UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)


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





For the
quarterly period ended September 30, 2009





 ̈  TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT





For the
transition period from ________________ to _______________





000-51429


(Commission
file number)





CHINA
HOUSING & LAND DEVELOPMENT, INC.


(Exact
name of registrant as specified in its charter)




Nevada
            
            20-1334845(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (IRS
      Employer Identification
              No.)





6 Youyi
Dong Lu, Han Yuan 4 Lou


Xi'An,
Shaanxi Province


China
710054


(Address
of principal executive offices)





86-029-8258-2632


(Issuer's
telephone number)





N/A


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





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes x No  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes  ̈ No  ̈





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




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





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





The
number of shares of Common Stock outstanding on November 10, 2009 was 31,884,969
shares.










CHINA
HOUSING & LAND DEVELOPMENT, INC.


Index





.
              
              
              
              Page
                NumberPART
      I
              
              FINANCIAL
      INFORMATION
              
              3Item
      1.
              
              Financial
      Statements
              
              3Interim
      Condensed Consolidated Balance Sheets as of September 30, 2009 (unaudited)
      and December 31, 2008
              
              3Interim
      Condensed Consolidated Statements of Income and Other Comprehensive Income
      for the three and nine months ended September 30, 2009 and 2008
      (unaudited)
              
              4Interim
      Condensed Consolidated Statements of Cash Flows for the nine months ended
      September 30, 2009 and 2008 (unaudited)
              
              5Condensed
      Consolidated Statements of Shareholders’ Equity
              
              6Notes
      to Consolidated Financial Statements (unaudited)
              
              7Item
      2.
              
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
              
              20Item
      3.
              
              Quantitative
      and Qualitative Disclosures About Market Risk
              
              43Item
      4T.
              
              Controls
      and Procedures
              
              45PART
      II.
              
              OTHER
      INFORMATION
              
              45Item
      1.
              
              Legal
      Proceedings
              
              45Item
      1A.
              
              Risk
      Factors
              
              45Item
      2.
              
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              
              45Item
      3.
              
              Defaults
      Upon Senior Securities
              
              45Item
      4.
              
              Submission
      of Matters to a Vote of Security Holders
              
              45Item
      5.
              
              Other
      Information
              
              46Item
      6.
              
              Exhibits
              
              46SIGNATURES
              
              
              
              47EX-31.1
              
              (Certifications
      required under Section 302 of the Sarbanes-Oxley Act of
    2002)EX-31.2
              
              (Certifications
      required under Section 302 of the Sarbanes-Oxley Act of
    2002)EX-32.1
              
              (Certifications
      required under Section 906 of the Sarbanes-Oxley Act of
    2002)EX-32.2
              
              (Certifications
      required under Section 906 of the Sarbanes-Oxley Act of
    2002)


-2-







PART I.
FINANCIAL INFORMATION





Item
1. Financial Statements





CHINA
HOUSING & LAND DEVELOPMENT, INC. AND SUBSIDIARIES





Interim
Condensed Consolidated Balance Sheets


As of
September 30, 2009 and December 31, 2008


(unaudited)


September 30,
                            
                            
                            December 31,2009
                            
                            
                            2008ASSETSCash
                            
                            $
                            19,089,130
                            
                            
                            $
                            37,425,340Cash
      - restricted
                            
                            
                            694,334
                            
                            
                            
                            805,012Accounts
      receivable, net of allowance for doubtfulaccounts of $1,002,074
      and $1,278,156, respectively
                            
                            
                            5,877,162
                            
                            
                            
                            813,122Other
      receivables and prepaid expenses, net
                            
                            
                            1,518,719
                            
                            
                            
                            446,497Notes
      receivable, net
                            
                            
                            274,399
                            
                            
                            
                            811,695Prepaid
      other taxes
                            
                            
                            1,300,432
                            
                            
                            
                            545,979Real
      estate held for development or sale
                            
                            
                            108,220,307
                            
                            
                            
                            60,650,011Property
      and equipment, net
                            
                            
                            12,868,210
                            
                            
                            
                            12,391,501Asset
      held for sale
                            
                            
                            14,300,936
                            
                            
                            
                            14,308,691Advance
      to suppliers
                            
                            
                            863,478
                            
                            
                            
                            704,275Deposits
      on land use rights
                            
                            
                            28,432,993
                            
                            
                            
                            47,333,287Intangible
      assets, net
                            
                            
                            41,654,421
                            
                            
                            
                            46,043,660Goodwill
                            
                            
                            816,433
                            
                            
                            
                            -Deferred
      selling costs
                            
                            
                            344,354
                            
                            
                            
                            -Deferred
      financing costs
                            
                            
                            506,245
                            
                            
                            
                            622,118Total
      assets
                            
                            
                            236,761,553
                            
                            
                            
                            222,901,188LIABILITIESAccounts
      payable
                            
                            $
                            18,638,322
                            
                            
                            $
                            10,525,158Advances
      from customers
                            
                            
                            9,252,447
                            
                            
                            
                            9,264,385Accrued
      expenses
                            
                            
                            4,838,168
                            
                            
                            
                            3,539,842Accrued
      security registration expenses
                            
                            
                            -
                            
                            
                            
                            613,483Payable
      to acquisition of businesses
                            
                            
                            6,342,865
                            
                            
                            
                            8,429,889Income
      taxes payable
                            
                            
                            6,554,658
                            
                            
                            
                            8,078,709Other
      payables
                            
                            
                            4,398,464
                            
                            
                            
                            5,183,251Loans
      from employees
                            
                            
                            2,195,218
                            
                            
                            
                            1,517,039Loans
      payable
                            
                            
                            29,591,867
                            
                            
                            
                            35,617,442Deferred
      tax liability
                            
                            
                            11,504,676
                            
                            
                            
                            11,510,915Warrants
      liability
                            
                            
                            4,721,294
                            
                            
                            
                            1,117,143Fair
      value of embedded derivatives
                            
                            
                            3,777,670
                            
                            
                            
                            760,398Convertible
      debt
                            
                            
                            14,511,239
                            
                            
                            
                            13,621,934Total
      liabilities
                            
                            
                            116,326,888
                            
                            
                            
                            109,779,588SHAREHOLDERS'
      EQUITYCommon
      stock: $.001 par value, authorized 100,000,000 shares
                            
                            
                            31,270
                            
                            
                            
                            30,894issued
      and outstanding 31,270,679 and 30,893,757 shares at September 30, 2009 and
      December 31, 2008, respectivelyAdditional
      paid in capital
                            
                            
                            33,062,320
                            
                            
                            
                            31,390,750Common
      stock subscribed
                            
                            
                            2,487,777
                            
                            
                            
                            -Statutory
      reserves
                            
                            
                            3,696,038
                            
                            
                            
                            3,541,226Retained
      earnings
                            
                            
                            42,171,440
                            
                            
                            
                            38,651,579Accumulated
      other comprehensive income
                            
                            
                            10,155,625
                            
                            
                            
                            10,397,801Total
      China Housing & Land Development, Inc. shareholders’
      equity
                            
                            
                            91,604,470
                            
                            
                            
                            84,012,250Non-controlling
      interest
                            
                            
                            28,830,195
                            
                            
                            
                            29,109,350Total
      shareholders' equity
                            
                            
                            120,434,665
                            
                            
                            
                            113,121,600Total
      liabilities and shareholders' equity
                            
                            $
                            236,761,553
                            
                            
                            $
                            222,901,188





The
accompanying notes are an integral part of these interim condensed consolidated
financial statements.


-3-







CHINA
HOUSING & LAND DEVELOPMENT, INC. AND SUBSIDIARIES





Interim
Condensed Consolidated Statements of Income and Other Comprehensive
Income


For The
Three and Nine Months Ended September 30, 2009 and 2008


(Unaudited)




3 Months
                    
                    
                    3 Months
                    
                    
                    9 Months
                    
                    
                    9 MonthsSeptember 30,
                      2009
                    
                    
                    September 30,
                      2008
                    
                    
                    September 30,
                      2009
                    
                    
                    September 30,
                      2008REVENUESSale
      of properties
                    
                    $
                    22,728,282
                    
                    
                    $
                    7,475,692
                    
                    
                    $
                    56,835,091
                    
                    
                    $
                    25,054,867Other
      income
                    
                    
                    1,065,363
                    
                    
                    
                    70,070
                    
                    
                    
                    3,405,156
                    
                    
                    
                    482,022Total
      revenues
                    
                    
                    23,793,645
                    
                    
                    
                    7,545,762
                    
                    
                    
                    60,240,247
                    
                    
                    
                    25,536,889COSTS
      AND EXPENSESCost
      of properties and land
                    
                    
                    16,374,170
                    
                    
                    
                    6,071,599
                    
                    
                    
                    41,266,855
                    
                    
                    
                    19,691,432Selling,
      general, and administrative expenses
                    
                    
                    2,501,688
                    
                    
                    
                    1,594,514
                    
                    
                    
                    5,853,458
                    
                    
                    
                    4,161,865Stock
      based compensation
                    
                    
                    87,777
                    
                    
                    
                    3,000,000
                    
                    
                    
                    87,777
                    
                    
                    
                    3,000,000Security
      registration expenses
                    
                    
                    579,775
                    
                    
                    
                    -
                    
                    
                    
                    1,786,517
                    
                    
                    
                    -Other
      expenses
                    
                    
                    284,044
                    
                    
                    
                    60,848
                    
                    
                    
                    474,167
                    
                    
                    
                    76,758Interest
      expense
                    
                    
                    417,809
                    
                    
                    
                    638,228
                    
                    
                    
                    1,202,786
                    
                    
                    
                    1,736,344Accretion
      expense on convertible debt
                    
                    
                    311,319
                    
                    
                    
                    266,541
                    
                    
                    
                    889,305
                    
                    
                    
                    691,782Change
      in fair value of embedded derivatives
                    
                    
                    (2,695,306
                    )
                    
                    
                    (2,101,825
                    )
                    
                    
                    3,017,272
                    
                    
                    
                    (2,556,313
                    )Change
      in fair value of warrants
                    
                    
                    (3,042,752
                    )
                    
                    
                    (2,939,563
                    )
                    
                    
                    4,012,736
                    
                    
                    
                    (3,895,615
                    )Foreign
      exchange loss
                    
                    
                    -
                    
                    
                    
                    (103,344
                    )
                    
                    
                    -
                    
                    
                    
                    -Total
      costs and expenses
                    
                    
                    14,818,524
                    
                    
                    
                    6,486,998
                    
                    
                    
                    58,590,873
                    
                    
                    
                    22,906,253Income before
      provision for income taxes
                    
                    
                    8,975,121
                    
                    
                    
                    1,058,764
                    
                    
                    
                    1,649,374
                    
                    
                    
                    2,630,636Recovery
      of income taxes
                    
                    
                    (3,652,886
                    )
                    
                    
                    (388,308)
                    
                    
                    
                    (1,591,331)
                    
                    
                    
                    -NET INCOME
                    
                    
                    12,628,007
                    
                    
                    
                    1,447,072
                    
                    
                    
                    3,240,705
                    
                    
                    
                    2,630,636Less:
      net loss attributable to non-controlling interest
                    
                    
                    (86,121
                    )
                    
                    
                    -
                    
                    
                    
                    (279,155
                    )
                    
                    
                    -Net
      income attributable to China Housing & Land Development,
      Inc.
                    
                    
                    12,714,128
                    
                    
                    
                    1,447,072
                    
                    
                    
                    3,519,860
                    
                    
                    
                    2,630,636OTHER
      COMPREHENSIVE INCOME (LOSS)Gain
      (loss) in foreign exchange
                    
                    
                    69,244
                    
                    
                    
                    911,996
                    
                    
                    
                    (242,176
                    )
                    
                    
                    6,176,248COMPREHENSIVE
      INCOME
                    
                    $
                    12,783,372
                    
                    
                    $
                    2,359,068
                    
                    
                    $
                    3,277,684
                    
                    
                    $
                    8,806,884WEIGHTED
      AVERAGE SHARES OUTSTANDINGBasic
                    
                    
                    31,134,137
                    
                    
                    
                    30,877,453
                    
                    
                    
                    30,987,760
                    
                    
                    
                    30,389,712Diluted
                    
                    
                    32,972,253
                    
                    
                    
                    30,882,483
                    
                    
                    
                    30,996,953
                    
                    
                    
                    30,436,461NET
      INCOME PER SHAREBasic
                    
                    $
                    0.41
                    
                    
                    $
                    0.05
                    
                    
                    $
                    0.11
                    
                    
                    $
                    0.09Diluted
                    
                    $
                    0.24
                    
                    
                    $
                    0.04
                    
                    
                    $
                    0.11
                    
                    
                    $
                    0.07





The
accompanying notes are an integral part of these interim condensed consolidated
financial statements.


-4-







CHINA
HOUSING & LAND DEVELOPMENT INC. AND SUBSIDIARIES





Interim
Condensed Consolidated Statements of Cash Flows


For The
Nine Months Ended September 30, 2009 and 2008


(Unaudited)





September 30,
                  
                  
                  September 30,2009
                  
                  
                  2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                  
                  $
                  3,240,705
                  
                  
                  $
                  2,630,636Adjustments
      to reconcile net income to cash provided by (used in) operating
      activities:Bad
      debt expense
                  
                  
                  80,713
                  
                  
                  
                  -Depreciation
                  
                  
                  471,788
                  
                  
                  
                  233,915Exchange
      gain
                  
                  
                  -
                  
                  
                  
                  (103,344)Loss
      on disposal of fixed assets and inventory
                  
                  
                  50,501
                  
                  
                  
                  15,088Amortization
      of stock issued for investor relations fees
                  
                  
                  -
                  
                  
                  
                  107,987Stock-based
      compensation
                  
                  
                  87,777
                  
                  
                  
                  3,000,000Security
      registration expenses settled with common stock to be
    issued
                  
                  
                  1,786,517
                  
                  
                  
                  -Change
      in fair value of warrants
                  
                  
                  4,012,736
                  
                  
                  
                  (3,895,615
                  )Change
      in fair value of embedded derivatives
                  
                  
                  3,017,272
                  
                  
                  
                  (2,556,313
                  )Accretion
      expense on convertible debt
                  
                  
                  889,305
                  
                  
                  
                  691,782Non-cash
      proceeds from sale of properties
                  
                  
                  (31,673)
                  
                  
                  
                  (2,904,172
                  )(Increase)
      decrease in assets:Accounts
      receivable
                  
                  
                  (4,702,750)
                  
                  
                  
                  (1,444,437
                  )Prepaid
      other taxes
                  
                  
                  (803,561)
                  
                  
                  
                  -Real
      estate held for development or sale
                  
                  
                  (35,859,057)
                  
                  
                  
                  (16,437,686
                  )Advances
      to suppliers
                  
                  
                  (159,660)
                  
                  
                  
                  486,434Refund
      (deposit) on land use rights
                  
                  
                  11,534,025
                  
                  
                  
                  (4,386,535
                  )Other
      receivable and deferred charges
                  
                  
                  234,834
                  
                  
                  
                  24,339Deferred
      selling costs
                  
                  
                  (344,134)
                  
                  
                  
                  -Deferred
      financing costs
                  
                  
                  155,873
                  
                  
                  
                  162,269Increase
      (decrease) in liabilities:Accounts
      payable
                  
                  
                  8,103,243
                  
                  
                  
                  2,852,863Advances
      from customers
                  
                  
                  (135,544)
                  
                  
                  
                  5,981,215Accrued
      expenses
                  
                  
                  1,165,695
                  
                  
                  
                  740,465Other
      payables
                  
                  
                  (1,941,379)
                  
                  
                  
                  40,646Income
      taxes payable
                  
                  
                  (1,621,435)
                  
                  
                  
                  (123,908)Net
      cash used in operating activities
                  
                  
                  (10,808,209)
                  
                  
                  
                  (14,884,371
                  )CASH
      FLOWS FROM INVESTING ACTIVITIES:Change
      in restricted cash
                  
                  
                  110,130
                  
                  
                  
                  (755,376
                  )Purchase
      of buildings, equipment and automobiles
                  
                  
                  (587,595)
                  
                  
                  
                  (868,817
                  )Notes
      receivable collected
                  
                  
                  212,140
                  
                  
                  
                  139,327Cash
      acquired in business combinations
                  
                  
                  519,309
                  
                  
                  
                  -Proceeds
      from sale of property and equipment
                  
                  
                  194,006
                  
                  
                  
                  867,806Net
      cash provided by (used in) investing activities
                  
                  
                  447,990
                  
                  
                  
                  (617,060
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      proceeds from issuance of convertible debt
                  
                  
                  -
                  
                  
                  
                  19,230,370Loans
      from bank
                  
                  
                  12,444,063
                  
                  
                  
                  32,213,727Repayments
      of loans payable
                  
                  
                  (18,447,426)
                  
                  
                  
                  (20,044,097))Loans
      from or repayment to employees, net
                  
                  
                  678,545
                  
                  
                  
                  (990,087
                  )Repayment
      of payables for acquisition of businesses
                  
                  
                  (3,841,072)
                  
                  
                  
                  (3,656,905)Proceeds
      from exercise of warrants
                  
                  
                  1,184,662
                  
                  
                  
                  -Proceeds
      from issuance of common stock and warrants
                  
                  
                  -
                  
                  
                  
                  8,415Net
      cash (used in) provided by financing activities
                  
                  
                  (7,981,228)
                  
                  
                  
                  26,761,423(DECREASE)/INCREASE
      IN CASH
                  
                  
                  (18,341,447)
                  
                  
                  
                  11,259,992Effects
      on foreign currency exchange
                  
                  
                  5,237
                  
                  
                  
                  773,037CASH,
      beginning of period
                  
                  
                  37,425,340
                  
                  
                  
                  2,351,015CASH,
      end of period
                  
                  $
                  19,089,130
                  
                  
                  $
                  14,384,044





The
accompanying notes are an integral part of these interim condensed consolidated
financial statements.


-5-







CHINA
HOUSING & LAND DEVELOPMENT, INC. AND SUBSIDIARIES





Condensed
Consolidated Statements of Shareholders' Equity


As of
September 30, 2009 and December 31, 2008


(Unaudited)





Common StockShares
                  
                  
                  Par
                    Value
                  
                  
                  CommonStock subscribed
                  
                  
                  Additionalpaid in capital
                  
                  
                  Statutory reserves
                  
                  
                  Retained earnings
                  
                  
                  Accumulated
                      othercomprehensive income
                  
                  
                  Non-controlling interest
                  
                  
                  TotalsBALANCE,
      December 31, 2008
                  
                  
                  30,893,757
                  
                  
                  $
                  30,894
                  
                  
                  $
                  -
                  
                  
                  
                  31,390,750
                  
                  
                  $
                  3,541,226
                  
                  
                  $
                  38,651,579
                  
                  
                  $
                  10,397,801
                  
                  
                  $
                  29,109,350
                  
                  
                  $
                  113,121,600Net
      Income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,302,719
                  
                  
                  
                  -
                  
                  
                  
                  (47,135)
                  
                  
                  
                  1,255,584Adjustment
      to statutory reserves
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  154,812
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  154,812Foreign
      currency translation adjustment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (363,133)
                  
                  
                  
                  -
                  
                  
                  
                  (363,133)BALANCE,
      March 31, 2009
                  
                  
                  30,893,757
                  
                  
                  
                  30,894
                  
                  
                  
                  -
                  
                  
                  
                  31,390,750
                  
                  
                  
                  3,696,038
                  
                  
                  
                  39,954,298
                  
                  
                  
                  10,034,668
                  
                  
                  
                  29,062,215
                  
                  
                  
                  114,168,863Stock-based
      compensation
                  
                  
                  54,583
                  
                  
                  
                  54
                  
                  
                  
                  -
                  
                  
                  
                  78,546
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  78,600Fair
      value of warrants exercised
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  189,005
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  189,005Common
      stock subscribed from warrants conversion
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  320,815
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  320,815Net
      Income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (10,496,987)
                  
                  
                  
                  -
                  
                  
                  
                  (145,899)
                  
                  
                  
                  (10,642,886)Foreign
      currency translation adjustment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  51,713
                  
                  
                  
                  -
                  
                  
                  
                  51,713BALANCE,
      June 30, 2009
                  
                  
                  30,948,340
                  
                  
                  $
                  30,948
                  
                  
                  $
                  320,815
                  
                  
                  
                  31,658,301
                  
                  
                  $
                  3,696,038
                  
                  
                  $
                  29,457,311
                  
                  
                  $
                  10,086,381
                  
                  
                  $
                  28,916,316
                  
                  
                  $
                  104,166,110Common
      Stock issued from warrants conversion
                  
                  
                  96,923
                  
                  
                  
                  97
                  
                  
                  
                  (320,815)
                  
                  
                  
                  320,718
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Fair
      value of warrants exercised
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  120,938
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  120,938Warrants
      exercised
                  
                  
                  191,966
                  
                  
                  
                  192
                  
                  
                  
                  -
                  
                  
                  
                  863,655
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  863,847Fair
      value of cashless warrants exercised
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  98,742
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  98,742Cashless
      warrants exercised
                  
                  
                  33,450
                  
                  
                  
                  33
                  
                  
                  
                  -
                  
                  
                  
                  (33)
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Common
      stock subscribed from liability settlement
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,400,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,400,000Net
      Income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  12,714,128
                  
                  
                  
                  -
                  
                  
                  
                  (86,121)
                  
                  
                  
                  12,628,007Stock
      based compensation
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  87,777
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  87,777Foreign
      currency translation adjustment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  69,244
                  
                  
                  
                  -
                  
                  
                  
                  69,244BALANCE,
      September 30, 2009
                  
                  
                  31,270,679
                  
                  
                  
                  31,270
                  
                  
                  
                  2,487,777
                  
                  
                  
                  33,062,320
                  
                  
                  
                  3,696,038
                  
                  
                  
                  42,171,440
                  
                  
                  
                  10,155,625
                  
                  
                  
                  28,830,195
                  
                  
                  
                  120,434,665





The
accompanying notes are an integral part of these interim condensed consolidated
financial statements.


-6-


CHINA
HOUSING & LAND DEVELOPMENT, INC. AND SUBSIDIARIES


Notes
To Interim Condensed Consolidated Financial Statements


(Unaudited)





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 6, 2006, the Company changed its name to China Housing &
Land Development, Inc.





The
accompanying unaudited interim condensed consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries,
Xi'an Tsining Housing 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”), Xi’an
Xinxing Property Management Co., Ltd. (“Xinxing Property”) (see Note 2), Puhua
(Xi’an) Real Estate Development Co., Ltd (75% interest) (“Puhua”) and
Success Hill Investments Limited (60% interest) (“Success Hill”) (collectively,
the "Subsidiaries"). All inter-company accounts and transactions have been
eliminated on consolidation. The accompanying unaudited interim condensed
consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America
(“GAAP”).





In the
opinion of management, the unaudited interim condensed consolidated financial
statements reflect all adjustments necessary for a fair statement of the
Company's consolidated financial position as at September 30, 2009 and results
of operations and cash flows for the periods ended September 30, 2009 and 2008.
These adjustments consist of normal recurring items. The results of operations
for any interim period are not necessarily indicative of results for the full
year.





The
unaudited interim condensed consolidated financial statements are based on
accounting principles that are consistent in all material respects with those
applied in the Company’s Annual Report on Form 10-K for the year ended December
31, 2008 (“2008 Annual Report”); except as disclosed below. They do not include
certain footnote disclosures and financial information normally included in
annual consolidated financial statements prepared in accordance with GAAP and,
therefore, should be read in conjunction with the audited consolidated financial
statements and notes included in the Company's 2008 Annual Report.





Accounting
Principles Recently Adopted





In July
2009, the FASB issued SFAS No. 168, “FASB Accounting Standards
Codification” (“SFAS 168”), as the single source of authoritative
nongovernmental U.S. generally accepted accounting principles (GAAP). The
Codification is effective for interim and annual periods ending after September
15, 2009. All existing accounting standards are superseded as described in SFAS
168. All other accounting literature not included in the Codification is
non-authoritative. Therefore, beginning with the 10Q filing for September 30,
2009, all references made by the Company to GAAP in the consolidated financial
statements will be the new codification numbering system.  The
Codification does not change or alter existing GAAP and therefore, does not have
any impact on the Company’s condensed consolidated financial
statements.





In
December 2007, the FASB issued new accounting guidance “Business
Combinations” which establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any non-controlling interest in the acquirer
and the goodwill acquired. It also establishes disclosure requirements which
will enable users to evaluate the nature and financial effects of the business
combination. The adoption on January 1, 2009 of this standard did not have a
material impact on the Company’s condensed consolidated financial
statements.





In
December 2007, the FASB issued new accounting guidance, “Non-controlling
Interests in Consolidated Financial Statements”. This guidance establishes
accounting and reporting standards for ownership interests in subsidiaries held
by parties other than the parent, the amount of consolidated net income
attributable to the parent and to the non-controlling interest, changes in a
parent's ownership interest and the valuation of retained non-controlling equity
investments when a subsidiary is deconsolidated. It also establishes
reporting requirements that provide sufficient disclosures that clearly identify
and distinguish between the interests of the parent and the interests of the
non-controlling owners. The adoption on January 1, 2009 of this standard
resulted in changes to our presentation for non-controlling interests and did
not have a material impact on the Company’s results of operations and financial
condition.


-7-


In March
2008, the FASB issued new accounting guidance, “Disclosures about Derivative
Instruments and Hedging Activities”. It requires 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 adoption on January 1, 2009 of this standard did not have a
material impact on the Company’s condensed consolidated financial position or
results of operations and the required disclosures have been included in Notes
12 and 14.





In April
2008, the FASB issued new accounting guidance, “Determination of the Useful Life
of Intangible Assets.” This guidance is intended to improve the consistency
between the useful life of a recognized intangible asset under the previous
guidance for Goodwill and Other Intangible Assets and the period of expected
cash flows used to measure the fair value of the asset 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 some entity-specific factors. The adoption on January
1, 2009 of this standard did not have a material impact on the Company’s
condensed consolidated financial statements.





In May
2008, the FASB issued new accounting guidance, “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)”. This guidance 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 instrument in 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 non-Convertible Debt borrowing
rate. In addition, the guidance provides for certain changes related to the
measurement and accounting related to derecognition, modification or exchange.
The adoption on January 1, 2009 of this standard did not have a material impact
on the Company’s condensed consolidated financial statements.





In
September 2008, the FASB issued new accounting guidance “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities”. It 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. This guidance establishes that unvested share-based
payment awards that contain non-forfeitable 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. The adoption on January 1, 2009 of this standard did not have a material
impact on the Company’s condensed consolidated financial
statements.


-8-




In April
2009, the FASB issued new accounting guidance “Recognition and Presentation of
Other-Than-Temporary Impairments”, which provides operational guidance for
determining other-than-temporary impairments (“OTTI”) for debt securities. It’s
effective for interim and annual periods ending after June 15, 2009. The
adoption on April 1, 2009 of this standard did not have a material impact on the
Company’s condensed consolidated financial statements.
 
 In
April 2009, the FASB issued new accounting guidance, “Interim Disclosure
about Fair Value of Financial Instruments”. It requires interim disclosures
regarding the fair values of financial instruments that are within the scope
of “Disclosures about the Fair Value of Financial Instruments.”
Additionally, it require disclosure of the methods and significant assumptions
used to estimate the fair value of financial instruments on an interim basis as
well as changes of the methods and significant assumptions from prior periods.
It does not change the accounting treatment for these financial instruments. The
adoption on April 1, 2009 of these standards did not have a material impact on
the Company’s condensed consolidated financial statements.
 
 In
April 2009, the FASB issued new accounting guidance, “Determining Fair
Value When Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly” It
provides guidance on how to determine the fair value of assets and liabilities
when the volume and level of activity for the asset/liability has significantly
decreased. It also provides guidance on identifying circumstances that indicate
a transaction is not orderly. In addition, It requires disclosure in interim and
annual periods of the inputs and valuation techniques used to measure fair value
and a discussion of changes in valuation techniques. Since the volume and level
of activity for the asset or liability of the Company have not decreased and
there are no identifying transactions that are not orderly, the adoption on
April 1, 2009 of this standard did not have a material impact on the Company’s
condensed consolidated financial statements.
 
 In May
2009, the FASB issued new accounting guidance, “Subsequent Events,” which
establishes general standards for the accounting for and the disclosures of
events that occur after the balance sheet date but before the financial
statements are issued or are available to be issued. The pronouncement requires
the disclosure of the date through which an entity has evaluated subsequent
events and the basis for that date, whether that date represents the date the
financial statements were issued or were available to be issued. We adopted this
pronouncement effective June 30, 2009, and the adoption of this new
standard did not have a material effect on our consolidated financial position,
results of operations or cash flows.
  -9-
  Foreign
exchange rates used
  September
      30,
                    2009
                  
                  
                  December
      31,
                    2008
                  
                  
                  September
      30,
                    2008Period end
      RMB/U.S. Dollar exchange rate
                  
                  
                  6.8262
                  
                  
                  
                  6.8225
                  
                  
                  
                  6.7899Average
      RMB/U.S. Dollar exchange rate
                  
                  
                  6.8306
                  
                  
                  
                  6.9483
                  
                  
                  
                  6.8375
  New
accounting policies related to acquisition
 
 On
January 1, 2009, the Company acquired Xinxing Property (See Note 2). Xinxing
Property provides property management services. The revenues of the property
management services are recognized when the services are provided.
 
 Depreciation
of Xinxing Property’s income producing property’s improvements is computed using
the straight-line method over the estimated useful lives of 10
years.
 
 Reclassification
 
 Certain
reclassifications have been made to the prior year’s financial statements to
conform to the 2009 presentation. The effects of the reclassifications were not
material to the Company’s condensed consolidated financial
statements.
 
 Note
2 – Acquisition
 
 On
January 20, 2009, the Company signed an equity purchase agreement with the
shareholders of Xinxing Property and acquired 100% ownership of Xinxing Property
for a purchase price of RMB 12 million (approximately $1.76
million). Xinxing Property provides property management services to
residential and commercial projects. The acquisition strengthens the Company’s
ability to improve the value to customers during the after-sale phase of the
real estate development business. The synergies and benefits gained are
reflected in the value of goodwill recorded.
 
 According
to the purchase agreement, the operational control of Xinxing Property passed to
the Company effective January 1, 2009, and, accordingly, the results of Xinxing
Property’s operations have been included in the Company’s condensed consolidated
statement of income and other comprehensive income from that date. This
acquisition is not considered material to the Company, and therefore, pro-forma
information for the comparative period has not been presented.
 
 The total
purchase price included (1) an initial cash payment of RMB 2.0 million
(approximately $0.3 million) payable upon signing of the purchase
agreement, (2) a cash payment of RMB 3.6 million (approximately $0.5
million) payable on March 30, 2009, (3) an additional cash payment of RMB 3.6
million (approximately $0.5 million) payable on June 30, 2009 and (4)
a final cash payment of RMB 2.8 million (approximately $0.4 million)
payable on September 30, 2009. If the Company does not make payments
after 45 days of signing the agreement, a 1% penalty per month will be
calculated based on the payable amount. If the payment is delayed for more than
3 months, the original shareholders of Xinxing Property have the right to cancel
the transaction. As of September 30, 2009, the remaining balance under
the agreement amounted to $410,184 (see note 9).
 
 The
acquisition was accounted for using the purchase method. The purchase price was
allocated to the identifiable assets and liabilities assumed based on their
estimated fair values.
  -10-
 
 Purchase
      Price
                      
                      $
                      1,758,886Value
      assigned to assets and liabilities:Assets:Cash
                      
                      
                      519,309Accounts
      receivable
                      
                      
                      81,769Other
      Receivable/Prepaid expenses and other assets
                      
                      
                      1,313,754Property
      and equipment, net
                      
                      
                      612,796Liabilities:Accounts
      payable
                      
                      
                      11,907Advance
      from customers
                      
                      
                      2,381Accrued
      expenses
                      
                      
                      120,188Income
      tax and other taxes payable
                      
                      
                      151,143Other
      payables
                      
                      
                      1,299,999Total
      net assets
                      
                      $
                      942,010Goodwill
      as at January 1, 2009
                      
                      
                      816,876Foreign
      exchange translation adjustment
                      
                      
                      (443
                      )Goodwill
      as at September 30, 2009
                      
                      $
                      816,433
 
 In
connection with the Xinxing Property acquisition, the statutory
reserve increased by $154,812.
 
 Note
3 – Supplemental Disclosure of Cash Flow Information
 
 Income
taxes paid for both the three and nine months ended September 30, 2009 amounted
to $42,135 (2008 - $225,964). Interest paid for the three months ended September
30, 2009 and 2008 amounted to $849,279 and $2,032,689, respectively. Interest
paid for the nine months ended September 30, 2009 and 2008 amounted to
$2,223,011 and $2,858,168, respectively.
 
 Note
4 – Other Receivables and Prepaid Expenses
 
 Other
receivables and prepaid expenses consisted of the following at
September 30, 2009 and December 31, 2008:
 
 September
      30,
                    2009
                  
                  
                  December
      31,
                    2008Other
      receivable
                  
                  $
                  1,601,082
                  
                  
                  $
                  916,886Allowance
      for bad debts
                  
                  
                  (328,738
                  )
                  
                  
                  (473,058
                  )Prepaid
      expenses
                  
                  
                  246,375
                  
                  
                  
                  2,669Other
      receivables and prepaid expense
                  
                  $
                  1,518,719
                  
                  
                  $
                  446,497
  -11-
  Note
5 – Real Estate Held for Development or Sale
 
 The
following summarizes the components of real estate inventories at
September 30, 2009 and December 31, 2008:
 
 September
      30,
                    2009
                  
                  
                  December
      31,
                    2008Finished
      projects
                  
                  $
                  11,584,242
                  
                  
                  $
                  10,181,827Construction
      in progress
                  
                  
                  96,636,065
                  
                  
                  
                  50,468,184Total
      real estate held for development or sale
                  
                  $
                  108,220,307
                  
                  
                  $
                  60,650,011
 
 Interest
on debt incurred by the Company for the three months ended September 30, 2009
was $1,057,898 (September 30, 2008 - $1,767,105), and for the nine months ended
September 30, 2009 was $3,450,234 (September 30, 2008 - $3,500,853). Of this
interest, the Company capitalized in real estate held for development or sale
during the three months and nine months ended September 30, 2009 totaled to
$640,089 and $2,251,580, respectively (September 30, 2008 - $1,130,929 and
$1,895,214, respectively).
 
 Note
6 – Property and Equipment
 
 Property
and equipment consisted of the following at September 30, 2009 and
December 31, 2008:
  September
      30,
                    2009
                  
                  
                  December
      31,
                    2008Head
      office buildings and improvements
                  
                  $
                  3,277,766
                  
                  
                  $
                  3,234,628Income
      producing properties and improvements
                  
                  
                  10,775,153
                  
                  
                  
                  10,055,310Electronic
      equipment
                  
                  
                  309,839
                  
                  
                  
                  238,422Vehicles
                  
                  
                  254,106
                  
                  
                  
                  71,140Office
      furniture
                  
                  
                  163,878
                  
                  
                  
                  183,939Computer
      software
                  
                  
                  129,340
                  
                  
                  
                  91,272Totals
                  
                  
                  14,910,082
                  
                  
                  
                  13,874,711Accumulated
      depreciation
                  
                  
                  (2,041,872
                  )
                  
                  
                  (1,483,210
                  )Property
      and equipment, net
                  
                  $
                  12,868,210
                  
                  
                  $
                  12,391,501
 
 Depreciation
expense for the three months ended September 30, 2009 and 2008 amounted to
$156,762 and $50,258, respectively. Depreciation expense for the
nine months ended September 30, 2009 and 2008 amounted to $471,788 and
$233,915, respectively. The depreciation expense was included in the
selling, general and administrative expenses.
  -12-
  Note
7 – Intangible Assets
 
 Intangible
assets consist of the following at September 30, 2009 and December
31, 2008:
 
 September
      30,
                    2009
                  
                  
                  December
      31,
                    2008Intangibles
      acquired
                  
                  $
                  47,308,685
                  
                  
                  $
                  47,334,342Accumulated
      amortization
                  
                  
                  (5,654,264
                  )
                  
                  
                  (1,290,682
                  )Intangible
      assets, net
                  
                  $
                  41,654,421
                  
                  
                  $
                  46,043,660
 
 Amortization
expense for the three months ended September 30, 2009 and 2008 amounted to
$0. Amortization expense for the nine months ended September 30, 2009 and 2008
amounted to $4,360,003 and $0, respectively. The amortization expense was
capitalized in the real estate construction in progress.
 
 Note
8 – Accrued Expenses
 
 September
      30,
                    2009
                  
                  
                  December
      31,
                    2008Accrued
      expenses
                  
                  $
                  1,780,148
                  
                  
                  $
                  855,270Accrued
      interest
                  
                  
                  3,058,020
                  
                  
                  
                  2,684,572Total
                  
                  $
                  4,838,168
                  
                  
                  $
                  3,539,842
 
 Note
9 – Payable to Acquisition of Businesses
 
 September
      30,
                    2009
                  
                  
                  December
      31,
                    2008Payable
      to original shareholders of New Land
                  (i)
                  
                  $
                  5,932,681
                  
                  
                  $
                  8,429,889Payable
      to original shareholders of Xinxing Property
                  (ii)
                  
                  
                  410,184
                  
                  
                  
                  -Total
                  
                  
                  $
                  6,342,865
                  
                  
                  $
                  8,429,889
 
 (i)
              The
      payable to the original shareholders of New Land bears 10% interest
      with an original maturity of January 30, 2009. New Land’s original
      shareholders have agreed to extend the loan to December 31,
      2009.
 
 (ii)
              On
      January 20, 2009, the Company completed the acquisition of Xinxing
      Property (See Note 2). The total purchase price for the acquisition was
      RMB 12 million, (approximately $1.76 million). The total purchase
      price included 1) an initial cash payment of RMB 2.0
      million,(approximately $0.3 million), payable upon signing of the purchase
      agreement, 2) an additional cash payment of RMB 3.6 million
      (approximately $0.5 million), on March 30, 2009, 3) an additional cash
      payment of RMB 3.6 million (approximately $0.5 million), on June 30,
      2009, and 4) a final cash payment of RMB
      2.8 million (approximately $0.4 million), on September 30,
      2009. If the Company does not make payments after 45 days of signing
      the agreement, a 1% penalty per month will be calculated based on the
      payable amount. If the payment is delayed for more than 3 months, the
      original shareholders of Xinxing Property have the right to cancel the
      deal. As of September 30, 2009, the remaining balance payable to original
      shareholders under the agreement amounted to
  $410,184.
  -13-
  Note
10 – Loans Payable
 
 Loans
payable represent amounts due to various banks. These loans generally can be
renewed with the banks when they expire. Loans payable as
of September 30, 2009 and December 31, 2008 consisted of
the following:
 September30,
                                2009
                              
                              
                              December 31,
                                2008Commercial
      Bank Weilai BranchDue
      December 25, 2009, annual interest rate is 7.5%, secured by the Company's
      24G project
                              
                              $
                              1,464,944
                              
                              
                              $
                              5,130,084Commercial
      Bank Weilai BranchDue
      August 29, 2010, annual interest rate is 10.21%, guaranteed by Tsining and
      secured by the Company's Tsining building and part of Jun Jing Yuan II
      project
                              
                              
                              5,127,304
                              
                              
                              
                              5,130,084Xi'an
      Rural Credit union Zao Yuan Rd. BranchDue
      July 3, 2010, annual interest rate is 8.83%, secured by the Company's Jun
      Jing Yuan I, Yuan I, Han Yuan and Xin Xing Tower projects
                              
                              
                              2,929,888
                              
                              
                              
                              3,371,198China
      Construction Bank, Xi'an BranchDue
      August 27, 2011, floating interest rate based on 110% of People’s Bank of
      China annual interest rate, secured by the Company's Jun Jing
      II project
                              
                              
                              7,617,708
                              
                              
                              
                              21,986,076China
      Construction Bank, Xi'an BranchDue
      September 8, 2012, floating interest rate based on 110% of People’s
      Bank of China annual interest rate, secured by the Company's Jun Jing II
      project
                              
                              
                              12,452,023
                              
                              
                              
                              -Total
                              
                              $
                              29,591,867
                              
                              
                              $
                              35,617,442
 
 All loans
are used to finance construction projects. All interest paid
was capitalized and allocated to various construction
projects.
 
 On June
28, 2008, the Company signed a strategic partnership Memorandum of Understanding
(“MOU”) with China Construction Bank Xi’an Branch that established a RMB 1
billion (approximately US$147 million) credit line for real estate development
by the Company and its subsidiaries. Under the MOU, the company and its
subsidiaries are required to set up a basic deposit account with China
Construction Bank, to maintain a current ratio of not less than 90% and to
maintain liabilities to assets ratio of not greater than 65%. On August 28,
2008, the Company entered a first loan agreement with China Construction Bank
Xi’an Branch to draw down the first RMB 150 million loans, which will mature
on August 27, 2011. $21,986,075 (RMB 150 million) was received by the
Company on December 31, 2008. During the nine months ended September 30, 2009,
the Company paid down the loan to $7,617,708 (RMB 52 million). On August 30,
2009, the Company entered a second loan agreement with China Construction Bank
Xi’an Branch to draw down another RMB 85 million loan, which will mature on
September 8, 2012. $12,452,023 (RMB 85 million) was received by the Company by
the end of September 30, 2009. As of September 30, 2009, our current ratio was
approximately 221.8%, and our liabilities to assets ratio was
approximately 49.1%. The Company will be able to draw down approximately another
$107.3 million before we reach the maximum liabilities to assets ratio of
65%.
  -14-
  Note
11 – Fair Value of Financial Instruments
 
 The
following table summarizes the financial assets and liabilities measured at fair
value on a recurring basis as of the measurement date, September 30, 2009, and
the basis for that measurement, by level within the fair value
hierarchy:
 
 Fair
      Value Measurements Using
                  
                  Assets/LiabilitiesLevel
      1
                  
                  
                  Level
      2
                  
                  
                  Level3
                  
                  
                  At
      Fair ValueWarrants
      liabilities
                  
                  
                  -
                  
                  
                  $
                  4,721,294
                  
                  
                  
                  -
                  
                  
                  $
                  4,721,294Derivative
      liabilities
                  
                  
                  -
                  
                  
                  $
                  3,777,670
                  
                  
                  
                  -
                  
                  
                  $
                  3,777,670Total
                  
                  
                  -
                  
                  
                  $
                  8,498,964
                  
                  
                  
                  -
                  
                  
                  $
                  8,498,964
 
 Note
12 – Convertible Debt
 
 On
January 28, 2008, the Company issued Senior Secured Convertible Debt due in 2013
(the "Convertible Debt") and warrants to subscribe for common shares for an
aggregate purchase price of US$20 million. The Convertible Debt bears interest
at 5% per annum (computed based on the actual days elapsed in a period of 360
days) of the RMB notional principle amount, payable quarterly 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 price thresholds
are met. Approximately 215,620 warrants are also available as a management
incentive if certain milestones are met. If the aggregate principal amount of
the Convertible Debt is reduced to US$10 million or less as a result of
repayment by the Company pursuant to the Convertible Debt as a result of any
optional conversion by the Investors or mandatory conversion by the Company of
the Convertible Debt, then each Investor agrees to surrender to the Company
warrants for an aggregate number of shares of common stock equal to such
Investors’ pro rata share of 107,810 shares. If the aggregate principal amount
of the Convertible Debt is reduced to $0 as a result of repayment by the Company
pursuant to the Convertible Debt as a result of any optional conversion by the
Investors or mandatory conversion by the Company of the Convertible Debt, then
each Investor agrees to surrender to the Company warrants in addition to the
107,810 warrants surrendered pursuant to the $10 million reduction noted above
for an aggregate number of shares of common stock equal to such Investor’s pro
rata share of 107,810 shares. The Company may hold in treasury and reissue to
the officers and directors of the Company any warrants surrendered by the
Investors. As of September 30, 2009, the Company did not repay any principle of
Convertible Debt and the Investors did not deliver any optional conversion
request to the Company.
 
 The
Investors have the right to convert up to 45% ($9 million) of the
principal amount of the Convertible Debt into common shares at an initial
conversion price of $5.57, subject to an 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 associated with the Convertible Debt grant the Investors 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 stock of Lu Pingji, the
Chairman of the Company. The Convertible Debt is subject to events of
default customary for convertible securities and for a secured
financing.
 
 Both the
warrants and the embedded derivative associated with Convertible Debt meet the
definition of a derivative instrument according to accounting guidance,
“Accounting for Derivative Instruments and Hedging Activities”. Because the
warrant and the convertible debt are denominated in U.S. dollars but the
company’s functional currency is the Chinese Renminbi, the exemption from
derivative instrument accounting provided by the accounting guidance is not
available and therefore the warrant and embedded conversion option are recorded
as derivative instrument liabilities and periodically marked-to-market. The fair
value of the warrants and the embedded derivative on inception were determined
to be $3,419,653 and $3,927,375, respectively, using the Cox-Rubinstein-Ross
Binomial Lattice Model (the “CRR Model”) with the following assumption: 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
September 30, 2009 were determined to be of $4,721,195 (December 31, 2008 -
$3,419,653) and $3,777,671 (December 31, 2008 – $3,927,375), respectively, using
the CRR Model with the following assumption: expected life 3.33 - 3.42 years,
expected volatility -105%, risk free interest rate - 1.59 - 1.63% and dividend
rate - 0%. For the three months ended September 30, 2009 and 2008, the Company
recorded a change in fair value for warrants and embedded derivatives of
$(662,080) (2008 - $(1,827,824)) and $(2,695,306) (2008 - $(2,101,825)),
respectively, in the interim condensed consolidated statements of income and
comprehensive income. For the nine months ended September 30, 2009 and 2008, the
Company recorded a change in fair value for warrants and embedded derivatives of
$3,604,052 (2008 - $(2,236,811)) and $3,017,273 (December 31, 2008 -
$(2,556,313)), respectively, in the interim condensed consolidated statements of
income and comprehensive income.
  -15-
  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 initial carrying
value of the Convertible Debt is accreted to its stated amount on maturity
using the effective interest method. The effective interest rate was
determined to be 15.42%. The carrying value of Convertible Debt at
September 30, 2009 was $14,511,239 (December 31, 2008 - $13,621,934).
Related interest expense and accretion expense for the three months ended
September 30, 2009 were $269,221 (2008 - $259,707) and $311,319 (2008 -
$266,541), respectively. Related interest expense and accretion expense for
the nine months ended September 30, 2009 were $798,894 (2008 -
$695,402) and $889,305 (2008 - $691,782), respectively.
 
 In
connection with this transaction, the Company and the Investors entered into a
registration rights agreement (the “Registration Rights Agreement”). Pursuant to
the terms and conditions of the Registration Rights Agreement, the Company
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 no later than the 180th day after the closing date of the
transaction. If the Form S-3 is not available at that time, then the Company
will file a Registration Statement on such form as is then available to effect a
registration of the registrable securities, subject to the consent of the
Investors, which consent will not be unreasonably withheld. The Company shall
register an amount of common stock for resale that equals at least 125% of the
sum of shares issuable upon conversion of the Convertible Debt and the exercise
of the warrants. The registration rights granted under the Registration Rights
Agreement are subject to customary exceptions and qualifications and compliance
with certain registration procedures. The Company is subject to the late
registration penalty payment equal to the product of (i) the Investor’s
outstanding principal amount and (ii) the quotient obtained by dividing 12% by
360 (the “Late Payments”).
 
 The
Company commenced negotiations with the Investors in December 2008 for a waiver
for the Late Payments, as the Company and the Investors believed that the
registration would become effective within a short period of time. However, as
the registration has not become effective as of September 2009, the Company has
accrued for the Late Payments as security registration expenses. For the three
months ended September 30, 2009, the Company has recorded security registration
expenses of $579,775 (2008 - $0). For the nine months ended September 30, 2009,
the Company has recorded security registration expenses of $1,786,517 (2008 -
$0). On September 28, 2009, the Company reached a First Amendment (the
“Amendment”) with the Investors to settle the Late Payments, in the amount of
$2,400,000, by the issuance of 614,290 common stock. The 614,290 common stock
was determined by dividing $2,400,000, the total Late Payments up to September
28, 2009, by 95% of the historical volume weighted average price (“VWAP”) of the
common stock, as determined by using Bloomberg function VWAP, for the immediate
preceding 30 days period. In accordance with the Amendment, the Investors will
waive any further Late Payments against the Company under the Registration
Rights Agreement.
 
 As at
September 30, 2009, the 614,290 common stock to settle the Late Payments has not
been issued. Therefore, the amount has been recorded as common stock
subscribed.
 
 Note
13 – Non-controlling Interest
 
 Non-controlling
interest consists of the interest of non-controlling shareholders in the
subsidiaries of the Company. As of September 30, 2009 non-controlling
interest amounted to $28,830,195 (December 31, 2008 -
$29,109,350).
 
 On
November 5, 2008, the Company and Prax Capital entered into a conditional joint
venture 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. Prax Capital’s shares are redeemable at
the option of holder, provided that Prax gives advance notice, and with the
Company’s approval. Prax Capital has the first right of distribution and there
is a maximum amount that Prax Capital can receive. At this time, the Company
believes that it is not probable that Prax Capital will exercise their
redemption option.
 
 On
November 5, 2008, New Land entered into a Deed of Guarantee (the “Guarantee”),
in favor of Prax Capital and Success Hill (Success Hill and together with Prax
Capital, the “Beneficiaries”) whereby the Company guarantees the performance of
certain obligations of New Land and Manstate pursuant to the terms and
conditions of various agreements entered into by and between Prax Capital,
Success Hill and New Land, among others, in connection with a Framework
Agreement entered into on November 5, 2008, (“Framework Agreement”) by and
between New Land, the Company and Prax Capital. Prax Capital and New Land,
through the Framework Agreement and the other related agreements, intend to
jointly participate in bidding for land use rights with respect to a parcel
of land and shall cause that land to be developed, operated and
sold.
  -16-
  The
Guarantee is a continuing Guarantee and shall remain effective until a
termination event occurs as contemplated by the Guarantee. If the Company fails
to timely 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 by the
Company shall include an interest accrued at the rate of 10% per annum from
the due date of such payment.
 
 During
the first nine months of 2009, the Company owned a 75% interest in Puhua (Xi’an)
Real Estate Development Co., Ltd. (“Puhua”), a real estate development company.
Given the Company’s controlling ownership interest, the accounts of Puhua have
been consolidated with the accounts of the Company, and a non-controlling
interest has been recorded for the non-controlling investors’ interests in the
net assets and operations of Puhua in accordance with the non-controlling
investor’s investments.
 
 Non-controlling
      interestNon-controlling
      Interest at December 31, 2008
                  
                  $
                  29,109,350Non-controlling
      interests’ share of loss for the three months ended March 31,
      2009
                  
                  
                  (47,135
                  )Non-controlling
      Interest at March 31, 2009
                  
                  $
                  29,062,215Non-controlling
      interests’ share of loss for the three months ended June 30,
      2009
                  
                  
                  (145,899
                  )Non-controlling
      Interest at June 30, 2009
                  
                  $
                  28,916,316Non-controlling
      interests’ share of loss for the three months ended September 30,
      2009
                  
                  
                  (86,121
                  )Non-controlling
      Interest at September 30, 2009
                  
                  $
                  28,830,195
 
 Note
14 – Shareholders' Equity
 
 Pursuant
to accounting guidance, "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, the Company
recorded the warrants issued through private placements in 2006 and 2007 as a
liability at their fair value on the date of grant and then marked them to
$1,403,464 at September 30, 2009 (December 31, 2008 - $458,461) using the
CRR Binomial Lattice Model with the following assumptions: expected life of 2.61
years; expected volatility - 105%, risk fee interest rate of 1.24% and dividend
rate - 0%. The change in fair value of warrants for the three months ended
September 30, 2009 was $(662,080) (2008 - $(1,111,740)). The change in fair
value of warrants for the nine months ended September 30, 2009 was
$1,353,688 (2008 - $(1,658,804)).
 
 As of
December 31, 2008, the Company accrued as a liability $78,600 of stock based
compensation expense for 54,583 shares of common stock granted by the Company to
various directors and executive in 2009. All these common stocks were
issued during the three months ended June 30, 2009.
 
 On June
28, 2009, $320,815 cash was received for 96,923 warrants exercised. The Company
recorded $189,005, the fair value of the warrants exercised, as additional
paid in capital. The Company also issued 96,923 common stocks for the 96,923
warrants exercised in July 2009.
 
 During
the three months ended September 30, 2009, $863,847 cash was received for
191,966 warrants exercised. The Company recorded $120,938, the fair value of the
warrants exercised, as additional paid in capital. The Company also issued
191,966 common stocks for the 191,966 warrants exercised.
 
 During
the three months ended September 30, 2009, an aggregate of 81,921 warrants were
exercised on a cashless basis. The Company recorded $98,742, the fair value of
the cashless warrants exercised, as additional paid in capital. In connection
with these transactions, the Company issued an aggregated of 33,450 common
stocks.
 
 On
September 28, 2009, the accrued security registration expenses of $2,400,000
were settled with the Company’s common stocks (see Note 12), and the settled
security registration expenses were recorded as common stock
subscribed.
 
 On
September 1, 2009, the Company granted 22,222 unissued common stocks to its
former CFO. The Company recorded $87,777, the fair value of the 22,222 shares
granted, as stock based compensation.
 
 Warrants
 
 Following
is a summary of the warrant activity:
 
 Number
      of
                      Warrants
                      Outstanding
                    
                    
                    WeightedAverageExercise
      PriceDecember
      31, 2008
                    
                    
                    4,381,980
                    
                    
                    $
                    4.96No
      warrants granted, expired or exercised during the 3 months ended March 31,
      2009
                    
                    
                    -
                    
                    
                    
                    -March
      31, 2009
                    
                    
                    4,381,980
                    
                    
                    $
                    5.00Expired
      during the 3 months ended June 30, 2009
                    
                    
                    (15,693
                    ))
                    
                    
                    3.31Exercised
      during the 3 months ended June 30, 2009
                    
                    
                    (96,923
                    )
                    
                    
                    3.31June
      30, 2009
                    
                    
                    4,269,364
                    
                    
                    $
                    5.00Expired
      during the 3 months ended September, 2009
                    
                    
                    (18,594
                    )
                    
                    
                    3.31Exercised
      during the 3 months ended September, 2009
                    
                    
                    (273,887
                    )
                    
                    
                    4.14September
      30, 2009
                    
                    
                    3,976,883
                    
                    
                    $
                    5.07
  -17-


Following
is a summary of the status of warrants outstanding at September 30,
2009:
 
 Outstanding
      WarrantsExercise
                      Price
                    
                    Number
                    
                    Average Remaining
                      Contractual Life$4.50
                    
                    
                    2,539,416
                    
                    2.61
      years$6.07
                    
                    
                    1,437,467
                    
                    3.42
      years
 
 Note
15 – Provision for Income Taxes
 
 As the
change in fair value of embedded derivatives and change in fair value of
warrants for the three months ended September 30, 2009 is not taxable, there was
no income tax provision for the change in fair value of embedded derivatives and
warrants.
 
 During
the three months ended September 30, 2009, the Company’s subsidiary, Hao Tai,
reached an income tax settlement with local tax bureau. As a result of the
settlement, the Company recorded $4,856,377 recovery of income
taxes.
 
 Note
16 – Net (Loss) Income per Share
 
 Earnings
per share for the nine months ended September 30, 2009 and
2008 were determined by dividing the net (loss) income for the years by the
weighted average number of both basic and diluted shares of common stock and
common stock equivalents outstanding.
 
 3
      Months
                              
                              
                              3
      Months
                              
                              
                              9
      Months
                              
                              
                              9
      MonthsSeptember
      30,
                              
                              
                              September
      30,
                              
                              
                              September
      30,
                              
                              
                              September
      30,2009
                              
                              
                              2008
                              
                              
                              2009
                              
                              
                              2008Numerator(Loss)Income
      attributable to common shareholders - basic
                              
                              $
                              12,714,128
                              
                              
                              $
                              1,447,072
                              
                              
                              $
                              3,519,860
                              
                              
                              $
                              2,630,636Effect
      of dilutive securities:Diluted
      warrants
                              
                              (2,380,672)
                              
                              
                              (256,091
                              )
                              
                              -
                              
                              
                              (482,642
                              )Diluted
      convertible debt
                              
                              (2,555,212)
                              
                              
                              -
                              
                              
                              -
                              
                              
                              -Income
      attributable to common shareholders - diluted
                              
                              $
                              7,778,244
                              
                              
                              $
                              1,220,981
                              
                              
                              $
                              3,519,860
                              
                              
                              $
                              2,147,994DenominatorWeighted
      average shares outstanding - basic
                              
                              
                              31,134,137
                              
                              
                              30,877,453
                              
                              
                              30,987,760
                              
                              
                              30,389,712Effect
      of dilutive securities:Common
      stock subscribed
                              
                              27,278
                              
                              
                              -
                              
                              
                              9,193
                              
                              
                              -Diluted
      warrants
                              
                              195,039
                              
                              
                              5,030
                              
                              
                              -
                              
                              
                              46,748Diluted
      convertible debt
                              
                              1,615,799
                              
                              
                              -
                              
                              
                              -
                              
                              
                              -Weighted
      average shares outstanding - diluted
                              
                              32,972,253
                              
                              
                              30,882,483
                              
                              
                              30,996,953
                              
                              
                              30,436,461Earnings
      per shareBasic
                              
                              $
                              0.41
                              
                              
                              $
                              0.05
                              
                              
                              $
                              0.11
                              
                              
                              $
                              0.09Diluted
                              
                              $
                              0.24
                              
                              
                              $
                              0.04
                              
                              
                              $
                              0.11
                              
                              
                              $
                              0.07
 
 For the
nine months ended September 30, 2009, 3,976,883 outstanding warrants issued in
2007 and 2008 and 1,615,799 shares conversion option for the convertible debt
issued in 2008 (see Note 12) were not included in the calculation because
they would have an anti-diluted effect.
   -18-
 
 Note
17 – Commitments and Contingencies
 
 The
Company leases part of its office and hotel space under various operating lease
agreements. The future minimum rental payments required under the
operating lease agreements are summarized below.
  Payment due by periodCommitments
      and Contingencies
                    
                    Total
                    
                    
                    Less than
                      1 year
                    
                    
                    1-3 years
                    
                    
                    3-5 years
                    
                    
                    Over 5 yearsRental
      lease
                    
                    $
                    336,859
                    
                    
                    $
                    86,292
                    
                    
                    $
                    52,806
                    
                    
                    $
                    52,806
                    
                    
                    $
                    144,955Rubber
      dam construction
                    
                    
                    1,025,461
                    
                    
                    
                    1,025,461Land
      use right
                    
                    
                    2,592,951
                    
                    
                    
                    
                    
                    
                    
                    2,592,951Total
                    
                    $
                    3,997,854
                    
                    
                    $
                    1,149,405
                    
                    
                    $
                    2,644,207
                    
                    
                    $
                    52,775
                    
                    
                    $
                    151,467
  The
Company entered into a contract with Xi’an Baqiao local government for a rubber
dam construction project. The Company is committed to expend approximately
$1,025,461 on this project.
 
 As of
September 30, 2009, the Company had 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 of the land use
right certificate.
 
 Note
18 – Subsequent Events
 
 The
Company evaluated subsequent events through November 9, 2009, the date the
interim condensed consolidated financial statements were available to be
issued.
 
 Pursuant
to the Amendment dated September 28, 2009, the Company issued 614,290 common
stock shares to settle $2,400,000 accrued security registration expenses
(see Note 12) on October 21, 2009.
 
 On July
15, 2009, the company entered a letter of Intent to acquire an 11 acre tract of
land in the center of Xi’an, China. The Company intends to develop a large
mid-upper income residential and commercial development project on this site,
with gross floor area of 200,000 square meters. The total consideration for the
land acquisition will be in the range of $18 to $22 million and is subject to
finance this project through a combination of internal company funds, revenue
derived from sales of existing projects and bank loans from China Construction
Bank, which enjoys a long-term cooperative relationship with the company. As of
November 10, 2009, the acquisition is still at the planning and preparation
stage. The Company expects to reach an official agreement with the current land
owner by December 31, 2009.
  -19-
  Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
 
 FORWARD-LOOKING
STATEMENTS
  Some of
the statements contained in this Form 10-Q are not historical facts and are
forward-looking statements, which can be identified by the use of terminology
such as estimates, projects, plans, believes, expects, anticipates, intends, or
the negative or other variations, 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-Q 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 the risks we face, and actual events and
conditions that 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 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-Q 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.
 
 Critical
Accounting Policies and Estimates
 
 We
prepare our consolidated financial statements in accordance with U.S. GAAP,
which requires us to make judgments, estimates and assumptions that affect (i)
the reported amounts of our assets and liabilities, (ii) the disclosure of our
contingent assets and liabilities at the end of each reporting period and (iii)
the reported amounts of revenues and expenses during each reporting period. We
continually evaluate these estimates based on our own experience, knowledge and
assessment of current business and other conditions, our expectations regarding
the future based on available information and reasonable assumptions, which
together form our basis for making judgments about matters that are inherently
uncertain. Since the use of estimates is an integral component of the financial
reporting process, our actual results could differ from those estimates. Some of
our accounting policies require a higher degree of judgment than others in their
application.
 
 When
reading our financial statements, you should consider (i) our selection of
critical accounting policies, (ii) the judgment and other uncertainties
affecting the application of such policies and (iii) the sensitivity of reported
results to changes in conditions and assumptions. We believe the following
accounting policies involve the most significant judgments and estimates used in
the preparation of our financial statements.
  Warrants
and derivative liability
 
 As of
September 30, 2009, the Company has approximately $4.7 million of warrants
liability and $3.8 million of fair value of embedded derivatives on the balance
sheet, representing approximately 4.0% and 3.2% of the total liabilities,
respectively.
 
 We
utilize the Cox-Rubinstein-Ross (“CRR”) Binomial Lattice Model to estimate the
fair values of warrants liability and embedded derivatives. The CRR
model depends on the following assumptions: the Company’s common stock
price underlying the warrants; strike price; conversion price; expected life;
expected volatility; risk free interest rate; and dividend rate. We used the CRR
Binomial Lattice Model for the past 3 years and we do not expect any significant
changes to assumptions except for the common share price and the expected
volatility.
 
 We
estimate the fair value of warrants liability and embedded derivatives every
quarter and recognize the change of fair value as gain or loss on our
current quarter consolidated statement of income. The fair values of warrants
liability and embedded derivatives have changed during the past few years
according to the valuation models and the fair values are positively related to
the market share price movement and the volatility.
 
 During
the three months ended September 30, 2009, our common stock price experienced
large fluctuations with the price decreasing from $5.58 on July 1, 2009 to $3.85
on September 30, 2009. The decrease in stock price caused a decrease in fair
value for warrants liability and embedded derivatives. As a result, we
recognized approximately $3.04 million as a change in fair value of warrants and
$2.70 million as a change in fair value of embedded derivatives, which are all
non-cash gains.
  -20-
 
 The
following table summarizes the fair value of warrant liability and embedded
derivative as at various periods.
  September 30,
                    2009
                  
                  
                  December 31,
                    2008Fair
      value of warrants liability
                  
                  $
                  4,721,195
                  
                  
                  $
                  1,117,143Fair
      value of embedded derivatives
                  
                  $
                  3,777,671
                  
                  
                  $
                  760,398
  The
following tables summarize all the warrants and conversion option outstanding
and the assumptions used for their valuations as of December 31, 2008 and
September 30, 2009.
  Investor Warrants:
                  
                  9/30/2009
                  
                  
                  12/31/2008Strike
      price
                  
                  
                  6.07
                  
                  
                  
                  6.07Market
      price
                  
                  
                  3.85
                  
                  
                  
                  1.29Valuation
      date
                  
                  9/30/2009
                  
                  
                  12/31/2008Expiry
      date
                  
                  2/28/2013
                  
                  
                  2/28/2013Volatility
                  
                  
                  105.00
                  %
                  
                  
                  90.00
                  %Risk
      free rate
                  
                  
                  1.63
                  %
                  
                  
                  1.33
                  %Option
      value
                  
                  
                  2.30810
                  
                  
                  
                  0.45822#
      of warrants
                  
                  
                  1,437,467
                  
                  
                  
                  1,437,467Value
                  
                  
                  3,317,830
                  
                  
                  
                  658,682
 
 Investor Warrants: 5-7-2007
                  
                  9/30/2009
                  
                  
                  12/31/2008Strike
      price
                  
                  
                  4.50
                  
                  
                  
                  4.50Market
      price
                  
                  
                  3.85
                  
                  
                  
                  1.29Valuation
      date
                  
                  9/30/2008
                  
                  
                  12/31/2008Expiry
      date
                  
                  5/9/2012
                  
                  
                  5/9/2012Vlolatility
                  
                  
                  105.00
                  %
                  
                  
                  90.00
                  %Risk
      free rate
                  
                  
                  1.24
                  %
                  
                  
                  1.09
                  %Option
      value
                  
                  
                  0.55267
                  
                  
                  
                  0.16402#
      of warrants
                  
                  
                  2,539,416
                  
                  
                  
                  2,731,382Value
                  
                  
                  1,403,464
                  
                  
                  
                  448,011
  -21-
  *Warrants
                      issued through
                      private
                      placement
                    
                    12/31/2008
                    
                    
                    12/31/2008
                    
                    
                    12/31/2008
                    
                    
                    12/31/2008
                    
                    
                    12/31/2008
                    
                    
                    12/31/2008Strike
      price
                    
                    
                    3.31
                    
                    
                    
                    3.31
                    
                    
                    
                    3.31
                    
                    
                    
                    3.31
                    
                    
                    
                    3.31
                    
                    
                    
                    3.31Market
      price
                    
                    
                    1.29
                    
                    
                    
                    1.29
                    
                    
                    
                    1.29
                    
                    
                    
                    1.29
                    
                    
                    
                    1.29
                    
                    
                    
                    1.29Valuation
      date
                    
                    12/31/2008
                    
                    
                    12/31/2008
                    
                    
                    12/31/2008
                    
                    
                    12/31/2008
                    
                    
                    12/31/2008
                    
                    
                    12/31/2008Expiry
      date
                    
                    6/28/2009
                    
                    
                    7/7/2009
                    
                    
                    8/21/2009
                    
                    
                    6/28/2009
                    
                    
                    7/7/2009
                    
                    
                    8/21/2009Volatility
                    
                    
                    90.00
                    %
                    
                    
                    90.00
                    %
                    
                    
                    90.00
                    %
                    
                    
                    90.00
                    %
                    
                    
                    90.00
                    %
                    
                    
                    90.00
                    %Risk
      free rate
                    
                    
                    0.27
                    %
                    
                    
                    0.27
                    %
                    
                    
                    0.30
                    %
                    
                    
                    0.27
                    %
                    
                    
                    0.27
                    %
                    
                    
                    0.30
                    %Option
      value
                    
                    
                    0.0372
                    
                    
                    
                    0.04086
                    
                    
                    
                    0.06394
                    
                    
                    
                    0.0372
                    
                    
                    
                    0.04086
                    
                    
                    
                    0.06394#
      of warrants
                    
                    
                    99,231
                    
                    
                    
                    11,536
                    
                    
                    
                    75,000
                    
                    
                    
                    8,770
                    
                    
                    
                    1,020
                    
                    
                    
                    17,574Value
                    
                    
                    3,692
                    
                    
                    
                    471
                    
                    
                    
                    4,796
                    
                    
                    
                    326
                    
                    
                    
                    42
                    
                    
                    
                    1,124
  *During
the third quarter of 2009, 81,921 warrants have been exercised, and the rest of
18,594 warrants have expired unexercised. As of September 30, 2009, there were
no warrants issued through private placement outstanding.
 
 Conversion
      Option Valuation:
                    
                    9/30/2008
                    
                    
                    12/31/2008Strike
      price
                    
                    
                    5.57
                    
                    
                    
                    5.57Market
      price
                    
                    
                    3.85
                    
                    
                    
                    1.29Valuation
      date
                    
                    9/30/2008
                    
                    
                    12/31/2008Expiry
      date
                    
                    2/28/2013
                    
                    
                    2/28/2013Volatility
                    
                    
                    105.00
                    %
                    
                    
                    90.00
                    %Risk
      free rate
                    
                    
                    1.59
                    %
                    
                    
                    1.31
                    %Option
      value
                    
                    
                    2.33796
                    
                    
                    
                    0.4706Host
      Value - principal
                    
                    
                    9,000,000
                    
                    
                    
                    9,000,000Host
      Value - interest (1)
                    
                    
                    0
                    
                    
                    
                    0Shares
      issuable on conversion
                    
                    
                    1,615,799
                    
                    
                    
                    1,615,799Host
      Value - principal
                    
                    
                    3,777,670
                    
                    
                    
                    760,398Host
      Value - interest (1)
                    
                    
                    0
                    
                    
                    
                    0Option
      value - total
                    
                    
                    3,777,670
                    
                    
                    
                    760,398Derivative
      value
                    
                    
                    3,777,670
                    
                    
                    
                    760,398
 
 Real
estate held for development or sale, intangible asset and deposits on land use
rights
 
 As of
November 10, 2009, our market capitalization is approximately $119.9
million.
 
 We
evaluate the recoverability of our real estate developments taking into account
several factors including, but not limited to, our plans for future operations,
prevailing market prices for similar properties and projected cash
flows.
 
 We review
real estate projects, whenever events or changes in circumstances indicate that
the carrying amount of an asset may no longer be recoverable. When these events
occur, we measure impairment by comparing the carrying value to the estimated
undiscounted future cash flows expected resulting from the use of the assets and
their eventual disposition. If the total of the expected undiscounted cash flow
is less than the carrying amount of the assets, we recognize an impairment loss
based on the fair value of the assets.
 
 Our
significant judgments and estimates related to impairment include our
determination if an event has occurred to warrant an impairment test. If a test
is required, other significant judgments and estimates will include our
expectations of future cash flows and the calculation of the fair value of the
impaired assets.
  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 undiscounted future cash flows of the assets.
Write-downs of real estate costs deemed impaired are recorded as adjustments to
the cost basis. There has been no impairment on real estate inventories and no
impairment loss has been recorded for the three and nine months ended September
30, 2009 and 2008.
  -22-
 
 The
following summarizes the components of real estate inventories as at September
30, 2009 and December 31, 2008:
 
 September 30, 2009
                  
                  
                  December 31, 2008Finished
      projects
                  
                  $
                  11,584,242
                  
                  
                  $
                  10,181,827Construction
      in progress
                  
                  
                  96,636,065
                  
                  
                  
                  50,468,184Total
      real estate held for development or sale
                  
                  $
                  108,220,307
                  
                  
                  $
                  60,650,011
 
 Intangible
asset
  The
Company’s intangible asset is related to the exclusive rights to develop 487
acres of land in the Baqiao area acquired in 2007. The Company believes that the
cooperation agreement with Baqiao District Government will be extended after
June 2011. Based on the prevailing market condition in Xi’an city we concluded
that there is no impairment.
 
 According
to the agreement with Baqiao District Government, at the beginning of each year,
the Company will prepare the annual work plan and have it approved by Baqiao
District Government. The annual work plan will include the detailed projects
that will be started during that year and the Baqiao District Government is
responsible for the land clearance. Due to the delay of land clearance progress,
certain scheduled projects have been postponed. The Baqiao District Government
acknowledged the delay and informed us of their intention to extend the
agreement. Currently, we still have 348 acres land undeveloped and $41.7 million
in intangible assets. If there’s any event that leads the Company to believe
it’s unlikely to extend the agreement, we will assess the impairment of the
intangible asset and write off the intangible asset from our balance
sheet.
 
 As of
September 30, 2009 and December 31, 2008, intangible asset consists of the
following:
 
 September
      30, 2009
                  
                  
                  December
      31, 2008Intangible
      acquired
                  
                  $
                  47,308,685
                  
                  
                  $
                  47,334,342Accumulated
      amortization
                  
                  
                  (5,654,264)
                  
                  
                  
                  (1,290,682)Intangible
      assets, net
                  
                  $
                  41,654,421
                  
                  
                  $
                  46,043,660
  The
Company evaluates its intangible assets for impairment whenever events or
changes in circumstances indicate the carrying value may not be recoverable.
Based on the estimated future cash flows, the Company records a write-down for
impairments, if appropriate. For the three and nine months ended September 30,
2009 and 2008, the Company has recorded $0 of impairment on this intangible
asset.
  The
Company amortized the intangible asset based on the percentage of the profit
margin realized over the total expected profit margin to be realized from the
487 acre land in the Baqiao project. During fiscal 2007, the Company sold 18.5
acres of land and the related profit margin realized on that sale
represented 2.4% of the total estimated profit margin on the whole 487 acre
project, as a result, the Company amortized $1,157,758 (2.4%) of the
total intangible asset during fiscal 2007. This method is intended to match the
pattern of amortization with the income-generating capacity of the intangible
asset. For the year ended December 31, 2008, the Company has recorded $0 of
amortization on this intangible asset。Amortization
expense for the three months ended September 30, 2009 and 2008 amounted to $0.
Amortization expense for the nine months ended September 30, 2009 and 2008
amounted to $4,360,003 and $0, respectively. The amortization expense was
capitalized and included in the real estate construction in
progress.
 
 Management
re-evaluated the expected profit margin from the 487 acres of land as at
September 30, 2009 and recalculated the intangible amortization related to the
2008 land sales based on the new estimate. As a result, management found the
difference resulting from the change of estimate was not material.
Therefore no adjustment was made in the three and nine months ended September
30, 2009 due to the change of accounting estimate of total profit margin on
the 487 acres of land.
  -23-
  Deposits
on land use rights
 
 September 30, 2009
                  
                  
                  December 31, 2008Deposits
      on land use rights
                  
                  
                  28,432,993
                  
                  
                  
                  47,333,287
 
 The
Company conducts regular reviews of the deposits on land use right. After review
and assessment, the Company concluded that there was no significant
decrease in the market price and therefore no impairment write-down was
required. According to E House (China) Real Estate Research Institute the
average residential sale price in Xi’an city was stable in the fiscal
quarter ended September 30, 2009. The average sale price increased to
4,962 RMB per square meter (approximately US$ 726 per
square meter) from 4,642 RMB in the second quarter 2009, representing
about 7% year-on-year growth.
  Material
trends and uncertainties that may impact continuing operations
  Changes
in national and regional economic conditions, as well as in areas where we
conduct our operations and where prospective purchasers of our homes live, may
result in more caution on the part of homebuyers resulting in fewer home
purchases. According to data from the Xi’an Bureau of Statistics, Xi’an city’s
real estate transaction volume (in terms of sq. meter signed) decreased about
30% in 2008 compared to 2007. All our projects are currently in Xi’an city,
the downturn of the real estate market in Xi’an caused a decline in
operating revenues in 2008. In 2009, the market has improved and
transaction volume has increased compared to same period of 2008. During the
third quarter of 2009, our revenue increased approximately 204% over same period
of 2008.
 
 Virtually
all purchasers of our homes finance their acquisitions through lenders providing
mortgage financing. A substantial increase in mortgage interest rates or
unavailability of mortgage financing would adversely affect the ability of
prospective homebuyers to obtain the financing they need in order to purchase
our homes, as well as the ability of prospective move-up homebuyers to sell
their current homes. For example, if mortgage financing became less available,
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 our competitors) may
reduce prices in an effort to compete for home buyers. A reduction in pricing
could result in a decline in revenues and margins. We do not expect any
substantial change in current mortgage policy or the prevailing
mortgage rate in the near future.
  The
real estate development industry is capital intensive, requiring 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 funds and 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 form of
debt or equity financing from a variety of potential sources, including bank
financing and/or securities offerings. The availability of borrowed funds, to be
utilized for land acquisition, development and construction, may be greatly
reduced, and the lending community may require larger amounts of equity to
be invested by borrowers in a project in connection with new loans. Failure
to obtain sufficient capital to fund planned capital and other expenditures
could have a material adverse effect on our business.
 
 In
addition, regulatory requirements could force us to incur significant
liabilities and operating expenses and could restrict our business activities.
We are subject to statutes and rules regulating, among other things, certain
developmental matters, building and site design, and matters concerning the
protection of health and the environment. Our operating expenses may be
increased by governmental regulations such as building permit allocation
ordinances and impact 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 grant the necessary licenses, permits and
approvals could have an adverse effect on our operations.
 
 As of
September 30, 2009, we had $19,089,130 of cash and cash equivalents, compared to
$37,425,340 as of December 31, 2008, a decrease of $18,336,210. However, cash
and cash equivalents had an increase of $8,955,530 since June 30,
2009.
 
 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 future projects, through cash provided by operations and
additional funds raised by future financings. Upon acquiring land for
future development, we intend to raise funds to develop our projects by
obtaining mortgage financing mainly 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 our real estate will secure the loans
needed. We believe that adequate cash will be available to fund our
operations.
  -24-
 
 BUSINESS
  The
Company 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, the Company has been engaged in the acquisition,
development, management and sales of residential and commercial real estate
properties and land through its subsidiaries in China.
  The
Company is the first and only Chinese real estate development company traded on
NASDAQ.
  By
leveraging its background and capabilities, the Company has been able
to capitalize on the supply of available land to develop residential and
commercial properties, further increase its brand recognition, and outperform
its competitors in the development of medium sized residential and commercial
real estate projects in greater Xi'an.
 
 The
Company is the leading non-government middle-and-upper income residential real
estate development company in Xi'an.
 
 Our
Property Projects
 
 We
provide three fundamental types of real estate development
products:
 
 ▪
              High-rise
      apartment buildings, typically 19 to 33 stories, usually constructed of
      steel-reinforced concrete, that are completed within approximately 24
      months of securing all required
permits.
 
 ▪
              Mid-rise
      apartment buildings, typically 7 to 18 stories, usually constructed of
      steel-reinforced concrete, that are completed within 12 to 18 months of
      securing all required permits.
 
 ▪
              Low-rise
      apartment buildings and villas, typically 2 to 6 stories, often
      constructed of steel-reinforced concrete, that are completed within
      approximately 12 months of securing all required
  permits.
 
 Our
projects can be classified into one of four stages of development:
 
 ▪
              Projects
      in planning, in which 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;
 
 ▪
              Projects
      in process, which include developments where we have typically secured the
      development and land use rights, and where the site planning,
      architecture, engineering and infrastructure work is in
      progress;
 
 ▪
              Projects
      under construction, where the building construction has started but has
      not yet been completed; and
 
 ▪
              Completed
      projects with units available for sale, where the construction has been
      finished and most of the units in the buildings have been sold or
      leased.
  -25-
 
 Projects
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
                                      September30,
                                      2009
                                      (m2)JunJing
      II
                                      Phase
      One
                                    
                                    Multi-Family
                                      residential
      &
                                      Commercial
                                    
                                    Q3/2007
                                      -
      Q3/2009
                                    
                                    
                                    
                                    Q2/2008
                                    
                                    
                                    
                                    39,524
                                    
                                    
                                    
                                    136,012
                                    
                                    
                                    
                                    111,463JunJing
      II
                                      Phase
      Two
                                    
                                    Multi-Family
                                      residential
      &
                                      Commercial
                                    
                                    Q2/2009
                                      -
      Q2/2011
                                    
                                    
                                    
                                    Q2/2009
                                    
                                    
                                    
                                    29,800
                                    
                                    
                                    
                                    112,556
                                    
                                    
                                    
                                    26,062Puhua
      Project
                                    
                                    Multi-Family
                                      residential
      &
                                      Commercial
                                    
                                    Q2/2009
                                      -
      Q3/2014
                                    
                                    
                                    
                                    Q4/2009
                                    
                                    
                                    
                                    192,582
                                    
                                    
                                    
                                    610,000
                                    
                                    
                                    
                                    -Project name
                                    
                                    Total
                                      Number of
                                      Units
                                    
                                    Number of
                                      Units sold by
                                      September30,
                                      2009
                                    
                                    
                                    Estimated
                                      Revenue
                                      ($ millions)
                                    
                                    
                                    Contract
                                      Revenue by
                                      September30,
                                      2009
                                      ($ millions)
                                    
                                    
                                    Recognized
                                      Revenue by
                                      September30,
                                      2009
                                      ($ millions)JunJing
      II
                                      Phase
      One
                                    
                                    1,182
                                    
                                    
                                    1,077
                                    
                                    
                                    
                                    95.6
                                    
                                    
                                    
                                    68.5
                                    
                                    
                                    
                                    66.5JunJing
      II
                                      Phase
      Two
                                    
                                    1,015
                                    
                                    
                                    244
                                    
                                    
                                    
                                    94.1
                                    
                                    
                                    
                                    19.1
                                    
                                    
                                    
                                    9.8Puhua
      Project
                                    
                                    5,000
                                    
                                    
                                    -
                                    
                                    
                                    
                                    700.0
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
 
 JunJing II: JunJing II is
located at 38 East Hujiamiao, Xi’an, with a total gross floor area (“GFA”) of
approximately 248,568 square meters. It is the first Canadian style residential
community with “green and energy-saving” characteristics in Xi’an and has won
the “National Energy Saving Project” award. 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 pre-sale campaign in the second quarter of 2008.
 
 As of
September 30, 2009, our customers of JunJing II Phase One have signed
pre-sale purchase agreements for apartments with purchase prices totaling $68.5
million, of which we have recognized $66.5 million in revenues, based on
the percentage of completion method of accounting.
 
 The
construction of Phase Two commenced in the second quarter of 2009 and pre-sales
started within the same quarter. As of September 30, 2009, the contract revenue
for Phase Two was $ 19.1 million, of which we have recognized $ 9.8 million
in revenues. Revenue will continue to be recognized as construction
advances.
 
 For
JunJing II and Puhua projects, approximately $8.7 million of pre-sale
payments were booked as advances from customers and will be recognized as
revenues as construction advances.
 
 Puhua: The Puhua
project, the Company’s 79 acre joint venture located in the Baqiao project, has
a total land area of 192,582 square meters and an expected gross floor area
of approximately 610,000 square meters. In November 2008, the Company entered
into an agreement with Prax Capital China Real Estate Fund I, Ltd., to form
a joint venture. The joint venture was formed in late 2008, subject to
certain conditions and approvals, which have been satisfied. Prax Capital Real
Estate Holdings Limited invested US$29.3 million in cash in the joint
venture, the joint venture acquired the land use rights early in the first
quarter of 2009, and the joint venture is proceeding with the
project.
 
 The
construction of the Puhua project began in June 2009. The whole project, which
consists of four phases, is expected to be completed in the third quarter of
2014, with estimated revenues of $700 million. The Company began
accepting pre-sale contracts for units in the Puhua Phase One project on October
24th. During
the inaugural sales weekend, the Company sold 133 out of 192 residential units
made available with a total gross floor area ("GFA") of approximately 16,388 sq.
meters. The contract amount for the units sold totaled $10.53 million and
included residential space within a high-rise building, a mid- rise building and
three garden homes.
  -26-
 
 Projects
under planning and 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
                        
                        Land
                          Development
                        2009
      - 2020
                        
                        
                        N/A
                        
                        
                        
                        N/A
                        
                        
                        
                        N/A
                        
                        
                        
                        N/AJunJing
      III
                        
                        Multi-Family
                          residential
      &
                          Commercial
                        Q4/2009
                          - Q4/2011
                        
                        
                        Q1/2010
                        
                        
                        
                        8,094
                        
                        
                        
                        47,586
                        
                        
                        
                        434Park
      Plaza
                        
                        Multi-Family
                          residential
      &
                          Commercial
                        Q3/2010
                          - Q4/2014
                        
                        
                        Q4/2010
                        
                        
                        
                        44,250
                        
                        
                        
                        180,000
                        
                        
                        
                        2,000Golden
      Bay
                        
                        Multi-Family
                          residential
      &
                          Commercial
                        Q4/2010
                          - Q4/2014
                        
                        
                        Q1/2011
                        
                        
                        
                        146,099
                        
                        
                        
                        378,887
                        
                        
                        
                        N/A
 
 Baqiao New Development
Zone:  On March 9, 2007, we entered into a Share Transfer
Agreement with the shareholders of Xi’an New Land Development Co., Ltd. (New
Land), under which the Company acquired 32,000,000 shares of New Land,
constituting 100 percent equity ownership of New Land. This acquisition gave the
Company the exclusive right to develop and sell 487 acres of land in the
Eastern part of Xi’an city. We believe this represents a major growth
opportunity for the Company.
 
 Xi’an has
designated the Baqiao District as a major resettlement zone in which the
city expects an middle – to upper – income population of 900,000 to settle. The
Xi’an government intends to create a successful development comparable to the
development of Pudong in Shanghai, which has resulted in new economic
opportunities and provided housing for Shanghai’s growing
population.
 
 The Xi’an
municipal government plans to invest 50 billion RMB (over $6 billion) in
infrastructure for the Baqiao New Development Zone. The construction of a
large-scale public wetland park is well underway; which will embellish the
natural environment adjacent to our Baqiao project.
  -27-
 
 Through
      its New Land subsidiary, the Company sold approximately 18 acres to
      another developer in 2007 and generated approximately $24.41 million in
      revenue.
                
                In
      2008, we initiated a joint venture with Prax Capital Real Estate Holdings
      Limited (Prax Capital) to develop 79 acres within the Baqiao project,
      which represents the first phase of the Baqiao project’s development. Prax
      Capital invested $29.3 million in cash in the joint venture. The project
      is further described in the Puhua section.
                
                After
      selling approximately18 acres, placing 79 acres into the joint venture
      with Prax Capital, and setting aside approximately 42 acres for the newly
      planned Golden Bay project, approximately 348 acres remain for the Company
      to develop in the Baqiao project.
                
                JunJing III: JunJing
      III is near our JunJing II project and the city expressway. It has an
      expected total gross floor area of approximately 47,586 square
      meters. The project will consist of 3 high rise buildings, each 28 to 30
      stories high. The project is targeting middle to high income customers who
      require a high quality living environment with convenient transportation
      to the city center. We plan to start construction during the fourth
      quarter of 2009 and expect pre-sales to begin during quarter one of 2010.
      The total estimated revenues from this project are approximately $46
      million.
 
 Park Plaza: In July 2009, the
Company entered into a Letter of Intent to acquire 44,250 square meters of
land in the center of Xi'an for the Park Plaza project. The Company intends to
develop a large mid-upper income residential and commercial development project
on this site, with a gross floor area of 180, 000 square meters. The four-year
construction of Park Plaza is expected to begin in the third quarter 2010.
We anticipate accepting pre-sale purchase agreements in the fourth quarter of
2010, and revenues from pre-sale agreements will be recognized when all revenue
recognition criteria have been met. The total revenue from Park Plaza is
estimated to be $206 million.
 
 Golden Bay: The Golden Bay
project is located within the Baqiao project, with a total gross floor area of
378,887 square meters. The Golden Bay project will consist of residential
buildings as well as a commercial area. Construction is anticipated to begin in
the fourth quarter of 2010, and we expect to begin accepting pre-sale purchase
agreements in the first quarter of 2011. Revenue will be recognized when
all revenue recognition criteria have been met.
 
 Completed
Projects with units available for sale
  Project name
                        
                        Type of
                          Projects
                        
                        Completion
                          Date
                        
                        
                        Total Site
                          Area
                          (m2)
                        
                        
                        Total GFA
                          (m2)
                        
                        
                        Total
                          Number of
                          Units
                        
                        
                        Number of
                          Units sold by
                          September 30,
                          2009Tsining
      Home IN
                        
                        Multi-Family
                          residential
      &
                          Commercial
                        
                        
                        Q4/2003
                        
                        
                        
                        8,483
                        
                        
                        
                        30,072
                        
                        
                        
                        215
                        
                        
                        
                        213Tsining-24G
                        
                        Hotel,
                          Commercial
                        
                        
                        Q2/2006
                        
                        
                        
                        8,227
                        
                        
                        
                        43,563
                        
                        
                        
                        773
                        
                        
                        
                        745JunJing
      I
                        
                        Multi-Family
                          residential
      &
                          Commercial
                        
                        
                        Q3/2006
                        
                        
                        
                        55,588
                        
                        
                        
                        167,931
                        
                        
                        
                        1,671
                        
                        
                        
                        1,564
  Tsining Home IN: 88 North
Xingqing Road, Xi’an. Located near the city center, the Home IN project consists
of 215 two to three bedroom western-style apartments. The total
construction area is 30,072 square meters. The project, completed in December
2003, generated total sales of $12.79 million.
  -28-
  Tsining-24G: 133 Changle
Road, Xi’an. 24G is a redevelopment of an existing 26 floor building, located in
the center of the most developed commercial belt of the city. This upscale
development includes secure 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. Target Customers were white-collar workers, small business owners and
traders as well as entrepreneurs. Total area available for residential use was
43,563 square meters, covering 773 one to three bedroom service apartments. The
project started construction in June 2005 and was completed in June 2006 with
total sales of $41.68 million.
  Tsining JunJing Garden I: 369
North Jinhua Road, Xi’an.JunJing Garden I was the first German style residential &
commercial community in Xi’an, designed by the world-famous WSP architectural
design house. Its target customers were local middle income families. The
project has 15 residential apartment buildings consisting of 1,671 one to five
bedroom apartments. The Garden features secure parking, cable TV, hot water,
heating systems and access to natural gas. Total GFA available was 167,931
square meters. JunJing Garden I is also a commercial venture that houses
small businesses serving the needs of JunJing Garden I residents and the
surrounding residential communities. The project was completed in September 2006
and generated total revenue of $50.38 million.
 
 CONSOLIDATED
OPERATING RESULTS
 
 Three
Months Ended September 30, 2009 Compared With Three Months Ended September 30,
2008
 
 Revenues
 
 Our
revenues 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 the
third quarter of 2009, most of our revenues came from Tsining JunJing II phases
one and two. JunJing II phase one 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 began to be delivered to customers at
the end of October, 2009. JunJing II phase two consists of 12 buildings, mainly
middle and high rises, and began to accept pre-sale contracts in the second
quarter 2009.
 
 Effective
January 1, 2008, the Company adopted the percentage of completion method of
accounting for revenue recognition for all building construction projects in
progress, including the Tsining JunJing II. The full accrual method was
used before that date for all of our residential, commercial and infrastructure
projects. Infrastructure projects continue to be accounted for using the full
accrual method of accounting.
 
 Three months
                          
                          
                          Three monthsended
                          
                          
                          endedRevenues by project:
                          
                          September30, 2009
                          
                          
                          September30, 2008US
      dollarsProject
      Under ConstructionTsining
      JunJing II Phase One
                          
                          $
                          12,130,788
                          
                          
                          $
                          6,893,604Tsining
      JunJing II Phase Two
                          
                          
                          8,804,441
                          
                          
                          
                          -Puhua
      Project
                          
                          
                          -
                          
                          
                          
                          -Projects
      CompletedTsining
      JunJing I
                          
                          
                          (88,081
                          )
                          
                          
                          1,686Tsining-24G
                          
                          
                          1,588,845
                          
                          
                          
                          63,476Tsining
      In Home
                          
                          
                          292,289
                          
                          
                          
                          49,141Additional
      Project
                          
                          
                          -
                          
                          
                          
                          109,918Infrastructure
      ProjectBaqiao
      infrastructure construction
                          
                          
                          -
                          
                          
                          
                          357,867Project
      In ProcessBaqiao
                          
                          
                          -
                          
                          
                          
                          -Revenues
      from the sale of properties
                          
                          $
                          22,728,282
                          
                          
                          $
                          7,475,692
  -29-


The
revenues from the sale of properties in the three months ended September 30,
2009 increased 204% to $22,728,282 from $7,475,692 in the same period of 2008.
The increase was primarily due to the increased revenue from Tsining JunJing II
Phase One and Phase Two.





Our
project in process is the Baqiao project where we have the exclusive right to
develop 487 acres. In 2007, we acquired the development rights and recognized
$24,405,717 in revenue as a result of an approximately 18 acre land sale to an
unrelated developer. Near the end of 2008, we initiated a joint venture with
Prax Capital to co-develop 79 acres within the Baqiao project. Prax Capital
invested $29.3 million in cash into the joint venture. After setting aside
approximately 42 acres for the newly planned Golden Bay project, approximately
348 acres remain available for development in the Baqiao project.





Revenues by project:
                      
                      3 Months Ended
                        September 30, 2009
                      
                      
                      3 Months Ended
                        September 30, 2008US$Project
      Under ConstructionTsining
      JunJing II Phase Two contract sales
                      
                      $
                      17,130,432Revenue
                      
                      $
                      8,804,441Total
      gross floor area (GFA) available for sale
                      
                      
                      112,556GFA
      sold during the period
                      
                      
                      23,606Remaining
      GFA available for sale
                      
                      
                      86,494Percentage
      of completion
                      
                      
                      47.17
                      %Percentage
      GFA sold during the period
                      
                      
                      21.0
                      %Percentage
      GFA sold to date
                      
                      
                      23.2
                      %Average
      sales price per GFA
                      
                      $
                      726Tsining
      JunJing II Phase one contract sales
                      
                      $
                      4,824,465
                      
                      
                      $
                      7,012,290Revenue
                      
                      $
                      12,130,788
                      
                      
                      $
                      6,893,604Total
      gross floor area (GFA) available for sale
                      
                      
                      136,012
                      
                      
                      
                      136,012GFA
      sold during the period
                      
                      
                      6,801
                      
                      
                      
                      10,975Remaining
      GFA available for sale
                      
                      
                      24,549
                      
                      
                      
                      83,868Percentage
      of completion
                      
                      
                      94.44
                      %
                      
                      
                      57.09
                      %Percentage
      GFA sold during the period
                      
                      
                      5.00
                      %
                      
                      
                      8.07
                      %Percentage
      GFA sold to date
                      
                      
                      81.95
                      %
                      
                      
                      38.34
                      %Average
      sales price per GFA
                      
                      $
                      709
                      
                      
                      $
                      639Projects
      Completed with units available for saleTsining
      JunJing I
                      
                      $
                      (88,081
                      )
                      
                      $
                      1,686Total
      gross floor area (GFA) available for sale
                      
                      
                      167,931
                      
                      
                      
                      167,931GFA
      sold during the period
                      
                      
                      (166.17
                      )
                      
                      
                      -30Remaining
      GFA available for sale
                      
                      
                      9,822
                      
                      
                      
                      10,766Percentage
      of completion
                      
                      
                      100
                      %
                      
                      
                      100
                      %Percentage
      GFA sold during the period
                      
                      
                      -0.10
                      %
                      
                      
                      -0.02
                      %Percentage
      GFA sold to date
                      
                      
                      94.15
                      %
                      
                      
                      93.59
                      %Average
      sales price per GFA
                      
                      $
                      531
                      
                      
                      $
                      N/ATsining-24G
                      
                      $
                      1,588,845
                      
                      
                      $
                      63,476Total
      gross floor area (GFA) available for sale
                      
                      
                      43,563
                      
                      
                      
                      43,563GFA
      sold during the period
                      
                      
                      1,507
                      
                      
                      
                      -23Remaining
      GFA available for sale
                      
                      
                      2,266
                      
                      
                      
                      5,977Percentage
      of completion
                      
                      
                      100
                      %
                      
                      
                      100
                      %Percentage
      GFA sold during the period
                      
                      
                      3.46
                      %
                      
                      
                      -0.05
                      %Percentage
      GFA sold to date
                      
                      
                      94.80
                      %
                      
                      
                      86.28
                      %Average
      sales price per GFA
                      
                      $
                      1,054
                      
                      
                      $
                      N/ATsining
      In Home
                      
                      $
                      292,289
                      
                      
                      $
                      49,141Total
      gross floor area (GFA) available for sale
                      
                      
                      30,072
                      
                      
                      
                      30,072GFA
      sold during the period
                      
                      
                      688
                      
                      
                      
                      148Remaining
      GFA available for sale
                      
                      
                      1,720
                      
                      
                      
                      2,900Percentage
      of completion
                      
                      
                      100
                      %
                      
                      
                      100
                      %Percentage
      GFA sold during the period
                      
                      
                      2.29
                      %
                      
                      
                      0.49
                      %Percentage
      GFA sold to date
                      
                      
                      94.28
                      %
                      
                      
                      90.36
                      %Average
      sales price per GFA
                      
                      $
                      425
                      
                      
                      $
                      332Additional
      Projects
                      
                      
                      
                      
                      
                      $
                      109,918Infrastructure
      ProjectBaqiao
      infrastructure construction
                      
                      $
                      -
                      
                      
                      $
                      357,867Project
      In ProcessBaqiao
                      
                      $
                      -
                      
                      
                      $
                      -Revenues
      from the sales of properties
                      
                      $
                      22,728,282
                      
                      
                      $
                      7,475,692


-30-





Revenues
from projects under construction





Tsining
JunJing II Phase One





Tsining
JunJing II Phase One was our major revenue generating construction project in
the three months ended September 30, 2009, contributing 12,130,788 in
revenues. By September 30, 2009, we pre-sold approximately 1,077 units in the
project, totaling approximately 111,463 square meters, which accounts for
approximately 91% and 82% of the total units available and total GFA
respectively.





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
approximately 136,012 square meters. Estimated total revenues for Phase One are
approximately $95.6 million. The Company completed most of the construction
of Phase One in the third quarter of 2009.





Tsining
JunJing II Phase Two





Tsining
JunJing II Phase Two consists of 12 middle and high-rise buildings with total
expected revenues of approximately $94.1 million. We officially started
pre-sales in the second quarter of 2009 and were able to secure $19.1 million in
sales contracts for 202 units of which we recognized approximately
$8.8 million in the third quarter. As of September 30, we have pre-sold 22%
of total units available and 21% of total GFA.


-31-





Please
note that the method of percentage of completion was utilized to recognize
revenue from Jan. 1, 2008. Only revenue recognition of Tsining JunJing II is
under this method. The percentages of completion of the construction for each
building as at September 30, 2009 are shown below:




Tsining JunJing II Phase one Buildings
                  
                  Percentage of Completion1#
                  
                  
                  97.11
                  %2#
                  
                  
                  98.99
                  %3#
                  
                  
                  98.81
                  %4#
                  
                  
                  97.73
                  %5#
                  
                  
                  99.03
                  %6#
                  
                  
                  91.33
                  %7#
                  
                  
                  99.48
                  %8#
                  
                  
                  99.61
                  %9#
                  
                  
                  89.96
                  %14#
                  
                  
                  96.82
                  %15#
                  
                  
                  99.91
                  %20#
                  
                  
                  97.25
                  %21#
                  
                  
                  96.86
                  %





Tsining JunJing II Phase two Buildings
                                
                                Percentage of Completion10#
                                
                                
                                46.78
                                %11#
                                
                                
                                52.79
                                %12#
                                
                                
                                46.96
                                %13#
                                
                                
                                62.90
                                %18#
                                
                                
                                47.50
                                %24#
                                
                                
                                40.64
                                %





The above
are all the buildings under pre-sale in JunJing II Phase One and Phase
Two.





Revenues
from projects completed





The
revenue from completed projects totaled $1,792,053 in the three months
ended September 30, 2009, compared to $224,221 during same period of
2008. The overall real estate market in China is stronger than last year.
A large portion of revenue came from the sales of commercial units in
the Tsining 24G project, which have higher average selling price and
contributing approximately $1.6 million in revenues.





Other
income





Other
income includes property management fees, rental income, revenues from the
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, continued river management and suburban planning for the entire
Baqiao high-technology industrial park. We recognized $1,065,363 in other income
for the three months ended September 30, 2009 compared with $70,070 in the same
period of 2008. The 1,420% increase is mainly due to the acquisition of Xinxing
Property Management, which contributed approximately $643,861 property and
hotel management revenues to our consolidated revenues, and the increased
rental income from existing commercial units.





Cost
of properties and land





The cost
of properties and land in the three months ended September 30, 2009 increased
169.7 percent to $16,374,170 compared with $6,071,599 in the same period of
2008. The increase was primarily a result of the increased sales volume in
our JunJing II Phase One and Phase Two projects.


-32-





Gross
profit and profit margin





Gross
profit for the three months ended September 30, 2009 was
$7,419,475, representing an increase of 403 percent from $1,474,163 in the
same period of 2008. The gross profit margin for the three months ended
September 30, 2009 was 31.2 percent compared with 19.5 percent in the same
period of 2008. The relatively low gross margin in the third quarter of
2008 is primarily due to the fact that residential units sold in that
quarter were subject to a marketing campaign that utilized favorable prices to
attract market interest and encourage future sales. This year we concentrated
more on the research and development and we are able to deliver real estate with
better quality and increased average sales price. Meanwhile the performance of
sales is much better with the improvement in market conditions. Our gross margin
increased due to all these factors.





Selling,
general and administrative expenses





Selling,
general and administrative expenses (SG&A) for the three months ended
September 30, 2009 increased 56.9 percent to $ 2,501,688 from $ 1,594,514
in the same period of 2008. The increase in SG&A is associated with the
increased sales. This quarter’s SG&A mainly include marketing expenses
associated with Tsining JunJing II Phase One and Phase Two as well as
administrative and marketing expenses related to the Puhua project. SG&A
accounted to 10.5% of total revenue in the third quarter of 2009 compared
to 21.13% for the same period in 2008.





Stock-based
compensation





We
incurred stock-based compensation expenses amounting to $87,777 in the three
months ended September 30, 2009, which was for the common stock issued for
service provided by the Company’s former CFO. We recorded $3,000,000 in the same
period of 2008 for 750,000 shares of common stock granted to members of
management for their 2007 services. 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 compensation was
based on the stock price on the grant date of July 2, 2008, which
was the day the awards were formally approved by the Board of
Directors.




Other
expenses





Other
expenses consist mainly of late delivery settlements and maintenance
costs.  Other expenses in the three months ended September 30, 2009
increased 366.8 percent to $284,044 compared with $60,848 in the same period of
2008. Combined with the delivery and sales from the JunJing project, the
expenses increased slightly.





Operating
profit and operating profit margin





Operating
profit is defined as gross profit minus selling, general and administrative
expenses, stock-based compensation, security registration expenses and
other expenses.  Operating profit in the three months ended September
30, 2009 was $3,966,191 compared with $3,181,199 operating loss in the same
period of 2008, primarily due to the higher revenues generated by Tsining
JunJing II Phase One and Phase Two and insignificant stock-based compensation.
As a result, the operating profit margin was 16.67 percent for the third quarter
of 2009 compared with negative 42.2 percent for the same period of
2008.





Interest
expense





Interest
expense in the three months ended September 30, 2009 decreased 35 percent to
$417,809 from $638,228 in the same period of 2008. This is primarily due to the
capitalization of interest in the construction in progress and repayment of the
$7.3million bank loan. In 2008, the Company signed a RMB 1 billion (about $147
million) construction credit line agreement with China Construction Bank. During
2008, we drew down approximately $22 million of the credit line. During the
three months ended September 30, 2009, the company drew down another $13 million
of the credit line and repaid $7.3 million. The loan from China Construction
Bank has an interest rate that floats at 110 percent of the People’s Bank of
China reference rate.





Change
in fair value of embedded derivative





The
embedded derivative is 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 the Cox-Ross-Rubinstein Binomial Lattice valuation
model (CRR model).


-33-





The CRR
model depends on the following assumptions: the Company’s common stock price
underlying the warrants; strike price; conversion price; expected life; expected
volatility; risk free interest rate; and dividend rate. During the third quarter
of 2009, our common stock price experienced large fluctuations with the price
decreasing from $5.76 on June 30, 2009 to $3.85 on September 30, 2009. The
decrease in stock price and expected volatility caused a decrease in
fair value for warrants and the change of fair value was booked as a reverse of
non-cash expense.





The
company recorded $(2,695,306) in the change in fair value of embedded
derivatives in the three months ended September 30, 2009 compared with
$(2,101,825) in the same period of 2008.




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 investors to buy
additional common shares at the prices specified in the warrant
agreements.





An
investor typically only exercises a warrant to buy common shares when the stock
price is higher than the warrant exercise price. In the three months ended
September 30, 2009, 273,887 warrants were exercised. The investor pays the
exercise price and the Company covers the difference between the warrant
exercise price and the share price at the time of conversion.





In
addition, the Company was required to estimate the fair value of its remaining
warrants outstanding and adjust the value as appropriate, 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 was $(3,042,752) in the three months ended
September 30, 2009, compared to $(2,939,563) during the same period of 2008,
which consisted of the periodic adjustment to the estimated cost to the company
to provide the common shares, assuming that all of the warrants will be
exercised sometime in the future. The basis for estimating the cost to provide
the common shares was provided by the valuation model. The CRR model depends on
the following assumptions: the Company’s common stock price underlying the
warrants; strike price; expected life; expected volatility; risk free interest
rate; and dividend rate. During the third quarter of 2009, our common stock
price experienced large fluctuations with the price decreasing from $5.76 on
June 30, 2009 to $3.85 on September 30, 2009. The decrease in stock price
and expected volatility caused a decrease in fair value for warrants and
the change of fair value was booked as a reverse of non-cash
expense.





Security
registration expenses





Pursuant
to the agreement with the investors of the 5% Senior Secured Convertible Debt,
the Company was required to pay the investors certain late registration payments
(“Late Payments”) if the company failed to file a Registration Statement within
60 days after the closing date of the 5% Senior Secured Convertible Debt. The
Company commenced negotiations with the investors of the 5% Senior Secured
Convertible Debt to waive the Late Payments in December 2008, as both parties
believed that the registration statement would become effective within a short
period of time. However, as the registration statement has not become effective
as of September 2009, the investors of the 5% Senior Secured Convertible Debt
have decided to claim the Late Payments. The Company has accrued for the
Late Payments of $579,775 in the third quarter. On September 28, 2009, the
Company reached a First Amendment (the “Amendment”) with the Investors to settle
the Late Payments, in the amount of $2,400,000, by the issuance of 614,290
common stock shares. The 614,290 common stock was determined by dividing
$2,400,000, the total Late Payments up to September 28, 2009, by 95% of the
historical volume weighted average price (“VWAP”) of the common stock shares, as
determined by using Bloomberg function VWAP, for the immediate preceding 30 days
period. In accordance with the Amendment, the Investors will waive any further
Late Payments against the Company under the Registration Rights Agreement. We do
not expect any similar claim in the future.





The
security registration expenses were $579,775 for the three months ended
September 30, 2009, compared with $0 in the same period of 2008.





Recovery
of income taxes




The
Company recognized an income tax benefit of $3,652,886 in the three months ended
September 30, 2009, compared with $388,308 in the same period of 2008. In
the third quarter, the Company reached an income tax settlement with local tax
bureau. Based on the settlement, Hao Tai, a subsidiary of the Company, received
a tax credit of $4.86 million. The Company estimated the tax provision for other
subsidiaries based on a 25% statutory rate.


-34-





Non-controlling
Interest





We
recorded a $86,121 loss attributable to non-controlling shareholder of Puhua and
Success Hill, which was related to the formation of Puhua in the third
quarter of 2008. We did not have any loss attributable to non-controlling
shareholder in the same period of 2008 before Puhua’s formation.





Net
income





Net
income for the three months ended September 30, 2009
increased 778.6 percent to $12,714,128 compared to $1,447,072 in
the same period of 2008.





We
believe that the net income increase was a result of multiple factors. The
overall real estate market condition in Xi’an has improved since the beginning
of 2009 and through the third quarter, which is also demonstrated in the
pre-sales results of our current projects under construction, i.e. JunJing
II Phase one and Phase two. In the third quarter, we were able to recognize
approximately $21 million as revenue from JunJing II project and were able to
secure approximately $21.95 million new contracts. As of September 30, 2009, we
have pre-sold 111,463 sq. meters out of 136,012 sq. meters total GFA of
Junjing II Phase one, approximately 82% on the GFA basis and 91% on the unit
basis.





With the
introduction of JunJing II Phase two, we are also expecting the gross
margin will be improved slightly in the future, which is primarily because of
its better quality and higher average price in JunJing II Phase two. The average
price for Phase two has reached $726/square meter, $17 higher than Phase
one.





The
periodic revaluation of derivatives and warrants also contributed approximately
$5.7 million during the quarter mainly due to the decrease of our common stock
price. The large fluctuation in our common stock price in recent months has
resulted in an approximately $13.1 million revaluation non-cash charge in the
second quarter of 2009.





The
settlement of tax with the local tax bureau during the third quarter also
contributed approximately $4.86 million, which is considered to be a one-time
gain.





Basic
and diluted earnings per share




Basic
earnings per share was $0.41 in the three months ended September 30, 2009,
compared to $0.05 in the same period of 2008. Diluted earnings per share
was $0.24 in the three months ended September 30, 2009, compared to
$0.04 in the same period of 2008. The number of shares outstanding
doesn’t change significantly from year to year. Earnings available to distribute
increased greatly from $1.45 million in third quarter of 2008 to
$12.71 million in the third quarter of this year. The EPS and diluted
EPS reflected the Company’s improved performance during the third
quarter of this year.





Common
shares used to calculate basic and diluted EPS





The
weighted average shares outstanding used to calculate basic earnings per
share was 31,134,137 shares in the three months ended September 30, 2009
and 30,877,453 shares in the same period of 2008. The weighted average shares
outstanding used to calculate the diluted earnings per share was
32,972,253 shares in the three months ended September 30, 2009 and
30,882,483 shares in the same period of 2008.





Foreign
exchange





The
company operates in China and the functional currency is Chinese Renminbi (RMB)
but the reporting currency is U.S. dollar, based on the exchange rate of the two
currencies. The fluctuation of exchange rates during the three months ended
September 30, 2009 and the same period of 2008, when translating the operating
results and financial positions at different exchange rates, created the
accrued gain (loss) on foreign exchange. The gain on foreign exchange in the
three months ended September 30, 2009 was $69,244, compared with $911,996 in the
same period of 2008.





Nine
Months Ended September 30, 2009 Compared With Nine Months Ended September 30,
2008





Revenues





Total
revenues for the nine months ended September 30, 2009 increased
135.9 percent to $60,240,247 from $25,536,889 for the nine months
ended September 30, 2008.


-35-





Nine months
                    
                    
                    Nine monthsended
                    
                    
                    endedRevenues by project:
                    
                    September 30, 2009
                    
                    
                    September 30, 2008US
      dollarsProject
      Under ConstructionTsining
      JunJing II Phase One
                    
                    $
                    42,457,017
                    
                    
                    $
                    18,967,385Tsining
      JunJing II Phase Two
                    
                    
                    9,764,537
                    
                    
                    
                    -Puhua
      Project
                    
                    
                    -
                    
                    
                    
                    -Projects
      CompletedTsining
      JunJing I
                    
                    
                    473,878
                    
                    
                    
                    4,531,413Tsining 24G
                    
                    
                    3,469,461
                    
                    
                    
                    100,896Tsining
      In Home
                    
                    
                    472,598
                    
                    
                    
                    102,361Additional
      Project
                    
                    
                    197,600
                    
                    
                    
                    306,761-Infrastructure
      ProjectBaqiao
      infrastructure construction
                    
                    
                    -
                    
                    
                    
                    1,046,051Project
      In ProcessBaqiao
                    
                    
                    -
                    
                    
                    
                    -Revenues
      from the sale of properties
                    
                    $
                    56,835,091
                    
                    
                    $
                    25,054,867


-36-





The
revenues from the sale of properties in the nine months ended September 30, 2009
increased 126.8 percent to $56,835,091 from $25,054,867 in the same period of
2008. The increase was primarily due to the increased revenue from Tsining
JunJing II Phase One and Phase Two





As a
result of the utilization of the full accrual method of accounting for
infrastructure projects, we have not recognized revenues from the infrastructure
project in the Baqiao area. We expect to recognize the revenues associated with
the construction of the river dam in the third quarter 2009 when the
project is delivered to the local government.


Revenues by project:
                            
                            9 months ended
                              September 30, 2009
                            
                            
                            9 months ended
                              September 30, 2008US$Project
      Under ConstructionTsining
      JunJing II Phase Two contract sales
                            
                            $
                            19,067,319Revenue
                            
                            $
                            9,764,537Total
      gross floor area (GFA) available for sale
                            
                            
                            112,556GFA
      sold during the period
                            
                            
                            26,062Remaining
      GFA available for sale
                            
                            
                            86,494Percentage
      of completion
                            
                            
                            47.17
                            %Percentage
      GFA sold during the period
                            
                            
                            23.2
                            %Percentage
      GFA sold to date
                            
                            
                            23.2
                            %Average
      sales price per GFA
                            
                            $
                            732Tsining
      JunJing II Phase one contract sales
                            
                            $
                            34,916,823
                            
                            
                            $
                            29,796,163Revenue
                            
                            $
                            42,457,017
                            
                            
                            $
                            18,967,385Total
      gross floor area (GFA) available for sale
                            
                            
                            136,012
                            
                            
                            
                            136,012GFA
      sold during the period
                            
                            
                            54,457
                            
                            
                            
                            52,144Remaining
      GFA available for sale
                            
                            
                            24,549
                            
                            
                            
                            83,868Percentage
      of completion
                            
                            
                            94.44
                            %
                            
                            
                            57.09
                            %Percentage
      GFA sold during the period
                            
                            
                            40.04
                            %
                            
                            
                            38.34
                            %Percentage
      GFA sold to date
                            
                            
                            81.95
                            %
                            
                            
                            38.34
                            %Average
      sales price per GFA
                            
                            $
                            641
                            
                            
                            $
                            571Projects
      CompletedTsining
      JunJing I
                            
                            $
                            473,878
                            
                            
                            $
                            4,531,413Total
      gross floor area (GFA) available for sale
                            
                            
                            167,931
                            
                            
                            
                            167,931GFA
      sold during the period
                            
                            
                            - 317
                            
                            
                            
                            5,709Remaining
      GFA available for sale
                            
                            
                            9,822
                            
                            
                            
                            16,474Percentage
      of completion
                            
                            
                            100
                            %
                            
                            
                            100
                            %Percentage
      GFA sold during the period
                            
                            
                            -0.19
                            %
                            
                            
                            3.40
                            %Percentage
      GFA sold to date
                            
                            
                            94.15
                            %
                            
                            
                            93.59
                            %Average
      sales price per GFA
                            
                            $
                            
                            **
                            
                            $
                            794Tsining-24G
                            
                            $
                            3,469,461
                            
                            
                            $
                            100,896Total
      gross floor area (GFA) available for sale
                            
                            
                            43,563
                            
                            
                            
                            43,563GFA
      sold during the period
                            
                            
                            3,794
                            
                            
                            
                            - 299Remaining
      GFA available for sale
                            
                            
                            2,266
                            
                            
                            
                            5,977Percentage
      of completion
                            
                            
                            100
                            %
                            
                            
                            100
                            %Percentage
      GFA sold during the period
                            
                            
                            8.71
                            %
                            
                            
                            -0.69
                            %Percentage
      GFA sold to date
                            
                            
                            94.80
                            %
                            
                            
                            86.28
                            %Average
      sales price per GFA
                            
                            $
                            914
                            
                            
                            $
                            
                            **Tsining
      In Home
                            
                            $
                            472,598
                            
                            
                            $
                            102,361Total
      gross floor area (GFA) available for sale
                            
                            
                            30,072
                            
                            
                            
                            30,072GFA
      sold during the period
                            
                            
                            1,130
                            
                            
                            
                            295Remaining
      GFA available for sale
                            
                            
                            1,720
                            
                            
                            
                            2,900Percentage
      of completion
                            
                            
                            100
                            %
                            
                            
                            100
                            %Percentage
      GFA sold during the period
                            
                            
                            3.76
                            %
                            
                            
                            0.98
                            %Percentage
      GFA sold to date
                            
                            
                            94.28
                            %
                            
                            
                            90.36
                            %Average
      sales price per GFA
                            
                            $
                            418
                            
                            
                            $
                            348Average
      sales price per GFA
                            
                            $
                            N/A
                            
                            
                            $
                            N/AAdditional
      Projects
                            
                            $
                            197,600
                            
                            
                            $
                            306,761Infrastructure
      ProjectBaqiao
      infrastructure construction
                            
                            $
                            -
                            
                            
                            $
                            1,046,051Project
      In ProcessBaqiao
                            
                            $
                            -
                            
                            
                            $
                            -Revenues
      from the sales of properties
                            
                            $
                            56,835,091
                            
                            
                            $
                            25,054,867





** The
figure is unavailable due to return of units during this
period.


-37-





Revenues
from projects under construction





Tsining
JunJing II Phase One





Tsining
JunJing II Phase One was our major revenue generating construction project in
the nine months ended September 30, 2009, contributing $42,457,017 in revenues.
By September 30, 2009, we had pre-sold approximately 1,077 units in the project,
totaling approximately 111,463 square meters.





Tsining
JunJing II Phase Two





Tsining
JunJing II Phase Two consists of 12 middle-rise and high-rise buildings with
total expected revenues of approximately $94.1 million. We officially started
the pre-sales in the second quarter of 2009 and were able to secure $19.1
million in sales contracts for 224 units of which we recognized
approximately $9.8 million in the first nine months of 2009.





Revenues
from projects completed





Revenues
in the nine months ended September 30, 2009 for completed projects decreased
8.49% percent to $4,613,537 compared with $5,041,431 in the same period of 2008.
The decrease in revenues for the nine months ended September 30, 2009 was
primarily due to reduced sales of JunJing I project, as most units of the
project were sold out.





Other
income





Other
income includes property management fees, rental income, revenues from
the 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, continued river management, and suburban planning
for the entire Baqiao high-technology industrial park. We recognized
$3,405,156 in other income for the nine months ended September 30,
2009 compared with $482 022 in the same period of 2008. The 606% increase is
mainly due to the acquisition of Xinxing Property Management during the first
quarter of 2009, which contributed approximately $1,787,705 property and
hotel management revenues to our consolidated revenues.


-38-




Cost
of properties and land





The cost
of properties and land in the nine months ended September 30, 2009 increased
109.6 percent to $41,266,855 compared with $19,691,432 in the same period
of 2008. The increase was primarily a result of the increased sales volume in
our JunJing II Phase One and Phase Two projects.





Gross
profit and profit margin





Gross
profit for the nine months ended September 30, 2009 was
$18,973,392, representing an increase of 224.6 percent from $5,845,457
in the same period of 2008. The gross profit margin for the nine months
ended September 30, 2009 was 31.5 percent compared with 22.9 percent in the
same period of 2008. The increase in the gross profit margin was mainly due
to our different product mix and our marketing strategy. The
residential units we sold during the nine months ended September 30, 2009
generally had higher profit margins than the units sold in the same period of
2008. In addition, due to the fact that we had a marketing campaign for our
JunJing II project from the second quarter of 2008 and used favorable prices to
attract market interest and encourage future sales. This year we concentrated
more on the research and development and we are able to deliver real estate with
better quality and increased average sales price. Meanwhile the performance of
sales is much better with the improvement in market conditions. Our gross margin
increased because of all these factors.





Selling,
general and administrative expenses





SG&A for
the nine months ended September 30, 2009 increased 40.6 percent to
$5,853,458 from $4,161,865 in the same period of 2008. The increase in
SG&A is due to the increased sales, for example, the
marketing expenses associated with Tsining JunJing II Phase One and Phase Two
projects and the administrative expenses and marketing expenses related to the
Puhua project. However the ratio of SG&A to total revenues for the nine
months decreased from 16.3% in 2008 to 9.72% in 2009, because the Company is
improving the management and become more and more efficient in
operation.





Stock-based
compensation





We
incurred stock-based compensation expenses amounting to $87,777 in the nine
months ended September 30, 2009, common stock issued for service provided by the
Company’s former CFO: this amount is compared to $3,000,000 in stock- based
compensation expenses in the same period of 2008 for 750,000 shares of common
stock granted to members of management for their 2007 services. The number of
shares granted to each individual was calculated in accordance with the
Company’s Detail Implementation Rule for Restricted Stock Incentive Plan of
2007-2008. The compensation was based on the stock price on the grant
date of July 2, 2008, which is the day the awards were formally
approved by the Board of Directors.





Other
expenses





Other
expenses consist mainly of late delivery settlements and maintenance
costs.





Other
expenses in the nine months ended September 30, 2009 increased 517.7 percent to
$474,167 compared with $76,758 in the same period of 2008. The Company incurred
a larger amount of expenses regarding the delivery and sales of
JunJing project.





Operating
profit and operating profit margin





Operating
profit in the nine months ended September 30, 2009 was $10,771,473 compared with
$1,393,166 operating loss in the same period of 2008 , primarily due to the
higher revenue generated by Tsining JunJing II Phase One and Phase Two. As a
result, the operating profit margin was 17.88 percent for the nine months ended
September 30, 2009 compared with negative 5.5 percent for the same period
of 2008.


-39-





Interest
expense





Interest
expense in the nine months ended September 30, 2009 decreased 31 percent to
$1,202,786 from $1,736,344 in the same period of 2008. This change
was primarily due to the capitalization of interest in construction in
process and repayment of a 18.4 million bank loan. 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 approximately $22
million of the credit line. The company repaid $18.4 million during
the nine months ended September 30, 2009. The loan from China Construction
Bank has an interest rate that floats at 110 percent of the People’s Bank of
China reference rate.





Change
in fair value of embedded derivative





The
Company recorded $3,017,272 expense in the change in fair value
of embedded derivatives in the nine months ended September 30, 2009 compared
with $2,556,313 reverse of expense in the same period of 2008.





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.





During the
nine months ended September 30, 2009, 370,810 warrants were exercised. 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.





In
addition, the Company was required to estimate the fair value of its remaining
warrants outstanding and adjust the value as appropriate, 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 was $4,012,736 in the nine months ended
September 30, 2009, compared to $(3,895,615) during the same period of 2008,
which consisted of the periodic adjustment to the estimated cost to the company
to provide the common shares, assuming that all the of the warrants will be
exercised sometime in the future. The basis for estimating the cost to provide
the common shares was provided by the valuation model. The CRR model depends on
the following assumptions: the Company’s common stock price underlying the
warrants; strike price; expected life; expected volatility; risk free interest
rate; and dividend rate. During the first nine months of 2009, our common stock
price experienced large fluctuations with the price increasing from $1.29 on
December 31, 2008 to $3.85 on September 30, 2009. The increase in
stock price and expected volatility caused an increase in fair value
for warrants and the change of fair value was booked as a non-cash
expense.





Security
registration expenses





Pursuant
to the agreement with the investors of the 5% Senior Secured Convertible Debt,
the Company was required to pay the investors certain late registration payments
(“Late Payments”) if the company failed to file a Registration Statement within
60 days after the closing date of the 5% Senior Secured Convertible Debt. The
Company commenced negotiations with the investors of the 5% Senior Secured
Convertible Debt to waive the Late Payments in December 2008, as both parties
believed that the registration statement would become effective within a short
period of time. However, as the registration statement has not become effective
as of September 2009, the investors of the 5% Senior Secured Convertible Debt
have decided to claim the Late Payments. The Company has accrued for the
Late Payments of $579,775 in the third quarter. On September 28, 2009, the
Company reached a First Amendment (the “Amendment”) with the Investors to settle
the Late Payments, in the amount of $2,400,000, by the issuance of 614,290
common stock shares. The 614,290 common stock was determined by dividing
$2,400,000, the total Late Payments up to September 28, 2009, by 95% of the
historical volume weighted average price (“VWAP”) of the common stock shares, as
determined by using Bloomberg function VWAP, for the immediate preceding 30 days
period. In accordance with the Amendment, the Investors will waive any further
Late Payments against the Company under the Registration Rights Agreement. We do
not expect any similar claim in the future.





The
security registration expenses were $1,786,517 for nine months ended September
30, 2009, compared with $0 in the same period of 2008.





Recovery
of income taxes




The
company booked a recovery for income tax provision of $1,591,331 compared
with $0 in the same period of 2008. The Company calculates income tax
provision based on the 25% statutory rate for each of the subsidiaries. The
recovery was caused by the tax settlement between Hao Tai and the local tax
bureau. Due to the settlement the Company recovered around $4.86 million in
the third quarter.


-40-





Non-controlling
Interest





We
recorded a $279,155 loss attributable to non-controlling shareholder of Puhua
and Success Hill in the nine months ended September 30, 2009, which
was related to the formation of Puhua in 2008. We did not have any loss
attributable to non-controlling shareholder in the same period of 2008 before
Puhua’s formation.





Net
income





Net
income in the nine months ended September 30, 2009
increased 33.8 percent to $3,519,860 from $2,630,636 in the same
period of 2008.





We
believe the net income increase was primarily due to the significantly
improved sales. The overall real estate market condition in Xi’an has improved
since the beginning of 2009 and through the third quarter, which is also
demonstrated in the pre-sales results of our current projects under
construction, i.e. JunJing II Phase one and Phase two. In the third
quarter, we were able to recognize approximately $21 million as revenue and were
able to secure approximately $21.95 million in new contracts. As of September
30, 2009, we have pre-sold 111,463 sq. meters out of 136,012 sq. meters
total GFA of Junjing II Phase one, approximately 82% on the GFA basis
and 91% on the unit basis.





With the
introduction of JunJing II Phase two, we also expect the gross margin
to improve slightly in the future, primarily because of the generally better
quality and higher average price of JunJing II  Phase two.
The average price for Phase two has reached $732/square meter, $91 higher than
Phase one.




Basic
and diluted earnings per share




Basic
earnings per share was $0.11 in the nine months ended September 30, 2009,
compared to $0.09 in the same period of 2008. Diluted earnings per share
was $0.11 in the nine months ended September 30, 2009, compared to
$0.07 in the same period of 2008. The number of shares outstanding doesn’t
change significantly from year to year. But earnings available to distribute
increased greatly from $2.63 million in third quarter of 2008 to $3.52 million
this year. The improved EPS and diluted EPS mainly demonstrated the good
performance of the Company during the first nine months of this
year.





Common
shares used to calculate basic and diluted EPS





The
weighted average shares outstanding used to calculate basic earnings per
share was 30,987,760 shares in the nine months ended September 30, 2009 and
30,389,712 shares in the same period of 2008. The weighted average shares
outstanding used to calculate the diluted earnings per share was
30,996,953 shares in the nine months ended September 30, 2009 and
30,436,461 shares in the same period of 2008.





Foreign
exchange





The
company operates in China and the functional currency is Chinese Renminbi (RMB)
but the reporting currency is U.S. dollar, based on the exchange rates of the
two currencies. The fluctuation of exchange rate during the nine months ended
September 30, 2009 and the same period of 2008, when translating the operating
results and financial positions at different exchange rates, created the accrued
gain (loss) on foreign exchange. The loss on foreign exchange in the nine
months ended September 30, 2009 was $242,176, compared with a gain of $6,176,248
in the same period of 2008.





Cash
flow discussion





There is
net cash outflow of $18,341,447 during the nine months ended September 30,
2009 compared with $11,259,992 cash inflow during the same period of
2008.


-41-


The major
cash outflow is from operating activities. The outflow was $10,808,209 in the
nine months ended September 30, 2009 and $14,884,371 in the same period of
2008. In the nine month of this year, cash is used for the development of
Tsining JunJing II Phase One, Phase Two and Puhua Project.





A cash
inflow $447,990 appeared at investing activities segment in the nine months
ended September 30, 2009, compared with the cash outflow of $617,060 for the
same period of 2008. The increase was primarily due to a change in restricted
cash, which brought $110,130 cash inflow to the Company instead of $755,376
outflow last year.  Also, the cash from acquired business contributed $0.5
million cash for the nine months ended September 30, 2009.





There was
a cash outflow of $7,981,228 for financing activities in the nine months
ended September 30, 2009 compared with $26,761,423 of inflow in 2008. The
difference is primarily attributable to the fact that the Company issued the $20
million Convertible Debt and warrants in the first quarter of 2008. Meanwhile
the Company also repaid $18.4 million bank loan creating a significant cash
outflow.




Debt
leverage





Total
debt consists of Payables for acquisition of businesses, Loans from employees,
Loans payable and Convertible Debt.





Total
debt outstanding as of September 30, 2009 was $52,641,189 compared with
$59,186,304 on December 31, 2008.





Net debt
outstanding (total debt less cash) as of September 30, 2009 was $32,857,725
compared with $20,955,952 on December 31, 2008. Cash decreased to $19.1 million
at September 30, 2009 from $37.4 million on December 31, 2008 is a major reason.
The company's net debt as a percentage of total capital (net debt plus
shareholders' equity) was 21 percent on September 30, 2009 and 16 percent on
December 31, 2008, which increased slightly due to the cash balance
decrease.





Liquidity
and capital resources





Our
principal liquidity demands are based on the development of new properties,
property acquisitions, and general corporate purposes.





As of
September 30, 2009, we had $19,089,130 of cash and cash equivalents, a
decrease of $18,336,210, compared with $37,425,340 of cash and cash equivalents
as of December 31, 2008 and an increase of $8,955,530 as of June 30, 2009. Our
cash flow from operating activities used over $10.8 million during the nine
months ended September 30, 2009 compared with an outflow of $15.1 million
in the Second quarter ended June 30, 2009. Along with progress in
projects, we started seeing positive cash flow from operations and we can use
this internal generated cash flow to fund our projects in the
pipeline.




The
Company leases part of its office and hotel space under various operating lease
agreements. The future minimum rental payments required under the operating
lease agreements are summarized below.  The Company entered into a
contract with Xi’an Baqiao local government for a rubber dam construction
project. The Company is committed to expend approximately $1 million on this
project.  As of September 30, 2009, the Company had 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 of the land use right certificate.




PaymentduebyperiodCommitments and Contingencies
                
                Total
                
                
                Lessthan
                  1year
                
                
                1-3years
                
                
                3-5years
                
                
                Over5yearsRental
      lease
                
                $
                336,859
                
                
                $
                86,292
                
                
                $
                52,806
                
                
                $
                52,806
                
                
                $
                144,955Rubber
      dam construction
                
                
                1,025,461
                
                
                
                1,025,461
                
                
                
                -
                
                
                
                -
                
                
                
                -Land
      use right
                
                
                2,592,951
                
                
                
                -
                
                
                
                2,592,951
                
                
                
                -
                
                
                
                -Total
                
                $
                3,997,854
                
                
                $
                1,149,405
                
                
                $
                2,664,207
                
                
                $
                52,775
                
                
                $
                151,467





Financial
obligations





As of
September 30, 2009, we had total bank loans of $29,591,867 with a weighted
average interest rate of 9.08 percent.


Mortgage
debt (total bank loans) is secured by the assets of the company.





-42-




Loans
payable





Loans
payable represent amounts due to various banks and are due on demand or normally
due within one or two years. These loans generally can be renewed with the banks
when the loans mature.





Most of
the obligations of 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.





On June
28, 2008, the Company signed a strategic partnership Memorandum of Understanding
(“MOU”) with China Construction Bank Xi’an Branch that established a RMB 1
billion credit line for real estate development of the Company and its
subsidiaries. Under the MOU, the Company and its subsidiaries are required to
set up a basic deposit account with China Construction Bank, to maintain a
current ratio of not less than 90% and to maintain liabilities to assets ratio
of not greater than 65%. On August 28, 2008, the Company entered a first loan
agreement with China Construction Bank Xi’an Branch to draw down the first RMB
150 million loans, which will mature on August 27, 2011. $21,986,075 (RMB
150 million) was received by the Company on December 31, 2008. During the nine
months ended September 30, 2009, the Company paid down the loan to $7,617,708
(RMB 52 million). On August 30, 2009, the Company entered a second loan
agreement with China Construction Bank Xi’an Branch to draw down another RMB 85
million loan, which will mature on September 8, 2012. $12,452,023 (RMB 85
million) was received by the Company by September 30, 2009.





As of
December 31, 2008 and September 30, 2009, our current ratios were approximately
255.1% and 221.8%, respectively, and our liabilities to assets ratios were
approximately 49.3% and 49.1%, respectively. The Company will be able to draw
down approximately another $107.3 million before we reach the maximum
liabilities to assets ratio of 65%.





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 September 30, 2009:




ObligationsDuebyPeriod
                
                1year
                
                
                1-3years
                
                
                3-5years(Millions of dollars)Current
      liabilities:Accounts
      payable
                
                $
                18.64Income
      taxes payable
                
                
                
                
                
                $
                6.55Other
      payables
                
                
                
                
                
                $
                4.40Advances
      (deposits) from customers
                
                
                
                
                
                $
                9.25Accrued
      expenses
                
                $
                4.84Current
      portion of long term loans payable
                
                $
                9.52Long-term
      liabilities:Warranties
      liabilities
                
                
                
                
                
                
                
                
                
                $
                4.72Deferred
      tax
                
                
                
                
                
                $
                11.50Fair
      value of embedded derivatives
                
                
                
                
                
                
                
                
                
                $
                3.78Convertible
      Debt
                
                
                
                
                
                
                
                
                
                $
                14.51Long-term
      debt:Loans
      payable
                
                
                
                
                
                $
                20.07Payable
      for acquisition of businesses
                
                $
                6.34Loans
      form employees
                
                
                
                
                
                $
                2.20





-43-




The
following table summarizes the company's loans payable that were outstanding as
of September 30, 2009 and December 31, 2008:





September30,
                            2009
                          
                          
                          December31,
                            2008Commercial
      Bank Weilai BranchDue
      December 25, 2009, annual interest rate is 7.5%, secured by the Company's
      24G project
                          
                          $
                          1,464,944
                          
                          
                          $
                          5,130,084Commercial
      Bank Weilai BranchDue
      August 29, 2010, annual interest rate is 10.21%, guaranteed by Tsining and
      secured by the Company's Tsining building and part of Jun Jing Yuan II
      project
                          
                          
                          5,127,304
                          
                          
                          
                          5,130,084Xi'an
      Rural Credit union Zao Yuan Rd. BranchDue
      July 3, 2010, annual interest rate is 8.83%, secured by the Company's Jun
      Jing Yuan I, Yuan I, Han Yuan and Xin Xing Tower projects
                          
                          
                          2,929,888
                          
                          
                          
                          3,371,198China
      Construction Bank, Xi'an BranchDue
      August 27, 2011, floating interest rate based on 110% of People’s Bank of
      China annual interest rate, secured by the Company's Jun Jing
      II project
                          
                          
                          7,617,708
                          
                          
                          
                          21,986,076China
      Construction Bank, Xi'an BranchDue
      September 8, 2012, floating interest rate based on 110% of People’s
      Bank of China annual interest rate, secured by the Company's Jun Jing II
      project
                          
                          
                          12,452,023
                          
                          
                          
                          -Total
                          
                          $
                          29,591,867
                          
                          
                          $
                          35,617,442




The
currently indicated annual interest requirement on these loans totals about $2.7
million. The loan from China Construction Bank has an interest rate that floats
at 110 percent of the People’s Bank of China reference rate.





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 future developments, we intend to raise funds to develop
our projects by obtaining mortgage financing mainly 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 our real estate
will secure the loans needed. We believe that adequate cash flow will be
available to fund our operations.





As part
of our funding plan, on March 9, 2007, we entered into a Share Transfer
Agreement with the shareholders of New Land, under 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 to
develop the Baqiao Science & Technology Industrial Park, a provincial
development zone in Shaanxi Province. With this acquisition, the company gained
the right to develop and sell 487 acres of property that has 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.





Item
3. Quantitative and Qualitative Disclosures 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 $13 million at
the end of September 2007, may change due to market fluctuations. Currently, it
is valued at its cost which is significantly below the market
value.




-44-





Risk
Relating to Property Sales




The
Company may not be able to sell a property at a particular time for its full
value, particularly in a poor market.




Foreign
Currency Exchange Rate Risk




The
Company is doing all of its business in the People’s Republic of China. All
revenue and profit are denominated in RMB. When the RMB depreciates, it may
adversely affect the Company’s financial performance. Specifically, since the
Company’s recent $20 million senior Convertible Debt interest payment is
denominated in U.S. dollars, the depreciation of the RMB may incur additional
cost to its financial cost.




Item
4T. 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 Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934 (the Exchange Act)). 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. Based on this
evaluation, our Chief Executive Officer and our Chief Financial Officer
concluded that our disclosure controls and procedures as of the end of the
period covered by this report were not effective due to the identified
significant deficiencies in our internal control over financial reporting
described in our Annual Report on Form 10-K/A for the fiscal year ended
December 31, 2008. The Company has engaged Ernest & Young to aid in the
compliance with SOX 404.




(b) 
   Changes in Internal Control over Financial Reporting.





During
the quarter ended September 30, 2009, there was no 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.





Part
II. OTHER INFORMATION





Item
1. Legal Proceedings





None.





Item
1A. Risk Factors.




We have
no material changes to the risk factors previously disclosed in our Form 10-K,
as amended, for the year ended December 31, 2008.




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





None.





Item
3. Defaults Upon Senior Securities





None.





Item
4. Submission of Matters to a Vote of Security Holders





None.




-45-




Item
5. Other Information





None.





Item
6. Exhibits





(a)
Exhibits





ExhibitNumber
            
            Description of Exhibit31.1
            
            Certification
      of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended31.2
            
            Certification
      of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended32.1
            
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 (Chief Executive
Officer)32.2
            
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 (Chief Financial
  Officer)




-46-


SIGNATURES





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





China
      Housing & Land Development, Inc.November
      12, 2009
              By:
              /s/
              Xiaohong FengXiaohong
      FengChief
      Executive Officer(Principal
      Executive Officer)





November
      12, 2009
              By:
              /s/
              Cangsang HuangCangsang
      HuangChief
      Financial Officer(Principal
      Financial and Accounting
Officer)




-47-