UNITED STATES
 SECURITIES AND EXCHANGE
COMMISSION
 WASHINGTON, D.C.
20549
 
 FORM 10-K
 
 |X| ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF
1934
 
 For the fiscal year ended December 31,
2008
 
 OR
 
 |_| 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:
333-105903
  China Housing & Land
      Development, Inc.(Exact name of registrant as
      specified in our
charter)
 
 NEVADA
                20-1334845(State or other jurisdiction of
      incorporation or organization)
                (I.R.S. Employer Identification
      No.)
 
 6 Youyi Dong Lu, Han Yuan 4
      Lou
                  Xi'an, Shaanxi
      Province
                  China
      710054(Address of principal executive
      offices) (Zip Code)
 
 (Registrant's telephone number,
      including area code)86-29-82582632
  (Former name, former address and former
fiscal year,
 if changed since last
report)
 
 Securities registered pursuant to
Section 12(b) of the Act: None
 Securities registered pursuant to
Section 12(g) of the
Act:
 
 Title of each
      class
              Name of each exchange
      on
                which
      registeredCommon Stock, $ .001 par value per
      share
              NASDAQ
 
 
 Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.  Yes
[_]   No [X]
 
 Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act.   Yes [_]   No [X]
 
 Indicate by check mark whether the
registrant(1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to suchfiling requirements for the past 90
days. Yes [X] No [_]
 
 Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
 
 Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer. See
definition of “accelerated
filer and large accelerated filer”in Rule 12b-2 of the Exchange
Act.
 Large accelerated filer [_]
                      
                      Accelerated filer [_]Non-accelerated filer [_]
                      (Do not check if a smallerreporting company)
                      Smaller reportingcompany [X]


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


The
number of shares outstanding of our common stock as of June 30, 2008, was
30,143,757 shares. The aggregate market value of the common stock held by
non-affiliates (12,702,110 shares), based on the closing market price ($3.99 per
share) of the common stock as of June 30, 2008 was
$50,681,419.
   
 Class
                Outstanding
      atMarch
      25,
      2009Common Stock, $ .001 par value per
      share
                30,948,340shares
 
 DOCUMENTS INCORPORATED BY
REFERENCE
 Document
                    Parts Into Which
      IncorporatedNone
                    Not
    applicable










SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
 
 This annual report includes forward-looking
statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities
ExchangeAct of 1934, as amended. All statements,
other than statements of historical fact, are statements that could be deemed
forward-looking statements, including, but not limited to, statements regarding
our future financial
position, business strategy and plans and objectives of management for future
operations. When usedin
thisfiling, the words believe, may, will,
estimate, continue, anticipate, intend, expect,and similar expressions are intended to
identify forward-looking
statements.
 
 We have based these forward-looking
statements largely on our current expectations and projections about future
events and financial trends that we believe may affect our financial condition,
results of operations, business strategy,short-term and long-term business
operations and objectives, and financial needs. These forward-looking statements
are subject to certain risks and uncertainties that could cause our actual
results to differ materially from those reflected in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to the
risks discussed under the heading “Risk Factors”. Except as required by law, we assume
no obligation to update these forward-looking statements publicly or to update the reasons
actual results could differ materially from those anticipated in these
forward-looking statements.
 
 In light of these risks,
uncertainties,and assumptions, the forward-looking
events and circumstances
discussed in thisannual
report may not occur and
actual results could differ materially and adversely from those anticipated or
implied in the forward-looking statements. Accordingly, readers are cautioned
not to place undue reliance on such forward-looking
statements.
  
  TABLE
OF CONTENT
 
 PART
      IITEM
      1
                  BUSINESS
                  1ITEM
      1A
                  RISK
      FACTORS
                  18ITEM
      2
                  PROPERTIES
                  24ITEM
      3
                  LEGAL
      PROCEEDINGS
                  25ITEM
      4
                  SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                  25PART
      IIITEM
      5
                  MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
                  25ITEM
      6
                  SELECTED
      FINANCIAL DATA
                  26ITEM
      7
                  MANAGEMENT
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                  27ITEM
      7A
                  QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                  36ITEM
      8
                  FINANCIAL
      STATEMENT AND SUPPLEMENTARY DATA
                  37ITEM
      9
                  CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURES
                  60ITEM
      9A
                  CONTROLS
      AND PROCEDURES
                  60ITEM
      9B
                  OTHER
      INFORMATION
                  61PART
      IIIITEM
      10
                  DIRECTORS
      AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
                  62ITEM
      11
                  EXECUTIVE
      COMPENSATION
                  65ITEM
      12
                  SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
                  67ITEM
      13
                  CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS
                  67ITEM
      14
                  PRINCIPAL
      ACCOUNTING FEES AND SERVICES
                  67PART
      IVITEM
      15
                  EXHIBITS
      AND REPORTS ON FORM 10-K
                  68SIGNATURES
                  69
  
  PART I
 
 ITEM 1.
BUSINESS
  China
Housing & Land Development, Inc., is a leading developer of residential and
commercial properties in northwest China. The Company is based in Xi’an, the
capital city of China’s Shaanxi province. Since 1992, China Housing has been
engaged in the acquisition, development, management, and sales of residential
and commercial real estate properties and land through its subsidiaries in
China.
  China
Housing & Land Development is the first and only Chinese real estate
development company traded on NASDAQ.
  By
leveraging its strong background and capability, China Housing & Land
Development has been able to capitalize on the supply of available land and
develop residential and commercial properties, further increase China Housing's
brand recognition, and outperform its competitors in the development of medium
size residential and commercial real estate projects in greater
Xi'an.
 
 China
Housing & Land Development is the number one non-government middle-and-upper
income residential real estate development company in Xi'an.
 
 Company
History
 
 China
Housing & Land Development, Inc. (China Housing, we, our, us, or the
Company) was incorporated in the state of Nevada on July 6, 2004, as Pacific
Northwest Productions Inc., (Pacific). On April 21, 2006, Pacific entered into
and completed a share purchase agreement with Xi’an Tsining Housing Development
Co., Ltd., (Tsining), a corporation formed under the laws of the People’s
Republic of China on September 7, 1999. Pursuant to the purchase agreement,
Pacific acquired all of the issued and outstanding capital stock of Tsining in
exchange for 16,000,000 (post-split) shares of Pacific’s common
stock.
 
 Concurrent
with the completion of the purchase agreement and as a condition thereof,
Pacific entered into an agreement with Deljit Bains and Davinder Bains, the then
executive officers, pursuant to which they each returned 4,000,000 (post-split)
shares (8,000,000 shares in total) of Pacific’s common stock to the company for
cancellation. They were not compensated in any way for the cancellation of their
shares of the Pacific common stock. Upon completion of the foregoing
transactions, Pacific had an aggregate of 20,000,000 shares of common stock
issued and outstanding.
 
 As a
result of the merger, Tsining’s stockholders owned approximately 80 percent of
the combined company and the directors and executive officers of Tsining became
the directors and executive officers of Pacific. Accordingly, the transaction
has been accounted for as a reverse acquisition of Pacific by Tsining, resulting
in a recapitalization of Tsining rather than as a business combination. Tsining
is deemed to be the purchaser and surviving company for accounting
purposes.
 
 Accordingly,
our assets and liabilities are included in the balance sheet at their historical
book values and the results of operations of Tsining have been presented for the
comparative prior period. The historical cost of the net liabilities of Pacific
that were acquired was $432. Pro forma information is not presented since the
financial statements of Pacific are insignificant.
 
 On May 5,
2006, Pacific Northwest Productions Inc., changed its name to China Housing
& Land Development, Inc., and the stockholders approved a stock dividend of
seven shares for each share held, which was accounted for as an eight-to-one
forward stock split. All shares and per share data have been restated
retrospectively.
 
 In March
2007, China Housing acquired 100 percent of the equity of Xi’an New Land
Development Co., Ltd, (New Land). The total purchase price for the acquisition
is RMB 270 million, approximately $35 million. New Land was originally
incorporated in September 2003 in Xi’an, Shaanxi province, China. In 2006, New
Land entered into an agreement with Baqiao District Government of Xi’an to
develop Baqiao Science & Technology Industrial Park, a provincial
development zone in Shaanxi Province, under which New Land has the exclusive
right to purchase and develop approximately 487 acres in Baqiao
Park.
 
 In
November 2008, China Housing agreed to form a joint venture with Prax Capital
Real Estate Holding Ltd., to finance the development of the first 79 acres
within the Baqiao project. As planned, the joint venture was subsequently formed
in late December and announced in January 2009 after all documentation and
permits had been approved.
  - 1
-
 
 In January, 2009, the Company completed
the acquisition of Xi’an Xinxing Property Management Co., Ltd.
(“Xinxing”). Xinxing was privately owned and provides property
management services to most of China Housing’s past residential and commercial
projects, as well as to other prominent customers like the Xi’an branch office building of the
People’s Bank of China, China Xi’an Electric Group headquarters, Shaanxi Bureau of State
Taxation offices, and the Xi’an University of International Studies,
to name a few. Xinxing’s current service area totals 1.67
million square meters in 43 facilities that include residential, commercial, and
schoolbuildings and parks. Xinxing’s revenues in 2008 were RMB 15.42
million, net income was RMB 1.82 million, and assets at yearend 2008 totaled RMB
11.29 million. Total consideration for the acquisition will beRMB12 million.
 China
Housing, through subsidiaries, is engaged in the development, construction, and
sale of residential and commercial real estate units, as well as land
development in the People’s Republic of China (“China”). Tsining has completed a
number of significant real estate development and construction projects in
Xi’an, and is considered as the leading private developer of middle and upper
income housing in Xi’an. Tsining intends to continue investing in Xi’an, in the
Shaanxi province, and potentially in other developing urban markets in western
China. New Land improves and develops land and performs infrastructure projects
for local governments, frequently in conjunction with China Housing’s planned
housing projects. The infrastructure work can include engineering and
installation of water systems, roads, sewer systems, waterway damns and bridges,
and public park facilities. As compensation for the infrastructure work, New
Land often receives the prime land in the development from local government, on
which China Housing usually constructs and sells residential and or commercial
facilities.
 
 We
maintain our statutory registered agent's office at 711 S. Carson Street, Suite
4, Carson City, Nevada 89701.
 
 Our
corporate offices are located at 6 Youyi Lu, Han Yuan 4th Floor, Xi’an, China.
Our telephone number at that location is +86-29-8258-2632.
 
 Notable Company Events in
2008
 Notable
company events or activities affecting China Housing’s 2008 consolidated
financial results include the following:
 ▪
                On
      January 1, China Housing adopted the percentage of completion method of
      accounting for building construction projects. Infrastructure construction
      work and sales of land continue to be reported only at the completion of
      each project, using the full accrual method of
  accounting.
 ▪
                In
      January, the company issued $20 million in senior secured convertible
      notes.
 ▪
                In
      May, China Housing became the first and only Chinese real estate
      development company to trade on NASDAQ. Ticker symbol is
    CHLN.
 ▪
                In
      July, the company received a RMB 1 billion construction line of credit
      with the China Construction Bank Shaanxi Branch. In September, China
      Housing also received a RMB 35 million infrastructure construction line of
      credit with the Xi'an Commercial
Bank.
 ▪
                In
      October, the company selected the world- renowned U.S. architecture and
      engineering firm of Leo A Daly to provide site planning and detailed
      architectural designs for the first 79 acres within the Baqiao
      project.
 ▪
                In
      November, China Housing agreed to form a joint venture with Prax Capital
      Real Estate Holding Ltd., to finance the development of the first 79 acres
      within the Baqiao project. As planned, the joint venture was formed in
      late December, subject to certain conditions and approvals, which were
      subsequently satisfied; the completion of the joint venture’s formation
      was announced in January 2009.
  - 2
-
 Industry
      Overview
                    China’s
      economic growth
                    
                    China
      has experienced rapid economic growth in the last 20 years. According to
      China’s Department of Commercial Affairs, China’s gross domestic product
      (GDP) achieved an annual growth rate of 17.1 percent from 2004 to 2008.
      According to the National Statistics Bureau of China, the GDP of China in
      2008 was RMB 30.1 billion, up 9.0 percent over 2007. Despite the current
      global economic crisis, China is expected to achieve relatively good
      economic growth in the next several years, compared to many other major
      economies in the world.
                    
                    Sources:
      World Economic Outlook database, IMF.
                    
                    Xi’an:
      economic growth higher than China
                    
                    Xi’an
      served as the capital of China during 13 dynasties (from West Zhou in 1066
      BC to Tang in 907 AD) and is well known for its Terracotta Army and other
      famous historic landmarks. It is now the largest metropolis in
      northwestern China, and one of the ten largest nationwide. A new wave of
      economic growth is occurring in tier two cities, and Xi’an has benefitted
      from the government’s “Go West” policy, which plans to develop Xi’an into
      a regional economic center.
                    
                    With
      this rich heritage as a foundation, today the city’s economic leadership
      is based on its high-technology, pharmaceutical, military, aerospace,
      tourism, and advanced education industries. Xi’an recorded a CAGR of 16.0
      percent for GDP and a CAGR of 12.3 percent for GDP per capita between 2001
      and 2007.
 Source:
Xi’an Municipal Bureau of Statistics.
  - 3
-
 
 Driven by
the government’s “Go West” policy and the city’s highly productive workforce,
Xi’an has experienced a relatively stronger growth compared with other
second-tier cities in 2008. Xi’an’s gross domestic product grew 15.6 percent in
2008, compared with 9.0 percent in 2008 for all of China. Similar to other tier
two cities, the historically significant city of Xi’an in northwestern China is
experiencing an economic renaissance. Compared to tier one cities, we believe
Xi’an will continue its growth momentum in the next few years, and we also
expect that its strong economic fundamentals, compared to other tier two cities,
will provide a solid foundation for growth in the real estate
sector.
 
  Source:
The Municipal Bureau of Statistics for the cities shown above.
  China
Real Estate Industry Factors
 
 Structural
long-term growth
 
 China’s
real estate sector is in the early stage of a long-term growth cycle, supported
by growth in its gross domestic product (GDP), rising demand for housing, and
substantial structural changes similar to those of Japan in the early 1970s and
Hong Kong of early 1980s. Hong Kong’s property market, for example, increased in
value by 8 times between 1980 and 1997, or a compound annual growth rate of
about 15 percent, while Japan’s property boom ran for more than 20 years from
early 1970s to the early 1990s. There are many fundamental similarities among
the growth paths of these three economies.
 
 China’s
real estate bull market began more than six years ago. Despite the moderations
in growth caused by the global economic weakness, we believe the fundamental
structural forces in China support continued growing demand for real estate in
China during the next 10 years. The two key industry drivers for this long-term
real estate demand in China are the dramatic migration of people from rural to
urban areas and the rising disposable income per capita in the
cities.
 
 China is
continuing its rapid urbanization process. In 2006, there were more than
577 million Chinese living in urban areas, accounting for about 44 percent of
total population of about 1.31 billion. According to the National Bureau of
Statistics of China, by the end of 2008, China’s urban population had reached
600 million. The State Council of China estimated in 2007 that China’s urban
population in 2020 would comprise about 870 million people or about 60 percent
of the total population of 1.45 billion.
 
 Another
source, the United Nations’ State of World Population
2007, reports that about 18 million people in China are expected to
migrate from rural to urban areas each year, and that the urban population would
reach about 877 million in the next 10 years.
 Sources:
The World Bank’s World Development Indicators and National Bureau of
Statistics.
 - 4
-
 Regardless
of which projection you prefer, it is reasonable to expect that the migration
into urban areas is likely to continue, both because of the potential for higher
income and greater wealth accumulation, and because of the evolution of China’s
farming toward larger-scale and more efficient methods that require fewer people
to do the agricultural work.
 
 With the
substantial housing demand created by the structural shift of the migration, the
urban real estate market has been thriving, and that long-term trend is expected
to continue.
 
 Higher
disposable incomes encourage home ownership
 
 Rural
dwellers are drawn to cities primarily by the potential of higher incomes and
greater wealth, because urban jobs generally pay higher wages and
salaries.
 
 The data
below from the National Bureau of Statistics of China shows that both disposable
income and wealth accumulation are higher for urban dwellers and confirms the
economic attractiveness of the migration from rural to urban areas.
 
 Annual
      per capita
                    disposable
      income and expenses (RMB)
                  2002
                  2003
                  2004
                  2005
                  2006
                  2007Urban
      per capitaDisposable
      income of urban households
                  7703.00
                  8472.00
                  9422.00
                  10493.00
                  11759.45
                  13786.00Consumption
      expenditures of urban households
                  6030.00
                  6511.00
                  7182.00
                  7943.00
                  8696.55
                  9997.50Net
      increase in wealth, urban
                  1673.00
                  1961.00
                  2240.00
                  2550.00
                  3062.90
                  3788.50Rural
      per capitaNet
      income of rural households
                  2476.00
                  2622.00
                  2936.00
                  3255
                  3587.0
                  4140.36Living
      expenditures of rural households
                  1834.00
                  1943.00
                  2185.00
                  2555.00
                  2829
                  3223.85Net
      increase in wealth, rural
                  642.00
                  679.00
                  751.00
                  700.00
                  758.00
                  916.51
 
 Source:
The National Bureau of Statistics of China.
 
 China
real estate: Quite warm but still comparatively undervalued
 
 Despite
the significant appreciation of property prices in China in recent years,
comparative analysis of fundamental factors indicate that prices are still
reasonable.
 
 Studies
have shown that a key underlying driver for property market growth is per capita
GDP. Recent International Monetary Fund studies report that China’s recent
property appreciation is supported by strong personal economic growth. When
compared using “price per capita GDP” in the U.S. and India, China’s property
market appears undervalued. For example, although Shanghai represents the most
expensive property market in China, India’s Mumbai (Bombay) has seen real estate
prices grow to more than twice those of Shanghai, even though China has higher
economic growth.
 
 Growth
in second-tier and third-tier markets
 
 Just as
the rapid economic growth in eastern China’s large cities has created a healthy
demand in the east coast real estate property market in recent years, the
economic multiplier effect of economic growth moving from the first-tier cities
to the second- and third-tier cities is likely to create increases in growth for
the real estate markets in those cities.
 
 In search
of lower costs, an educated talent pool, and new markets, multinational
corporations have been expanding out of mega cities, like Beijing, Shanghai, and
Shenzhen, into neighboring and inland cities.
 
 Intel,
for example, has opened a development center in Chengdu, while the Liberty
Mutual Group, the U.S. insurance giant, has chosen Chongqing for its Chinese
headquarters. Unilever has relocated its Chinese headquarters from Shanghai to
the neighboring province of Hefei due to the lower labor and land costs and its
strategic location.
  - 5
-
 
 The
wealth gap is expected to narrow between the first-tier and second-tier
cities.
 
 Rising
disposable income in the second-tier cities has lured top luxury goods
manufacturers, including LVMH Group, to expand aggressively into key second-tier
cities. The Chinese government has also been instrumental in stimulating
regional growth by designating certain second-tier regions as priority zones.
These actions are benefitting Xi’an, the Company’s primary market. Xi’an’s urban
disposable income grew 20.1 percent in 2008.
  
 
 Source:
The Municipal Bureau of Statistics for the cities shown above.
 
 Xi’an
Real Estate Market Factors
 
 City
of Xi’an: first class in the second tier
  As the
ripple effect of economic growth continues to permeate second-tier cities and
create a healthy environment for real estate development, leading indicators are
signaling continuing moderate growth in local property markets.
 Source:
Xi’an Municipal Bureau of Statistics.
 
 Growth
factors include the transition of certain industries to higher value-added
business, especially high-technology and services, rising GDP per capita (shown
above), increasing foreign investments, and expanding foreign retailing and
hotel operations. In addition, concerted efforts by the local governments to
create clear strategies, institute attractive policies, and invest in the
necessary infrastructure are all focused on creating favorable investment
environments in their cities.
 
 The city
of Xi’an has demonstrated all of these characteristics.
 
 Transformation
and urbanization
 
 Xi’an
served as the capital of China during 13 dynasties (from West Zhou in 1066 BC to
Tang in 907 AD) and is well known for its Terracotta Army and other famous
historic landmarks. With that rich heritage as a foundation, today the city’s
economic leadership is based on its high-technology, pharmaceutical, military,
aerospace, tourism, and advanced education industries.
 
 Xi’an
also is being transformed into a high-tech international city that offers a
large and educated work force. The city has China’s third largest
university-educated workforce, making it a hotbed for research &
development, high-technology manufacturing, and information technology
solutions.
 
 Xi’an has
begun to attract well-known high-tech companies, including IBM, Applied
Materials, Micron Technology, and Infineon. Applied Materials, for example,
selected Xi’an for its $255 million phase one R&D center that will design
and develop equipment for semiconductor chip manufacturing. In addition, Micron
Technology has invested $250 million in Xi’an for packaging and testing of
semiconductor chips.
 
 China has
announced its intention to become a world-class center for information
technology research and development, production, outsourcing, and services to
rival and perhaps surpass the success of India’s IT industry. Xi’an plays
an
  - 6
-
  important
role in that effort, having been designated by the government as one of five
China Outsourcing Bases. Similar to Bangalore and Hyderabad, the Xi’an
government is carving out a niche in IT outsourcing by creating the 400,000
square-meter Xi’an Software Park. The park has already attracted top software
and technology companies, including IBM, which is the government’s joint venture
partner in creating the software park. Sybase, SPSS, Nortel, Fujouru, and NEC
are already operating in the park. The Xi’an government anticipates that the
city’s IT outsourcing workforce will grow to 200,000 by 2010.
 
 The Xi’an
government has a clear master plan through the year 2020 to foster economic
transformation and urbanization. For example, Xi’an is now limiting development
in the city’s famous historical Gated Wall City (or Inner Ring), which will be
revamped primarily for tourism. The city plans to relocate about 450,000
residents from the Inner Ring to the second, third, and fourth rings of the city
and beyond.
 
 One of
the most ambitious plans is the development of a new satellite city in the
Baqiao district, about 8 kilometers from Xi’an’s center. The Xi’an government is
developing the Baqiao district into the “First Water City of the West”, complete
with high-end residential properties and hotels, international convention
centers, and a high-technology industry center. The new urban area will be home
for 900,000 middle-to-upper income residents and for firms in industries that
include R&D, services, and high-technology, plus the potential headquarters
for the Chinese operations of multinational corporations.
 
 Emerging
as an international city
 
 Xi’an’s
government has been proactive in enhancing the city’s international image by
hosting world class events like the Euro-Asia Economic Forum every second year
and the Formula One Powerboat World Championship. In November 2007, Xi’an hosted
the Euro-Asia Economic Forum in the Baqiao district, where high level delegates
held discussions on economic issues related to energy, finance, tourism, and
other cooperative industries. Baqiao is the permanent venue for the Euro-Asia
Economic Forum. On October 5, 2007, Xi’an hosted the Formula One Powerboat World
Championship on the Ba River near China Housing’s development site.
 
 To
attract international tourists, Xi’an is leveraging its famous historical and
cultural significance. Xi’an has revamped its tourism infrastructure in numerous
ways, including the redevelopment of the famous Terracotta theme park. It also
has selected China’s largest construction company to build a RMB 20 billion
($2.5 billion) theme park and a residential and commercial redevelopment project
on the grounds of the famous Da Ming Gong Palace that was built 1,300 years ago
during the Tang Dynasty.
 
 The city
has also revamped its tourism infrastructure to attract international travelers
and is drawing large foreign retailers. The big box retailers have entered
Xi’an, including Wal-mart, Carrefour of France, and Metro of Germany. Xi’an’s
historic mystique and economic potential has also lured top luxury brands,
including Louis Vuitton, Gucci, Prada, and Versace to Xi’an.
 
 Attracting
world-class investors
 
 Property
markets in nearly all of China’s major cities have benefitted from capital
investments by major international developers, especially those from Hong Kong.
Xi’an is no exception.
 
 Top Hong
Kong developer Henderson Land has signed agreements to develop two residential
projects in Xi’an. Partnering with Surbana, a unit of Singapore’s Temasek,
Henderson plans to develop a 30,000 unit residential project with a GFA of 1.5
million square meters and a budgeted cost of RMB 5 billion. Henderson will
develop 1,200 units for its second project with an estimated cost of RMB 1.3
billion. The projects give Baqiao a major vote of confidence because Henderson
Land and Temasek are two of the leading property developers and investors in
Asia. With developments adjacent to China Housing’s site, Henderson &
Temasek’s second project should benefit China Housing’s JunJing II residential
project. Because China Housing’s land was acquired at a substantially lower
cost, China Housing expects healthy margins from the JunJing II project when the
construction is finished.
 
 Prices
catching up to fundamentals
 
 Good
demographic and economic factors, including emerging high-tech industries and
increasing foreign capital inflow, bode well for Xi’an’s future
growth.
  In 2007,
the average urban living area per person was 23.4 square meters  in
Xi’an, slightly higher than China’s urban average of 22.6 square meters per
person in the same year. Xi’an has announced plans to increase the average
living area per person to 31.1 square meters by 2020, which will require an
additional 130 million square meters of new development by 2020. That growth
target is already creating significant opportunity for property
developers.
  - 7
-
  Despite
the solid economic growth and rising housing demand, real estate prices in Xi’an
are still less than half of those in the mega cities such
as  Shanghai, Beijing, and Shenzhen. As shown below, land appreciation
since 2001 is lower than the national average and the gap of property
appreciation between Xi’an and tier-one cities has widened since
2002.
 Sources:
National Bureau of Statistics and E-House China Real Estate Research Institute,
Xi’an Branch.
  
 Xi’an:
Growing, leading, and still affordable
  The
central government’s “Go West” policy has designated Xi’an as the regional
economic center of western China. To further encourage western China’s
development, the central government has planned to establish the Central Shanxi
Plain Economic region that will help enable the free flow of people, skills,
capital, and trade among the western provinces. Xi’an, as the economic center of
the west, will play a unique leadership role among the western tier-two
cities.
 
 Despite
its role as the economic center of the west, compared with other tier-two
cities, shown below, Xi’an’s new-property price appreciation since 2002 is
relatively modest, making Xi’an still a very affordable city.
  
 
 Sources:
E-House China Real Estate Research Institute.
 
 2008
and Early 2009 Xi’an market update
 
 In 2007,
China experienced the highest rise in residential property prices in the world.
The first half of 2008, however, saw a marked slowdown. The housing price index
for 70 major cities rose 7 percent in July 2008 from July 2007, the smallest
increase yet in 2008, following by a decline in those 70 cities in the fourth
quarter of 2008.
 
 The real
estate sector in Xi’an was influenced by that broader market decline, with both
prices and volume in Xi’an falling in the fourth quarter 2008. Given the global
economic uncertainty, we believe many consumers chose to delay their new housing
decisions until the falling prices stabilized.
 
 The Xi’an
real estate market warmed in January and February 2009, with consumers
apparently sensing that it was time to buy. Both sales volume and prices were up
as illustrated below.
 Residential
pre-sales volume, measured by per square meter sold in the January-February 2009
period, increased 5.9 percent from the same two-month period of 2007, perhaps
indicating that the outlook for the Xi’an housing market may be
improving.
  - 8
-
 
 Residential
pre-sales average price per square meter increased by 4.5 percent in
January and by 7.0 percent in February 2009 compared with January and February
of 2008.
 
 China
Housing’s pre-sales volume and prices in January and February 2009 were up over
the same periods of 2007, as well.
 
 While the
volume and price increases in January and February are good news, it is still
too early to determine if the increases were caused by a temporary release of
pent up demand or by a sustainable upturn in the Xi’an housing
market.
 Sources: E-House
      China Real Estate Research Institute, Xi’an
Branch.
 February
2007 and January 2008 reflect the holiday Lunar
  New Year
and Spring Festival periods in China.
  Sources:
E-House China Real Estate Research Institute, Xi’an
Branch.
  Economic
and Industry Stimulus Programs of 2008 and early 2009
 
 Xi’an’s
real estate stimulation in 2008
 
 To
stimulate its housing market, in August 2008, the Xi’an municipal government
announced a series of favorable new policies to encourage the growth of its
housing market by making homes more available and more affordable for Xi’an
citizens and by providing support and improvements for real estate
developers.
 
 The Xi’an
municipal government’s new policy consists of three broad actions, which will be
in effect through the end of 2009. First, the Xi’an government is providing
subsidy discounts to consumers for housing purchases that will vary primarily by
the size of the home. Buyers will receive subsidized discounts on their home
purchase prices, with a 1.5 percent subsidy on apartments less than 90 square
meters, a 1.0 percent on medium-sized homes, and a 0.5 percent for apartments
larger than 144 square meters.
 
 Second,
the Xi’an city government is relaxing qualifications for residential housing
loans, increasing the total RMB available for each loan, and reducing the
interest rates on the loans.
 
 And
third, real estate developers will be able to receive subsidies and supports on
loans and land rights purchases, plus reductions in fees and taxes, and will
also benefit from streamlined project planning, approval, and oversight
processes by the city.
  - 9
-
 
 China’s
4 trillion RMB stimulation package of 2008
  In
response to the global financial crisis, the People’s Republic of China
announced a 4 trillion RMB stimulation program on November 27, 2008.
Subsequently, on March 6, 2009, the National Development and Reform Commission
Director, Mr. Zhang Ping, announced a reshaping of that economic stimulus
package that retained the investment total of 4 trillion RMB but adjusted its
focus. Within the 4 trillion RMB package, about 400 billion RMB will go toward
civil works, including low-income housing and renovation. Two additional
categories (technology advances & industry restructuring for 370 billion RMB
and infrastructure for 1.5 trillion RMB) are also expected to benefit Xi’an’s
industries, and therefore further support demand in the city’s real estate
market.
  Source:
Zhang Ping, National Development and Reform Commission, press conference, March
6, 2009.
 
 China’s
10-industry stimulation of 2009
 
 On
February 26, 2009, China’s State Council reinforced China’s 2008 stimulation
package by further measures to stimulate specific industries in 2009. The
industries include automobile, iron and steel, textiles, equipment
manufacturing, shipbuilding, electronics and information technology,
petrochemicals, light industries, nonferrous metals, and logistics.
 
 Cautionary
disclaimer
 
 Although
the individuals and governments around the world hope that government
stimulation efforts will have the desired effects, the global economy and global
financial markets have not yet stabilized, so the true effects of these and
perhaps additional stimulation efforts by local, provincial, and national
governments in China, as well as by other countries, remain unknowable at the
moment.
 
 Our Goal
  Our goal is to become the leading
residential property developer in Xi’an and in other urban markets in western
China, measured by the combination of high customer satisfaction, high quality
design and construction, the gross floor area created each year, total assets,
and return on investment (IRR).
  Our Strategies
  1.
              Focus on continuing to serve the
      greater Xi’an market and on expanding our real estate development business
      into the leading urban markets in western China, because western China
      --
  ▪
              accounts
      for about half the geographic area of China in total and a growing share
      of the country’s population,
  ▪
              has
      substantial natural resources that are being mined and that are creating
      jobs and higher incomes per capita,
  ▪
              has
      high potential GDP growth, creating higher disposable
    incomes,
  ▪
              has
      high population growth due to --
  ▪
              China’s
      Go West policy that encourages people to move from the tier 1 cities to
      smaller cities in the west,
  ▪
              China’s
      rural to urban migration, and
  ▪
              the
      emerging economies based on resource exploitation and plans for industry
      diversification, and
  ▪
              is
      a market that is just emerging, so the development cost will be relatively
      inexpensive but the potential price appreciation should be
      attractive.
  2.
              Serve
      the rapidly growing middle and upper income
  families.
  Our
target market customers appreciate our high quality and can afford our
attractive cost-effective apartments.
  - 10
-
  3.
              Maintain modern cost control
      systems to ensure cost-effective and efficient
      operations.
  Wehave established modern processes and
systemstoanalyze andmanageall functions in our company, including
operating and construction
schedules andassociatedcosts, land
rightsacquisition
costs, cash, working
capital, assets, liabilities, bidding and selection processes,andcapital expenditures.
  4.      Leverage our strong
brand.
  With more than 16years in the Xi’an real estate market,
China Housing has built a widely recognized brand, using the Tsining name, that
is known for high quality atreasonableprices. Each of our seven completed
projects hasstrengthened our reputation, andwe believeour current projects will do the
same.
  Our acquisition of the Xi’an Xinxing
property management company in early 2009 will further strengthen our
high-quality brand by providing outstanding property management services to
customers long after they have purchased their apartments. The buildings and
grounds will be better maintained, and the value of the apartments should be
better retained.
  Our strong brand gives us a competitive
advantage in acquiring property rights, attracting customers, negotiating
prices, achievingtargetinternal rates of return,
and expanding into other markets.
  5.
              Use our access in the global
      capital markets to expand our organic growth and increase our prudent
      acquisitions and expansions.
  Because we have an unblemished record as
a borrower, we have good access to capital, both in China, and in the global
capital markets. Our listing on NASDAQ in 2008 broadened investors’ and bankers’
awareness, recognition, and interest in our Company, which has already made our
access to capital easier and atrelativelylower costs.
   Our Strengths
  1.
              We are effectively positioned in
      greater Xi’an and expect to be similarly positioned in our targeted
      locations.
  2.
              We understand and serve our chosen
      targetmarket
      segments (middle and
      middle-upper income families) well and have a proven ability to
      provide large-scale high-quality housing thatour customers desire and willcherishfor many years to
      come.
  3.
              We have extensive core
      competencies, supplemented by training and development programs. Our
      core competencies, listed below, are woven into every phase of our real
      estate development business. Our staff works as one integrated team on
      each phase. China Housing's core competencies
      include:
  ▪
              Land
      analysis and acquisition,
  ▪
              Site
      planning and development,
  ▪
              Design,
      architecture, engineering, and
construction,
  ▪
              Environmental
      awareness and actions,
  ▪
              Project
      management,
  ▪
              Finance,
  ▪
              Marketing
      and sales,
  ▪
              Joint
      ventures and co-developments,
  ▪
              Government
      relations,
  ▪
              Property
      management,
  ▪
              Demolition
      and recycling, and
  ▪
              Acquisition
      integration.
  4.      Our experienced management team has a
proven track record of high-quality performance and high investment
returns.
  In every position, we haveeffective and efficientpeople who focus onextending our track record of successful
operating and financial performance.
  Our top five leaders have a total of
more than 85 years of relevant experience.
  - 11
-
  5.      Our access to the global capital
markets.
  We believe our good record with our banks and
investors, plus the greater awareness and recognition created by our listing on
NASDAQ and our investor relations program,will giveuscontinuingaccess to adequate
capital.
  6.      Our local market knowledge and
familiarity with the real estate market and participants in northwest
China.
  We know the real estate market, the
players, and the parcels. Usually, we have the best relationships in the
industry, which give us a substantial competitive advantage -- to acquire
development rights and land rights, toselectthe best subcontractors and suppliers,
to have the most effective marketing and sales programs, to attract the best
leaders and staff, tosupportthe government inimplementing its desired housing
policies, and toachieve our target rates of
return on investment.
 
 
 Our Property
Projects
 
 We provide three fundamental types of
real estate development products:
 
 ▪
              High-rise apartment buildings,
      typically 12 to 28 stories high, usually of steel-reinforced concrete, that are
      completed within about 24 months aftersecuringall required
      permits.
 
 ▪
              Mid-rise apartment buildings,
      typically 7 to 11 stories high, usually of steel-reinforced concrete, that
      are completed within 12 to 18 months aftersecuringall required
      permits.
 
 ▪
              Low-rise apartment buildings and
      villas, typically 2 to 6 stories high, often of steel-reinforced concrete,
      that are completed within about 12 months aftersecuringall required
      permits.
 
 Our projects can be classified into
oneof four stages of
development:
 
 ▪
              Projects under construction, where
      the building construction has started but has not yet been
      completed;
 
 ▪
              Projects in process, which include
      developments where typically we have secured thedevelopmentand land use rights, and where the site planning,
      architecture, engineering, and infrastructure work is
      progressing;
 
 ▪
              Projects in planning, where we
      have purchased the development and or land use rights for parcels of land
      as part of our project development pipeline. The completion of projects on these
      sites is subject to adequate financing, permits, licensing, and certain
      market conditions;
      and
 
 ▪
              Completed projects, where the
      construction has beenfinished and mostof theunits in the buildings havebeensold, leased,or rented.
 
 Project under
construction
 
 Project
      name
              
              Type
      of Projects
              
              Actual
      or Estimated Construction Period
              
              Actual
      or Estimated Pre-sale Commencement Date
              
              Total
      Site Area
                (m2)
              
              Total
      GFA
                (m2)
              
              Sold
      GFA by Dec. 31/2008
                (m2)JunJingII
                phase
      one
              
              Multi-Family
      residential & Commercial
              
              Q3/
      2007
                -Q3/2009
              
              Q2/2008
              
              39,524
              
              136,012
              
              57,098JunJingII
                phase
      two
              
              Multi-Family
      residential & Commercial
              
              Q2/2009
                -Q2/2011
              
              Q3/2009
              
              29,800
              
              112,556
              
              -Project
      name
              
              Total
      Number of Units
              
              Number
      of Units sold
              
              Estimated
      Revenue
                (million)
              
              Contracted
      Revenue by Dec.31/2008
                (million)
              
              Recognized
      Revenue by Dec.31 2008 (million)JunJingII
                phase
      one
              
              1,182
              
              559
              
              95.6
              
              33.6
              
              23.8JunJingII
                phase
      two
              
              1,015
              
              -
              
              94.1
              
              -
              
              -
  - 12
-
  JunJing
II:JunJing II is located at38 East Hujiamiao,Xi’anwith total GFA about 248,568 square
meters. It’s the first Canadian style residential
community with “green and
energy-saving”characteristics, and won “National Energy Saving
Project”.The project is divided into 2 phases, namely
JunJing II phase one and JunJing II phase two. We started the construction of
JunJing II phase one in the third quarter of 2007 and started the presalecampaignin the second quarter of
2007.
 
 As of December 31, 2008,our customershavesigned pre-sales purchase agreements
for apartments with purchase prices totaling$33.6 million, of which we haverecognized$23.8millioninour revenuesin 2008, based onthe percentage of completion
methodof
accounting. About $9.2
millionof thosepre-salespayments werebookedasadvancesfrom customers and will be recognized
as revenuesas the construction
advances.
 
 Wewillstart the construction work for phase
twoin thesecond quarter2009 and willbegin accepting pre-salespurchase agreementsduring thethirdquarter2009. Revenuefrom those pre-sales inphase two willbegin tobe recognizedwhenthe constructionstarts above the ground
level.
  Projectsunder planningand in process
  Project
name
                
                Type of
      Projects
                
                Estimated Construction
      Period
                
                Estimated Pre-sale Commencement
      Date
                
                Total Site
Area
                  (m2)
                
                Total GFA
                  (m2)
                
                Total
      Number of UnitsBaqiao New Development
      Zone
                
                LandDevelopment
                
                2009 - 2020
                
                N/A
                
                N/A
                
                N/A
                
                N/APuhua
                
                Multi-Family residential &
      Commercial
                
                Q3/2009
                  -Q3/2014
                
                Q4/2009
                
                192,582
                
                610,000
                
                5,000JunJingIII
                
                Multi-Family residential &
      Commercial
                
                Q3/2009
                  -Q3/2011
                
                Q3/2009
                
                8,094
                
                51,470
                
                570
  Baqiao New
Development Zone:On March 9, 2007, we entered into a Shares Transfer
Agreement with the shareholders of Xi’an New Land Development Co., Ltd. (NewLand), under which the Company
acquired32,000,000 shares
of New Land, constituting 100 percent equity ownership of New Land. This
acquisition gave theCompanytheexclusive right to develop and sell 487
acres of land in a newly designated satellite city of Xi’an. We believe thisrepresents a major growth opportunity
for the Company.
 
 Xi’an has designated the Baqiao District as
a major resettlementzone
wherethe cityexpects 900,000 middle to upper income
peopletosettle. The Xi’an government intends to generate a
success similar to that created by Pudong for Shanghai, which hasresulted innew economicopportunities and provided housing for
Shanghai’s growing
population.
 
 The Xi’an municipal government plans to invest
50 billion RMB (over $6 billion) in infrastructure in the Baqiao New Development
Zone. The construction of a large-scale public wetland park iswellunderway; itwill embellish the natural environment adjacent to China
Housing’s Baqiao project.
   Through its New Land subsidiary,
      China Housing sold 18.4 acres to another developer in 2007 and generated
      about $24.41 million in revenue.

                
                In
      2008, we established a joint venture with Prax Capital Real Estate
      Holdings Limited (Prax Capital) to develop 79 acres within the Baqiao
      project, which will be the first phase of the Baqiao project’s
      development. Prax Capital invested $29.3 million cash in the joint
      venture. The project is further described in Puhua section
      below.
                
                After
      selling 18.4 acres and placing 79 acres in the joint venture, about 390
      acres remain available for the Company to develop in the Baqiao
      project.
                
                Puhua:   ThePuhua project, the Company’s 79 acre joint
      venturelocatedin Baqiaoproject,has atotal land area of 192,582 square meters andan
      expectedgross floor area ofabout 610,000 square meters.In November2008, the Company entered into
      anagreement with Prax Capital China
      Real Estate Fund I, Ltd.,to formthejointventure.The joint venture was formed in
      late 2008, subject to certain conditions and approvals, which were
      satisfied,Prax
      CapitalReal Estate
      Holdings Limited invested US$29.3millioncashin the joint venture, the joint venture acquired the
      land use rights early
      in the first quarter 2009, and the joint venture is proceeding with the
      project.
                
                JunJing
      III:JunJing III isnearour JunJing II project and the
      city expressway. It
      will havean expectedtotalgross floor area ofabout 66,890 square
      meters.Theproject will consistof 3 high rise
      buildings,each 28 to 30 stories
      high. The project is targeting middle to high incomecustomerswho requireahigh quality living environment
      andconvenienttransportationto the city center. We
      planto startconstructionduring the third quarter 2009 and
      the pre-salesduring the same quarter. The
      total estimated revenue from this project is about $46.0
      million.
  - 13
-
  CompletedProjects
  Project
name
                
                Type of
      Projects
                
                Completion
    Date
                
                Total Site
Area
                  (m2)
                
                Total GFA
                  (m2)
                
                Total
      Number of Units
                
                Number of Units soldby Dec.
    31/2008Tsining
      Mingyuan
                
                Multi-Family residential &
      Commercial
                
                Q2/2000
                
                17,526
                
                53,055
                
                303
                
                303Lidu
    Mingyuan
                
                Multi-Family residential &
      Commercial
                
                Q4/2001
                
                5,289
                
                8,284
                
                56
                
                56Tsining Hanyuan
                
                Multi-Family residential &
      Commercial
                
                Q4/2003
                
                3,026
                
                32,229
                
                238
                
                238Tsining Home
    IN
                
                Multi-Family residential &
      Commercial
                
                Q4/2003
                
                8,483
                
                30,072
                
                215
                
                213Tsining
    Gangwan
                
                Multi-Family residential &
      Commercial
                
                Q4/2004
                
                12,184
                
                41,803
                
                466
                
                464Tsining-24G
                
                Hotel,
      Commercial
                
                Q2/2006
                
                8,227
                
                43,563
                
                773
                
                672JunJing I
                
                Multi-Family residential &
      Commercial
                
                Q3/2006
                
                55,588
                
                167,931
                
                1,671
                
                1,566
  Tsining
Mingyuan: 8 East Youyi
Road,Xi’an. The construction areawas53,055squaremeters. Mingyuan is a residential complex
consisting of 303 apartments ranging from two to four bedrooms. Construction
commenced in March 1998 and was completed in April 2000. In total, the project
generated total sales of US$19.98 million.
 
 Lidu
Mingyuan: 25East Mutoushi,Xi’an. Located in the prime commercial area
nearXi’anhistoric Bell Tower. The project covers
1.3 acres, a building area of8,284squaremeters, andhas56 apartments ranging from two to four
bedrooms. The project began in October 2000 andwas completed in November 2001.Total sales were US$4.32
million.
 
 Tsining
Hanyuan: 6 East Youyi Road,Xi’an. Located in the south ofXi’an,the area isnoted foritsschools and universities. The project
was started in February 2002 and completed in December 2003. It is comprised of 238 two and
three bedroom apartments and covering a total construction area of32,229squaremeters. Theprojectgeneratedtotal sales of US$14.05
million.
 
 Tsining Home
IN: 88 North Xingqing Road,Xi’an. Located near the citycenter, the Home IN project consists of
215 two and three bedroom western-style apartments. Total construction area is30,072 squaremeters. The project, completed in December
2003, generated sales of US$12.77million in total
sales.
 Tsining GangWan: 123 Laodong
Road, Xi’an. Less than one mile from the western hi-tech industrial zone,
GangWan spans three acres and is comprised of eight buildings with a total
construction area of 41,803 square meters. The project began in April 2003 and
was completed in December 2004. GangWan has 466 apartments ranging from one
to three bedrooms. Total sales were US$ 18.28 million.
 
 Tsining 24G: 133 Changle
Road, Xi’an. 24G is an redevelopment of an existing 26 floor building, located
in the center of the most matured and developed commercial belt of the city.
This upscale development will include secured parking, cable TV, hot water, air
conditioning, natural gas access, internet connection, and exercise facilities.
This project was awarded “The Most Investment Potential Award in Xi’an city
” in 2006, Its target Customer: White collar workers, small business owners
and traders, entrepreneurs. Total area available for residential use was 43,563
square meters, covering 372 one to three bedroom serviced apartments. The
project started construction in June 2005 and was completed in June 2006 with
sales totaled $38.22 million.
  - 14
-
  Tsining JunJing Garden I: 369
North Jinhua Road, Xi’an. It’s the first German style Residential &
Commercial Community in Xi’an, designed by the world-famous WSP architect design
house. Its target Customer is local middle income families. The project has 15
residential apartment buildings consisting of 1,230 one to five bedroom
apartments. The Garden will feature secured parking, cable TV, hot water,
heating systems, and access to natural gas. Total GFA available was 167,931
square meters. JunJing Garden I was also a commercial venture that will house
small businesses serving the needs of JunJing Garden I residents and surrounding
residential communities. The project was completed in September 2006 and
generated total revenue $48.88 million.
 
 Customers
 
 Middle income families comprise the
Company’s primary residential customer group and
represent the fastest growing segment in Xi’an as well as China in general. The annual incomefor the middle-income family targeted by
the Company ranges between RMB100,000 and RMB200,000.Xi’an’s per capita GDP has grown at a
12.5percent CAGR during themost recently availablefive years(2002-2007)with continued growthanticipated over the next five years with
the strengthening of Xi’an’s economic and cultural significance in
thecentralandwesternpart of China. The middle-market niche
segment partially insulates the company from direct competition with the
internationaland national
developers in Xi’an that are targeting primarily the
high-end market due to their high cost structure and brand
recognition.
 
 Marketing
 
 TheCompany
currently hassevensales
managers andmore
than 30primarily
commission driven directsalesemployeeswhoare
onsite
to service prospective clients.Itsmarketing
campaigns
typicallyinclude
television, radio, billboard, andtheinternet.
The company also has membership program (gold
andsilver
members)
where existing and potential customers canpay
for “points”at
a discount that can be redeemed for the purchase of property unitslater.
The program has been very popular and provides goodaindication
offutureproject
sales and creates better cash liquidity for theCompany.TheCompany
has been focusing
on building brand equity and has hired a third-party
evaluation company to survey both existing and potential customersaboutthe
company’s
services, recognition of our “Tsining”brand,and
so on.
Every year theChina
Housinghasachieved
customersatisfactionratingsbetween
80-85 percent,
which is very high.
 
 Advertising and sales promotion costs
are expensed as incurred. Advertising expense totaled $1,261,495in 2008and $781,998in2007.The companyconductedanaggressive marketing campaign
during 2008 for Tsining
JunJing II, which included advertising and fully furnished showrooms where
potential buyers could see possible layouts and decorative effects. These
showrooms have attracted hundreds of potential buyers and continue to create
buyer interest and result in additional pre-sales
purchase agreements.
 
 Suppliers
 
 The supply of land is controlled by the
government. There are generally three ways in which we acquire
land.
  ▪
              Purchase by auction held by the
      Land Consolidation and Rehabilitation Center;
  ▪
              Purchase by auction held by court
      under bankruptcy
proceedings;
  ▪
              Merger with or acquisition of a
      state-owned enterprise that controls developable
    land.
  All such purchases of land are required
to be reported to and authorized by the Xi’an Bureauof Land and Natural
Resources.
 
 As for other suppliers of design and
construction services, we typically selects the lowest-cost provider through an
open bidding process. Such service providers are numerous in China and we
foresee no difficulties in securing alternative sources of services as
needed.
 
 Intellectual
Property
 
 We currently have no registered
intellectual property.
 
 Research and
Development
  We have not had any material research
and development expenses over the past two years. Due to the characteristic of the housing and land
development industry, “R&D”consists of marketing research. The
funding of all marketing research is expected to come from operating cash
flow.
  - 15
-
 
 Governmental and Environmental
Regulation
 
 To date, we have been compliant
with all registrations and
requirements for the issuance and maintenance of all licenses required by the
applicable governing authorities in China. These licenses
include:
 
 “Level 1 Qualification
Certificate for Real Estate
Development”authorized by the Shaanxi Construction Bureau, effective
from December 20, 2006 to
December 20, 2009. License numberJianKaiQi (2006) 603. The housing &
land development process is regulated by the Ministry of Construction and
authorized by the local offices of the Ministry.Each development project must obtain the
following licenses:
 
 “License
for Construction Area Planning" and "License for Construction Project Planning",
authorized by Xi’an Bureau of Municipal Design;
 “Building Permit”authorized by the Committee of
Municipal and Rural
Construction;
 
 After construction is complete, the
project must obtain a validation certificate. There are various standards that
must be met to obtain this certificate. These standards are regulated by Local
Ministry of Construction Bureau.
 
 Housing and land development sales
companies are regulated by the Ministry of Land & Natural Resources and
authorized by the local office of the Ministry. Each project also has to be
authorized and must obtain a “Commercial License for Housing
Sale”from the Real Estate
Bureau.
 
 Competition
 
 The real estateindustry in Chinatiertwocities isfragmented and highly competitive.We compete primarily with
local and regional property developers and an increasing number of large
national property developershave also started to enter these
markets.
 
 There are developers of varioussizestargeting the Xi’an real estate market, including pure
developers, subsidiaries of traditional industries,and municipal government real estate
development companies.
We have divided them into three categories:
local, national,and international. The national and
international developers tend to limit themselves to the high end residential
markets in Xi’an, targeting annual family income
aboveRMB300,000, whereas
China Housingfocuses on the middle tier with annual income between RMB
100,000 and RMB200,000.
  - 16
-
 
 Typically, the housing and land
development industry is a regional business with mostly local players competing
with us for small to medium size projects.
 
 Local competition
 
 The local Xi’an development market is fragmented with
close to 350 listed developers, most of which are of small scale and scope and
currently do not have active development projects.Tsiningis one of thefourLevel I rated developers in
Xi’an. Theotherthreemajor local companies are government
related andone ispublicly listed in Shanghai
Stock Exchange.
 
 Tande Co. (Tiandiyuan) is considered the
largest developer in Xi’an. It is a government affiliated
company that has been targeting primarily the High-tech Development Zone.China Housinghas not seen any direct competition with
TandesinceChina Housingfocuses mainly on theeasternandsouthernpart of Xi’an.Tande targets primarily thesouthwestern Xi’an.
 
 Xi’an Jingfa RealEstateCo.,Ltd.,(Jingfa) is also a state owned
enterprise.Sofar,Jingfahas onlyengaged inone project innorthernXi’an.The Company has not seen direct
competition withJingfa.
 
 Shaanxi International Trust &
Investment Corp.,was acquired byChina Minsheng Banking Corp., Ltd.,in March 2008,andis no longerin real estatedevelopmentbusiness.
 
 With the new stringent government policy
striving to enhance buyers’services and reduce property
development speculation, many smaller local developers are finding it
harder and harder to
survive when faced with increased regulatory oversight, weakened ability to
borrow, and enhanced international competition. This presents an attractive
opportunity for well financed and managed companieslike China Housingto acquiredeveloperswith attractiveparcels ofland.
 
 National orregionalcompetition
 
 The larger scale national developers have
increased their presence in Xi’an, includingVanke,Greenland, Guangzhou R&F, Gemdale,andChina Overseas & Land. Most of these
national players target the
higher end markets due to their higher costbase and better name
recognition. Theirprojects are located in Qujiangandthehigh-techzone of Xi’an.The average price
of Gemdale’s projects in these areasis RMB 10,438 per square meter.
China Overseas &
Land’sprojectis priced at about RMB 6,587 per square
meters. Since China Housingtargets differentincome levelsandgeographicregionsthan they do, wehave notseen any significantdirect competition withthesenational players.
 
 International competition
 
 There are a number of top international
developers starting to focus on Xi’an,including Hutchinson Whampoa, Henderson
Land, Surbana, Mapletree Group, GIC Group,and so on.
 
 Hong Kong’s Henderson Land and
Singapore’s Temasek are workingon a 30,000 unit joint project in the
Baqiao district.Known asLa Botanica, the project
covers about 323 acres, with a GFA about 3 million square meters, in which
residences account for about 85 percent of the GFA, with commercial spaces
occupying the remainder. Facilities will include restaurants, a shopping mall,
entertainment, one-stop education from kindergarten to high school, a hospital,
and a giant club covering 12,000 square meters.Although these brand name Asian
developers may present competitionfor theacquisition of land, over the long run,
we believe they help to bring a higher standard of living and higher real estate
valuations to Xi’an’s and China Housing’s market.
 
 Qualification
levels
 
 The real estate development business in
China is organized into
four levels under the structure of the “Qualification Certificate for Real
Estate Development Enterprise.”The starting level is Level 4 (see
table below). Dependent upontheregistered capital, the number of years
of industry experience, the area of land it has developed anditssafety record, a company may climb the
scale to participate in larger projects. However, only one level may be ascended
per year.
  RegisteredCapital
                            (million)
                          
                          Experience
                            (years)
                          
                          Developed Area
                            (squaremeters)
                          
                          Other
                          
                          Time for
                            license to
                            be
    authorizedLevel 1
                          
                          US$6.250
                          
                          5
                          
                          300,119
                          
                          NoLevel 2
                          US$2.500
                          
                          3
                          150,059
                          Severe
                          20 DaysLevel 3
                          US$1.000
                          
                          2
                          50,020
                          AccidentLevel 4
                          US$0.125
                          
                          1
                          N/A
   - 17
-
  On the national level, there are
numerous Level 1 companies that have real estate projects across China (to
develop in multiple regions,a Level 1 status is required). There
are 79 housing and land development companies listed on the Shanghai,
Shenzhen,and Hong Kongstockexchanges. However, such companies
usually undertake large scale projects and are unlikely to compete with us for
business, sincewe target small to medium size
projects.
 
 We had gained Level 1 status under the China Ministry of
Construction licensing policy in December 2006.
 
 Employees
 
 As of
December 31, 2008, we had 77 employees in the following capacities: 11
management, 4 administrative, 11 finance, 4 planning, 3 research and
development, and 44 employees in subsidiaries, including 30 in Tsining, 9 in New
Land, and 5 in the Puhua.
 
 We
believe we have a good working relationship with our employees. We are not a
party to any collective bargaining agreements. At present, no significant change
in our staffing is expected over the next 12 months, except for our acquisition
of the property management company we acquired in January 2009. All employees
are eligible for performance-based compensation.
 
 ITEM1A. RISK
FACTORS
 
 The investment in our company has a high degree of risk. Before you
invest you should carefully consider the risks and uncertainties described below
and theother information in thisfiling. If any of the following risks actually
occur, our business, operating results,and financialcondition could be harmed and
thevalue of our stock could go down. This
means you could lose all or a part of your investment.
 
 Risks
Related to Our Business
 
 Our home sales and operating revenues
could decline due to macro-economic and other factors outside of our control, such as changes in
consumer confidenceand declines in employment
levels.
 
 Changes in national and regional
economic conditions, as well as local economic conditions where the Company
conductsitsoperations and where
prospectivepurchasers of our homes live, may result in
more caution on the part of homebuyers and consequentlymay makefewer home purchases. These economic
uncertaintiesinvolve, among other things, conditions
of supply and demand in local markets and changes in consumer confidence and income, employment
levels, andgovernment regulations. These risks and
uncertainties could periodically have an adverse effect on consumer demand for
and the pricing of our homes, whichcould cause our operating revenues to
decline. In addition,
builders are subject to various risks, many of them outside the control of the
homebuilder includingcompetitive overbuilding, availability
and cost of building lots, materials and labor, adverse weather conditions which
can cause delays in construction schedules,cost overruns, changes in government
regulations, and increases in real estate taxes and other local government fees.
A reduction in our revenues could,in turn,negatively affect the market price of
our securities.
 
 An increase in mortgageinterest rates or unavailability of
mortgage financing may reduce consumer demand for the Company’s homes.Virtually all purchasers of our homes
finance their acquisitions through lenders providing mortgage financing. A
substantial increase in mortgage interest rates orunavailability of mortgage financing
would adversely affect the ability of prospective homebuyers to obtain the financing they
would need in order to purchaseour homes, as well as adversely affect
the ability of prospective move-up homebuyers to sell their current homes. For
example, if mortgage financing became lessavailable, demand for our homes could
decline. A reduction in demand could also have an adverse effect on the pricing
of our homes because we and ourcompetitors may reduce prices in an effort to better compete for
home buyers. A reduction in pricing could result in a decline in revenues and in
our margins.
 
 We could experience a reduction in home
sales and revenues or reduced cash flows if we are unable to obtain reasonably
priced financing to support
ourhomebuilding and land development
activities.
 
 The real estate development industry is
capital intensive, and development requires significant up-front expenditures to
acquire land and begin development.Accordingly, we incur substantial indebtedness to finance
our homebuilding and land development
activities. Although we believe that internally generated fundsand current borrowing capacity will be
sufficient to fund our capital and other expenditures (including land
acquisition,
development,and construction
activities),the amounts available from such sources
may not be adequate to meet our needs. If such sources are not sufficient, we
would seek additional capital in the formof debt or equity financing from a
variety ofpotential
sources, including bank financing andor securities offerings. The
availability of borrowed funds, to beused for land acquisition,
development,and construction, may be greatly
reduced, and the lending community may require increased amounts ofequity to beinvested in a project by borrowers in
connection with new loans. The failure to obtain sufficient capital to fund our
planned capital and
  - 18
-
  other expenditures couldhave a material adverse effect on our
business.
 
 We are subject to extensive
government regulation which
could causethe
Companyto incur
significant liabilities or restrict itsbusiness activities.Regulatory requirementsalsocould cause us to incur significant
liabilities and operating expenses and could restrict our business
activities. We are subject
to statutesand rules regulating, among other
things, certain developmental matters, building and site design, and matters
concerning the protection of health and theenvironment. Our operating expenses may
be increased by governmental regulations such as building permit
allocation ordinances and other fees and taxes,which may be imposed to defray the cost
of providing certain governmental services and improvements. Any delay or
refusal from government agencies to grantus necessarylicenses, permits,and approvals could have an adverse
effect on our operations.
 
 We may require additional capital in the
future, which may not be available on favorable terms or at
all.
 
 Our
future capital requirements will depend on many factors, including industry and
market conditions, our ability to successfully implement our new
branding and marketing initiative, and expansion of our production
capabilities. We anticipate that we may need to raise additional funds in order
to grow our business and implement our business strategy. We anticipate
that any such additional funds would be raised through equity or debt
financings. In addition, we may enter into a revolving credit facility or a
term loan facility with one or more syndicates of lenders. Any equity or debt
financing, if available at all, may be on terms that are not favorable to
us. Even if we are able to raise capital through equity or debt financings, as
to which there can be no assurance, the interest of existing shareholders
in our company may be diluted, and the securities we issue may have rights,
preferences, and privileges that are senior to those of our common stock or
may otherwise materially and adversely affect the holdings or rights of our
existing shareholders. If we cannot obtain adequate capital, we may not be able
to fully implement our business strategy, and our business, results of
operations, and financial condition would be adversely affected. See also
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.” In addition, we have and will
continue to raise additional capital through private placements or
registered offerings, in which broker-dealers will be engaged. The activities of
such broker-dealers are highly regulated, and we cannot assure that the
activities of such broker-dealers will not violate relevant regulations and
generate liabilities despite our expectation otherwise.
 
 We depend on the availability of
additional human resources for future growth.
 
 We are currently experiencing a period
of significant growth in our sales volume. We believe that continued expansion
is essential for us to remain competitiveand to capitalize on the growth
potential of our business. Such expansion may place a significant strain on our management and
operations and financialresources. As our operations continue to
grow, we will have to continually improve our management, operational and
financial systems, procedures and controls,and other resources infrastructure, andexpand our workforce. There
can be no assurance that our existing or future management, operating and
financial systems,procedures,and controls will be adequate to
support our operations, or that we will be able to recruit, retain,and motivateemployees. Further, there can be noassurance that we will be able to
establish, develop,or maintain the business relationships
beneficial to our operations, or to do so or to implement any of theabove activities in a timely manner.
Failure to manage our growth effectively could have a material adverse
effect on our business and the results of ouroperations and financial
condition.
 
 We may be adversely affected by the
fluctuation in raw material prices and selling prices of our
products.
 
 Our projects and the rawmaterials we use have experienced
significant price fluctuations in the past. There is no assurance that they will
not be subject to futureprice fluctuations or pricing control.
The land and raw materials we use may experience price volatility caused byevents such as market
fluctuations or changesin governmental programs. The market
price of land and raw materials may also experience significant upward
adjustment, if, for instance, there is a materialunder-supply or over-demand in the
market. These price changes
may ultimately result in increases in the selling prices of our products, and
may, in turn,adversely affect our sales volume,
revenue,and operating
profit.
 
 We could be adversely affected by the
occurrence of natural disasters.
 
 From time totime, our developed sites may experience
strong winds, storms, floods,and earthquakes. Natural disasters
could impede operationsand
ordamageinfrastructure necessary to our
constructions and operations. The occurrence of natural disasters could
adversely affect our
business, the results of our operations,prospects,and financial condition, even though we
currently have insurance against damages caused by natural disasters, including
typhoons, accidents,or similarevents.
  - 19
-
 
 Intense competition from
existing and new entities
may adversely affect our revenues and profitability.
 
 In general, the property development
industry is intensely competitive and highly fragmented. We compete with various
companies. Many of our competitors aremore established than we are and have significantly greater
financial, technical, marketing,and other resources than we presently
possess. Some of ourcompetitors have greater name
recognition and a larger customer base. These competitors may be able to respond
more quickly tonew or
changing opportunitiesand customer requirements and may be
able to undertake more extensive promotional activities, offer more attractive
terms to customers, and adopt moreaggressive pricing policies. We intend
to create greater awareness for ourbrand name so that we can successfully
compete with our competitors. We cannotassure you that we will be able to
compete effectively or successfully with current or future competitors or that
the competitive pressures we face will not harmour business.
 
 Our operating subsidiariesmust comply with environmental
protection laws that could adversely affect our
profitability.
 
 We are
required to comply with the environmental protection laws and regulations
promulgated by the national and local governments of the People’s
Republic of China (“PRC” or “China”). Some of these regulations govern the
level of fees payable to government entities providing environmental protection
services and the prescribed standards relating to the constructions.
Although our construction technologies allow us to efficiently control the level
of pollution resulting from our construction process, due to the nature of
our business, waste are unavoidably generated in the processes. If we fail to
comply with any of these environmental laws and regulations in the PRC,
depending on the types and seriousness of the violation, we may be subject to,
among other things, warning from relevant authorities, imposition of
fines, specific performance and or criminal liability, forfeiture of
profits made, being ordered to close down our business operations, and
suspension of relevant permits.
 
 Our success depends on our management
team and other key personnel, the loss of any of whom could disrupt our business
operations.
 
 Our future success will dependin substantial part on the
continued service of our senior management, including Mr. Lu Pingji, our
Chairmanof the Board of
Directors, Mr. Feng
Xiaohong, our ChiefExecutiveOfficer, and Ms. Lu Jing, our Chief Operating
Officer. The loss of the
services of one or more of
our key peoplecould impedeimplementation of our business plan and
result in reduced profitability. We do not carry key person life or other
insurance in respect of any of our officers oremployees. Our future success will also
depend onthe continued
ability to attract, retain,and motivate highly qualified
technical,sales and marketing,customersupport, and other employees. Because of the rapid growth of the
economy in the People’s Republic of China, competition for
qualified peopleisintense. We cannot guarantee
thatwe will be able to retain our key
peopleor that we will be able to attract,
assimilate,or retain qualified peoplein the future.
 
 Risk
Relating to the Residential Property Industry in China
 
 We are heavily dependent onthe performance of the residential
property market in China, which is at a relatively early development
stage.
 
 The residential property industry in the
PRC is still in a relatively early stage of development. Although demand for
residential property in the
PRC has beengrowing rapidly in recent years, such
growth is often coupled with volatility in market conditions and fluctuation in
property prices. It is extremely difficult topredict how much and when demand will
develop, as many social, political, economic, legal,and other factors, most of which are
beyond our control, may affectthe development of the market. The level
of uncertainty is increased by the limited availability of accurate financial
and market information,as well as the overalllow level of transparency in the PRC, especially
intiertwocities,which have lagged in progress in these
aspects when compared totieronecities. The lack of aliquid secondary market for residential
property may discourage investors from acquiring new properties. The limited amount of property
mortgage financingavailable to PRC individuals may further
inhibit demand for residential developments.
 
 We face intense competition from other
real estate developers.
 
 The property industry in the PRC is
highly competitive. In thetiertwocitieson whichwe focus, local and regional property
developers are our major competitors, and anincreasing number of large state-owned
and private national property developers have started entering these markets.
Many of our competitors,
especially thestate-owned and private national
property developers, are well capitalized and have greater financial,
marketing,and other resources than we have. Some
alsohave larger land banks, greater
economies of scale, broader name recognition, a longer track record,and more established relationships in
certain markets. Inaddition, the PRC government’s recent measures designed to reduce
land supply further increased competition for land among property
developers.
 
 Competition among property developers may result in increased costs
for the acquisition of land for development, increased costs for raw materials,
shortages ofskilled contractors, oversupply of
properties, decrease in property prices in certain parts
  - 20
-
  of the PRC, a slowdown in
therate at which new
property developmentswill be approved andor reviewed by the relevant government
authorities,and an increase in administrative costs
for hiring or retaining qualified personnel, any ofwhich may adversely affect our business
and financial condition.
Furthermore, property developers that are better capitalized than we are may be
morecompetitive in acquiring land through
the auction process. If we cannot respond to changes in market conditions as
promptly and effectively as our competitors,or effectively compete for land
acquisition through the auction systems and acquire other factors of production,
our business and financial condition will beadversely affected.
 
 In addition, risk of property
over-supply is increasing in parts of China, where property investment,
trading,and speculation have become overly
active. We areexposed to the risk that in the event of
actual or perceived over-supply, property prices may fall drastically, and our
revenue and profitability will be adverselyaffected.
 
 The PRC government may adopt further
measures to curtail the overheating of the property sector.
 
 Along with the economic growth in China,
investments in the property sectors have increased significantly in the past few
years. In response to concerns over thescale of the increase in property
investments, the PRC government has introduced policies to curtail property
development. We believe the following regulations,among others, significantly affect the
property industry in China.
 
 In May 2006, theMinistry of Construction, National
Development and Reform Commission(NDRC),the People’s Bank of China (PBOC),and other relevant PRC
governmentauthorities jointly issued the Opinions
on Adjusting the Housing Supply Structure and Stabilizing the
Property Prices, which
introduced measures to limitresources allocated to the luxury
residential market. For instance, the new measures require that at least 70
percent of a residential project must consist of unitswith a GFA of less than 90 square meters
per unit, and the minimum
amount of down payment was increased from 20 percent to 30 percent of the
purchase priceof the underlying property if it has a
unit GFA of 90 square meters or more. In September 2007, PBOC and China Banking
Regulatory Commission issued theCircular on Strengthening the Management
of Commercial Real Estate Credit Facilities, which increased the minimum down
payment for any purchase ofsecond or subsequent residential
property to 40 percent of the purchase price if the purchaser had
obtained a bank loan to
finance the purchase of his or her firstproperty.
 
 In July 2006, the Ministry of
Construction, the Ministry of Commerce, NDRC, PBOC, the State Administration for
Industry and Commerce,andtheState Administration for
Foreign ExchangeissuedOpinions on Regulating the Entry and
Administration of Foreign Investment in Real Property Market, which impose
significant requirements on foreigninvestment in the PRC real estate
sector. For instance, these opinions set forth requirements of registered capital of a foreign invested
real property enterprise aswell as thresholds for a foreign
invested real property enterprise to borrow domestic or overseas loans. In
addition, since June 2007, a foreign invested realproperty enterprise approved
bylocal authorities is
required to register such approvals with the Ministry of
Commerce.
 
 The PRC government’s restrictive regulations and measures
to curtail the overheating of the property sector could increase our operating
costs in adapting tothese regulations and measures, limit our
access to capital resources or even restrict our business operations. We cannot
be certain that the PRC government willnot issue additional and more stringent
regulations or measures, which could further slow down property development in China and adversely
affect our businessand prospects.
 
 Our sales will be affected if mortgage
financing becomes more costly or otherwise becomes less
attractive.
 
 Substantially all purchasers of our
residential properties rely on mortgages to fund their purchases. An increase
in interest rates may significantly increase thecost of mortgage financing, thus
affecting the affordability of residential properties. In2008, PBOCchanged the lendingrates five times. The benchmark lendingratefor loans with a term of over five
years, which affects mortgage rates, has been increased to5.94percenton December 31, 2008. The PRC government and commercial
banks mayalso increase the down payment requirement, impose other
conditions or otherwise change the regulatory framework in a
manner that would make mortgagefinancing unavailable or unattractive to
potential property purchasers. Under current PRC laws and regulations,
purchasers of residential properties generallymust pay at least 20 percent
of the purchase price of
the properties before they can finance their purchases through mortgages. In May
2006, the PRC governmentincreased the minimum amount of down
payment to 30 percent of the purchase price of the underlying property if such
property has a unit GFA of
90 squaremeters or more. In September 2007, the
minimum down payment for any purchase of second or subsequent residential
property was increased to 40 percent ofthe purchase price if the purchaser had
obtained a bank loan to finance thepurchase of his or her first property.
Moreover, the interest rate for bank loans of suchpurchase shall not be less than 110
percent of the PBOC benchmark rate of the same term and category. For further
purchases of properties, there would beupward adjustments on the minimum down payment and
interest rate for any bank loan. In addition, mortgagee banks may not lend to
any individual borrower ifthe monthly repayment of the anticipated
mortgage loan would exceed 50 percent of the individual borrower’s monthly income or if the total debt service
of theindividual borrower would exceed 55
percent of such individual’s monthly income. If the availability or
attractiveness of
  - 21
-
  mortgage financing is reduced
orlimited, many of our prospective
customers may not be able
to purchase our properties and, as a result, our business, liquidity and results
of operations could beadversely affected.
 
 In line with industry practice, we
provide guarantees to PRC banks with respect to loans procured by the purchasers
of our properties for the
total amount ofmortgage loans. Such guarantees expire
upon the completion of the registration of the mortgage with the relevant
mortgage registration authorities. If there arechanges in laws, regulations,
policies,and practices that would prohibit property developers from
providing guarantees to banks in respect of mortgages offered toproperty purchasers and as a result,
banks would not accept any alternative guarantees by third parties, or if no
third party is available or willing inthe market toprovide such guarantees, it may become
more difficult for property purchasers to obtain mortgages from banks and other
financial institutions during sales andpre-sales of our properties. Such
difficulties in financing could result in a substantially lower rate of sale and pre-sale
of our properties, which would adverselyaffect our cash flow, financial
condition,and results of operations. We are not
aware of any impending changes in laws, regulations, policies,or practicesthatwill prohibit such practice in China. However, there
can be no assurance that such changes in laws, regulations, policies,or practices will not occur in China
inthe future.
 
 Risks
Related to China
 
 China’seconomicpolicies could affect ourbusiness.
 
 Substantiallyall of our assets are located in China
and substantially all of our revenue is derived from our operations in
China.Accordingly, our results of operations
and prospects are subject, to a significant extent, to the economic,
political,and legal developments in China.While China’s economy has experienced significant
growth in the past20years, such growth has been uneven,
both geographically and among varioussectors of the economy. The Chinese
government has implemented various measures to encourage economic growth and guide the allocation of
resources. Someof these measures benefit the overall
economy of China, but they may also have a negative effect on us. For example,
operating results and financial conditionmay be adversely affected by the
government control over
capital investments or changes in tax regulations.
 
 The economy of China has been changing
from a planned economy to a more market-oriented economy. In recent years the
Chinese government hasimplemented measures emphasizing the
utilizationof market
forces for economic reform and the reduction of state ownership of productive
assets, and theestablishment of corporate governance in
business enterprises; however, a substantial portion of productive assets in
China are still owned by the Chinesegovernment. In addition, the Chinese
government continues to play a significant role in regulating industry
development by imposing industrial policies. It alsoexercises significant control over
China’s economic growth through the allocation
of resources, the control
of payment of foreign currency- denominatedobligations, the setting of monetary
policy,and the provision of preferential
treatment to particular industries or companies.
 
 Capital outflow policies in China may
hamper our ability to remitincome to the United
States.
 
 China has adopted currency and capital
transfer regulations. These regulations may require us to comply with complex
regulations for the movement of capital.Although our directors believe that it
is currently in compliance with these regulations, should these
regulations or the interpretation of them by courts orregulatory agencies change; we may not
be able to remit all income earned and proceeds received in connection with our
operations or from the sale of ouroperating subsidiariesto our
stockholders.
 
 In addition, there can be no assurance
that we will be able to obtain sufficient foreign exchange to pay dividends or
satisfy other foreign exchange requirementsin the future.
 
 It may be difficult to effect service of
process and enforcement of
legal judgments upon our company and our officers and directors because some of
them resideoutside the United
States.
 
 As our operations are presently based in
China and some of our key directors and officers reside outside the
United States, service of
process on our key directorsand officers may be difficult to effect
within the United States. Also, substantially all of our assets are located
outside the United States and any judgmentobtained in the United States against us
maynot be enforceable
outside the United States. We have appointed Lu Pingji, our Chairmanof the Board of Directors, as our agent to receive service of
process in any action against our company in the United States.If relations between the United States
andChina worsen, our stock
price may decrease,and we may have difficulty accessing
the U.S. capital markets.
 
 At various times during recent years,
the United States and China have had disagreements over political and economic
issues. Controversies may arise in thefuture between these two countries. Any
political or trade controversies between the United States and China could
adversely affect the market price of ourcommon stock and our ability to access
U.S. capital markets.
  - 22
-
 
 We may face obstacles fromthe communist system in
China.
 
 Foreign companies conducting operations
in China face significant political,economic,and legal risks.The political system in China, including
a cumbersome bureaucracy, may hinder Western investment. We may have
difficulty establishing
adequatemanagement, legal,and financial controls in China. China
historically has not adopted a Western style of management and financial
reporting concepts andpractices, modern banking,
computer,or other control systems. We may have
difficulty in hiring and
retaining a sufficient number of qualified employees to workin China. As a result of these factors,
we may experience difficulty in establishing management, legal,and financial controls, collecting
financial data andpreparing financial statements, books of account and
corporate records,and instituting business practices that
meet Western standards.
 
 It will be extremely difficult to
acquire jurisdiction and enforce liabilities against our officers,
directors,and assets based in China.Because the Company’s executive officers and directors,
including, the chairman ofitsboard of directors, are Chinese
citizens, it may be difficult, if notimpossible, to acquire jurisdiction over
these persons in the event a lawsuit is initiated against us andor our officers and directors by a
stockholder or group ofstockholders in the United States. Also,
because the majority of our assets are located in China,it would also be extremely difficult to
access those assets tosatisfy an award enteredagainst it in a United States
court.
 
 We may face judicial corruption in the
People’s Republic of China.
 
 Another obstacle to foreign investment
in the People’s Republic of China is corruption. There
is no assurance that we will be able to obtain recourse, if desired,through the People’s Republic of China’s poorly developed and sometimes corrupt
judicial systems.
 
 Risks
Related to Our Common Stock
 
 Our common stock is currently traded on
the NASDAQ Capital Market. The market price of our common stock could fluctuate substantially due to a
variety offactors, including market perception of
our ability to achieve our planned growth, quarterly operating
resultsof
competitors, trading volume
in ourcommon stock, changes in general
conditions in the economy,and the financial markets or other
developments affecting our competitors or us. In addition, thestock market is subject to extreme price
and volume fluctuations. This volatility has had a significant effect on the
market price of securities issued by manycompanies for reasons unrelated to their
operating performance and could have the same effect on our common
stock.
 
 Our
principal stockholdersandcurrent
executive officers and directors own a significant percentage of our company and
will be able to exercise
significant influenceover
our company.Our
executive officers and directors and principal stockholders together will
beneficially own amajorityof the total voting power of our outstanding
votingcapital
stock. These stockholders will be able to determine
the composition of our Board of Directors, will retain the voting power to
approve all mattersrequiring
stockholder approval,and
will continue to have significant influence over our affairs. This concentration
of ownership could have the effectof
delayingor
preventing a change in our control or otherwise discouraging a potential
acquirer from attempting to obtain control of us, which in turn could have a
materialand
adverse effect on the market price of the common stock or prevent our
stockholders
from realizing a premium over the market prices for their shares ofcommon
stock. See “Principal
Stockholders”for
information about the ownership of common by our executive officers,
directors,and
principal stockholders.
 
 We do not anticipate paying dividends on the Common
Stock.
 
 We have never paid dividends on our
common stock and do not anticipate paying dividends in the foreseeable future.
Our directors intend to follow a policy ofretaining all of our earnings, if any,
to finance the development
and expansion of our business.
 
 Our common stock could be considered to
be a “penny
stock.”
 
 Our common stock could be considered to
be a “penny
stock”if it meets one or
more of the definitions in Rules 15g-2 through 15g-6 promulgated under
Section15(g) of the Securities Exchange Act of
1934, as amended. These include but are not limited to the following: (i) the
stock trades at a price less than $5.00 pershare; (ii) it is NOT traded on a
“recognized”national exchange; (iii) it is NOT
quoted on TheNasdaq Stock
Market, or even if so, has a price less than $5.00 pershare; or (iv) is issued by a company
with net tangible assets less than $2.0 million, if in business more than a
continuous three years, or with average revenues ofless than $6.0 millionfor the past three years. The principal
result or effect of being designated a “penny stock”is that securities broker-dealers
cannotrecommend the stock but must trade in it
on an unsolicited basis.
  - 23
-
 
 Broker-dealer requirements may affect
trading and liquidity.
 
 Section 15(g) of the Securities Exchange
Act of 1934, as amended, and Rule 15g-2 promulgated there under by the SEC
require broker-dealers dealing in pennystocks to provide potential investors
with a document disclosing the risks of penny stocks and to obtain a manually signed and
dated written receipt of thedocument before effecting any
transaction in a penny stock for the investor’s account.
 
 Potential investors in our common stock
are urged to obtain and read such disclosure carefully beforepurchasing any shares that are deemed
to be “penny
stock.”Moreover, Rule 15g-9 requires
broker-dealers in penny stocks to approve the account of any investor for
transactions in such stocks before selling any pennystock to that investor. This procedurerequires the broker-dealer
to (i) obtain from the investor information concerning his or her financial
situation, investmentexperience,and investment objectives; (ii)
reasonably determine, based on that information, that transactions in penny
stocks aresuitable for the
investor and thatthe investor has sufficient knowledge
and experience as to be reasonably capable of evaluating the risks of penny
stock transactions; (iii) provide the investorwith a written statement setting forth
the basis on which the
broker-dealer made the determination in (ii) above; and (iv) receive a signed
and dated copy of suchstatement from the investor, confirming
that it accurately reflects the investor’s financial situation, investment
experience,and investment objectives.Compliancewith these requirements may make it more
difficult for holders of our common stock to resell their shares to third
parties or to otherwise dispose of them in themarket or otherwise.
 
 Shares eligible for future sale may
adversely affect the market
price of our common stock, as the future sale of a substantial amount of our
restricted stock in thepublic marketplace could reduce the
price of our common stock.
 
 From time to time, certain of our
stockholders may be eligible to sell all or some oftheir shares of common stock by means of
ordinary brokerage transactions inthe open market pursuant to Rule 144,
promulgated under the Securities Act (Rule 144), subject to certain limitations.
In general, pursuant to Rule 144, astockholder (or stockholders whose shares are aggregated) who has
satisfied a one-year holding period may, under certain circumstances, sell
within anythree-month period a number of
securities which does not exceed the greater of 1 percent of the then
outstanding shares of commonstock or the average weeklytrading volume of the class during the
four calendar weeks prior to such sale. Rule 144 alsopermits,under certain circumstances, the sale
of securities, withoutany limitations, by a non-affiliate of
our company that has satisfied a two-year holding period. Any
substantial sale of common stock pursuant to Rule 144 orpursuant to any resale prospectus may
have an adverse effect on the market price of our
securities.
 
 ITEM 2.
 PROPERTIES
 
 Our principal executive offices are
located at 6 Youyi Dong Lu,
Han Yuan 4 Lou, Xi’an, Shaanxi Province, China 710054. This
office consists of approximately 2,608.06 square meters which we
own.
 
 Our properties are located inXi’an, Shaanxi province in
China.
 
 Name of
    project
                  
                  Geographic
      location
                  
                  Subsistence
      area
                    (square
    meter)Tsining JunJing
      I
                  
                  North Jinhua Road Xi'an
      City
                  
                  29,929Tsining-24G
                  
                  East Erhuan of Xi'an
      City
                  
                  8,999Tsining JunJing IIPhase one
                  
                  Dongzhan Road of Xi'an
      City
                  
                  136,012Tsining JunJing IIPhase two
                  
                  Dongzhan Road of Xi'an
      City
                  
                  112,556Yijing Yuan
      (Land)
                  
                  South Erhuan of Xi'an
      City
                  
                  60,666Other
    Projects
                  
                  
                  
                  4,218Total
                  
                  
                  
                  352,380
 
 (1)
              The
      Company started the JunJing II phase one in the third quarter of 2007 and
      expects to complete it in the third quarter 2009. Total GFA will be 136,012
      square meters. As of December 31, 2008, we have sold 57,098square meters, with 78,914
      square meters remaining to be sold.
 
 (2)
              The
      Company is planning to start the JunJing II phase two in the second
      quarter of 2009 and expects to complete it in the second quarter of 2010
      with total GFA of 112,556 square
meters.
  - 24
-
  ITEM 3.
LEGAL PROCEEDINGS
 
 From time to time, we may become
involved in various lawsuits and legal proceedings, which arise in the
ordinary course of
business. However, litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to time that may
harm business. We are
currently not aware of anysuch legal proceedings or claims thatwill have, individually or in the
aggregate, a material adverse affect on business, financial condition or
operating results.
 
 ITEM 4.
SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
 
 None.
 
 
 PART II
 
 ITEM 5.
MARKET FOR REGISTRANT’S COMMON
EQUITY AND RELATED
STOCKHOLDER MATTERS
 
 Our common stock istraded on NASDAQunder the symbol CHLN. The following tableshows, for the periods indicated, the high
and lowtradingprices for our common stock as reported
by the National Quotation Bureau, Inc., from thesecond quarter of2006 throughMay15,2008 when our stock traded on the OTC
Bulletin Board, and as reported by NASDAQfromMay16,2008onward.
 
 High
      & Low Stock Price
                    
                    1st
      Quarter
                    
                    2nd
      Quarter
                    
                    3rd
      Quarter
                    
                    4th
      Quarter2008High
                    
                    6.10
                    
                    5.65
                    
                    4.25
                    
                    2.33Low
                    
                    3.30
                    
                    3.80
                    
                    1.85
                    
                    0.752007High
                    
                    3.85
                    
                    5.20
                    
                    5.00
                    
                    8.20Low
                    
                    2.00
                    
                    3.15
                    
                    3.20
                    
                    4.252006High
                    
                    N/A
                    
                    4.25
                    
                    3.75
                    
                    3.10Low
                    
                    N/A
                    
                    3.50
                    
                    1.70
                    
                    1.55
  OnMarch23,
2009,the closing price of our common stock was $1.29.
 
 As of December 31, 2008, there were approximately154shareholdersof record of our common stock,excludingshareholders who have their sharesheldinstreet name(by their stock brokerage
firms).
 
 RECENT SALES
OF UNREGISTERED SECURITIES.
 
 Private PlacementonJanuary 28, 2008
 
 On January 28, 2008, China Housing &
Land Development, Inc.,(Company) entered into a Securities
Purchase Agreement (PurchaseAgreement) with certain investors
(Investors). Pursuant to the Agreement, the Company agreed to sell to
Investors 5.0% Senior
Secured Convertible Notes, which are convertible into shares of the
Company’s Common Stock, for an aggregate
purchase price of US$ 20,000,000 and to receive, in consideration for such
purchase, Warrants to acquire additional shares of Common Stock.
 
 The 5% Senior Secured Convertible
Notes(Convertible Notes) shall bear interest at a rate of 5%
per annum (computed based on the actual days elapsed in a period of 360 days) of
the RMB Notional Principal Amount, payable quarterly in arrears inlawful money of the United States (U.S.
Dollars) on the first business day of each calendar quarter and on the Maturity
Date, in each case in an amount equal to the amount of such interest as
expressed in RMB multiplied by the US$-RMB Exchange Rate as of the applicable Interest Exchange Rate
Determination Date. The Notes are secured by a first priority, perfected
security interest in certain shares of Common Stock of Lu Pingji, as
evidenced by the pledge agreement. The Notes are subjectto events of default customary for
convertible securities and for a secured financing.
 
 The
Company’s 5.0% Senior Secured Convertible Notes were purchased by the following
investors: Whitebox Intermarket Partners, LP, Whitebox Convertible Arbitrage
Partners, LP, Whitebox Hedged High Yield Partners, LP, Whitebox Special
Opportunities Fund Series B Partners, LP, Pope Investments II, LLC, Berlin
Income, L.P., Berlin Capital growth, L.P., Thomas G. Berlin, and Eastern
Management & Financial, LLC. The shares of Common Stock covered by warrants
were 1,437,467 in total. The securities were being offered and sold in reliance
upon the exemptions from securities registration afforded by Section 4(2) of the
Securities Act and Rule 506 under Regulation D. All securities were sold to
accredited investors and the Company did not use general solicitation or
advertising to market the securities. Capitalized terms used herein and not
otherwise defined have the meanings set forth in the Purchase
Agreement.
 - 25
-


The Warrants grant the Investors the
right to acquire shares of Common Stock at $6.07 per share of Common Stock, subject to customary
anti-dilution adjustments. The Warrants may be exercised to purchase Common
Stock at any time after January 28, 2008 to and including February 28, 2013, the
expiration date of the Warrants.
 
 In connection with this
transaction, the Company
and the Investors entered into aRegistrationRightsAgreement (Registration Rights
Agreement). Pursuant to the terms and conditions of the Registration Rights
Agreement, the Company has agreed to register within 60 calendar days after
closing shares of Common
Stock issuable to the Investors for resale on a Form S-3 Registration Statement
to be effective by 90 calendar days or 120 days if the registration statement is
subject to a full review by the U.S. Securities and Exchange Commission.
The Company shall register an amount of
Common Stock for resale that equals at least 120% of the sum of shares issuable
upon conversion of the Notes, the exercise of the Warrants and the payment of
interest accrued on the Notes. The registration rights granted under the Registration Rights
Agreement are subject to customary exceptions and qualifications and compliance
with certain registration procedures.
 
 
 SUBSEQUENT
DEVELOPMENTS
 
 On January 21, 2009, the Company
completed the acquisition of Xi’an Xinxing Property Management Co., Ltd.,(“Xinxing”). Xinxing was privately owned and
provides property management services to most of China Housing’s past residential and commercial
projects, as well as to other prominent customers like the Xi’an branch office building of the People’s Bank of China, China Xi’an Electric Group headquarters, Shaanxi
Bureau of State Taxation offices, and the Xi’an University of International Studies,
to name a few. Xinxing’s current service area totals 1.67
million square meters in 43 facilities that include residential,
commercial, and school buildings and parks. Xinxing’s revenues in 2008 were RMB 15.42
million, net income was RMB 1.82 million, and assets at yearend 2008 totaled RMB
11.29 million. Total consideration for the acquisitionwill be 12 million
RMB.
 
 
 ITEM 6.
SELECTED FINANCIAL DATA
  Summary of
      operations
                                            (US$in thousands, exceptper shareamounts)As of December
      312008
                                          
                                          
                                          2007
                                          
                                          
                                          2006Totalrevenue
                                          
                                          $
                                          26,466
                                          
                                          
                                          $
                                          73,913
                                          
                                          
                                          $
                                          54,099Cost of
    sales
                                          
                                          
                                          21,473
                                          
                                          
                                          
                                          43,222
                                          
                                          
                                          
                                          36,750Selling, general, and
      administrative expenses
                                          
                                          
                                          8,498
                                          
                                          
                                          
                                          2,919
                                          
                                          
                                          
                                          3,197Stock-based
      compensation
                                          
                                          
                                          3,079
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Income from
      operations
                                          
                                          
                                          (6,662
                                          )
                                          
                                          
                                          27,771
                                          
                                          
                                          
                                          13,851Net income
                                          
                                          $
                                          9,556
                                          
                                          
                                          $
                                          16,686
                                          
                                          
                                          $
                                          9,051Net income per common
      share-
      Basic
                                          
                                          
                                          0.31
                                          
                                          
                                          
                                          0.62
                                          
                                          
                                          
                                          0.45Net income per common
      share-
      Diluted
                                          
                                          
                                          0.30
                                          
                                          
                                          
                                          0.62
                                          
                                          
                                          
                                          0.45
 
 
 Financial data
                        (in
    thousands)As of December
      312008
                      
                      2007Total
assets
                      
                      $
                      222,355
                      
                      
                      $
                      155,707Totalshareholders’equity
                      
                      
                      84,626
                      
                      
                      
                      66,178Basic weighted average shares
      outstanding
                      
                      
                      30,516
                      
                      
                      
                      26,817Diluted weighted average
      shares
                      
                      
                      30,527
                      
                      
                      
                      26,817
  - 26
-
  ITEM 7.
MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  FORWARD-LOOKING
STATEMENTS
 Some of the statements contained in this
Form 10-K that are not
historical facts are “forward-looking statements”that can be identified by the use of
terminology such as estimates, projects, plans, believes, expects, anticipates,
intends, or the negative or other variations of those words, or by
discussions of strategy that involve risks and
uncertainties. We urge you to be cautious of the forward-looking statements,
that such statements, which are contained in this Form 10-K, reflect our current
beliefs with respect to future events and involve known and unknown risks, uncertainties and other
factors affecting our operations, market growth, services, products, and
licenses. No assurances can be given regarding the achievement of future
results, as actual results may differ materially as a result of therisks we face, and actual events may
differ from the assumptions underlying the statements that have been made
regarding anticipated events. Factors that may cause actual results, our
performance or achievements, or industry results, to differ materially
from those contemplated by such
forward-looking statements include without limitation: our ability to attract
and retain management, and to integrate and maintain technical information and
management information systems; our ability to raise capital when needed and on acceptable terms and
conditions; the intensity of competition; and general economic conditions. All
written and oral forward-looking statements made in connection with this Form
10-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety
by these cautionary statements. Given the uncertainties that surround such
statements, you are cautioned not to place undue reliance on such
forward-looking statements.
 GENERAL
 
 China
Housing & Land Development, Inc., is a leading developer of residential and
commercial properties in northwest China. The Company is based in Xi’an, the
capital city of China’s Shaanxi province. Since 1992, China Housing has been
engaged in the acquisition, development, management, and sales of residential
and commercial real estate properties and land through its subsidiaries in
China. China Housing & Land Development is the first and only Chinese real
estate development company traded on NASDAQ.
  CONSOLIDATED OPERATING
RESULTS
 
 Comparison ofyears 2008, 2007, and
2006
 
 Revenues
 
 Our
revenues from sales of properties are mainly derived from the sale of
residential and commercial units and buildings, infrastructure work we perform
for the local government, and land development projects in the Baqiao
area.
 
 In 2008,
most of our revenues came from Tsining JunJing II phase one, which consists of
13 residential buildings and 3 auxiliary buildings, including one kindergarten,
with a gross floor area of about 136,012 square meters. This project is
currently under construction and collecting funds under pre-sales
agreements.
 
 Effective
January 1, 2008, the company adopted the percentage of completion method of
accounting for revenue recognition for all building construction projects in
progress, which currently includes project Tsining JunJing II. The full accrual
method was used before that date for all our residential, commercial, and
infrastructure projects. Infrastructure projects continue to be accounted for
using the full accrual method of accounting.
 
 
 Revenues by
      project:
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006US$Project Under
      ConstructionTsining JunJing IIPhase one
                  
                  $
                  23,776,789
                  
                  
                  $
                  -
                  
                  
                  $
                  -Projects
      CompletedTsining JunJing
      I
                  
                  
                  264,066
                  
                  
                  
                  8,964,783
                  
                  
                  
                  39,670,186Tsining-24G
                  
                  
                  27,243
                  
                  
                  
                  25,198,128
                  
                  
                  
                  13,000,694Tsining
    Gangwan
                  
                  
                  58,427
                  
                  
                  
                  2,368,602
                  
                  
                  
                  318,338Tsining
    Hanyuan
                  
                  
                  13,894
                  
                  
                  
                  3,100
                  
                  
                  
                  161,274Tsining Home
    In
                  
                  
                  121,076
                  
                  
                  
                  323,751
                  
                  
                  
                  -Tsining
      Mingyuan
                  
                  
                  44,567
                  
                  
                  
                  247,298
                  
                  
                  
                  352,199Lidu
    Mingyuan
                  
                  
                  -
                  
                  
                  
                  303,124
                  
                  
                  
                  144,483Infrastructure ProjectBaqiao infrastructure
      construction
                  
                  
                  -
                  
                  
                  
                  10,790,610
                  
                  
                  
                  -Project In
      ProcessBaqiao
                  
                  
                  -
                  
                  
                  
                  24,405,717
                  
                  
                  
                  -Revenues from the
      sales of properties
                  
                  $
                  24,306,062
                  
                  
                  $
                  73,579,325
                  
                  
                  $
                  53,647,174
  - 27
-
  The
revenues from the sale of properties in the 2008 decreased 67.0% to $24,306,062
from $73,579,325 in 2007. The decrease was primarily due to the absence of a
land sale in 2007, and the completion of several projects in 2007. Revenues in
2007 increased 37.2% from 2006.
 
 The
revenue from our project under construction and completed projects totaled
$24,306,062 in 2008 compared with $38,382,998 in 2007. The 36.7% decrease was
due mainly to the absence of 2007 revenues from Tsining-24G and JunJing I
because both projects had come to completion and most of the revenues for those
two projects were recognized at one moment using the full accrual method of
accounting, partly offset in 2008 by revenues we recognized from Tsining JunJing
II phase one using the percentage of completion method of accounting and by the
2008 sales of some units in completed projects.
 
 Our
infrastructure project in the Baqiao area generated $1,433,837 in revenues and
was booked under other revenue in 2008, which consisted of the government’s
allowance for the equivalent cost of interest on the company’s investments
required to support the infrastructure construction, plus continued river
management and suburban planning for the entire Baqiao high-technology
industrial park. In 2007 we acquired the Baqiao infrastructure project and
constructed and delivered a river dam to the local government during the year,
for which we recognized $10,790,610 in revenues in 2007. In 2008, we were
awarded another dam project on the same river but have not recognized revenues
from it under full accrual method of accounting because the project is still in
progress. We expect to finish the river dam in second quarter 2009 and recognize
the revenues when the project is delivered to the local government.
 
 Our
project in process is the Baqiao project where we have the exclusive right to
develop 487 acres. We acquired the development rights in 2007 and recognized
$24,405,717 in revenue in 2007 as a result of a land 18.4 acre land sale to an
unrelated developer, we established a joint venture with Prax Capital Real
Estate Holdings Limited (Prax Capital) to co-develop 79 acres within the Baqiao
project. Prax Capital invested $29.3 million cash in the joint venture. Under
Generally Accepted Accounting Principles, we did not recognize any revenue from
the creation of this development project in 2008. About 390 acres remain
available for development in the Baqiao project.
 
 Revenues
from projects under construction
 
 Tsining
JunJing II Phase one
 
 Tsining
JunJing II Phase one was our major revenue generating construction project in
2008, contributing $23,776,789 in revenues. We began construction in 2007
however; as a result of utilizing the percentage of completion method of
accounting, we did not begin to realize revenues from our pre-sales until we met
certain construction milestones in the second quarter of 2008. By the end of
2008, we had pre-sold about 564 units in the project.
 
 JunJing
II phase one consists of 13 middle-rise and high-rise residential buildings and
3 auxiliary buildings, including a kindergarten, with a gross floor area of
about 136,012 square meters. Estimated total revenues from phase one are about
$101.6 million. The company expects to complete the construction of phase one in
the third quarter of 2009.
 
 Phase two
of JunJing II consists of 12 middle-rise and high-rise buildings and is expected
to start construction during the second quarter of 2009 and should begin
contributing revenue from third quarter of 2009 or the first quarter of 2010.
The total revenues from phase two are expected to be about $94.1
million.
 
 Revenues
from projects completed
 
 Tsining
JunJing I
 
 Project
Tsining JunJing I’s revenues for the year 2008 decreased 97.1percent to $264,066
from $8,964,783 in 2007 because the project was completed and most units were
deliveredin 2006 and the
sale of additional residential and retail units occurred in 2007. The
revenues in 2008 came from the sales of a few remaining retail units and parking
spaces.
 
 Tsining JunJing I revenues in 2007
declined 77.4 percent to $8,964,783 from $39,670,186in 2006 due to thefact thatthe project was completed and most units were delivered
in 2006. The 2007 revenues
came from the sale of additional residential and commercial units in the
project.
 
 Tsining-24G
 
 Project
Tsining-24G’s revenues for the year 2008 decreased 99.9 percent to $27,243
compared with $25,198,128 for the year 2007, due to the completion of the
residential, hotel, and retail project in the second quarter 2007, when most of
the revenues were recognized using the full accrual method of accounting. The
sale of the hotel portion of the building and most retail spaces in Tsining-24G
were recognized in second quarter 2007 revenues. The revenues in 2008 resulted
from the sales
  - 28
-
  of a few
remaining retail and parking spaces.
 
 Project Tsining-24G revenues in 2007 grew 93.9
percent to $25,198,128 compared with $13,000,694 in 2006. The increase was due
to the block sale of the hotel portion of one building in
2007.
 
 Other
Projects
 
 Revenues
in 2008 for other projects decreased 92.7 percent to $237,964 compared with
$3,245,875 in 2007. All remaining units from the company’s projects completed
that are not listed above are included in other projects. The decrease in
revenues in 2008 was primarily due to the absence of the sales of a
residential-commercial building, which was rented out before the sales and
several residential units in the company's previously completed projects in
2007.
 
 Revenues in 2007 for other projects were
$3,245,875, up
231.6percent compared with $976,294in 2006. The increase in 2007 was primarily due to the
sale of an occupied residential-commercial building and the sale of several
units in the company’s older projects.
 
 Other
income
 
 Other
income includes rental income, revenues from disposal of fixed assets as well as
government’s allowance for the equivalent cost of interest on the company’s
investments required to support infrastructure construction, plus continued
river management and suburban planning for the entire Baqiao high-technology
industrial park. We recognized $2,159,784  as other income in 2008
compared with $333,525 in 2007. Also in 2008, we generated a minor amount of
revenue from leasing commercial units, parking spaces, and ancillary facilities
in our completed projects. Other
income in 2007 decreased26.3 percent to $333,525 from $452,312
in 2006 primarily due to the absence in 2007 of a property clean-up project
performed in 2006.
 
 Cost of properties and
land
 
 2008–The cost of properties and land in 2008
decreased50.3
percent to $21,473,426
compared with $43,221,757
in 2007. The decrease was primarily as a result of the lower number of projects
sold. In 2008, we had one project recognizea portion of pre-sales using the
percentage of completion method of accounting,compared with sales of two
projects in 2007 using the
full accrual method of accounting.
 
 Revenues and the cost of revenues from
Project TsiningJunJing IIphase onebegan to be recognized in the second
quarter 2008 and are being recognized using the percentage of completion method of
accounting. The revenues and cost of revenues for Tsining-24G, most of which was
sold in the first quarter 2007, were recognized using the full accrual method of
accounting.
 
 2007–The cost of sales in 2007 increased
17.6 percent to $43,221,757
compared with $36,749,683 in 2006. The primary sources of the higher cost were
the Baqiao infrastructure construction and land development projects that were
new in 2007.
 
 Gross profit and profit
margin
 
 2008–Gross profit for 2008was $4,992,420, down 83.7 percent from
$30,691,093 in 2007.The gross profit margin for 2008 was 18.9
percent compared with 41.5 percent in 2007. The decrease inthegross profit was due to the smaller
number of projects on sale in 2008 and the sales of residential units in 2008 had lower profit
margins than the premium-priced retail and residential units sold in
2007and the sale of land
in 2007 had a better margin. Most buildings sold in 2008 were in
the Tsining JunJing II residential project, which included the first units in the project that
were negotiated in 2007 at attractive prices to stimulate the market interest
and encourage future sales.
 
 2007–Gross profit for 2007 was $30,691,093,
up 76.9 percent from $17,349,803 in 2006.The gross profit margin for 2007 was 41.5 percent compared
with 32.1 percent in 2006. The increases in gross profit and gross profit margin
were primarily due to the Baqiao land development and infrastructure
construction projects in 2007 that were not part of the company in2006.
  - 29
-
  Selling, general, and administrative
expenses
 
 2008–Selling, general, and
administrative expenses for
2008 increased191.1percent to $8,497,562from $2,919,360 in 2007. The increase
in selling, general, and administrative expenses was due primarily to the following
reasons:
 
 1.  Higher advertising,
marketing, and selling expenses totaled $1,261,495 in 2008 compared with
$781,998 in 2007. Advertising and sales promotion costs are expensed as
incurred. The higher advertising, marketing, and sellingexpenses resulted from the
company’s aggressive marketing campaign during
2008 for Tsining JunJing IIphase oneproject, which included
advertising and fully furnished showrooms where potential buyers could see
possible layouts and decorative effects. These showrooms have attracted hundreds of
potential buyers and continue to create buyer interest and result in additional
pre-sales purchase agreements.
 
 2.  During the fourth quarter
of 2008, we completed the formation of thePuhuawith Prax Capital. Start-up costs totaling$637,522 were expensed in 2008. We had
no similar start-up costs in 2007.
 
 3.  An increase in allowance
for bad debts. The Company provides an allowance for doubtful accounts equal to
the estimated uncollectible amounts. The Company's estimated uncollectible amounts are based on
historical collection experience and a review of the current status of trade
accounts receivable. We booked an allowance for doubtful accounts of
$1,278,516in 2008 compared with $94,514 in
2007.
 
 4.  Higher professional expenses that resulted from the
company’s upgrade to NASDAQ where its common
shares began trading in May 2008. The company believes its listing on NASDAQ
will provide more liquidity and transparency for shareholders and additional
financing flexibility for the company. Audit, legal, and
other professional costs totaled $780,032 in 2008 compared with 392,251 in
2007.
 
 5.  Higher stamp tax and land
use tax paid in 2008 due tochanges inlocal regulationsthatcaused us to recognize $429,593 for
those taxes in 2008
compared with $6,964 in 2007.
 
 6.  Debt issuance costs are
capitalized as deferred financing cost and amortized on a straight line basis
over the term of the debt. The amortization of debt issuance costs
for2008 was $148,606andno such costswere incurred in2007.
 
 2007–Selling, general, and administrative
expenses for 2007 decreased 8.7 percent to $2,919,360 from $3,197,310 in 2006.
The decrease in selling, general, and administrative expenses was due primarily
to the benefits from the Enterprise Resources Planning system adopted
by the company in 2007 to control expenses.
 
 Stock-based
compensation
 
 2008 – The company recorded a $3
million noncash expense for restricted common shares during the third quarter of
2008, which was related the company’s incentive program for performance achieved
in 2007. The company also recorded a $78,600 noncash expense as we issued shares
to certain directors and officer as part of their 2008 salary.
 
 2007 and 2006–The company did not incur any
stock-based compensation cost in 2007or 2006.
 
 Other expenses
 
 Other
expenses mainly consist of the losses (gains) related to the cleanup of fixed
assets, donations to charitable organizations, late delivery settlements, and
maintenance costs.
 
 2008–Other expenses in 2008 increased414.8percent to $295,595compared with $57,416 in 2007. The
other expenses in 2008 include $146,412 (RMB 1,000,000) in donations to
earthquake relief funds in China.
 
 2007–Other expenses in 2007 decreased 80.9
percent to $57,416 compared with $301,158 in 2006. The 2007 decline
was primarily due to the 2007 absence of the expenses in 2006 associated with
the normal addedfixtures
andfinishing in the
Tsining JunJing I and Tsining-24G projects desired by the customers to reach
final satisfaction.
 
 Operating profit and operating profit
margin
 
 Operating profit is defined as gross
profit minusselling, general, and administrative expenses,stock-based compensation,and Otherexpenses.
 
 2008–Operatinglossin 2008 was $(6,879,337) compared
withincome of$27,714,317in2007, down 124.8 percent, primarily due
to lower gross profit on the residential portion of Tsining JunJing II, the
absence of high operating profit from
  - 30
-
  the Tsining-24G commercial spaces sold
in the first quarter of 2007and the higher profit from the land sale in
2007, and higher selling,
general, and administrative expenses in the 2008 that included higher
professional expenses associated with the listing on the NASDAQ stock market and
the non-cash stock-based incentive compensation in 2008. As a result, the
operating profit margin was (26.0)% for the 2008 compared with 37.5% for
2007.
 
 2007–Operating profit in 2007 increased
100.1 percent to $27,714,317 from $13,851,335 in 2006, due primarily to higher
revenues in 2007 fromthe
Baqiao infrastructure construction andfromland development sales at attractive
profit margins. The profit margin increased to 37.5 percent in 2007, compared
with 25.6 percent in 2006, primarily due to the attractive pricing and low costs
associated with the two
Baqiao projects listed above.
 
 Interest expense
 
 2008–Interest expense in 2008 decreased18.5percent to $1,346,183 from
$1,652,349 in
2007.The
decrease was primarily due to the capitalization of interest directly related to
the construction. We capitalized $4.7 million in year ended December 31, 2008
compare to $3.5 million during the same period of 2007.In mid-2008, the
company signed a RMB 1 billion (about $147 million) construction credit line
agreement with China Construction Bank. During 2008, we drew down about $22
million in the credit line.
The loan from China Construction Bank has an interest rate that floats at 110
percent of the People’s Bank of China reference
rate.
 
 2007–Interest expense in 2007 increased
471.6 percent to $1,652,349 from $289,083 in 2006. The increase in
2007 was due primarily to
the financing associated with the purchase of the company that owned the
exclusive right to develop the Baqiao project and to perform the related
infrastructure construction.
 
 Change in fair value of embedded
derivatives
 
 The embedded derivatives are related to the
company’s $20 million convertible debt offering
completed in January 2008. The change in the fair value of embedded derivatives
was a periodic adjustment to the estimated cost to the company, which was
provided by a valuation model. The company booked
$(3,166,977) in 2008 as the decrease in the fair value of embedded derivatives
compared withno such
costsin 2007 and 2006,
since the convertible debt did not exist in those years.
 
 Change in fair value of
warrants
 
 In 2006,
2007, and 2008 the company issued warrants in conjunction with the issuance of
common shares or convertible debt. The warrants permit the shareholders to buy
additional common shares at the prices specified in the warrant
agreements.
 
 In 2008,
shareholders exercised a total of 1,870 warrants to buy a total of 1,870 common
shares. A shareholder typically only exercises a warrant to buy common shares
when the stock price is higher than the warrant exercise price, the shareholder
pays the exercise price and the company covers the difference between the
warrant exercise price and the share price at the time of
conversion.
 
 The
company was required to estimate the fair value of its remaining warrants
outstanding and adjust the value as needed, and it chose to use the
Cox-Ross-Rubinstein Binomial Lattice valuation model to estimate their fair
value.
 
 The
change in fair value of warrants of $(4,932,961) in 2008 consisted of the
periodic adjustment to the estimated cost to the company to provide the common
shares, assuming that all the warrants will be exercised sometime in the future.
The basis for estimating the cost to provide those common shares was provided by
the valuation model.
 
 Provision for income
taxes
 
 During the fourth quarter of 2008,the local tax authority conducted a tax examination and reached a tax
settlement with us regarding our income tax liability; we realized a gain of
$12,712,153, which is included in the provision for income taxes. Local tax
authority examined the Company’s tax records and issued an income tax settlement
report. As a result, the company
adjusted its provision for income taxes to $(10,490,833) compared with the $8,743,556
provision recorded in 2007.
 
 The effective tax rate was 34.4 percent
for 2007 and 33.3 for 2006.
The slightly higher effective rate is due primarily to one of the
company’s operations whose required structureentailsowning two subsidiariesthatcreate costs that cannot be used to
reduce the company’s tax obligation.
  - 31
-
  Minority
Interest
 
 We recorded$(159,564)minority interestattributable to the minority shareholder
ofPuhua andSuccess Hill, which is relate to the formation of
Puhua in the fourth quarter of 2008.Wedid not have any minority interest in
2007.
 
 Net income
 
 2008–Net income in2008 decreased42.7percent to $9,555,853 from $16,686,116
in 2007.
 
 As explained above, the decrease in net
income was due primarily to the absence of a land sale, fewer projectsin thesales cycle, lower gross profit, higher selling,
general, and administrative
expenses, the restricted common stock issued in 2008 as incentive compensation
for the year 2007, and accretion on convertible debt, partly offset by the
change in the fair value of warrants and embedded derivatives and the tax
settlement in fourth quarter of 2008.
 
 2007–Net income for the year 2007 increased
84.4 percent to $16,686,116 from $9,050,810 for the year 2006. The increase was
primarily due to the 2007 revenue from the land sale and infrastructure project
relatedtothe Baqiao project, partly offset by the absence of the
2006 sales of the Tsining JunJing I and Tsining-24G projects, the 2007 change in
the fair value of the warrants, and the higher interest expense associated with
borrowings to acquire the Baqiao project in 2007.
 
 Basicand diluted earnings per
share
 
 2008–Basic earnings per share were $0.31 in
2008, down50.0percentfrom $0.62 in 2007. Diluted earnings per
share were $0.30in 2008, down51.6percentfrom $0.62 in 2007. The increases in
the weighted average shares outstanding in 2008 compared with 2007 were
due to the restricted common shares issued in the third quarter 2008 as
incentive compensation for the year 2007 performance.
 
 2007–Basic and diluted earnings per share
were $0.62 in 2007, up 37.8 percent from $0.45 in 2006. The basic and diluted
earnings per share were both $0.62 in 2007 because the warrants were
anti-dilutive. Likewise, the basic and diluted earnings per share were both
$0.45 in 2006 for the same reason.
 
 Common shares used to calculate basic
anddiluted
EPS
 
 2008 --The weighted average shares outstanding used to calculate the basic
earnings per share were 30,516,411 shares in 2008 and 26,871,388 shares in 2007.
The weighted average shares outstanding used to calculate the diluted earnings
per share were 30,527,203 shares in 2008 and 26,871,388 shares in 2007. The
increase was primarily due to the incentive shares we issued to certain
managements for their 2007
performance.
 
 2007-- Basic and diluted earnings per
share were based on weighted average shares outstanding of 26,817,388 for 2007
and 20,277,615 for 2006. The 32.3 percent increase in the weighted
average shares outstanding
was due to the common shares with warrants issued in 2007, as well as the common stock with
warrants that were issued in 2006.
 
 Gain on foreign
exchange
 
 The company operates in China and
accounts in the Chinese renminbi but reports its financial results in U.S.
dollars, based on the exchange rates of the twocurrencies. During 2006, 2007, and
2008, the renminbi
appreciated in value against the U.S. dollar, which,when translating the operating results
and financial positions at different exchange rates,created the accrued gain on foreign
exchange.
 
 Cash flowdiscussion
 
 2008–The increase in cash for the year 2008
was $34,413,512compared with $2,007,132in 2007.
 
 Cash flow from operating activitiesin2008 decreased 436.9percent to $(29,076,621) from $8,611,383in 2007, primarily due to the operating
cashoutflow associated
with the development of Tsining JunJing IIphase one.
 
 The use
of cash in investing activities in 2008 was $(510,713), which was 98.0 percent
less than 2007, primarily due to the increase of the restricted cash and the
absence of the subsidiary acquisition. We acquired 100 percent equity of New
Land in March 2007.
 
 Cash flow
from financing activities in 2008 provided $63,933,479, up 247.2 percent from
2007, primarily due to $29,268,913 net proceeds from the creation of the joint
venture with Prax Capita, the $19,230,370 proceeds from the convertible notes
offering in January 2008 and funds from construction loans with banks that
totaled $46,054,762, partly offset by payments on loans totaling
$25,905,804.
  - 32
-
  In mid-2008, the company signed a RMB 1
billion (about $147 million) construction credit line agreement with China
Construction Bank to support the company’s development projects. The company
has been granted a total
RMB 22 million loan for the JunJing II phase one project and expects another 22
million loan once the JunJing II phase twoproject begins.
 
 2007–The increase in cash for the year 2007
was$2,007,132 compared with $358,864 in
2006.
 
 Cash flow from operating activities in
2007 increased 35.75 percent to $8,611,383 from 2006,this wasprimarily due to higher net income from
the sale of real estate and profit from thesale of a land use
right.
 
 Cash flow from investing activities in
2007 consumed $25,020,248,
up 70.4 percent from 2006, primarily due to higher expenditures to acquire a
company that held the right to develop the Baqiao project, and the absence of
the 2006 purchases of buildings, equipment, and automobiles.
 
 Cash flow from financing activities in 2007 provided
$18,415,997, up 111.8 percent from$8,696,388in2006, primarily due to the issuance of
common stock and warrants,which waspartly offset by payments on
loans.
 
 Debt leverage
 
 Total debt consists of the sum of the
balance sheet lines titled
Payable to New Land’s
previous shareholders, Loans from employees, Loans payable, and Convertible
debt.
 
 2008–Total debt outstanding as of December 31, 2008 was
$59,186,304 compared with
$27,922,125 on December 31, 2007.
 
 Net debt outstanding (total debt less cash) as of
December 31, 2008 was $20,955,952 compared with $25,469,759 on December 31,
2007. The company's net debt as a percent of total capital (net debt plus
shareholders' equity) was 19.8 percent on December 31, 2008 and 27.8
percent on December 31, 2007. The decrease
in net debt as a percent of total capital was primarily due to the increase of
cash. In the fourth quarter of 2008, we completed the formation of a joint
venture andreceived $29.3 million in cash from Prax Capital for their
share of the participation.
 
 2007–Total debt outstanding at year end 2007
was $27,922,125 compared with $29,707,492 at yearend 2006. Net debt outstanding
(total debt less cash) at yearend 2007 was $25,469,759 compared with $28,219,588
at yearend2006. The
company’s net debt as a percent of total capital
(net debt plus shareholders’equity) was 27.79 percent at yearend
2007 and 59.49 percent at yearend 2006. The reduction in net debt leverage was
primarily due to the issuance of common stock andwarrants and the net reduction in
loans.
 
 Liquidity and capital
resources
 
 Our principal demands for liquidity are
forthedevelopment of new properties, property
acquisitions, and general corporate purposes.
 
 As of December 31, 2008, we had
$38,230,352 ofcash and
cash equivalents, an
increase of $35,777,986
compared with $2,452,366 of cash and cash equivalents as of December 31,
2007.
 
 Financial
obligations
 
 As of December 31, 2008, we had total bank loans of
$35,617,442 with a weighted
average interest rate of10.65percent. Future scheduled maturities of
loans payable were as follows:
  Due Date
                        
                        
                        Outstanding
      Amount2009-09-14
                        
                        
                        $
                        3,371,1982009-12-25
                        
                        
                        $
                        5,130,0842010-08-29
                        
                        
                        $
                        5,130,0842011-08-27
                        
                        
                        $
                        21,986,076
 
 Mortgage debt (total bank loans) is
securedby the assets of
the company.
 
 Loans payable
 
 Loans payable represent amounts due to
various banks and are due on demand or normally due within one year. These
loans
  - 33
-
  generally can be renewed with the banks
when the loans mature.
 
 Most of the obligationsof the company are tied to specific
projects. The terms of the loans typically are 1 to 3 years. Loan extensions are
determined by mutual agreement when the current term expires and both parties
will consider the remaining time needed to complete the project. Most of these loans are payable
when the project has been completed and the residents or businesses take
possession.
 
 The following table summarizes the
company's loans payable that were outstanding as of December 31,
2008:
 
 (Millions of
      dollars)
                            
                            Balance
                            
                            
                            Interest
    rate
                            
                            Due dateXi'an Rural Credit
      Union
                            
                            $
                            3.37
                            
                            
                            
                            9.53
                            %
                            14-Sep-2009Commercial Bank
      Weilai
                            
                            $
                            5.13
                            
                            
                            
                            9.47
                            %
                            25-Dec-2009Commercial Bank
      Weilai
                            
                            $
                            5.13
                            
                            
                            
                            10.21
                            %
                            29-Aug-2010China Construction
      Bank
                            
                            $
                            22.00
                            
                            
                            
                            6.14
                            %
                            28-Aug-2011
 
 The currently indicated annual interest
requirement on these loans totals about $3.8million. The loan from China
Construction Bank has an interest rate that floats at 110 percent of the
People’s Bank of China reference
rate.
 
 The following table summarizes the
amounts and types of the
company's obligations and provides the estimated period of maturity for the
financial obligations by class as of December 31, 2008:
 
 Obligations Due by
      Period
                    
                    1 year
                    
                    
                    1-3 years
                    
                    
                    3-5 years(Millions of
      dollars)Currentliabilities:Accounts
      payable
                    
                    $
                    10.53Income and other taxes
      payable
                    
                    
                    
                    
                    
                    $
                    7.53Other
    payables
                    
                    
                    
                    
                    
                    $
                    5.18Advances (deposits) from
      customers
                    
                    
                    
                    
                    
                    $
                    9.26Accrued
      expenses
                    
                    $
                    3.54Long-term
      liabilities:Warranties liabilities
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    1.12Deferred
tax
                    
                    
                    
                    
                    
                    $
                    11.50Fair value of embedded
      derivatives
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    0.76Convertible
      debt
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    13.62Long-term
    debt:Loans
    payable
                    
                    $
                    8.50
                    
                    
                    $
                    27.13Payable toNewLand’s previousshareholders
                    
                    $
                    8.43Loans from employees
                    
                    
                    
                    
                    
                    $
                    1.52
  Liquidity
expectation
 
 The company believes that the
combination of present capital resources, internally generated funds, and unused
financing sources are more than adequate to meet cash requirements for the year
2009.
 
 We intend to meet our liquidity requirements, including
capital expenditures related to the purchase of land for the development of our
future projects, through cash flow provided by operations and additional funds
raised by future financings. Upon acquiring land for futuredevelopment, we intend to raise funds to
develop our projects by obtaining mortgage financing from local banking
institutions with which we have done business in the past. We believe that our
relationships with these banks are in good standing and that ourreal estate will secure the loans
needed. We believe that adequate cash flow will be available to fund our
operations.
  - 34
-
  As part of our funding plan, on March 9,
2007, we entered into a Shares Transfer Agreement with the shareholders
of  New Land, pursuant to which we have acquired 32,000,000
shares of the New Land, constituting 100 percent equity ownership of New
Land.
 
 New Land is now in cooperation with the
Baqiao District Government of Xi'an City in developing the Baqiao Science &
Technology IndustrialPark,
a provincial development zone in Shaanxi Province. This acquisition has been
completed, and theCompany has the right to develop and sell
487 acres of propertythathas been targeted for new residential
developments.
 
 The majority of the company's
revenues and expenses were
denominated primarily in renminbi (RMB), the currency of the People's Republic
of China. There is no assurance that exchange rates between the RMB and the U.S.
dollar will remain stable. The company does not engage in currency
hedging. Inflation has not had a material
impact on the company's business.
 Off-Balance
Sheet Arrangements
 
 Neither
us, nor any of our subsidiaries has any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on their financial
condition or results of operations.
 Other events
 
 On January 28, 2008, the company raised
$20 million through the issuance of senior secured convertible notes to
institutional investors. As part of the private placement, the company issued five-year senior
secured convertible notes with an aggregate principal amount of $20 million that
pays cash interest of 5 percent per annum. $9 million of the notes are
convertible into common stock and carry an initial conversion price of $5.57 per share, which can be
increased if certain stock price thresholds are met. Additionally, forced
conversion can also occur at the Company’s discretion if certain stock price
thresholds are met. The notes are secured by certain real estate assets and additionally through a pledge of
common shares owned by Mr. Pingji Lu, the Company’s Chairman. Additionally, investors in
the private placement were granted 1,437,467 five-year warrants with a strike
price of $6.07 per common share, which are callable if certain stock price thresholds are
met. Approximately 215,620 of the warrants are available as a management
incentive if certain milestones are met.
 
 On July 7, 2008, the company signed a
strategic partnership agreement with the China Construction Bank Shaanxi Branch that establishes a RMB
1 billion construction credit line to support the construction work of China
Housing and its subsidiaries. The new strategic partnership is the first and
only one of its kind for both China Housing & Land Development and China Construction Bank Shaanxi
Branch. The agreement also establishes China Housing as a VIP client for the
bank.
 
 On October 13, 2008, the company
announced that it recently began constructing its third dam on the Ba River,
adjacent to the company's
487-acre Baqiao housing project. The dam is expected to be completed in the
second quarter of 2009. The company expects to record $3.7 million in revenue
and about $0.6 million in net income when the dam is finished. The company
alreadyhassecured an infrastructure construction loan of about
RMB 35 million with the Xi'an Commercial Bank to finance this project. The dam
will create a large lake about three meters deep on the Ba River that will
increase the attractiveness and value of theCompany's Baqiaohousing project.
 
 In early November2008, China Housing and Prax Capital
China Real Estate Fund I, Inc.,entered into a joint agreement to
develop 79 acres within China Housing’s Baqiao project.The joint venture was formed in
lateDecember2008,subjecttocertainconditions and approvals, which were
met.Prax Capital Real
Estate Holdings Limited invested US$29.3 million cash in the joint venture, thejoint ventureacquired the land use rights early in
the first quarter 2009 and thejoint ventureis proceeding with the
project.
  - 35
-
  ITEM 7A.
QUANTITATIVE AND
QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 
 The company is subject to the following
market risks, including but not limit to:
 
 General Real Estate
Risk
 
 There is a risk that the
company’s property values could go down due to
general economic conditions, a weak market for real estate
generally, or changing supply and demand. The company’s property held for sale value,
approximately $14 million at the end of December, 2008, may change due to market
fluctuations. Currently, it is valued at our cost which is significantly below the market
value.
 
 Risk Relating to Property
Sales
 
 The company may not be able to sell a
property at a particular time for our full value, particularly in a poor
market.
 
 Foreign Currency Exchange Rate
Risk
 
 The company is doing all our business in the
People’s Republic of China. All the revenue and
profit is denominated in RMB. When RMB depreciates, it may adversely affect the
company’s financial performance. Specifically,
since the company’s recent $20 million senior
convertiblenote interest payment is denominated in
U.S. dollars; the depreciation of RMB may incur additional cost to our financial
cost. However,the effect
likely wouldbe
small.
  - 36
-
 
 ITEM 8.
NOTES & CONSOLIDATED FINANCIAL STATEMENTS
 
 Report of Independent RegisteredPublic Accounting
Firm
 
 To the Shareholders and Board of
Directors of China Housing & Land Development, Inc.
 
 We have audited the accompanying
consolidated balance sheetsof China Housing & Land
Development, Inc., and subsidiaries (the “Company”) as at December 31, 2008and 2007and the related consolidated statements
of income and comprehensive income, shareholders’equity and cash flows for the
yearsthen ended. These consolidated
financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
 
 We conducted our auditsin accordance with standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. We are not engaged to perform an audit of the Company’s internal control over financial
reporting. Our auditsincluded consideration ofinternal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimatesmade by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
  As
discussed in Note 2 to the consolidated financial statements, effective January
1, 2008, the Company changed its method of revenue recognition.
  In our opinion, these consolidated
financial statements present fairly, in all material respects, the financial position of the Company
as at December 31, 2008and
2007and the results of its
operations and its cash flows for the yearsthen ended in accordance with
accounting principles generally accepted in the United States of
America.
 
 
 Signed:
      “MSCM
      LLP”
                  
                  MSCM LLP
                  Toronto,Canada
                  March25, 2009
   Report of Independent Registered
Public Accounting
Firm
 To the
Board of Directors and Stockholders
 China
Housing & Land Development Inc.
 
 We have
audited the accompanying consolidated statements of income and other
comprehensive income, shareholders’ equity and cash flows of China Housing &
Land Development Inc. and subsidiaries (the "Company") for the year ended
December 31, 2006. These statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these statements
based on our audit.
  We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The company
was not required to have, nor were we engaged to perform, and audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, assessing the accounting
principles used and significant estimates made by management, as well as
evaluation the overall financial statement presentation. We believe that our
audit provide a reasonable basis for our opinion.
  In our
opinion, the consolidated statements of income and comprehensive income,
shareholders' equity and cash flows referred to above presents fairly, in all
material respects, the results of the operations and its cash flows of China
Housing & Land Development Inc for the year ended December 31, 2006, in
conformity with accounting principles generally accepted in the United States of
America.
  Moore
Stephens Wurth Frazer and Torbet, LLP
 
 Walnut,
California
 March 26,
2007
 - 37
-
 
 CHINA HOUSING &
      LAND DEVELOPMENT, INC., AND SUBSIDIARIESConsolidated
      Balance SheetsAs
      of December 31, 2008 and December 31, 2007December
      31,
                                
                                
                                December
      31,2008
                                
                                
                                2007ASSETSCash
                                
                                $
                                37,425,340
                                
                                
                                $
                                2,351,015Cash
      - restricted
                                
                                
                                805,012
                                
                                
                                
                                101,351Accounts
      receivable, net of allowance for doubtfulaccounts
      of $1,278,156 and $94,514, respectively
                                
                                
                                813,122
                                
                                
                                
                                12,107,882Other
      receivables, prepaid expenses and other assets
                                
                                
                                446,497
                                
                                
                                
                                567,308Notes
      receivable, net
                                
                                
                                811,695
                                
                                
                                
                                947,918Real
      estate held for development or sale
                                
                                
                                60,650,011
                                
                                
                                
                                40,986,931Property
      and equipment, net
                                
                                
                                12,391,501
                                
                                
                                
                                5,707,012Assets
      held for sale
                                
                                
                                14,308,691
                                
                                
                                
                                12,910,428Advance
      to suppliers
                                
                                
                                704,275
                                
                                
                                
                                2,071,549Deposits
      on land use rights
                                
                                
                                47,333,287
                                
                                
                                
                                29,694,103Intangible
      assets, net
                                
                                
                                46,043,660
                                
                                
                                
                                48,205,697Deferred
      financing costs
                                
                                
                                622,118
                                
                                
                                
                                55,451Total
      assets
                                
                                
                                222,355,209
                                
                                
                                
                                155,706,645LIABILITIESAccounts
      payable
                                
                                $
                                10,525,158
                                
                                
                                $
                                9,311,995Advances
      from customers
                                
                                
                                9,264,385
                                
                                
                                
                                5,258,351Accrued
      expenses
                                
                                
                                3,539,842
                                
                                
                                
                                1,903,451Payable
      to New Land’s previous shareholders
                                
                                
                                8,429,889
                                
                                
                                
                                11,413,229Income
      and other taxes payable
                                
                                
                                7,532,730
                                
                                
                                
                                22,711,981Other
      payables
                                
                                
                                5,183,251
                                
                                
                                
                                3,881,137Loans
      from employees
                                
                                
                                1,517,039
                                
                                
                                
                                2,388,862Loans
      payable
                                
                                
                                35,617,442
                                
                                
                                
                                14,120,034Deferred
      tax liability
                                
                                
                                11,510,915
                                
                                
                                
                                15,907,880Warrants
      liability
                                
                                
                                1,117,143
                                
                                
                                
                                2,631,991Fair
      value of embedded derivatives
                                
                                
                                760,398
                                
                                
                                
                                -Convertible
      debt
                                
                                
                                13,621,934
                                
                                
                                
                                -Total
      liabilities
                                
                                
                                108,620,126
                                
                                
                                
                                89,528,911MINORITY
      INTEREST IN SUBSIDIARIES
                                
                                
                                29,109,350
                                
                                
                                
                                -SHAREHOLDERS'
      EQUITYCommon
      stock: $.001 par value, authorized 100,000,000 shares issued and
      outstanding 30,893,757 and 30,141,887, respectively
                                
                                
                                30,894
                                
                                
                                
                                30,142Additional
      paid in capital
                                
                                
                                31,390,750
                                
                                
                                
                                28,381,534Statutory
      reserves
                                
                                
                                3,541,226
                                
                                
                                
                                2,885,279Retained
      earnings
                                
                                
                                39,265,062
                                
                                
                                
                                30,365,156Accumulated
      other comprehensive income
                                
                                
                                10,397,801
                                
                                
                                
                                4,515,623Total
      shareholders' equity
                                
                                
                                84,625,733
                                
                                
                                
                                66,177,734Total
      liabilities and shareholders' equity
                                
                                $
                                222,355,209
                                
                                
                                $
                                155,706,645The
      accompanying notes are an integral part of these consolidated financial
      statements.
  - 38
-
  CHINA
      HOUSING & LAND DEVELOPMENT, INC., AND SUBSIDIARIESConsolidated
      Statements of Income and Comprehensive IncomeFor
      The Years Ended December 31, 2008, 2007 and 20062008
                      
                      
                      2007
                      
                      
                      2006REVENUESSale
      of properties
                      
                      $
                      24,306,062
                      
                      
                      $
                      73,579,325
                      
                      
                      $
                      53,647,174Other
      income
                      
                      
                      2,159,784
                      
                      
                      
                      333,525
                      
                      
                      
                      452,312Total
      revenues
                      
                      
                      26,465,846
                      
                      
                      
                      73,912,850
                      
                      
                      
                      54,099,486COSTS
      AND EXPENSESCost
      of properties and land
                      
                      
                      21,473,426
                      
                      
                      
                      43,221,757
                      
                      
                      
                      36,749,683Selling,
      general, and administrative expenses
                      
                      
                      8,497,562
                      
                      
                      
                      2,919,360
                      
                      
                      
                      3,197,310Stock-based
      compensation
                      
                      
                      3,078,600
                      
                      
                      
                      -
                      
                      
                      
                      -Other
      expenses
                      
                      
                      295,595
                      
                      
                      
                      57,416
                      
                      
                      
                      301,158Interest
      expense
                      
                      
                      1,346,183
                      
                      
                      
                      1,652,349
                      
                      
                      
                      289,083Accretion
      expense on convertible debt
                      
                      
                      968,962
                      
                      
                      
                      -
                      
                      
                      
                      -Change
      in fair value of embedded derivatives
                      
                      
                      (3,166,977
                      )
                      
                      
                      -
                      
                      
                      
                      -Change
      in fair value of warrants
                      
                      
                      (4,932,961
                      )
                      
                      
                      632,296
                      
                      
                      
                      -Total
      costs and expenses
                      
                      
                      27,560,390
                      
                      
                      
                      48,483,178
                      
                      
                      
                      40,537,234(Loss)
      income before provision for income taxes and minority
    interest
                      
                      
                      (1,094,544
                      )
                      
                      
                      25,429,672
                      
                      
                      
                      13,562,252(Recovery)
      provision for income taxes
                      
                      
                      (10,490,833
                      )
                      
                      
                      8,743,556
                      
                      
                      
                      4,511,442Income
      before minority interest
                      
                      
                      9,396,289
                      
                      
                      
                      16,686,116
                      
                      
                      
                      9,050,810Minority
      interest in net loss of subsidiaries, net of tax
                      
                      
                      159,564
                      
                      
                      
                      -
                      
                      
                      
                      -NET
      INCOME
                      
                      
                      9,555,853
                      
                      
                      
                      16,686,116
                      
                      
                      
                      9,050,810Gain
      on foreign exchange
                      
                      
                      5,882,178
                      
                      
                      
                      3,617,405
                      
                      
                      
                      655,435COMPREHENSIVE
      INCOME
                      
                      $
                      15,438,031
                      
                      
                      $
                      20,303,521
                      
                      
                      $
                      9,706,245WEIGHTED
      AVERAGE SHARES OUTSTANDINGBasic
                      
                      
                      30,516,411
                      
                      
                      
                      26,871,388
                      
                      
                      
                      20,277,615Diluted
                      
                      
                      30,527,203
                      
                      
                      
                      26,871,388
                      
                      
                      
                      20,277,6159EARNINGS
      PER SHAREBasic
                      
                      $
                      0.31
                      
                      
                      $
                      0.62
                      
                      
                      $
                      0.45Diluted
                      
                      $
                      0.30
                      
                      
                      $
                      0.62
                      
                      
                      $
                      0.45The
      accompanying notes are an integral part of these consolidated financial
      statements.
  - 39
-
  CHINA
      HOUSING & LAND DEVELOPMENT INC., AND SUBSIDIARIESConsolidated
      Statements of Cash FlowsFor
      The Years Ended December 31, 2008, 2007 and
2006
 2008
                                                    
                                                    
                                                    2007
                                                    
                                                    
                                                    2006CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                                                    
                                                    $
                                                    9,555,853
                                                    
                                                    
                                                    $
                                                    16,686,116
                                                    
                                                    
                                                    $
                                                    9,050,810Adjustments
      to reconcile net income to cashprovided
      by (used in) operating activities:Minority
      interest in subsidiaries
                                                    
                                                    
                                                    (159,564
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Bad
      debt expense
                                                    
                                                    
                                                    1,420,434
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    509,435Depreciation
                                                    
                                                    
                                                    454,728
                                                    
                                                    
                                                    
                                                    423,932
                                                    
                                                    
                                                    
                                                    354,444Gain
      on disposal of fixed assets
                                                    
                                                    
                                                    15,167
                                                    
                                                    
                                                    
                                                    (48,347
                                                    )
                                                    
                                                    
                                                    (149,830
                                                    )Gain
      on income tax settlement
                                                    
                                                    
                                                    (12,712,153
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Amortization
      of stock issued for investor relations fees
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    131,400
                                                    
                                                    
                                                    
                                                    -Amortization
      of deferred financing costs
                                                    
                                                    
                                                    148,606
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Amortization
      of intangible assets
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    1,157,758
                                                    
                                                    
                                                    
                                                    -Stock-based
      compensation
                                                    
                                                    
                                                    3,078,600
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Change
      in fair value of warrants
                                                    
                                                    
                                                    (4,932,961
                                                    )
                                                    
                                                    
                                                    632,296
                                                    
                                                    
                                                    
                                                    -Change
      in fair value of embedded derivatives
                                                    
                                                    
                                                    (3,166,977
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Accretion
      expense on convertible debt
                                                    
                                                    
                                                    968,962
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Non-cash
      proceeds from sales
                                                    
                                                    
                                                    (166,148
                                                    )
                                                    
                                                    
                                                    (10,783,201
                                                    )
                                                    
                                                    
                                                    -(Increase)
      decrease in assets:Accounts
      receivable
                                                    
                                                    
                                                    10,758,758
                                                    
                                                    
                                                    
                                                    (8,463,433
                                                    )
                                                    
                                                    
                                                    (431,805
                                                    )Real
      estate
                                                    
                                                    
                                                    (23,463,229
                                                    )
                                                    
                                                    
                                                    13,696,294
                                                    
                                                    
                                                    
                                                    3,640,231Advances
      to suppliers
                                                    
                                                    
                                                    1,600,308
                                                    
                                                    
                                                    
                                                    (1,480,596
                                                    )
                                                    
                                                    
                                                    11,930,759Deposit
      on land use rights
                                                    
                                                    
                                                    (15,387,541
                                                    )
                                                    
                                                    
                                                    (17,695,934
                                                    )
                                                    
                                                    
                                                    -Other
      receivables and deferred charges
                                                    
                                                    
                                                    (114,638
                                                    )
                                                    
                                                    
                                                    658,893
                                                    
                                                    
                                                    
                                                    (1,118,155
                                                    )Deferred
      financing costs
                                                    
                                                    
                                                    202,888
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Increase
      (decrease) in liabilities:Accounts
      payable
                                                    
                                                    
                                                    570,250
                                                    
                                                    
                                                    
                                                    2,556,717
                                                    
                                                    
                                                    
                                                    2,716,495Advances
      from customers
                                                    
                                                    
                                                    3,576,253
                                                    
                                                    
                                                    
                                                    2,066,546
                                                    
                                                    
                                                    
                                                    (28,428,381
                                                    )Accrued
      expense
                                                    
                                                    
                                                    1,607,634
                                                    
                                                    
                                                    
                                                    42,522
                                                    
                                                    
                                                    
                                                    1,625,843Other
      payable
                                                    
                                                    
                                                    1,003,031
                                                    
                                                    
                                                    
                                                    (1,016,610
                                                    )
                                                    
                                                    
                                                    (266,309
                                                    )Income
      and other taxes payable
                                                    
                                                    
                                                    (3,934,882
                                                    )
                                                    
                                                    
                                                    10,047,030
                                                    
                                                    
                                                    
                                                    6,909,809Net
      cash provided by (used in) operating activities
                                                    
                                                    
                                                    (29,076,621
                                                    )
                                                    
                                                    
                                                    8,611,383
                                                    
                                                    
                                                    
                                                    6,343,346CASH
      FLOWS FROM INVESTING ACTIVITIES:Change
      in restricted cash
                                                    
                                                    
                                                    (684,040
                                                    )
                                                    
                                                    
                                                    1,039,410
                                                    
                                                    
                                                    
                                                    591,312Purchase
      of buildings, equipment and automobiles
                                                    
                                                    
                                                    (1,063,332
                                                    )
                                                    
                                                    
                                                    (244,355
                                                    )
                                                    
                                                    
                                                    (13,269,773
                                                    )Notes
      receivable collected
                                                    
                                                    
                                                    364,313
                                                    
                                                    
                                                    
                                                    1,272,541
                                                    
                                                    
                                                    
                                                    (2,246,025
                                                    )Proceed
      from sale of fixed assets
                                                    
                                                    
                                                    872,346
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    243,616Acquisition
      of subsidiary
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (27,087,844
                                                    )
                                                    
                                                    
                                                    -Net
      cash provided by (used in) investing activities
                                                    
                                                    
                                                    (510,713
                                                    )
                                                    
                                                    
                                                    (25,020,248
                                                    )
                                                    
                                                    
                                                    (14,680,870
                                                    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      proceeds from issuance of convertible debt
                                                    
                                                    
                                                    19,230,370
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Investment
      and advances from minority shareholder
                                                    
                                                    
                                                    29,268,914
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Loans
      from bank
                                                    
                                                    
                                                    46,054,761
                                                    
                                                    
                                                    
                                                    3,944,359
                                                    
                                                    
                                                    
                                                    13,835,303
 Payments
      on loans
                              
                              
                              (25,905,804
                              )
                              
                              
                              (14,202,410
                              )
                              
                              
                              (7,905,887
                              )Loans
      to or from employees, net
                              
                              
                              (1,018,357
                              )
                              
                              
                              1,226,736
                              
                              
                              
                              1,016,551Repayment
      of loan from New Land previous shareholders
                              
                              
                              (3,704,820
                              )
                              
                              
                              4,207,315
                              
                              
                              
                              -Proceeds
      from issuance of common stock and warrants
                              
                              
                              8,415
                              
                              
                              
                              23,239,997
                              
                              
                              
                              1,750,421Net
      cash provided by financing activities
                              
                              $
                              63,933,479
                              
                              
                              $
                              18,415,997
                              
                              
                              $
                              8,696,388INCREASE
      IN CASH
                              
                              
                              34,346,145
                              
                              
                              
                              2,007,132
                              
                              
                              
                              358,864Effects
      on foreign current exchange
                              
                              
                              728,180
                              
                              
                              
                              (35,750
                              )
                              
                              
                              (9,976
                              )CASH,
      beginning of year
                              
                              
                              2,351,015
                              
                              
                              
                              379,633
                              
                              
                              
                              30,745CASH,
      end of year
                              
                              $
                              37,425,340
                              
                              
                              $
                              2,351,015
                              
                              
                              $
                              379,633
  - 40
-
  CHINA
      HOUSING & LAND DEVELOPMENT, INC., AND SUBSIDIARIESConsolidated
      Statements of Shareholders' EquityFor
      The Years Ended December 31, 2008, 2007 and 2006Additional
                          
                          
                          
                          
                          
                          
                          
                          
                          Capital
                          
                          
                          OtherCommon
      Stock
                          
                          
                          paid
      in
                          
                          
                          Statutory
                          
                          
                          Retained
                          
                          
                          contribution
                          
                          
                          comprehensiveShares
                          
                          
                          Par
      Value
                          
                          
                          capital
                          
                          
                          reserves
                          
                          
                          earnings
                          
                          
                          receivable
                          
                          
                          income
                          
                          
                          TotalsBALANCE,
      December 31, 2005
                          
                          
                          20,000,000
                          
                          
                          $
                          20,000
                          
                          
                          $
                          5,442,798
                          
                          
                          $
                          1,234,178
                          
                          
                          $
                          6,279,331
                          
                          
                          $
                          -
                          
                          
                          $
                          242,783
                          
                          
                          $
                          13,219,090Common
      stock issued for cash at $3.25
                          
                          
                          619,223
                          
                          
                          
                          619
                          
                          
                          
                          1,749,802
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,750,421Net
      Income
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          9,050,810
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          9,050,810Adjustment
      to statutory reserve
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          915,960
                          
                          
                          
                          (915,960
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Capital
      contribution receivable
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (5,462,798
                          )
                          
                          
                          -
                          
                          
                          
                          (5,462,798
                          )Foreign
      currency translation adjustment
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          655,435
                          
                          
                          
                          655,435BALANCE,
      December 31, 2006
                          
                          
                          20,619,223
                          
                          
                          $
                          20,619
                          
                          
                          $
                          7,192,600
                          
                          
                          $
                          2,150,138
                          
                          
                          $
                          14,414,181
                          
                          
                          $
                          (5,462,798
                          )
                          
                          $
                          898,218
                          
                          
                          $
                          19,212,958Common
      stock issued for consulting services
                          
                          
                          60,000
                          
                          
                          
                          60
                          
                          
                          
                          131,340
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          131,400Common
      stock and warrants issued at $2.70
                          
                          
                          9,387,985
                          
                          
                          
                          9,388
                          
                          
                          
                          20,532,623
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          20,542,011Common
      Stock issued from warrants conversion
                          
                          
                          74,679
                          
                          
                          
                          75
                          
                          
                          
                          524,971
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          525,046Net
      Income
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          16,686,116
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          16,686,116Adjustment
      to statutory reserve
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          735,141
                          
                          
                          
                          (735,141
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Capital
      contribution receivable
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          5,462,798
                          
                          
                          
                          -
                          
                          
                          
                          5,462,798Foreign
      currency translation adjustment
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          3,617,405
                          
                          
                          
                          3,617,405BALANCE,
      December 31, 2007
                          
                          
                          30,141,887
                          
                          
                          $
                          30,142
                          
                          
                          $
                          28,381,534
                          
                          
                          $
                          2,885,279
                          
                          
                          $
                          30,365,156
                          
                          
                          $
                          -
                          
                          
                          $
                          4,515,623
                          
                          
                          $
                          66,177,734Common
      Stock issued from warrants conversion
                          
                          
                          1,870
                          
                          
                          
                          2
                          
                          
                          
                          9,966
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          9,968Stock
      based compensation
                          
                          
                          750,000
                          
                          
                          
                          750
                          
                          
                          
                          2,999,250
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          3,000,000Net
      Income
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          9,555,853
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          9,555,853Adjustment
      to statutory reserve
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          655,947
                          
                          
                          
                          (655,947
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Foreign
      currency translation adjustment
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          5,882,178
                          
                          
                          
                          5,882,178BALANCE,
      December 31, 2008
                          
                          
                          30,893,757
                          
                          
                          $
                          30,894
                          
                          
                          $
                          31,390,750
                          
                          
                          $
                          3,541,226
                          
                          
                          $
                          39,265,062
                          
                          
                          $
                          -
                          
                          
                          $
                          10,397,801
                          
                          
                          $
                          84,625,733The
      accompanying notes are an integral part of these consolidated financial
      statements.
  - 41
-
  Note 1 -- Organization and Basis of
Presentation


China
Housing & Land Development, Inc., (the Company) is a Nevada corporation,
incorporated on July 6, 2004 under the name Pacific Northwest Productions Inc.,
(Pacific). On May 5, 2006, the Company changed its name to China Housing &
Land Development, Inc. The Company, through its subsidiaries, is engaged in
acquisition, development, management, and sale of commercial and residential
real estate properties located primarily in Xi'an, Shaanxi Province, People’s
Republic of China (PRC or China).
 
 The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned subsidiaries, Xi'anTsiningHousing Development Company Inc.
(Tsining), Xi'an New Land Development Co. (New
Land),Xi'an Hao Tai Housing Development
Company Inc. (Hao Tai),Manstate Assets Management
Limited(Manstate),Puhua (Xi’an) Real Estate Development Co.,
Ltd(75%
interest)(Puhua),Success Hill Investments
Limited(60%
interest)(Success
Hill)(collectively, the Subsidiaries). All
inter-company accounts and transactions have been eliminated on consolidation.
The accompanyingconsolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America
(GAAP).
 
 Tsining
was established during May 1992 as a state-owned enterprise, whose former name
is Xi’an New Star Group Real Estate Development Co. Ltd, and was reorganized as
a limited liability company with equity capital invested by management personnel
in September 1999 with registered capital of approximately $3,140,000 (RMB
26,000,000). On March 28, 2002, the registered capital of Tsining was increased
to approximately $6,050,000 (RMB 50,000,000). On May 21, 2007, the registered
capital of Tsining was further increased to $17,000,000 (RMB
132,838,270).
 
 On April
21, 2006, Tsining entered into and closed a share purchase agreement with
Pacific, incorporated in the state of Nevada in the United States of America.
Pursuant to the purchase agreement, Pacific acquired all of the issued and
outstanding capital stock of Tsining in exchange for 16,000,000 (post-split)
shares of Pacific’s common stock.
 
 Concurrent
with the closing of the purchase agreement and as a condition thereof, Pacific
entered into an agreement with Deljit Bains and Davinder Bains, its then
executive officers, pursuant to which they each returned 4,000,000 (post-split)
shares (8,000,000 shares in total) of Pacific common stock to Pacific for
cancellation. They were not compensated in any way for the cancellation of their
shares of Pacific common stock. Upon completion of the foregoing transactions,
Pacific had an aggregate of 20,000,000 shares of common stock issued and
outstanding.
 
 As a
result of the transaction, Tsining’s stockholders owned approximately 80% of the
combined company and the directors and executive officers of Tsining became the
directors and executive officers of Pacific. Accordingly, the transaction has
been accounted for as a reverse acquisition of Pacific by Tsining resulting in a
recapitalization of Tsining. Tsining was deemed to be the purchaser and
surviving company for accounting purposes.
 
 On May 5,
2006, Pacific changed its name to China Housing & Land Development, Inc. and
the stockholders approved a stock dividend of seven shares for each share held,
which has been accounted for as an eight to one forward stock split. All shares
and per share data have been restated retrospectively.
 
 On March
9, 2007, the Company acquired 100% of the equity of New Land.
 
 New Land
was originally incorporated in September 2003 in Xi’an City in Shaanxi province,
China. In 2006, New Land entered into an agreement with the Baqiao District
Government of Xi’an City to develop Baqiao Science & Technology Industrial
Park (“Baqiao Park”), a provincial development zone in Shaanxi Province, to
establish a joint venture for New Land to develop and purchase approximately 487
acres in Baqiao Park. The agreement covers the period from July 2006 to June
2011. New Land is responsible for the installation and maintenance of all basic
infrastructure, including water, electricity, and gas supply, along with
telecommunication and sewer systems. In return, New Land has been given the
exclusive right to obtain 487 acres of land use rights (“Baqiao
Project”).
 
 On June
19, 2007, New Land established Xi’an Hao Tai Housing Development Company Inc.
(“Hao Tai”) for the purpose of obtaining, developing, and trading land use
rights in China. Hao Tai is 100% owned by New Land and received its formal
business license from the government in July 2007.
 
 On
November 10, 2008, the Company entered into a framework agreement with Prax
Capital China Real Estate Fund I, Ltd., (“Prax Capital”) to develop 79 acres
within the Company’s Baqiao Project site. Pursuant to the Agreement, as of
December 31, 2008, Prax Capital Real Estate Holdings Limited has invested
US$29,270,000 into Success Hill for an ultimate 25% interest in Puhuawith various distribution
rights. Prax
Capital’s interest is recorded as minority interest in the consolidated
financial statements. The Company holds the remaining 75% interest in Puhua
directly and indirectly through Manstate and Success Hill.
  - 42
-
  Note 2 -- Summary of Significant
Accounting Policies
 
 Principles
of Consolidation and Basis of Presentation
 
 The
accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Tsining, New Land, Hao Tai and
Manstate, its 75%interest inPuhuaand60%interest inSuccess Hill. All inter-company
accounts and transactions have been eliminated on consolidation. The
accompanying consolidated financial statements have been prepared in conformity
with GAAP.
 
 Use of Estimates
 
 The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
 
 Reporting Currency and Foreign Currency
Translation
 
 As ofDecember 31, 2008, the accounts of the Company and
its Subsidiaries are maintained in their functional currency, the Chinese Yuan
Renminbi ("RMB").The
consolidated financial statements of the Company have been translated into U.S.
dollars inaccordance with
Statement of Financial AccountingStandards (“SFAS”) No.52, “Foreign Currency
Translation”. According toSFAS No. 52, all assets and
liabilities oftheSubsidiaries are translated
at the exchange rate on the balance sheet date, shareholders' equity is translated at the
historical rates and the statements of income and cash flows are translated at
the weighted average exchange rate for theyear. The resulting translation adjustments
are reported under comprehensive income in accordance withSFAS No. 130, "Reporting Comprehensive
Income."
 
 
 Foreign exchange rates
used:
 
 December
      31,    2008
                    
                    December
      31,    2007
                    
                    December
      31,    2006Periodend RMB/U.S. Dollar exchange
      rate
                    
                    6.8225
                    
                    7.2946
                    
                    7.8041Average RMB/U.S. Dollar exchange
      rate
                    
                    6.9483
                    
                    7.6058
                    
                    7.9723
 
 Revenue Recognition
 
 Effective January 1, 2008, the Company
changed its revenue recognition policy for sales of development properties to
the percentage of completion method. Previously, the full accrual method was
used. The percentage of
completion method is based on estimated costs incurred. The change is preferable
as it accurately reflects the business activity of the Company and matches
revenues with the costs incurred in the pursuit of such revenue. SFAS No. 154,
"Accounting Changes and Error Corrections," requires
that a change in accounting policy be reflected through retrospective
application of the new accounting policy to all prior periods, unless it is
impracticable to do so. The Company has determined that retrospective
application to periods prior to January 1,
2008 is not practical as the necessary information needed to restate prior
periods is not available. Therefore, the Company began to apply the percentage
completion method on a prospective basis beginning January 1,2008.
 
 Real estate sales are reported in
accordance with the provisions of SFAS No. 66, "Accounting for Sales of Real
Estate". Profit from the sales of real estate properties, is recognized by the
percentage of completion method on the sale of individualunits when all the following criteria
are met:
 
 a.
              Construction is beyond a
      preliminary stage.b.
              The buyer is committed to the
      extent of being unable to require a refund except for non-delivery of the
      unit or interest.c.
              Sufficient units have already
      been sold to assure
      that the entire property will not revert to rental
      property.d.
              Sales prices are
      collectible.
 e.
              Aggregate sales proceeds and costs
      can be reasonably estimated.
  - 43
-
  If any of the above criteria is not met,
proceeds shall be accountedfor as deposits until the criteria are
met.
 
 Under the percentage of completion
method, revenues from condominium 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 incurred costs,
including land use rights costs and construction costs, to total estimated costs
and applying that ratio to the contracted sales amounts. Cost of sales is
recognized bydetermining the ratio of contracted
sales during the period to total estimated sales value, and applying that ratio
to the incurred costs. Current period amounts are calculated based on the
difference between the life-to-date project totals and the previously recognized
amounts.
 
 Significant
judgments and estimates related to applying the percentage of completion method
include the Company’s estimates of the time necessary to complete the project,
the total expected revenue and the total expected costs. Fluctuations in sale
prices and variances in costs from budgets could change the percentages of
completion and affect the amount of revenue and costs recognized. Changes in
total estimated project 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 included in account receivable. As of December 31,
2008, the related account receivable balance was $299,745 ( 2007 and 2006 –
$Nil). Amounts received from customers in excess of revenue recognized to date
are classified as current liabilities under advances from customers. As of
December 31, 2008 and 2007, the related advances from customers were $9,264,385
and $5,258,351, respectively.
 
 For Company’s financed sales, the Company recognizes sales based on the
full accrual method provided that the buyer's initial and continuing investment
is adequate according to SFAS No. 66, “Accounting For Sales of Real
Estate”. The initial
investment is the buyer's down-payment less the loan amount provided by the Company.
Interest on these loans is amortized over the term of the
loans.
 
 For land sales, the Company recognizes
revenue when title of the land development right is transferred and
collectability is assured.
 
 Real
estate rental income is recognized on the straight-line basis over the
terms of the tenancy agreements.
 
 For the reimbursement on infrastructure
costs, the Company recognizes income, which is at a value agreed to by the
Company and the government of thePRC, when they enter into a binding
agreement.
 
 Real Estate Capitalization and Cost
Allocation
 
 Real estate held for development or sale
consists of residential and commercial units under construction and units
completed. Construction in progressincludes costs associated with
development and construction of the Baqiao project, the JunJing II project andprepaymentpaid on the Tang Du
project.
 
 The Company leases land for the
residential and commercial unit sites under land use rightsfrom the government of the
PRC.
 
 Real estate held for development or sale
is stated at cost or estimated net realizable value, whichever is lower. Costs
include land and land improvements, direct construction costs and development
costs, including predevelopment costs, engineering costs,
interest on indebtedness, real estate taxes, wages, insurance, construction
overhead and indirect project costs. All costs are accumulated by specific
projects and allocated to residential and commercial units withinthe respective projects. Selling and
advertising costs are expensed as incurred. Total estimated costs of multi-unit
developments are allocated to individual units based upon specific
identification methods.
 
 Land and land improvement costs include
cost of land use rights,
land improvements, and real estate taxes. Appropriate costs are allocated to
projects on the basis of acreage, dwelling units and relative sales
value.
 
 Land and land improvements applicable to
apartments and retail space are transferredto construction in progress when
construction commences.
 
 When real estate costs are determined to
be impaired, they are written down to their estimated net realizable value.
The Company evaluates the carrying value for impairment based on the
undiscountedfuture cash
flows of the assets. Write-downs of real estate costs deemed impaired would be
recorded as adjustments to the cost basis. No impairment
loss
  - 44
-
  was incurred or recorded for theyearendedDecember 31, 2008 (December 31, 2007- $Niland 2006 - $79,665).
 
 No depreciation is provided for
construction in progress.
 
 Capitalization of
Interest
 
 In accordance with SFAS No.34,“Capitalization of Interest
Cost”, interest incurred
during and directly related to construction is capitalized to construction in
progress. All other interest is expensed as
incurred.
 
 For theyearendedDecember 31, 2008, interest
incurred by the Company was $4,659,778(December 31, 2007 - $3,454,862and 2006 -
$2,245,021) and capitalized
interest for the same period was $3,313,595(December 31, 2007 - $1,904,096and
2006-$1,975,588).
 
 Concentration of
Risks
 
 The Company sells residential and
commercial units to residents and small business owners and the Company sells
land tootherreal estate developers. There was no
major customer that accounted for more than 5% of the sales for theyearendedDecember 31, 2008. One customer accounted for
approximately 44% of accounts receivable as at December 31, 2008.The Company had four major customers
that accounted for approximately 62% of the Company’s sales for theyearended December 31,2007.One of these customers accounted for 84%
of accounts receivable as at December 31, 2007. The Company has no major
customer that accounts for more than 5% of revenue for the year ended December
31, 2006.
 
 The Company isdependent on third-party
sub-contractors, manufacturers, and distributors for all of construction
services and supply of construction materials. Construction services or products
purchased from the Company's five largest subcontractors/suppliers
accountedfor30% of total services and supplies forthe yearended December 31, 2008
(December 31, 2007 - 56%and  December 31, 2006–41%).
 
 Accounts payables to these
subcontractors/suppliers amounted to $4,490,185atDecember 31, 2008 (December 31, 2007 - $1,723,020).
 
 The Company's operations are carried out in the
PRC. Accordingly, the Company's business, financial condition and results of
operations may be influenced by the political, economic and legal environments
in the PRC and by the general state of the PRC’s economy. TheCompany's business may be influenced by
changes in governmental policies with respect to laws and regulations,
anti-inflationary measures, currency conversion and remittance abroad, and rates
and methods of taxation, among other things.
 
 Cash and Concentration of Risk
 
 Cash includes cash on hand andrestricted cashin accounts maintained with state-owned
banks within the PRC. Total cash in state-owned banks atDecember 31, 2008 amounted to $38,230,352(December 31, 2007 - $2,452,366) of which no deposits arecovered by insurance. The Company has
not experienced any losses in such accounts.
 
 Restricted Cash
 
 The bank grants
mortgage loans to home purchasers and will transfer these amounts to the
Company's bank account once title passes. If the homes are not completed and the new
home owners have no ownership documents to secure the loan, the bank will deduct
10% of the home owner's loan from the Company's bank account and transfer that
amount to a designated bank account 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 home purchasers have obtained
the ownership documents to secure the mortgage loan. Total restricted cash
amounted to $805,012as ofDecember 31, 2008 (December 31,
2007 - $101,351).
 
 Accounts Receivable
 
 Accounts receivable consists of balances
due from customers for the sale of residential and commercial units in the PRC.
The Company provides an allowance fordoubtful accounts equal to the estimated
uncollectible amounts. The Company's estimated uncollectible amounts are based
on historical collection experience and a review of the current status of trade
accounts receivable. It is reasonably possible that theCompany's estimate of the allowance for
doubtful accounts will change. Accounts receivableare$813,122at December 31, 2008 (December 31,
2007-$12,107,882). Andtheaccounts receivableare presented net of an allowance for
doubtful accounts of $1,278,156atDecember 31, 2008 (December 31, 2007 -
$94,514).
  - 45
-
 
 Other Receivables
 
 Other receivables consist of various
cash advances to unrelated companies and individuals. These amounts are not
related to operations of the Company, are unsecured, non-interest
bearing and generally short
term in nature. The balance of other receivables after
deduction of an allowance for doubtful accounts,was $446,497as ofDecember 31, 2008(December 31, 2007 - $567,308).Other receivables are reviewed annually
as to whether their carrying value has become impaired. As ofDecember 31, 2008, the Company has established an
allowance for doubtful accounts of $473,058(December 31, 2007 -
$190,372).
 
 Notes Receivable
 
 The Company finances sales to certain
new homeowners with terms of one to three years. These loans are non-interest
bearing, therefore the
Company has discounted the carrying amount of notes receivable at the market
mortgage rateat 5.4% (2007–6.35%). Notes receivable are presented net of
allowance for doubtful accounts.
 
 2008
                        
                        
                        2007Notes
      receivable
                        
                        $
                        859,682
                        
                        
                        $
                        1,036,75Less: unamortized
      interest
                        
                        
                        (47,988
                        )
                        
                        
                        (88,857
                        )Notes receivable,
      net
                        
                        $
                        811,695
                        
                        
                        $
                        947,918
 
 Property and
Equipment
 
 Property and equipment are recorded at
cost. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets.
Depreciation expense for theyearendedDecember 31, 2008,2007and 2006amounted to $454,728,$423,932and $354,444respectively.Depreciation expense was included in the
selling, general and administrative expenses and other income. Estimated useful lives of the assets
are as follows:
 
 Estimated Useful
      LifeHead
      office buildings and improvements
                          
                          30
      yearsIncome
      producing properties
                          
                          21
      - 30 yearsVehicles
                          
                          6
      yearsElectronic
      equipment
                          
                          5
      yearsOffice
      furniture
                          
                          5yearsComputer
      software
                          
                          3
      years
 
 Maintenance and repairs are charged
directly to expenses as incurred. Major additions and betterment to property and
equipment are capitalized and depreciated over the remaining useful life of the
assets.
 
 Asset Held for Sale
 
 The Company intends to
sell one of its fixed assets which consist of13,609square meters of
retail units with net book value of $14,308,691as ofDecember 31, 2008 (December 31,
2007 - $12,910,428) and the
Company ceases depreciation of the asset.
 
 Long-lived Assets
 
 The Company periodically evaluates the carrying value of
long-lived assets to be held and used in accordance with SFAS No. 144,
“Accounting For Impairment
on Disposal of Long-Lived Assets”which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amounts. In that event, a loss is
recognized based on the amount by which the carrying amount exceedsthe fair value of the long-lived assets.
Loss on long-lived assets to be disposed of is determined in a similar manner,
except that fair values are reduced for the cost of disposal. Based on its
review, the Company believes there were no impairments of itslong-lived assets as ofDecember 31, 2008 and 2007.
 
 Advances to
Suppliers
 
 Advances to suppliers
consist of amounts paid in advance to contractors and vendors for services and
materials. Advances amounted to $704,275as ofDecember 31, 2008 (December 31,2007 -
$2,071,549).
  - 46
-
 
 Deposits on Land Use
Rights
 
 Deposits on land use rights consist of
deposits held by the PRC government to purchase land use rights in
Baqiaoand other projects
under planning. Deposits
amounted to $47,333,287as ofDecember 31, 2008(December 31, 2007 -
$29,694,103).
 
 Intangible Assets
  Intangible
assets relate to the development right for the 487 acres of land in Baqiao
Park obtained from the acquisition of New Land in fiscal 2007. The
intangible assets have a definite life. In accordance with SFAS No. 142,
“Goodwill and Other Intangible Assets”, the intangible assets are subject
to amortization over their useful life. The method of amortization selected
reflects the pattern in which the economic benefit of the intangible
assets are realized. The amortization is based on the acreage of land sold
or developed and weighted-average expected profit margins. This method is
intended to match the pattern of amortization with the income-generating
capacity of the assets.
  As of
December 31, 2008, the amount recorded for its intangible assets were
$46,043,660 (December 31, 2007 - $48,205,697). The Company evaluates its
intangible assets for impairment whenever events or changes in circumstances
indicate the carrying value may not be recoverable. Based on estimated future
cash flows, the Company records a write-down for impairments, if
appropriate. For the year ended December 31, 2008, the Company has
recorded $0  (2007 - $1,157,758) of amortization on the intangible
asset.
  Deferred financing
costs
 
 Debt issuance
costsare
capitalized as deferred financing costs and amortized on a straight line basis
over the term of the debt. The amortization expense forthe yearendedDecember 31, 2008 was
$148,606(2007 and 2006
-$0). This amortization
expense was included in the general administrative
expense.
 
 Fair Value of Financial
Instruments
 
 Effective January 1, 2008, the Company
adopted SFAS No. 157, "Fair Value Measurements," (as impacted by FSP No. 157-1
and 157-2), which provides a framework for measuring fair value under GAAP. Asdefined in SFAS No. 157,
fair value is 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 (exit price). The Company utilizes market data or
assumptions that the Company believes market
participants would use in pricing the asset or liability, including assumptions
about risk and the risks inherent in the inputs to the valuation technique.
These inputs can be readily observable, market corroborated orgenerally
unobservable.
 
 The Company primarily applies the market
approach for recurring fair value measurements and endeavors to utilize the best
available information. Accordingly, the Company utilizes valuation techniques
that maximize the use of observable inputs and minimize the use of
unobservable inputs. The Company is able to classify fair value balances based
on the observability of those inputs.
 
 SFAS No. 157 establishes a fair value
hierarchy that prioritizes the inputs 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 measurement) and the lowest priority to unobservable inputs
(Level 3 measurement). The three levels of the fair value hierarchy defined by SFAS No. 157 are as
follows:
 
 Level
    1
              Quoted prices are
      available in active markets for identical assets orliabilities as of the reporting
      date. Activemarkets are those inwhich transactions for the asset
      or liability occur in sufficientfrequency and volume toprovide pricing information on an
      ongoingbasis. Level 1 primarily consists
      of financial instruments such asexchange-traded derivatives,
      listed equities and U.S. governmenttreasury
      securities.
 
 Level
    2
              Pricing
      inputsare other than
      quoted prices in active markets includedin Level 1, which are either
      directly orindirectly observable as
      ofthe reporting date. Level 2
      includes those financial instruments thatare valuedusing models or other valuation
      methodologies. These
      modelsare primarily industry-standard
      models thatconsider variousassumptions, including quoted
      forward prices for commodities, timevalue, volatility factors, and
      current market and contractual pricesfor the underlying instruments, as
      well asother
      relevant economicmeasures. Substantially all of
      these assumptions are observable in themarketplace throughout the full
      term ofthe instrument, can be
      derivedfrom observable data or are
      supported by observable levels at whichtransactions are executed in the marketplace.
      Instruments in thiscategory include
      non-exchange-tradedderivatives such as over
      thecounter forwards, options and
      repurchase agreements.
 
 Level
    3
              Pricing inputs include
      significant inputs that are generally lessobservable from objective sources. Theseinputs may be used
      withinternally developed methodologies
      that result in management's bestestimate of fairvalue from the perspective of a
      market participant.Level 3 instruments include those
      that may be morestructured orotherwise tailored to customers'
      needs. At each balance sheet date,the Company performs ananalysis of all instruments
      subject to SFASNo. 157 and includes in Level 3
      all of those whose fair value isbasedon significant unobservable
      inputs.
  - 47
-
  Assetsand liabilities measured at fair value
on a recurring basis include the following as ofDecember 31, 2008:
 
 Fair Value Measurements
      Using
                    
                    Assets/LiabilitiesLevel 1
                    
                    
                    Level 2
                    
                    
                    Level3
                    
                    
                    At Fair
    ValueWarrants
      liabilities
                    
                    
                    -
                    
                    
                    $
                    1,117,143
                    
                    
                    
                    -
                    
                    
                    $
                    1,117,143Derivative
      liabilities
                    
                    
                    -
                    
                    
                    
                    760,398
                    
                    
                    
                    -
                    
                    
                    
                    760,398Total
                    
                    
                    -
                    
                    
                    $
                    1,877,541
                    
                    
                    
                    -
                    
                    
                    $
                    1,877,541
 
 
 Accounts Payable
 
 Accounts payable
consists of balances due to subcontractors and suppliers for the purchase of
construction services and the Baqiao government for land use rights.
Accounts payable amounted to $10,525,158atDecember 31, 2008 (December 31,
2007-$9,311,995).
 
 Advances from
Customers
  Advances
from customers represent prepayments by customers for home purchases. The
Company records such prepayments as advances from customers when the payments
are received. The balance is reduced by the percentage of revenue recognized.
Advances from customers amounted to $9,264,385 at December 31, 2008
(December 31, 2007 - $5,258,351).
 
 Other Payables
 
 Other Payables consist of balances for
non-construction costs with unrelated companies and individuals.These amounts are
unsecured, non-interest bearing and short term in nature. Other payables
amounted to $5,183,251as ofDecember 31, 2008
(December 31, 2007-
$3,881,137)of which, $731,087 is
payable for JV set up (2007 -$Nil).
 
 Advertising Costs
 
 Advertising and sales promotion costs
are expensed as incurred. Advertising expensefor the yeartotaled $1,261,495 (2007 - $781,998 and 2006 -
$565,577)
 
 Warranty Costs
 
 Generally, the Company provides all of
its customers with a limited (half a year to 5 years) warranty
period for defective workmanship. The Company accrues the estimated warranty
costs into the cost of its homes as a liability after each project is closed
based on the Company's historical experience, which normally isless than 0.2% of total costs of the
project. Any excess amounts are expensed in the period when they occur. Any
significant material defects are generally under warranty with the Company's
suppliers. Currently, the Company retains 5% of the total construction contract from the construction
contractors for a period of one year after the completion of the construction.
Such retention amounts will be used to pay for any repair expense incurred due
to defects in the construction. The Company has not historically incurred any significant litigation
requiring additional specific reserves for its product offerings. As ofDecember 31, 2008 and 2007, the Companydid not accrueforwarranty costs.
 
 Income Taxes
  The
Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. At December 31, 2008 and 2007 the significant
accounting to tax difference was related to the intangible assets which have no
tax value.
  - 48
-
  The
Company adopted the provisions of FASB Interpretation No. 48, "Accounting
for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109",
("FIN 48"), on January 1, 2007. The Company did not have any material
unrecognized tax benefits and there was no effect on its financial condition or
results of operations as a result of implementing FIN 48. During fiscal 2008,
the Company settled a prior year income tax liability with the PRC local
tax authority resulting in a gain of $12,712,153 included in the provision for
income taxes. The local tax authority examined the Company’s tax records and
issued an income tax settlement report. Management believes there is only a
remote possibility that the local tax authority or higher tax authority will
reassess the tax settlement.
 
 The Company files income tax returns in
the PRC jurisdictions. The Company does not believe there will be any material
changes in its unrecognized taxpositions over the next 12
months.
  The
Company's policy is to recognize interest and penalties accrued on any
unrecognized tax liability as a component of general and administrative
expense. As of the date of adoption of FIN 48, the Company did not have any
accrued interest or penalties associated with any unrecognized tax rate
differences from the federal statutory rate primarily due to non-deductible
expenses, temporary differences and preferential tax treatment. No assessments
of income taxes for the years ended December 31, 2008, 2007 and 2006 have been
received by the Company, except for the income tax settlement report issued
by local tax authority as previously described.
 
 PRC and Local Income
Tax
 
 The subsidiaries of the Company are
governed by the Income Tax Laws of the PRC concerning Chinese
registered limited
liability companies. Under the Income Tax Laws of the PRC, Chinese enterprises
are generally subject to income tax at a statutory rate of 25% on income
reported in the statutory financial statements after appropriate tax
adjustments, unlessthe enterprise is located in a specially
designated region for which more favorable effective tax rates are applicable.
New Land and Hao Tai are entitled to a refund of 6% of taxes otherwise payable
if they meet certain annual earning criteria.
 
 The provision for income taxes for theyearendedDecember 31, 2008,2007and 2006consisted of the
following:
 
 2008
                          
                          
                          2007
                          
                          
                          2006(Recovery)
      provision for China income and local tax
                          
                          $
                          (10,490,833
                          )
                          
                          $
                          9,125,616
                          
                          
                          $
                          4,511,442Provision
      of deferred taxes
                          
                          
                          -
                          
                          
                          
                          (382,060
                          )
                          
                          
                          -Total
      (recovery) provision for income taxes
                          
                          $
                          (10,490,833
                          )
                          
                          $
                          8,743,556
                          
                          
                          $
                          4,511,442
  2008
                            
                            
                            2007
                            
                            
                            2006(Loss)
      income before provision for income
taxes
                            
                            $
                            (1,094,544
                            )
                            
                            $
                            25,429,672
                            
                            
                            $
                            13,562,252U.S.
      statutory rateof
      34%
                            
                            
                            (372,145
                            )
                            
                            
                            8,646,088
                            
                            
                            
                            4,611,166Foreign
      loss(income)not
      recognized in USA
                            
                            
                            2,092,057
                            
                            
                            
                            (9,766,843
                            )
                            
                            
                            (4,611,166
                            )Non-taxable
      income and non-deductible expense
                            
                            
                            (2,424,532
                            )
                            
                            
                            819,055
                            
                            
                            
                            -Foreign(loss)income
      tax rate of 25%
                              (2007
      and2006
      -33%)
                            
                            
                            (1,538,277
                            )
                            
                            
                            9,541,001
                            
                            
                            
                            4,511,442Favorable
      foreignincometax
      settlement
                            
                            
                            (12,712,153
                            )
                            
                            
                            -
                            
                            
                            
                            -Tax
      on favorableforeign
      income taxsettlement
                            
                            
                            3,170,407
                            
                            
                            
                            -
                            
                            
                            
                            -Tax
      incentive on New Land and Hao Tai
                            
                            
                            -
                            
                            
                            
                            (344,133
                            )
                            
                            
                            -Recovery
      of future income tax provision
                            
                            
                            
                            
                            
                            
                            (382,060
                            )Change
      in valuation allowance
                            
                            
                            1,293,810
                            
                            
                            
                            230,448
                            
                            
                            
                            -(Recovery)
      provision
      for income taxes
                            
                            
                            (10,490,833
                            )
                            
                            
                            8,743,556
                            
                            
                            
                            4,511,442
  - 49
-
  Deferred
tax
 
 The tax
effects of temporary differences that give rise to the Company’s deferred tax
liability as of December 31, 2008 and December 31, 2007 are as
follows:
 
 2008
                      
                      
                      2007Deferred tax
      assetNon-capital
      losses
                      
                      
                      1,530,488
                      
                      
                      
                      236,678Valuation
      allowance
                      
                      
                      (1,530,488
                      )
                      
                      
                      (236,678
                      )Net deferred tax
      asset
                      
                      
                      -
                      
                      
                      
                      -Deferred tax
      liabilityTemporary difference related to
      intangible asset
                      
                      $
                      15,907,880
                      
                      
                      $
                      15,907,880Foreign
      exchange rate change
                      
                      
                      (4,396,965
                      )Net deferred tax
      liability
                      
                      $
                      11,510,915
                      
                      
                      $
                      15,907,880
 As of
December 31, 2008, the Company’s PRC subsidiaries have net operating loss
carry forward of approximately $2,356,757which will begin to expire in
2013. The Company has U.S. net operating loss carry forward of
approximately $2,768,525, which will begin to expire in 2026.
  Basic and Diluted Earnings Per
Share
 
 Earnings per share is calculated in
accordance with the SFAS No. 128, "Earnings per share". Basic net earnings per
share are based upon the
weighted average number of common shares outstanding. Diluted net earnings per
share are based on the assumption that all dilutive convertible shares, stock
options and warrants were converted or exercised. Dilution is computed by
applyingthe treasury stock
method.
 
 Under this method, options and warrants
are assumed to be exercised at the beginning of the period (or at the time of
issuance, if later), and as if funds obtained thereby were used to purchase
common stock at the average marketprice during theyear.
 
 Minority Interest
 
 Minority
interest is attributable to the minority shareholders of Puhua and Success Hill.
Minority interests in net income and losses are generally subtracted from or
added to arrive at consolidated net income.
 
 
 Share
based compensation
 
 The Company records stock-based
compensation pursuant to Statement of Financial Accounting Standard No.
123(revised 2004), “Share-Based Payments,”(“FAS123R”), which established standards for the
accounting for transactions inwhich an entity exchanges its equity
instruments for goods or services. This statement requires companies to measure
the cost of services received in exchange for an award of equity instruments
based on the grant-date fair value of the award. The cost isrecognized over the period of services
rendered.
 
 Comprehensive Income
 
 Comprehensive income consists of net
income and foreign currency translation gains and losses affecting shareholders'
equity that, under GAAP, are excluded from net income. The gain onforeign exchange translations totaled$5,882,178,$3,617,405 and$655,435for theyearendedDecember 31, 2008, 2007and2006, respectively.
 
 Statement of Cash
Flows
 
 In accordance with SFAS No. 95,
"Statement of Cash Flows," cash flows from the Company's operations are calculated based
upon the local currenciestranslated at the weighted average exchange rate for the year. As a result, amounts related to assets
and liabilities reported on the statement of cash flows will not necessarily
agree with changesin the
corresponding balances on the balance sheet.
  - 50
-
  Accounting Principles Recently
Adopted
 
 SFAS No. 159, "The Fair Value Option for
Financial Assets and Financials Liabilities -- Including an Amendment of FASB
Statement No.115" issued by FASB in February 2007, permits measurement of certain
financial assets and financial liabilities at fair value. If the fair value
option is elected, the unrealized gains and losses are reported in earnings at
each reporting date. Generally, the fair value option may beelected on an instrument by instrument
basis, as long as it is applied to the instrument in its entirety. The fair
value option election is irrevocable, unless a new election date occurs. SFAS
No. 159 requires prospective application and certain additionalpresentation and disclosure
requirements. The adoption on January 1, 2008 of this statement did not have a
material impact on the Company's consolidated financial
statements.
 
 Recent Accounting
Pronouncements
 
 In December 2007, the FASB issued SFAS
No. 141(R), "Business
Combinations" which revised SFAS No. 141, "Business Combinations". SFAS No.
141(R) establishes principles and requirements for how an acquirer recognizes
and measures in its financial statements the identifiable assetsacquired, the liabilities assumed, any
non-controlling interest in the acquirer and the goodwill acquired. SFAS No.
141(R) also establishes disclosure requirements which will enable users to
evaluate the nature and financial effects of the business combination. This standard is effective for
fiscal years beginning after December 15, 2008. As the provisions of SFAS No.
141(R) are applied prospectively, the impact of this standard cannot be
determined until the transactions occur.
 
 In December 2007, the FASB issued SFAS No. 160, "Noncontrolling
Interests in Consolidated Financial Statements". SFAS No. 160 establishes
accounting and reporting standards for ownership interests in subsidiaries held
by parties other than the parent, the amount of consolidated netincome attributable to the parent and to
the noncontrolling interest, changes in a parent's ownership interest and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. SFAS No. 160 also establishes reporting requirements that provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. This standard is
effective for fiscal years beginning after December 15, 2008.The Companyis currently evaluating the impact of
the adoption of SFAS No. 160.
 
 In March 2008, the FASB issued SFAS No.
161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS
No. 161"). SFAS No. 161 amends and expands the disclosure
requirements of FASB
Statement 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133") to require qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about fair value
amounts of and gains and losses on derivative instruments,
and disclosures about credit risk-related contingent features in derivative
agreements. The Statement is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008. Early application is encouraged. The
Company is currently evaluating the impact of the adoption of SFAS No.
161.
  In April
2008, the FASB issued FSP SFAS 142-3, "Determination of the Useful Life of
Intangible Assets" ("FSP 142-3"). This guidance is intended to improve the
consistency between the useful life of a recognized intangible asset under SFAS
No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), and the period of
expected cash flows used to measure the fair value of the asset under SFAS 141R
when the underlying arrangement includes renewal or extension of terms that
would require substantial costs or result in a material modification to the
asset upon renewal or extension. Companies estimating the useful life of a
recognized intangible asset must now consider their historical experience in
renewing or extending similar arrangements or, in the absence of historical
experience, must consider assumptions that market participants would use about
renewal or extension as adjusted for SFAS 142's entity-specific factors. FSP
142-3 is effective for for financial statements issued for fiscal years and
interim periods beginning January 1, 2009. The Company is currently evaluating
the potential impact of the adoption of FSP 142-3.
 
 In May 2008, the FASB issued SFAS No.
162, "The Hierarchy of Generally Accepted Accounting Principles." SFAS No. 162 identifies
the sources of accounting principles and the framework for selecting the
principles to be used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with GAAP.
SFASNo. 162 bacame effective on
November 15, 2008.The
Company is currently evaluating the potential impact of the adoption of SFAS No.
162.
 
 In May 2008, the FASB issued FASB FSP
APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in
Cash upon Conversion (Including Partial CashSettlement)". FSP APB 14-1 requires the
issuer of certain convertible debt instruments that may be settled in cash (or
other assets) on conversion to separately account for the liability (debt) and
equity (conversion option) components of the instrumentin a manner that reflects the issuer's
non-convertible debt borrowing rate. Such separate accounting also requires
accretion of the resulting discount on the liability component of the debt to
result in interest expense equal to an issuer`s nonconvertibledebt borrowing rate. In addition, the FSP
provides for certain changes related to the measurement and accounting related
to derecognition, modification or exchange. FSP APB
  - 51
-
  14-1 is effective for fiscal years
beginning after December 15, 2008 on a retroactive basis. Theadoption of FASB FSP APB 14-1 is not
expected to have a significant impact on the Company’s consolidated financial
statements.
 
 In September 2008, the FASB issued FSP
EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based
Payment Transactions Are
Participating Securities." FSP EITF 03-6-1 addresses whether instruments granted
in share-based payment transactions are participating securities prior to
vesting and, therefore, need to be included in the earnings allocation in
computing income per share under the two-class
method pursuant to SFAS No. 128, "Earnings per Share." This guidance establishes
that unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating securities and
shall be included in the computation of earnings per share pursuant to the
two-class method. FSP EITF 03-6-1 is effective for financial statements issued
for fiscal years beginning after December 15, 2008. Furthermore,all prior period earnings per share data
presented shall be adjusted retrospectively to conform to the provisions of FSP
EITF 03-6-1. The Company is currently evaluating the potential impact of the
adoption of FSP EITF 03-6-1.
 
 Note 3—Acquisition
  On March
9, 2007, the Company entered into a Share Transfer Agreement (the “Agreement”)
to acquire RMB 32 million of registered and paid-in capital of New Land,
representing 100% equity ownership of New Land. The acquisition was effective on
May 31, 2007. The total purchase price for the acquisition was RMB 270 million,
(approximately $35.2 million). The total purchase price included 1) an initial
cash payment of RMB 5 million, (approximately $0.6 million), payable within 20
days after the signing of the Agreement, 2) an additional cash payment of
RMB 57 million, approximately $7.4 million, within 30 days of the receipt
of the due diligence report and 3) a promissory note of the aggregate amount of
RMB 208 million, (approximately $27.2 million), bearing 10% interest with a
maturity of January 30, 2009. As of December 31, 2008, the remaining balance of
the above note payable under the Agreement amounted to $5,606,449 (2007 -
$8,717,684) (see note 10) and New Land’s original shareholders have agreed to
extend the loan to December 31, 2009.
 
 The Company accounted for the business
combination using the purchase method of accounting pursuant to SFAS No. 141,
“Business
Combinations”. The purchase
price was allocated to the identifiable assets and liabilities assumed based on
their estimated fair
values.
 Purchase
    Price
                        $
                        35,286,737Value assigned to assets and
      liabilities:Assets:Cash
                        $
                        50,390Other
      receivables
                        
                        20,318Equipment
                        
                        102,577Work in
      progress
                        
                        6,448,748Prepayment
                        
                        224,597Intangible
      assets
                        
                        47,107,396Liabilities:Accounts
      payable
                        
                        (963,233)Other
    payables
                        
                        (2,100,310)Accrued
      expenses
                        
                        (58,304)Deferred
tax
                        
                        (15,545,441)Total net
      assets
                        $
                        35,286,637
 
 
 The operations of NewLand,startingfrom June 1,2007,areincluded in the Company’s consolidated financial
statements.
  Note4-- Supplemental Disclosure of Cash Flow
Information
 
 Income taxes paid amounted to
$225,964, $384,615 and $0for theyearendedDecember 31, 2008, 2007 and 2006, respectively.Interest paid for theyearendedDecember 31, 2008,2007 and 2006amounted to$3,724,070, $1,975,917 and $2,147,800respectively.
  - 52
-
  Note5–Real Estate
 
 The following summarizes the components
of real estate inventoriesasat December 31, 2008and 2007:
 
 2008
                  
                  
                  2007Finished
      projects
                  
                  $
                  10,181,827
                  
                  
                  $
                  16,130,130Construction in
      progress
                  
                  
                  50,468,184
                  
                  
                  
                  24,856,801Total real estate held for
      development or sale
                  
                  $
                  60,650,011
                  
                  
                  $
                  40,986,931
 
 
 Note6-- Accounts Receivable
 
 Accounts receivable consist of the
followingasatDecember 31, 2008 and 2007:
 
 2008
                    
                    
                    2007Accounts
      receivable
                    
                    $
                    2,691,278
                    
                    
                    $
                    12,202,396Allowance for doubtful
      accounts
                    
                    
                    (1,278,156
                    )
                    
                    
                    (94,514
                    )Accounts receivable,
      net
                    
                    $
                    813,122
                    
                    
                    $
                    12,107,882
 
 
 Note7--Other Receivables, Prepaid Expenses and
Other Assets
 
 Other receivables, prepaid expenses and
other assets consist of the followingasatDecember 31, 2008 and 2007:
  2008
                  
                  
                  2007Other receivables
                  
                  $
                  916,886
                  
                  
                  $
                  749,890Allowance for bad
      debts
                  
                  
                  (473,058
                  )
                  
                  
                  (190,372
                  )Prepaid
      expenses
                  
                  
                  2,669
                  
                  
                  
                  7,790Other receivables, prepaid expense
      other assets
                  
                  $
                  446,497
                  
                  
                  $
                  567,308
   Note8-- Property and Equipment,
Net
 
 Property and equipment consist of the
followingasatDecember 31, 2008 and December 31,
2007:
  2008
                  
                  
                  2007Head office buildings and
      improvements
                  
                  $
                  3,234,628
                  
                  
                  $
                  1,018,494Income producing
      properties
                  
                  
                  24,588,347
                  
                  
                  
                  18,469,852Electronic
      equipment
                  
                  
                  238,422
                  
                  
                  
                  195,244Vehicles
                  
                  
                  71,140
                  
                  
                  
                  87,740Office
      furniture
                  
                  
                  183,939
                  
                  
                  
                  119,960Computer
      software
                  
                  
                  91,272
                  
                  
                  
                  48,180Totals
                  
                  
                  28,407,748
                  
                  
                  
                  19,939,470Accumulated
      depreciation
                  
                  
                  (1,707,556
                  )
                  
                  
                  (1,322,030
                  )Net book value of assets held for
      sale
                  
                  
                  (14,308,691
                  )
                  
                  
                  (12,910,428
                  )Property and equipment,
      net
                  
                  $
                  12,391,501
                  
                  
                  $
                  5,707,012
  During
the years ended December 31, 2208 and 2007, no depreciation was recorded with
respect to the assets held for sale.
  - 53
-
  Note9--Intangible assets
 
 Intangible asset consists of the
followingasatDecember 31, 2008 and 2007:
  2008
                  
                  
                  2007Intangible
      acquired
                  
                  $
                  47,334,342
                  
                  
                  $
                  49,412,847Accumulated
      amortization
                  
                  
                  (1,290,682
                  )
                  
                  
                  (1,207,150
                  )Intangible assets,
      net
                  
                  $
                  46,043,660
                  
                  
                  $
                  48,205,697
 
 
 Note10–Loans payable toNew Land’s previousshareholders
 
 The Company has loans payable to
previous shareholders of New Land totaling to $8,429,889 atDecember 31, 2008 (December 31, 2007 -
$11,413,229). $5,606,449 (2007 - $8,717,684) of the
total relates to the acquisition of New Land (see note 3) and is due inDecember2009.The
remaining balance pertains to additional loans made by these shareholders and is
due in December 2009. The loans bear interest at 10% per annum.
 
 Note11-- Loans from
Employees
  The
Company has borrowed monies from certain employees to fund the Company's
construction projects. These loans bear interest at rates ranging between 7% and
12% and all principal amounts matures in 2009. At December 31, 2008, loans
from employees amounted to $1,517,039 (December 31, 2007 -
$2,388,862).
 
 Note 12-- Loans Payable
 
 Loans payable represent amounts due to
various banks and are due on demand or withinthreeyears. These loans generally can be renewed
with the banks when theymature. Loans payable atDecember 31, 2008 and December 31, 2007 consisted
of the following:
 
 2008
                  
                  
                  2007Commercial Bank Weilai
      BranchDue August 29, 2008, annual
      interest rate is at 11.34 percent, secured by the Company'sXin Xing
      Gangwan,
                    Xin Xing Tower and Ming Yuan Yuan
      projects
                  
                  $
                  -
                  
                  
                  $
                  5,209,333Commercial Bank Weilai
      BranchDue December25, 2009, annual interest is at
      9.47percent, secured by the Company's
      24G projects
                  
                  
                  5,130,084
                  
                  
                  
                  5,483,508Commercial Bank Weilai
      BranchDue August 29, 2010, annual
      interest is at 10.21 percent, guaranteed byTsiningand secured by the Company'sXin Xing Towerand part of the
      JunJing II project
                  
                  
                  5,130,084
                  
                  
                  
                  -Xi'an Rural Credit union Zao Yuan
      Rd. BranchDue September 14, 2009, annual
      interest is at 9.527 percent, secured by the Company's Jun Jing Yuan I,
      Han Yuan and Xin Xing Tower projects
                  
                  
                  3,371,198
                  
                  
                  
                  3,427,193China Construction Bank, Xi'an
      BranchDue
      August 27, 2011, annual interest is at floating interest rate based
      on 110% of People’s Bank of China rate, secured by the Company's Jun Jing
      Yuan II project
                  
                  
                  21,986,076
                  
                  
                  
                  -Total
                  
                  $
                  35,617,442
                  
                  
                  $
                  14,120,034
 
 All loans were borrowed for construction
projects. All interest paid was capitalized and allocated toJunJing II project.
 
 On June 28, 2008, the Company signed a
strategic partnership Memorandum Of Understanding (“MOU”) withChina Construction BankXi’anBranch that established a RMB 1 billion
credit line for real estate developmentbythe Company and its subsidiaries. Under the MOU, the Company is
required to meet certain bank covenants. On August 28, 2008, the Company entered
a loan agreement with China Construction BankXi’anBranch for a RMB 150 million loans
maturing on
  - 54
-
  August 27, 2011. $21,986,075(RMB150million) was received by the Company at
December 31,2008;there are no specific bank
covenants requiredon this
loan.
 
 Note 13- Convertible debt
 
 On January 28, 2008, the Company issued
Senior Secured Convertible Notes due in 2013 (the "Convertibledebt") and warrants to subscribe for
common shares for an aggregate purchase price of US$20 million. The Convertible
debt bears 5% per annum (computed based on the actual days elapsed in a period
of 360 days) of the RMB notional principle amount, payablequarterly in arrears in U.S. Dollars on
the first business day of each calendar quarter and on the maturity date. In
addition, 1,437,467 five-year warrants were granted with a strike price of $6.07
per common share, which are callable if certain stock pricethresholds are met. Approximately
215,620 warrants are also available as a management incentive if certain
milestones are met.
 
 The holders have the right to convert up
to 45% ($9 million) of the principal amount of the Convertible debt into common
sharesat an initial
conversion price of $5.57, subject to upward adjustment. The Company, at its
discretion, may redeem the remaining $11 million of Convertible debt at 100% of
the principle amount, plus any accrued and unpaid interest. The warrants
associatedwith the Convertible debt grant the
holders the right to acquire shares of common stock at $6.07 per share, subject
to customary anti-dilution adjustments. The warrants may be exercised to
purchase common stock at any time up to and including February 28,2013.
 
 The convertible debt is secured by a
first priority, perfected security interest in certain shares of common stockheld byLu Pingji, thechairmanof the Company. The convertible debt is
subject to events of default customary for convertible securities and for a secured
financing.
  Both the
warrant and embedded derivative associated with convertible debt meet the
definition of a derivative instrument according to FASB No. 133, ”Accounting for
Derivative Instruments and Hedging Activities” and are recorded as a derivative
instrument liabilities and periodically marked-to-market. The fair value of the
warrants and embedded derivative on inception were determined to be $3,419,653
and $3,927,375, respectively, using the Cox-Rubinstein-Ross (“CRR”) Binomial
Lattice Model with the following assumptions: expected life 4.32 years, expected
volatility - 75%, risk free interest rate - 2.46% and dividend rate - 0%. The
fair value of the warrants and embedded derivative at December 31, 2008 were
determined to be of $658,682 and $760,398, respectively, using the CRR Binomial
Lattice Model with the following assumption: expected life 4.08 - 4.16 years,
expected volatility - 90%, risk free interest rate - 1.31-1.33% and dividend
rate - 0%. For the year ended December 31, 2008, the Company recorded a change
in fair value for the warrants and embedded derivative of $(2,760,971) and
$(3,166,977), respectively in the consolidated statement of income.
 
 After
allocating the gross proceeds to the fair value of the warrants and the embedded
derivative instrument, the remaining proceeds were allocated as the initial
carrying value of the Convertible debt. The amount is accreted to its face
amount at maturity using the effective interest method. The effective interest
rate was determined to be 15.42%. The carrying value of Convertible debt at
December 31, 2008 was $13,621,934. Related interest expense and accretion
expense for the year ended December 31, 2008 were $964,897 and $968,962,
respectively.
 
 Note 14--Minority interest
 
 Minority
interest consists of the interest of minority shareholders in the subsidiaries
of the Company. As of December 31, 2008 minority interest amounted to
$29,109,350 (December 31, 2007 - $Nil)
 
 On
November 5, 2008, the Company and Prax Capital entered into a conditional joint
agreement to develop 79 acres within China Housing’s Baqiao project located in
Xi’an. Prax Capital invested US$ 29.3 million for a 25% interest in Puhua with
various distribution rights by
acquiring 1,000 Class A shares of Success Hill. Prax Capital’s Class A
Shares in Success Hill are redeemable at the option of holder, provided
that Prax gives advance notice, and with the Company’s approval. Prax has the
first right of the distribution on profits, commencing with acumulative
annual return rate of 25% for their equity ownership, capped out at an
additional 10% based on the success of the development and on the
market conditions.At this time, the company believes that it
is not probable that Prax Capital will exercise their redemption
option.
  Under FAS
150, “Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity” the shares with the redeemable feature are not
classified as a liability since they are not mandatorily
redeemable.
  Rule
5-02.28 of Regulation S-X (and ASR 268) specifically requires preferred
securities that are redeemable for cash or other assets to be classified outside
of permanent equity if they are contractually redeemable 1) at a fixed or
determinable price on a fixed or determinable date or dates, 2) at the option of
the holder, or 3) upon the occurrence of an event that is not solely within
the control of the issuer.
 
 As Prax’s
put option provides them the right to sell the Preferred Shares back to the
Company, the Preferred Shares meet 2) “at the option of the holder”
above.  As such, the Class A shares in Success Hill should
be classified as mezzanine equity.
 
 On
November 5, 2008, the
Company entered into a Deed of Guarantee (the “Guarantee”), in favor of
Prax Capital and Success Hill (Success Hill and together with Prax, the
“Beneficiaries”) whereby the Company guarantees the performance of certain
obligations relating
to the agreements entered into with Prax Capital.
 - 55
-


The Guarantee is a continuing
Guarantee and shall remain
effective until a termination event occurs as contemplated by the Guarantee. Ifthe Companyfails totimely and fully perform its obligations
under the Guarantee then the Beneficiaries shall be afforded the appropriate
remedy as contemplated by
the Guarantee,including, but not limited to, the claim
for damages and the reimbursement of expenses. Any amounts payable under the
Guarantee bythe
Companyshall includeinterest accrued at the
rate of 10% from the due date of such payment.
 
 As ofDecember 31, 2008, the Company owned a
75% interest inPuhua. Given the Company’s majority ownership interest, the
accounts ofPuhuahave been consolidated with the
accounts of the Company, and a minority interest has been recorded for the
minority investors’interests in the net assets and
operations ofPuhuato the extent of the minority
investor’s investments.
 
 Minority
      interestMinority
      interest at November 5, 2008
                    
                    $
                    29,268,914Minority
      interests’ share of loss for the year
                    
                    
                    (159,564
                    )Distributions
      for the year
                    
                    
                    0Minority Interest at December 31,
      2008
                    
                    $
                    29,109,350
 
 Note 15--Accrued Expenses
 
 2008
                  
                  
                  2007Accrued
      expenses
                  
                  $
                  855,270
                  
                  
                  $
                  362,854Accrued
      Interest
                  
                  $
                  2,684,572
                  
                  
                  
                  1,540,597Total
                  
                  $
                  3,539,842
                  
                  
                  $
                  1,903,451
 
 In accrued expense, there isa$293,148 (RMB 2 million) finder fee
payable to anunrelatedpartythat assistedthe Company in the formation ofPuhua.
 
 Note 16-- Shareholders'
Equity
  Common
stock
  (1)
                On
      June 28, 2006, the Company entered into securities purchase agreements
      with accredited investors and completed the issue of $1,075,000 of the
      Company’s common stock and common stock purchase warrants. The securities
      sold were an aggregate of 330,769 shares of common stock and 99,231
      warrants. Each warrant is exercisable for three years with an initial
      exercise price of $3.60 per share. The exercise price was amended to $3.31
      per share during 2007 with additional 8,770 warrants were
      issued.
  Pursuant
to the terms of the warrants, each investor has contractually agreed to restrict
its ability to exercise the warrants to an amount which would not exceed the
difference between the number of shares of common stock beneficially owned by
the holder or issuable upon exercise of the warrant held by such holder and 9.9%
of the outstanding shares of common stock of the Company.
  In
connection with the offering, the Company paid a placement fee of 10% of the
proceeds in cash, together with other expenses in the amount of 3% of the
proceeds, in cash. In addition, the placement agent was issued warrants to
purchase 66,154 shares of common stock on the same terms and conditions as the
investors. The fair value of these warrants was determined to be $118,340 on the
date they were issued, and were exercised during 2007.
  The fair
value of each warrants at December 31, 2008 was determined to be $0.04 (2007
-$2.52) using the CRR Binomial Lattice Model with the following assumptions:
expected life – 0.47 years (2007 – 1.47 years); expected volatility – 90% (2007
- 75%), risk free interest rate – 0.27% (2007 – 3.20%) and dividend rate – 0%
(2007 – 0%).
  (2)
                Pursuant
      to securities purchase agreements with accredited investors dated July 7,
      2006, the Company received $124,975 and issued 38,454 shares of common
      stock and 11,536 warrants. Each warrant is exercisable for three years at
      an initial exercise price of $3.60 per share. The exercise price was
      amended to $3.31 per share during 2007 with 1,020 warrants were
      issued.
  In
connection with the offering, the Company paid a placement fee of 10% of the
proceeds in cash, together with other expenses in the amount of 3% of the
proceeds, in cash. In addition, the placement agent was issued warrants to
purchase 7,691 shares of common stock on the same terms and conditions as the
investors. The fair value of these warrants was determined to be $13,727 on the
date they were issued, and were exercised during 2007.
  The fair
value of each warrant at December 31, 2008 was determined to be $0.04 (2007
-$2.53) using the CRR Binomial Lattice Model with the following assumptions:
expected life – 0.49 years (2007 – 1.49 years); expected volatility – 90% (2007
- 75%), risk free interest rate – 0.27% (2007 – 3.20%) and dividend rate – 0%
(2007 – 0%).
  (3)
                Pursuant
      to securities purchase agreements with accredited investors dated August
      21, 2006, the Company received $812,500 and issued 198,845 shares of
      common stock and 75,000 warrants. Each warrant is exercisable for three
      years at $3.60 per share. The exercise price was amended to $3.31 per
      share during 2007 with 17,574 warrants were
  issued.
  In
connection with the offering, the Company paid a placement fee of 10% of the
proceeds in cash, together with other expenses in the amount of 3% of the
proceeds, in cash. In addition, the placement agent was issued warrants to
purchase 50,000 shares of common stock on the same terms and conditions as the
investors. The fair value of these warrants was determined to be $94,646 on the
date they were issued, and were exercised during 2007.
  - 56
-
  The fair
value of each warrant at December 31, 2008 was determined to be $0.06 (2007
-$2.59) using the CRR Binomial Lattice Model with the following assumptions:
expected life – 0.62 years (2007 – 1.62 years); expected volatility – 90% (2007
- 75%), risk free interest rate – 0.30% (2007 – 3.20%) and dividend rate – 0%
(2007 – 0%).
  The
Company filed the registration statement registering the resale of shares of the
Company’s common stock and those issuable upon exercise of the warrants on
August 21, 2006 and the registration statement was effective on September 14,
2006.
  (4)
                On
      January 15, 2007, the Company issued 60,000 shares of common stock to an
      investor relations company in consideration for one year of consulting
      service through December 31, 2007. The 60,000 shares of common stock have
      been recorded at $2.19 per share or $131,400 based on the trading price of
      the shares at January 12, 2007. This amount was included in prepaid
      expenses and is being amortized over the service
  period.
 
 (5)
                Pursuant
      to securities purchase agreements with accredited investors dated May 7,
      2007, the Company received $25,006,978 and issued 9,261,847 shares of
      common stock and 2,778,554 warrants. Each warrant is exercisable for five
      years at $4.50 per share. In connection with the offering, the Company
      paid a 7% placement fee and $173,689 in legal
  fees.
  45,302
warrants having an exercise price of $4.50 were exercised in July 2007 on a cash
basis, resulting in the issuance of 45,302 shares of common stock.
  1,870
warrants having an exercise price of $4.50 were exercised in February 2008 on a
cash basis, resulting in the issuance of 1,870 shares of common stock with
proceeds of $8,415.
  The fair
value of each warrant at December 31, 2008 was determined to be $0.16 (2007
-$0.76) using the CRR Binomial Lattice Model with the following assumptions:
expected life – 3.34 years (2007 – 4.34 years); expected volatility – 90% (2007
- 75%), risk free interest rate – 1.09% (2007 – 3.35%) and dividend rate – 0%
(2007 – 0%).
  (6)
                According
      to Section 4.8, Anti-Dilute of the Share Purchase Agreements dated June
      28, 2006, July 7, 2006 and August 21, 2006, the Company issued 126,138
      shares of common stock and 27,364 warrants during 2007; additionally, the
      Company reduced the exercise price of all related warrants from $3.60 to
      $3.31.
  123,845
warrants having an exercise price of $3.31 were exercised in July 2007 on
non-cash, basis resulting in the issuance of 29,377 shares of common
stock.
  The fair
value of each additional warrant at December 31, 2008 was determined to be in
the range from $0.04 to $0.06 (2007 – $2.54 to $2.60) using the CRR Binomial
Lattice Model with the following assumptions: expected life ranges from 0.47 to
0.62 years (2007 – 1.47 to 1.62); expected volatility – 90% (2007 – 75%), risk
fee interest rate ranges from 0.27% to 0.3% and dividend rate – 0% (2007 –
0%).
  Pursuant
to EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settle in, a Company's Own Stock," the warrants issued contain a
provision permitting the holder to demand payment based on a Black Scholes
valuation in certain circumstances. Therefore, under EITF 00-19 and SFAS No.
133, the Company recorded all warrants as a liability at their fair value on the
date of grant and then marked them to $458,461(2007 - $2,631,991) at December
31, 2008.  The change in fair value of related warrants for the year
ended December 31, 2008 was $2,171,990 (2007 -$632,296 and 2006
-$Nil).
  - 57
-
  Including
the fair value of warrants associated with convertible debenture (see note 13),
the total warrant liability as at December 31, 2008 was $1,117,143 (2007 -
$2,631,991).  The total change in fair value of warrants for the year
ended December 31, 2008 was $4,932,961 (2007 - $632,296 and 2006-
$Nil).
  The
Company filed the registration statement registering the resale of shares of the
Company’s common stock on June 22, 2007 and the registration statement was
effective on July 5, 2007.
  On July
2, 2008, the Company granted 750,000 shares of common stock that vested
immediately to members of management. The number of shares granted to each
individual is calculated in accordance with the Company’s Detail Implementation
Rule for Restricted Stock Incentive Plan of 2007-2008. The Company recognized a
$3,000,000, based on the stock price on the grant date, stock based
compensation expense for the year ended December 31, 2008 (2007 and 2006 –
Nil).
 
 As at
December 31, 2008, the Company accrued as a liability $78,600 stock based
compensation expense for 54,583 shares of common stocks to be granted by the
Company to various directors and executive in 2009.
  Warrants
 
 Following
is a summary of the warrant activity:
 
 Number
      of
                      Warrants
                      Outstanding
                    
                    
                    Weighted
      Average
                      Exercise
                      PriceDecember
      31, 2005
                    
                    
                    -
                    
                    
                    $
                    -Granted
                    
                    
                    309,612
                    
                    
                    
                    3.31December
      31, 2006
                    
                    
                    309,612
                    
                    
                    
                    3.31Granted
                    
                    
                    2,805,918
                    
                    
                    
                    4.49Exercised
                    
                    
                    (169,147
                    )
                    
                    
                    3.63December
      31, 2007
                    
                    
                    2,946,383
                    
                    
                    $
                    4.41Granted
                    
                    
                    1,437,467
                    
                    
                    $
                    6.07Exercised
                    
                    
                    (1,870
                    )
                    
                    $
                    4.50December
      31, 2008
                    
                    
                    4,381,980
                    
                    
                    $
                    4.96
 
 Following
is a summary of the status of warrants outstanding at December 31,
2008:
 
 Outstanding
      WarrantsExercise
                                Price
                              
                              Number
                              
                              Average
      Remaining
                                Contractual
      Life$3.31
                              
                              
                              213,131
                              
                              0.53
      years$4.50
                              
                              
                              2,731,382
                              
                              3.34
      years$6.07
                              
                              
                              1,437,467
                              
                              4.16
      years
 Note 17--Statutory Reserves
 
 In accordance with the laws and
regulations of the PRC, a wholly-owned Foreign Invested Enterprises' income,
after the payment of the PRC income taxes, shall be allocated to the statutory
surplus reserves. The proportion of allocation for reserve funds is no less than 10 percent of the
profit after tax until the accumulated amount of allocation for statutory
surplus reserve funds reaches 50 percent of the registered capital. Statutory
reserves represent restricted retained earnings.
 
 Statutory surplusreserves are to be utilized to offset
prior years' losses, or to increase its share capital. When a limited liability
company converts its surplus reserves to capital in accordance with a
shareholders' resolution, the Company will either distribute new shares in proportion to the number of
shares held by each shareholder, or increase the par value of each share. Except
for the reduction of losses incurred, any other usage should not result in this
reserve balance falling below 25% of the registered capital.Total registered capitalof all the PRC subsidiariesatDecember 31, 2008 is approximately $81.8million (December 31, 2007 - $23.6
million).
 
 Pursuant to the board of directors'
resolution,Tsiningtransferred 10% of its net income, as
determined in accordance
with the PRC accounting rules and regulations, to a statutory surplus reserve
fund until such reserve balance reaches 50% of thePRC subsidiaries’registered capital.
 
 The transfer to this reserve must be
made before distributions of any dividends to shareholders. For theyearendedDecember 31, 2008, the Company appropriated
$665,947(December 31, 2007 - $735,141 and 2006 - $915,960) to this surplus
reserve.
 
 Note 18-- Employee Welfare
Plan
 
 Regulations in the PRC require the
Company to contributeto a
defined contribution retirement plan for all permanent employees. The Company
established a retirement pension insurance, unemployment insurance, health
insurance and house accumulation fund for the employees during the term they are
employed. For theyearendedDecember 31, 2008, 2007and 2006, the Company made contributions in the
amount of $71,705,$51,781 and $13,922, respectively.
  - 58
-
  Note 19--Earnings Per Share
 
 Earnings per share for years ended
December 31, 2008,
2007and 2006 were
determined by dividing net
income for the years by the weighted average number of both basic and diluted
shares of common stock and common stock equivalents
outstanding.
 
 
 2008
                    
                    
                    2007
                    
                    
                    2006NumeratorIncome attributable to common
      shareholders -basic
                    
                    $
                    9,555,853
                    
                    
                    $
                    16,686,115
                    
                    
                    $
                    9,050,810Effect of
      dilutive securitiesWarrants
                    
                    
                    (536,480
                    )
                    
                    
                    -
                    
                    
                    
                    -Income
      attributable to common shareholders - diluted
                    
                    $
                    9,019,373
                    
                    
                    $
                    16,686,115
                    
                    
                    $
                    9,050,810DenominatorWeighted average shares
      outstanding-
      basic
                    
                    
                    30,516,411
                    
                    
                    
                    26,871,388
                    
                    
                    
                    20,277,615Effect of dilutive
      securitiesWarrants
                    
                    
                    10,792
                    
                    
                    
                    -
                    
                    
                    
                    -Weighted average shares
      outstanding-
      diluted
                    
                    
                    30,527,203
                    
                    
                    
                    26,871,388
                    
                    
                    
                    20,277,615Earnings per
      shareBasic earnings per
      share
                    
                    $
                    0.31
                    
                    
                    $
                    0.62
                    
                    
                    $
                    0.45Diluted earnings per
      share
                    
                    $
                    0.30
                    
                    
                    $
                    0.62
                    
                    
                    $
                    0.45
 
 Certain
outstanding warrants have an anti-dilutive effect on the earnings per share and
are therefore excluded from the determination of diluted earnings per share
calculation.
 
 Notes 20--Other Income
 
 The Company rents certain portions of
its residential and commercial units to individuals and businesses for 1 year
terms, renewed annually.
 
 Rental income and other income and
expenses for the year ended
December 31 consisted of the following:
 
 2008
                  
                  
                  2007
                  
                  
                  2006Other interest
    income
                  
                  $
                  1,433,837
                  
                  
                  $
                  42,380
                  
                  
                  $
                  30,395Other non-operating
      income
                  
                  
                  339,568
                  
                  
                  
                  89,439
                  
                  
                  
                  58,543Rental income, net
                  
                  
                  369,798
                  
                  
                  
                  153,359
                  
                  
                  
                  213,544Gain on disposal offixed assets and
      inventory
                  
                  
                  16,581
                  
                  
                  
                  48,347
                  
                  
                  
                  149,830Total
                  
                  $
                  2,159,784
                  
                  
                  $
                  333,525
                  
                  
                  $
                  452,312
 
 
 Note21--Segmented
Information
  The Company has one operating segment,
being the real-estate sales and development. All revenue is from customers in
the PRC and all of the
Company’s assets are located in the
PRC.
 
 Note22-- Commitments and
Contingencies
  The Company leases part of its office
space under non-cancelable operating lease agreements. The leases expired on December 31, 2008 and the
Company is in theprocess of renewing the
lease.The future minimum
rental payments required under the operating lease agreements are $118,095. The leases are expected to be renewed
on annual basis.
 
 The Company entered into a contract with
Xi’anBaqiaolocal government for arubber dam construction project. The
Company is committed tospendapproximately $1,026,017for this project.
  - 59
-
 
 As of
December 31, 2008, the Company was committed to one land use right with an
unpaid balance of approximately $2.6 million.
The balance is not due until the vendor removes the existing building on the
land and changes the zoning status on the land use right
certificate.
 
 On
December 12, 2008, the Company entered into a contract to acquire a land use
right for total consideration of $37.5 million. Approximately, $7.3 million was
paid and is included in Deposits on land use rights.
 
 Note23--Subsequent event
 
 OnJanuary 21, 2009, the Companycompleted theacquisition of Xi’an Xinxing Property Management Co., Ltd.
(“XinxingProperty”).XinxingPropertywas privately owned and provides
property management services to most ofthe Company’spast residential and commercial
projects.XinxingProperty’s current service area totals 1.67
million square meters in 43 facilities that include residential, commercial, and school buildings
and parks. Total consideration forthe acquisitionis RMB 12 million.
 
 Xinxing Property provided the property
management services to theCompanyduring the year ended December 31, 2008
totaled $144,384(2007 - $35,793and 2006 - $69,234)and Xinxing Property leased the offices
from the Company for $303,988during the sameyear(2007 - $85,219 and 2006–$45,308).The Company has a receivable balance of$1,901 (2007- $1,778)anda payablebalanceof$1,207,047 (2007 -$1,128,928)withXinxingproperty as of December 31,
2008.
 
 ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  Effective December 10, 2007, Moore
Stephens Wurth Frazer and Torbet, LLP (MSWFT) resigned as
the independent certified public accounting
firm for China Housing & Land Development, Inc. (the
Company). MSWFT’s resignation letter was dated December
10, 2007.
 
 The audit reports of MSWFT on the
consolidated financial statements of the Company as of and for theyear ended December 31, 2006 did not
contain an adverse opinion or a disclaimer of opinion, and were not qualified or
modified as to uncertainty, audit scope or accounting
principles.
 
 In connection with the audit of the
Company’s consolidated financial statements for each of the fiscal years
ended December 31, 2006 and through December 10, 2007, there were: (i) no
disagreements between the Company and MSWFT on any matters of accounting
principles or practices, financial statement disclosure, or auditingscope or procedures, which disagreements,
if not resolved to the satisfaction of MSWFT, would have caused MSWFT to make
reference to the subject matter of the disagreement in their reports on the
Company’s financial statements for such years,
and (ii) no reportable events within the meaning set
forth in Item 304(a)(1)(v) of Regulation S-K.
 
 Effective as of  December 13, 2007,
the engagement date, the Company engaged MSCM LLP (New Auditor) as the
Company’s new independent registered public
accounting firm. The
decision to engage the New Auditor as the Company’s independent registered public
accounting firm was approved by the Company’s Board of Directors on December 10,
2007.
 
 During the Company’s two most recent fiscal years ended
December 31, 2006 and 2005and through the date of this current
report, the Company did not consult with the New Auditor on (i) the application
of accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that may be rendered on theCompany’s financial statements, and the New
Auditor did not provide either a written report or oral advice to the Company
that the New Auditor concluded was an important factor considered by the Company
in reaching a decision as to any accounting, auditing, or financial reporting issue; or (ii)
the subject of any disagreement, as defined in Item 304 (a)(1)(iv) of Regulation
S-K and the related instructions, or a reportable event within the meaning set
forth in Item 304(a)(1)(v) of Regulation S-K
 
 ITEM 9A.CONTROLS AND
PROCEDURES.
  (a)    
Evaluation of Disclosure Controls and Procedures.
 
 Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we evaluated the effectiveness of
the design and operation of our disclosure controls and procedures (as such term
is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the
Exchange Act)). Disclosure controls and procedures are the controls and other
procedures that we designed to ensure that we record, process, summarize and
report in a timely manner the information we must disclose in reports that we
file with or submit to the Securities and Exchange Commission under the Exchange
Act. Based on this evaluation, our Chief Executive Officer and our Chief
Financial Officer concluded that our disclosure controls and procedures there
were still room for improvement as of the end of the period covered by this
report. The company has engaged Ernest & Young to help us comply with SOX
404.
 
 - 60
-
  Disclosure
controls and procedures are controls and procedures that are designed to ensure
that information required to be disclosed in our reports filed or submitted
under the Securities Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is
accumulated and communicated to management, including our principal executive
officer and our principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
  Management’s Annual
Report on Internal Control Over Financial
Reporting
  We performed an evaluation of the effectiveness of our
internal control over financial reporting that is designed by, or under the
supervisionof, our principal executive and
principal financial officers, and effected by our board of directors,
management, and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP and
includes those policies and procedures that:
 
 •
                  pertain to the maintenance of records that, in
      reasonable detail, accurately and fairly reflect the transactions and
      dispositions of the assets of theCompany;
 
 •
                  provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with Generally Accepted Accounting Principles, and that
      receipts and expenditures of the Company are being made only
      in accordance with authorizations of
      management and directors of the Company;
  and
 
 •
                  provide reasonable assurance regarding prevention
      or timely detection of unauthorized acquisition, use, or disposition of
      the Company's assets that could havea material effect on the financial
      statements.
  Because of its inherent limitations, internal control
over financial reporting may not preventor
detect misstatements. Projections of any evaluation of effectiveness to future
periods are subject to the risk that
controls may become inadequate because ofchanges in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
  Under the supervision and with the participation of our
management, including our principal executive officer and principal financial officer, we conducted an evaluation of
the effectiveness of our internal control over financial reporting as of
December 31, 2008. Based on such evaluation, our management, including the CEO
and CFO, has concluded that theCompany’s
internal control over financial reporting
(as defined in Rules13a-15(f) and 15d-15(f) of the Securities Exchange Act of
1934, as amended) as of December 31, 2008 still has room to improve.
Notwithstanding the foregoing, there can be no assurance that the Company’s internal control
over financial reporting will detect or uncover all failures of persons within
the Company to comply with these
procedures.
 
 This annual report does not include an attestation
report of our registered public accounting
firm regarding internal control over
financial reporting. Management’s report was not
subject to attestation by our registered public accounting firm pursuant to
temporary rules of the SEC that permit us to provide only management’s report in this
annualreport.
 
 Starting
February 2009, the Company has engaged Earnest Young to help the company perform
SOX 404 evaluation and preparation work. Our management hopes that this course
of action will further improve the effectiveness of company’s internal control
and by the end of 2009 to achieve SOX 404 compliance.
  Changes in Internal
Control over Financial Reporting.
 
 During the year ended December 31,
2008, there wasno change in our internal control over
financial reporting (as such term is defined in Rule 13a-15(f)under the Exchange
Act) that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
  ITEM
9B. OTHER
INFORMATION.
 
 Not Applicable.
  - 61
-
  PART III
 
 
 ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
GOVERNANCE COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT.
 
 Executive Officers and
Directors
 
 Below are the names and certain information regarding our
executive officers and directors.
 
 Name
                  
                  Age
                  
                  Title
(1)Mr. Pingji
    Lu
                  
                  58
                  
                  Chairman of the Board of
      DirectorsMr. Xiaohong
      Feng
                  
                  44
                  
                  Chief Executive Officer &
      Managing DirectorMs. Jing Lu
                  
                  29
                  
                  Chief Operating Officer & Board
      SecretaryMr. GenXi’ang Xiao
                  
                  46
                  
                  Vice President & Managing
      DirectorMr. Michael
      Marks
                  
                  37
                  
                  Independent
      DirectorMr. Albert
      McLelland
                  
                  50
                  
                  Independent
      DirectorMs. Carolina
      Woo
                  
                  69
                  
                  Independent
      DirectorMr. Suiyin Gao
                  
                  55
                  
                  Independent
      DirectorMr. William
    Xin
                  
                  42
                  
                  Chief Financial
      Officer
 
 Officers are elected annually by the
Board of Directors, at the Company’s annual meeting, to hold such office
until an officer’s successor has been duly appointed and
qualified, unless an officer sooner dies, resigns or is
removed by the Board.
 
 Background
of Executive Officers and Directors
 
 Mr.Lu
Pingji,Chairman of the Board of
Directors
  Mr. Lu
has served as the Chairman of the Board of Directors since he joined the company
in 1999. He also served as the company’s Chief Executive Officer from 1999 until
January 2009, when his CEO duties were assumed by Mr. Xiaohong Feng. Mr. Lu has
more than 40 years of experience in housing development, management, and
construction. After graduating from the Xi’an Army College with a major in
architectural engineering, Mr. Lu served 32 years in the Chinese Army in
architecture and engineering and completed his military career with the rank of
Senior Colonel. Mr. Lu was the founder of Lanbo Financial Investment Company
Group Limited, where he was the Chairman of the Board and Chief Executive
Officer from its formation in September 2003 until its merger with Lanbo
Financial Group, Inc. Mr. Lu served as the Chairman of the Board and Chief
Executive Officer of Lanbo Financial Group, Inc., until December 2005. Prior to
that, Mr. Lu served as Chairman of the Board and Chief Executive Officer of
Xi’an Newstar Real Estate Development Co., Ltd., from 1998 until December 2005.
He previously served as its General Manager from 1992 to 2003. He is member of
the Enterprise Credit Association of Shaanxi Province.
  Mr.Feng
Xiaohong,Chief Executive
Officer & Managing Director
 
 Mr. Feng
was elected Chief Executive Officer in January 2009. He previously served as the
company’s Chief Operating Officer from 2003 through 2008. He has been a member
of the Board of Directors since he joined the company in 2003. With more than 20
years in the industry, Mr. Feng’s experience in architectural design and real
estate development is leveraged as a member of the China Architecture
Association, as Vice President of the Shaanxi Provincial Real Estate
Association, and as Vice Director of Xi’an Decoration Association. From June
1996 to December 2002, Mr. Feng was General Manager and President of Xi'an
Honghua Industry, Inc. He is a Registered Architect, and received his Master of
Science degree in Architecture Science from Xi’an Architecture & Technology
University.
 
 Ms. Lu Jing, Chief Operating Officer & Board
Secretary
 
 Ms. Lu,
was elected to her current position in January 2009. She previously served as
Vice President of the company from 2004 through 2008. Ms. Lu continues to serve
as Board Secretary, which she has done since 2004, and is the company's primary
spokesperson with investors and security analysts. She received her Master's
degree from King's College in London in September 2004. Ms. Lu is
the daughter of Mr. Pingji Lu.
  - 62
-
 
 Mr.Xiao
GenXi’ang,Vice President & Managing
Director
  Mr. Xiao GenXi’ang, the Chief Administrative Officer of
the Company, joined the company and became CAO and Board Member in September
1999. In addition, Mr. Xiao was a director and Executive Vice President of Lanbo
Financial Investment Company Group Limited from October 2003 until our merger
with Lanbo Financial Group, Inc., when Mr. Xiao served asthe Executive Vice President, Chief
Operating Officer and a director of Lanbo Financial Group, Inc. until December
2005. Prior to that Mr. Xiao was a director and President ofXi’anNewstar Real Estate Development Co.,
Ltd. from 1999. Mr. Xiao received anM.B.A from Xi’an Jiaotong University in
2001.
 
 Mr. William
Xin, Chief Financial Officer
 
 Mr. William Xin, has been Chief
Financial Officer of the Company since joining in January 2008. Mr. Xin has over
ten years of experience in finance and international executive management operating in a broad
range of industries. Most recently he was managing partner of Golden Leaf
Investment Group, where he provided financial consulting, strategic planning,
market research and venture capital services for multiple Chinese companies. Since 2005, Mr. Xin has
served as Managing Partner at Golden Leaf Investment Group in New York City
where he has provided financial consulting, strategic planning, market research
and venture capital services on a number of projects includinga hydropower company, a nanotechnology
company and two emerging telecommunications companies. From 2000 through 2005,
Mr. Xin was co-founder, chairman and CEO of BChinaB, Inc., a
vertically-integrated US-based outsourcing company, where he helped
companies such as Henry Schein, Libbey Inc.,
Ametek, Inc. Champion Enterprises and Rheem Air Conditioners increase
profitability by outsourcing their supply chains to China. Mr. Xin has been
featured in the Wall Street Journal and Crain’s magazine as a China business expert and has spoken on many panels
regarding China. Mr. Xin earned his Bachelor’s degree and Master of Business
Administration degree from Yale University in New Haven,
Connecticut.
 
 Ms. Carolina
Woo, Independent Directors
 
 Ms. Carolina Woo, is currently the owner of CW Group, a consulting
firm focused in real estate development, planning and design. Ms. Woo is also a
member of the Board of Trustees of the Rhode Island School of Design.
Previously, Ms. Woo worked at Skidmore, Owings & Merrill LLP (SOM) beginning in 1969, and retired as a
partner of the international architecture-engineering office of SOM where she
served as the President of SOM International Ltd. with overall responsibility
for SOM’s work in China, Hong Kong, Taiwan, and
the Asia-Pacific region. Ms. Woo received her
Master’s Degree from Columbia University
Graduate School of Business and her Bachelor’s Degree in Architecture from the Road
Island School of Design.
 
 Mr. Michael
Marks, Independent Director
 
 Mr.
Michael Marks is currently president and director of Middle Kingdom Alliance
Corp., a special purpose acquisition corporation listed on Over-the-Counter
Bulletin Board. Mr. Marks is also an independent director of Genesis
Pharmaceuticals Enterprises, Inc. (GNPH: OTCBB) and of Yanglin Soybean, Inc.
(YSYB: OTCBB).  Previously, Mr. Marks served as a managing director
and principal of Sonnenblick Goldman Asia Pacific Limited, a firm that provides
advisory services in real estate investments, until December 2007. Mr. Marks
also previously served as a director of Horwath Asia Pacific from January 2002
to December 2005 and was chief executive officer and director at B2Gglobe (Pty)
Limited from May 2001 to December 2002. Mr. Marks received both Bachelor’s and
Master’s Degrees in Commerce from the University of the Witwatersrand in
Johannesburg, South Africa in 1994 and 1997, respectively, and also received a
Bachelor’s Degree in Psychology from the University of South Africa in 1998. In
1997, Mr. Marks qualified as a Chartered Accountant in South Africa, and in 1999
as a Fellow of the Association of International Accountants in the United
Kingdom.
 
 Mr. Suiyin
Gao, Independent Director
 
 Mr. Suiyin Gao, has over 30 years
experience in human resource and management consultant area. Mr. Gao is
currently the head of the Shaanxi Senior Talent Office, which is affiliated with
Shaanxi Provincial government and focused on corporation management,
consultation and human resources services. Mr. Gao is the founder and chairman
of Shanxi management Member Club, one of the
largest manager clubsin
Shanxi province. Mr. Gao is currently an independent director of six
enterprises, and also acted as senior consultant for more than twenty
enterprises. Previously, Mr. Gao worked)government since 1973. In 1998, Mr. Gao
received his degree in Master ofBusiness Administration from Northwest
University in China.
  - 63
-
 
 Mr.Albert
McLelland,
Independent Director
  Mr.
Albert McLelland began serving as an independent director in February 2009. He
also serves as the Chairman of the Board's Audit Committee. Mr. McLelland has
been Senior Managing Director of AmPac Strategic Capital LLC since 2003. He is
also a founder and Managing Director of AmPac-TDJ LLC. Prior to founding AmPac
Strategic Capital, Mr. McLelland was responsible for the day to day cross-border
transactions practice of PricewaterhouseCoopers’ Financial Advisory Services.
Mr. McLelland has extensive investment and merchant banking experience, has
built two Asian-based financial service firms, and has led the corporate finance
department at CEF Taiwan Limited. He began his investment banking career in
Public Finance at Shearson Lehman. He holds an M.B.A. degree from the University
of Chicago and a Master of International Affairs degree from Columbia
University. He completed his undergraduate studies at the University of South
Florida and studied Mandarin at the National Normal University in Taiwan. Since
September 2008, Mr. McLelland has served as an independent director and Chairman
of the audit committee of the Board of Directors for China Fire & Security
Group, Inc. On March
9, 2009, Mr. McLelland became an independent director and Chairman of the audit
committee of the Board of Directors for Yanglin Soybean,
Inc.
 (1)
                In
      early January 2009, executives in the Company changed positions. Mr.
      Pingji Lu continued as Chairman of the Board of Directors and his CEO
      responsibilities were assumed by Mr. Xiaohong Feng, who was previously
      Chief Operating Officer. Ms. Jing Lu, previously Vice President, was
      elected Chief Operating Officer.
 SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
 
 Section 16(a) of the Securities Exchange
Act of 1934, as amended (the Exchange Act), requires our executive officers,
directors and persons who
own more than 10 percent of our common stock to file initial reports of
ownership on Form 3 and changes in ownership on Forms 4 or 5 with the SEC. Such
executive officers, directors and over 10 percent stockholders are also requiredby SEC rules to furnish us with copies of
all such forms they file.
 
 Based
solely on our review of the copies of such forms we have received, or written
representations from certain reporting persons, we believe that, during the year
endedDecember
31, 2008,
all executive officers, directors and over 10 percent stockholders filed on a
timely basis all reports required to be filed by them under Section 16(a) with
respect to our common stock,
  CODE OF
ETHICS
 
 On
November 8, 2007, the Company’s Board of Directors adopted a Code of Ethics that
applies to the Company’s principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing
similar functions. A copy of this Code of Ethics is available on the Company’s
website, www.chldinc.com, in the section titled officers & directors, which
can be found on our home page. The website and information contained on it or
incorporated in it are not intended to be incorporated in this Annual Report on
Form 10-K or other filings with the U.S. Securities and Exchange
Commission.
  AUDIT
COMMITTEE
  The
members of the Audit Committee are Mr. Albert McLelland, Mr. Michael Marks, and
Ms. Caroline Woo, with Mr. McLelland serving as chairman of the audit committee.
All members of the Audit Committee are independent directors. The Company’s
Board of Directors has determined that Mr. McLelland possesses accounting or
related financial management expertise and that he qualifies as an “audit
committee financial expert” as defined in Item 407 of Regulation
S-K.
  - 64
-


ITEM 11. EXECUTIVE
COMPENSATION
  COMPENSATION DISCUSSION AND
ANALYSIS
  The
following table sets forth all compensation paid in respect of our Chief
Executive Officer and those individuals who received compensation in excess of
$100,000 per year (collectively, the Named Executive Officers) for our last two
completed fiscal years. The compensation is comprised of base salary and
bonus. The Company’s compensation committee has not completed the 2008
annual review for our executive officers and all 2008 bonus numbers are
preliminary and subject to change.
 
 SUMMARY
COMPENSATION TABLE
 
 The
following table sets forth all compensation paid in respect of our Chief
Executive Officer, Chief Financial Officer and those individuals who received
compensation in excess of $100,000 per year (collectively, the Named Executive
Officers) for our last four completed fiscal years. The compensation is
comprised of base salary and bonus. The Company’s compensation committee has not
completed the 2008 annual review for our executive officers and all 2008 bonus
numbers are preliminary and subject to change.
  Name and
                
                
                
                Base
                
                
                Bonus
      (2)
                
                
                Stock
                
                
                Option
                
                
                Non-Equity
                  Incentive
                  Plan
                
                
                Nonqualified
                  Deferred
                  Compensation
                
                
                All
      OtherPrincipal
                  Position
                
                Year
                
                Salary
                    ($) (1)
                
                
                Cash
                  ($)
                
                
                Stock
                  ($)
                
                
                Awards
                  ($) (3)
                
                
                Awards
                  ($)
                
                
                Compensation
                  ($)
                
                
                Earnings
                  ($)
                
                
                Compensation
                  ($)
                
                
                Total
                  ($)Pingji Lu (4)
                
                2008
                
                $
                3,868
                
                
                
                30,066
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                33,934Chairman
      of the Board of Directors
                
                2007
                
                $
                2,174
                
                
                
                17,111
                
                
                
                1,641,626
                
                
                
                1,641,626
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                1,660,9112006
                
                $
                1,769
                
                
                
                15,015
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                16,7842005
                
                $
                1,561
                
                
                
                15,326
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                16,887GenXi’ang
      Xiao
                
                2008
                
                $
                3,516
                
                
                
                16,670
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                20,186Vice
      President & Managing Director
                
                2007
                
                $
                2,174
                
                
                
                9,729
                
                
                
                348,730
                
                
                
                348,730
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                360,6332006
                
                $
                1,769
                
                
                
                11,994
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                13,7632005
                
                $
                1,561
                
                
                
                12,286
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                13,847Xiaohong
      Feng
                
                2008
                
                $
                3,516
                
                
                
                21,928
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                25,444Chief
      Executive Officer & Managing Director
                
                2007
                
                $
                2,174
                
                
                
                16,647
                
                
                
                427,006
                
                
                
                427,006
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                445,8272006
                
                $
                1,769
                
                
                
                13,507
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                15,2762005
                
                $
                1,561
                
                
                
                13,809
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                15,370Yulong
      Wan
                
                2008
                
                $
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0Former
      Chief Financial Officer
                
                2007
                
                $
                1,777
                
                
                
                N/A
                
                
                
                73,815
                
                
                
                73,815
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                75,592Notes:
      Working Period (Jan to Apr, 2007)
                
                2006
                
                $
                1,385
                
                
                
                5,853
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                7,2382005
                
                $
                1,190
                
                
                
                6,093
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                7,283Zhiyong
      Shi
                
                2008
                
                $
                3,516
                
                
                
                12,756
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                16,272Former
      Vice President, Chief Legal
                
                2007
                
                $
                725
                
                
                
                757
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                1,482Counsel,
      and Board Member
                
                2006
                
                $
                1,769
                
                
                
                6,962
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                8,731Notes:
      Working Period (Jan to Apr, 2007)
                
                2005
                
                $
                1,561
                
                
                
                7,224
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                8,785William
      Xin (5)
                
                2008
                
                $
                36,000
                
                
                
                0
                
                
                
                0
                
                
                
                43,000
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                79,000Chief
      Financial Officer
                
                2007
                
                $
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                02006
                
                $
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                02005
                
                $
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0Jing
      Lu
                
                2008
                
                $
                2,813
                
                
                
                8,626
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                11,439Chief
      Operating Officer & Board Secretary
                
                2007
                
                $
                6,957
                
                
                
                6,957
                
                
                
                312,082
                
                
                
                312,082
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                325,9962006
                
                $
                4,615
                
                
                
                4,615
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                9,2302005
                
                $
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/A
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
  1.
                    The
      Company pays salaries in RMB to all executive officers every month. The
      RMB amount is translated into US$ when the Company files SEC documents.
      The exchange rates used were the average rates of 2008, 2007 and 2006.
      They were 0.1439, 0.1315 and 0.12557 respectively. The stock awards were
      valued based on the closing price of our common stock on the NASDAQ on
      July 2, 2008.2.
                    The
      Company’s bonus has been mostly in cash. Whether the bonus can be issued
      in stock is discretionary with the Compensation Committee. Other than the
      stocks issued under the 2007 Stock Incentive Plan, we have not issued any
      stock bonus. The dollar value of stock is based on the stock price of
      $3.99 per share.
 
 3.
                The
      stock awards column shows all stocks paid to our executives, which
      includes the stocks paid in 2008 for their 2007 performance. The stock
      awards amount is based on the stock price of
  $3.99.
 
 4.
                Since
      June 1st, 2008, Chairman Mr. Lu’s salary increased to US$ 200,000, which
      was approved by compensation committee on June 1,
  2008.
 
 5.
                William
      Xin’s compensation package includes base salary and a total of 100,000
      shares of the Company’s common stock which will be vested equally over the
      three year employment period by 33.33% each year and are not based on the
      performance evaluation at the year end. For 2008, the stock amount he
      received as part of his compensation is based on the stock price of
      $1.29.


- 65
-
 COMPENSATION
OF NAMED EXECUTIVES
 
 On June
1, 2008 the Company entered into a one-year employment agreement with Pingji Lu
as President and Chief Executive Officer. The annual compensation is US$200,000.
The agreement provides for a monthly base salary of RMB 2,200 (or US$ 301,
determined based on the minimum base salary requirements by the Employment Law
of the PRC), and a monthly bonus payment of RMB 22,000 (or US$3,010), which for
12 months, constitutes 20% to 40% of the annual compensation based on the
Guidelines. The performance or bonus payment is given pursuant to the Guidelines
in accordance with relevant laws. The Company has the right to adjust Mr. Lu’s
salary according to his production operations, alteration of his post and
distribution methods for labor remuneration established under the law. Mr. Lu is
entitled to pension insurance, unemployment insurance, medical insurance,
overall-planned medical care for serious illnesses, housing fund and other
social insurance of the Company pursuant to relevant regulations of the province
and Xi’an city. In the event the Company terminates Mr. Lu’s employment in
violation of the agreement, the Company shall be required to pay Mr. Lu, in
addition to paying the salaries for the remaining months of the term in full,
economic compensation equal to 25% of the corresponding salaries. The Company
has established annual personal performance targets for Mr. Pingji Lu. Mr. Lu’s
monthly bonus is based on a percentage of his expected annual compensation and
assumes his reasonable progress during the year against his annual performance
targets established at the beginning of the year. The monthly bonus is based on
his contribution to the Company and is reviewed and is subject to periodic
adjustment within his total annual compensation by the Compensation
Committee.
 
 In 2008,
Mr. Lu was paid 60,000 shares at a value of $239,400 as his performance bonus
based on the Compensation Committee’s decision in view of the audited financial
statements of 2007.
 
 Our Human
Resources department measured Mr. Lu’s performance scores in accordance with his
annual targets agreement. Mr. Lu signed his annual targets agreement with
the Company at the beginning of 2007. At the beginning of 2008, the Human
Resources department reviewed the targets agreement to measure how many targets
had been met by Mr. Lu and then set his targets achievement score
accordingly. The result was then sent to our Compensation Committee for
consideration and approval.
 
 On
January 2, 2008 the Company entered into a three-year employment agreement with
William Xin as Chief Financial Officer. The agreement provides for an annualized
base salary to Mr. Xin of $36,000 before tax. The base salary will be reviewed
annually by the Board of Directors of the Company, provided, however, that the
base salary shall not be decreased below the amount set forth in the first year.
During Mr. Xin’s term of three year, totally 100,000 shares of the Company’s
common stock should be granted to him. All of the shares of common stock shall
be vested equally over the three year employment period by 33.33% each year with
pro rata vesting if it is less than a full year. In the event the Company
terminates Mr. Xin’s employment without cause, as defined in the agreement, or
due to the change of control, the Company shall be required to pay Mr. Xin the
lesser of (1) six months, or (2) the balance of the remaining three year
contract all the salary and economic benefits including but not limited to all
the unvested shares, health insurance and other infringe benefit.
 
 On
January 12, 2009, Mr. Xiaohong Feng was appointed as the new Chief Executive
Officer of the Company. Mr. Feng's employment agreement is still in negotiation
and the Company will file a Form 8-K to disclose the agreement as soon as the
Compensation Committee approves it.
 
 DIRECTOR
COMPENSATION
  The table
below sets forth the salary our independent director received for the services
performed in the last three years. Our directors’ salary comprises of both cash
and stock. For 2008, the stock value is based on the stock price of $1.29. The
cash salary is paid to all directors in US$ every quarter.
  Name
      and
                  
                  
                  
                  Salary
                  
                  
                  Option
                  
                  
                  Non-Equity
                    Incentive
      Plan
                  
                  
                  Change
      in
                    Pension
      Value
                    and
                    Nonqualified
                    Deferred
                  
                  
                  All
      OtherPrincipal
                    Position
                  
                  Year
                  
                  Cash
                    ($)
                  
                  
                  Stock
                    ($)
                  
                  
                  Awards
                    ($)
                  
                  
                  Compensation
                    ($)
                  
                  
                  Compensation
                    Earnings ($)
                  
                  
                  Compensation
                    ($)Carolina
      Woo
                  
                  2008
                  
                  $
                  20,000
                  
                  
                  
                  9,675
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Independent
      director of the Board
                  
                  2007
                  
                  $
                  3,333
                  
                  
                  
                  N/A
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  02006
                  
                  $
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Edward
      Meng(1)
                  
                  2008
                  
                  $
                  20,000
                  
                  
                  
                  4,838
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Independent
      director of the Board
                  
                  2007
                  
                  $
                  3,333
                  
                  
                  
                  N/A
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  02006
                  
                  $
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Michael
      Marks
                  
                  2008
                  
                  $
                  15,000
                  
                  
                  
                  6,450
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Independent
      director of the Board
                  
                  2007
                  
                  $
                  2,500
                  
                  
                  
                  N/A
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  02006
                  
                  $
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Suiyin
      Gao
                  
                  2008
                  
                  $
                  15,000
                  
                  
                  
                  6,450
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Independent
      director of the Board
                  
                  2007
                  
                  $
                  2,500
                  
                  
                  
                  N/A
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  02006
                  
                  $
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
  (1)  Edward
Meng resigned as independent director on October 10, 2008.
  - 66
-
  COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
 We do not have any member of our compensation committee who is, or was an
officer or employee, or had any relationship with the Company requiring
disclosure under Item 404 of Regulation S-K. We also do not have any executive
officer who served as a member of the compensation committee of another entity
or a director of another entity, whose executive officers served on our
compensation committee or served as a director of our board.
  ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AN RELATED
STOCKHOLDER MATTERS.
 
 The following table sets forth certain
information, as ofMarch
24,2009, with respect to the beneficial
ownership of the outstanding common stock by (i) any holder of more than five (5
percent) percent; (ii) each of the Company’s executive officers and directors; and
(iii) the Company’s directors and executive officers as a
group. Except as otherwise indicated, each of the stockholders listed
below has sole voting and investment power
over the shares beneficially owned.
 
 Name
                        
                        Title
                        
                        Shares
      ownership
                        
                        Percentage of
      OwnedMr. Pingji
    Lu
                        
                        Chairman
                        
                        3,950,935
                        
                        12.77%Mr. Xiaohong
      Feng
                        
                        CEO & Managing
      Director
                        
                        707,019
                        
                        2.28%Mr. GenXi’ang Xiao
                        
                        Vice President
      &  Managing Director
                        
                        552,401
                        
                        1.78%Mr. William Xin
      (3)
                        
                        CFO
                        
                        33,333
                        
                        0.11%Ms. Jing Lu
                        
                        COO & Board
      Secretary
                        
                        578,216
                        
                        1.87%Mr. Michael
      Marks(3)
                        
                        Independent
      Director
                        
                        5,000
                        
                        0.02%Ms. Carolina
      Woo(3)
                        
                        Independent
      Director
                        
                        7,500
                        
                        0.02%Mr. Suiyin
      Gao(3)
                        
                        Independent
      Director
                        
                        5,000
                        
                        0.02%Mr. Edward Meng(3)(4)
                        
                        Independent
      Director
                        
                        3,750
                        
                        0.01%Total
                        
                        
                        
                        5,843,154
                        
                        18.88%
  (1)
              Except as otherwise indicated, the
      address of each beneficial owner is c/o Xi’an Tsining Housing
      Development CO.,
      Ltd., 6 Youyi Dong Lu, Han Yuan 4 Lou, Xi’an, Shaanxi Province, China
      710054.
 
 (2)
              Applicable percentage ownership is
      based on 30,948,340 shares of common stock outstanding as ofMarch 24, 2009.Beneficial ownership is determined
      in accordance with
      the rules of the Securities and Exchange Commission and generally includes
      voting or investment power with respect to
    securities.
 
 (3)
              On Feb. 29, 2009, the Company
      issued shares to certain officer and independent directors according to
      their respective
      contract as part of their 2008
  compensation.
 
 (4)
              Edward
      Meng resigned as independent director on October 10,
  2008.
 
 
 ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
 
 We have four directors that are
independent under the independence standards of S-K Item 407(a)(1). They
are: Mr. Michael Marks, Mr.Albert McLelland, Mr. Suiyin Gao, andMs. Carolina Woo.
 The
Company has borrowed money from certain employees to fund the Company's
construction projects. The loans bear interest ranging between 7% to 12% and the
principal matures within one to three years. As of December 31, 2008, loan from
employees amounted to $1,517,039. The following table sets forth the largest
aggregate amount of principal outstanding during fiscal year 2007 and
2008:
  Fiscal year 2007
              
              
              Fiscal year 2008Item
              
              RMB
              
              
              USD
              
              
              RMB
              
              
              USDThe
      largest aggregate amount of principal outstanding
              
              
              19,909,569
              
              
              
              2,729,602
              
              
              
              12,770,236
              
              
              
              1,880,769Principal
      paid
              
              
              5,963,716
              
              
              
              784,101
              
              
              
              2,645,236
              
              
              
              389,584Interest
      Paid
              
              
              768,786
              
              
              
              101,079
              
              
              
              215,350
              
              
              
              31,716Total
      Amount of Loans Outstanding
              
              
              17,424,230
              
              
              
              2,388,862
              
              
              
              10,350,000
              
              
              
              1,517,039
 The
Company does not allow borrowing by the employees from the Company. There are no
buying/selling transactions between the employees and the Company. The employee
loans were made at a time when the Company needed working capital to expand
operation and the employees helped the Company by giving their loans. The loans
were made at or below the then current market rate. Although we have the overall
policy of not allowing related party transaction unless the Company benefits, we
have no written policies and procedures for the review, approval, ratification
of any related party transaction. All our directors and officers understand that
they should not engage in any related party transactions and we have announced
the rule to the employees of the Company a few times at different employee
meetings. The Company will work with the audit committee to set up such written
policies and procedures for the review, approval, ratification of any related
party transaction.
  The
following table sets forth all loans the Company and New Land, its subsidiary,
have made with their employees during the period for which this report is
provided.
 Tsining (As of December 31, 2008)First
                                    
                                    Last
                                    
                                    
                                    
                                    
                                    Ex rate: 6.8225Name
                                    
                                    Name
                                    
                                    Amount (RMB)
                                    
                                    
                                    Amount (USD)Zhongbiao
                                    
                                    Wang
                                    
                                    
                                    200,000
                                    
                                    
                                    
                                    29,315Qiang
                                    
                                    Tong
                                    
                                    
                                    75,000
                                    
                                    
                                    
                                    10,993Zhiyong
                                    
                                    Shi
                                    
                                    
                                    160,000
                                    
                                    
                                    
                                    23,452Fang
                                    
                                    Shen
                                    
                                    
                                    140,000
                                    
                                    
                                    
                                    20,520Lijun
                                    
                                    Lu
                                    
                                    
                                    80,000
                                    
                                    
                                    
                                    11,726Fengrong
                                    
                                    Jiao
                                    
                                    
                                    330,000
                                    
                                    
                                    
                                    48,369Ming
                                    
                                    Hui
                                    
                                    
                                    70,000
                                    
                                    
                                    
                                    10,260Yan
                                    
                                    Huang
                                    
                                    
                                    30,000
                                    
                                    
                                    
                                    4,397Weiping
                                    
                                    Fu
                                    
                                    
                                    335,000
                                    
                                    
                                    
                                    49,102Enhu
                                    
                                    Fan
                                    
                                    
                                    100,000
                                    
                                    
                                    
                                    14,657LieXi’ang
                                    
                                    Chen
                                    
                                    
                                    500,000
                                    
                                    
                                    
                                    73,287Yongan
                                    
                                    Chang
                                    
                                    
                                    200,000
                                    
                                    
                                    
                                    29,315Yuewu
                                    
                                    Bian
                                    
                                    
                                    400,000
                                    
                                    
                                    
                                    58,630Zhongquan
                                    
                                    Yang
                                    
                                    
                                    370,000
                                    
                                    
                                    
                                    54,232Total
                                    
                                    
                                    2,990,000
                                    
                                    
                                    
                                    438,256
  New Land (As of December 31, 2008)First
                                
                                Last
                                
                                
                                
                                
                                Ex rate: 6.8225Name
                                
                                Name
                                
                                Amount (RMB)
                                
                                
                                Amount (USD)Jiaqun
                                
                                Zhou
                                
                                
                                100,000
                                
                                
                                
                                14,657Chenyang
                                
                                Zhang
                                
                                
                                200,000
                                
                                
                                
                                29,315Ganming
                                
                                Yi
                                
                                
                                200,000
                                
                                
                                
                                29,315Qian
                                
                                Xue
                                
                                
                                150,000
                                
                                
                                
                                21,986Xiuqin
                                
                                Wang
                                
                                
                                110,000
                                
                                
                                
                                16,123Shangyuan
                                
                                Wan
                                
                                
                                320,000
                                
                                
                                
                                46,904Qiang
                                
                                Tong
                                
                                
                                10,000
                                
                                
                                
                                1,466Xijing
                                
                                Tao
                                
                                
                                300,000
                                
                                
                                
                                43,972Yan
                                
                                Tao
                                
                                
                                130,000
                                
                                
                                
                                19,055Zhiyong
                                
                                Shi
                                
                                
                                300,000
                                
                                
                                
                                43,972Fang
                                
                                Shen
                                
                                
                                110,000
                                
                                
                                
                                16,123Junfeng
                                
                                Qiao
                                
                                
                                100,000
                                
                                
                                
                                14,657Meng
                                
                                Luo
                                
                                
                                200,000
                                
                                
                                
                                29,315Lijun
                                
                                Lu
                                
                                
                                20,000
                                
                                
                                
                                2,931Runsheng
                                
                                Lu
                                
                                
                                45,000
                                
                                
                                
                                6,596Pengfei
                                
                                Liu
                                
                                
                                10,000
                                
                                
                                
                                1,466Wen
                                
                                Liu
                                
                                
                                20,000
                                
                                
                                
                                2,931Jine
                                
                                Li
                                
                                
                                210,000
                                
                                
                                
                                30,781Xuesong
                                
                                Li
                                
                                
                                670,000
                                
                                
                                
                                98,204Lanqiu
                                
                                Kang
                                
                                
                                400,000
                                
                                
                                
                                58,630Fengrong
                                
                                Jiao
                                
                                
                                2,045,000
                                
                                
                                
                                299,743Yuan
                                
                                Jiao
                                
                                
                                70,000
                                
                                
                                
                                10,260Aiguo
                                
                                Fu
                                
                                
                                1,200,000
                                
                                
                                
                                175,889Delin
                                
                                Chen
                                
                                
                                250,000
                                
                                
                                
                                36,643Yuewu
                                
                                Bian
                                
                                
                                190,000
                                
                                
                                
                                27,849Total
                                
                                
                                7,360,000
                                
                                
                                
                                1,078,783
 
 ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
 
 During fiscal 2007 and2008 ourprincipal independent auditor was MSCM,
LLP. MSCM, LLP performed
the auditfor the year ended December 31, 2008.
Moore Stephens Wurth Frazer and Torbet, LLP reviewed for the 9 months ended
September 30, 2007 and reported on the company’s financial statements for the year
ended December 31, 2006.
 
 The audit of our annual financial statement
for this 10-K for the period ended December 31, 2008, were performed by our current
principal independent auditor MSCM, LLP. The following are the services provided
and the amount billed:
 
 (a)
                AUDIT
  FEES
 
 The
aggregate fees billed or to be billed for professional services rendered by our
principal accountants for the audit of our annual
financial statements for the ended December 31, 2008, 2007 and 2006 were
$190,000, $160,000 and $100,000, respectively. The reviews for the financial
statements included in our quarterly reports on Form 10-QSB during the fiscal
years ended December 31, 2008, 2007 and 2006 were $120,000, $75,000 and $75,000,
respectively.


- 67
-
  (b)
                AUDIT-RELATED
      FEES
 
 We incurred $86,070 fees for the fiscal
years ended December 31, 2008 and none for 2007 for assurance and related
services by our principal accountant that were reasonably related to the
performance of the audit or review of our financial statements, and not reported under Audit fees
above.
 
 (c)
                TAX
  FEES
 
 The aggregate fees billed for
professional services rendered by our principal accountant for tax compliance,
tax advice, preparation and filing of tax returns and tax planning for the
fiscal yearsended December
31, 2008and 2007were $5,250
and $0.
  (d)
                ALL OTHER
    FEES
 
 All other
fees billed for the fiscal years ended December 31, 2008 and 2007 were $30,660
and $Nil.
 Our audit committee consists of three independent
directors.
 
 
 ITEM 15.
EXHIBITS AND REPORTS ON FORM 10-K.
 
 EXHIBIT NO.
              DESCRIPTION OF
      EXHIBIT
 
 3.1
                          Articles of Incorporation
      (incorporated by reference to the exhibits to Registrants Form SB-2 filed
      on October 27, 2004)3.2
                          Registrant's By-Laws (incorporated by
      reference to the exhibits to Registrants Form SB-2 filed on October 27,
      2004)10.1
                          Securities Purchase Agreement
      (incorporated by reference to the exhibits to Registrant's Form 8-K filed
      on January 30, 2008).10.2
                          Formof Convertible Note (incorporated
      by reference to the exhibits to Registrant's Form 8-K filed on January 30,
      2008).10.3
                          Form of Warrant (incorporated by
      reference to the exhibits to Registrant's Form 8-K filed on January 30,
      2008).10.4
                          Form of Pledge Agreement (incorporated by
      reference to the exhibits to Registrant's Form 8-K filed on January 30,
      2008).10.5
                          Form of Registration Rights
      Agreement (incorporated by reference to the exhibits to Registrant's Form
      8-K filed on January 30, 2008).10.6
                          Framework
      Agreement, dated November 5, 2009, by and between the Registrant and Prax
      Capital China Real Estate Fund I, Ltd.*10.7
                          Deed
      of Guarantee, dated November 5, 2008, made by the Registrant in favor of
      Success Hill Investments Limited and Prax Capital Real Estate Holding
      Limited (incorporated by reference to the exhibit to Registrant's Form 8-K
      filed on January 28, 2009).21.1
                          Listof
      subsidiaries.*23.1
                          Consent of Moore Stephens Wurth
      Frazer and Torbet, LLP. *23.2
                          Consent of MSCM
      LLP*31.1
                          Certification of Chief Executive
      Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act.*31.2
                          Certification of Principal
      Financial and Accounting Officer Pursuant to
      Section 302 of the Sarbanes-Oxley Act.*32.1
                          Certification of Chief Executive
      Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act.*32.2
                          Certification of Chief Accounting
      Officer Pursuant to Section 906 of the Sarbanes-Oxley
  Act.*
  * Filed herewith
  - 68
-
  SIGNATURES
 
 Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on our behalf by the undersigned, thereunto duly
authorized.
 
 CHINA HOUSING AND LAND
      DEVELOPMENT, INC.March 25,
    2009
                              By:
                              /s/ Feng
      XiaohongName:
      Feng Xiaohong
                                Title: Chief Executive
      OfficerMarch 25,
      2009
                              By:
                              /s/
      William XinName: William Xin
                                Title: Chief
      Financial Officer
                                (Principal
      Financial and Accounting
Officer)
 
 
 Pursuant to the requirements of the
Securities Act of 1933, this Form 10-K has been signed by the following persons
in the capacities and on
the dates indicated.
 
 SIGNATURE
                        TITLE
                        DATE/s/ Lu Pingji
                          Lu Pingji
                          
                          /s/ Feng
      Xiaohong
                          Feng Xiaohong
                          
                          /s/
      Xiao GenXi’ang
                          Xiao GenXi’ang
                          
                          /s/ Mr. William
      Xin
                          Mr. William
Xin
                          
                          /s/Albert S.
      McLelland
                          Mr.Albert S.
      McLelland
                          
                          /s/ Mr. Michael
      Marks
                          Mr. Michael
      Marks
                          
                          /s/ Mr. Carolina
      Woo
                          Mr. Carolina
      Woo
                          
                          /s/ Mr. Gao
      Suiyi
                          Mr. Gao
      Suiyi
                        Chairman of the
      Board
                          
                          
                          Chief Executive Officer& Managing
      Director
                          
                          
                          Vice President & Managing
      Director
                          
                          
                          Chief Financial
      Officer
                          
                          Independent
      Director
                          
                          
                          Independent
      Director
                          
                          
                          Independent
      Director
                          
                          
                          Independent
      Director
                        March 25, 2009
                          
                          
                          March 25, 2009
                          
                          
                          March 25, 2009
                          
                          
                          March 25, 2009
                          
                          March 25, 2009
                          
                          
                          March 25, 2009
                          
                          
                          March 25, 2009
                          
                          
                          March 25,
    2009
 - 69
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