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MULIANG VIAGOO TECHNOLOGY, INC. - Quarter Report: 2023 September (Form 10-Q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

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

 

For the quarterly period ended September 30, 2023

 

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

 

Commission File Number: 001-40636

 

MULIANG VIAGOO TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   NA
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

2498 Wanfeng Highway, Lane 181

Fengjing Town, Jinshan District
Shanghai, China 201501

(Address of principal executive offices) (Zip Code)

 

(86) 21-67355092

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the issuer (1) 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.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

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 Exchange Act). Yes ☐ No ☒

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 14, 2023, the registrant had 19,251,477 shares of its common stock outstanding.

 

 

 

 

 

 

MULIANG VIAGOO TECHNOLOGY, INC.

 

QUARTERLY REPORT ON FORM 10-Q

September 30, 2023

 

TABLE OF CONTENTS

 

  Page
PART I - FINANCIAL INFORMATION
     
Item 1. Financial Statements (unaudited) 1
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 43
     
Item 4. Controls and Procedures 43
     
PART II - OTHER INFORMATION
     
Item 1. Legal Proceedings 44
     
Item 1A. Risk Factors 44
     
Item 2. Unregistered Sales of Equity Securities 44
     
Item 3. Defaults Upon Senior Securities 44
     
Item 4. Mine Safety Disclosures 44
     
Item 5. Other Information 44
     
Item 6. Exhibits 44
     
  Signatures 45

 

i

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

The following unaudited interim financial statements of Muliang Viagoo Technology, Inc. (referred to herein as the “Company,” “we,” “us” or “our”) are included in this quarterly report on Form 10-Q:

 

INDEX TO FINANCIAL STATEMENTS

 

  PAGE
Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022 (Audited) 2
   
Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2023 and 2022 3
   
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2023 and 2022 4
   
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 5
   
Notes to Condensed Consolidated Financial Statements 6

 

1

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2023 AND DECEMBER 31 2022

 

   September 30,   December 31, 
   2023   2022 
         
ASSETS        
Current Assets:        
Cash and cash equivalents  $3,028   $73,313 
Accounts receivable, net   14,442,802    11,756,610 
Inventories   341,663    194,226 
Prepayment   3,184,890    3,719,342 
Other receivables, net   1,396,644    1,591,031 
Total Current Assets   19,369,027    17,334,522 
           
Long term investment   -    29,459 
Property, plant and equipment, net   5,515,452    6,004,575 
Right of use assets   1,188,216    1,274,228 
Operating lease right of use asset, net   133,063    140,120 
Intangible assets, net   
-
    46,885 
Other assets and deposits   18,801    19,798 
Deferred tax asset   229,685    241,866 
           
Total Assets  $26,454,244   $25,091,453 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
Current Liabilities:          
Current portion of long-term debt  $753,245   $1,039,243 
Accounts payable and accrued liability   2,510,446    3,430,697 
Advances from customers   263,752    282,978 
Operating lease liabilities - current   53,336    56,165 
Income tax  payable   1,373,969    929,105 
Accrued interest   1,492,720    1,576,932 
Other payables   788,431    861,614 
Due to related party   1,625,354    1,045,224 
Total Current Liabilities   8,861,253    9,221,958 
           
Operating lease liabilities - noncurrent   64,170    67,573 
Deferred tax liabilities   
-
    8,553 
Total Liabilities   8,925,423    9,298,084 
           
Stockholders’ Equity:          
Series A Preferred Stock,$0.0001 par value, 50,000,000 shares authorized,  9,500,000 shares issued and outstanding as of December 31, 2022 and September 30, 2023.   950    950 
Common stock, $0.0001 par value, 250,000,000 shares authorized, 19,251,477 shares issued and outstanding as of December 31, 2022 and September 30, 2023.   1,925    1,925 
Additional paid in capital   19,936,668    19,936,668 
Accumulated deficit   (2,473,906)   (3,965,137)
Accumulated other comprehensive loss   (93,607)   (328,151)
Stockholders’ Equity (Deficit) - Muliang Viagoo Technology Inc. and Subsidiaries   17,372,030    15,646,255 
Noncontrolling interest   156,791    147,114 
Total Stockholders’ Equity (Deficit)   17,528,821    15,793,369 
Total Liabilities and Stockholders’ Equity  $26,454,244   $25,091,453 

 

See accompanying notes to consolidated financial statements

 

2

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Unaudited)

 

   For Three Months Ended
September 30,
   For Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
                 
Revenues  $3,836,522    3,467,477   $6,703,445    6,506,226 
Cost of goods sold   2,321,217    1,998,669    3,787,985    3,679,893 
Gross profit (loss)   1,515,305    1,468,808    2,915,460    2,826,333 
    39.50%   42.36%   43.49%   43.44%
Operating expenses:                    
General and administrative expenses   165,390    (26,355)   632,552    264,854 
Selling expenses   73,890    97,798    221,713    218,395 
Total operating expenses   239,280    71,443    854,265    483,249 
                     
Income (Loss) from operations   1,276,025    1,397,365    2,061,195    2,343,084 
                     
Other income (expense):                    
Interest Income   1    
-
    4    
-
 
Interest expense   (42,997)   13,419    (43,790)   (64,147)
Asset impairment loss   
 
    (241,730)   
 
    (241,730)
Other income (expense), net   
-
    8,335    
-
    8,313 
Total other income (expense)   (42,996)   (219,976)   (43,786)   (297,564)
                     
Income (Loss) before income taxes   1,233,029    1,177,389    2,017,409    2,045,520 
                     
Income taxes   516,981    444,982    516,981    444,982 
                     
Net income from continued operations   716,048    732,407    1,500,428    1,600,538 
                     
Net loss from discontinued operations   
-
    (339,422)   
-
    (206,941)
                     
Net income   716,048    392,985    1,500,428    1,393,597 
                     
Net income (loss) attributable to noncontrolling interest   737    4,636    9,197    4,524 
Net income (loss) attributable to Muliang Viagoo Technology Inc. common stockholders   715,311    388,349    1,491,231    1,389,073 
                     
Other comprehensive income (loss):                    
Unrealized foreign currency translation adjustment   257,898    (903,392)   234,544    (1,315,075)
                     
Total Comprehensive income(loss)   973,946    (510,407)   1,734,972    78,522 
Total comprehensive (income) loss attributable to noncontrolling interests   (498)   (2,167)   (480)   (783)
Total comprehensive (income) loss attributable to Muliang Viagoo Technology Inc. common stockholders  $974,444    (508,240)  $1,735,452    79,305 
                     
Earnings per common share                    
Basic and diluted
   0.04    0.04    0.08    0.08 
                     
Weighted average common shares outstanding                    
Basic   19,251,477    19,251,477    19,251,477    19,251,477 
Diluted   19,251,477    19,251,477    19,251,477    19,251,477 

 

See accompanying notes to consolidated financial statements

 

3

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)

 

   Series A
Preferred Stock
   Common Stock   Additional Paid-in   Accumulated   Accumulated Other Comprehensive   Non-controlling     
   Shares   Amount   Shares   Amount   Capital   Deficit   Income (Loss)   Interest   Total 
                                     
Balance, December 31, 2021   9,500,000   $950    19,251,477   $1,925    19,936,668    (6,876,227)   1,500,727    143,814    14,707,857 
Net income                            1,389,073         4,524    1,393,597 
Foreign currency translation adjustment                                 (1,320,382)   (5,307)   (1,325,689)
Balance, September 30, 2022   9,500,000   $950    19,251,477   $1,925    19,936,668    (5,487,154)   180,345    143,031    14,775,765 
Net income                            1,522,017         3,921    1,525,938 
Foreign currency translation adjustment                                 (508,496)   162    (508,334)
Balance, December 31, 2022   9,500,000   $950    19,251,477   $1,925    19,936,668    (3,965,137)   (328,151)   147,114    15,793,369 
Net income                            1,491,231         9,197    1,500,428 
Foreign currency translation adjustment                                 234,544    480    235,024 
Balance, September 30, 2023   9,500,000   $950    19,251,477   $1,925    19,936,668    (2,473,906)   (93,607)   156,791    17,528,821 

 

See accompanying notes to consolidated financial statements

 

4

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 

   For the Nine Months Ended
September 30,
 
   2023   2022 
         
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income (loss)  $1,500,428   $1,393,597 
Net income(loss) from discontinued operations   
-
    (206,941)
Net income from continued operations   1,500,428    1,600,538 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:          
Depreciation and amortization   366,989    520,094 
Bad debt expense(reverse)   
-
    
 
 
Amortization of right of use assets   356,509    79,517 
Cash withdrew for disposing subsidiary   (65,191)   
-
 
Assets impairments loss   
-
    241,730 
Changes in assets and liabilities:          
Accounts receivable   (3,407,423)   (741,536)
Inventories   (162,884)   (1,442,971)
Prepayment   364,876    3,595,664 
Other receivables   36,140    (1,604,664)
Accounts payable and accrued payables   736,753    (3,407,984)
Advances from customers   (5,155)   19,806 
Lease liability   
-
    (42,303)
Accrued interest   (4,970)   
-
 
Other payables   (31,624)   93,456 
Net cash provided by (used in) operating activities from continuing operations   (315,552)   (1,088,653)
Net cash used in operating activities from discontinued operations   
-
    (46,736)
Net cash provided by (used in) operating activities   (315,552)   (1,135,389)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Invest in Construction in progress   (179,805)   
-
 
Purchase of Property, plant and equipment, net   
-
    (128,623)
Net cash used in investing activities from continuing operations   
-
    (128,623)
Net cash used in investing activities from discontinued operations   
 
    
-
 
Net cash used in investing activities   (179,805)   (128,623)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from  related party   655,575    1,435,411 
Repayment of short-term loans   (242,083)   (262,875)
Net cash provided by financing activities from continuing operations   413,492    1,172,536 
Net cash used in financing activities from discontinued operations   
-
    
-
 
Net cash provided by (used in) financing activities   413,492    1,172,536 
           
EFFECT OF EXCHANGE RATE CHANGES ON CASH   11,580    294,264 
           
NET INCREASE (DECREASE) IN CASH   (70,285)   202,788 
CASH, BEGINNING OF PERIOD   73,313    38,013 
CASH, END OF PERIOD  3,028   240,801 
LESS: CASH FROM DISCONTINUED OPERATIONS   
-
    230,521 
CASH FROM CONTINUING OPERATIONS   3,028    10,280 
    -      
SUPPLEMENTAL DISCLOSURES:          
Cash paid during the period for:          
Cash paid for interest expense, net of capitalized interest  $82,786   $98,836 
Cash paid for income tax  $
-
   $
-
 
           
NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES          
Long term investment without paying cash  $
-
   $
-
 
Recognition of operating lease right of use asset  $
-
   $
-
 

 

See accompanying notes to consolidated financial statements

 

5

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

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 the 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 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 subsidiaries is engaged in 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 Agritech 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.

 

6

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS (CONTINUED)

 

January 27, 2015, Muliang HK incorporated a wholly foreign-owned enterprise, Shanghai Mufeng Investment Consulting Co., Ltd (“Shanghai Mufeng”), in the People’s Republic of China (“PRC”).

 

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 75,262,500 shares outstanding of which 60,000,000 were owned by Chenxi Shi, the founder of Muliang Viagoo and its sole officer and director. The remaining 15,262,500 were held by a total of 39 investors.

 

On January 11, 2016, Muliang Viagoo issued 64,737,500 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 60,000,000 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. As a result, 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. 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.

 

7

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS (CONTINUED)

 

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 in loss before income tax 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 February 22, 2016 and June 8, 2017, Muliang Industry established a 65% owned subsidiary of Maguan Jiamu Agricultural Development Co., Ltd (Maguan) and a 100% owned subsidiary of Anhui Muliang Agricultural Biotechnology Co., Ltd (Anhui Muliang) respectively. Since its establishment, both of the Companies have no operation.

 

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 fifty million (50,000,000) 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 250,000,000 shares of common stock, $0.0001 par value, and 50,000,000 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 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 505,500 shares of the Company’s restricted common stock, valued at $5.60 per share.

 

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.”.

 

On December 16, 2022, the Company entered into a Share Purchase Agreement with Viagoo Inc. (the “Buyer”), pursuant to which the Buyer purchased 100% of the issued and outstanding ordinary shares of Viagoo Pte Ltd., a Singapore private limited liability company and a 100% parent company of NexG Pte. Ltd., and TPS Solutions Hong Kong Limited, from the Company in exchange for a consideration of US$ 5,254,001.20 to be paid to the Company.

 

8

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS (CONTINUED)

 

Muliang Agritech, Muliang HK, Shanghai Mufeng, Muliang Industry, Shanghai Zongbao, Zongbao Cangzhou, Muliang Sales, Fukang, Agritech Development, Yunnan Muliang, Zhonglian, Anhui Muliang, and Maguan 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, Anhui Muliang, Maguan, and Agritech Development, from the first period presented. The transactions detailed above have been accounted for as reverse takeover transactions 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. 

 

Liquidity and Going Concern

 

As reflected in the accompanying consolidated financial statements, we had a net accumulated deficit of $2,473,906 and $3,965,137 as of September 30, 2023, and December 31, 2022, respectively. Our cash balances as of September 30, 2023, and December 31, 2022, were $3,028 and $73,313, respectively. We had a current liability of $8,861,253 at September 30, 2023, which would be due within the next 12 months. In addition, we had net working capital of $10,507,774 and $8,112,564 at September 30, 2023 and December 31, 2022, respectively.

 

Because the company is gradually recovering the accounts receivables affected by COVID-19, and the sales are gradually returning to the normal level, the company’s current cash revenue and expenditure are normal, which did not affect the normal operation. Now, after Covid-19, the company has no problems with business sustainability. IPO or other additional financing will be used for new investments to expand the operating scale and does not affect the existing operating scale.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in conformity with US GAAP. However, 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”). Therefore, 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”).

 

Interim Financial Statements

 

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) applicable to interim financial information and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosure required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2022. Not all disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim financial statements follow the same accounting policies and methods of computations as the audited financial statements for the year ended December 31, 2022.

 

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 various other assumptions that are 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 the collectability of receivables, and impairment for long-term assets.

 

9

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Basis of Consolidation

 

The consolidated financial statements include the financial statements of the Company, its subsidiaries, and consolidated VIEs, including the VIEs’ subsidiaries, for which Muliang Viagoo is the primary beneficiary.

 

All transactions and balances among the Company, its subsidiaries, the VIEs, and the VIEs’ subsidiaries have been eliminated upon consolidation.

 

As PRC laws and regulations welcome investment in organic fertilizer industry businesses, Muliang Viagoo operates its fertilizer business in the PRC through Muliang Industry and its subsidiaries, which are collectively referred to as the “WFOEs.”

 

By entering into a series of agreements (the “VIE Agreements”), Muliang Viagoo, through WFOEs, obtained control over Muliang Industry and its subsidiaries (collectively referred to as “VIEs”). The VIE Agreements enable Muliang Viagoo to (1) have the power to direct the activities that most significantly affect the economic performance of the VIEs, and (2) receive the economic benefits of the VIEs that could be significant to the VIEs. Accordingly, Muliang Viagoo is considered the primary beneficiary of the VIEs and has consolidated the VIEs’ financial results of operations, assets and liabilities in Muliang Viagoo’s consolidated financial statements. In making the conclusion that Muliang Viagoo is the primary beneficiary of the VIEs, Muliang Viagoo’s rights under the Power of Attorney also provide Muliang Viagoo’s abilities to direct the activities that most significantly impact the VIEs’ economic performance. Muliang Viagoo also believes that this ability to exercise control ensures that the VIEs will continue to execute and renew the Master Exclusive Service Agreement and pay service fees to Muliang Viagoo. By charging service fees to be determined and adjusted at the sole discretion of Muliang Viagoo, and by ensuring that the Master Exclusive Service Agreement is executed and remains effective, Muliang Viagoo has the right to receive substantially all of the economic benefits from the VIEs.

 

Comparative VIE financials, are set forth below:

 

   As of
September 30,
2023
   As of
December 31,
2022
 
Current assets  $19,218,991   $17,244,572 
Non-current assets   7,085,217    7,698,043 
Total Assets   26,304,208    24,942,615 
Current liabilities   8,636,001    7,967,596 
Non-current liabilities   64,170    67,573 
Total liabilities   8,700,171    8,035,169 
Total shareholders’ equity  $17,604,037   $16,907,446 

 

   For nine months ended
September 30,
 
   2023   2022 
Net income  $1,500,428   $1,600,538 
Net cash used in operating activities   (315,552)   (1,135,389)
Net cash used in investment activities   (179,805)   (128,623)
Net cash provided by  financing activities  $413,492   $1,172,536 

 

10

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Quantitative Metrics of the VIE, Shanghai Muliang Industry Co., Ltd. are set forth below:

 

For the nine months ended September 30, 2023

 

    Parent
company
      WFOE
(Shanghai
Mufeng)
- Note 2
    Shanghai
Muliang
Industry
Co., Ltd.
and its
subsidiaries
(the VIEs)
      Subsidiaries     Elimination
of
intercompany balances
    Consolidated
Financials
    % of the
Consolidated
Financials
 
    A       B     C       D     E     F=A+B+C+D+E     G=C/F  
Cash and cash equivalence   $        -                 3,028                -           -       3,028     100 %
Current assets     -         150,036       19,218,991         -       -       19,369,027     99 %
Intercompany receivable from VIE     -   Note 2     12,225,739       -         -       (12,225,739 )     -     N/A  
Investment in Subsidiaries               -       -         -       -       -     N/A  
Total Assets   $ -         12,375,775       26,304,208         -       (12,225,739 )     26,454,244     99 %
Current liabilities     14,534         210,718       8,636,001         -               8,861,253     97 %
Intercompany payable to WFOE     -         -       12,225,739         -       (12,225,739 )     -     N/A  
Total liabilities   $ 14,534         210,718       20,925,910         -       (12,225,739 )     8,925,423     234 %
Total shareholders’ equity (deficit)   $ (14,534 )       (60,682 )     5,378,298   Note 1     -       12,225,739       17,528,821     100 %
                                                           
Revenues     -         -       6,703,445         -       -       6,703,445     100 %
Gross profit     -         -       2,915,460         -       -       2,915,460     100 %
Service fee expense from VIE to WFOE     -         1,500,428       -         -       (1,500,428 )     -     N/A  
Total operating expenses     -         -       854,265         -               854,265     100 %
Operating Income     -         1,500,428       2,061,195         -       (1,500,428 )     2,061,195     100 %
Income from VIE     -         1,500,428       -         -       (1,500,428 )     -     N/A  
Income (loss) from equity method investment     -         -       -         -       -       -     N/A  
Net income (loss)   $ -         1,500,428       1,500,428         -       (1,500,428 )     1,500,428     100 %
Total Comprehensive Income     -         1,500,428       1,894,690         -       (1,500,428 )     1,894,690     100 %
                                                           
OPERATING ACTIVITIES                                                          
Net income     -         1,500,428       1,500,428         -       (1,500,428 )     1,500,428     100 %
Equity in earnings of subsidiaries     -        
 
      -         -       -       -     N/A  
Intercompany receivable / payable between WFOE and VIE     -         (1,500,428 )     1,500,428         -       -       -     N/A  
Net cash used in operating activities   $ -         -       (315,552 )       -       -       (315,552 )   100 %
Net cash used in investment activities     -         -       (179,805 )       -       -       (179,805 )   100 %
Net cash provided by financing activities   $ -         -       413,492         -       -       413,492     100 %

  

Note 1 The Company’s shareholders would not hold any ownership interest, direct or indirect, in the operating company in China, i.e. the VIE, and would merely have a contractual relationship with the VIE.

 

Note 2 The intercompany balances of $12,225,739 between the WOFE and the VIE arising from the service fee income payable to the WOFE by the VIE; the intercompany balances do not include any loans between the WOFE and the VIE. The amount is accumulated from the date that the VIE agreements when into effect on February 16, 2016. As the Company has disclosed, the VIE has not paid amounts in cash or other means to settle the payables balances owed by the VIE to the WOFE.

 

11

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

VIE Agreements that were entered to give Muliang Viagoo effective control over the VIEs include:

 

Voting Rights Proxy Agreement and Irrevocable Power of Attorney

 

Under which each shareholder of the VIEs grant to any person designated by WFOEs to act as its attorney-in-fact to exercise all shareholder rights under PRC law and the relevant articles of association, including but not limited to, appointing directors, supervisors and officers of the VIEs as well as the right to sell, transfer, pledge and dispose all or a portion of the equity interest held by such shareholders of the VIEs. The proxy and power of attorney agreements will remain effective as long as WFOEs exist. The shareholders of the VIEs do not have the right to terminate the proxy agreements or revoke the appointment of the attorney-in-fact without written consent of the WFOEs.

 

Exclusive Option Agreement

 

Under which each shareholder of the VIEs granted 9F or any third party designated by 9F the exclusive and irrevocable right to purchase from such shareholders of the VIEs, to the extent permitted by PRC law and regulations, all or part of their respective equity interests in the VIEs for a purchase price equal to the registered capital. The shareholders of the VIEs will then return the purchase price to 9F or any third party designated by 9F after the option is exercised. 9F may transfer all or part of its option to a third party at its own option. The VIEs and its shareholders agree that without prior written consent of 9F, they may not transfer or otherwise dispose the equity interests or declare any dividends. The restated option agreement will remain effective until 9F or any third party designated by 9F acquires all equity interest of the VIEs.

 

Spousal Consent

 

The spouse of each shareholder of the VIEs has entered into a spousal consent letter to acknowledge that he or she consents to the disposition of the equity interests held by his or her spouse in the VIEs in accordance with the exclusive option agreement, the power of attorney and the equity pledge agreement regarding VIE structure described above, and any other supplemental agreement(s) may be consented by his or her spouse from time to time. Each such spouse further agrees that he or she will not take any action or raise any claim to interfere with the arrangements contemplated under the mentioned agreements. In addition, each such spouse further acknowledges that any right or interest in the equity interests held by his or her spouse in the VIEs do not constitute property jointly owned with his or her spouse and each such spouse unconditionally and irrevocably waives any right or interest in such equity interests.

 

Loan Agreement

 

Pursuant to the loan agreements between WFOEs and each shareholder of the VIEs, WFOEs extended loans to the shareholders of the VIEs, who had contributed the loan principal to the VIEs as registered capital. The shareholders of VIEs may repay the loans only by transferring their respective equity interests in VIEs to 9F Inc. or its designated person(s) pursuant to the exclusive option agreements. These loan agreements will remain effective until the date of full performance by the parties of their respective obligations thereunder.

 

VIE Agreements that enables Muliang Viagoo to receive substantially all of the economic benefits from the VIEs include:

 

Equity Interest Pledge Agreement

 

Pursuant to equity interest pledge agreement, each shareholder of the VIEs has pledged all of his or her equity interest held in the VIEs to WFOEs to secure the performance by VIEs and their shareholders of their respective obligations under the contractual arrangements, including the payments due to WFOEs for services provided. In the event that the VIEs breach any obligations under these agreements, WFOEs as the pledgees, will be entitled to request immediate disposal of the pledged equity interests and have priority to be compensated by the proceeds from the disposal of the pledged equity interests. The shareholders of the VIEs shall not transfer their equity interests or create or permit to be created any pledges without the prior written consent of WFOEs. The equity interest pledge agreement will remain valid until the master exclusive service agreement and the relevant exclusive option agreements and proxy and power of attorney agreements, expire or terminate.

 

Master Exclusive Service Agreement

 

Pursuant to exclusive service agreement, WFOEs have the exclusive right to provide the VIEs with technical support, consulting services and other services. WFOEs shall exclusively own any intellectual property arising from the performance of the agreement. During the term of this agreement, the VIEs may not accept any services covered by this agreement provided by any third party. The VIEs agree to pay service fees to be determined and adjusted at the sole discretion of the WFOEs. The agreement will remain effective unless WFOEs terminate the agreement in writing.

 

12

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Risks in relation to the VIE structure

 

Muliang viagoo believes that the contractual arrangements with the VIEs and their current shareholders are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit Muliang Viagoo’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:

 

  Revoke the business and operating licenses of Muliang Viagoo’s PRC subsidiaries or consolidated affiliated entities;
     
  Discontinue or restrict the operations of any related-party transactions among Muliang Viagoo’s PRC subsidiaries or consolidated affiliated entities;
     
  Impose fines or other requirements on Muliang Viagoo’s PRC subsidiaries or consolidated affiliated entities;
     
  Require Muliang Viagoo’s PRC subsidiaries or consolidated affiliated entities to revise the relevant ownership structure or restructure operations; and/or;

 

  Restrict or prohibit Muliang Viagoo’s use of the proceeds of the additional public offering to finance Muliang Viagoo’s business and operations in China;
     
  Shut down Muliang Viagoo’s servers or blocking Muliang Viagoo’s online platform;
     
  Discontinue or place restrictions or onerous conditions on Muliang Viagoo’s operations; and/or
     
  Require Muliang Viagoo to undergo a costly and disruptive restructuring.

 

Muliang Viagoo’s ability to conduct its business may be negatively affected if the PRC government were to carry out any of the aforementioned actions. As a result, Muliang Viagoo may not be able to consolidate the VIEs in its consolidated financial statements as it may lose the ability to exert effective control over the VIEs and its shareholders, and it may lose the ability to receive economic benefits from the VIEs. Muliang Viagoo currently does not believe that any penalties imposed or actions taken by the PRC government would result in the liquidation of the Company, WFOEs, or the VIEs.

 

The following table sets forth the assets, liabilities, results of operations and cash flows of the VIEs and their subsidiaries, which are included in Muliang Viagoo’s consolidated financial statements after the elimination of intercompany balances and transactions:

 

Under the VIE Arrangements, Muliang Viagoo has the power to direct activities of the VIEs and can have assets transferred out of the VIEs. Therefore, Muliang Viagoo considers that there is no asset in the VIEs that can be used only to settle obligations of the VIEs, except for assets that correspond to the amount of the registered capital and PRC statutory reserves, if any. As the VIEs are incorporated as limited liability companies under the Company Law of the PRC, creditors of the VIEs do not have recourse to the general credit of Muliang Viagoo for any of the liabilities of the VIEs.

 

Currently, there is no contractual arrangement that requires Muliang Viagoo to provide additional financial support to the VIEs. However, as Muliang Viagoo conducts its businesses primarily based on the licenses held by the VIEs, Muliang Viagoo has provided and will continue to provide financial support to the VIEs.

 

Revenue-producing assets held by the VIEs include certain internet content provision (“ICP”) licenses and other licenses, domain names and trademarks. The ICP licenses and other licenses are required under relevant PRC laws, rules and regulations for the operation of internet businesses in the PRC, and, therefore, are integral to Muliang Viagoo’s operations. The ICP licenses require that core PRC trademark registrations and domain names are held by the VIEs that provide the relevant services.

 

Muliang Viagoo consolidates the following entities, including wholly-owned subsidiaries, Muliang HK, Shanghai Mufeng, 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 100% controlled Anhui Muliang, 65% controlled Maguan, and 51% controlled Heilongjiang. Accordingly, the 40% equity interest holder of Agritech Development, 1% equity interest holders in Fukang, 35% equity interest holders in Zhonglian, 35% interest in Maguan, 20% interest in Yunnan Muliang, and 49% equity interest in Heilongjiang are accounted as non-controlling interest in the Company’s consolidated financial statements.

 

13

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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.

 

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. In addition, the Company maintains cash with various financial institutions.

 

Accounts Receivable

 

Accounts receivable are presented net of an allowance for doubtful accounts. In addition, 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 creditworthiness, and current economic trends. Accounts are written off after exhaustive efforts at collection.

 

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 consists 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 construction period 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.

 

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

 

   Useful Life
Building  20 years
Operating equipment  5-10 years
Vehicle  3-5 years
Electronic equipment  3-20 years
Office equipment  3-20 years
Apple orchard  10 years

 

14

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

The apple orchard includes the rental of an apple farm, labor costs, fertilizers, apple seeds, apple seedlings, etc. 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 an 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 the cost of goods sold. Therefore, 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.

 

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. The 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.

 

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

 

   Useful Life
Land use rights  50 years
Non-patented technology  10 years

 

The Company carries intangible assets at a 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 the 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 nine months ended September 30, 2023, and 2022.

 

15

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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. Upon loss of control, the interest sold and 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. Accordingly, 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 the 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. Instead, 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 the 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.

 

Cost of Sales

 

Cost of sales 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.

 

16

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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 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 the extent that one of the transacting parties might be prevented from fully pursuing its 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) consists of net income (loss) and unrealized gains from foreign currency translation adjustments.

 

Foreign Currency Translation

 

The Company’s functional currency is the Chinese Renminbi (“RMB”) and Singapore Dollar (“SGD”); 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 nine months ended September 30, 2023, and 2022 was a gain of $394,262 and a loss of $1,315,075, respectively. Transactions denominated in foreign currencies are translated into 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 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. Accordingly, transaction gains or losses have not had, and are not expected to have, a material effect on the Company’s results of operations.

 

17

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

The asset and liability accounts at September 30, 2023, and December 31, 2022, were translated at 7.2755 RMB to $1 USD and 6.9091 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 nine months ended September 30, 2023, and 2022 were 7.0224 RMB and 6.6001 RMB to $1 USD, respectively. 

 

Earnings (Loss) per Share

 

Basic earnings per share are 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 give 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 exclude all potential dilutive shares of common stock if their effect is anti-dilutive. There were no potential dilutive securities on September 30, 2023, and December 31, 2022, and for the nine months ended September 30, 2023, and 2022.

 

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 that 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. Accordingly, the Company did not elect to apply the fair value option to any outstanding instruments.  

 

18

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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

 

   September 30,
2023
   December 31,
2022
 
Current portion of long-term loan  $753,245   $1,039,243 
Long-term loan   
-
    
-
 
   $753,245   $1,039,243 

 

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 the local labor bureau a monthly contribution at a stated contribution rate based on the basic monthly 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.

 

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 can use the current period net income after tax to offset against the accumulated 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 one business segment, which is geographically located in China.

 

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:

 

  Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position.

 

19

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

  Recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of comprehensive income
     
  Classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows.

 

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

 

  Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position
     
  Recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis
     
  Classify all cash payments within operating activities in the statement of cash flows.

 

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:

 

  Apply ASC 840 in the comparative periods.
     
  Provide the disclosures required by ASC 840 for all periods that continue to be presented in accordance with ASC 840.
     
  Recognize the effects of applying ASC 842 as a cumulative-effect adjustment to retained earnings for the period of adoption.

 

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.

 

20

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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 February 2020, the FASB issued ASU 2020-02, “Financial Instruments — Credit Losses (Topic 326) and Leases (topic 842) Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (topic 842)”. This ASU provides guidance regarding methodologies, documentation, and internal controls related to expected credit losses. This ASU is effective for interim and annual periods beginning after December 15, 2019, and early adoption is permitted. The Company is evaluating the impact of this guidance 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.

 

NOTE 3 – DISCONTINUED OPERATIONS

 

Disposition of Viagoo Pte Ltd and its subsidiaries

 

On December 16, 2022, Muliang Viagoo Technology Inc. (the “Company”) entered into a share purchase agreement with Viagoo Inc., pursuant to which Viagoo Inc purchased 100% of the issued and outstanding ordinary shares of Viagoo Pte Ltd., a Singapore private limited liability company and a 100% parent company of NexG Pte. Ltd., and TPS Solutions Hong Kong Limited, from the Company in exchange for a consideration of US$ 5,254,001.20 to be paid to the Company.

 

Reconciliation of the amounts of major classes of income and losses from discontinued operations in the consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2022 as follows.

 

  

For the

Nine

Months
Ended

September 30,

 
   2022 
     
Revenues  $608,896 
Cost of goods sold   369,205 
Gross profit (loss)   239,691 
Operating expenses:     
General and administrative expenses   434,389 
Total operating expenses   434,389 
Income (Loss) from operations   (194,698)
Other income (expense):     
Other income (expense), net   (9,553)
Total other income (expense)   (9,553)
Income (Loss) before income taxes   (204,251)
Income taxes   2,690 
Net loss from discontinued operations   (206,941)

 

21

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 4 – ACCOUNTS RECEIVABLE

 

Accounts receivable consisted of the following:

 

   September 30,   December 31, 
   2023   2022 
Accounts receivable  $15,480,644   $12,849,490 
Less: Allowance for credit losses   (1,037,842)   (1,092,880)
Total, net  $14,442,802   $11,756,610 

 

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 did not recognize additional credit losses for the nine months ended September 30, 2023, and 2022. The allowance balance as of September 30, 2023 was carried forward from the prior period.

 

NOTE 5 – INVENTORIES

 

Inventories consisted of the following:

 

   September 30,   December 31, 
   2023   2022 
Raw materials  $145,900   $47,326 
Finished goods   195,763    146,900 
Less: Provision for impairment   
-
    
-
 
Total, net  $341,663   $194,226 

 

The Company did not recognize a loss from inventory impairment for the nine months ended September 30, 2023, and 2022.

 

NOTE 6 – PREPAYMENT

 

The prepayment balance of $3,184,890 and $3,719,342 as of September 30, 2023 and December 31, 2022 respectively, represents the advances paid to suppliers for the purchase of raw materials to be delivered in the next operating period.

  

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment at September 30, 2023 and December 31, 2022 consisted of:

 

   September 30,   December 31, 
   2023   2022 
Building  $2,655,071   $2,795,874 
Operating equipment   2,593,192    2,740,527 
Vehicle   77,903    82,034 
Office equipment   19,833    78,714 
Apple Orchard   878,390    924,972 
Construction in progress   2,904,949    2,876,250 
    9,129,338    9,498,371 
Less: Accumulated depreciation   (3,613,886)   (3,493,796)
   $5,515,452   $6,004,575 

  

For the nine months ended September 30, 2023 and 2022, depreciation expense amounted to $366,989 and $520,094, 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 $2,904,949 represents the investment of a black goat processing plant located in Shuangbai County, Chuxiong City, Yunnan Province, PRC.

 

NOTE 8 – RIGHT OF USE ASSETS

 

The total balance of $1,188,216 as of September 30, 2023 represents the net value of two industrial land use rights located in Weihai City, Shandong Province, and Chuxiong City, Yunnan Province. The total cost of land use rights is $1,409,228 and the accumulated amortization is $221,012.

 

22

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 9 – DEFERRED TAX ASSETS, NET

 

The components of the deferred tax assets are as follows:

 

   September 30,   December 31, 
   2023   2022 
Deferred tax assets, non-current        
Deficit carried-forward  $76,420   $80,474 
Allowance   153,265    161,392 
Deferred tax assets   229,685    241,866 
Less: valuation allowance   
-
    
-
 
Deferred tax assets, non-current  $229,685   $241,866 

 

Deferred taxation is calculated under the liability method with 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.

 

NOTE 10 – LOANS PAYABLE

 

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

 

   September 30,   December 31, 
   2023   2022 
Loan payable to Rushan City Rural Credit Union, annual interest 8.7875%, due by September 18 2024.  $753,245   $1,039,243 
Long-term loans due to individuals and entities without interest   
-
    
-
 
    753,245    1,039,243 
Current portion of long-term loans payable   753,245    1,039,243 
Total, net  $
-
   $
-
 

 

As of September 30, 2023, the Company’s future loan obligations according to the terms of the loan agreement are as follows:

 

within 1 year  $753,245 
1-2 years   
-
 
3 years   
-
 
Total  $753,245 

 

The Company recognized interest expenses of $43,790 and $64,147 for the nine months ended September 30, 2023 and 2022, respectively.

 

23

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 11 – STOCKHOLDERS EQUITY

 

Authorized Stock

 

The Company has authorized 250,000,000 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 250,000,000 shares of common stock, $0.0001 par value, and 50,000,000 shares of blank check preferred stock after the filling.

 

On October 30, 2019, 15,000,000 shares were designated to be Series A Preferred Stock out of the 50,000,000 shares of blank check preferred stock.

 

On February 24, 2023, our Board of Directors declared a two-for-one reverse stock split of our authorized common stock and Series A Preferred Stock. There was no effect on total stockholders’ equity, and the par value per share of both our common stock and Series A Preferred Stock remains unchanged at $0.0001 per share after the reverse stock split. All references made to share or per share amounts in the accompanying condensed consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the effects of the reverse stock split.

 

As of September 30, 2023, there were 250,000,000 common shares of the Company authorized, and 50,000,000 preferred shares authorized.

 

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 21,600 shares of Common Shares at $15.10 per share.

 

On June 29, 2018 the Company issued 149,259 common shares of the Company at $15.10 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 the Company’s common stock.

 

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 9,500,000 shares of Series A Preferred Stock to Mr. Wang, the CEO and Chairman of the Company, in exchange for 9,500,000 shares of common stock beneficially owned by him. Following the transaction, 9,500,000 shares of common stock were canceled and returned to the 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 505,500 shares of the Company’s restricted common stock, valued at $5.60 per share.

 

On June 28, 2020, the Company issued 25,000 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 50,000 of restricted common stock to two investors for US$280,000 valued at $5.60 per share.

 

On February 24, 2023, the Company’s Board of Directors and majority shareholder approved a 2 to 1 reverse stock split of all of the issued and outstanding shares of the Company’s common stock and preferred stock. There was no effect on total stockholders’ equity, and the par value per share of our both common stock and Series A Preferred Stock remains unchanged at $0.0001 per share after the reverse stock split. All references made to share or per share amounts in the accompanying condensed consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the effects of the reverse stock split.

 

As of the date of this report, there were 19,251,477 shares of common stock outstanding.

 

24

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 11 – STOCKHOLDERS EQUITY (CONTINUED)

 

Blank Check Preferred Stock

 

On April 4, 2019, the Company’s Board of Directors and majority shareholder approved creation of fifty million (50,000,000) 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, 15,000,000 shares were designated to be Series A Preferred Stock out of the 50,000,000 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 15,000,000 shares as Series A Preferred Stock out of the 50,000,000 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 9,500,000 shares of Series A Preferred Stock to Mr. Wang, the CEO and Chairman of the Company, in exchange for 9,500,000 shares of common stock beneficially owned by him. Following the transaction, 9,500,000 shares of common stock were canceled and returned to the treasury.

 

On February 24, 2023, the Company’s Board of Directors and majority shareholder approved a 2 to 1 reverse stock split of all of the issued and outstanding shares of the Company’s common stock and preferred stock. There was no effect on total stockholders’ equity, and the par value per share of both our common stock and Series A Preferred Stock remains unchanged at $0.0001 per share after the reverse stock split. All references made to share or per share amounts in the accompanying condensed consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the effects of the reverse stock split.

 

As of the filing date, there were 9,500,000 shares of Series A Preferred Stock issued outstanding.

 

25

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 12 – RELATED PARTY TRANSACTIONS

 

*Due to related parties

 

Outstanding balance due to the related parties below are advances to the Company as working capital. These advances are due on demand, non-interest bearing, and unsecured, unless further disclosed.

 

   September 30,   December 31,    
   2023   2022   Relationship
Mr. Lirong Wang   1,495,607    897,821   The CEO and Chairman / Actual controlling person
Ms. Xueying Sheng   88,442    102,007   Controller/Accounting Manager of the Company
Mr. Guohua Lin   41,006    45,080   Senior management / One of the Company’s shareholders
Mr. Zhongfang Wang   299    316   Father of Lirong Wang
Total   1,625,354    1,045,224    

  

For the nine months ended September 30, 2023, the Company borrowed $673,385 from Mr. Lirong Wang, and repaid $75,599. For the nine months ended September 30, 2022, the Company borrowed $1,260,251 from Mr. Lirong Wang, and repaid $0. 

 

There was no loan transaction between the Company and Mr. Guohua Lin, for the nine months ended September 30, 2023. For the nine months ended September 30, 2022, the Company borrowed $0 from Mr. Guohua Lin, and repaid $11,419. 

  

For the nine months ended September 30, 2023, the Company borrowed $7,102 from Ms. Xueying Sheng and repaid $20,667. For the nine months ended September 30, 2022, the Company borrowed $2,565 from Ms. Xueying Sheng and repaid $9,392.

 

There was no loan transaction between the Company and Mr. Zhongfang Wang, for the nine months ended September 30,, 2023 and 2022. 

 

26

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 13 – CONCENTRATIONS

 

Customer Concentrations

 

The following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenues for the nine months ended September 30, 2023, and 2022.

 

   For nine months ended September 30, 
   2023   2022 
Customer  Amount   %   Amount   % 
Guangzhou Lvxing Organic Agricultural Products Co., Ltd   2,491,563    37%   2,551,090    39%
Guangzhou Xianshangge Trading Co., Ltd   2,432,509    36%   2,715,338    42%

 

Supplier Concentrations

 

The following table sets forth information as to each supplier that accounted for 10% or more of the Company’s purchases for the nine months ended September 30, 2023, and 2022.

 

   For nine months ended September 30, 
   2023   2022 
Suppliers  Amount   %   Amount   % 
A   1,246,013    28%   1,412,513    30%
B   1,588,004    36%   1,689,611    36%
C   649,460    15%   691,015    15%
D   655,502    15%   697,444    15%

 

Credit Risks

 

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the PRC’s political, economic, and legal environment and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

 

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. Substantially all of the Company’s cash is maintained with state-owned banks within the PRC, and none of these deposits are covered by insurance. As a result, the Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts. A significant portion of the Company’s sales are credit sales, which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations of credit risk with respect to trade accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk. On September 30, 2023, and December 31, 2022, the Company’s cash balances by geographic area were as follows:

 

   September 30,
2023
   December 31,
2022
 
China  $3,028    100%  $8,122    11%
Singapore   
-
    
-
    65,191    89%
Total cash and cash equivalents  $3,028    100%  $73,313    100%

 

27

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 14 – INCOME TAXES

 

United States

 

Muliang Viagoo was established in the State of Nevada in the United States and is subject to Nevada State and US Federal tax laws. Muliang Viagoo has approximately $97,672 of unused net operating losses (“NOLs”) available for carrying forward to future years for U.S. federal income tax reporting purposes. The benefit from the carry forward of such NOLs will begin expiring during the year ended December 31, 2034. Because United States tax laws limit the time during which NOL carry forwards may be applied against future taxable income, the Company may be unable to take full advantage of its NOLs for federal income tax purposes should the Company generate taxable income. Further, the benefit from utilization of NOL carry forwards could be subject to limitations due to material ownership changes that could occur in the Company as it continues to raise additional capital. Based on such limitations, the Company has significant NOLs for which realization of tax benefits is uncertain.

 

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law. The Company has considered the accounting impact of the effects of the Act during the year ended December 31, 2018 including a reduction in the corporate tax rate from 34% to 21% among other changes.

 

Hong Kong

 

Muliang HK is established in Hong Kong, and its income is subject to a 16.5% profit tax rate for income sourced within the Special Administrative Region. For the nine months ended September 30, 2023 and 2022, Muliang HK did not earn any income derived in Hong Kong, and therefore was not subject to Hong Kong Profits Tax.

 

Singapore

 

Viagoo is incorporated in Singapore where tax is levied on profits at rate of 17.0%. Singapore uses a territorial tax system. Post-tax profit distributions (i.e., dividends) to shareholders are tax-free. Singapore does not tax on capital gains.

 

China, PRC

 

Shanghai Mufeng and its subsidiaries Muliang Industry, Zongbao, Zongbao Cangzhou, Muliang Sales, Fukang, Agritech Development, Zhonglian, Heilongjiang Anhui Muliang, Maguan, and Yunnan Muliang are established in China and its income is subject to income tax rate of 25%.

 

The reconciliation of effective income tax rate as follows:

 

   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022 
US Statutory income tax rate   21%   21%
Valuation allowance   (21)%   (21)%
Total   
-
    
-
 

 

28

 

 

MULIANG VIAGOO TECHNOLOGY, INC. AND VARIABLE INTEREST ENTITIES

NOTES OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 14 – INCOME TAXES (CONTINUED)

 

Accounting for Uncertainty in Income Taxes

 

The tax authority of the PRC government conducts periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises complete their relevant tax filings. Therefore, the Company’s PRC entities’ tax filings results are subject to change. Therefore, it is uncertain whether the PRC tax authority may take different views about the Company’s PRC entities’ tax filings, which may lead to additional tax liabilities.

 

ASC 740 requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Accordingly, the management evaluated the Company’s tax positions and concluded that no provision for uncertainty in income taxes was necessary as of September 30, 2023, and December 31, 2022.

 

The provision for income taxes consists of the following:

 

   For the Nine Months Ended September 30, 
   2023   2022 
Current  $516,981   $444,982 
Deferred   
-
    
-
 
Total  $516,981   $444,982 

 

NOTE 15 – BUSINESS SEGMENTS

 

The revenues and cost of goods sold from operation consist of the following:

 

   Revenues   Cost of Sales 
   For the Nine Months Ended   For the Nine Months Ended 
   September 30,   September 30,   September 30,   September 30, 
   2023   2022   2023   2022 
Fertilizer sales  $6,703,445   $6,474,751   $3,787,985   $3,648,418 
Logistic   
-
    608,896    
-
    369,205 
Total  $6,703,445   $7,083,647   $3,787,985   $4,017,623 

 

NOTE 16 – SUBSEQUENT EVENTS 

 

The Company has evaluated subsequent events that have occurred after the balance sheet date but before the financial statements are issued. Based on this evaluation, the Company concluded that subsequent to September 30, 2023, but prior to November 14, 2023, the date the financial statements were available to be issued, there was no subsequent event that would require disclosure to or adjustment to the financial statements other than the ones disclosed above.

 

29

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion of our financial condition and results of operations should also be read in conjunction with our unaudited consolidated financial statements and the notes to those financial statements appearing elsewhere in this report. The following discussion contains forward-looking statements relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

 

Business Overview

 

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.”

 

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 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 organic straw 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 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 100.0% and 91.5% of our total revenue for the nine months ended September 30, 2023, and 2022, respectively. We currently have two integrated factories in Weihai City, Shandong Province, PRC, to produce our organic fertilizers, which have been in operation since August 2015. We plan to improve the technology for our existing organic straw 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.

 

In addition, we plan to engage in the processing and distribution of black goat products, with business commencing in September 2023. 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 include 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 2023.

 

30

 

 

Recent Development

 

Impact of COVID-19

 

Starting 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 have gradually resumed production and are now operating at full capacity.

 

As a result of the COVID-19 outbreak in December 2019 and continuing through 2020,2021 and 2022, the Company’s businesses, results of operations, financial position and cash flows were adversely affected in 2022 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.

 

Though the global outbreak and spread of the novel strain of coronavirus (COVID-19) came to an end in November 2022, we are still 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.

 

Disposal of land use right and production facility for repayment of debt

 

The Company completed its sale of industrial land and production facility in Shanghai through an administratively organized private sale on June 16, 2021. Through the sale, the Company’s subsidiary Shanghai Zongbao is able to satisfy its debt obligations due to Agricultural Bank of China and Shanghai Zhongta Construction and Engineering Co., Ltd. and improve its cash position. As a result of the sale, Agricultural Bank of China received RMB 35,632,193.36, Shanghai Zhongta Construction and Engineering Co., Ltd. received RMB 26,000,000 and Shanghai Zongbao received the remaining RMB 7,921,902.28.

 

Sale of Viagoo

 

On December 16, 2022, Muliang Viagoo Technology Inc. (the “Company”) entered into a share purchase agreement (the “Agreement”) with Viagoo Inc. (the “Buyer”), pursuant to which the Buyer purchased 100% of the issued and outstanding ordinary shares of Viagoo Pte Ltd., a Singapore private limited liability company and a 100% parent company of NexG Pte. Ltd., and TPS Solutions Hong Kong Limited, from the Company in exchange for a consideration of US$ 5,254,001.20 to be paid to the Company as follows:

 

  (i) The Buyer agrees to issue a convertible note to a certain convertible noteholder of the Company in exchange for the cancellation of certain debt of the Company held by certain noteholder;

 

  (ii) US$1,000,000 in a promissory note issued by the Buyer (the “Promissory Note”), which must be paid off by the Buyer within three (3) business days of the closing date of the next financing transaction by the Buyer (the “Closing Date”);

 

  (iii) 625,715 ordinary shares of the Buyer, valued at US$5.60 per share, or an aggregate of US$3,504,001.20, within seven (7) business days of the Closing Date.

  

  (iv) US$750,000 within five (5) business days of a Liquidity Event by the Buyer in any combination of cash or stock. Each share of stock shall be valued at the fair market value price at the time of the Liquidity Event. “Liquidity Event” shall mean any event that allows the Buyer to raise capital or shareholders of the Buyer to sell or dispose for consideration part or all of their ownership shares and list on a national stock exchange in the United States, including but not limited to acquisition, merger, initial public offering, SPAC merger and listing, direct listing or other such events.

 

Should the Buyer fail to perform a financing transaction after the effective date of the Agreement, shall result in the cancellation of the transaction. The Agreement also includes customary representations, warranties, and covenants by the parties.

 

31

 

 

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

 

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”) and Singapore dollar(“SGD”); however, the accompanying consolidated financial statements have been translated and presented in United States Dollars (“USD”).

 

Principles of Consolidation

 

The consolidated financial statements include the financial statements of the Company, its subsidiaries and consolidated VIE, including the VIE’ subsidiaries, for which the Muliang Viagoo is the primary beneficiary.

 

All transactions and balances among the Company, its subsidiaries, the VIE and the VIE’ subsidiaries have been eliminated upon consolidation.

 

As PRC laws and regulations welcome to invest in organic fertilizer industry businesses, the Muliang Viagoo operates its fertilizer business in the PRC through Muliang Industry and its subsidiaries, which are collectively referred as the “WFOEs”.

 

By entering into a series of agreements (the “VIE Agreements”), the Muliang Viagoo, through WFOEs, obtained control over Muliang Industry and its subsidiaries (collectively referred as “VIE”). The VIE Agreements enable the Muliang Viagoo to (1) have power to direct the activities that most significantly affect the economic performance of the VIE, and (2) receive the economic benefits of the VIE that could be significant to the VIE. Accordingly, the Muliang Viagoo is considered the primary beneficiary of the VIE and has consolidated the VIE’ financial results of operations, assets and liabilities in the Muliang Viagoo’s consolidated financial statements. In making the conclusion that the Muliang Viagoo is the primary beneficiary of the VIE, the Muliang Viagoo’s rights under the Power of Attorney also provide the Muliang Viagoo’s abilities to direct the activities that most significantly impact the VIE’ economic performance. The Muliang Viagoo also believes that this ability to exercise control ensures that the VIE will continue to execute and renew the Master Exclusive Service Agreement and pay service fees to Muliang Viagoo. By charging service fees to be determined and adjusted at the sole discretion of Muliang Viagoo, and by ensuring that the Master Exclusive Service Agreement is executed and remains effective, Muliang Viagoo has the rights to receive substantially all of the economic benefits from the VIE.

 

Comparative VIE financials, are set forth below:

 

   As of
September 30,
2023
   As of
December 31,
2022
 
Current assets  $19,218,991   $17,244,572 
Non-current assets   7,085,217    7,698,043 
Total Assets   26,304,208    24,942,615 
Current liabilities   8,636,001    7,967,596 
Non-current liabilities   64,170    67,573 
Total liabilities   8,700,171    8,035,169 
Total shareholders’ equity  $17,604,037   $16,907,446 

  

   For nine months ended
September 30,
 
   2023   2022 
Net income  $1,500,428   $1,600,538 
Net cash used in operating activities   (315,552)   (1,135,389)
Net cash used in investment activities   (179,805)   (128,623)
Net cash provided by  financing activities  $413,492   $1,172,536 

 

32

 

 

Quantitative Metrics of the VIE, Shanghai Muliang Industry Co., Ltd.are set forth below:

 

For the nine months ended September 30, 2023

 

    Parent
company
      WFOE
(Shanghai
Mufeng)
- Note 2
    Shanghai
Muliang
Industry
Co., Ltd.
and its
subsidiaries
(the VIEs)
      Subsidiaries     Elimination
of
intercompany
balances
    Consolidated
Financials
    % of the
Consolidated
Financials
 
    A       B     C       D     E     F=A+B+C+D+E     G=C/F  
Cash and cash equivalence   $ -                 3,028               -       -       3,028     100 %
Current assets     -         150,036       19,218,991         -       -       19,369,027     99 %
Intercompany receivable from VIE     -   Note 2     12,225,739       -         -       (12,225,739 )     -     N/A  
Investment in Subsidiaries               -       -         -       -       -     N/A  
Total Assets   $ -         12,375,775       26,304,208         -       (12,225,739 )     26,454,244     99 %
Current liabilities     14,534         210,718       8,636,001         -               8,861,253     97 %
Intercompany payable to WFOE     -         -       12,225,739         -       (12,225,739 )     -     N/A  
Total liabilities   $ 14,534         210,718       20,925,910         -       (12,225,739 )     8,925,423     234 %
Total shareholders’ equity (deficit)   $ (14,534       (60,682 )     5,378,298   Note 1     -       12,225,739       17,528,821     100 %
                                                           
Revenues     -         -       6,703,445         -       -       6,703,445     100 %
Gross profit     -         -       2,915,460         -       -       2,915,460     100 %
Service fee expense from VIE to WFOE     -         1,500,428       -         -       (1,500,428 )     -     N/A  
Total operating expenses     -         -       854,265         -               854,265     100 %
Operating Income     -         1,500,428       2,061,195         -       (1,500,428 )     2,061,195     100 %
Income from VIE     -         1,500,428       -         -       (1,500,428 )     -     N/A  
Income (loss) from equity method investment     -         -       -         -       -       -     N/A  
Net income (loss)   $ -         1,500,428       1,500,428         -       (1,500,428 )     1,500,428     100 %
Total Comprehensive Income     -         1,500,428       1,894,690         -       (1,500,428 )     1,894,690     100 %
                                                           
OPERATING ACTIVITIES                                                          
Net income     -         1,500,428       1,500,428         -       (1,500,428 )     1,500,428     100 %
Equity in earnings of subsidiaries     -                 -         -       -       -     N/A  
Intercompany receivable / payable between WFOE and VIE     -         (1,500,428 )     1,500,428         -       -       -     N/A  
Net cash used in operating activities   $ -         -       (315,552       -       -       (315,552 )   100 %
Net cash used in investment activities     -         -       (179,805       -       -       (179,805 )   100 %
Net cash provided by financing activities   $ -         -       413,492         -       -       413,492     100 %

 

Note 1 The Company’s shareholders would not hold any ownership interest, direct or indirect, in the operating company in China, i.e. the VIE, and would merely have a contractual relationship with the VIE.

 

Note 2 The intercompany balances of $12,225,739 between the WOFE and the VIE arising from the service fee income payable to the WOFE by the VIE; the intercompany balances do not include any loans between the WOFE and the VIE. The amount is accumulated from the date that the VIE agreements when into effect on February 16, 2016. As the Company has disclosed, the VIE has not paid amounts in cash or other means to settle the payables balances owed by the VIE to the WOFE.

 

33

 

 

VIE Agreements that were entered to give Muliang Viagoo effective control over the VIE include:

 

Voting Rights Proxy Agreement and Irrevocable Power of Attorney

 

Under which each shareholder of the VIE grant to any person designated by WFOEs to act as its attorney-in-fact to exercise all shareholder rights under PRC law and the relevant articles of association, including but not limited to, appointing directors, supervisors and officers of the VIE as well as the right to sell, transfer, pledge and dispose all or a portion of the equity interest held by such shareholders of the VIE. The proxy and power of attorney agreements will remain effective as long as WFOEs exist. The shareholders of the VIE do not have the right to terminate the proxy agreements or revoke the appointment of the attorney-in-fact without written consent of the WFOEs.

 

Exclusive Option Agreement

 

Under which each shareholder of the VIE granted 9F or any third party designated by 9F the exclusive and irrevocable right to purchase from such shareholders of the VIE, to the extent permitted by PRC law and regulations, all or part of their respective equity interests in the VIE for a purchase price equal to the registered capital. The shareholders of the VIE will then return the purchase price to 9F or any third party designated by 9F after the option is exercised. 9F may transfer all or part of its option to a third party at its own option. The VIE and its shareholders agree that without prior written consent of 9F, they may not transfer or otherwise dispose the equity interests or declare any dividends. The restated option agreement will remain effective until 9F or any third party designated by 9F acquires all equity interest of the VIE.

 

Spousal Consent

 

The spouse of each shareholder of the VIE has entered into a spousal consent letter to acknowledge that he or she consents to the disposition of the equity interests held by his or her spouse in the VIE in accordance with the exclusive option agreement, the power of attorney and the equity pledge agreement regarding VIE structure described above, and any other supplemental agreement(s) may be consented by his or her spouse from time to time. Each such spouse further agrees that he or she will not take any action or raise any claim to interfere with the arrangements contemplated under the mentioned agreements. In addition, each such spouse further acknowledges that any right or interest in the equity interests held by his or her spouse in the VIE do not constitute property jointly owned with his or her spouse and each such spouse unconditionally and irrevocably waives any right or interest in such equity interests.

 

Loan Agreement

 

Pursuant to the loan agreements between WFOEs and each shareholder of the VIE, WFOEs extended loans to the shareholders of the VIE, who had contributed the loan principal to the VIE as registered capital. The shareholders of VIE may repay the loans only by transferring their respective equity interests in VIE to 9F Inc. or its designated person(s) pursuant to the exclusive option agreements. These loan agreements will remain effective until the date of full performance by the parties of their respective obligations thereunder.

 

VIE Agreements that enables Muliang Viagoo to receive substantially all of the economic benefits from the VIE include:

 

Equity Interest Pledge Agreement

 

Pursuant to equity interest pledge agreement, each shareholder of the VIE has pledged all of his or her equity interest held in the VIE to WFOEs to secure the performance by VIE and their shareholders of their respective obligations under the contractual arrangements, including the payments due to WFOEs for services provided. In the event that the VIE breach any obligations under these agreements, WFOEs as the pledgees, will be entitled to request immediate disposal of the pledged equity interests and have priority to be compensated by the proceeds from the disposal of the pledged equity interests. The shareholders of the VIE shall not transfer their equity interests or create or permit to be created any pledges without the prior written consent of WFOEs. The equity interest pledge agreement will remain valid until the master exclusive service agreement and the relevant exclusive option agreements and proxy and power of attorney agreements, expire or terminate.

 

Master Exclusive Service Agreement

 

Pursuant to exclusive service agreement, WFOEs have the exclusive right to provide the VIE with technical support, consulting services and other services. WFOEs shall exclusively own any intellectual property arising from the performance of the agreement. During the term of this agreement, the VIE may not accept any services covered by this agreement provided by any third party. The VIE agree to pay service fees to be determined and adjusted at the sole discretion of the WFOEs. The agreement will remain effective unless WFOEs terminate the agreement in writing.

 

34

 

 

Risks in relation to the VIE structure

 

Muliang Viagoo believes that the contractual arrangements with the VIE and their current shareholders are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit Muliang Viagoo’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:

 

Revoke the business and operating licenses of Muliang Viagoo’s PRC subsidiaries or consolidated affiliated entities;

 

Discontinue or restrict the operations of any related-party transactions among Muliang Viagoo’s PRC subsidiaries or consolidated affiliated entities;

 

Impose fines or other requirements on Muliang Viagoo’s PRC subsidiaries or consolidated affiliated entities;

 

Require Muliang Viagoo’s PRC subsidiaries or consolidated affiliated entities to revise the relevant ownership structure or restructure operations; and/or;

 

Restrict or prohibit Muliang Viagoo’s use of the proceeds of the additional public offering to finance Muliang Viagoo’s business and operations in China;

 

Shut down Muliang Viagoo’s servers or blocking Muliang Viagoo’s online platform;

 

Discontinue or place restrictions or onerous conditions on Muliang Viagoo’s operations; and/or

 

Require Muliang Viagoo to undergo a costly and disruptive restructuring.

 

Muliang Viagoo’s ability to conduct its business may be negatively affected if the PRC government were to carry out any of the aforementioned actions. As a result, Muliang Viagoo may not be able to consolidate the VIE in its consolidated financial statements as it may lose the ability to exert effective control over the VIE and its shareholders, and it may lose the ability to receive economic benefits from the VIE. Muliang Viagoo currently does not believe that any penalties imposed or actions taken by the PRC government would result in the liquidation of the Company, WFOEs, or the VIE.

 

The following table sets forth the assets, liabilities, results of operations and cash flows of the VIE and their subsidiaries, which are included in Muliang Viagoo’s consolidated financial statements after the elimination of intercompany balances and transactions:

 

Under the VIE Arrangements, Muliang Viagoo has the power to direct activities of the VIE and can have assets transferred out of the VIE. Therefore, Muliang Viagoo considers that there is no asset in the VIE that can be used only to settle obligations of the VIE, except for assets that correspond to the amount of the registered capital and PRC statutory reserves, if any. As the VIE are incorporated as limited liability companies under the Company Law of the PRC, creditors of the VIE do not have recourse to the general credit of Muliang Viagoo for any of the liabilities of the VIE.

 

Currently there is no contractual arrangement which requires Muliang Viagoo to provide additional financial support to the VIE. However, as Muliang Viagoo conducts its businesses primarily based on the licenses held by the VIE, Muliang Viagoo has provided and will continue to provide financial support to the VIE.

 

Revenue-producing assets held by the VIE include certain internet content provision (“ICP”) licenses and other licenses, domain names and trademarks. The ICP licenses and other licenses are required under relevant PRC laws, rules and regulations for the operation of internet businesses in the PRC, and therefore are integral to Muliang Viagoo’s operations. The ICP licenses require that core PRC trademark registrations and domain names are held by the VIE that provide the relevant services.

 

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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, 100% controlled Anhui Muliang, 65% controlled Maguan, and 51% controlled Heilongjiang. Accordingly, 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, 35% equity interest in Maguan, 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 and 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. Accordingly, actual results could differ from those estimates.

 

Accounts Receivable

 

Accounts receivable are presented net of an allowance for doubtful accounts. In addition, 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.

 

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.

  

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.

 

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Revenue for the 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 considerations. 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 the 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. 

 

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:

 

  Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position
     
  Recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of comprehensive income
     
  Classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows.

 

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

 

  Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position
     
  Recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis
     
  Classify all cash payments within operating activities in the statement of cash flows.

 

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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:

 

  Apply ASC 840 in the comparative periods.
     
  Provide the disclosures required by ASC 840 for all periods that continue to be presented in accordance with ASC 840.
     
  Recognize the effects of applying ASC 842 as a cumulative-effect adjustment to retained earnings for the period of adoption.

 

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.

 

In February 2020, the FASB issued ASU 2020-02, “Financial Instruments — Credit Losses (Topic 326) and Leases (topic 842) Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (topic 842)”. This ASU provides guidance regarding methodologies, documentation, and internal controls related to expected credit losses. This ASU is effective for interim and annual periods beginning after December 15, 2019, and early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements.

 

The Company believes that no other accounting standards were 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 accounts for 100.0% of our total revenue for the nine months ended September 30, 2023.

 

As a result of the COVID-19 outbreak in December 2019 and continuing in the years 2020, 2021, and 2022, the Company’s businesses, results of operations, financial position and cash flows were adversely affected in 2022. However, the COVID-19 came to an end in China in November 2022. And we are growing our revenue and net income steadily currently and expect to keep growing for the coming years.

 

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Results of Operations for the Three Months Ended September 30, 2023 and 2022

 

   Three Months Ended
September 30,
         
   2023   2022   Variance     
   $   $   $   % 
Revenues-fertilizer   3,836,522    3,467,477    369,045    10.6%
Subtotal of revenue   3,836,522    3,467,477    369,045    10.6%
Cost-fertilizer   2,321,217    1,998,669    322,548    16.1%
Subtotal of cost   2,321,217    1,998,669    322,548    16.1%
Gross profit   1,515,305    1,468,808    46,497    3.2%
Gross margin   39.5%   42.4%            
Operating expenses:                    
General and administrative expenses   165,390    (26,355)   191,745    -727.5%
Selling expenses   73,890    97,798    (23,908)   -24.4%
Total operating expenses   239,280    71,443    167,837    234.9%
Income(loss) from operations   1,276,025    1,397,365    (121,340)   -8.7%
Other income (expense):                       
Interest Income   1    -    1    N/A 
Interest expense   (42,997)   13,419    (56,416)   -420.4%
Asset impairment loss   -    (241,730)   241,730    -100.0%
Other income (expense), net   -    8,335    (8,335)   N/A 
Total other income (expense)   (42,996)   (219,976)   176,980    -80.5%
Income before income taxes   1,233,029    1,177,389    55,640    4.7%
Income taxes   516,981    444,982    71,999    N/A 
Net income   716,048    732,407    (16,359)   -2.2%

  

Revenue

 

Total revenue for fertilizer decreased from $3,467,477 for the three months ended September 30, 2022, to $3,836,522 for the three months ended September 30, 2023, which represented an increase of $369,045, or approximately 10.6%. The increase in revenue was mainly due to the rebound in demand after the epidemic. Traditionally, we experience some seasonality in our sales.

 

We have sold the logistic business and there is no logistic revenue for the three months ended September 30, 2023 any more.

 

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Cost of sales

 

Cost of sales for fertilizer slightly increased from $1,998,669 for the three months ended September 30, 2022, to $2,321,217 for the three months ended September 30, 2023, which represented an increase of approximately $322,548, or 16.1%. The increase in the cost of revenue for fertilizer was in line with the increase in revenue.

  

Gross profit (margin)

 

The gross profit for fertilizer increased from $1,468,808 for the three months ended September 30, 2022 to gross profit of $1,515,305 for the three months ended September 30, 2023. The gross margin decreased from 42.4% for the three months ended September 30, 2022 to 39.5% for the three months ended September 30, 2023. The decreased gross margin was due to the increase in material cost.

 

Expenses

 

We incurred $73,890 in selling expenses for the three months ended September 30, 2023, compared to $97,798 for the three months ended September 30, 2022. We incurred $165,390 in general and administrative expenses for the three months ended September 30, 2023, compared to negative $26,355 for the three months ended September 30, 2022. Total selling, general and administrative expenses increased by $167,837, or 234.9% for the three months ended September 30, 2023, as compared to the same period in 2022. Our selling expenses decreased by $23,908, and our general and administrative expenses increased by $191,745. The increase in general and administrative expenses was due to an accounting adjustment, We expect our general and administrative expenses to increase in the near future if we successfully complete our public offering.

 

Net income

 

Our net income was $716,048 for the three months ended September 30, 2023, compared with a net income of $732,407 for the three months ended September 30, 2022, representing a decrease of $16,359,or 2.2%..

  

Results of Operations for the Nine Months Ended September 30, 2023 and 2022

 

   Nine Months Ended
September 30,
         
   2023   2022   Variance     
   $   $   $   % 
Revenues-fertilizer   6,703,445    6,506,226    197,219    3.0%
Subtotal of revenue   6,703,445    6,506,226    197,219    3.0%
Cost-fertilizer   3,787,985    3,679,893    108,092    2.9%
Subtotal of cost   3,787,985    3,679,893    108,092    2.9%
Gross profit   2,915,460    2,826,333    89,127    3.2%
Gross margin   43.5%   43.4%            
Operating expenses:                    
General and administrative expenses   632,552    264,854    367,698    138.8%
Selling expenses   221,713    218,395    3,318    1.5%
Total operating expenses   854,265    483,249    371,016    76.8%
Income(loss) from operations   2,061,195    2,343,084    (281,889)   -12.0%
Other income (expense):                       
Interest Income   4    1    3    N/A 
Interest expense   (43,790)   (64,147)   20,357    -31.7%
Asset impairment loss   -    (241,730)   241,730    N/A 
Other income (expense), net   -    8,313    (8,313)   N/A 
Total other income (expense)   (43,786)   (297,563)   253,777    -85.3%
Income before income taxes   2,017,409    2,045,521    (28,112)   -1.4%
Income taxes   516,981    444,982    71,999    16.2%
Net income   1,500,428    1,600,539    (100,111)   -6.3%

 

Revenue

 

Total revenue for fertilizer increased from $6,506,226 for the nine months ended September 30, 2022, to $6,703,445 for the nine months ended September 30, 2023, which represented an increase of $197,219, or approximately 3.0%. The increase in revenue was mainly due to the rebound in demand after the epidemic. Traditionally, we experience some seasonality in our sales. We tend to sell more fertilizer products in the coming year.

 

We have sold the logistic business and there is no logistic revenue for the nine months ended September 30, 2023 any more.

 

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Cost of sales

 

Cost of sales for fertilizer slightly increased from $3,679,893 for the nine months ended September 30, 2022, to $3,787,985 for the nine months ended September 30, 2023, which represented an increase of approximately $108,092, or 2.9%. The increase in the cost of revenue for fertilizer was in line with the increase in revenue.

 

Gross profit (margin)

 

The gross profit for fertilizer increased from $2,826,333 for the nine months ended September 30, 2022 to a gross profit of $2,915,460 for the nine months ended September 30, 2023. The gross margin slightly increased from 43.4% for the nine months ended September 30, 2022, to 43.5% for the nine months ended September 30, 2023. The gross profit and margin maintained stable.

 

Expenses

 

We incurred $221,713 in selling expenses for the nine months ended September 30, 2023, compared to $218,395 for the nine months ended September 30, 2022. We incurred $632,552 in general and administrative expenses for the nine months ended September 30, 2023, compared to $264,854 for the nine months ended September 30, 2022. Total selling, general and administrative expenses increased by $371,016, or 76.8% for the nine months ended September 30, 2023, as compared to the same period in 2022. Our selling expenses increased by $3,318, and our general and administrative expenses increased by $367,698. The increase was due to more business activities occurred after the pandemic, We expect our general and administrative expenses to increase in the near future if we successfully complete our public offering.

 

Net income

 

Our net income was $1,500,428 for the nine months ended September 30, 2023, compared with a net income of $1,600,539 for the nine months ended September 30, 2022, representing a decrease of $100,111,or 6.3%. 

 

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 a going concern basis. At September 30, 2023 and December 31, 2022 our net current assets (working capital) were $10,507,774 and $8,112,564, respectively.

 

We have financed our operations over the nine months ended September 30, 2023 and 2022 primarily through proceeds from net cash inflow from operations.

 

The components of cash flows are discussed below:

 

   Nine Months Ended 
   September 30, 
   2023   2022 
Net cash used in operating activities  $(315,552)  $(1,135,389)
Net cash used in investing activities   (179,805)   (128,623)
Net cash provided by financing activities   413,492    1,172,536 
Exchange rate effect on cash   11,580    294,264 
Net cash inflow (outflow)  $(70,285)  $202,788 

 

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Cash Provided by Operating Activities

 

Net cash used in operating activities was $315,552 for the nine months ended September 30, 2023. The net cash outflow consisted primarily of an increase of $3,407,423 in accounts receivable, an increase of $162,884 in inventory, a decrease of $31,624 in other payable, offset by the net income of $1,500,428, depreciation and amortization of $366,989, an increase of $736,753 in accounts payable, etc.

 

Net cash used in operating activities was $1,135,389 for the nine months ended September 30, 2022. The net cash outflow consisted primarily of decrease of $3,407,984 in account payable, an increase of $1,604,664 in other receivable, an increase of $1,442,971 in inventory, an increase of $741,536 in accounts receivable, cash outflow of $46,736 from discontinued operations, which were offset by the net income of $1,600,538, depreciation and amortization of $520,094, a decrease of $3,595,664 in prepayment, an increase of $93,456 in other payable, amortization of right of use asset in amount of $79,517 and asset impairment loss of $241,730.

 

Cash used in Investing Activities

 

There Company invested construction in progress of $179,805 during the nine months ended September 30, 2023. The Company purchased office equipment in the amount of $128,623 for the nine months ended September 30, 2022. 

 

Cash Used in Financing Activities

 

Net cash provided by financing activities was $413,492 for the nine months ended September 30, 2023. During the period, cash provided by financing activities mainly consisted of the proceeds from related parties of $655,575, offset by short-term loan repayment of $242,083.

 

Net cash provided by financing activities was $1,172,536 for the nine months ended September 30, 2022. During the period, cash used in financing activities mainly consisted of the short-term loans repayment of $262,875 and offset by proceeds from related party of $1,435,411.

  

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 currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of shares of our common stock or renewing our current obligations with lenders. 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 on September 30, 2023, and the effect those obligations are expected to have on our liquidity and cash flow in future periods.

 

   Payments Due by Period as of September 30, 2023 
   Total   Less than
1 Year
   2 – 3 Years   4 – 5 Years   Over
5 Years
 
Contractual obligations                    
Loans  $753,245   $753,245   $        -   $        -   $      - 
Others   -    -    -    -    - 
   $753,245   $753,245   $-   $-   $- 

 

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Commitments for Capital Expenditure 

 

There were no non-cancelable commitments for capital expenditure as of September 30, 2023.

 

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.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable because we are a smaller reporting company.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective as of September 30, 2023 to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting

 

During the quarterly period ended September 30, 2023, there has been no change in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected or is reasonably likely to materially affect, our internal controls over financial reporting. We will continue to monitor the deficiencies identified in internal controls and make changes that our management deems necessary.

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

There are no actions, suits, proceedings, inquiries, or investigations before or by any court, public board, government agency, self-regulatory organization, or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company that is outside the ordinary course of business or in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors.

 

Not applicable because we are a smaller reporting company.

 

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

 

There were no unregistered sales of the Company’s equity securities during the nine months ended September 30, 2023, that were not otherwise disclosed in a Current Report on Form 8-K.

 

Item 3. Defaults Upon Senior Securities.

 

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default with respect to any indebtedness of the Company.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

There is no other information required to be disclosed under this item, which was not previously disclosed.

 

Item 6. Exhibits.

 

Exhibit
Number
  Description
31.1   Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1+   Certifications of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2+   Certifications of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   Inline XBRL Instance Document.
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

+ In accordance with the SEC Release 33-8238, deemed being furnished and not filed.

 

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SIGNATURES

 

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

 

Date: November 14, 2023 MULIANG VIAGOO TECHNOLOGY, INC.
     
  By: /s/ Lirong Wang
  Name:  Lirong Wang
  Title: Chief Executive Officer
    (Principal Executive Officer)
     
  By: /s/ Shaw Cheng “David” Chong
  Name:  Shaw Cheng “David” Chong
  Title: Chief Financial Officer
    (Principal Accounting Officer)

 

 

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