MULIANG VIAGOO TECHNOLOGY, INC. - Annual Report: 2020 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2020

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

For the transition period from _______________ to _______________ 

Commission File Number: 333-201360

MULIANG VIAGOO TECHNOLOGY INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (86) 21-67355092

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

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 Section 13 or 15(d) of the Exchange Act. Yes ☐  No ☒ 

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections. 

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, 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.

If an 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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐  No ☒

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. ☐

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter: None. The Company has not developed an active trading market for its common stock.

As of the date of this report, there are 38,502,954 shares of common stock and 19,000,000 shares of Series A Preferred Stock issued and outstanding.

Documents Incorporated by Reference: None

MULIANG VIAGOO TECHNOLOGY INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2020

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this Annual Report on Form 10-K. Additionally, statements concerning future matters are forward-looking statements.

Although forward-looking statements in this Annual Report on Form 10-K reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report on Form 10-K, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Annual Report on Form 10-K, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

OTHER PERTINENT INFORMATION

Unless the context specifically states or implies otherwise, references in this Annual Report on Form 10-K to “we,” “us,” and words of like import refer to Muliang Viagoo Technology, Inc. or formerly known as M & A Holding Corporation, Mullan Agritech, Inc., and Muliang Agritech, Inc. (“Muliang Viagoo”, or previously known as “Mullan Agritech”), its wholly-owned subsidiaries, Muliang Agricultural Limited (“Muliang HK”), Shanghai Mufeng Investment Consulting Co., Ltd (“Shanghai Mufeng”), Shanghai Muliang Industry Co., Ltd. (“Muliang Industry”), Shanghai Zongbao Environmental Construction Co., Ltd. (“Zongbao”), Shanghai Zongbao Environmental Construction Co., Ltd. Cangzhou Branch (“Zongbao Cangzhou”), Shanghai Muliang Agricultural Sales Co., Ltd. (“Muliang Sales”), Weihai Fukang Bio-Fertilizer Co., Ltd. (“Fukang”), Shanghai Muliang Agritech Development Co., Ltd. (“Agritech Development”), Viagoo Pte Ltd. (“Viagoo”), Yunnan Muliang Animal Husbandry Development Co., Ltd (“Yunnan Muliang”), Zhonglian Huinong (Beijing) Technology Co., Ltd (“Zhonglian”), and Viagoo’s two subsidiaries, NexG Pte Ltd and TPS Solutions (HK) Ltd.

Our business is conducted in the People’s Republic of China (“China” or the “PRC”) and Republic of Singapore. “RMB” refers to Renminbi, or the Yuan, the official currency of the PRC. Our consolidated financial statements are presented in U.S. dollars in accordance with U.S. GAAP. In this Annual Report, we refer to assets, obligations, commitments and liabilities in our financial statements in U.S. dollars. These dollar references are based on the exchange rate of RMB to USD and SGD to USD, determined as of a specific date. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of U.S. dollars, which may result in an increase or decrease in the amount of our obligations (expressed in U.S. dollars) and the value of our assets.

PART I

We primarily engage in the manufacturing and distribution of organic fertilizer and the sales of agricultural products in the PRC. Our organic fertilizer products are sold under our brand names “Zongbao,” “Fukang,” and “Muliang.” Our wholly-owned subsidiary Viagoo Pte Ltd, a Singapore company, is primarily focused on building smart document, operation and delivery platform for distribution and logistics companies.

Through our patented technology, we process in three hours crop straw (including corn, rice, wheat, cotton, and other crops) into high quality organic nutritious fertilizers that are easily absorbed by crops. Straws are common agricultural by-products. In PRC, farmers usually remove the straw stubble that remains after harvesting grains, by burning them in order to continue farming on the same land. These activities have resulted in significant air pollution, and they damage the surface structure of the soil with loss of nutrients. We turn waste into treasure by transforming the straws into organic fertilizer, which also effectively reduces air pollution. The straw organic fertilizer we produce does not contain the heavy metals, antibiotics and harmful bacteria that are common in the traditional manure fertilizer. Our fertilizers also provide optimum levels of primary plant nutrients, including multi-minerals, proteins and carbohydrates that promote the healthiest soils capable of growing the healthy crops and vegetables. It can effectively reduce the use of chemical fertilizers and pesticides as well as reduce the penetration of large chemical fertilizers and pesticides into the soil, thus avoiding water pollution. Therefore, our fertilizer can effectively improve the fertility of soil, and the quality and safety of agricultural products.

We generated our revenue mainly from our organic fertilizers, which accounted for approximately 95.82% and 94.5% of our total revenue for the fiscal years ended December 31, 2020 and 2019, respectively. We currently have two integrated factories in Weihai City, Shandong Province, PRC to produce our organic fertilizers, which have been in operations since August 2015. We plan to improve the technology for our existing straw organic fertilizer production lines in the following aspects: (i) adopt more advanced automatic control technology for raw material feed to shorten the processing time of raw material, and (ii) manufacture powdered organic fertilizer instead of granular organic fertilizer in order to avoid the drying and cooling process, as such will increase our production capacity.

Besides the focus of producing organic fertilizers, we also engage in the business of selling agriculture food products including apples, and as a sales agent for other large agriculture companies in the PRC. In 2014, we rented 350 mu (about 57.66 acres) of mountainous land as an apple orchard. The sales of apples generated less than 1% of our total revenue for the fiscal years ended December 31, 2020 and 2019 respectively. We expect to generate more revenues from the sales of apples as the apple orchards become more mature in the next few years.

In addition, we plan to engage in the processing and distribution of black goat products business commencing in June 2021. We are currently constructing a deep-processing slaughterhouse and processing plant which is expected to have the capacity of slaughtering 200,000 black goats per year in Chuxiong City, Yunnan Province, in China. Our black goat processing products including goat rib lets, goat loin roast, goat loin chops, goat rack, goat leg, goat shoulder, goat leg shanks, ground goat, goat stew meat, whole goat, half goat, lamb viscera, etc. We expect to start generating revenue from the black goat products in 2021.

Our assets mainly include: (i) 22,511 square meters of industrial land and 10,373 square meters of plant area and straw organic fertilizer production line in Weihai City, Shandong Province, and (ii) more than $2 million investment of land use right and the black goat slaughtering and processing plant located in Shuangbai County, Chuxiong City, Yunnan Province, in China.

As the factory area in Jinshan District, Shanghai City is too close to the urban area to produce straw organic fertilizer, some factory buildings, office buildings and spare land in Jinshan District, Shanghai City, have been leased to third parties. In August, 2020, the land use right and building of this factory was listed on Taobao’s online auction platform for sale by the Shanghai Jinshan People’s Court. The sale price achieved after competitive biddings was RMB 74,515,000 (approximately $10.8 million). Based on this, we have entered into a settlement agreement with the lienholders of the property and expect to clear all liens and legal claims attached to our subsidiary Shanghai Zongbao to improve our cash position. We plan to use the remaining sales proceeds for general working capital needs. The assets went through a court-arranged sale in August 2020. While the sale has not closed due to COVID-caused court backlog, the court provided a distribution plan of sale proceeds to all involved parties on March 15, 2021. The buyer’s full purchase amount has been escrowed with the court since August 2020. The court has indicated to the Company that it is expected to complete the sale by April 2021, subject to administrative clearance from various departments within the court.

History

The following diagram illustrates and assumes the completion of the Reorganization, including consolidation of our subsidiaries and VIEs:

Shanghai Muliang Industry Co., Ltd. (referred to herein as “Muliang Industry”) was incorporated in PRC on December 7, 2006 as a limited liability company, owned 95% by Lirong Wang and 5% by Zongfang Wang. Muliang Industry through its own operations and its subsidiaries is engaged in the business of developing, manufacturing and selling organic fertilizers for use in the agricultural industry.

On May 27, 2013, Muliang Industry entered into and consummated an equity purchase agreement whereby it acquired 99% of the outstanding equity of Weihai Fukang Bio-Fertilizer Co., Ltd. (“Fukang”), a corporation organized under the laws of the People’s Republic of China. Fukang was incorporated in Weihai City, Shandong Province on January 6, 2009. Fukang is focused on the distribution of organic fertilizers and the development of new bio-organic fertilizers. As a result of the completion of the transaction, Fukang became a 99% owned subsidiary of Muliang Industry, with the remaining 1% equity interest owned by Mr. Hui Song.

On July 11, 2013, Muliang Industry established a wholly owned subsidiary, Shanghai Muliang Development Co., Ltd. (“Agritech Development”) in Shanghai, China. On November 6, 2013, Muliang Industry sold 40% of the outstanding equity of Agritech Development to Mr. Jianping Zhang for consideration of approximately $65,000 or RMB 400,000. Agritech Development does not currently conduct any operations.

On July 17, 2013, Muliang Industry entered into an equity purchase agreement to acquire 100% of the outstanding equity of Shanghai Zongbao Environmental Construction Co., Ltd. (“Shanghai Zongbao”) with consideration of approximately $3.2 million or RMB 20 million, effectively becoming the wholly-owned subsidiary of Muliang Industry. Shanghai Zongbao was incorporated in Shanghai on January 25, 2008. Shanghai Zongbao processes and distributes organic fertilizers. Shanghai Zongbao wholly owns Shanghai Zongbao Environmental Construction Co., Ltd. Cangzhou Branch (“Zongbao Cangzhou”).

On August 21, 2014, Muliang Agricultural Limited (“Muliang HK”) was incorporated in Hong Kong as an investment holding company.

January 27, 2015, Muliang HK incorporated a wholly foreign-owned enterprise, Shanghai Mufeng Investment Consulting Co., Ltd (“Shanghai Mufeng”), in China

On July 8, 2015, Mullan Agritech entered into certain stock purchase agreement with Muliang Agriculture, Inc., pursuant to which Mullan Agritech, for a consideration of $5,000, acquired 100% interest in Muliang HK and its wholly-owned subsidiary Shanghai Mufeng. Both Muliang HK and Shanghai Mufeng are controlled by the Company’s officer and director, Lirong Wang.

On July 23, 2015, Muliang Industry established a wholly owned subsidiary, Shanghai Muliang Agricultural Sales Co., Ltd. (“Muliang Sales”) in Shanghai, China.

On September 3, 2015, Mullan Agritech effected a split of its outstanding common stock resulting in an aggregate of 150,525,000 shares outstanding of which 120,000,000 were owned by Chenxi Shi, the founder of Mullan Agritech and its then sole officer and director. The remaining 30,525,000 were held by a total of 39 investors.

On January 11, 2016, Mullan Agritech issued 129,475,000 shares of its common stock to Lirong Wang for an aggregate consideration of $64,737.50. On the same date, Chenxi Shi, the then sole officer and director of Mullan Agritech on that date, transferred 120,000,000 shares of common stock of the Company held by him to Lirong Wang for $800 pursuant to a transfer agreement.

On February 10, 2016, Shanghai Mufeng entered into a set of contractual agreements known as Variable Interest Entity (“VIE”) Agreements, including (1) Exclusive Technical Consulting and Service Agreement, (2) Equity Pledge Agreement, and (3) Call Option Cooperation Agreement, with Muliang Industry, and its Principal Shareholders. As a result of the Stock Purchase Agreement and the set of VIE Agreements, Shanghai Muliang Industry Co., Ltd., along with its consolidated subsidiaries, became entities controlled by Mullan Agritech, whereby Mullan Agritech would derive all substantial economic benefit generated by Muliang Industry and its subsidiaries.

As a result, Mullan Agritech has a direct wholly-owned subsidiary, Muliang HK and an indirectly wholly owned subsidiary Shanghai Mufeng. Through its VIE Agreements, Mullan Agritech exercises control over Muliang Industry. Muliang Industry has two wholly-owned subsidiaries (Shanghai Zongbao and Muliang Sales), one 99% owned subsidiary (Fukang), one 60% owned subsidiary (Agritech Development), and one indirectly wholly owned subsidiary Zongbao Cangzhou.

On June 6, 2016, Muliang Industry established a wholly-owned subsidiary, namely, Muliang (Ningling) Bio-chemical Fertilizer Co. Ltd (“Ningling Fertilizer”) in Henan Province, the central plain of China. Ningling Fertilizer is setup for a new production line of bio-chemical fertilizer and has not begun any operation yet.

On July 7, 2016, Muliang Industry established a subsidiary, namely, Zhonglian Huinong (Beijing) Technology Co., Ltd (“Zhonglian”) in Beijing City, China. Muliang Industry owns 65% shares of Zhonglian, and a third-party company, Zhongrui Huilian (Beijing) Technology Co., Ltd owns the other 35% shares. Zhonglian is to develop and operate an online agricultural products trading platform.

On October 27, 2016, Muliang Industry established a subsidiary, namely, Yunnan Muliang Animal Husbandry Development Co., Ltd (“Yunnan Muliang”) in Yunnan Province, China. Muliang Industry owns 55% shares of Yunnan Muliang, and a third-party company, Shuangbai County Development Investment Co., Ltd. owns the other 45% shares. Yunnan Muliang was setup for the sales development of West China.

On October 12, 2017, the Company canceled the registration of Ningling with the administration authorities for Industry and Commerce. Ningling has historically been reported as a component of our operations and incurred $33,323 to loss before income taxes provisions for the year ended December 31, 2017. The termination does not constitute a strategic shift that will have a major effect on our operations or financial results and as such, the termination is not classified as discontinued operations in our consolidated financial statements.

On June 19, 2020, the Company entered into a Share Exchange Agreement with Viagoo Pte Ltd. and all the shareholders of Viagoo for the acquisition of 100% equity interest of Viagoo. Pursuant to the SEA, Muliang shall purchase from Viagoo Shareholders all of Viagoo Shareholder’s right, title and interest in and to the Viagoo’s capital stock. The aggregate purchase price for the Shares was US$2,830,800, paid in 1,011,000 shares of the Company’s restricted common stock, valued at $2.80 per share.

Muliang HK, Shanghai Mufeng, Muliang Industry, Shanghai Zongbao, Zongbao Cangzhou, Muliang Sales, Fukang, Agritech Development, Yunnan Muliang, Zhonglian, and Viagoo are referred to as subsidiaries. The Company and its consolidated subsidiaries are collectively referred to herein as the “Company”, “we” and “us”, unless specific reference is made to an entity.

On April 4, 2019, the Company’s Board of Directors and majority shareholder approved a 5 to 1 reverse stock split of all of the issued and outstanding shares of the Company’s common stock, the change of corporate name from “Mullan Agritech Inc.” to “Muliang Agritech Inc.”, and the creation of one hundred million (100,000,000) shares of Blank Check Preferred Stock.

On April 5, 2019, we filed a Certificate of Amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada to reflect the Name Change and to authorize the creation of Blank Check Preferred Stock. As a result, the capital stock of the Company consists of 500,000,000 shares of common stock, $0.0001 par value, and 100,000,000 shares of blank check preferred stock, $0.0001 par value. To the fullest extent permitted by the laws of the State of Nevada, as the same now exists or may hereafter be amended or supplemented, the Board of Directors may fix and determine the designations, rights, preferences or other variations of each class or series within each class of preferred stock of the Company. The Company may issue the shares of stock for such consideration as may be fixed by the Board of Directors.

On April 16, 2019, we filed a Certificate of Change to our Articles of Incorporation with the Secretary of State of the State of Nevada to reflect the reverse stock split. Any fractional shares are to be rounded up to whole shares. The reverse stock split does not affect the par value or the number of authorized shares of common stock of the Company.

The reverse stock split and the name change took effect on May 7, 2019. In connection with the name change, our stock symbol changed to “MULG”.

On June 26, 2020, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of the State of the State of Nevada, changing its name from “Muliang Agritech, Inc.” to “Muliang Viagoo Technology, Inc.”. 

Our Industry

The Status and Market Demand of Straw Organic Fertilizer Industry in China

Straw in China is in a large quantity, and has wide variety and broad distribution. The annual output of straw is more than 700 million tons, according to the China Industry Information Network’s report on “2017 China Straw Resource Reserves and Utilization Market Overview.” Straw contains more than 3 million tons of nitrogen, more than 700,000 tons of phosphorus and nearly 7 million tons of potassium, equivalent to more than a quarter of China’s current fertilizer amount of use and equivalent to 300 million tons of standard coal. However, nearly 100 million tons of straws are burned directly in the fields every year, which not only seriously damages the beneficial bacteria in the soil surface, but also directly leads to severe air pollution and increases the greenhouse effect. With the significant amount of production of straws in China, so long as part of the straw can be recycled every year, it will bring huge sustainable recycling resources to the fertilizer industry. On November 25, 2015, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Agriculture and the Ministry of Environmental Protection jointly issued a notice, requiring the utilization rate of straw to exceed 85% by 2020.

Market demand in China for organic fertilizer is significant. According to the National Bureau of Statistics in 2019, the China national sales volume of organic fertilizers in 2018 was 133.42 million tons. According to the current policy of encouraging less use of chemical fertilizer, improving the quality of agricultural products and restoring land, it is estimated that the demand of organic fertilizers will increase to 180 million tons by 2020. At the same time, according to a governmental advocate of increasing proportion of organic fertilizer to 50% of the total use of fertilizer, the demand in China for organic fertilizer will reach more than 500 million tons by 2030.

The Environmental Considerations of Promoting Straw Organic Fertilizer

Less Air Pollution. Even if each county area builds a 100,000 tons of straw disposal factories, 100 counties in total can approximately reduce 10 million tons of straw burning, reduce carbon dioxide emissions by 15 million tons, and reduce a large number of carbon monoxide, volatile organic particles (PM), nitrogen oxides, benzene, polycyclic aromatic hydrocarbons and other harmful gases.

Less soil pollution, more environment restoration. Straw is a circulating agricultural resource and the best organic fertilizer resource, according to Baidu. Straw organic fertilizer is also the main measure to convert wasteland, tidal flat and saline-alkali land into arable land, to transform barren land into medium-low yield field and to upgrade medium-low yield field to high-quality fertile field.

Less water pollution. The utilization rate of traditional chemical fertilizers is generally below 30%, and 70% of the dissolved chemical fertilizers directly enter the underground water bodies and flow into rivers, resulting in eutrophication of water bodies. Increasing the application of organic fertilizer is one of the important methods to reduce water pollution.

The High Growth of Logistics and Last Mile Delivery Market in China

According to research done by Reportlinker.com (https://www.reportlinker.com/p05819554/Global-Last-Mile-Delivery-Industry.html?utm_source=GNW), the global last mile delivery market is estimated to reach USD 53.4 billion by 2027. China, the world’s second largest economy is expected to reach a market size of USD 9.3 billion by the year 2027, representing a compound annual growth rate (CAGR) of 7.1% over the analysis period of 2020 to 2027.

With Muliang Viagoo’s last mile delivery platform, we are placed in a good position to aggregate the carriers and merchant’s orders, taking advantage of the route optimization and tracking technologies to drive down the cost per delivery. The platform is able to expand beyond Muliang’s business network of organic fertilizer supplies to food distribution, restaurants and eCommerce merchants.

Our Products

We are committed to ensuring the quality of our agricultural products. We aim to provide high-quality and environmentally friendly straw organic fertilizer for our customers. Our organic fertilizers are the products of natural decomposition and are easy for plants to absorb and digest. Our powder form fertilizer maximizes the survival rate of microorganisms, ensures faster nutrient absorption and increases soil improvement seed and processing productivity. While we are primarily engaged in producing organic fertilizers, we also sell agriculture food products such as apples. We generated our revenue mainly from our organic fertilizers, which constituted approximately 94.5% and 91.3%  of our total revenue for the fiscal years ended December 31, 2020 and 2019, respectively. The sales of apples generated less than 1% of our total revenue for the fiscal years ended December 31, 2020 and 2019, respectively. In addition, we invested in the construction of a deep-processing slaughterhouse which is expected to have the capacity of slaughtering 200,000 black goats per year in Chuxiong City, Yunnan Province, China. We expect to complete the construction in June 2021 and start generating revenues from the black goat processing products in the third quarter of 2021. The rest of our revenues for the last two fiscal years comes from the sales of agricultural foods as an intermediate sales agent for large diary companies in China such as Bright Dairy & Food Co., Ltd., and Mengniu Dairy industry Limited.

Organic Fertilizer

Our fertilizer products are sold under our brand names “Zongbao,” “Fukang,” and “Muliang.” There are seven lines of our organic fertilizers including:

Our organic fertilizer contains all-purpose nutrition that can be used in the different stages of plant growth. It aims to increase soil fertility, improve soil aggregate structure, provide nutrient absorption ability for crop, improve water retention capacity and improve fertilizer utilization, thus creating a sustainable environment and healthy soil.

Agricultural Products (Food)

While concentrating on the development of organic fertilizers, we are actively developing the agricultural food business.

Apple Orchard

In 2014, we leased 350 mu (about 57.66 acres) of mountainous land as an apple farm and, for the purpose of using our own fertilizer to demonstrate the advantages of our straw organic fertilizer. The selling of apples generated less than 1% of our total revenue for the fiscal years ended December 31, 2020 and 2019, respectively. As the apple trees become more mature, we expect to generate more revenues from the sales of apples in the future.

Other Agricultural products

We are also acting as intermediate sales agent for the agricultural products from large agricultural products companies, such as Bright Dairy & Food Co., Ltd., Mengniu Dairy industry Limited, Haitian Flavoring & Food Co., Ltd. and Hangzhou Wahaha Group, etc.

Future Products

Black Goat Processing Products

Currently we invested in a goat slaughtering and processing factory located in Shuangbai County, Chuxiong City, Yunnan Province, PRC starting in 2018. This factory is expected to be completed in June 2021 with a capacity of deep processing of 200,000 black goats per year. Our products will include goat riblets, goat loin roast, goat loin chops, goat rack, goat leg, goat shoulder, goat leg shanks, ground goat, goat stew meat, whole goat, half goat, and lamb viscera, etc. We expect to commence sales of black goat processing products and start generating revenue in the third quarter of 2021.

Forage Grass

We are exploring the options to use forage grass as an alternative for traditional feed for live-stocks. We currently have several research and development projects with schools and institutions. See “Research and Development” below.

Integration with Viagoo

The Viagoo business model includes the following main revenue streams. Viagoo Transport Marketplace (VTM) – This is the transaction platform for shippers and carriers to list and accept delivery jobs. The platform provides sharing functions where a group of shippers can share the transport fleet to some common places (e.g. shopping malls in the city). This service will reduce the waiting time and fuels, resulting in huge cost savings.

VTM is charged to carriers based on certain percentage of the freight charges. Other add-on services like online insurance, rest stop services will be a percentage charged to the service providers.

Viagoo Enterprise Services (VES) - is a cloud based service that provides operations management to support the Transport and Logistics team. With the use of the various modules, the carrier’s transport management is able to greatly optimize its resources and achieve higher efficiency.

VES is charged based on a monthly subscription by vehicles and by users. It is integrated with VTM and jobs received via VTM can be assigned and tracked automatically by VES.

Enterprise Systems – This is a project based system integration. The Enterprise system is charged based on project price and annual maintenance service fees. As Viagoo smart logistics platform gains acceptance in local markets, we expect business opportunities to arise for us to custom build enterprise solutions in the healthcare as well as logistic sectors. For example, Parkway Pantai Singapore is using us to custom build the online logistic job assignment and tracking of lab sample collection / delivery between clinics / hospitals and lab. This is to facilitate efficient deployment of the delivery resources and to ensure compliance is achieved in a tightly controlled fashion.

Viagoo’s 1^st tier technology platform, codename VES (Viagoo Enterprise System) enables onboarding customers to seamlessly embark on a digital transformation path to reduce costs and increase efficiencies with quick ROI (return of investments) and total cost of ownership (TCO). Customers using VES effectively transformed their operations digitally instantly by having full visibility and full control of operations, underpinned by logistical movements, traceability, status reporting, communications, operations planning and data analytics for key business decisions.

Viagoo platform (VES) is currently used by ST Synthesis, Horme Hardware, Strategic Marketing, Parkway Pantai, Bridgestone, Skyfast, Impetus, KL Enviro, PN-I, P5, Servtouch and many others. Canon Singapore, Canon Malaysia, Ibiz (Navision ERP Vendor), Konica Minolta Singapore are new partners onboarded as resellers of Viagoo VES.

Viagoo has recently completed the development of the 2^nd tier technology platform primarily for the “Transport Market Place Community.” Coined as VTM (Viagoo Transportation Marketplace), the purpose is to allow “trading collaboration, transportation crowd sourcing and resource sharing”. It creates a transport crowdsourcing eco-system between vested partners, stakeholders, fleet owners, retailers, online shops, transport owners in which they can co-share resources to resolve transport inadequacies and achieve a demand to supply equilibrium.

Transport inadequacies are caused by various reasons such as surges in delivery demand because of seasonal or festivities or simply sudden business growth. Another key pain point is where delivery trips in large countries often result in empty return trips. For long geographical distances, some one way delivery trips can log up to hundreds of kilometres but with empty return trips resulting in wastage of time, fuel and money. Empty trips can be filled up through a robust job sourcing system, by way of “jobs versus transports sourcing” via intelligent matching, an effective booking system and a payment gateway system, which now is a reality made possible through the technology cornerstone of VTM.

Viagoo has also just recently marked its roadmap milestone with the 3^rd tier technology through the launch of “Viamove”. Soft-launched in May 2020, Viamove is the “Last mile on-demand delivery service” in Singapore using the VTM technology. This platform was a testbed amidst the impact of the COVID-19 pandemic hard hitting local economy and businesses. On the contrary, Viamove has attested to the growth potential by remaining relatively unscathed despite COVID-19’s relentless hit on many businesses.

Over 200 merchants and an overwhelming 300 freelance delivery agents have signed up since its launch. The testbed yielded promising results and hence Viagoo is looking at expanding into “next day and international delivery” through our delivery partners to broaden the business horizon. To enhance the business model, the team is working on two hour same day island wide delivery which is suitable for food, medical, and perishable products.

To solidify its partnership and brand building objectives, Viagoo is actively working with Enterprise Singapore, a local government agency, to support the efficient use of transport resources. In addition, Viagoo is partnering with the Singapore Logistics Association to support her members in promoting the online integration with local eCommerce portals to enable them to fulfil the services via Viagoo’s digital platform.

The strong growth of e-Commerce in the South East Asia market could exceed USD 200 billion by 2025 (https://www.temasek.com.sg/en/news-and-views/stories/future/Southeast-Asia-accelerating-internet-economy). With a population of 630 million in Association of Southeast Asia Nations (ASEAN) alone, 163 million households are expected to have income capacity for discretionary spending (https://www.iseas.edu.sg/images/pdf/TRS1_18.pdf). As such the need for logistics services will push for the demand for efficiency in this sector.

The opportunities to improve performance to better serve customers using digital platforms remain elusive to small and medium enterprises (SMEs) despite vast support from local government agencies. This is seen particularly in logistics operations in many SMEs. The shippers are finding difficulties in efficiently managing delivery and storage resources and as a result they are incurring heavy costs in maintaining these resources. Customers now expect to get shipments faster, have more flexibility, and more transparency at a lower price. B2B customers are facing far faster expectations around efficiency and performance than ever before.

An inefficient delivery also results in high wastage of fuels and contributes to avoidable environmental pollution. Carriers and logistic service providers are facing similar problems in adopting digital technology as the high costs of implementing and maintaining such systems has proven to be a big challenge for stakeholders. Defining a clear digital strategy that’s integrated into business strategy is critical. Digital is still a challenge in logistics space, and there are vast opportunities to improve performance and serve customers better. In addition, logistics sectors have substantial benefits in having more consolidation. However, fragmentation, accountability, and a lack of consistency make collaboration more difficult.

Viagoo logistic platform aims to provide a solution for shippers to easily optimize the logistics resources by either listing their assets in the platform for other shippers to book or request the logistic services via the platform. The flexible sharing model ensures shippers and carriers are able to get the best deals so as to reduce the cost by maximizing utilization of the unused resources.

Our Technology and Manufacturing Process

We utilize our patented technologies to process crop straws into organic fertilizer.

Crop straws include the stems, roots, leaves, pods and vines of crops. The main ingredients are cellulose, hemicellulose and lignin, as well as a small amount of minerals. Straw is a crude fiber material that is waxy and lignified. The fermentation cycle is long for the straw to be processed into organic fertilizer, as it takes 15 days to 60 days for microbial action. This is a common challenge for the large-scale and timely manufacturing of straw fertilizer.

The crop straws will be processed into a nutrient-rich organic fertilizer in a closed container by low-pressure, medium-temperature acid hydrolysis technology (with 9-to-13-kg pressure and at 150-to-180-degree temperature). The basic principle is as follows:

We utilize cellulose hydrolysis, hemicellulose hydrolysis and lignin hydrolysis methods to process cellulose, hemicellulose and lignin into short-chain cellulose, polysaccharide, monosaccharide, oligomer, etc. Based on the demand for our organic fertilizers and the controlled processing conditions, on average our methods produce a mix with a majority of short-chain cellulose, some polysaccharides and a small amount of monosaccharides.

The straws are stored in our warehouse after compacting them in a briquetting machine. The straw compacts are easy to transfer and occupy less storage space. The straw compacts will be first crushed to 3 cm to 5 cm in length. The straws are then processed in the hydrothermal degradation tank for 2 to 3 hours. We pump steam generated by a boiler into the hydrothermal degradation tank, so that the temperature in the hydrothermal degradation tank is maintained between 150°C and 180°C and the pressure is maintained at 0.9-1.3MPa. After 2-3 hours of thermal degradation, we release the pressure to 0.2~0.4MPa. By releasing the pressure, the straws explode to the storage tank, resulting in a mechanical treatment of the explosion impinging stream, breaking the cellulose, hemicellulose and lignin in the straw, breaking the hydrogen bonds, degrading fiber crystallization regions into an amorphous stage and degrading macromolecules into micro-molecules. After that, we add different auxiliary materials through an automatic batching system to make different organic fertilizers suitable for different crops. We then repeat a process of crushing, granulating, cooling and screening before packaging the fertilizers into products.

Sales and Marketing

We believe that our sales services, combined with the quality and reputation of our products will help us retain and attract new customers.

We distribute and sell our products to our end-customers through several different channels, including professional markets and the sales department of our company and distributors:

By using various channels to sell and distribute our products to customers, we can directly serve our customers and end-customers by providing customer service and support.

Suppliers and Customers

Suppliers

Most of our suppliers are local suppliers from Qingdao city, Shandong province. The main raw materials for organic feeds include: (i) hydrolysed crop straw, which are chemically decayed wheat straw, corn straw and other kinds of crop straw, accounting for about 54% of the total raw materials; (ii) plant ash (Potassium carbonate, K₂CO₃), accounting for estimated 4% of the total raw materials; and (iii) Humic acid, accounting for about 3% of the total raw materials. Other auxiliary materials include monoammonium phosphate, urea, etc.

The following table sets forth information as to each supplier that accounted for 10% or more of the Company’s purchase for the years ended December 31, 2020 and 2019.

Customers

Our customers are mainly located in provinces of Guangdong, Jilin and Shandong.

The following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenues for the years ended December 31, 2020 and 2019.

Our Growth Strategy

We intend to build upon our proven ability to produce high-quality organic fertilizer and increase our presence and market share in the agriculture industry. We have begun to implement the growth strategies described below and expect to continue to do so over the several years following this offering. Although the net proceeds of this offering will be available to assist us to implement our growth strategies, we cannot estimate the ultimate amount of capital needed to achieve our expected growth. We may need additional capital to implement these strategies, particularly in the event we pursue acquisitions of complementary businesses or technologies.

Scale Up Production of Organic Fertilizer and Accelerate Penetration in Local and Regional Markets

We plan to construct a new organic fertilizer factory in Heilongjiang Province, China. We have entered into a strategic cooperation agreement with Suihua City of Heilongjiang Province to produce a total of 1 million tons of organic fertilizer. We expect to produce 70,000 tons of organic fertilizer in 2021 and the remaining within the next 5 years. In addition, we will establish warehouse and distribution center in Heilongjiang Province, which is expected to accelerate penetration in the local and regional market.

Increase Sources of Revenue by Expanding Our Current Business

We have a slaughtering and processing plant for black goats under construction in Yunnan Province, China. We expect the plant to begin operations in June 2021 and start generating revenue in the third quarter of 2021. Demand for lamb in China as an alternative to pork is increasing due to growing concern on swine disease and pork quality. We plan to offer lamb and lamb products to consumers via a subscription program available on our website and mobile app in the future.

Continue to Invest in Research and Development and Expand Our Product Portfolio

We have invested significant capital in the development and improvement of our products. One of the R&D results introduced us to a type of forage grass that contains 30% more protein than other crops. We plan to work with the forage grass farmers in Xinjiang Province and to produce plant protein powder from the forage grass to be used in food and beverages in 2020.

Growth Strategy in Viagoo Online Smart Logistics

The Chinese smart logistics industry reached a total size of USD 37 billion in 2017 and is projected to reach a size of USD 135 billion by the year 2024. (https://www.businesswire.com/news/home/20190903005657/en/China-Smart-Logistics-Market-Report-2019-Industry)

As of 2018, there were 25.68 million registered trucks in China based on data shown in Statista.com. To ride on the growth trend and capitalize the emerging growth potential, Muliang Viagoo will be implementing the Viagoo Technology platform in China and targeting the China fleet owners and truck drivers.

The Viagoo VTM is a very apt and synergistic logistic platform for China logistic market as it has huge geographical distance and a sheer huge population of truck drivers. They can collaborate by job listings/postings, sub listings and job bookings as a resource sharing model. Muliang Viagoo can potentially extend to seek further value added revenue streams deriving from examples of insurance and soliciting job bookings.

The mitigation of empty return trips for the trucks drivers and fleet operators is a key impetus and an enticement to join and onboard the VTM platform for costs reductions and added revenues. In tandem, the onboarding of the customers’ side notwithstanding retailers, malls, ecommerce (the shippers) who are the source of demand generation whereas the truck drivers and fleet owners (the carriers) are the fulfilment of demand, hence forming the sought after business equilibrium.

With Muliang Viagoo’s connections to farms, malls, logistics service providers in conjunction with VTM platform, we are well poised to pave way to gain quicker inroads into China logistic markets to seek business growth as planned.

As for South East Asia, third party logistics market accounted for US$ 36.4 billion in 2017 and is expected to grow at a CAGR of 5.5% over the forecast period 2018-2025, to account for US$ 55.7 billion in 2025. Viagoo platform is well positioned in the regional technology hub of ASEAN and we are targeting to have a strong growth in these markets.

In China, we plan to adopt a three phases approach. In phase 1, the platform will be opened to Muliang’s businesses and business partners. The platform will enable participating merchants to take advantage of Viagoo’s digital technology to improve efficiency and lower costs. We plan to onboard truck drivers to the platform to list their services. To entice the drivers to join, we plan to partner with local insurance and finance companies to offer discounts in insurance coverage and truck leasing.

In phase 2, we plan to use data analytics technology to provide forecasts on supply and demand across provinces and delivery locations. With the improved data, the platform services is expected to expand the market coverage to other cities and provinces. We plan to deploy blockchain technology to enhance data and transaction security. Using a distributed ledger, the data is protected and transparent between the respective stakeholders.

In phase 3, we plan to expand the partner network to include other supportive merchants to offer their services at the key rest stops across the strategic locations.

Outside China, we plan to work with joint venture partners in target countries to establish our platform services. This is to ensure a quick deployment of the services and reduce the political and cultural differences. The target countries include Malaysia, Hong Kong SAR, and Indonesia.

We also plan to look at introducing specialized services such as medicine delivery linking to hospital and clinical systems for on demand dispensing.

Competitive Advantages

Competitive Advantages of Our Technology

Competitive Advantage of Our Products

Competitive Advantage of Muliang Viagoo Logistic Platform

Intellectual Property

We rely on certain intellectual property to protect our domestic business interests and ensure our competitive position in our industry.

We have 12 patents and 5 registered trademarks in China on sludge and straw technology, and we are a pilot company of technology in Jinshan District, Shanghai. Among the patents we now own, “microwave induced catalytic hydrolysis treatment sludge” was reviewed by Chinese Academy of Sciences Shanghai Technology Chaxin Consulting Centre (the “Centre”) (report no. 200921C0703709, 200821C0701507). According to the review by the Centre, there is no public report of the same kind of research, and therefore, the project is innovative and is advanced at the international level.

NEXG Pte Ltd has trademark FleetnexG in Feb 2016 in Singapore (Publication (040201521235Y). Viagoo is planning to register the trademark of Viagoo’s technology in the 1^st quarter of 2021 in Singapore and China.

Patents

We own the following patents through our subsidiaries and/or VIE entities:

Trademarks

We own several trademarks through our subsidiaries and/or VIE entities, including Muliang, Zongbao, Xiutubao, Vijifeng, Jingletu, and Huangdicao. Muliang and Zongbao are our company’s brand names.

Our Employees

As of the date hereof, we have 135 full-time employees. The following table sets forth the number of our employees by function:

We provide social insurance for each employee in accordance with Chinese law, including pension insurance, medical insurance, unemployment insurance, work injury insurance and maternity insurance and housing provident fund.

Smaller reporting companies are not required to provide the information required by this item.

Smaller reporting companies are not required to provide the information required by this item.

Our principal executive office is located at 2498 Wanfeng Highway, Lane 181, Fengjing Town, Jinshan District, Shanghai, China, and our telephone number is (86) 21-67355092. The office space belongs to our President and Chief Executive Officer, Mr. Lirong Wang, who allows us to use the space for free.

Property, plant and equipment at December 31, 2020 and 2019 consisted of:

Except for those set forth below, currently there are no legal proceedings pending or threatened against the Company. However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise.

As of the hereof, there are currently two civil proceedings, including: (1) default over a loan agreement between Shanghai Zongbao and Agricultural Bank of China Jinshan Subbranch, the judgment for which has become effective since January 14th, 2019; and (2) default over a construction contract between Shanghai Zongbao and Shanghai Zhongta Construction and Engineering Co., Ltd., as to which both parties reached a mediation agreement through the mediation procedure held by the court. The cause for both cases is that the established project of organic fertilizer production could not be continued due to the change of business focus of the industrial park in which the company is located to food, machinery and new energy industries. This caused defaults with both aforementioned parties. The relevant land and production building were mortgaged under to Agricultural Bank of China, and Shanghai Zongbao and Shanghai Zhongta Construction and Engineering Co., Ltd., with the understanding that the value of the assets will be sufficient to cover the debts under these two cases. We expect the outstanding defaults will be satisfied by a disposition of the mortgaged asset. Both the Agriculture Bank of China (“ABC”) and Shanghai Zongbao agreed to allow Shanghai Jinshan People’s Court to list the asset on Taobao’s online auction platform for sale. The sale price achieved after competitive biddings was RMB 74,515,000 (approximately $10.8 million). Based on this, we have entered into a settlement agreement with ABC for the settlement of the remaining balance of RMB 29,900,000 (approximately $4.27 million) with accrued interest. We plan to repay ABC and amount owed to the contractor with the sales proceeds. We expect the sale to complete by the end of April 2021 and plan to use the remaining sales cash proceeds for general working capital needs. The manufacturing base for the project of Shanghai Zongbao has already been relocated and therefore any potential sale of the land use rights and building facility will have no material adverse impact on our operations.

Shanghai Aoke Chemicals Co., Ltd. (“Shanghai Aoke”) placed with Shanghai Nai Sheng Kalan Industrial Co., Ltd. (“Shanghai Nai Sheng”) an equipment procurement order of RMB 25 million (approximately US$3.84M) in 2013. Due to a product defect issue at the fault of Shanghai Nai Sheng, Shanghai Aoke suspended payments to Shanghai Nai Sheng, and RMB 2.94 million remains to be paid to Shanghai Nai Sheng as of September 2017, guaranteed by Shanghai Zongbao. In August 2020, Shanghai Nai Sheng commenced a legal proceeding against Shanghai Aoke in the Jinshan District People’s Court for the payment of the balance of the purchase order, concurrently enjoining Zongbao as the guarantor. When Shanghai Nai Sheng eventually brought the legal action against Shanghai Aoke, the total amount owed had been reduced from RMB 2.94 million to RMB 1.21 Million (approximately US$184,000) based on payments made between September 2017 and August 2020. To our knowledge, the reduced figure was confirmed by all parties in a court mediation on December 3, 2020, and a settlement was reached pursuant to which all amounts due shall be paid by June 30, 2021.

PRC Regulations

Our operation in China is subject to a number of PRC laws and regulations. This section summarizes all material PRC laws and regulations relevant to our business and operations in China and the key provisions of such regulations.

Fertilizer License

The examination and approval of fertilizer license is based on Article 25 of the Agricultural Law of the People’s Republic of China, the Management for the Administration of Fertilizer Registration (Order No. 32 and No. 38 by the Ministry of Agriculture), and the Requirements for Fertilizer Registration Materials (Publication No. 161 from the Ministry of Agriculture). Organic fertilizers are required to be registered with provincial agricultural department.

There are four examination and approval requirements for obtaining a fertilizer license (1) A valid business license issued by Administration for Industry and Commerce, whose business scope shall cover the industry of fertilizer; (2) Products must comply with the relevant requirements of laws, regulations and relevant national policies (such as safety and environmental protection); (3) The product quality must comply with national standards, industry standards, local standards or enterprise standards approved by the quality supervision department; and (4) The application materials must be true, legal, complete and effective.

All of our fertilizer products currently have valid five-year fertilizer licenses that are renewable upon the expiration date in the year of 2022.

Corporate Laws and Industry Catalogue Relating to Foreign Investment

The establishment, operation and management of corporate entities in China are governed by the Company Law of the PRC, or the Company Law, effective in 1994, as amended in 1999, 2004, and 2005, respectively. The Company Law is applicable to our PRC subsidiaries and affiliated PRC entity unless the PRC laws on foreign investment have stipulated otherwise.

The establishment, approval, registered capital requirement and day-to-day operational matters of wholly foreign-owned enterprises (“WFOE”), are regulated by the WFOE Law of the PRC effective in 1986, as amended in 2000, and the Implementation Rules of the WFOE Law of the PRC effective in 1990, as amended in 2001.

Investment activities in the PRC by foreign investors are principally governed by the Guidance Catalogue of Industries for Foreign Investment, or the Catalogue, which was promulgated and is amended from time to time by the Ministry of Commerce and the National Development and Reform Commission. The Catalogue divides industries into three categories: encouraged, restricted and prohibited. Industries not listed in the Catalogue are generally open to foreign investment unless specifically restricted by other PRC regulations.

Establishment of WFOEs is generally permitted in encouraged industries. Some restricted industries are limited to equity or contractual joint ventures, while in some cases Chinese partners are required to hold the majority interests in such joint ventures.

For example, sales and distribution of audio and video products are among the restricted categories, and only contractual joint ventures in which Chinese partners holding majority interests can engage in the distribution of audio and video products in China.

In addition, restricted category projects are also subject to higher-level government approvals. Foreign investors are not allowed to invest in industries in the prohibited category.

Regulations Relating to Taxation

In January 2008, the PRC Enterprise Income Tax Law (The “EIT” Law) took effect. The EIT applies a uniform 25% enterprise income tax rate to both foreign-invested enterprises and domestic enterprises, unless where tax incentives are granted to special industries and projects. Under the EIT Law and its implementation regulations, dividends generated from the business of a PRC subsidiary after January 1, 2008 and payable to its foreign investor may be subject to a withholding tax rate of 10% if the PRC tax authorities determine that the foreign investor is a non-resident enterprise, unless there is a tax treaty with China that provides for a preferential withholding tax rate. Distributions of earnings generated before January 1, 2008 are exempt from PRC withholding tax.

Under the EIT Law, an enterprise established outside China with “de facto management bodies” within China is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. A circular issued by the State Administration of Taxation in April 2009 regarding the standards used to classify certain Chinese-invested enterprises controlled by Chinese enterprises or Chinese enterprise groups and established outside of China as “resident enterprises” clarified that dividends and other income paid by such PRC “resident enterprises” will be considered PRC-source income and subject to PRC withholding tax, currently at a rate of 10%, when paid to non-PRC enterprise shareholders. This circular also subjects such PRC “resident enterprises” to various reporting requirements with the PRC tax authorities.

Under the implementation regulations to the EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, the tax circular mentioned above specifies that certain PRC-invested overseas enterprises controlled by a Chinese enterprise or a Chinese enterprise group in the PRC will be classified as PRC resident enterprises if the following are located or residence in the PRC: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, the company seal and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights.

Regulations Relating to Foreign Exchange

Pursuant to the Regulations on the Administration of Foreign Exchange issued by the State Council and effective in 1996, as amended in January 1997 and August 2008, current account transactions, such as sale or purchase of goods, are not subject to PRC governmental control or restrictions. Certain organizations in the PRC, including foreign-invested enterprises, may purchase, sell, and/or remit foreign currencies at certain banks authorized to conduct foreign exchange business upon providing valid commercial documents. Approval of the PRC State Administration of Foreign Exchange (“SAFE”), however, is required for capital account transactions.

In August 2008, SAFE issued a circular on the conversion of foreign currency into Renminbi by a foreign-invested company that regulates how the converted Renminbi may be used. The circular requires that the registered capital of a foreign-invested enterprise converted into Renminbi from foreign currencies may only be utilized for purposes within its business scope. For example, such converted amounts may not be used for investments in or acquisitions of other PRC companies, unless specifically provided otherwise, which can inhibit the ability of companies to consummate such transactions. In addition, SAFE strengthened its oversight of the flow and use of the Renminbi registered capital of foreign-invested enterprises converted from foreign currencies. The use of such Renminbi capital may not be changed without SAFE’s approval, and may not in any case be used to repay Renminbi loans if the proceeds of such loans have not been utilized. Violations may result in severe penalties, such as heavy fines.

Regulations Relating to Labor

Pursuant to the PRC Labor Law effective in 1995 and the PRC Labor Contract Law effective in 2008, a written labor contract is required when an employment relationship is established between an employer and an employee. Other labor-related regulations and rules of the PRC stipulate the maximum number of working hours per day and per week as well as the minimum wages. An employer is required to set up occupational safety and sanitation systems, implement the national occupational safety and sanitation rules and standards, educate employees on occupational safety and sanitation, prevent accidents at work and reduce occupational hazards.

In the PRC, workers dispatched by an employment agency are normally engaged in temporary, auxiliary or substitute work. Pursuant to the PRC Labor Contract Law, an employment agency is the employer for workers dispatched by it, and it must perform an employer’s obligations toward them. The employment contract between the employment agency and the dispatched workers, and the placement agreement between the employment agency and the company that receives the dispatched workers must be in writing. Also, the company that accepts the dispatched workers must bear joint and several liabilities for any violation of the Labor Contract Law by the employment agencies arising from their contracts with dispatched workers. An employer is obligated to sign an indefinite term labor contract with an employee if the employer continues to employ the employee after two consecutive fixed-term labor contracts. The employer also has to pay compensation to the employee if the employer terminates an indefinite term labor contract. Except where the employer proposes to renew a labor contract by maintaining or raising the conditions of the labor contract and the employee is not agreeable to the renewal, an employer is required to compensate the employee when a definite term labor contract expires. Furthermore, under the Regulations on Paid Annual Leave for Employees issued by the State Council in December 2007 and effective as of January 2008, employees who have served an employer for more than one (1) year and less than ten years are entitled to a 5-day paid vacation, those whose service period ranges from 10 to 20 years are entitled to a 10-day paid vacation, and those who have served for more than 20 years are entitled to a 15-day paid vacation. An employee who does not use such vacation time at the request of the employer shall be compensated at three times their normal salaries for each waived vacation day.

Pursuant to the Regulations on Occupational Injury Insurance effective in 2004 and the Interim Measures concerning the Maternity Insurance for Enterprise Employees effective in 1995, PRC companies must pay occupational injury insurance premiums and maternity insurance premiums for their employees. Pursuant to the Interim Regulations on the Collection and Payment of Social Insurance Premiums effective in 1999 and the Interim Measures concerning the Administration of the Registration of Social Insurance effective in 1999, basic pension insurance, medical insurance, and unemployment insurance are collectively referred to as social insurance. Both PRC companies and their employees are required to contribute to the social insurance plans. Pursuant to the Regulations on the Administration of Housing Fund effective in 1999, as amended in 2002, PRC companies must register with applicable housing fund management centers and establish a special housing fund account in an entrusted bank. Both PRC companies and their employees are required to contribute to the housing funds.

Regulations on Dividend Distribution

Wholly foreign-owned companies in the PRC may pay dividends only out of their accumulated profits after tax as determined in accordance with PRC accounting standards. Remittance of dividends by a wholly foreign-owned enterprise out of China is subject to examination by the banks designated by SAFE. Wholly foreign-owned companies may not pay dividends unless they set aside at least 10% of their respective accumulated profits after tax each year, if any, to fund certain reserve funds, until such time as the accumulative amount of such fund reaches 50% of the wholly foreign-owned company’s registered capital. In addition, these companies also may allocate a portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds at their discretion. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends.

Safe Regulations on Offshore Special Purpose Companies Held by PRC Residents or Citizens

Pursuant to the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Inbound Investment via Overseas Special Purpose Vehicles, or Circular No. 75, issued in October 2005 by SAFE and its supplemental notices, PRC citizens or residents are required to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas equity financing involving a roundtrip investment whereby the offshore entity acquires or controls onshore assets or equity interests held by the PRC citizens or residents. In addition, such PRC citizens or residents must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to increases or decreases in investment amount, transfers or exchanges of shares, mergers or divisions, long-term equity or debt investments, external guarantees or other material events that do not involve roundtrip investments. Subsequent regulations further clarified that PRC subsidiaries of an offshore company governed by the SAFE regulations are required to coordinate and supervise the filing of SAFE registrations in a timely manner by the offshore holding company’s shareholders who are PRC citizens or residents. If these shareholders fail to comply, the PRC subsidiaries are required to report to the local SAFE branches. If the shareholders of the offshore holding company who are PRC citizens or residents do not complete their registration with the local SAFE branches, the PRC subsidiaries may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to the offshore company, and the offshore company may be restricted in its ability to contribute additional capital to its PRC subsidiaries. Moreover, failure to comply with the SAFE registration and amendment requirements described above could result in liability under PRC law for evasion of applicable foreign exchange restrictions.

M&A Rules

On August 8, 2006, six PRC regulatory agencies, including China Securities Regulatory Commission (“CSRC”), promulgated a rule entitled Provisions Regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (“the M&A Rules”) to regulate foreign investment in PRC domestic enterprises. The M&A rules, among other things, requires an overseas special purpose vehicle (“SPV”), formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, to obtain the approval of CSRC prior to publicly listing their securities on an overseas stock exchange. There remains some uncertainty as to how this regulation will be interpreted or implemented in the context of an overseas offering. If the CSRC or another PRC regulatory agency subsequently determines that approval is required for this offering, we may face sanctions by the CSRC or another PRC regulatory agency.

The M&A Rules also establish procedures and requirements that could make some acquisitions of Chinese companies by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a Chinese domestic enterprise.

SAFE Regulations on Employee Share Options

On March 28, 2007, SAFE promulgated the Application Procedure of Foreign Exchange Administration for Domestic Individuals Participating in Employee Share Holding Plan or Share Option Plan of Overseas Listed Company, or the Share Option Rule. Pursuant to the Share Option Rule, Chinese citizens who are granted share options by an overseas publicly listed company are required to register with SAFE through a Chinese agent or Chinese subsidiary of the overseas publicly listed company and complete certain other procedures. Our PRC employees who have been granted share options will be subject to these regulations. Failure of our PRC share option holders to complete their SAFE registrations may subject these PRC employees to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to us.

Not Applicable.

PART II

Our common stock is currently quoted on the OTC Markets under the symbol “MULG’”, however, there is no active public trading market for our common stock.We had 38,502,954 shares of common stock issued and outstanding as of April 15, 2021. 

The following table sets forth, for the periods indicated, the high and low bid prices of our common stock.

Holders of Capital Stock

As of April 15, 2021, we had 1032 holders of our common stock and 1 holder of our Series A Preferred Stock.

Stock Option Grants

We do not have a stock option plan in place and have not granted any stock options at this time.

Dividends

To date, we have not declared or paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors has the discretion to declare and pay dividends in the future.

Payment of dividends in the future will depend upon our earnings, capital requirements, and any other factors that our Board of Directors deems relevant.

Recent Sales of Unregistered Securities

Except as set forth below and those previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K, there were no equity securities of the registrant sold by the registrant during the period covered by this annual report that were not registered under the Securities Act.

On December 29, 2020, we sold through a Regulation S offering a total of 100,000 shares of common stock to two non-U.S. investors, at a price of $2.80 per share for an aggregate purchase price of $280,000. The transaction was not registered under the Securities Act in reliance on an exemption from registration set forth in Regulation S promulgated hereunder as a transaction by the Company not involving any public offering. The securities were sold in an offshore transaction by a foreign issuer, to foreign investors, not using any directed selling efforts in the United States. These securities may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Securities Act.

Smaller reporting companies are not required to provide the information required by this item.

The information set forth in this section contains certain “forward-looking statements”, including, among others (i) expected changes in our revenue and profitability, (ii) prospective business opportunities and (iii) our strategy for financing our business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as “believes”, “anticipates”, “intends” or “expects”. These forward-looking statements relate to our plans, liquidity, ability to complete financing and purchase capital expenditures, growth of our business including entering into future agreements with companies, and plans to successfully develop and obtain approval to market our product. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

Although we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this Annual Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved.

We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements.

Our revenues and results of operations could differ materially from those projected in the forward-looking statements as a result of numerous factors, including, but not limited to, the following: the risk of significant natural disaster, the inability of the our company to insure against certain risks, inflationary and deflationary conditions and cycles, currency exchange rates, and changing government regulations domestically and internationally affecting our products and businesses.

You should read the following discussion and analysis in conjunction with the Financial Statements and Notes attached hereto, and the other financial data appearing elsewhere in this Annual Report.

US Dollars are denoted herein by “USD”, “$” and “dollars”.

Overview

Through our patented technology, we process crop straw (including corn, rice, wheat, cotton, and other crops) into high quality organic nutritious fertilizers that are easily absorbed by crops in three hours. Straws are common agricultural by-products. In PRC, farmers usually remove the straw stubble that are remains after grains, by burning them in order to continue farming on the same land. These activities have resulted in significant air pollution, and they damage the surface structure of the soil with loss of nutrients. We turn waste into treasure by transforming the straws into organic fertilizer, which also effectively reduces air pollution. The straw organic fertilizer we produce does not contain the heavy metals, antibiotics and harmful bacteria that are common in the traditional manure fertilizer. Our fertilizers also provide optimum levels of primary plant nutrients, including multi-minerals, proteins and carbohydrates that promote the healthiest soils capable of growing the healthy crops and vegetables. It can effectively reduce the use of chemical fertilizers and pesticides as well as reduce the penetration of large chemical fertilizers and pesticides into the soil, thus avoiding water pollution. Therefore, our fertilizer can effectively improve the fertility of soil, and the quality and safety of agricultural products.

We generated our revenue mainly from our organic fertilizers, which accounted for approximately 95.82% and 94.5% of our total revenue for the years ended December 31, 2020 and 2019, respectively. We currently have two integrated factories in Weihai City, Shandong Province, PRC to produce our organic fertilizers, which have been in operations since August 2015. We plan to improve the technology for our existing straw organic fertilizer production lines in the following aspects: (i) adopt more advanced automatic control technology for raw material feed to shorten the processing time of raw material, and (ii) manufacture powdered organic fertilizer instead of granular organic fertilizer production in order to avoid the drying and cooling process, as such will increase our production capacity.

With the focus of producing organic fertilizers, we also engage in the business of selling agriculture food products including apples, and as a sales agent for other large agriculture companies in the PRC. In 2014, we rented 350 mu (about 57.66 acres) of mountainous land as an apple orchard. The sales of apples generated less than 1% of our total revenue for the years ended December 31, 2020 and 2019. We expect to generate more revenues from the sales of apples as the apple orchards become more mature in the next few years.

In addition, we plan to engage in the processing and distribution of black goat products, with business commencing in June 2021. We are currently constructing a deep-processing slaughterhouse and processing plant which is expected to have the capacity of slaughtering 200,000 black goats per year in Chuxiong City, Yunnan Province, in China. Our black goat processing products including goat rib lets, goat loin roast, goat loin chops, goat rack, goat leg, goat shoulder, goat leg shanks, ground goat, goat stew meat, whole goat, half goat, lamb viscera, etc. We expect to start generating revenue from the black goat products in 2021.

Our 42,895 square meters of industrial land and 28,549 square meters of factory and office space located in Jinshan District, Shanghai are to be sold to the highest bidder for RMB 74.52 Million (US$11.42 million), and the buyer’s funds have been placed in escrow administered by the court. Our assets includes (i) 22,511 square meters of industrial land and 10,373 square meters of plant area and straw organic fertilizer production line in Weihai City, Shandong Province, and (ii) more than $2 million investment of land use right and the black goat slaughtering and processing plant located in Shuangbai County, Chuxiong City, Yunnan Province, China.

As the factory area in Jinshan District, Shanghai City is too close to the urban area to produce straw organic fertilizer, some factory buildings, office buildings and spare land in Jinshan District, Shanghai City, have been leased to third parties. In August, 2020, the land use right and building of this factory was listed on Taobao’s online auction platform for sale by the Shanghai Jinshan People’s Court. The sale price achieved after competitive biddings was RMB 74,515,000 (approximately $10.8 million). Based on this, we have entered into a settlement agreement with the lienholders of the property and expect to clear all liens and legal claims attached to our subsidiary Shanghai Zongbao to improve our cash position. We plan to use the remaining sales proceeds for general working capital needs. The manufacturing base for the project of Shanghai Zongbao has already been relocated to our property in Weihai and therefore the sale of the land use rights and building facility will have no material adverse impact on our operations.

Viagoo Solutions

Viagoo logistic platform aims to provide a solution for shippers to easily optimise the logistics resources by either listing their assets in the platform for other shippers to book or request the logistic services via the platform. The flexible sharing model ensures shippers and carriers to be able to get the best deals so as to reduce the cost by maximizing utilization of the unused resources.

Viagoo platform provides full online tracking, route optimization and capacity planning options to help the carriers efficiently manage their operations. Using Internet of Things (IOT), GPS, mobile integration, document and data integration services, Viagoo platform is able to empower shippers and carriers with an up to date digital platform to support their digital transformations. With a ready Application Programming Interface (API) to various eCommerce platforms, shippers and carriers are able to plan their digital strategies and grow their businesses.

Viagoo platform is built on a secured cloud environment that has been tested and approved by some key corporate users in healthcare as well as logistics sectors. With advanced technology in plan, Viagoo is seeking investments to expand the digital capability particularly in the area of Artificial Intelligence, machine learning, blockchain in transaction handling, data analytics in resource distribution and cold chain management. Also, using document automation and data integration technologies, Viagoo platform will offer value added services such as insurance on the go, vehicle lease financing, link up to rest stop, fuel, vehicle workshop services.

The acquisition of Viagoo Pte Ltd, a Singapore based online logistic platform, will enable the Muliang group of companies to optimize the transport logistics to lower the cost of delivery and increase the efficiency. The platform will connect truck drivers to Muliang and provide end to end tracking of delivery status. With this platform, it is expected to reduce delivery costs by 30%.

Viagoo platform is expected to be opened to the China market where other companies and merchants can book delivery services and transporters can sign on to list and provide their services. Development work has begun in August 2020 to provide localization and support for map and address services in China. The development and testing are expected to be completed in February 2021 and ready for launch in April 2021.

Viagoo Business Model

Viagoo business model has 3 main revenue streams.

Viagoo Transport Marketplace (VTM) – This is the transaction platform for shippers and carriers to list and accept delivery jobs. The platform provides sharing functions where a group of shippers can share the transport fleet to some common places (e.g. shopping malls in the city). This service will reduce the waiting time and fuels and resulting in huge cost savings.

VTM is charged to carriers based on certain percentage of the freight charges. Other add-on services like online insurance, rest stop services will be a percentage charged to the service providers.

Viagoo Enterprise Services (VES) - is a cloud base service that provides the operation management to support the Transport and Logistics team. With the use of the various modules, carrier’s transport management is able to greatly optimised the resources and achieve higher efficiency.

VES is charged based on a monthly subscription by vehicles and by users. It is integrated with VTM and jobs received via VTM can be assigned and tracked automatically by VES.

Enterprise Systems – This is a project based system integration. The enterprise system is charged based on project price and annual maintenance service fees. As Viagoo smart logistics platform gains acceptance in local markets, we expect business opportunities to arise for us to custom build enterprise solutions in the healthcare as well as logistics sectors. For example, Parkway Pantai Singapore is using us to custom build the online logistic job assignment and tracking of lab sample collection / delivery between clinics / hospitals and lab. This is to facilitate efficient deployment of the delivery resources and to ensure compliance is achieved in a tightly controlled fashion.

Recent Development

Impact of COVID-19

Started in December 2019, the outbreak of COVID-19 caused by a novel strain of the coronavirus has become widespread in China and in the rest of the world, including in each of the areas in which the Company, its suppliers and its customers operate. In order to avoid the risk of the virus spreading, the Chinese government enacted various restrictive measures, including suspending business operations and quarantines, starting from the end of January 2020. We followed the requirements of local health authorities to suspend operation and production and have employees work remotely in February and March 2020. Since April 2020, we gradually resumed production and are now operating at full capacity.

As a result of the COVID-19 outbreak in December 2019 and continuing in the first quarter of 2020, the Company’s businesses, results of operations, financial position and cash flows were adversely affected in the first quarter of 2020 with potential continuing impacts on subsequent periods, including but not limited to the material adverse impact on the Company’s revenues as result of the suspension of operations and decline in demand by the Company’s customers.

We are monitoring the global outbreak and spread of the novel strain of coronavirus (COVID-19) and taking steps in an effort to identify and mitigate the adverse impacts on, and risks to, our business (including but not limited to our employees, customers, other business partners, our manufacturing capabilities and capacity and our distribution channels) posed by its spread and the governmental and community reactions thereto. We continue to assess and update our business continuity plans in the context of this pandemic, including taking steps in an effort to help keep our workforces healthy and safe. The spread of COVID-19 has caused us to modify our business practices (including employee travel, employee work locations in certain cases, and cancellation of physical participation in certain meetings, events and conferences), and we expect to take further actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, customers and other business partners. We are also working with our suppliers to understand the existing and future negative impacts to our supply chain and take actions in an effort to mitigate such impacts. Due to the speed with which the COVID-19 situation is developing, the global breadth of its spread and the range of governmental and community reactions thereto, there is uncertainty around its duration and ultimate impact; therefore, any negative impact on our overall financial and operating results (including without limitation our liquidity) cannot be reasonably estimated at this time, but the pandemic could lead to extended disruption of economic activity and the impact on our financial and operating results could be material.

Disposal of Land use right for repayment of debt

The Land use right and related building are expected to be sold to Yigang (Shanghai) Technology Development Co., Ltd. for repayment of debt due to Agricultural Bank of China. The assets (land and building) have been appraised for RMB 97.64 Million (US$14.96 million), more than the sale price of RMB 74.52 Million (US$11.42 million).

The assets went through a court-arranged sale in August 2020. While the sale has not closed due to COVID-caused court backlog, the court provided a distribution plan of sale proceeds to all involved parties on March 15, 2021. The buyer’s full purchase amount has been escrowed with the court since August 2020. The court has indicated to the Company that it is expected to complete the sale by April 2021, subject to administrative clearance from various departments within the court.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We evaluate, on an on-going basis, our estimates for reasonableness as changes occur in our business environment. We base our estimates on experience, the use of independent third-party specialists and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments, estimates and uncertainties, and potentially result in materially different results under different assumptions and conditions. We believe the following are our critical accounting policies:

Basis of Presentation

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.

Liquidity and Going Concern

As reflected in the accompanying consolidated financial statements, we had net accumulated deficit of $8,596,332 and $9,571,836 as of December 31, 2020 and December 31, 2019, respectively. Our cash balances as of December 31, 2020 and December 31, 2019 were $348,834 and $103,868, respectively. We had current liability of $22,152,210 at December 31, 2020 which would be due within the next 12 months. In addition, we had a working capital of $4,001,073 and working capital deficit of $6,213,140 at December 31, 2020 and 2019, respectively.

As a result of the improved liquidity since last fiscal year, the Company has resolved the going concern issue.

Principles of Consolidation

Muliang Viagoo consolidates the following entities, including wholly-owned subsidiaries, Muliang HK, Shanghai Mufeng, Viagoo, and its wholly controlled variable interest entities, Muliang Industry, and Zhongbao, 60% controlled Agritech Development, 99% controlled Fukang, 65% controlled Zhonglian, 80% controlled Yunnan Muliang and 51% controlled Heilongjiang. The 40% equity interest holder of Agritech Development, 1% equity interest holders in Fukang, 35% equity interest holders in Zhonglian, 20% interest in Yunnan Muliang and 49% equity interest in Heilongjiang are accounted as non-controlling interest in the Company’s consolidated financial statements.

The variable interest entities consolidated for which the Company is deemed the primary beneficiary. All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

In preparing financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates, required by management, include the recoverability of long-lived assets and the valuation of inventories. Actual results could differ from those estimates.

Accounts Receivable

We state accounts receivable at cost, net of allowance for doubtful accounts. Based on our past experience and current practice in the PRC, management provides for an 100% allowance for doubtful accounts equivalent to those accounts that are not collected within one year, and 50% for receivables outstanding for longer than six months. It is management’s belief that the current bad debt allowance adequately reflects an appropriate estimate based on management’s judgment.

Inventory Valuation

We value our fertilizer inventories at the lower of cost, determined on a weighted average basis, and net realizable value (the estimated market price). Substantially all inventory expenses, packaging and supplies are valued by the weighted average method.

Apple Orchard

Apple Orchard consists primarily of rent for an apple farm, labor cost, fertilizers, apple seeds, apple seedlings and others. The costs to purchase and cultivate apple trees and the expenditures related to labor and materials to plant apple trees until they become commercially productive are capitalized, which require a 2-year period. The estimated production life for apple tree is 10 years, and the costs are amortized without a residual value. Expenses incurred maintaining apple trees during the growth cycle until seedling apple trees or grafted varieties are fruited are capitalized into inventory and included in Work In Process—apple orchard, a component of inventories.

Amortized expenses pertaining to apple orchard are included in inventory costs for those apples to be sold and ultimately become a component of cost of goods sold. Similar to other assets, the failure of our apple orchard to be serviceable over the entirety of their anticipated useful lives or to be sold at their anticipated residual value will negatively impact our operating results.

Revenue Recognition

On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method. Results for the reporting period beginning after January 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the Company’s historic accounting under Topic 605.

Management has determined that the adoption of ASC 606 did not impact the Company’s previously reported financial statements in any prior period nor did it result in a cumulative effect adjustment to opening retained earnings.

Revenue for sale of products is derived from contracts with customers, which primarily include the sale of fertilizer products and environmental protection equipment. The Company’s sales arrangements do not contain variable consideration. The Company recognizes revenue at a point in time based on management’s evaluation of when performance obligations under the terms of a contract with the customer are satisfied and control of the products has been transferred to the customer. For vast majority of the Company’s product sales, the performance obligations and control of the products transfer to the customer when products are delivered, and customer acceptance is made.

Revenue for logistics-related service is derived from Viagoo subsidiaries. Through an online service platform,  the company provides the operation management service to support customers. For VTM service, revenue is charged to carriers based on certain percentage of the freight charges. For VES service, revenue is recognized based on monthly subscription by vehicles and by users. For system integration service, revenue is recognized over time based on the progress of project and annual maintenance service.

Pursuant to the guidance of ASC Topic 840, rent shall be reported as income by lessors over the lease term as it becomes receivable. The Company leased part of the building of the Shanghai new plant to third parties as a warehouse. The Company recognizes building leasing revenue over the beneficial period described by the agreement, as the revenue is realized or realizable and earned. 

The Company recognized rental income from leasing a portion of its manufacturing facility located in Shanghai to third parties. For the years ended December 31, 2020 and 2019, rental income was $54,277 and $194,663.

Income Taxes

The Company accounts for income taxes under the provision of FASB ASC 740-10, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

New Accounting Standards

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) “Leases (Topic 842)”. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. For finance leases, a lessee is required to do the following:

For operating leases, a lessee is required to do the following:

In July 2018, the FASB issued Accounting Standards Update No. 2018-11 (ASU 2018-11), which amends ASC 842 so that entities may elect not to recast their comparative periods in transition (the “Comparatives Under 840 Option”). ASU 2018-11 allows entities to change their date of initial application to the beginning of the period of adoption. In doing so, entities would:

In addition, the FASB also issued a series of amendments to ASU 2016-02 that address the transition methods available and clarify the guidance for lessor costs and other aspects of the new lease standard.

The management has reviewed the accounting pronouncements and adopted the new standard on January 1, 2019 using the modified retrospective method of adoption.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820), – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. The amendments in this Update modify the disclosure requirements on fair value measurements based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the potential impacts of ASU 2018-13 on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU provides an exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, (2) requires an entity to evaluate when a step-up in the tax basis of goodwill should be considered part of the business combination in which goodwill was originally recognized for accounting purposes and when it should be considered a separate transaction, and (3) requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The standard is effective for the Company for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

The Company believes that there were no other accounting standards recently issued that had or are expected to have a material impact on our financial position or results of operations.

Results of Operations

We are principally engaged in the organic fertilizer manufacture and distribution business in the PRC, which account for 96.2% of our total revenue for the year ended December 31, 2020.

As a result of the COVID-19 outbreak in December 2019 and continuing in the first three quarters of 2020, the Company’s businesses, results of operations, financial position and cash flows were adversely affected in the first three quarters of 2020. Evidently, our operating scale shrank significantly over the whole year of 2020.

Operating Results for the Years Ended December 31, 2020 and 2019

Revenue.

Total revenue for fertilizer decreased from $12,178,231 for the year ended December 31, 2019 to $10,548,324 for the year ended December 31, 2020, which represented a decrease of $1,629,907, or approximately 13.38%. The decrease in revenue was mainly due to the impact of COVID-19. Some large customers suspended to purchase our fertilizer products during the epidemic period. Such as Huizhou Sijilv Agricultural Products Co., Ltd., Guangzhou Nonggengshen Planting Cooperative, and Guangzhou Zhichangwang Planting Cooperative, etc. The economy is recovering from the epidemic. We expect to increase our sales significantly in the near future.

Cost of sales

Cost of sales for fertilizer decreased from $6,742,300 for the year ended December 31, 2019 to $5,994,087 for the year ended December 31, 2020, which represented a decrease of approximately $748,213, or 11.10%. The decrease in cost of revenue was in line with the decrease in revenue.

Gross profit

The gross profit for fertilizer decreased from $5,435,931 for the year ended December 31, 2019 to gross profit of $4,554,237 for the year ended December 31, 2020. The gross margin increased from 41.42% for the year ended December 31, 2019 to 43.24% for the year ended December 31, 2020. The gross margin kept stable.

Expenses.

We incurred $464,942 in selling expenses for the year ended December 31, 2020, compared to $698,071 for the year ended December 31, 2019. We incurred $2,677,054 in general and administrative expenses for the year ended December 31, 2020, compared to $1,557,906 for the year ended December 31, 2019. Total selling, general and administrative expenses increased by $886,019, or 39.27% for the year ended December 31, 2020 as compared to the same period in 2019. Our selling expenses decreased by $233,129 and our general and administrative expenses increased by $1,119,148. The decrease in our selling expenses was mainly due to the decrease in salaries expense, travelling expense, etc., for selling department. The increase in general and administrative expenses was due to increased professional expenses relating to our public offering for the year ended December 31, 2020. We expect our general and administrative expense to continue increase for the next year, if we successfully complete our public offering.

Interest income (expense).

We incurred $700,030 in interest expense during the year ended December 31, 2020, compared with interest expense of $452,470 for the year ended December 31, 2019. The increased interest expense reflects the increased loan balance as of December 31, 2020.

Net Income.

Our net income was $979,907 for the year ended December 31, 2020, compared with net income of $2,205,379 for the year ended December 31, 2019, representing a decrease of $1,470,420, or 55.57%. The significant decrease in net income was mainly due to the significant decrease in revenue, the increase in operating expense, and lesser government subsidy income for the year ended December 31, 2020.

Liquidity and Capital Resources 

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. At December 31, 2020 and December 31, 2019 our working capital was $5,145,436 and working capital deficit was $6,213,140, respectively. The significant improvement in our working capital deficit was reflecting faster increase in our current assets, especially the significant increase in account receivable balance.

We have financed our operations over the years ended December 31, 2020 and 2019 primarily through proceeds from stock issuance and advances from related parties, and net cash inflow from operations.

The components of cash flows are discussed below:

Cash provided by Operating Activities

Net cash provided by operating activities was $1,807,790 for the year ended December 31, 2020. Cash provided by operating activities for the year ended December 31, 2020 consisted primarily of net income of $979,907, which was adjusted by depreciation and amortization of $965,296, and deferred income tax assets of $429,232. The Company had an increase of $3,974,562 in account payables, an increase of $870,166 in other payable, which were offset by an increase of $6,121,606 in accounts receivable, and an increase of $125,255 in inventory.

Net cash provided by operating activities was $3,759,100 for the year ended December 31, 2019. Cash provided by operating activities for the year ended December 31, 2019 consisted primarily of net income of $2,205,379 which was adjusted by depreciation and amortization of $1,066,196. The Company had an increase of $745,653 in account payable, a decrease of $1,161,433 in prepaid expense, an increase of $1,596,839 in other payable, which was offset by an increase of $3,744,204 in accounts receivable.

Cash used in Investing Activities

Net cash used in investing activities was $75,346 for the year ended December 31, 2020. The investment activity was payments made for construction in progress.

Net cash used in investing activities was $1,318,129 for the year ended December 31, 2019. The investment activity was payments made for construction in progress. 

Cash used in Financing Activities

Net cash used in financing activities was $1,368,247 for the year ended December 31, 2020. During the period, cash used in financing activities consisted of repayment of $845,807 to related party, short term loan repayment of $802,440, and proceeds from issuing common stock of $280,000.

Net cash used in financing activities was $2,277,001 for the year ended December 31, 2019. During the year, cash provided by financing activities included repayment to related parties of $2,434,949, and repayment of short-term loans of $149,885, which were partly offset by proceeds from third party individual of $307,833.

We anticipate that our current cash reserves plus cash from our operating activities will not be sufficient to meet our ongoing obligations and fund our operations for the next twelve months. As a result, we will need to seek additional funding in the near future. We are looking to obtain additional funding through equity financing in the secondary market, and/or renewing our current obligations with loaners. We may also seek to obtain short-term loans from our directors or unrelated parties. Additional funding may not be available, or at acceptable terms, to us at this time. If we are unable to obtain additional financing, we may be required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results.

Contractual Commitments and Commitments for Capital Expenditure

Contractual Commitments

The following table summarizes our contractual obligations as of December 31, 2020 and the effect those obligations are expected to have on our liquidity and cash flow in future periods.

Commitments for Capital Expenditure

There is no commitment for capital expenditure as of December 31, 2020.

Off-Balance Sheet Items

We do not have any off-balance sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into operating lease commitments, purchase commitments and other contractual obligations. These transactions are recognized in our financial statements in accordance with generally accepted accounting principles in the United States.

Smaller reporting companies are not required to provide the information required by this item.

INDEX TO FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Muliang Viagoo Technology, Inc. (the Company) as of December 31, 2020 and 2019, and the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ WWC, P.C.

WWC, P.C.

Certified Public Accountants

We have served as the Company’s auditor since March 15, 2016.

San Mateo, CA

April 15, 2021

MULIANG VIAGOO TECHNOLOGY INC. AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements

MULIANG VIAGOO TECHNOLOGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

See accompanying notes to consolidated financial statements

MULIANG VIAGOO TECHNOLOGY INC.AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

See accompanying notes to consolidated financial statements

MULIANG VIAGOO TECHNOLOGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

See accompanying notes to consolidated financial statements

MULIANG VIAGOO TECHNOLOGY INC. AND SUBSIDIARIES

NOTES OF CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

Muliang Viagoo Technology, Inc (“Muliang Viagoo”), formerly known as M & A Holding Corporation., Mullan Agritech Inc. and Muliang Agritech Inc. was incorporated under the laws of the State of Nevada on November 5, 2014. Muliang Viagoo’s core business activities of developing, manufacturing, and selling organic fertilizers and bio-organic fertilizers for use in agricultural industry are conducted through several indirectly owned subsidiaries in China.

On June 9, 2016, M & A Holding Corporation filed a Certificate of Amendment to its Articles of Incorporation (the “Amendment”) with the Secretary of State of the State of Nevada, changing its name from “M & A Holding Corporation,” to “Mullan Agritech, Inc.”

On July 11, 2016, the Financial Industry Regulatory Authority (FINRA) effected in the marketplace the change of the corporate name from “M & A Holding Corporation,” to “Mullan Agritech, Inc.”, and effective on such date.

On April 4, 2019, the Company changed its corporate name from “Mullan Agritech Inc.” to “Muliang Agritech Inc.” The name change took effect on May 7, 2019. In connection with the name change, our stock symbol changed to “MULG”.

On June 26, 2020, Muliang Agritech, Inc. filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of the State of the State of Nevada, changing its name from “Muliang Agritech, Inc.” to “Muliang Viagoo Technology, Inc.”. The Company will trade under the new name upon approval by FINRA.

History

Shanghai Muliang Industry Co., Ltd. (referred to herein as “Muliang Industry”) was incorporated in PRC on December 7, 2006 as a limited liability company, owned 95% by Lirong Wang and 5% by Zongfang Wang. Muliang Industry through its own operations and its subsidiaries is engaged in the business of developing, manufacturing and selling organic fertilizers and bio-organic fertilizers for use in the agricultural industry.

On May 27, 2013, Muliang Industry entered into and consummated an equity purchase agreement whereby it acquired 99% of the outstanding equity of Weihai Fukang Bio-Fertilizer Co., Ltd. (“Fukang”), a corporation organized under the laws of the People’s Republic of China. Fukang was incorporated in Weihai City, Shandong Province on January 6, 2009. Fukang is focused on the distribution of organic fertilizers and the development of new bio-organic fertilizers. As a result of the completion of the transaction, Fukang became a 99% owned subsidiary of Muliang Industry, with the remaining 1% equity interest owned by Mr. Hui Song.

On July 11, 2013, Muliang Industry established a wholly owned subsidiary, Shanghai Muliang Viagoo Development Co., Ltd. (“Agritech Development”) in Shanghai, China. On November 6, 2013, Muliang Industry sold 40% of the outstanding equity of Agritech Development to Mr. Jianping Zhang for consideration of approximately $65,000 or RMB 400,000. Agritech Development does not currently conduct any operations.

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On July 17, 2013, Muliang Industry entered into an equity purchase agreement to acquire 100% of the outstanding equity of Shanghai Zongbao Environmental Construction Co., Ltd. (“Shanghai Zongbao”) with consideration of approximately $3.2 million or RMB 20 million, effectively becoming the wholly-owned subsidiary of Muliang Industry. Shanghai Zongbao was incorporated in Shanghai on January 25, 2008. Shanghai Zongbao processes and distributes organic fertilizers. Shanghai Zongbao wholly owns Shanghai Zongbao Environmental Construction Co., Ltd. Cangzhou Branch (“Zongbao Cangzhou”).

On August 21, 2014, Muliang Agricultural Limited (“Muliang HK”) was incorporated in Hong Kong as an investment holding company.

January 27, 2015, Muliang HK incorporated a wholly foreign-owned enterprise, Shanghai Mufeng Investment Consulting Co., Ltd (“Shanghai Mufeng”), in China

On July 8, 2015, Muliang Viagoo entered into certain stock purchase agreement with Muliang HK, pursuant to which Muliang Viagoo, for a consideration of $5,000, acquired 100% interest in Muliang HK and its wholly-owned subsidiary Shanghai Mufeng. Both Muliang HK and Shanghai Mufeng are controlled by the Company’s sole officer and director, Lirong Wang.

On July 23, 2015, Muliang Industry established a wholly owned subsidiary, Shanghai Muliang Agricultural Sales Co., Ltd. (“Muliang Sales”) in Shanghai, China.

On September 3, 2015, Muliang Viagoo effected a split of its outstanding common stock resulting in an aggregate of 150,525,000 shares outstanding of which 120,000,000 were owned by Chenxi Shi, the founder of Muliang Viagoo and its sole officer and director. The remaining 30,525,000 were held by a total of 39 investors.

On January 11, 2016, Muliang Viagoo issued 129,475,000 shares of its common stock to Lirong Wang for an aggregate consideration of $64,737.50. On the same date, Chenxi Shi, the sole officer and director of Muliang Viagoo on that date, transferred 120,000,000 shares of common stock of the Company held by him to Lirong Wang for $800 pursuant to a transfer agreement.

On February 10, 2016, Shanghai Mufeng entered into a set of contractual agreements known as Variable Interest Entity (“VIE”) Agreements, including (1) Exclusive Technical Consulting and Service Agreement, (2) Equity Pledge Agreement, and (3) Call Option Cooperation Agreement, with Muliang Industry, and its Principal Shareholders. As a result of the Stock Purchase Agreement and the set of VIE Agreements, Shanghai Muliang Industry Co., Ltd., along with its consolidated subsidiaries, became entities controlled by Muliang Viagoo, whereby Muliang Viagoo would derive all substantial economic benefit generated by Muliang Industry and its subsidiaries.

As a result, Muliang Viagoo has a direct wholly-owned subsidiary, Muliang HK and an indirectly wholly owned subsidiary Shanghai Mufeng. Through its VIE Agreements, Muliang Viagoo exercises control over Muliang Industry. Muliang Industry has two wholly-owned subsidiaries (Shanghai Zongbao and Muliang Sales), one 99% owned subsidiary (Fukang), one 60% owned subsidiary (Agritech Development), and one indirectly wholly owned subsidiary Zongbao Cangzhou.

On June 6, 2016, Muliang Industry established a wholly-owned subsidiary, namely, Muliang (Ningling) Bio-chemical Fertilizer Co. Ltd (“Ningling Fertilizer”) in Henan Province, the central plain of China. Ningling Fertilizer is setup for a new production line of bio-chemical fertilizer and has not begun any operation yet.

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On July 7, 2016, Muliang Industry established a subsidiary, namely, Zhonglian Huinong (Beijing) Technology Co., Ltd (“Zhonglian”) in Beijing City, China. Muliang Industry owns 65% shares of Zhonglian, and a third-party company, Zhongrui Huilian (Beijing) Technology Co., Ltd owns the other 35% shares. Zhonglian is to develop and operate an online agricultural products trading platform.

On October 27, 2016, Muliang Industry established a subsidiary, namely, Yunnan Muliang Animal Husbandry Development Co., Ltd (“Yunnan Muliang”) in Yunnan Province, China. Muliang Industry owns 55% shares of Yunnan Muliang, and a third-party company, Shuangbai County Development Investment Co., Ltd. owns the other 45% shares. Yunnan Muliang was setup for the sales development of West China.

On October 12, 2017, the Company canceled the registration of Ningling with the administration authorities for Industry and Commerce. Ningling has historically been reported as a component of our operations and incurred $33,323 to loss before income taxes provisions for the year ended December 31, 2017. The termination does not constitute a strategic shift that will have a major effect on our operations or financial results and as such, the termination is not classified as discontinued operations in our consolidated financial statements.

On June 19, 2020, the Company entered into a Share Exchange Agreement with Viagoo Pte Ltd. and all the shareholders of Viagoo for the acquisition of 100% equity interest of Viagoo. Pursuant to the SEA, Muliang shall purchase from Viagoo Shareholders all of Viagoo Shareholder’s right, title and interest in and to the Viagoo’s capital stock. The aggregate purchase price for the Shares was US$2,830,800, paid in 1,011,000 shares of the Company’s restricted common stock, valued at $2.80 per share.

Muliang HK, Shanghai Mufeng, Muliang Industry, Shanghai Zongbao, Zongbao Cangzhou, Muliang Sales, Fukang, Agritech Development, Yunnan Muliang, Zhonglian, and Viagoo are referred to as subsidiaries. The Company and its consolidated subsidiaries are collectively referred to herein as the “Company”, “we” and “us”, unless specific reference is made to an entity.

On April 4, 2019, the Company’s Board of Directors and majority shareholder approved a 5 to 1 reverse stock split of all of the issued and outstanding shares of the Company’s common stock, the change of corporate name from “Mullan Agritech Inc.” to “Muliang Viagoo Inc.”, and the creation of one hundred million (100,000,000) shares of Blank Check Preferred Stock.

On April 5, 2019, we filed a Certificate of Amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada to reflect the Name Change and to authorize the creation of Blank Check Preferred Stock. As a result, the capital stock of the Company consists of 500,000,000 shares of common stock, $0.0001 par value, and 100,000,000 shares of blank check preferred stock, $0.0001 par value. To the fullest extent permitted by the laws of the State of Nevada, as the same now exists or may hereafter be amended or supplemented, the Board of Directors may fix and determine the designations, rights, preferences or other variations of each class or series within each class of preferred stock of the Company. The Company may issue the shares of stock for such consideration as may be fixed by the Board of Directors.

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On April 16, 2019, we filed a Certificate of Change to our Articles of Incorporation with the Secretary of State of the State of Nevada to reflect the reverse stock split. Any fractional shares are to be rounded up to whole shares. The reverse stock split does not affect the par value or the number of authorized shares of common stock of the Company.

The reverse stock split and the name change took effect on May 7, 2019.

On June 19, 2020, Muliang Agritech Inc. entered into a Share Exchange Agreement with Viagoo Pte Ltd. (“Viagoo”) and all the shareholders of Viagoo for the acquisition of 100% equity interest of Viagoo.

On June 26, 2020, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of the State of the State of Nevada, changing its name from “Muliang Agritech, Inc.” to “Muliang Viagoo Technology, Inc.”. In connection with the name change, our stock symbol changed to “MULG”.

Viagoo is a Singapore-based logistics sharing platform that enables shippers and carriers to share and optimize resources to lower cost and increase efficiency. From last mile delivery to cross border transportation, the platform provides digital transaction contracts for customers to source for service providers to deliver goods and services in a convenient manner. Viagoo partners with various Singapore agencies to promote the platform to support urban logistics need in Singapore, such as Enterprise Singapore, a government agency to support Singapore small and medium businesses, and Singapore Logistics Association.

Pursuant to the SEA, Muliang shall purchase from Viagoo Shareholders all of Viagoo Shareholder’s right, title and interest in and to the Viagoo’s capital stock. The aggregate purchase price for the Shares was US$2,830,800, paid in 1,011,000 shares of the Company’s restricted common stock, valued at $2.80 per share. The Company recognized $673,278 in goodwill as result of this transaction.

Management determined that the results of operations of Viagoo from June 19, 2020 to June 30, 2020 were not material to the Company’s consolidated results of operations, and as a result has excluded them from the Company’s consolidated results of operations and cash flows for the year end December 31, 2020.

Muliang Agritech, Muliang HK, Shanghai Mufeng, Muliang Industry, Shanghai Zongbao, Zongbao Cangzhou, Muliang Sales, Fukang, Agritech Development, Yunnan Muliang, Zhonglian, and Viagoo are referred to as subsidiaries. The Company and its consolidated subsidiaries are collectively referred to herein as the “Company”, “we” and “us”, unless specific reference is made to an entity.

The consolidated financial statements were prepared assuming that the Company has controlled Muliang HK and its intermediary holding companies, operating subsidiaries, and variable interest entities: Shanghai Mufeng, Muliang Industry, Shanghai Zongbao, Zongbao Cangzhou, Muliang Sales, Fukang, Heilongjiang, and Agritech Development, from the first period presented. The transactions detailed above have been accounted for as reverse takeover transaction and a recapitalization of the Company; accordingly, the Company (the legal acquirer) is considered the accounting acquiree and Muliang HK (the legal acquiree) is considered the accounting acquirer. No goodwill has been recorded for these transactions. As a result of this transaction, the Company is deemed to be a continuation of the business of Muliang HK, Shanghai Mufeng, and Muliang Industry.

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Liquidity and Going Concern

As reflected in the accompanying consolidated financial statements, we had net accumulated deficit of $8,596,332 and $9,571,836 as of December 31, 2020 and December 31, 2019, respectively. Our cash balances as of December 31, 2020 and December 31, 2019 were $348,834 and $103,868, respectively. We had current liabilities of $21,161,217 and $14,688,418 as of December 31, 2020 and December 31, 2019, which would be due within the next 12 months. In addition, we had a working capital of $4,001,073 and working capital deficit of $6,213,140 as of December 31, 2020 and December 31, 2019, respectively.

In August, 2020, the land use right and building of this factory was listed on Taobao’s online auction platform for sale by the Shanghai Jinshan People’s Court. While the sale has not closed due to COVID-caused court backlog, the court provided a distribution plan of sale proceeds to all involved parties on March 15, 2021. The buyer’s full purchase amount has been escrowed with the court since August 2020. The court has indicated to the Company that it is expected to complete the sale by April 2021, subject to administrative clearance from various departments within the court. The assets are to be sold to the highest bidder for RMB 74.52 Million (US$11.42 million), and the buyer’s funds have been placed in escrow administered by the court.

Based on the distribution plan provided by the court, after deducting related court expenses, ABC shall be entitled to RMB 36 Million (full principal amount and accrued interest of the loan), Shanghai Zhongta Construction Engineering Co., Ltd. Shall be entitled to RMB 27.6 Million (as amount due for the construction of the production facility) and Zongbao shall receive the remaining RMB 5.2 Million. The sale of the assets will improve the company’s liquidity but at the same time have no impact on Company’s operation as the facility has not been in use as our production plant. As a result of the improved liquidity since last fiscal year, the Company has resolved the going concern issue.

The assets are expected to be sold to Yigang (Shanghai) Technology Development Co., Ltd. We had no prior relationship with the company. They were the highest bidder in the court sale.

The assets (land and building) have been appraised for RMB 97.64 Million (US$14.96 million), more than the sale price of RMB 74.52 Million (US$11.42 million).

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with US GAAP. The basis of accounting differs from that used in the statutory accounts of the Company, which are prepared in accordance with the accounting principles of the PRC (“PRC GAAP”). The differences between US GAAP and PRC GAAP have been adjusted in these consolidated financial statements. The Company’s functional currency is the Chinese Renminbi (“RMB”); however, the accompanying consolidated financial statements have been translated and presented in United States Dollars (“USD”).

Use of Estimates

The preparation of these financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of these financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ from these estimates. Significant estimates include the useful lives of property and equipment, land use rights, assumptions used in assessing collectability of receivables and impairment for long-term assets.

Principles of Consolidation

Muliang Viagoo consolidates the following entities, including wholly-owned subsidiaries, Muliang HK, Shanghai Mufeng, Viagoo, and its wholly controlled variable interest entities, Muliang Industry, and Zhongbao, 60% controlled Agritech Development, 99% controlled Fukang, 65% controlled Zhonglian, 80% controlled Yunnan Muliang and 51% controlled Heilongjiang. The 40% equity interest holder of Agritech Development, 1% equity interest holders in Fukang, 35% equity interest holders in Zhonglian, 20% interest in Yunnan Muliang and 49% equity interest in Heilongjiang are accounted as non-controlling interest in the Company’s consolidated financial statements.

The variable interest entities consolidated for which the Company is deemed the primary beneficiary. All significant inter-company accounts and transactions have been eliminated in consolidation.

Control by Principal Stockholders

The Company’s directors and executive officers and their affiliates or related parties own, beneficially and in the aggregate, the majority of the voting power of the outstanding shares of our common stock. Accordingly, if our directors and executive officers and their affiliates or related parties vote their shares uniformly, they would have the ability to control the approval of most corporate actions, including increasing our authorized capital stock and the dissolution or merger of our company or the sale of our assets.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents. The Company maintains cash with various financial institutions.

Accounts Receivable

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventories

Inventories, consisting of raw materials, work in process, and finished goods related to the Company’s products are stated at the lower of cost or market utilizing the weighted average method.

Property, Plant and Equipment

Plant and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

Included in property and equipment is construction-in-progress which consisted of factory improvements and machinery pending installation and includes the costs of construction, machinery and equipment, and any interest charges arising from borrowings used to finance these assets during the period of construction or installation of the assets. No provision for depreciation is made on construction-in-progress until such time as the relevant assets are completed and ready for their intended use.

Estimated useful lives of the Company’s assets are as follows:

The apple orchard includes rental for an apple farm, labor cost, fertilizers, apple seeds, apple seedlings and others. The costs to purchase and cultivate apple trees and the expenditures related to labor and materials to plant apple trees until they become commercially productive are capitalized, which require a two-year period. The estimated production life for apple tree is ten years, and the costs are depreciated without a residual value. Expenses incurred maintaining apple trees during the growth cycle until seedling apple trees or grafted varieties are fruited are capitalized into inventory and included in Work In Process—apple orchard, a component of inventories.

Depreciation expenses pertaining to apple trees will be included in inventory costs for those apples to be sold and ultimately become a component of cost of goods sold. Similar to other assets, the failure of our apple trees to be serviceable over the entirety of their anticipated useful lives or to be sold at their anticipated residual value will negatively impact our operating results.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangible Assets

Included in the intangible assets are land use rights and non-patented technology. According to the laws of the PRC, the government owns all the land in the PRC. Companies or individuals are authorized to possess and use the land only through land use rights granted by the Chinese government. Useful life for non-patented technology refers to the period during which economic benefits can be generated. Intangible assets are being amortized using the straight-line method over their lease terms or estimated useful life.

Estimated useful lives of the Company’s intangible assets are as follows:

The Company carries intangible assets at cost less accumulated amortization. In accordance with US GAAP, the Company examines the possibility of decreases in the value of intangible assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. The Company computes amortization using the straight-line method over estimated useful life of 50 years for the land use rights.

Impairment of Long-lived Assets

In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company recorded no impairment charge for the years ended December 31, 2020 and 2019.

Advances from Customers

Advances from customers consist of prepayments from customers for merchandise that had not yet been shipped. The Company will recognize the deposits as revenue as customers take delivery of the goods and title to the assets is transferred to customers in accordance with the Company’s revenue recognition policy.

Non-controlling Interest

Non-controlling interests in the Company’s subsidiaries are recorded in accordance with the provisions of ASC 810 and are reported as a component of equity, separate from the parent’s equity. Purchase or sale of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the non-controlling interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.

Revenue Recognition

On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method. Results for the reporting period beginning after January 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the Company’s historic accounting under Topic 605.

Management has determined that the adoption of ASC 606 did not impact the Company’s previously reported financial statements in any prior period nor did it result in a cumulative effect adjustment to opening retained earnings.

Revenue for sale of products is derived from contracts with customers, which primarily include the sale of fertilizer products and environmental protection equipment. The Company’s sales arrangements do not contain variable consideration. The Company recognizes revenue at a point in time based on management’s evaluation of when performance obligations under the terms of a contract with the customer are satisfied and control of the products has been transferred to the customer. For vast majority of the Company’s product sales, the performance obligations and control of the products transfer to the customer when products are delivered, and customer acceptance is made.

Revenue for logistics-related service is derived from Viagoo subsidiaries. Through an online service platform, the company provides the operation management service to support customers. For VTM service, revenue is charged to carriers based on certain percentage of the freight charges. For VES service, revenue is recognized based on monthly subscription by vehicles and by users. For system integration service, revenue is recognized over time based on the progress of project and annual maintenance service.

Pursuant to the guidance of ASC Topic 840, rent shall be reported as income by lessors over the lease term as it becomes receivable. The Company currently leased part of the building of the Shanghai new plant to third parties as warehouse. The Company recognizes building leasing revenue over the beneficial period described by the agreement, as the revenue is realized or realizable and earned. 

The Company recognized rental income from leasing a portion of its manufacturing facility located in Shanghai to third parties. For the years ended December 31, 2020 and 2019, rental income of $54,277 and $194,663 were recognized as other income.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cost of Sales

Cost of goods sold consists primarily of raw materials, utility and supply costs consumed in the manufacturing process, manufacturing labor, depreciation expense and direct overhead expenses necessary to manufacture finished goods as well as warehousing and distribution costs such as inbound freight charges, shipping and handling costs, purchasing and receiving costs.

Income Taxes

The Company accounts for income taxes under the provisions of Section 740-10-30 of the FASB Accounting Standards Codification, which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in its financial statements or tax returns.

The Company is subject to the Enterprise Income Tax law (“EIT”) of the People’s Republic of China. The Company’s operations in producing and selling fertilizers are subject to the 25% enterprise income tax.

Related Parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions.

Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) comprised of net income (loss) and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. The Company’s comprehensive income (loss) consist of net income (loss) and unrealized gains from foreign currency translation adjustments.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Foreign Currency Translation

The Company’s functional currency is the Chinese Renminbi (“RMB”); however, the accompanying consolidated financial statements have been translated and presented in United States Dollars (“USD”). Results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income/loss. The translation adjustment for the years ended December 31, 2020 and 2019 was gain of $909,436 and loss of $111,336, respectively. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

All of the Company’s revenue transactions are transacted in the functional currency. The Company does not enter into any material transaction in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.

For business in China, asset and liability accounts at December 31, 2020 and 2019 were translated at 6.5277 RMB to $1 USD and 6.9499 RMB to $1 USD, respectively, which were the exchange rates on the balance sheet dates. The average translation rates applied to the statements of income for the years ended December 31, 2020 and 2019 were 6.9001 RMB and 6.9053 RMB to $1 USD, respectively.

For business in Singapore, asset and liability accounts at December 31, 2020 was translated at 1.3217 SGD to $1 USD. The average translation rates applied to the statements of income for the years ended December 31, 2020 was 1.3792 SGD to $1 USD.

Earnings (Loss) per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted earnings per share gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Earnings per share excludes all potential dilutive shares of common stock if their effect is anti-dilutive. There were no potential dilutive securities at December 31, 2020 and 2019.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value of Financial Instruments

The Company adopted the guidance of ASC Topic 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The carrying amounts reported in the balance sheets for cash and cash equivalents, accounts receivable, inventories, advances to suppliers, prepaid expenses, short-term loans, accounts payable, accrued expenses, advances from customers, VAT and service taxes payable and income taxes payable approximate their fair market value based on the short-term maturity of these instruments.

ASC Topic 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

The following table summarizes the carrying values of the Company’s financial instruments:

Government Contribution Plan

Pursuant to the laws applicable to PRC law, the Company is required to participate in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company has no further commitments beyond its monthly contribution.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Statutory Reserve

Pursuant to the laws applicable to the PRC, the Company must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) at each year-end). For foreign invested enterprises and joint ventures in the PRC, annual appropriations should be made to the “reserve fund”. For foreign invested enterprises, the annual appropriation for the “reserve fund” cannot be less than 10% of after-tax profits until the aggregated appropriations reach 50% of the registered capital (as determined under PRC GAAP at each year-end). If the Company has accumulated loss from prior periods, the Company is able to use the current period net income after tax to offset against the accumulate loss.

Segment Information

The standard, “Disclosures about Segments of an Enterprise and Related Information,” codified with ASC-280, requires certain financial and supplementary information to be disclosed on an annual and interim basis for each reportable segment of an enterprise. The Company believes that it operates in two business segments and in one geographical segment (China), as all of the Company’s current operations are carried in China.

MULIANG VIAGOO TECHNOLOGY INC. AND SUBSIDIARIES

NOTES OF CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncement

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) “Leases (Topic 842)”. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. For finance leases, a lessee is required to do the following:

For operating leases, a lessee is required to do the following:

In July 2018, the FASB issued Accounting Standards Update No. 2018-11 (ASU 2018-11), which amends ASC 842 so that entities may elect not to recast their comparative periods in transition (the “Comparatives Under 840 Option”). ASU 2018-11 allows entities to change their date of initial application to the beginning of the period of adoption. In doing so, entities would:

In addition, the FASB also issued a series of amendments to ASU 2016-02 that address the transition methods available and clarify the guidance for lessor costs and other aspects of the new lease standard.

The management has reviewed the accounting pronouncements and adopted the new standard on January 1, 2019 using the modified retrospective method of adoption.

In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU provides an exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, (2) requires an entity to evaluate when a step-up in the tax basis of goodwill should be considered part of the business combination in which goodwill was originally recognized for accounting purposes and when it should be considered a separate transaction, and (3) requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The standard is effective for the Company for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820), – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. The amendments in this Update modify the disclosure requirements on fair value measurements based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the potential impacts of ASU 2018-13 on its consolidated financial statements.

The Company believes that there were no other accounting standards recently issued that had or are expected to have a material impact on our financial position or results of operations.

MULIANG VIAGOO TECHNOLOGY INC. AND SUBSIDIARIES

NOTES OF CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following:

The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. After evaluating the collectability of individual receivable balances, the Company recognized bad debt allowance of $1,307,965 and $341,667 for the years ended December 31, 2020 and 2019.

The novel coronavirus epidemic that began in the PRC at the beginning of 2020 has significantly impacted the operation of customers, resulting in delays in collecting outstanding receivables as of December 31, 2020. As of the date of this report, a majority of the Company’s customers have resumed normal operations.

As of the filing date, a balance of $6,158,418 account receivable out of the total balance as of December 31, 2020 has been collected

MULIANG VIAGOO TECHNOLOGY INC. AND SUBSIDIARIES

NOTES OF CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – INVENTORIES

Inventories consisted of the following:

NOTE 5 – PREPAYMENT

The prepayment balance of $513,491 as of December 31, 2020 represents the advances paid to suppliers for the purchase of raw materials to be delivered in the next operating period.

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 2020 and 2019 consisted of:

MULIANG VIAGOO TECHNOLOGY INC. AND SUBSIDIARIES

NOTES OF CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

For the years ended December 31, 2020 and 2019, depreciation expense amounted to $785,893 and $991,408, respectively. Depreciation is not taken during the period of construction or equipment installation. Upon completion of the installation of manufacturing equipment or any construction in progress, construction in progress balances will be classified to their respective property and equipment category.

The construction in progress of $1,829,057 represents the investment of a black goat processing plant located in Shuangbai County, Chuxiong City, Yunnan Province, PRC.

NOTE 7 – RIGHT OF USE ASSETS

The total cost of $1,413,598 as of December 31, 2020 represents the two industrial land use rights located in Weihai City, Shandong Province, and Chuxiong City, Yunnan Province.

The total cost of $3,099,564 as of December 31, 2019 represents the three industrial land use rights located in Shanghai city, Weihai City, Shandong Province, and Chuxiong City, Yunnan Province.

The land use right located in Shanghai city, with a book net value of $1,808,882, and the related building are to be sold to the highest bidder for RMB 74.52 Million (US$11.42 million), and the funds from Yigang (Shanghai) Technology Development Co., Ltd., the buyer, have been placed in escrow administered by the court. Please refer to Note 9.

NOTE 8 – DEFERRED TAX ASSETS, NET

The components of the deferred tax assets are as follows:

Deferred taxation is calculated under the liability method in respect of taxation effect arising from all timing differences, which are expected with reasonable probability to realize in the foreseeable future. The Company’s subsidiary registered in the PRC is subject to income taxes within the PRC at the applicable tax rate.

MULIANG VIAGOO TECHNOLOGY INC. AND SUBSIDIARIES

NOTES OF CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – LOANS

As of December 31, 2020, current portion of long-term loans refers to $4,571,452 due to Agricultural Bank of China (“ABC”), which is collateralized with land use rights and guaranteed by Mr. Lirong Wang, the CEO.  

The Company has been in “default” with the loan payable to ABC. The bank has taken legal action against the Company and on April 26, 2020, the bank has been awarded a judgment by the PRC courts for $4,359,925 (RMB 30,301,044). This amount is expected to be fully settled in April 2021 upon completion of the auction sale of the collateralized land use right and related building in Shanghai city.

The loan agreement was entered into between Agricultural Bank of China (“ABC”) and one of our VIEs Shanghai Zongbao Environment Company Engineering Co., Ltd. (“Zongbao”) on October 29, 2014 (the “Loan Agreement”) for a total loan amount of RMB 45 Million (approximately US$6.43 million) at a floating interest rate of 20% premium to the base rate published by the People’s Bank of China for loans of the same tenure and same loan grade per annum (the “Loan”). The loan was given as part of a project financing for the construction of production facility and the development of our fertilizer business. Pursuant to the Loan Agreement, Zongbao was obligated to make repayments based on the following schedule:

Zongbo repaid the loan as scheduled through September 30, 2017 (total RMB 10 Million). However, a local government policy was later implemented in the Industrial Park where the Company’s then newly-built facility is located. Because the Industrial Park shifted its focus to concentrate on businesses relating to food production, machinery and renewable energy, Company’s organic fertilizer business was not permitted. It is very common for China and large cities such as Shanghai to implement such sudden policy change to promote the development of industrial park characteristics. Because of this regulatory change and Company’s inability to satisfy the use of proceeds based on the new policy, Agricultural Bank of China initiated on the “default” of the Loan Agreement and commenced legal action against Zongbao and its guarantors on January 18, 2018 to demand early repayment of the remaining RMB 35 Million. In addition, as a condition of the loan, if the borrower fails to repay the principal of the loan within the time limit specified in the contract, the interest on the overdue loan will rise by 50%. If the borrower’s default causes the creditor to resort to litigation and other methods to realize the creditor’s rights, the lender’s attorney fees, travel expenses, and other enforcement fees shall be borne by the borrower.

The land and production facility of Zongbao was collateralized to secure the loan. In addition, the Loan Agreement was guaranteed personally by Mr. Lirong Wang (as the legal representative) and affiliated entities, Shanghai Muliang Industrial Co., Ltd., and Weihai Fukang Biological Fertilizer Co., Ltd. (“Weihai Fukang”). It is a common practice in China for the banks to demand a personal guarantee for these types of financing. See Note 16 for further information.

As of December 31, 2020, the amount of $281,112 represents the long-term loan owed to Ms. Hui Song. The amount owed to Ms. Hui Song is non-interest bearing, unsecured, and due after December 31, 2020.

Long-term loan and current portion of long-term loan consisted of the following: 

As of December 31, 2020, the Company’s future loan obligations according to the terms of the loan agreement are as follows:

The Company recognized interest expenses of $700,030 and $452,470 for the years ended December 31, 2020 and 2019, respectively.

MULIANG VIAGOO TECHNOLOGY INC. AND SUBSIDIARIES

NOTES OF CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – STOCKHOLDERS EQUITY

Authorized Stock

The Company has authorized 500,000,000 common shares with a par value of $0.0001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

On April 5, 2019, the Company filed a Certificate of Amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada to reflect the creation of Blank Check Preferred Stock. As a result, the capital stock of the Company consisted of 500,000,000 shares of common stock, $0.0001 par value, and 100,000,000 shares of blank check preferred stock after the filling.

On October 30, 2019, 30,000,000 shares were designated to be Series A Preferred Stock out of the 100,000,000 shares of blank check preferred stock.

Common Share Issuances

On June 29, 2018, the outstanding amount $326,348 due to Mr. Wang, CEO and Chairman of the Company, were converted into 43,200 shares of Common Shares at $ 7.55 per share.

On June 29, 2018 the Company issued 298,518 common shares of the Company at $7.55 for proceeds of $2,255,111 to Mr. Wang, CEO and Chairman of the Company.

On April 4, 2019, the Company’s Board of Directors and majority shareholder approved a 5 to 1 reverse stock split of all of the issued and outstanding shares of the Company’s common stock (the “Reverse Stock Split”). No fractional shares of Common Stock will be issued as a result of the reverse stock split. The Stock Split does not affect the par value or the number of authorized shares of common stock of the Company.

On April 16, 2019, the Company filed a Certificate of Change to our Articles of Incorporation with the Secretary of State of the State of Nevada to reflect the Reverse stock Split. The reverse stock split took effect on May 7, 2019 The common shares outstanding have been retroactively restated to reflect the reverse stock split.

On October 10, 2019 and November 1, 2019, the Company issued a total of 19,000,000 shares of Series A Preferred Stock to Mr. Wang, the CEO and Chairman of the Company, in exchange for 19,000,000 shares of common stock beneficially owned by him. Following the transaction, 19,000,000 shares of common stock were cancelled and returned to treasury.

On June 19, 2020, Muliang Viagoo Technology Inc. entered into a Share Exchange Agreement with Viagoo Pte Ltd. (“Viagoo”) and all the shareholders of Viagoo for the acquisition of 100% equity interest of Viagoo.

Pursuant to the Share Exchange Agreement, Muliang shall purchase from Viagoo Shareholders all of Viagoo Shareholder’s right, title and interest in and to the Viagoo’s capital stock. The aggregate purchase price for the Shares was US$2,830,800, paid in 1,011,000 shares of the Company’s restricted common stock, valued at $2.80 per share.

On June 28, 2020, the Company issued 50,000 of restricted common stock as the compensation for Shaw Cheng “David” Chong, the new Chief Financial Officer of the Company.

On December 29, 2020, the Company issued 100,000 of restricted common stock to two investors for US$280,000 valued at $2.80 per share.

As of the date of this report, there were 38,502,954 shares of common stock outstanding.

MULIANG VIAGOO TECHNOLOGY INC. AND SUBSIDIARIES

NOTES OF CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – STOCKHOLDERS EQUITY (CONTINUED)

Blank Check Preferred Stock

On April 4, 2019, the Company’s Board of Directors and majority shareholder approved creation of one hundred million (100,000,000) shares of Blank Check Preferred Stock, $0.0001 par value. To the fullest extent permitted by the laws of the State of Nevada, as the same now exists or may hereafter be amended or supplemented, the Board of Directors may fix and determine the designations, rights, preferences or other variations of each class or series within each class of preferred stock of the Company. The Company may issue the shares of stock for such consideration as may be fixed by the Board of Directors.

On April 5, 2019, the Company filed a Certificate of Amendment to the Articles of Incorporation with the Secretary of State of the State of Nevada to authorize the creation of Blank Check Preferred Stock.

On October 30, 2019, 30,000,000 shares were designated to be Series A Preferred Stock out of the 100,000,000 shares of blank check preferred stock.

Series A Preferred Stock

On October 30, 2019, the Company’s Board of Directors and majority shareholder approved to designate 30,000,000 shares as Series A Preferred Stock out of the 100,000,000 shares of blank check preferred stock, which the preferences and relative and other rights, and the qualifications, limitations or restrictions thereof, shall be set forth in the discussion below under the “Series A Preferred Stock”. A certificate of designation for the Series A Preferred Stock was filed with the Secretary of the State of the State of Nevada on October 30, 2019.

The holders of Series A Preferred Stock shall not be entitled to receive dividends of any kind.

The Series A Preferred Stock shall not be subject to conversion into Common Stock or other equity authorized to be issued by the Corporation.

The holders of the issued and outstanding shares of Series A Preferred Stock shall have voting rights equal to ten (10) shares of Common Stock for each share of Series A Preferred Stock.

On November 1, 2019, the Company issued a total of 19,000,000 shares of Series A Preferred Stock to Mr. Wang, the CEO and Chairman of the Company, in exchange for 19,000,000 shares of common stock beneficially owned by him. Following the transaction, 19,000,000 shares of common stock were cancelled and returned to treasury.