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 June 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 xNo  ̈
 
 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 August
12, 2009 was 31,045,303 shares.










CHINA
HOUSING & LAND DEVELOPMENT, INC.


Index





.
                
                
                
                Page
                  NumberPART
      I
                
                FINANCIAL
      INFORMATION
                
                3Item
      1.
                
                Financial
      Statements
                
                3Consolidated
      Balance Sheets as of June 30, 2009 (unaudited) and December 31,
      2008
                
                3Consolidated
      Statements of Income and Other Comprehensive Income for the three and six
      months ended June 30, 2009 and 2008 (unaudited)
                
                4Consolidated
      Statements of Cash Flows for six months ended June 30, 2009 and 2008
      (unaudited)
                
                5Notes
      to Consolidated Financial Statements (unaudited)
                
                7Item
      2.
                
                Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                
                17Item
      3.
                
                Quantitative
      and Qualitative Disclosures About Market Risk
                
                33Item
      4T.
                
                Controls
      and Procedures
                
                34PART
      II.
                
                OTHER
      INFORMATION
                
                34Item
      1.
                
                Legal
      Proceedings
                
                34Item
      1A.
                
                Risk
      Factors
                
                34Item
      2.
                
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                
                35Item
      3.
                
                Defaults
      Upon Senior Securities
                
                35Item
      4.
                
                Submission
      of Matters to a Vote of Security Holders
                
                35Item
      5.
                
                Other
      Information
                
                35Item
      6.
                
                Exhibits
                
                35SIGNATURES
                
                
                
                36EX-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
June 30, 2009 and December 31, 2008


(unaudited)





June
      30,
                                        
                                        
                                        December
      31,2009
                                        
                                        
                                        2008ASSETSCash
                                        
                                        $
                                        10,133,600
                                        
                                        
                                        $
                                        37,425,340Cash
      - restricted
                                        
                                        
                                        751,173
                                        
                                        
                                        
                                        805,012Accounts
      receivable, net of allowance for doubtfulaccounts
      of $1,001,487 and $1,278,156, respectively
                                        
                                        
                                        3,860,834
                                        
                                        
                                        
                                        813,122Other
      receivables and prepaid expenses, net
                                        
                                        
                                        800,396
                                        
                                        
                                        
                                        446,497Notes
      receivable, net
                                        
                                        
                                        684,959
                                        
                                        
                                        
                                        811,695Prepaid
      other taxes
                                        
                                        
                                        2,286,955
                                        
                                        
                                        
                                        545,979Real
      estate held for development or sale
                                        
                                        
                                        106,219,713
                                        
                                        
                                        
                                        60,650,011Property
      and equipment, net
                                        
                                        
                                        12,975,105
                                        
                                        
                                        
                                        12,391,501Asset
      held for sale
                                        
                                        
                                        14,292,560
                                        
                                        
                                        
                                        14,308,691Advance
      to suppliers
                                        
                                        
                                        689,565
                                        
                                        
                                        
                                        704,275Deposits
      on land use rights
                                        
                                        
                                        26,586,901
                                        
                                        
                                        
                                        47,333,287Intangible
      assets, net
                                        
                                        
                                        41,630,027
                                        
                                        
                                        
                                        46,043,660Goodwill
                                        
                                        
                                        815,955
                                        
                                        
                                        
                                        -Deferred
      financing costs
                                        
                                        
                                        544,726
                                        
                                        
                                        
                                        622,118Total
      assets
                                        
                                        
                                        222,272,469
                                        
                                        
                                        
                                        222,901,188LIABILITIESAccounts
      payable
                                        
                                        $
                                        13,729,345
                                        
                                        
                                        $
                                        10,525,158Advances
      from customers
                                        
                                        
                                        10,305,087
                                        
                                        
                                        
                                        9,264,385Accrued
      expenses
                                        
                                        
                                        4,461,524
                                        
                                        
                                        
                                        3,539,842Payable
      to acquisition of businesses
                                        
                                        
                                        7,649,891
                                        
                                        
                                        
                                        8,429,889Income
      taxes payable
                                        
                                        
                                        10,203,902
                                        
                                        
                                        
                                        8,078,709Other
      payables
                                        
                                        
                                        3,145,809
                                        
                                        
                                        
                                        5,183,251Loans
      from employees
                                        
                                        
                                        2,185,880
                                        
                                        
                                        
                                        1,517,039Loans
      payable
                                        
                                        
                                        24,450,236
                                        
                                        
                                        
                                        35,617,442Deferred
      tax liability
                                        
                                        
                                        11,497,938
                                        
                                        
                                        
                                        11,510,915Warrants
      liability
                                        
                                        
                                        7,983,626
                                        
                                        
                                        
                                        1,117,143Fair
      value of embedded derivatives
                                        
                                        
                                        6,472,976
                                        
                                        
                                        
                                        760,398Convertible
      debt
                                        
                                        
                                        14,199,920
                                        
                                        
                                        
                                        13,621,934Total
      liabilities
                                        
                                        
                                        116,286,134
                                        
                                        
                                        
                                        109,166,105SHAREHOLDERS'
      EQUITYCommon
      stock: $.001 par value, authorized 100,000,000 shares
                                        
                                        
                                        30,948
                                        
                                        
                                        
                                        30,894issued
      and outstanding 30,948,340 and 30,893,757, respectivelyAdditional
      paid in capital
                                        
                                        
                                        31,658,301
                                        
                                        
                                        
                                        31,390,750Common
      stock subscribed from
      warrants conversion
                                        
                                        
                                        320,815
                                        
                                        
                                        
                                        -Statutory
      reserves
                                        
                                        
                                        3,696,038
                                        
                                        
                                        
                                        3,541,226Retained
      earnings
                                        
                                        
                                        31,277,536
                                        
                                        
                                        
                                        39,265,062Accumulated
      other comprehensive income
                                        
                                        
                                        10,086,381
                                        
                                        
                                        
                                        10,397,801Noncontrolling
      interest
                                        
                                        
                                        28,916,316
                                        
                                        
                                        
                                        29,109,350Total
      shareholders' equity
                                        
                                        
                                        105,986,335
                                        
                                        
                                        
                                        113,735,083Total
      liabilities and shareholders' equity
                                        
                                        $
                                        222,272,469
                                        
                                        
                                        $
                                        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 Six Months Ended June 30, 2009 and 2008


(Unaudited)




3
      Months
                                        
                                        
                                        3
      Months
                                        
                                        
                                        6
      Months
                                        
                                        
                                        6
      MonthsJune
      30, 2009
                                        
                                        
                                        June
      30, 2008
                                        
                                        
                                        June
      30,
                                          2009
                                        
                                        
                                        June
      30,
                                          2008REVENUESSale
      of properties
                                        
                                        $
                                        21,180,940
                                        
                                        
                                        $
                                        13,055,230
                                        
                                        
                                        $
                                        34,106,809
                                        
                                        
                                        $
                                        17,579,175Other
      income
                                        
                                        
                                        1,420,979
                                        
                                        
                                        
                                        189,260
                                        
                                        
                                        
                                        2,339,793
                                        
                                        
                                        
                                        411,952Total
      revenues
                                        
                                        
                                        22,601,919
                                        
                                        
                                        
                                        13,244,490
                                        
                                        
                                        
                                        36,446,602
                                        
                                        
                                        
                                        17,991,127COSTS
      AND EXPENSESCost
      of properties and land
                                        
                                        
                                        15,394,470
                                        
                                        
                                        
                                        11,252,721
                                        
                                        
                                        
                                        24,892,685
                                        
                                        
                                        
                                        13,619,833Selling,
      general, and administrative expenses
                                        
                                        
                                        1,942,946
                                        
                                        
                                        
                                        1,418,750
                                        
                                        
                                        
                                        3,351,770
                                        
                                        
                                        
                                        2,567,351Other
      expenses
                                        
                                        
                                        150,327
                                        
                                        
                                        
                                        103,344
                                        
                                        
                                        
                                        190,123
                                        
                                        
                                        
                                        119,254Interest
      expense
                                        
                                        
                                        446,899
                                        
                                        
                                        
                                        658,443
                                        
                                        
                                        
                                        784,977
                                        
                                        
                                        
                                        1,098,116Accretion
      expense on convertible debt
                                        
                                        
                                        296,164
                                        
                                        
                                        
                                        253,558
                                        
                                        
                                        
                                        577,986
                                        
                                        
                                        
                                        425,241Change
      in fair value of embedded derivatives
                                        
                                        
                                        5,836,616
                                        
                                        
                                        
                                        (738,999
                                        )
                                        
                                        
                                        5,712,578
                                        
                                        
                                        
                                        (454,488
                                        )Change
      in fair value of warrants
                                        
                                        
                                        7,222,727
                                        
                                        
                                        
                                        (946,563
                                        )
                                        
                                        
                                        7,055,488
                                        
                                        
                                        
                                        (956,052
                                        )Total
      costs and expenses
                                        
                                        
                                        31,290,149
                                        
                                        
                                        
                                        12,001,254
                                        
                                        
                                        
                                        42,565,607
                                        
                                        
                                        
                                        16,419,255Income
      before provision for income taxes
                                        
                                        
                                        (8,688,230
                                        )
                                        
                                        
                                        1,243,236
                                        
                                        
                                        
                                        (6,119,005
                                        )
                                        
                                        
                                        1,571,872Provision
      for income taxes
                                        
                                        
                                        1,347,914
                                        
                                        
                                        
                                        107,357
                                        
                                        
                                        
                                        2,061,555
                                        
                                        
                                        
                                        388,308NET (LOSS) INCOME
                                        
                                        
                                        (10,036,144
                                        )
                                        
                                        
                                        1,135,879
                                        
                                        
                                        
                                        (8,180,560
                                        )
                                        
                                        
                                        1,183,564Less:
      net loss attributable to noncontrolling interest
                                        
                                        
                                        (145,899
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (193,034
                                        )
                                        
                                        
                                        -Net
      (loss)
      income attributable to China Housing & Land Development,
      Inc.
                                        
                                        
                                        (9,890,245
                                        )
                                        
                                        
                                        1,135,879
                                        
                                        
                                        
                                        (7,987,526
                                        )
                                        
                                        
                                        1,183,564OTHER
      COMPREHENSIVE INCOME (LOSS)Gain
      (loss) in foreign exchange
                                        
                                        
                                        51,713
                                        
                                        
                                        
                                        1,735,766
                                        
                                        
                                        
                                        (311,420
                                        )
                                        
                                        
                                        5,264,252COMPREHENSIVE
      (LOSS) INCOME
                                        
                                        $
                                        (9,838,532
                                        )
                                        
                                        $
                                        2,871,645
                                        
                                        
                                        $
                                        (8,298,946
                                        )
                                        
                                        $
                                        6,447,816WEIGHTED
      AVERAGE SHARES OUTSTANDINGBasic
                                        
                                        
                                        30,932,745
                                        
                                        
                                        
                                        30,143,757
                                        
                                        
                                        
                                        30,913,359
                                        
                                        
                                        
                                        30,143,161Diluted
                                        
                                        
                                        30,938,070
                                        
                                        
                                        
                                        30,311,201
                                        
                                        
                                        
                                        30,916,036
                                        
                                        
                                        
                                        30,304,679NET
      (LOSS) INCOME PER
      SHAREBasic
                                        
                                        $
                                        (0.32
                                        )
                                        
                                        $
                                        0.04
                                        
                                        
                                        $
                                        (0.26
                                        )
                                        
                                        $
                                        0.04Diluted
                                        
                                        $
                                        (0.32
                                        )
                                        
                                        $
                                        0.03
                                        
                                        
                                        $
                                        (0.26
                                        )
                                        
                                        $
                                        0.02





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
Six Months Ended June 30, 2009 and 2008


(Unaudited)





June
      30,
                                              
                                              
                                              June
      30,2009
                                              
                                              
                                              2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      (loss) income
                                              
                                              $
                                              (8,180,560
                                              )
                                              
                                              $
                                              1,183,564Adjustments
      to reconcile net income to cashprovided
      by (used in) operating activities:Bad
      debt recovery
                                              
                                              
                                              (275,265
                                              )
                                              
                                              
                                              -Depreciation
                                              
                                              
                                              315,026
                                              
                                              
                                              
                                              183,657Exchange
      loss
                                              
                                              
                                              -
                                              
                                              
                                              
                                              103,344(Gain)
      loss on disposal of fixed assets and inventory
                                              
                                              
                                              (16,200
                                              )
                                              
                                              
                                              14,844Amortization
      of deferred financing costs
                                              
                                              
                                              77,391
                                              
                                              
                                              
                                              67,367Change
      in fair value of warrants
                                              
                                              
                                              7,055,488
                                              
                                              
                                              
                                              (956,052
                                              )Change
      in fair value of embedded derivatives
                                              
                                              
                                              5,712,578
                                              
                                              
                                              
                                              (454,488
                                              )Accretion
      expense on convertible debt
                                              
                                              
                                              577,986
                                              
                                              
                                              
                                              425,241Non-cash
      proceeds from sale of properties
                                              
                                              
                                              (23,804
                                              )
                                              
                                              
                                              (2,923,177
                                              )(Increase)
      decrease in assets:Accounts
      receivable
                                              
                                              
                                              (2,689,972
                                              )
                                              
                                              
                                              (1,871,161
                                              )Prepaid
      other taxes
                                              
                                              
                                              (1,790,793
                                              )
                                              
                                              
                                              -Real
      estate held for development or sale
                                              
                                              
                                              (33,922,050
                                              )
                                              
                                              
                                              (14,440,226
                                              )Advances
      to suppliers
                                              
                                              
                                              13,738
                                              
                                              
                                              
                                              375,487Refund
      (deposit) on land use rights
                                              
                                              
                                              13,363,368
                                              
                                              
                                              
                                              (1,594,144
                                              )Other
      receivables prepaid expenses
                                              
                                              
                                              952,254
                                              
                                              
                                              
                                              233,934Increase
      (decrease) in liabilities:Accounts
      payable
                                              
                                              
                                              3,205,445
                                              
                                              
                                              
                                              5,654,551Advances
      from customers
                                              
                                              
                                              922,457
                                              
                                              
                                              
                                              3,869,507Accrued
      expense
                                              
                                              
                                              790,270
                                              
                                              
                                              
                                              902,519Other
      payable
                                              
                                              
                                              (3,191,392
                                              )
                                              
                                              
                                              694,784Other
      taxes payable
                                              
                                              
                                              -
                                              
                                              
                                              
                                              49,274Income
      taxes payable
                                              
                                              
                                              2,031,450
                                              
                                              
                                              
                                              504,122Net
      cash used in operating activities
                                              
                                              
                                              (15,072,585
                                              )
                                              
                                              
                                              (7,977,053
                                              )CASH
      FLOWS FROM INVESTING ACTIVITIES:Change
      in restricted cash
                                              
                                              
                                              52,887
                                              
                                              
                                              
                                              (2,437,759
                                              )Purchase
      of buildings, equipment and automobiles
                                              
                                              
                                              (478,557
                                              )
                                              
                                              
                                              (123,516
                                              )Notes
      receivable collected
                                              
                                              
                                              149,549
                                              
                                              
                                              
                                              71,614Cash
      acquired in business combinations
                                              
                                              
                                              519,309
                                              
                                              
                                              
                                              -Proceed
      from sale of property and equipment
                                              
                                              
                                              194,006
                                              
                                              
                                              
                                              858,755Net
      cash provided by (used in) investing activities
                                              
                                              
                                              437,194
                                              
                                              
                                              
                                              (1,630,906
                                              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      proceeds from issuance of convertible debt
                                              
                                              
                                              -
                                              
                                              
                                              
                                              19,230,370Investment
      and advances from minority shareholder
                                              
                                              
                                              267,605
                                              
                                              
                                              
                                              14,168,119Payments
      on loans payable
                                              
                                              
                                              (11,127,389
                                              )
                                              
                                              
                                              -Loans
      from or repayment to employees, net
                                              
                                              
                                              670,493
                                              
                                              
                                              
                                              (659,605
                                              )Repayment
      of payables for acquisition of businesses
                                              
                                              
                                              (2,533,242
                                              )
                                              
                                              
                                              (3,476,856
                                              )Proceeds
      from
      exercise of warrants
                                              
                                              
                                              320,815
                                              
                                              
                                              
                                              8,415Net
      cash provided by (used in) financing activities
                                              
                                              
                                              (12,401,718
                                              )
                                              
                                              
                                              29,270,443(DECREASE)/INCREASE
      IN CASH
                                              
                                              
                                              (27,037,109
                                              )
                                              
                                              
                                              19,662,484Effects
      on foreign currency exchange
                                              
                                              
                                              (254,631
                                              )
                                              
                                              
                                              752,116CASH,
      beginning of period
                                              
                                              
                                              37,425,340
                                              
                                              
                                              
                                              2,351,015CASH,
      end of period
                                              
                                              $
                                              10,133,600
                                              
                                              
                                              $
                                              22,765,615





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
June 30, 2009 and December 31, 2008


(Unaudited)





Common
      Stock
                                  
                                  
                                  Common
                                  
                                  
                                  Additional
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Accumulated
                                    otherShares
                                  
                                  
                                  Par
                                    Value
                                  
                                  
                                  stocksubscribed
                                  
                                  
                                  paid
      incapital
                                  
                                  
                                  Statutoryreserves
                                  
                                  
                                  Retainedearnings
                                  
                                  
                                  comprehensiveincome
                                  
                                  
                                  Noncontrollinginterest
                                  
                                  
                                  TotalsBALANCE,
      December 31, 2008
                                  
                                  
                                  30,893,757
                                  
                                  
                                  $
                                  30,894
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  
                                  31,390,750
                                  
                                  
                                  $
                                  3,541,226
                                  
                                  
                                  $
                                  39,265,062
                                  
                                  
                                  $
                                  10,397,801
                                  
                                  
                                  $
                                  29,109,350
                                  
                                  
                                  $
                                  113,735,083Net
      Income
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,902,719
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -47,135
                                  
                                  
                                  
                                  1,855,584Adjustment
      to statutory reserves
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  154,812
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  154,812Foreign
      currency translation adjustment
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -363,133
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -363,133BALANCE,
      March 31, 2009
                                  
                                  
                                  30,893,757
                                  
                                  
                                  
                                  30,894
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  31,390,750
                                  
                                  
                                  
                                  3,696,038
                                  
                                  
                                  
                                  41,167,781
                                  
                                  
                                  
                                  10,034,668
                                  
                                  
                                  
                                  29,062,215
                                  
                                  
                                  
                                  115,382,346Stock-based
      compensation
                                  
                                  
                                  54,583
                                  
                                  
                                  
                                  54
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  78,546
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  78,600Fair
      value ofwarrants exercised
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  189,005
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  189,005Common
      stock subscribed from warrants conversion
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  320,815
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  320,815Net
      Income
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -9,890,245
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -145,899
                                  
                                  
                                  
                                  -10,036,144Foreign
      currency translation adjustment
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  51,713
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  51,713BALANCE,
      June 30, 2009
                                  
                                  
                                  30,948,340
                                  
                                  
                                  $
                                  30,948
                                  
                                  
                                  $
                                  320,815
                                  
                                  
                                  
                                  31,658,301
                                  
                                  
                                  $
                                  3,696,038
                                  
                                  
                                  $
                                  31,277,536
                                  
                                  
                                  $
                                  10,086,381
                                  
                                  
                                  $
                                  28,916,316
                                  
                                  
                                  $
                                  105,986,335





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 interimcondensedconsolidated financial statements
include the accounts of the
Company and its whollyowned subsidiaries, Xi'an Tsining Housing
Development Company Inc. ("XTHDC"), 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”)andSuccess Hill Investments Limited (60%
interest) (“Success Hill”) (collectively, the "Subsidiaries").
All inter-company accountsand transactions have been eliminated on
consolidation. The accompanying unaudited interimcondensedconsolidated 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 interimcondensedconsolidated financial statements
reflect all adjustments necessary for a fair statement of the Company's
consolidated financial positionas at June 30, 2009andresults of operations and
cashflows for the periodsended June 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 interimcondensedconsolidated financial statementsare 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”); exceptas disclosed below. Theydo 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's2008Annual Report.
 
 Accounting Principles Recently
Adopted
 
 In December 2007, the FASB issued SFAS
No. 141(R), "Business Combinations" ("SFAS No. 141(R)") which revised SFAS No.
141, "Business Combinations". SFAS No. 141(R) establishes
principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
any non-controlling interest in the acquirer and the goodwill acquired. SFAS No. 141(R) also
establishes disclosure requirements which will enable users to evaluate the
nature and financial effects of the business combination.The adoption on January 1, 2009 of this
standard did not have a material impact on the Company’scondensedconsolidated financial
statements.
 
 In December 2007, the FASB issued SFAS
No. 160, "Noncontrolling Interests in Consolidated Financial Statements". SFAS
No. 160 establishes accounting and reporting standards for ownership interests
in subsidiaries held by
parties other than the parent, the amount of consolidated net income
attributable to the parent and to the noncontrolling interest, changes in a
parent's ownership interest and the valuation of retained noncontrolling equity
investmentswhen a subsidiary is deconsolidated.
SFAS No. 160 also establishes reporting requirements that provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners.The adoption on January 1, 2009 of this standard
resulted in changes to our presentation for noncontrolling 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 SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities" ("SFAS No. 161"). SFAS No. 161 amends and expands the
disclosure requirements of FASB Statement 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133") to requirequalitative 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
derivativeagreements.The adoption on January 1, 2009 of this
standard did not have a material impact on the Company’scondensedconsolidated financial position or
results of operations and the required disclosures have been
includedinNote12 and 14.
 
 In April 2008, the FASB issued FSP SFAS 142-3,
"Determination of the Useful Life of Intangible Assets" ("FSP 142-3"). This
guidance is intended to improve the consistency between the useful life of a
recognized intangible asset under SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), and
the period of expected cash flows used to measure the fair value of the asset
under SFAS 141R when the underlying arrangement includes renewal or extension of
terms that would require substantial costs or result in amaterial 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 historicalexperience, must consider assumptions
that market participants would use about renewal or extension as adjusted for
SFAS 142's entity-specific factors.The adoption on January 1, 2009 of this
standard did not have a material impact on the Company’scondensedconsolidated financial
statements.
 
 In May 2008, the FASB issued SFAS No.
162, "The Hierarchy of Generally Accepted Accounting Principles." SFAS No. 162
identifies the sources of accounting principles and the framework for selecting
the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP.The adoption on January 1, 2009 of this
standard did not have a material impact on the Company’scondensedconsolidated financial statements.
 
 In May 2008, the FASB issued FASB FSP
APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in
Cash upon Conversion (Including Partial Cash Settlement)". FSP APB 14-1 requires
the issuer of certain convertible debt instrumentsthat 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 nonconvertible debt borrowing rate. In
addition, the FSP 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’scondensedconsolidated financial
statements.
 
 In September 2008, the FASB issued
FSP EITF 03-6-1,
"Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities." FSP EITF 03-6-1 addresses whether instruments granted
in share-based payment transactions are participating securities prior to
vesting and, therefore, need to be included
in the earnings allocation in computing income per share under the two-class
method pursuant to SFAS No. 128, "Earnings per Share." This guidance establishes
that unvested share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and
shall be included in the computation of earnings per share pursuant to the
two-class method.The
adoption on January 1, 2009 of this standard did not have a material impact on the
Company’scondensedconsolidated financial
statements.
  -8-
  In April
2009, the FASB issued SFAS No. 115-2 and SFAS No. 124-2, “Recognition and
Presentation of Other-Than-Temporary Impairments,” (“SFAS No.152-2 and SFAS
No.124-2”) which provides operational guidance for determining
other-than-temporary impairments (“OTTI”) for debt securities. SFAS No.152-2 and
SFAS No.124-2 are effective for interim and annual periods ending after
June 15, 2009. Theadoption
on April 1, 2009 of this standard did not have a material impact on the
Company’scondensedconsolidated financial
statements.
 
 In
April 2009, the FASB issued SFAS No. 107-1 and APB 28-1, “Interim
Disclosure about Fair Value of Financial Instruments” (“SFAS No. 107-1and APB
28-1”). SFAS No. 107-1 and APB 28-1 requires interim disclosures regarding the
fair values of financial instruments that are within the scope of SFAS No. 107,
“Disclosures about the Fair Value of Financial Instruments.” (“SFAS No. 107”).
Additionally, SFAS No. 107-1 and APB 28-1 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. SFAS No. 107-1 and APB 28-1 do not change the
accounting treatment for these financial instruments. The adoption on April 1, 2009 ofthesestandardsdid not have a material impact on the
Company’scondensedconsolidated financial
statements.
 
 In
April 2009, the FASB issued SFAS No. 157-4, “Determining Fair Value When
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly” (“SFAS No. 157-4”).
SFAS No. 157-4 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. SFAS No. 157-4 also provides guidance on
identifying circumstances that indicate a transaction is not orderly. In
addition, SFAS No. 157-4 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 activitiy 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’scondensedconsolidated financial
statements.
 
 In May
2009, the FASB issued SFAS No. 165, “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. We have evaluated subsequent events through
August 12, 2009, the date the condensed consolidated financial statements were
available to be issued. There were no subsequent events identified.
 
 Recent accounting
pronouncement
 
 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, is not
expected to have any impact on the Company’s condensed consolidated financial
statements.
  -9-
  Foreign exchange ratesused
  June30,
                2009
              
              
              December
      31,
                2008
              
              
              June30,
                2008Periodend RMB/U.S. Dollar exchange
      rate
              
              
              6.8302
              
              
              
              6.8225
              
              
              
              6.8591Average RMB/U.S. Dollar exchange
      rate
              
              
              6.8293
              
              
              
              6.9483
              
              
              
              6.9572
  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 financialstatements to conform to the 2009
presentation. The effects of the reclassifications were not material to the
Company’scondensedconsolidated financial
statements.
 
 Note2–Acquisition
 
 OnJanuary 20, 2009, the Companysignedanequity purchase agreement with the shareholders of Xinxing
Property and acquired 100% ownership of XinxingProperty for a purchase price of RMB12 million(approximately $1.76million).Xinxing Property provides property
management services to residentialand commercial projects. The acquisition strengthens the
Company’s ability to improve the value to
customers during the after-sale phase ofthereal estate development business. The
synergies and benefitsgained are reflected in the value of
goodwill recorded.
 
 According to thepurchaseagreement,the operational control of Xinxing
Property passed to the Company effective January 1, 2009, and, accordingly, the
results of Xinxing Property’s operationshave been included in the
Company’scondensed consolidatedstatement ofincome andothercomprehensiveincome 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 2.0million (approximately $0.3
million)payable upon
signing of the purchase agreement,(2)acash payment of RMB 3.6
million(approximately $0.5 million)payableon March 30, 2009,(3) an additionalcash payment of RMB 3.6
million(approximately $0.5 million)payableon June30, 2009and (4) a finalcash payment of RMB 2.8million(approximately $0.4million)payableon September30, 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 thetransaction.As ofJune 30, 2009, the remaining balance under the
agreement amounted to
$937,015(see note 9).
 
 The acquisition was accounted for using
the purchase method in accordance with SFAS No. 141(R). The purchase price was
allocated to the identifiable assets and liabilities assumed based on their
estimated fair values.The
purchase price allocation is not considered final as of the date of this report
as the Company is still reviewing all of the underlying assumptions and
calculation used in the allocation. However, The Company believes the final
purchase price allocation will not be materially different than
presented below.
  -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 taxand other taxes
      payable
              
              
              151,143Other
    payables
              
              
              1,299,999Total net
      assets
              
              
              942,010Goodwill as at January 1,
      2009
              
              
              816,876Foreign exchange translation
      adjustment
              
              
              (921
              )Goodwill as atJune 30, 2009
              
              $
              815,955
 
 In connection withtheXinxingPropertyacquisition, the statutory reserve increased$154,812.
 
 Note3–Supplemental Disclosure of Cash Flow
Information
 
 Income taxes paidforboththe three and six months ended June 30,
2009amounted to$42,135(2008 -$225,963).Interest paidforthethree months endedJune 30, 2009 and 2008 amounted to$917,073 and $448,334,respectively. Interest paid forthesix months ended June 30, 2009 and
2008amounted to $2,008,308and$825,479,respectively.
 
 Note4–Other ReceivablesandPrepaid Expenses
 
 Other receivables, prepaid expenses and
other assets consistedof the following atJune30, 2009and December 31, 2008:
 
 June 30,
                2009
              
              
              December 31,
                2008Other
      receivable
              
              $
              1,021,160
              
              
              $
              916,886Allowance for bad
      debts
              
              
              (328,546
              )
              
              
              (473,058
              )Prepaid
      expenses
              
              
              107,782
              
              
              
              2,669Other receivables, prepaid expense
      other assets
              
              $
              800,396
              
              
              $
              446,497
  -11-
  Note5–Real EstateHeld for Development or
Sale
 
 The following summarizes the components
of real estate inventories atJune30,2009andDecember 31,2008:
 
 June30,
                2009
              
              
              December 31,
                2008Finished
      projects
              
              $
              9,132,754
              
              
              $
              10,181,827Construction in
      progress
              
              
              97,086,959
              
              
              
              50,468,184Total real estate held for
      development or sale
              
              $
              106,219,713
              
              
              $
              60,650,011
 
 Interest
on debt incurred by the Company for the three months ended June 30, 2009 was
$1,194,478 (June 30, 2008 - $939,717), and for the six months ended June 30,
2009 was $2,392,335 (June 30, 2008 - $1,733,748). Of this interest, the Company
capitalized in real estate held for development or sale during the three months
ended June 30, 2009 $751,712 (June 30, 2008 - $393,310). Of this interest, the
Company capitalized in real estate held for development or sale during the six
months ended June 30, 2009 $1,611,491 (June 30, 2008 - $764,285).
 
 Note6– Property and
Equipment
 
 Property and equipmentconsistedof the following atJune30,2009and December31,2008:
  June30,
                2009
              
              
              December 31,
                2008Head office buildings and
      improvements
              
              $
              3,275,847
              
              
              $
              3,234,628Income producing
      propertiesand
      improvements
              
              
              10,710,953
              
              
              
              10,055,310Electronicequipment
              
              
              419,454
              
              
              
              228,422Vehicles
              
              
              253,957
              
              
              
              71,140Office
      furniture
              
              
              286,424
              
              
              
              183,399Computer
      software
              
              
              126,951
              
              
              
              91,272Totals
              
              
              15,073,586
              
              
              
              13,874,711Accumulated
      depreciation
              
              
              (2,098,481
              )
              
              
              (1,483,210
              )Property and equipment,
      net
              
              $
              12,975,105
              
              
              $
              12,391,501
 
 Depreciationexpensefor the three months ended June 30, 2009
and 2008amountedto $160,177 and $89,839, respectively. Depreciation expense for
thesixmonthsendedJune30, 2009 and 2008 amounted to
$315,026and $183,657, respectively.The depreciation expense was included in
the selling,generalandadministrativeexpenses.
  -12-
  Note7–IntangibleAssets
 
 Intangible assetsconsistsof the following atJune30,2009and December 31,2008:
 
 June30,
                2009
              
              
              December 31,
                2008Intangiblesacquired
              
              $
              47,280,980
              
              
              $
              47,334,342Accumulated
      amortization
              
              
              (5,650,953
              )
              
              
              (1,290,682
              )Intangible assets, net
              
              $
              41,630,027
              
              
              $
              46,043,660
 
 Amortization expense for thethree monthsendedJune30, 2009 and 2008 amounted to$0.Amortization expense for the six months
ended June 30, 2009 and 2008 amounted to $4,360,003 and $0, respectively.Theamortizationexpense was capitalized in the real
estate construction in progress.
 
 Note8–Accrued Expenses
 
 June
      30,
                2009
              
              
              December
      31,
                2008Accrued
      expenses
              
              $
              1,500,266
              
              
              $
              855,270Accrued
      Interest
              
              
              2,961,258
              
              
              
              2,684,572Total
              
              $
              4,461,524
              
              
              $
              3,539,842
 
 Note
9 – Payable to Acquisition of Businesses
 
 June
      30,
                2009
              
              
              December
      31,
                2008Payable
      to original shareholders of New Land
              (i)
              
              $
              6,712,876
              
              
              $
              8,429,889Payable
      to original shareholders of Xinxing Property
              (ii)
              
              
              937,015
              
              
              
              -Total
              
              
              $
              7,649,891
              
              
              $
              8,429,889
 
 (i)
              The payable totheoriginal shareholders of New Land
      bears10% interest with anoriginal maturity of January 30, 2009. New
      Land’s original shareholders have
      agreed to extend the
      loan to December 31, 2009.
 
 (ii)
              SeeNote
  2
  -13-
  Note10– Loans
Payable
 
 Loans payable represent amounts due to
various banks.These loans generally can be renewed
with the banks when theyexpire. Loans payable as ofJune30,2009and December 31,2008consisted of thefollowing:
 June
      30,
                2009
              
              
              December
      31,
                2008Commercial Bank Weilai
      BranchDue December25, 2009, annual interest is at7.5percent, secured by the Company's
      24G projects
              
              $
              3,660,215
              
              
              $
              5,130,084Commercial Bank Weilai
      BranchDue August 29, 2010, annual
      interest is at 10.21 percent, guaranteed byTsiningand secured by the Company'sTsiningbuilding and partof Junjing II
      properties
              
              
              5,124,301
              
              
              
              5,130,084Xi'an Rural Credit union Zao Yuan
      Rd. BranchDueJuly 3, 2010, annual interest is at8.83percent, secured by the Company's
      Jun Jing Yuan I, Yuan I, Han Yuanand Xin Xing Tower
      projects
              
              
              2,928,172
              
              
              
              3,371,198China Construction Bank, Xi'an
      BranchDue August 27, 2011, annual
      interest is at floating interest ratebased on 110% of
      People’s Bank of China rate, secured by the Company's Jun
      JingYuan
      II
              
              
              12,737,548
              
              
              
              21,986,076Total
              
              $
              24,450,236
              
              
              $
              35,617,442
 
 All loansare used to financeconstruction projects. All interest
paid wascapitalized and allocated to various
construction projects.
 
 On June 28, 2008, the Companysignedastrategic partnershipMemorandum Of Understanding
(“MOU”)withChina Construction Bank XianBranchthat establisheda RMB 1 billion credit line for real
estate developmentof the
Company and its subsidiaries.On August 28, 2008, the Company
entered a loan agreement with China Construction Bank Xi’an Branch for a RMB 150
million loan maturing on August 27, 2011. As of June 30, 2009, the balance of
this loan was $12,737,548 (RMB 87 million) (December 31, 2008 - $21,986,075 (RMB
150 million)).
  -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,June 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
              
              
              -
              
              
              $
              7,983,626
              
              
              
              -
              
              
              $
              7,983,626Derivative
      liabilities
              
              
              -
              
              
              $
              6,472,976
              
              
              
              -
              
              
              $
              6,472,976Total
              
              
              -
              
              
              $
              14,456,602
              
              
              
              -
              
              
              $
              14,456,602
 
 Note 12– ConvertibleDebt
 
 On January 28, 2008, the Company issued
Senior Secured Convertible Notes due in2013 (the "Convertible debt") and
warrants to subscribe for common shareswithanaggregate purchase price of US$20
million. The Convertibledebt bearsinterest at5% perannum (computed based on the actual days
elapsed in a period of 360 days) of theRMB notional principle amount, payable
quarterly in arrears in U.S. Dollars onthe first business day of each calendar
quarter and on the maturity
date. Inaddition, 1,437,467 five-year warrants
were granted with a strike price of $6.07per common share, which are callable if
certain stock price thresholds are met.Approximately 215,620 warrants are also
available as a management incentive ifcertain milestones are
met.
 
 The holders have the right to convert up
to 45% ($9 million) of the principalamount of the Convertible debt into
common shares at an initial conversion priceof $5.57, subject toanupward adjustment. The Company, at its
discretion, mayredeem the remaining $11 million of
Convertible debt at 100% of the principleamount, plus any accrued and unpaid
interest. The warrants associated with theConvertible debt grant the holders the
right to acquire shares of common stockat $6.07 pershare, subject to customary
anti-dilution adjustments. The warrantsmay be exercised to purchase common
stock at any time up to and includingFebruary 28, 2013.
 
 The convertible debt is secured by a
first priority, perfected security interestin certain shares of common stock of Lu Pingji, theChairmanof the Company.The convertible debt is subject to
events of default customary for convertiblesecurities and for a secured
financing.
 
 Boththewarrantsandtheembedded derivative associated with
convertible debt meet
thedefinition of a derivative instrument
according to FASB No. 133,
“Accounting for Derivative
Instruments and Hedging Activities”andarerecorded asderivative instrument liabilities and
periodicallymarked-to-market. The fair value ofthewarrants andtheembedded derivative oninception were determined to be
$3,419,653 and $3,927,375, respectively, usingthe Cox-Rubinstein-Ross(“CRR”)Binomial Lattice Model with the
following assumption:expected life4.32years, expected volatility -75%, risk free interest rate
-2.46% and dividend rate - 0%.The fair value of the
warrants and embeddedderivative atJune30,2009were determined to be of $5,698,403(2008 - $658,682)and $6,472,976(2008–$760,398),respectively, using the
Cox-Rubinstein-Ross
Binomial Lattice Model with thefollowingassumption: expected life3.58-3.66years, expected volatility-105%, riskfree interest rate -1.90-1.94% and dividend rate - 0%.ForthethreemonthsendedJune30, 2009 and 2008,the Company recordeda change in fair value for
warrantsand
embeddedderivatives of$5,144,461(2008 - $(652,744)) and$5,836,616(2008 - $(738,999)),respectively,in thecondensedconsolidated statementsof incomeand comprehensive income.ForthesixmonthsendedJune30,2009and 2008,the Company recorded a change in fair
value for warrantsand
embeddedderivativesof$5,039,721(2008 - $(408,988)) and$5,712,578(2008 - $(454,488)),respectively,in thecondensedconsolidated statementsof incomeand comprehensive income.
  -15-
  After allocating the gross proceeds to
the fair value of the warrants and theembedded derivative instrument, the remaining proceeds
were allocated as theinitial carrying value of the
Convertible debt. It is accreted to its faceamount at maturity using the effective interest method. The
effective interestrate was determined to be
15.30%. The carrying value of Convertible debt atJune30, 2009was $14,199,920(2008 - $13,621,934).Related interest expense and accretion
expense for thethreemonthsendedJune30, 2009were $266,311(2008 - $257,826)and $296,164(2008 - $253,558),respectively.Related interest expense and accretion
expense for thesixmonthsendedJune30, 2009were $529,674(2008 - $435,603)and$577,986(2008 - $425,241),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 has agreed to register within 60 calendar days after closing shares ofcommon stock issuable to
the Investors for resale on a Form S-3 Registration Statement to be effective no
later than the 180th dayafter the closing date of the transaction.If Form S-3 is not available at that time, then the Company
will file a Registration Statement on such form asis then available to effect aregistration of the
registrable securities, subject to the consent of the Investors, which consent
will not be unreasonably withheld.TheCompany shall register anamount of common stock for resale that
equals at least 125% of the sum of shares issuable upon conversion of the Notes
and theexercise of the
warrants. Theregistration
rights granted under the Registration Rights Agreement are subject to customary exceptions and
qualifications and
compliance with certainregistration procedures. The Company is
subject to the late registration penalty payment equal to the product of (i) the
Investor’s outstanding principal amountand (ii) the
quotient obtained by
dividing 12% by 360 (the “Late Payments”). Currently, the Company is in the
process of negotiating the waiving of the Late Payments with
Investors.
 
 Note 13–Noncontrolling Interest
 
 Noncontrollinginterest consists of the interest ofnoncontrollingshareholders in the subsidiaries of the
Company. As ofJune30, 2009noncontrollinginterest amounted to $28,916,316(December 31, 2008- $29,109,350)
 
 On November 5, 2008, the Company and
Prax Capital entered into a conditional jointventureagreement 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. PraxCapitalhas the first right ofdistribution and there isamaximumamountthat PraxCapitalcanreceive. At thistime, theCompany 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 PraxCapital, 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 andbetween Prax Capital, Success Hill and
New Land, among others, in connection withaFramework Agreement entered into on
November 5, 2008, (“Framework Agreement”) by and between New Land, the
Companyand Prax
Capital. Prax Capital and New Land, through the Framework Agreement and the
other related agreements, intend tojointlyparticipateinbiddingforland 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 aninterest accrued at the rate of 10%per annumfrom the due date of such
payment.
 
 During the first six months of 2009,
the Company owned a
75% interest inPuhua (Xi’an) Real Estate Development Co.,
Ltd.(“Puhua”), a real estate development company.
Given the Company’scontrollingownership interest, the accounts ofPuhuahave been consolidated with the
accounts of the Company, and anoncontrollinginterest has been recorded for thenoncontrollinginvestors’interests in the net assets and
operations ofPuhuain accordance withthenoncontrollinginvestor’s investments.
 
 Noncontrolling
      interestNoncontrollingInterest at December
      31,2008
              
              $
              29,109,350Noncontrolling
      interests’ share of loss for the six months ended June 30,
      2009
              
              
              (193,034
              )NoncontrollingInterest at June 30,
      2009
              
              $
              28,916,316
 
 Note 14– Shareholders'
Equity
 
 Pursuant to EITF 00-19, "Accounting for
Derivative Financial
Instruments Indexed to, and Potentially Settle in, a Company's Own Stock," the
warrants issued contain a provision permitting the holder to demand payment
based on a Black-Scholes valuation in certain
circumstances. Therefore, under EITF 00-19 and SFAS No. 133,the Company recordedthe warrantsissued in 2006 and 2007as a liability at their fair value on
the date of grant and then marked them to $2,285,223atJune30, 2009(2008 - $458,461)using the CRR Binomial Lattice Model with
the followingassumptions:
expected life ranges from0.02to2.84years; expected volatility -105%, risk fee interest rate ranges from
0.17% to1.56% and dividend rate - 0%.Thechange in fair value of warrants for thethreemonthsendedJune30, 2009was $2,078,266(2008- $(293,819)).The change in fair value of warrants for
thesixmonthsendedJune30, 2009was $2,015,767(2008- $(547,064)).
 
 As of
December 31, 2008, the Company accrued as a liability $78,600 of stock based
compensation expense for 54,583 shares of common stocks granted by the Company
to various directors and executive in 2009. As of June 30, 2009, all of these
shares were issued.
 
 Warrants
 
 Following is a summary of the warrant
activity:
 
 Number of
                Warrants
                Outstanding
              
              
              Weighted Average
      Exercise PriceDecember 31,
      2008
              
              
              4,381,980
              
              
              $
              4.96Expired
              
              
              15,693
              
              
              
              3.31Exercised
              
              
              96,963
              
              
              
              3.31June30, 2009
              
              
              4,269,364
              
              
              $
              5.00
  -17-
  Following is a summary of the status of
warrants outstanding atJune30, 2009:
 
 Outstanding WarrantsExercise
                Price
              
              
              Number
              
              Average Remaining
                Contractual
      Life$3.31
              
              
              
              100,515
              
              0.14years$4.50
              
              
              
              2,731,382
              
              2.86years$6.07
              
              
              
              1,437,467
              
              3.67years
 
 Note 15–Provision for Income
Taxes
 
 As the
change in fair value of embedded derivatives and change in fair value of
warrants is not tax deductable, the Company incurred a provision for taxes in
the three months and six months ended June 30, 2009 despite a net loss before
taxes.
 
 Note 16–Net (Loss) IncomeperShare
 
 Earnings per share forthesixmonthsendedJune30,2009and2008were determined by dividingthenet(loss)income for the years by the weighted
average number of bothbasic and diluted shares of common stock and common stock equivalents
outstanding.
 
 3 Months
              
              
              3 Months
              
              
              6 Months
              
              
              6 MonthsJune 30,
              
              
              June 30,
              
              
              June 30,
              
              
              June 30,2009
              
              
              2008
              
              
              2009
              
              
              2008Numerator(Loss)Income attributable to
      common shareholders- basic
              
              $
              (9,890,245
              )
              
              $
              1,135,879
              
              
              $
              (7,987,526
              )
              
              $
              1,183,564Effect of dilutive
      securities:Warrants
              
              
              
              
              (288,510
              )
              
              
              
              
              (547,064
              )Income attributable to common
      shareholders - diluted
              
              $
              (9,890,245
              )
              
              $
              847,369
              
              
              $
              (7,987,526
              )
              
              $
              636,500DenominatorWeighted average shares
      outstanding - basic
              
              
              30,932,745
              
              
              30,143,757
              
              
              30,913,359
              
              
              30,143,161Effect of dilutive
      securities:Warrants
              
              5,325
              
              
              167,444
              
              
              2,677
              
              
              161,518Weighted average shares
      outstanding - diluted
              
              30,938,070
              
              
              30,311,201
              
              
              30,916,036
              
              
              30,304,679Earnings per
      shareBasic
              
              $
              (0.32
              )
              
              $
              0.04
              
              
              $
              (0.26
              )
              
              $
              0.04Diluted
              
              $
              (0.32
              )
              
              $
              0.03
              
              
              $
              (0.26
              )
              
              $
              0.02
 
 All of
the outstanding warrants and convertible debt have an anti-dilutive effect on
the earnings per share and are therefore excluded from the determination of
diluted earnings per share calculation.
 
 Note17– Commitments and
Contingencies
 
 The Company leases part of its
officeand
hotelspace undervariousoperating lease agreements.The futureminimum rental payments required under
the operating lease agreementsaresummarizedbelow.
 
 The Companyentered intoa contract with Xi’anBaqiaolocal governmentfora rubber damconstruction project.The Company is committed to expend
approximately $1,024,860onthis project.
 
 As of
June 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.
 
 Payment
      due by periodCommitments and
      Contingencies
              
              Total
              
              
              Less than
                1 year
              
              
              1-3years
              
              
              3-5years
              
              
              Over 5yearsRental
      lease
              
              $
              381,562
              
              
              $
              124,545
              
              
              $
              52,775
              
              
              $
              52,775
              
              
              $
              151,467Rubber
      dam construction
              
              
              1,024,860
              
              
              
              1,024,860Land
      use right
              
              
              2,591,432
              
              
              
              
              
              
              
              2,591,432Total
              
              $
              3,997,854
              
              
              $
              1,149,405
              
              
              $
              2,644,207
              
              
              $
              52,775
              
              
              $
              151,467
 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 that 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, and to integrate and maintain technical
information and management information systems; our ability to raise capital
when needed and on acceptable terms and conditions; the intensity of
competition; and general economic conditions.





All
written and oral forward-looking statements made in connection with this Form
10-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.


-18-




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
June 30, 2009, the Company has approximately $8.0 million of warrants liability
and $6.5 million of fair value of embedded derivatives on the balance sheet,
which is approximately 6.9% and 5.6% of the total liabilities,
respectively.
 
 We are
using 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 warrant liability and embedded derivatives every
quarter and recognize the change of fair value as gain or loss in 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 June 30, 2009,
our common stock price experienced large fluctuations with the price increasing
from $1.20 on March 31, 2009 to $5.76 on June 30, 2009. The increase in stock
price and expected volatility caused an increase in fair value for warrants. As
a result, we recognized approximately $7.2 million as a change in fair value of
warrants and $5.8 million as a change in fair value of embedded derivatives,
which are all non-cash expenses.
  The
following table summarizes the fair value of warrant liability and embedded
derivative as at various periods.
 
 (in
      million)
              
              2008
              
              
              20093rd
      Quarter
              
              
              4th
      Quarter
              
              
              1st
      Quarter
              
              
              2nd
      QuarterWarrants
      Liability
              
              $
              2.2
              
              
              $
              1.1
              
              
              $
              0.9
              
              
              $
              8.0Fair
      value of embedded derivatives
              
              $
              1.4
              
              
              $
              0.8
              
              
              $
              0.6
              
              
              $
              6.5
  Real
estate held for development or sale, intangible asset and deposits on land use
rights
 
 The
Company conducts regular review of its assets for impairment, which include real
estate inventories, intangible asset, deposits on land use rights and other
significant accounting line items. After our review and assessment, we concluded
that there were no significant decreases in the market price for our long-lived
asset and real estate inventories. The average residential sale price in Xi’an
City was quite stable during the quarter ended June 30, 2009 and according to
Xi’an Bureau of Statistics’ data, the average sale price increased to 4,639 RMB
per sq. meter (approximately US$677 per sq. meter), from approximately 4,430 RMB
per sq. meter (US$646 per sq. meter) representing approximately 5% year-on-year
growth.
 
 -19-
  As of
August 11, 2009, our market capitalization is approximately $175
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 as a result 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 would 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 would be recorded as
adjustments to the cost basis. There has been no impairment on the real estate
inventories and no impairment loss has been recorded for the three and six
months ended June 30, 2009 and 2008.
  The
following summarizes the components of real estate inventories as at June 30,
2009 and December 31, 2008:
 
 June
      30, 2009
              
              
              December
      31, 2008Finished
      projects
              
              $
              9,132,754
              
              
              $
              10,181,827Construction
      in progress
              
              
              97,086,959
              
              
              
              50,468,184Total
      real estate held for development or sale
              
              $
              106,219,713
              
              
              $
              60,650,011
  Intangible
asset
  The
Company’s intangible asset is related to the exclusive rights to develop 487
acres land in the Baqiao area that the Company acquired during 2007. We assessed
the fair value of this intangible asset based on the current-period operating
cash flow and a projection of future cash flows. This method is intended to
match the pattern of amortization with the income-generating capacity of the
assets. It is the Company’s understanding 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.
 
 As of
June 30, 2009 and December 31, 2008, intangible asset consists of the
following:
 
 June
      30, 2009
              
              
              December
      31, 2008Intangible
      acquired
              
              $
              47,280,980
              
              
              $
              47,334,342Accumulated
      amortization
              
              
              (5,650,953)
              
              
              
              (1,290,682)Intangible
      assets, net
              
              $
              41,630,027
              
              
              $
              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 six months ended June 30, 2009
and 2008, the Company has recorded $0 of impairment on the intangible
asset.
  -20-
  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 487
acre land in the Baqiao project. During fiscal 2007, the Company sold 18.5 acre
land and the related profit margin realized on that sale represents 2.4% of
total estimated profit margin on the whole 487 acre project, therefore the
Company amortized $1,157,758 (2.4% ) of 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 (2007 -
 $1,157,758)
of amortization on the intangible asset. Amortization expense for the three
months ended June 30, 2009 and 2008 amounted to $0. Amortization expense for the
six months ended June 30, 2009 and 2008 amounted to $4,360,003 and $0,
respectively. The amortization expense was capitalized in the real estate
construction in progress.
 
 
 Management
re-evaluated the expected profit margin from the 487 acre land as at June 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 resulted
from change of estimate was not material. Therefore there was no adjustment made
in the three and six months ended June 30, 2009 due to the change of accounting
estimate of total profit margin in 487 acres land.
  Deposits
on land use rights
 
 June
      30, 2009
              
              
              December
      31, 2008Deposits
      on land use rights
              
              
              26,586,901
              
              
              
              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. The residential average sale price in Xi’an city was stable the
fiscal quarter ended June 30, 2009 and according to the Xi’an Bureau of
Statistics’ data, the average sale price increased to 4,642RMB per
square meter (approximately US$677 per square meter) from 4,496RMB in
the first quarter 2009, and representing about 5% year-on-year
growth.
   Material
trends and uncertainties that may impact our continuing operations
  Changes
in national and regional economic conditions, as well as local economic
conditions where we conduct our operations and where prospective purchasers of
our homes live, may result in more caution on the part of homebuyers and
consequently fewer home purchases. According to the data from 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. As currently all our
projects are in Xi’an city, the downturn of the real estate market in Xi’an
caused the decline of our operating revenues in 2008. Since 2009, we see the
market sentiment has improved and the transaction volume has increased compared
to same period of 2008. During the second quarter of 2009, our revenue increased
approximately 70.7% over same period 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 would need in order to
purchase our homes, as well as adversely affect 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 better compete for home
buyers. A reduction in pricing could result in a decline in revenues and in our
margins. We do not expect any substantial change of current mortgage policy and
the prevailing mortgage rate in the near future.
  The
real estate development industry is capital intensive, and development requires
significant up-front expenditures to acquire land and begin development.
Accordingly, we incur substantial indebtedness to finance our homebuilding and
land development activities. Although we believe that internally generated 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
increased amounts of equity to be invested in a project by borrowers in
connection with new loans. Failure to obtain sufficient capital to fund its
planned capital and other expenditures could have a material adverse effect on
our business.
  -21-
  In
addition, regulatory requirements could cause 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 us necessary licenses, permits and
approvals could have an adverse effect on our operations.
 
 As of
June 30, 2009, we had $10,133,600 of cash and cash equivalents, a decrease of
$27,291,740, compared with $37,425,340 of cash and cash equivalents as of
December 31, 2008.
 
 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
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 flow will be available to fund our
operations.


-22-




BUSINESS




China
Housing & Land Development, Inc. (the “Company” or “we”), 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 high, 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 high, 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 high, often
      constructed of steel-reinforced concrete, that are completed within approximately12 months of securing all required
  permits.





Our
projects can be classified into one of four stages of development:





▪
            Projects
      in planning, where we have purchased the development and or land use
      rights for parcels of land as part of our project development pipeline.
      The completion of projects on these sites is subject to adequate
      financing, permits, licensing and certain market
    conditions;





▪
            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, where the construction has been finished and most of the units
      in the buildings have been sold, leased or
  rented.


-23-





Projects
under construction





Projectname
                                    
                                    Typeof
                                      Projects
                                    
                                    
                                    Actualor
                                      Estimated
                                      Construction
                                      Period
                                    
                                    
                                    Actualor
                                      EstimatedPre-
                                      sale
                                      Commencement
                                      Date
                                    
                                    
                                    TotalSite
                                      Area
                                      (m2)
                                    
                                    
                                    TotalGFA
                                      (m2)
                                    
                                    
                                    SoldGFAby
                                      June30,2009
                                      (m2)JunJing
      II
                                      Phase
      One
                                    
                                    Multi-Family
                                      residential
      &
                                      Commercial
                                    
                                    
                                    Q3/2007
                                      -
      Q3/2009
                                    
                                    
                                    
                                    Q2/2008
                                    
                                    
                                    
                                    39,524
                                    
                                    
                                    
                                    136,012
                                    
                                    
                                    
                                    104,662JunJing
      II
                                      Phase
      Two
                                    
                                    Multi-Family
                                      residential
      &
                                      Commercial
                                    
                                    
                                    Q2/2009
                                      -
      Q2/2011
                                    
                                    
                                    
                                    Q2/2009
                                    
                                    
                                    
                                    29,800
                                    
                                    
                                    
                                    112,556
                                    
                                    
                                    
                                    2,456Puhua
      Project
                                    
                                    Multi-Family
                                      residential
      &
                                      Commercial
                                    
                                    
                                    Q2/2009
                                      -
      Q3/2014
                                    
                                    
                                    
                                    Q3/2009
                                    
                                    
                                    
                                    192,582
                                    
                                    
                                    
                                    610,000
                                    
                                    
                                    
                                    -Projectname
                                    
                                    Total
                                      Numberof
                                      Units
                                    
                                    
                                    Numberof
                                      Unitssoldby
                                      June30,2009
                                    
                                    
                                    Estimated
                                      Revenue
                                      ($millions)
                                    
                                    
                                    Contracted
                                      Revenueby
                                      June30,
                                      2009
                                      ($millions)
                                    
                                    
                                    Recognized
                                      Revenueby
                                      June30,
                                      2009
                                      ($millions)JunJing
      II
                                      Phase
      One
                                    
                                    1,182
                                    
                                    
                                    
                                    1,017
                                    
                                    
                                    
                                    95.6
                                    
                                    
                                    
                                    63.7
                                    
                                    
                                    
                                    54.4JunJing
      II
                                      Phase
      Two
                                    
                                    1,015
                                    
                                    
                                    
                                    22
                                    
                                    
                                    
                                    94.1
                                    
                                    
                                    
                                    1.9
                                    
                                    
                                    
                                    1.0Puhua
      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 approximately248,568 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
June 30, 2009, our customers have signed pre-sale purchase agreements for
apartments with purchase prices totaling $63.7 million, of which we have
recognized $54.4 million in revenues, based on the percentage of completion
method of accounting. Approximately
$10 million of pre-sale payments were booked as advances from customers and
will be recognized as revenues as construction advances.





The
construction of Phase Two commenced in the second quarter of 2009 and pre-sales
started within the same quarter. As of June 30, 2009, the contract revenue for
Phase Two is $ 1.9 million, of which we have recognized $ 1.0 million in
revenues. Revenue will continue to be recognized 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.


-24-





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. We will begin accepting pre-sale
purchase agreements during the third quarter of 2009. Revenue from the pre-sales
will begin to be recognized upon the completion of the
foundation.





Projects
under planning and in process




Project
                            name
                          
                          Typeof
                            Projects
                          
                          Estimated
                            Construction
                            Period
                          
                          
                          EstimatedPre-
                            sale
                            Commencement
                            Date
                          
                          
                          TotalSite
                            Area
                            (m2)
                          
                          
                          TotalGFA
                            (m2)
                          
                          
                          Total
                            Numberof
                            UnitsBaqiao
      New
                            Development
                            Zone
                          
                          Land
                            Development
                          
                          2009
      - 2020
                          
                          
                          
                          N/A
                          
                          
                          
                          N/A
                          
                          
                          
                          N/A
                          
                          
                          
                          N/AJunJing
      III
                          
                          Multi-Family
                            residential
      &
                            Commercial
                          
                          Q3/2009
                            - Q3/2011
                          
                          
                          
                          Q3/2009
                          
                          
                          
                          8,094
                          
                          
                          
                          51,470
                          
                          
                          
                          570Park
      Plaza
                          
                          Multi-Family
                            residential
      &
                            Commercial
                          
                          Q4/2009
                            - Q4/2013
                          
                          
                          
                          Q1/2010
                          
                          
                          
                          44,250
                          
                          
                          
                          200,000
                          
                          
                          
                          2,000Golden
      Bay
                          
                          Multi-Family
                            residential
      &
                            Commercial
                          
                          Q4/2010
                            - Q4/2014
                          
                          
                          
                          Q1/2011
                          
                          
                          
                          160,665
                          
                          
                          
                          351,812
                          
                          
                          
                          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 where the city
expects an middle
– to upper – income population of900,000 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; it will embellish the natural
environment adjacent to our Baqiao project.


-25-





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 51,470 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 third quarter of 2009 and
      expect pre-sales to begin during the same quarter. The total estimated
      revenue from this project is 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 200,000 square meters. The four-year
construction of Park Plaza is expected to begin in the fourth quarter 2009. We
anticipate accepting pre-sale purchase agreements in the second quarter of 2010,
and revenues from pre-sale agreements will be begin to be recognized upon the
completion of the foundation. 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
351,812 square meters. The Golden Bay project will consist of a hotel, office
buildings, 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 second quarter of 2011. Revenue
will be recognized upon the completion of the foundation.





Completed
Projects




Projectname
                      
                      Typeof
                        Projects
                      
                      Completion
                        Date
                      
                      
                      TotalSite
                        Area
                        (m2)
                      
                      
                      TotalGFA
                        (m2)
                      
                      
                      Total
                        Numberof
                        Units
                      
                      
                      Numberof
                        Unitssold by
                        June30,
                        2009Tsining
      Mingyuan
                      
                      Multi-Family
                        residential
      &
                        Commercial
                      
                      
                      Q2/2000
                      
                      
                      
                      17,526
                      
                      
                      
                      53,055
                      
                      
                      
                      303
                      
                      
                      
                      303Lidu
      Mingyuan
                      
                      Multi-Family
                        residential
      &
                        Commercial
                      
                      
                      Q4/2001
                      
                      
                      
                      5,289
                      
                      
                      
                      8,284
                      
                      
                      
                      56
                      
                      
                      
                      56Tsining
      Hanyuan
                      
                      Multi-Family
                        residential
      &
                        Commercial
                      
                      
                      Q4/2003
                      
                      
                      
                      3,026
                      
                      
                      
                      32,229
                      
                      
                      
                      238
                      
                      
                      
                      238Tsining
      Home IN
                      
                      Multi-Family
                        residential
      &
                        Commercial
                      
                      
                      Q4/2003
                      
                      
                      
                      8,483
                      
                      
                      
                      30,072
                      
                      
                      
                      215
                      
                      
                      
                      213Tsining
      Gangwan
                      
                      Multi-Family
                        residential
      &
                        Commercial
                      
                      
                      Q4/2004
                      
                      
                      
                      12,184
                      
                      
                      
                      41,803
                      
                      
                      
                      466
                      
                      
                      
                      466Tsining-24G
                      
                      Hotel,
                        Commercial
                      
                      
                      Q2/2006
                      
                      
                      
                      8,227
                      
                      
                      
                      43,563
                      
                      
                      
                      773
                      
                      
                      
                      707JunJing
      I
                      
                      Multi-Family
                        residential
      &
                        Commercial
                      
                      
                      Q3/2006
                      
                      
                      
                      55,588
                      
                      
                      
                      167,931
                      
                      
                      
                      1,671
                      
                      
                      
                      1,567




-26-




Tsining Mingyuan: 8 East
Youyi Road, Xi’an. The construction area was 53,055 square meters. Mingyuan is a
residential complex consisting of 303 two to four bedroom apartments.
Construction commenced in March 1998 and was completed in April 2000. The
project generated total sales of $19.98 million.





Lidu Mingyuan: 25 East
Mutoushi, Xi’an. Located in a prime location near the historic Xi’an Bell Tower,
the project covers 1.3 acres with a building area of 8,284 square meters, and
has 56 apartments ranging from two to four bedrooms. The project began in
October 2000 and was completed in November 2001. Total sales were $4.32
million.





Tsining Hanyuan: 6 East Youyi
Road, Xi’an. Located in the south of Xi’an, the area is noted for its schools
and universities. The project was started in February 2002 and was completed in
December 2003. It is comprises of 238 two to three bedroom apartments and
covers a total construction area of 32,229 square meters. The project generated
total sales of $14.05 million.





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.




Tsining GangWan: 123 Laodong
Road, Xi’an. Less than one mile from the western hi-tech industrial zone,
GangWan spans three acres and is comprises eight buildings with a total
construction area of 41,803 square meters. The project began in April 2003 and
was completed in December 2004. GangWan has 466 apartments ranging from one
to three bedrooms. The total sales were US$ 18.44 million.





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 372 one to three bedroom service apartments. The
project started construction in June 2005 and was completed in June 2006 with
total sales of $40.10 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 1,230 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 was 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 $50.46 million.


-27-


CONSOLIDATED
OPERATING RESULTS





Three
Months Ended June 30, 2009 Compared With Three Months Ended June 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
second quarter of 2009, most of our revenues came from Tsining JunJing II phase
one, which consists of 13 residential buildings and 3 auxiliary buildings,
including one kindergarten, with a gross floor area of about 136,012 square
meters. This project is currently under construction and collecting funds under
pre-sale agreements.





Effective
January 1, 2008, the Company adopted the percentage of completion method of
accounting for revenue recognition for all building construction projects in
progress, which currently includes 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:
                  
                  June 30, 2009
                  
                  
                  June 30, 2008US
      dollarsProject
      Under ConstructionTsining
      JunJing II Phase One
                  
                  $
                  20,020,967
                  
                  
                  $
                  12,073,781Tsining
      JunJing II Phase Two
                  
                  
                  960,096
                  
                  
                  
                  -Puhua
      Project
                  
                  
                  -
                  
                  
                  
                  -Projects
      CompletedTsining
      JunJing I
                  
                  
                  (1,018,606
                  )
                  
                  
                  309,154Tsining-24G
                  
                  
                  1,018,023
                  
                  
                  
                  183,351Additional
      Project
                  
                  
                  200,460
                  
                  
                  
                  128,941Infrastructure
      ProjectBaqiao
      infrastructure construction
                  
                  
                  -
                  
                  
                  
                  360,003Project
      In ProcessBaqiao
                  
                  
                  -
                  
                  
                  
                  -Revenues
      from the sale of properties
                  
                  $
                  21,180,940
                  
                  
                  $
                  13,055,230





The
revenues from the sale of properties in the three months ended June 30, 2009
increased 62.2% to $21,180,940 from $13,055,230 in the same period of 2008. The
increase was primarily due to the increased revenue from Tsining JunJing II
Phase One.





The
revenue from completed projects totaled $199,877 in the three months ended June
30, 2009 compared with $492,505 in the same period of 2008. The 59.4% decrease
was due mainly to the returned units of JunJing I from one of our customers in
the second quarter.


-28-





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 finish the river dam in the third
quarter of 2009 and recognize the associated revenues when the project is
delivered to the local government.





Our
project in process is the Baqiao project where we have the exclusive right to
develop 487 acres. In 2007, we acquired the development rights and recognized
$24,405,717 in revenue as a result of a an approximately 18 acre land sale to an
unrelated developer. Near the end of 2008, we initiated a joint venture with
Prax Capital 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
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 June 30, 2009, contributing $20,020,967 in revenues. By
June 30, 2009, we had pre-sold approximately 1,017 units in the project,
totaling approximately 104,662 square meters.





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 expects to complete 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 $1.9 million in
sales contracts for 22 units of which we recognized approximately $1.0 million
in the second quarter.





Revenues
from projects completed





Revenues
in the three months ended June 30, 2009 for completed projects decreased 59.4
percent to $199,877 compared with $492,505 in the same period of 2008. The
decrease in revenues for the three months ended June 30, 2009 was primarily due
to the completion of Tsining-24G and JunJing I.





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 $1,420,979 in other income
for the three months ended June 30, 2009 compared with $189,260 in the same
period of 2008. The 650.8% increase is mainly due to the acquisition of Xinxing
Property Management, which contributed approximately $588,558 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 June 30, 2009 increased 36.8
percent to $15,394,470 compared with $11,252,721 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.





The
percentage of completion method of accounting is based on estimated costs
incurred, and is preferable as it accurately reflects the business activity of
the Company and matches revenues with the costs incurred in the pursuit of such
revenue. The Company has determined that retrospective application to periods
prior to January 1, 2008 is not practical as the necessary information needed to
restate prior periods is not available. Therefore, the Company began to apply
the percentage of completion method on a prospective basis beginning on January
1, 2008.


-29-





Gross
profit and profit margin





Gross
profit for the three months ended June 30, 2009 was $7,207,449, representing
an increase of 261.9 percent from $1,991,769 in the same period of 2008.
The gross profit margin for the three months ended June 30, 2009 was 31.9
percent compared with 15.0 percent in the same period of 2008. The relatively
low gross margin in the second 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. With the improvement in market conditions, we began providing higher
margin products to the market in 2009, which effectively increased our average
sales price and gross margin.





Selling,
general and administrative expenses





Selling,
general and administrative expenses for the three months ended June 30, 2009
increased 36.9 percent to $ 1,942,946 from $ 1,418,750 in the same period of
2008. The increase in selling, general and administrative expenses was due
primarily to marketing expenses associated with Tsining JunJing II Phase One
and Phase Two as well as administrative and marketing expenses related
to the Puhua project.





Stock-based
compensation





We did
not incur stock-based compensation expenses in the three months ended June 30,
2009 or during the same period of 2008.





Other
expenses





Other
expenses mainly consist of late delivery settlements and maintenance
costs.  Other expenses in the three months ended June 30, 2009
increased 45.5 percent to $150,327 compared with $103,344 in the same period of
2008.





Operating
profit and operating profit margin





Operating
profit is defined as gross profit minus selling, general and administrative
expenses, stock-based compensation, and other expenses.  Operating
profit in the three months ended June 30, 2009 was $5,114,176 compared with
$469,675 in the same period of 2008, representing
an increase of 988.9 percent, primarily due to the higher revenues
generated by Tsining JunJing II Phase One and Phase Two. As a result, the
operating profit margin was 22.6 percent for the second quarter of 2009 compared
with 3.5 percent for the same period of 2008.





Interest
expense





Interest
expense in the three months ended June 30, 2009 decreased 32.1 percent to
$446,899 from $658,443 in the same period of 2008. This is primarily due to the
capitalization and repayment of a $9.9 million RMB bank loan to Xi’an Tsining
Housing Development Co., Ltd. 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 June 30, 2009, the company has repaid $8.8
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).


-30-


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 second
quarter of 2009, our common stock price experienced large fluctuations with the
price increasing from $1.20 on March 31, 2009 to $5.76 on June 30, 2009. The
price increase and higher than usual volatility caused an increase in fair value
for both the derivative and warrants.





The
company recorded $5,836,616 in the
change in fair value of embedded derivativesin the three months
ended June 30, 2009 compared with $(738,999) 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.





A
shareholder 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
June 30, 2009, 96,923 warrants were exercised. 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 $7,222,727 in the three months ended June
30, 2009, compared to $(946,563) 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 second quarter of 2009, our common stock price experienced
large fluctuations with the price increasing from $1.20 on March 31, 2009 to
$5.76 on June 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.





Provision
for income taxes




The
company booked a provision for income tax of $1,347,914 in the three months
ended June 30, 2009, compared with $107,357 in the same period of 2008. The
increase of the tax provision is mainly due to the increase of sales revenue and
the improvement of profit margin during the second quarter of 2009. As the
change in fair value of embedded derivatives and change in fair value of
warrants, totaled to a loss of $13,059,343, is not tax deductable, the Company
incurred a provision for taxes based on the 25% statutory rate despite a net
loss before taxes.




Since the
change in fair value of embedded derivative and warrants could not be deducted
from the income before taxes, we recognized tax provision based on 25% statutory
rate.





Non-controlling
Interest





We
recorded $(145,899) loss attributable to non-controlling shareholder of Puhua
and Success Hill, which is related to the formation of Puhua in the second
quarter of 2009. We did not have any loss attributable to non-controlling
shareholder in the same period of 2008.





Net
income





Net
income in the three months ended June 30, 2009 decreased 983.6 percent to
$(10,036,144) from $1,135,879 in the same period of 2008.





The
decrease in net income was due primarily to the changes in fair value of
embedded derivatives and warrants. Together, these two items represented
expenses of approximately $13.0 million for the three months ended June 30,
2009.


-31-





Basic
and diluted earnings per share




Basic
earnings per share was $(0.32) in the three months ended June 30, 2009, compared
to $0.04 in the same period of 2008. Diluted earnings per share was $(0.32) in
the three months ended June 30, 2009, compared to $0.03 in the same period of
2008. The decrease is mainly due to the non-cash expenses related to our
convertible notes and warrants. These two items together represented
approximately $13.0 million. Without these two non-cash expenses, basic earning
per share and diluted earning per share would be $0.10 and $0.10, respectively,
in the three months ended June, 2009.
  Common
shares used to calculate basic and diluted EPS





The
weighted average shares outstanding used to calculate basic earnings per
share was 30,932,745 shares in the three months ended June 30, 2009 and
30,143,757 shares in the same period of 2008. The weighted average shares
outstanding used to calculate the diluted earnings per share was 30,938,070
shares in the three months ended June 30, 2009 and 30,311,201 shares in the same
period of 2008.





Foreign
exchange





The
company operates in China and accounts in the Chinese Renminbi (RMB) but reports
its financial results in U.S. dollars, based on the exchange rate of the two
currencies. The fluctuation of exchange rates during the three months ended June
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 June 30, 2009 was $51,713, compared with $1,735,766 in the same period of
2008.





Six
Months Ended June 30, 2009 Compared With Six Months Ended June 30,
2008





Revenues





Total
revenues for the six months ended June 30, 2009 increased 100.1 percent to
$36,446,602 from $17,991,127 for the six months ended June 30,
2008.





Effective
January 1, 2008, the Company adopted the percentage of completion method of
accounting for revenue recognition for all building construction projects in
progress, which currently includes the Tsining JunJing II.





Six months
                                  
                                  
                                  Six
      monthsended
                                  
                                  
                                  endedRevenues
      by project:
                                  
                                  June
      30, 2009
                                  
                                  
                                  June
      30, 2008US
      dollarsProject
      Under ConstructionTsining
      JunJing II Phase One
                                  
                                  $
                                  30,326,229
                                  
                                  
                                  $
                                  12,073,781Tsining
      JunJing II Phase Two
                                  
                                  
                                  960,096
                                  
                                  
                                  
                                  -Puhua
      Project
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Projects
      CompletedTsining
      JunJing I
                                  
                                  
                                  561,959
                                  
                                  
                                  
                                  4,529,727Tsining-24G
                                  
                                  
                                  1,880,616
                                  
                                  
                                  
                                  37,420Additional
      Project
                                  
                                  
                                  377,909
                                  
                                  
                                  
                                  250,063-Infrastructure
      ProjectBaqiao
      infrastructure construction
                                  
                                  
                                  -
                                  
                                  
                                  
                                  688,184Project
      In ProcessBaqiao
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Revenues
      from the sale of properties
                                  
                                  $
                                  34,106,809
                                  
                                  
                                  $
                                  17,579,175


-32-





The
revenues from the sale of properties in the six months ended June 30, 2009
increased 82.3% to $34,106,809 from $17,579,175 in the same period of 2008. The
increase was primarily due to the increased revenue from Tsining JunJing II
Phase One, our current project under construction.





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
from projects under construction





Tsining
JunJing II Phase One





Tsining
JunJing II Phase One was our major revenue generating construction project in
the six months ended June 30, 2009, contributing $30,326,229 in revenues. By
June 30, 2009, we had pre-sold approximately 1,017 units in the project,
totaling approximately 104,662 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 $1.9 million
in sales contracts for 22 units of which we recognized approximately $1.0
million in the first six months of 2009.





Revenues
from projects completed





Revenues
in the six months ended June 30, 2009 for completed projects decreased 43.1
percent to $2,820,484 compared with $4,817,210 in the same period of 2008. The
decrease in revenues for the six months ended June 30, 2009 was primarily due to
units returned by one of our customers.





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 $2,339,793
in other income for the six months ended June 30, 2009 compared with
$411,952 in the same period of 2008. The 468.0% increase is mainly due to the
acquisition of Xinxing Property Management during the first quarter of 2009,
which contributed approximately $1,141,303 to our consolidated
revenues.





Cost
of properties and land





The cost
of properties and land in the six months ended June 30, 2009 increased 82.7
percent to $24,892,685 compared with $13,619,833 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.


-33-


Gross
profit and profit margin





Gross
profit for the six months ended June 30, 2009 was $11,533,917, representing
an increase of 163.9 percent from $4,371,294 in the same period of
2008. The gross profit margin for the six months ended June 30, 2009 was
31.6 percent compared with 24.3 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 six
months ended June 30, 2009 generally had higher profit margins than the units
sold in the same period of 2008. We began the marketing campaign for our
JunJing II project during the second quarter of 2008 and used favorable prices
to attract market interest and encourage future sales.





Selling,
general and administrative expenses





Selling,
general and administrative expenses for the six months ended June 30, 2009
increased 30.6 percent to $3,351,770 from $2,567,351 in the same period of 2008.
The increase in selling, general, and administrative expenses was due primarily
to 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.





Stock-based
compensation





We did
not incur stock-based compensation expenses in the six months ended June 30,
2009 or during the same period of 2008.





Other
expenses





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





Other
expenses in the six months ended June 30, 2009 increased 59.4 percent to
$190,123 compared with $119,254 in the same period of 2008.





Operating
profit and operating profit margin





Operating
profit in the six months ended June 30, 2009 was $8,012,024 compared with
$1,684,689 in the same period of 2008, representing
an increase of375.6 percent, primarily due to the higher revenue
generated by Tsining JunJing II Phase One and Phase Two. As a result, the
operating profit margin was 22.0 percent for the six months ended June
30, 2009 compared with 9.4 percent for the same period of
2008.





Interest
expense





Interest
expense in the six months ended June 30, 2009 decreased 28.5 percent to $784,977
from $1,098,116 in the same period of 2008. This is primarily due to the
capitalization and repayment of a 11.1 million RMB bank loan to Xi’an
Tsining Housing Development Co., Ltd. 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 $9.2 million during the six months ended
June 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 $5,712,578 in the
change in fair value of embedded derivativesin the six months ended
June 30, 2009 compared with $(454,488) 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
six months ended June 30, 2009, 96,923 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.


-34-





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 $7,055,488 in the six months ended June 30,
2009, compared to $(956,052) 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 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 six months of 2009, our common stock price experienced
large fluctuations with the price increasing from $1.29 on December 31, 2008 to
$5.76 on June 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.





Provision
for income taxes




The
company booked a provision for income tax of $2,061,555 compared
with $388,308 recorded in the same period of 2008. The increase of the tax
provision is mainly due to the increase of sales revenue and the improvement of
profit margin during the first six months of 2009. As the change in fair value
of embedded derivatives and change in fair value of warrants, totaled to a loss
of $12,768,066, is not tax deductable, the Company incurred a provision for
taxes based on the 25% statutory rate despite a net loss before
taxes.
  Since the
change in fair value of embedded derivative and warrants could not be deducted
from the income before taxes, we recognized tax provision based on the 25%
statutory rate.





Non-controlling
Interest





We
recorded $(193,034) loss attributable to non-controlling shareholder of Puhua
and Success Hill, which is related to the formation of Puhua in 2009. We did not
have any loss attributable to non-controlling shareholder in the same period of
2008.





Net
income





Net
income in the six months ended June 30, 2009 decreased 774.9 percent to
$(7,987,526) from $1,183,564 in the same period of 2008.





The
decrease in net income was due primarily to the change in fair value of embedded
derivatives and warrants and partly caused by the higher selling, general,
and administrative expenses in the second quarter of 2009.





Basic
and diluted earnings per share




Basic
earnings per share was $(0.26) in the six months ended June 30, 2009, compared
to $0.04 in the same period of 2008. Diluted earnings per share was $(0.26) in
the six months ended June 30, 2009, compared to $0.02 in the same period of
2008. The decrease is mainly due to the non-cash expenses related to our
convertible notes and warrants. These two items together represented
approximately $12.8 million. Without these two non-cash expenses, basic earning
per share and diluted earning per share would be $0.15 and $0.15, respectively,
in the six months ended June, 2009.
  Common
shares used to calculate basic and diluted EPS





The
weighted average shares outstanding used to calculate basic earnings per
share was 30,913,359 shares in the six months ended June 30, 2009 and 30,143,161
shares in the same period of 2008. The weighted average shares outstanding used
to calculate the diluted earnings per share was 30,916,036 shares in the six
months ended June 30, 2009 and 30,304,679 shares in the same period of
2008.





Foreign
exchange





The
company operates in China and accounts in the Chinese Renminbi (RMB) but reports
its financial results in U.S. dollars, based on the exchange rates of the two
currencies. The fluctuation of exchange rate during the six months ended June
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 six months ended June
30, 2009 was $(311,420), compared with a gain of $5,264,252 in the same period
of 2008.


-35-





Cash
flow discussion





The
decrease in cash for the six months ended June 30, 2009 was $(27,291,740)
compared with $19,662,484 increase in cash during the same period of
2008.





Cash flow
from operating activities in the six months ended June 30, 2009 decreased 89.4
percent to $(15,072,585) from $(7,977,053) in the same period of 2008. This was
primarily due to the operating cash outflow associated with the development of
Tsining JunJing II Phase One and Phase Two.





Cash from
investing activities in the six months ended June 30, 2009 was $437,194,
compared with $(1,630,906) for the same period of 2008. The increase was
primarily due to a change in restricted cash.





Cash flow
from financing activities in the six months ended June 30, 2009 was
$(12,401,718) compared with $29,270,443 in 2008. The difference is primarily
attributable to the fact that the Company issued the $20 million convertible
debt and warrants in the second quarter of 2008.





In 2008,
the Company signed a RMB 1 billion (approximately $147 million) construction
credit line agreement with China Construction Bank to support the Company’s
development projects. As of June 30, 2009, the Company has been granted a RMB
12.7 million loan for the JunJing II Phase One project and expects another RMB
22 million loan for JunJing II Phase Two project in the third quarter of
2009.





Debt
leverage





Total
debt consists of the sum of the balance sheet lines titled Payables for
acquisition of businesses, Loans from employees, Loans payable and Convertible
debt.





Total
debt outstanding as of June 30, 2009 was $48,485,927 compared with $59,186,304
on December 31, 2008.





Net debt
outstanding (total debt less cash) as of June 30, 2009 was $37,601,154 compared
with $20,955,952 on December 31, 2008. The company's net debt as a percent of
total capital (net debt plus shareholders' equity) was 26.2 percent on June 30,
2009 and 15.6 percent on December 31, 2008. The increase in net debt as a
percent of total capital was primarily due to the payment for land use rights in
2009, which decreased our cash to $10.1 million at June 30, 2009 from $37.4
million on December 31, 2008.





Liquidity
and capital resources





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





As of
June 30, 2009, we had $10,133,600 of cash and cash equivalents, a decrease of
$27,291,740, compared with $37,425,340 of cash and cash equivalents as of
December 31, 2008 and $10,598,200 as of March 31, 2009. Our cash flow from
operating activities provided over $10.7 million during the three months
ended June 30, 2009 compared with an outflow of $25.7 million
in the first quarter ended March 31, 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 $1,024,860 on this
project.  As of June 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.




Payment
      due by periodCommitments
      and Contingencies
              
              Total
              
              
              Less
      than
                1 year
              
              
              1-3 years
              
              
              3-5 years
              
              
              Over 5 yearsRental
      lease
              
              $
              381,562
              
              
              $
              124,545
              
              
              $
              52,775
              
              
              $
              52,775
              
              
              $
              151,467Rubber
      dam construction
              
              
              1,024,860
              
              
              
              1,024,860Land
      use right
              
              
              2,591,432
              
              
              
              
              
              
              
              2,591,432Total
              
              $
              3,997,854
              
              
              $
              1,149,405
              
              
              $
              2,644,207
              
              
              $
              52,775
              
              
              $
              151,467





Financial
obligations





As of
June 30, 2009, we had total bank loans of $24,450,236 with a weighted average
interest rate of 8.98 percent. Future scheduled maturities of loans payable were
as follows:


-36-





Due
      Date
                      
                      Outstanding
      Amount12-25-2009
                      
                      $
                      3,660,21507-03-2010
                      
                      $
                      2,928,17208-29-2010
                      
                      $
                      5,124,30108-27-2011
                      
                      $
                      12,737,548





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





Loans
payable





Loans
payable represent amounts due to various banks and are due on demand or normally
due within one year. These loans 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 loan
agreement with China Construction Bank Xi’an Branch to draw down the first RMB
150 million loan, which will mature on August 27, 2011. $12,737,548 was the
balance on June 30, 2009.





As of
December 31, 2008 and June 30, 2009, our current ratios were approximately
336.2% and 362.7%, respectively, and our liabilities to assets ratios were
approximately 49.0% and 52.3%, respectively. The Company will be able to draw
down approximately another $81 million before we reach the maximum liabilities
to assets ratio of 65%. If we are unable to meet all above covenants, we may not
be able to draw down new loans from China Construction Bank and this will cause
the delay of our projects under construction.





The
following table summarizes the company's loans payable that were outstanding as
of June 30, 2009:





(Millions
      of dollars)
                    
                    Balance
                    
                    
                    Interest
      rate
                    
                    Due
      dateXi'an
      Rural Credit Union
                    
                    $
                    2.93
                    
                    
                    
                    8.83
                    %
                    03-Jul-2010Commercial
      Bank Weilai
                    
                    $
                    3.66
                    
                    
                    
                    7.5
                    %
                    25-Dec-2009Commercial
      Bank Weilai
                    
                    $
                    5.12
                    
                    
                    
                    10.21
                    %
                    29-Aug-2010China
      Construction Bank
                    
                    $
                    12.70
                    
                    
                    
                    8.94
                    %
                    27-Aug-2011





The
currently indicated annual interest requirement on these loans totals about $3.2
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.





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 June 30, 2009:


-37-





Obligations
      Due by Period
                
                1
      year
                
                
                1-3
      years
                
                
                3-5
      years(Millions
      of dollars)Current
      liabilities:Accounts
      payable
                
                $
                13.73Income
      taxes payable
                
                
                
                
                
                $
                10.20Other
      payables
                
                
                
                
                
                $
                3.15Advances
      (deposits) from customers
                
                
                
                
                
                $
                10.31Accrued
      expenses
                
                $
                4.46Long-term
      liabilities:Warranties
      liabilities
                
                
                
                
                
                
                
                
                
                $
                7.98Deferred
      tax
                
                
                
                
                
                $
                11.50Fair
      value of embedded derivatives
                
                
                
                
                
                
                
                
                
                $
                6.47Convertible
      debt
                
                
                
                
                
                
                
                
                
                $
                14.20Long-term
      debt:Loans
      payable
                
                $
                3.6
                
                
                $
                20.8Payable
      for acquisition of businesses
                
                $
                7.65Loans
      from employees
                
                
                
                
                
                $
                2.19





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.


-38-




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 note 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 effective, although there were certain
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.




(c) 
   Changes in Internal Control over Financial Reporting.





During
the quarter ended June 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.


-39-


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.





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)


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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.August
      12, 2009
                By:
                /s/
                Xiaohong
      FengXiaohong
      FengChief
      Executive Officer(Principal
      Executive Officer)





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


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