s/ Cindy Zheng
		Cindy Zheng
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)