UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2022

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File No. 001-34864

GREEN GIANT INC.

(Exact Name of Registrant as Specified in its Charter)

Florida		33-0961490
(State or Other Jurisdiction of Incorporation)		(I.R.S. Employer Identification Number)

6 Xinghan Road, 19th Floor, Hanzhong City

Shaanxi Province, PRC 723000

(Address of principal executive offices) (zip code)

Registrant’s phone number, including area code

+(86)091-62622612

Neng Chen

Chief Executive Officer

6 Xinghan Road, 19th Floor, Hanzhong City

Shaanxi Province, PRC 723000

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:

Title of each class registered:		Trading Symbol		Name of each exchange on which registered:
Common Stock, par value $0.001		GGE		Nasdaq Capital Market

Securities registered under Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☒ Yes ☐ No

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging Growth Company	☐

If and emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based upon the closing price of the registrant’s common stock on March 31, 2022, the last business day of the Company’s second fiscal quarter, as reported by the Nasdaq Capital Market on that date, was $110 million. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose.

As of January 13, 2023, the number of shares outstanding of the registrant’s common stock was 55,753,268.

DOCUMENTS INCORPORATED BY REFERENCE

None.

GREEN GIANT INC.

FORM 10-K

For the Fiscal Year Ended September 30, 2022

INDEX

		Page
	PART I
Item 1.	Business	1
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	42
Item 2.	Properties	42
Item 3.	Legal Proceedings	43
Item 4.	Mine Safety Disclosure	43

	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	44
Item 6.	[Reserved]	45
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 8.	Financial Statements and Supplementary Data	F-1
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	57
Item 9A.	Controls and Procedures	57
Item 9B.	Other Information	58
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	58

	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	59
Item 11.	Executive Compensation	62
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	64
Item 13.	Certain Relationships and Related Transactions, and Director Independence	66
Item 14.	Principal Accountant Fees and Services	66

	PART IV
Item 15.	Exhibits and Financial Statement Schedules	67
Item 16.	Form 10-K Summary	69
SIGNATURES		70

FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K (the “Report”) and other reports (collectively the “Filings”) filed by the registrant from time to time with the Securities and Exchange Commission (the “SEC”) contain or may contain forward looking statements and information that are based upon beliefs of, and information currently available to, the registrant’s management as well as estimates and assumptions made by the registrant’s management. When used in the filings the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan” or the negative of these terms and similar expressions as they relate to the registrant or the registrant’s management identify forward looking statements. Such statements reflect the current view of the registrant with respect to future events and are subject to risks, uncertainties, assumptions and other factors (including the risks contained in the section of this Report entitled “Risk Factors”) relating to the registrant’s industry, the registrant’s operations and results of operations and any businesses that may be acquired by the registrant. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

Although the registrant believes that the expectations reflected in the forward looking statements are reasonable, the registrant cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the registrant does not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with the registrant’s financial statements and the related notes thereto included in this Report.

In this Report, “we,” “our,” “us,” “Green Giant Inc. or the “Company” sometimes refers collectively to Green Giant Inc. and its subsidiaries and affiliated companies.

PART I

ITEM 1. BUSINESS

Our Organization

Green Giant Inc. (formerly China HGS Real Estate Inc., the “Company” or “GGE,” “we”, “our”, “us”), is a corporation organized under the laws of the State of Florida.

China HGS Investment Inc. is a Delaware corporation and owns 100% of the equity interest in Shaanxi HGS Management and Consulting Co., Ltd. (“Shaanxi HGS”), a wholly owned foreign entity incorporated under the laws of the People’s Republic of China (“PRC” or “China”).

GGE does not conduct any substantive operations of its own. Instead, through its subsidiary, Shaanxi HGS, it entered into certain exclusive contractual agreements with Shaanxi Guangsha Investment and Development Group Co., Ltd. (“Guangsha”). Pursuant to these agreements, Shaanxi HGS is obligated to absorb a majority of the risk of loss from Guangsha’s activities and entitles Shaanxi HGS to receive a majority of Guangsha’s expected residual returns. In addition, Guangsha’s shareholders have pledged their equity interest in Guangsha to Shaanxi HGS, irrevocably granted Shaanxi HGS an exclusive option to purchase, to the extent permitted under PRC Law, all or part of the equity interests in Guangsha and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by Shaanxi HGS.

Our Company engages in real estate development, primarily in the construction and sale of residential apartments, car parks and commercial properties.

Guangsha was organized in August 1995 as a limited liability company under the laws of the PRC. Guangsha is headquartered in the city of Hanzhong, Shaanxi Province. Guangsha is engaged in developing large scale and high quality commercial and residential projects, including multi-layer apartment buildings, sub-high-rise apartment buildings, high-rise apartment buildings, and office buildings.

On November 29, 2021, Green Giant Ltd. was incorporated in Delaware.

Green Giant Energy Texas Inc. was incorporated in Texas on October 3, 2022 which is a wholly owned subsidiary of Green Giant Ltd.

Green Giant International Limited (Hong Kong) was incorporated in Hong Kong on December 9, 2021 as a wholly owned subsidiary of Green Giant Ltd.

Our corporate structure as of September 30, 2022 is set forth below:

Business Overview

Our Company engages in real estate development, primarily in the construction and sale of residential apartments, car parks and commercial properties. We conduct all of our business in mainland China. Shaanxi Guangsha Investment and Development Group Co., Ltd., or Guangsha, was founded by Mr. Xiaojun Zhu, and commenced operations in 1995 in Hanzhong, a prefecture-level city in Shaanxi Province.

Currently, we are operating in Hanzhong, a prefecture-level city in Shaanxi Province, and Yang County, a county in Hanzhong. Our management has been focused on expanding our business in Tier 3 and Tier 4 cities and counties in China that we strategically select based on population and urbanization growth rates, general economic conditions and growth rates, income and purchasing power of resident consumers, anticipated demand for private residential properties, availability of future land supply and land prices, and governmental urban planning and development policies. Initially, these Tier 3 and Tier 4 cities and counties will be located in the Shaanxi province, China. We utilize a standardized and scalable model that emphasizes rapid asset turnover, efficient capital management and strict cost control. We plan to expand into strategically selected Tier 3 and Tier 4 cities and counties with real estate development potential in Shaanxi Province, and expect to benefit from rising demand for residential housing as a result of increasing income levels of consumers and growing populations in these cities and counties due to urbanization.

In September 2020, the Company started land leveling and construction process for the Oriental Garden Phase II and Liangzhou Mansion real estate properties in the Liangzhou Road related projects. The Company started the construction of the Liangzhou Road related projects, which consist of residential buildings, office buildings and a commercial plaza, after the approval by the local government of the road. Upon completion, the Liangzhou Road related projects will become a new city center of Hanzhong city.

The Company is transforming itself from legacy business to a new energy corporation and has appointed a CEO in USA subsidiary to lead and operate the new business venture.

Real Estate Industry Overview

During the volatile real estate market, the Company has been capitalizing on its inherent strengths and market opportunities in Tier 3 and Tier 4 cities and counties to deliver value for our shareholders. We feel confident and also competent to take on every challenge and grasp every opportunity during market consolidation. We expect to provide rapid response to the market on the basis of our projected business plans together with a flexible approach in seizing market opportunities; strict investment standards and prudent attitude towards investment opportunities, and appropriate replenishment of quality land resources in existing regions to realize value within the Tier 3 and Tier 4 cities and counties in Western China.

Company Positioning

The Company is headquartered in Hanzhong in the southwestern part of the Shaanxi province, in the center of the Hanzhong Basin, on the Han River, near the Sichuan border. According to the China City Statistical Yearbook, Hanzhong had a population of about 3.8 million.

Hanzhong is a key transportation hub connecting China’s Middle Economic zone and Western Economic Zone. The travel time from Xi’an, the provincial capital of Shaanxi province, to Hanzhong takes less than 2 hours. The airport in Hanzhong was completed and put into service in 2014. The airport handled approximately 650,000 passengers and 2,200 tons of cargo on annual basis. Xicheng, a high-speed railway between Chengdu, the provincial capital of Sichuan province, and Xi’an with a major stop in Hanzhong was completed in 2017. It takes 1.5 hours from Hanzhong to Xi’an and 2.5 hours from Hanzhong to Chengdu. The railway passenger’s volume was around 6 million in 2020.

In accordance with Hanzhong Government’s 2020 annual report, Hanzhong’s GDP reached RMB 159.3 billion (approximately $24.0 billion) by 2020 calendar year, representing a 2.9% increase from 2019 calendar year. Residents’ annual disposable income for 2020 calendar year was RMB34,417 (equivalent to $5,331), representing a 4.8% increase as compared to 2019 calendar year.

Many Tier 3 and Tier 4 cities and counties in China provide a major source of migration workers (the “Migration Workers”)for the Tier 1 and Tier 2 cities in China. Income from migration workers is becoming a significant factor in supporting the hometown economy. Migration workers are not permanent residents in the the Tier 1 and Tier 2 cities and travel back to their home towns during the national holidays. Based on Hanzhong Government’s 2020 annual report, the number of Hanzhong’s migration workers reached approximately 893,000 as of December 31, 2020 (2019 – 865,000).

On November 11, 2022 the People’s Bank of China and the China Banking and Insurance Regulatory Commission issued “Yin Fa [2022] No. 254 “Notice on Supporting the Stable and Healthy Development of the Real Estate Market” to support the stable and healthy development of the real estate market. The details are as follows:

A. Keeping real estate financing stable and order

1). Stabilize the issuance of real estate development loans.　　

Adhere to the “two unswerving”, and treat all types of real estate enterprises such as state-owned and private enterprises equally. Encourage financial institutions to focus on supporting the steady development of real estate enterprises with sound governance, focus on their main business and good qualifications.　　

Financial institutions should reasonably distinguish the risks of project subsidiaries from the risks of group holding companies, and meet the reasonable financing needs of real estate projects in accordance with the principle of marketization on the premise of ensuring the safety of creditor’s rights and the closed operation of funds. Support the project host bank and the syndicated loan model, strengthen the management of the whole process of loan approval, issuance and recovery, and effectively ensure the safety of funds.

2). Support the reasonable needs of individual housing loans.

Reasonably determine the down payment ratio of local personal housing loans and the lower limit of the loan interest rate policy to support rigid and improved housing demand.

Financial institutions are encouraged to reasonably determine the specific down payment ratio and interest rate level for individual housing loans based on the lower limit of urban policies in light of their own business conditions, customer risk status and credit conditions, etc.

3). Stabilize the credit supply of construction enterprises.

4). Support the reasonable extension of existing financing such as development loans and trust loans

For real estate enterprise development loans, trust loans and other existing financing, on the premise of ensuring the safety of creditor’s rights, financial institutions and real estate enterprises are encouraged to negotiate independently based on commercial principles, and actively support through the extension of existing loans, adjustment of repayment arrangements, etc., to promote the completion of the project deliver.

From the date of issuance of the notice, those due within the next six months may be allowed to extend for one more year beyond the original regulations, and the loan classification may not be adjusted, and the loan classification submitted to the credit reporting system should be consistent with it.

5). Keep bond stable, and support high-quality real estate enterprises to issue bond. Promote professional credit enhancement agencies to provide credit enhancement support for bond issuance of real estate enterprises with overall financial health and short-term difficulties.

Encourage bond issuers to communicate with holders in advance and make arrangements for borrowing bonds to redeem funds. If it is really difficult to make payment on time, reasonable arrangements such as extension and replacement shall be made through negotiation to proactively resolve risks.

6). Maintain stable financing of asset management products such as trusts.

B. Actively do a good job in “delivery guarantee building” financial services

7). Support development policy banks to provide special loans for “delivery guarantee building”.

Support China Development Bank and Agricultural Development Bank in accordance with relevant policy arrangements and requirements. In accordance with the laws and regulations, the special insurance payment for “delivery guarantee building” is issued to the borrowers who have been reviewed and filed in an efficient and orderly manner, which is closed and dedicated. It is specially used to support the accelerated construction and delivery of overdue and difficult-to-deliver residential projects that have been sold.

8). Encourage financial institutions to provide supporting financing support.

Encourage financial institutions, especially the main financing commercial banks of the project personal housing loans or the syndicates they lead to form, in accordance with the principles of marketization and the rule of law, to provide new supporting financing support for special loan support projects, and promote the resolution of unfinished personal housing loan risks.

For the sale of the remaining value of goods, the project can be reviewed at the same time for special loans and new supporting financing, and the sales of the remaining value of goods cannot cover both the special loan and the new supporting financing, but it has been clarified that the new supporting financing and special financing The loan matching mechanism arranges and implements the project of the source of repayment, and encourages financial institutions to actively provide new matching financing support under the premise of commercial voluntary.

The subject of the newly added supporting financing should be consistent with the subject of the implementation of the special loan-supported project. The existing assets and liabilities of the project should be audited and evaluated by a qualified institution organized by the local government, and an implementation plan of “one building one policy” has been formulated. Commercial banks with the “special loan supporting financing” sub-section can be newly established under the real estate development loan for statistics and management. In principle, the supporting financing should not exceed the period of the corresponding special loan. For a maximum period of no more than 3 years, the project sales receipts shall be transferred to a special project account opened with the main financing commercial bank or other commercial banks, and the special project account shall be jointly managed by the commercial bank that provides additional financing. It is clearly stated that in accordance with the principle of “last-in, first-out”, the sales receipts of the remaining value of the project should be given priority to repay the newly-added supporting financing and special loans.

For commercial banks, in accordance with the requirements of this notice, within half a year from the date of issuance of this notice, the supporting financing issued to special fund-supported projects shall not be reduced in risk classification during the loan period; The main body management is not good for the newly issued supporting financing, and the relevant institutions and personnel have done their due diligence. Liability is waived.C. Actively cooperate with trapped real estate enterprises to deal with the risk disposal

9). Provide financial support for M&A of real estate projects.

Encourage commercial banks to carry out M&A loan business for real estate projects in a stable and orderly manner, and focus on supporting high-quality real estate enterprises to merge and acquire projects of distressed real estate enterprises.

Encourage financial asset management companies and local asset management companies (hereinafter collectively referred to as asset management companies) to use their experience and capabilities in non-performing asset management and risk management, and jointly negotiate risk resolution models with local governments, commercial banks, and real estate companies, and promote accelerate asset disposal.

10) Actively explore market-oriented support methods.For some projects that have entered judicial reorganization, financial institutions can assist in promoting project resumption and delivery by one enterprise and one policy according to the principles of independent decision-making, risk-taking, and self-responsibility for profits and losses.

Encourage asset management companies to participate in project disposal by acting as bankruptcy administrators, reorganization investors, etc., and support qualified financial institutions to prudently explore the establishment of funds and other methods to resolve the risks of distressed real estate enterprises in accordance with laws and regulations, and support project completion and delivery.

D. Legally protect the legitimate rights and interests of housing finance consumers

11). Encourage independent negotiation and extension of principal and interest repayment in accordance with the law.

For individuals who have lost their source of income due to hospitalization or isolation due to the epidemic, or who have lost their income due to the closure of business due to the epidemic, as well as personal housing loans due to changes or cancellations of housing purchase contracts, financial institutions can follow the market-based approach. Based on the principle of rule of law, negotiate with the buyers independently, and make adjustments such as postponement and extension.

For malicious evasion of financial debts, they will be dealt with in accordance with laws and regulations to maintain a good market order.

12). Effectively protect the personal credit investigation rights of deferred loans.

If the repayment arrangement of the personal housing loan has been adjusted, the financial institution shall submit the credit record according to the new repayment arrangement; if the judgment or ruling of the people’s court determines that the adjustment should be made, the financial institution shall adjust the credit record and submit it according to the effective judgment or ruling of the people’s court which has been reported to be adjusted.

E. Phased adjustment of some financial management policies

13). Extending the transition period of the real estate loan concentration management policy.

For banking financial institutions that cannot meet the requirements of real estate loan concentration management as scheduled due to objective reasons such as the epidemic, the transition period will be reasonably extended based on the actual situation and objective assessment.

14). Periodically optimize the M&A financing policy for real estate projects.

Relevant financial institutions should make good use of the phased real estate financial management policies issued by the People’s Bank of China and the China Banking and Insurance Regulatory Commission, which are applicable to major commercial banks and national financial asset management companies, and accelerate the marketization of real estate risks.

F. Increase financial support for housing leasing

15). Optimize housing leasing credit services.

16). Broaden diversified financing channels in the housing leasing market.

Support housing rental and sales enterprises to issue credit bonds and guaranteed bonds and other direct financing products, which are specially used for the construction and operation of rental housing, and Gupin Commercial Bank issues financial bonds to support housing rental to raise funds to increase housing rental development and construction loans and business operations. Loans were provided, and the pilot program of real estate investment trusts (REITs) was steadily promoted.

On November 14, 2022 China Banking and Insurance Regulatory Commission, the Ministry of Housing and Urban-Rural Development and the Central Bank issued the “Notice on the Relevant Work of Commercial Banks Issuing letters of Guarantee to Replace the Pre-sale Supervision Funds” (the “Pre-sale Supervision Funds Notice”). Commercial banks’ house related credit business is expected to expand. The “Financial Support for Real Estate Notice” issued sixteen measures to generate power at both supply and demand ends, it further clarifies the support policies for housing credit. Many policies have been implemented at the document system level for the first time, or will push banks to increase their support for the real estate market. It is expected to modify the conservative attitude of commercial banks to intervene in the development loan market and support the reasonable demand for individual housing loans.

The existing debt financing of real estate enterprises shall be reasonably extended. Reasonable extension arrangements will be made for the existing financing such as real estate development loans and trust loans, with an additional extension of one year for those due in the next six months, and the credit rating will not be downgraded or credit information will not be changed. The “Financial Support for Real Estate Notice” is the first time to mention the support policy for trust loans, which may help banks to enhance the risk appetite of house related businesses, especially private real estate enterprises.

Extend the transition period of the real estate concentration management policy arrangement. For the real estate concentration management requirements of banking financial institutions established by the end of 2020 that cannot meet the standards as scheduled due to the epidemic and other reasons, the transition period can be reasonably extended based on the actual situation through objective assessment. The phased “relaxation” of management requirements will help banks to participate in the real estate credit market in a reasonable manner based on the actual situation.

Emphasis on doing a good job to provide financial services for “delivery guarantee building”. Supporting the State Development bank, the Agricultural Development Bank and other institutions to provide special loans for real estate enterprises to “delivery guarantee building” and providing supporting financing for special loans projects, will further resolve the risks of individual housing loans that are not yet delivered.

Add exemption clause to relieve worries. If the participation in the newly issued supporting financing of the delivery guarantee building is bad, the relevant institutions and personnel shall perform their duties and be exempted from liability, which will boost the initiative of the relevant institutions to participate in such projects. With the introduction of the policy of replacing pre-sale supervision funds with letters of guarantee, real estate enterprises are facing significate liquidity benefits. According to the “Notice on Pre-sale Supervision Funds”, high-quality real estate enterprises can apply to banks for a letter of guarantee to replace the pre-sale supervision funds, which is a significant benefit to the short-term liquidity of real estate. According to the regulatory requirements, the replacement funds of real estate enterprises are given priority to use for project construction and repayment of debts due. On the one hand, the replacement funds can directly relieve the liquidity pressure of real estate enterprises and improve the cash flow of enterprises; On the other hand, it is good for real estate enterprises to activate the pre-sale funds to complete the project delivery, promote the “delivery guarantee building” in an orderly manner, strengthen the signal “stability maintenance” in the real estate market, and promote the recovery of the sales side, so as to substantially improve the debt repayment ability of real estate enterprises, especially private real estate enterprises, and the risks of banks involved in real estate can be mitigated.

The upper limit of the replacement quota and the term of the letter of guarantee are clearly stipulated, and the bank risk is guaranteed. According to the “Notice on Pre-sale Supervision Funds”, the replacement amount of the real estate enterprise shall not exceed 30% of the amount of funds required to ensure the completion and delivery of the project in the supervision account. At the same time, the term of the letter of guarantee shall be matched with the project construction period to ensure that the replacement funds are used for the project construction. At the regulatory level, there are clear provisions on the quota for the replacement of real estate enterprises and the term of the letter of guarantee, which not only improves the utilisation efficiency of the use of pre-sale supervision funds, but also ensures the capital safety to the greatest extent and reduces the credit risk of banks.

The target market of the Company is in Western China. The Company continues to focus on Tier 3 and Tier 4 cities and counties in acquiring sizable quality land reserves at low cost in a flexible and diversified manner. There has been an increasing demand for high quality residential housing, largely driven by the “Go West” policy and accelerated urbanization. Many buyers in Tier 3 and Tier 4 cities and counties are first time home buyers. In order to mitigate default risk, the Company generally requires from its homebuyer customers a deposit in the range of 30%-50% of the purchase price, which is higher than the percentage required by the government for the mortgage down payment.

The Company received the National Grade-I real-estate development qualification granted by the Ministry of Housing and Urban-Rural Development of the People’s Republic of China (“MOHURD”) on October 12, 2011. The Company is not required to renew the National Grade-I real-estate development qualification after it passed the initial qualification application set out by the MOHURD. The Grade-I real-estate development qualification is the highest qualification for real-estate developers in China and requires meeting several strict criteria, including:

a. Registered capital of at least RMB 50 million (approximately $7.3 million);

b. At least five years of experience in real estate development and operations;

c. The completion of construction of a total over 300,000 square meters. of ground floor area (GFA) within the last three years and, in the most recent year, developed real estate projects of at least 150,000 square meters; and

d. The completed real estate projects have no quality issues in each of the past five years; and an established, comprehensive quality control and guarantee system.

The National Grade-I real-estate development qualification provides significant opportunities for the Company to expand its operations beyond Shaanxi province into new regional real estate markets in China. Without the National Grade-I real-estate development qualification, a real estate developer shall not develop a real estate property in other cities or provinces in China. The Company is not required to periodically renew the National Grade-I real-estate development qualification after the Company passed the initial qualification application set out by the MOHURD.

Looking ahead, the Company will continue to focus on developing high quality and large scale real estate projects in the suburban areas of Tier 3 and Tier 4 cities and counties with promising economic growth potential. Leveraging on its unique competitive strengths, and under the direction and guidance of the government’s macro policies, the Company expects to further replicate its successful business model into new high growth regions through strategic selection of project locations, a short project development schedule characterized by fast asset turnover and excellent execution ability, as well as innovative product offering closely in line with market demand. The Company aims at becoming a leading large-scale residential property developer in Western China and a well-recognized brand name.

Pre-Sales and Sales

In the PRC, real estate developers are allowed to begin to market properties before construction is completed. Like other developers, we pre-sell properties prior to completion of construction. Under PRC pre-sales regulations, property developers must satisfy specific conditions before properties under construction can be pre-sold. These mandatory conditions include:

●

the land premium must have been paid in full;

●

the land use rights certificate, the construction site planning permit, the construction work planning permit and the construction permit must have been obtained;

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at least 25% of the total project development cost must have been incurred;

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the progress and the expected completion and delivery date of the construction must be fixed;

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the pre-sale permit must have been obtained; and

●

the completion of certain milestones in the construction processes must be specified by the local government authorities.

These mandatory conditions are designed to require a certain level of capital expenditure and substantial progress in project construction before the commencement of pre-sales. Generally, the local governments also require developers and property purchasers to have standard pre-sale contracts prepared under the auspices of the government. Developers are required to file all pre-sale contracts with local land bureaus and real estate administrations after entering into such contracts.

After-Sale Services and Delivery

We assist customers in arranging for and providing information related to financing. We also assist our customers in various title registration procedures related to their properties, and we have set up an ownership certificate team to assist purchasers to obtain their property ownership certificates. We offer various communication channels to customers to facilitate customer feedback collection. We also cooperate with property management companies that manage our properties and ancillary facilities, to handle customer feedback.

We endeavor to deliver the units to our customers on a timely basis. We closely monitor the progress of construction of our property projects and conduct pre-delivery property inspections to ensure timely delivery. The time frame for delivery is set out in the sale and purchase agreements entered into with our customers, and we are subject to penalty payments to the purchasers for any delay in delivery caused by us. The Company has never incurred any delay penalties. Once a property development has been completed, has passed the requisite government inspections and is ready for delivery, we will notify our customers and hand over keys and possession of the properties.

Marketing and Distribution Channel

We maintain a marketing and sales force for our development projects, which at September 30, 2022 consisted of 38 employees specializing in marketing and sales. We also train and use outside real estate agents to market and increase the public awareness of our projects, and spread the acceptance and influence of our brand. However, our marketing and sales are primarily conducted by our own sales force because we believe our own dedicated sales representatives are better motivated to serve our customers as well as to control our property pricing and selling expenses.

Our marketing and sales team develops the appropriate advertising and selling plan for each project. We develop public awareness through marketing and advertising as well as referrals from customers. We utilize a customer relationship management system to track customer profiles, which helps us to forecast future customer requirements and general demand for our projects. This allows us to have real-time information on the status of individual customer transactions as well as available inventory by project, which enables us to better anticipate the preferences of current and future customers.

We use various advertising media to market our developments and enhance our brand name, including newspapers, magazines, television, radio, e-marketing and outdoor billboards. We also participate in real estate exhibitions.

We have also developed a strong relationship with local institutional purchasers and governments. The Company has entered into various significant residential-apartment group-purchase agreements with local government and institutional purchasers.

A typical real estate property sales transaction usually consists of three steps. First, the customer pays a deposit to the Company. Within a week, after paying the deposit, the customer will sign a purchase contract with us and make a down payment to us in cash. After making the down payment, the customer arranges for a mortgage loan for the balance of the purchase price. Once the loan is approved, the mortgage loan proceeds are paid to us directly by the bank. Finally, we deliver the property to the customer. Legal title, as evidenced by a property ownership certificate issued by local land and construction bureaus, will be delivered to the customer.

For customers purchasing properties with mortgage financing, under current PRC laws, their minimum down payment is 30% of the total purchase price for the purchase of the first self-use residential unit with total GFA of 90 square meters (about 970 square feet) or more on all existing units and those yet to be completed, and a down payment of 20% on the first residential units for self-use with total GFA of under 90 square meters. In order to mitigate the default risk, the Company requires from its homebuyer customers deposits ranging from 30% - 50% of the purchase price, which is higher than the percentage required by the government for the mortgage down payment.

Like most real estate companies in China, we generally provide guarantees to mortgagee banks in respect of the mortgage loans provided to the purchasers of our properties up until completion of the registration of the mortgage with the relevant mortgage registration authorities. As of September 30, 2022, the Company had security deposits for these guarantees of approximately $3.0 million. Guarantees for mortgages on residential properties are typically discharged when the individual property ownership certificates are issued. In our experience, the issuance of the individual property ownership certificates typically takes six to twelve months, so our mortgage guarantees typically remain outstanding for up to twelve months after we deliver the underlying property.

Our Property Development Operations

We have a systematic and standardized process of project development, which we implement through several well-defined phases. One critically significant portion of our process is the land acquisition process, which is segmented into three stages: (i) opportunity identification, (ii) initial planning and budgeting, and (iii) land use rights acquisition. The following diagram sets forth the key stages of our property development process.

LAND ACQUISITION PROCESS

Project
planning and
design

Project
construction
and
Management

Pre-sale, sale
and marketing

After-sale
and delivery

Opportunity Identification

Initial Planning

Land Acquisition

-Strategic planning

-Feasibility study

-Financial assessment

-Outsource architectural and engineering design

-Outsource
construction

-Pre-sale

-Delivery

-Geographic and market analysis

- Preliminary design

-Internal approval

-Design management

-Construction
supervision

-Marketing

-Feedback collection

-Project evaluation

-Bidding process

-Arrange financing

-Quality control

-Advertising

-Completion inspection

-Landscaping

and fixture installation

Our Projects

Overview

We develop the following three types of real estate projects, which may be developed in one or more phases:

●

multi-layer apartment buildings, which are typically six stories or less;

●

sub-high-rise apartment buildings, which are typically seven to 11 stories; and

●

high-rise apartment buildings, which are typically 12 to 33 stories.

At any one time, our projects (or phases of our projects) are in one of the following three stages:

●

completed projects, meaning properties for which construction has been completed;

●

properties under construction, meaning properties for which construction permits have been obtained but construction has not been completed; and

●

properties under planning, meaning properties for which we have entered into land grant contracts and are in the process of obtaining the required permits to begin construction.

Our main projects located in Hanzhong City are: Mingzhu Beiyuan, Oriental Pearl Garden and Liangzhou Road related projects. In Yang County, our project is Yangzhou Pearl Garden and Yangzhou Palace. Most projects are being developed in multiple phases.

Real Estate Projects located in Hanzhong City

Mingzhu Garden - Mingzhu Beiyuan

This project is located in the southwest part of Hanzhong City. The Phase I project includes two high-rise residential buildings with commercial shops located on the first floor with unsold GFA of Nil square meters as of September 30, 2020. The Phase II Mingzhu Beiyuan project includes 17 high-rise residential buildings with GFA of 358,058 square meters. The Company started construction in the third quarter of fiscal 2012 and completed the construction in the last quarter of fiscal 2015. As of September 30, 2022, the unsold GFA was 78,677 square meters; un-allocated costs was $20,672,000.

Oriental Pearl Garden

This project is located in the downtown of Hanzhong City. The Company started construction in the third quarter of fiscal 2012. It consists of 12 high-rise residential buildings with commercial shops on the first and second floors with GFA of approximately 275,014 square meters. The project was fully completed in fiscal 2016. As of September 30, 2022, the unsold GFA was 53,506 square meters; un-allocated costs was $17,425,514.

Real Estate Projects located in Yang County

Yangzhou Pearl Garden

Yangzhou Pearl Garden mainly consists of multi-layer residential buildings and sub-high-rise residential buildings with commercial shops on the first floors. As of September 30, 2021, the remaining unsold GFA of Phase I of Yangzhou Pearl Garden, which includes multi-layer residential buildings, commercial units, sub-high-rise and high-rise residential buildings was a total GFA of Nil square meters. Yangzhou Pearl Garden Phase II consists of five high-rise residential buildings and one multi-layer residential building, with a total GFA of 67,991 square meters. The construction was completed in fiscal 2015. As of September 30, 2022, the unsold GFA of Yangzhou Pearl Garden Phase II was 10,545 square meters; un-allocated costs was $2,039,912.

Yangzhou Palace

The Company is currently constructing 9 high-rise residential buildings and 16 sub-high-rise residential and multi-layer residential buildings with total GFA of 297,059 square meters in Yangzhou Palace located in Yang County. The construction started in the fourth quarter of fiscal 2013 and was completed during the year ended September 30, 2021. The Company received the pre-sale license on September 1, 2016 and started to promote and sell the property in November 2016. As of September 30, 2022, the remaining unsold GFA of Yangzhou Palace, which includes multi-layer residential buildings, commercial units, sub-high-rise and high-rise residential buildings was a total GFA of 87,989 square meters; un-allocated costs was $34,635,104.

The following table sets forth our real estate projects in the year ended September 30, 2022:

Unsold GFA as

GFA sold / disposed

of September 30,

Project Name

Location

Type of Buildings

during the year

2022

Mingzhu Garden

(Mingzhu Beiyuan) Phase II

Hanzhong City

High-rise residential

1,138

78,677

Oriental Pearl Garden

Hanzhong City

High-rise residential

363

53,506

Yangzhou Pearl Garden Phase II

Yang County

High-rise residential

10,545

Yangzhou Palace

Yang County

High-rise residential

14,681

87,989

Total

16,182

230,717

(1)	The amounts for “total GFA” in this table are the amounts of total saleable gross floor area and are derived on the following basis:

●

for properties that are sold, the stated GFA is based on sales contracts relating to such property;

●

for unsold properties that are completed, the stated GFA is calculated based on the detailed construction blueprint and the calculation method approved by the PRC government for saleable GFA, after necessary adjustments; and

●

for properties that are under planning, the stated GFA is based on the land grant contract and our internal projections.

Suppliers

Land Bank

In China, the supply of land is controlled by the government. Since the early 2000s, the real estate industry in China has been transitioning from an arranged system controlled by the PRC government to a more market-oriented system. At present, although the Chinese government still owns all urban land in China, land use rights with terms of up to 70 years can be granted to, owned or leased by, private individuals and companies.

Land - under planning and development

In May 2011, the Company entered into a development agreement with the local government. Pursuant to the agreement, the Company will prepay the development cost of approximately $16.8 million (RMB 119,700,000) and the Company has the right to acquire the land use rights through public bidding. The prepaid development cost will be deducted from the final purchase price of the land use rights. As of September 30, 2022, a deposit of approximately $2.2 million was paid by the Company (2021- $2.0 million). The local government is still in a slow process of re-zoning the property. The Company expects to make payment of the remaining development cost based on the government’s current work progress.

All land transactions are required to be reported to and authorized by the local Bureau of Land and Natural Resources. With respect to real estate project design and construction services, the Company typically selects the lowest-cost provider based on quality selected through an open bidding process. Such service providers are numerous in China and the Company foresees no difficulties in securing alternative sources of services as needed.

Other Suppliers

The Company uses various suppliers in the construction of its projects. For the year ended September 30, 2022 and 2021, no suppliers accounted for more than 10% of the total project expenditures

Competition

The real estate industry in China is highly competitive. In the Tier 3 and Tier 4 cities and counties that we focus on, the markets are relatively more fragmented than in the Tier 1 or Tier 2 cities. We compete primarily with regional property developers and an increasing number of large national property developers who have also started to enter these markets. Competitive factors include the geographical location of the projects, the types of products offered, brand recognition, price, designing and quality. In the regional markets in which we operate, our major competitors include regional real estate developers Wanbang Real Estate Development Co. Ltd. (“Wanbang”), Jingtai Real Estate Development Co. Ltd. (“Jingtai”) and Shaanxi Fenghui Real Estate Development Co. Ltd. (“Fenghui”) as well as other national real estate developers such as Evergrande Real Estate Group (“Evergrande”) who have also started their projects in these local markets.

Nationally, there are numerous national real estate developers that have real estate projects across China. There are many housing and land development companies listed on the Shanghai and Shenzhen Stock Exchanges. However, such companies usually undertake large scale projects and are unlikely to compete with the Company for business as the Company targets small to medium sized projects in Tier 3 and Tier 4 cities and counties.

In the regional market, the Company’s only direct competitor with meaningful market share in the market is Wanbang. This company generally undertakes medium and small scale projects and focuses on development of commercial real estate properties, such as hotels and shopping centers.

Competitive Strength:

We believe the following strengths allow us to compete effectively:

Well Positioned to Capture Opportunities in Tier 3 and Tier 4 Cities and Counties.

With the increase in consumer disposable income and urbanization rates, a growing middle-income consumer market has emerged driving demand for affordable and high quality housing in many cities across northwest China. We focus on building large communities of modern, mid-sized residential properties for this market segment and have accumulated substantial knowledge and experience about the residential preferences and demands of mid-income customers. We believe we can leverage our experience to capture the growth opportunities in the markets.

Standardized and Scalable Business Model.

Our business model focuses on a standardized property development process designed for rapid asset turnover. We break up the overall process into well-defined stages and closely monitor costs and development schedules through each stage. These stages include (i) identifying land, (ii) pre-planning and budgeting, (iii) land acquisition, (iv) detailed project design, (v) construction management, (vi) pre-sales, sales and (vii) after-sale services. We commence pre-planning and budgeting prior to the land acquisition, which enables us to acquire land at costs that meet our pre-set investment targeted returns and to quickly begin the development process upon acquisition. Our enterprise resource planning enables us to collect and analyze information on a real-time basis throughout the entire property development process. We utilize our customer relationship management system to track customer profiles and sales to forecast future individual preferences and market demand.

Experienced Management Team Supported by Trained and Motivated Workforce.

Our management and workforce are well-trained and motivated. Employees receive on-going training in their areas of specialization at our head office in Hanzhong.

Guangsha is also an “AAA Enterprise in Shaanxi Construction Industry” as recognized by the Credit Association of Agricultural Bank of China, Shaanxi Branch.

Strategies

Our goal is to become the leading residential property developer focused on China’s Tier 3 and Tier 4 cities and counties by implementing the following strategies:

Continue Expanding in Selected Tier 3 and Tier 4 Cities. We believe that Tier 3 and Tier 4 cities and counties present development opportunities that are well suited for our scalable business model of rapid asset turnover. Furthermore, Tier 3 and Tier 4 cities and counties currently tend to be in an early stage of market maturity and have fewer large national developers. We believe that the fragmented market and relative abundance of land supply in Tier 3 and Tier 4 cities, as compared to Tier 1 and Tier 2 cities, offer more opportunities for us to generate attractive margins. And we also believe that our experience affords us the opportunity to emerge as a leading developer in these markets. In the near future, we plan to enter into other Tier 3 and Tier 4 cities that have:

●

Increasing urbanization rates and population growth;

●

High economic growth and increasing individual income; and

●

Sustainable land supply for future developments.

We plan to continue to closely monitor our capital and cash positions and carefully manage our cost for land use rights, construction costs and operating expenses. We believe that we will be able to use our working capital more efficiently by adhering to prudent cost management, which will help to maintain our profit margins. When selecting a property project for development, we will continue to follow our established internal evaluation process, including utilizing the analysis and input of our experienced management team and choosing third-party contractors through a tender process open only to bids which meet our budgeted costs.

Quality Control

We emphasize quality control to ensure that our buildings and residential units meet our standards and provide high quality service. We select only experienced design and construction companies. We, through our contracts with construction contractors, provide customers with warranties covering the building structure and certain fittings and facilities of our property developments in accordance with the relevant regulations. To ensure construction quality, our construction contracts contain quality warranties and penalty provisions for poor work quality. In the event of delay or poor work quality, the contractor may be required to pay pre-agreed damages under our construction contracts. Our construction contracts do not allow our contractors to subcontract or transfer their contractual arrangements with us to third parties. We typically withhold 2% of the agreed construction fees for two to five years after completion of the construction as security to guarantee quality, which provides us with assurance for our contractors’ work quality.

Our contractors are also subject to our quality control procedures, including examination of materials and supplies, on-site inspection and production of progress reports. We require our contractors to comply with relevant PRC laws and regulations, as well as our own standards and specifications. We set up a profile for each and every unit constructed and monitor the quality of such unit throughout its construction period until its delivery. We also employ independent surveyors to supervise the construction progress. In addition, the construction of real estate projects is regularly inspected and supervised by the PRC governmental authorities.

Environmental Matters

As a developer of property in the PRC, we are subject to various environmental laws and regulations set by the PRC national, provincial and municipal governments. These include regulations on air pollution, noise emissions, as well as water and waste discharge. As of September 30, 2022, we have never paid any penalties associated with the breach of any such laws and regulations. Compliance with existing environmental laws and regulations has not had a material adverse effect on our financial condition and results of operations, and we do not believe it will have such an impact in the future.

Our projects are normally required to undergo an environmental impact assessment by government-appointed third parties, and a report of such assessment needs to be submitted to the relevant environmental authorities in order to obtain their approval before commencing construction.

Upon completion of each project, the relevant environmental authorities inspect the site to ensure the applicable environmental standards have been complied with, and the resulting report is presented together with other specified documents to the relevant construction administration authorities for their approval and records. Approval from the environmental authorities on such report is required before we can deliver our completed work to our customers. As of September 30, 2022, we have not experienced any difficulties in obtaining those approvals for commencement of construction and delivery of completed projects.

Employees

We currently have 90 full-time employees .

Department
Management			15
Accounting Staff			11
Sales and marketing staff			38
Administrative			26
Total			90

Contractual Arrangements between Shaanxi HGS and Guangsha

Due to PRC legal restrictions on foreign ownership, neither we nor our subsidiaries own any direct equity interest in Guangsha. Instead, we control and receive the economic benefits of Guangsha’s business operation through a series of contractual arrangements. Shaanxi HGS, Guangsha and the Guangsha shareholders entered into a series of contractual arrangements, also known as VIE Agreements. The VIE agreements are designed to provide Shaanxi HGS with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Guangsha, including absolute control rights and the rights to the assets, property and revenue of Guangsha. If Guangsha or the Guangsha’s shareholders fail to perform their respective obligations under the contractual arrangements, we could be limited in our ability to enforce the contractual arrangements that give us effective control over Guangsha and its subsidiary. Furthermore, if we are unable to maintain effective control, we would not be able to continue to consolidate the financial results of our variable interest entity in our financial statements.

Although we took every precaution available to effectively enforce the contractual and corporate relationship above, these contractual arrangements may still be less effective than direct ownership and that the Company may incur substantial costs to enforce the terms of the arrangements. For example, our VIE and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of our VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of our VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance by our VIE and its shareholders of their obligations under the contracts to exercise control over our VIE. The shareholders of our consolidated VIE may not act in the best interests of our Company or may not perform their obligations under these contracts. In addition, failure of our VIE shareholders to perform certain obligations could compel the Company to rely on legal remedies available under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which may not be effective.

All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over our operating entities and we may be precluded from operating our business, which would have a material adverse effect on our financial condition and results of operations. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state.

Selected Condensed Consolidated Financial Schedule of the Company and its Subsidiaries and the VIE

The following tables present selected condensed consolidating financial data of the Company and its subsidiaries and the VIE for the fiscal years ended September 30, 2022 and 2021, and balance sheet data as of September 30, 2022 and 2021, which have been derived from our consolidated financial statements for those years.

SELECTED CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

	For the Year Ended September 30, 2022
	The											Consolidated
	Company			Subsidiaries			VIE			Eliminations		Total

Revenues	$	—		$	—		$	9,577,405		$	—	$	9,577,405
Income from equity method investment	$	(87,959,503	)	$	—		$	—		$	87,959,503	$	—
Net income (loss)	$	(108,124,682	)	$	(65	)	$	(87,959,438	)	$	87,959,503	$	(108,124,682	)
Comprehensive income (loss)	$	(119,559,356	)	$	(65	)	$	(99,394,112	)	$	99,394,177	$	(119,559,356	)

	For the Year Ended September 30, 2021
	The										Consolidated
	Company		Subsidiaries			VIE		Eliminations			Total

Revenues	$	—	$	—		$	58,915,239	$	—		$	58,915,239
Income from equity method investment	$	6,643,438	$	—		$	—	$	(6,643,438	)	$	—
Net income (loss)	$	6,375,438	$	(12,000	)	$	6,387,438	$	(6,375,438	)	$	6,375,438
Comprehensive income (loss)	$	15,763,825	$	(12,000	)	$	15,775,825	$	(15,763,825	)	$	15,763,825

SELECTED CONDENSED CONSOLIDATING BALANCE SHEETS

	As of September 30, 2022
	The										Consolidated
	Company		Subsidiaries			VIE		Eliminations			Total
Cash	$	1,074,440	$	2,000		$	283,777	$	—		$	1,360,217
Investments in subsidiaries and VIE	$	94,868,534	$	—		$	—	$	(94,868,534	)	$	—
Total assets	$	123,043,589	$	(70	)	$	280,939,924	$	(96,596,049	)	$	307,387,394
Total liabilities	$	3,597,919	$	669,765		$	183,674,040	$	—		$	187,941,724
Total shareholders’ equity	$	119,445,670	$	(669,835	)	$	97,265,884	$	(96,596,049	)	$	119,445,670
Total liabilities and shareholders’ deficit	$	123,043,589	$	(70	)	$	280,939,924	$	(96,596,049	)	$	307,387,394

	As of September 30, 2021
	The										Consolidated
	Company		Subsidiaries			VIE		Eliminations			Total
Cash	$	—	$	—		$	170,001	$	—		$	170,001
Investments in subsidiaries and VIE	$	194,262,711	$	—		$	—	$	(194,262,711	)	$	—
Total assets	$	194,262,711	$	371,230		$	384,629,333	$	(194,262,711	)	$	385,000,563
Total liabilities	$	3,565,000	$	1,266,921		$	189,470,931	$	—		$	194,302,852
Total shareholders’ equity	$	190,697,711	$	(895,691	)	$	195,158,402	$	(194,262,711	)	$	190,697,711
Total liabilities and shareholders’ deficit	$	194,262,711	$	371,230		$	384,629,333	$	(194,262,711	)	$	385,000,563

SELECTED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

	For the Year Ended September 30, 2022
	The									Consolidated
	Company			Subsidiaries		VIE		Eliminations		Total
Net cash (used in) operating activities	$	(925,560	)	$	2,000	$	166,053	$	—	$	(757,507	)
Net cash provided by investing activities	$	(26,936,915	)	$	—	$	—	$	—	$	(26,936,915	)
Net cash used in financing activities	$	28,936,915		$	—	$	—	$	—	$	28,936,915

	For the Year Ended September 30, 2021
	The									Consolidated
	Company		Subsidiaries		VIE			Eliminations		Total
Net cash (used in) operating activities	$	—	$	—	$	(604,167	)	$	—	$	(604,167	)
Net cash provided by investing activities	$	—	$	—	$	—		$	—	$	—
Net cash used in financing activities	$	—	$	—	$	—		$	—	$	—

Transfers of Cash to and from Our VIE

Green Giant Inc. is a holding company with no operations of its own. We conduct our operations in China primarily through our subsidiary and VIE in China. As a result, although other means are available for us to obtain financing at the holding company level, Green Giant Inc.’s ability to pay dividends to its shareholders and to service any debt it may incur may depend upon dividends paid by our PRC subsidiaries and license and service fees paid by our PRC consolidated affiliated entities. If any of our subsidiaries incurs debt on its own in the future, the instruments governing such debt may restrict its ability to pay dividends to Green Giant Inc. In addition, our PRC subsidiary and VIE are required to make appropriations to certain statutory reserve funds, which are not distributable as cash dividends except in the event of a liquidation of the companies.

Current PRC regulations permit our indirect PRC subsidiaries to pay dividends to HGS Investment only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiaries in the PRC incur debt on their own

SEC Form 10-K filed by Green Giant Inc.