Muliang Viagoo(MULG) - 2023 Q3 - Quarterly Report

Organic Fertilizer Business - Organic fertilizer revenue accounted for 100.0% and 91.5% of total revenue for the nine months ended September 30, 2023, and 2022, respectively [188] - The company plans to improve organic straw fertilizer production technology by adopting advanced automatic control and shifting to powdered organic fertilizer to increase production capacity [188] - The company's organic fertilizer business accounted for 100% of total revenue for the nine months ended September 30, 2023 [232] - Total revenue for fertilizer increased by $369,045 (10.6%) from$ 3,467,477 in Q3 2022 to $3,836,522 in Q3 2023, driven by post-epidemic demand rebound [234] - Cost of sales for fertilizer rose by$ 322,548 (16.1%) from $1,998,669 in Q3 2022 to$ 2,321,217 in Q3 2023, aligning with revenue growth [236] - Gross profit for fertilizer increased slightly to $1,515,305 in Q3 2023 from$ 1,468,808 in Q3 2022, but gross margin decreased from 42.4% to 39.5% due to higher material costs [237] - Fertilizer revenue increased by $197,219 (3.0%) to$ 6,703,445 for the nine months ended September 30, 2023, driven by post-pandemic demand recovery [241] - Fertilizer cost of sales rose by $108,092 (2.9%) to$ 3,787,985, aligning with revenue growth [243] - Gross profit for fertilizer increased to $2,915,460, with a slight margin improvement to 43.5% [244] Financial Performance - Net income for the nine months ended September 30, 2023, was$ 1,500,428, compared to $1,600,538 for the same period in 2022 [202] - Net cash used in operating activities was$ 315,552 for the nine months ended September 30, 2023, compared to $1,135,389 for the same period in 2022 [202] - Net cash provided by financing activities was$ 413,492 for the nine months ended September 30, 2023, compared to $1,172,536 for the same period in 2022 [202] - Net income decreased by$ 16,359 (2.2%) from $732,407 in Q3 2022 to$ 716,048 in Q3 2023 [239] - Total operating expenses surged by $371,016 (76.8%), primarily due to a$ 367,698 increase in general and administrative expenses [245] - Net income decreased by $100,111 (6.3%) to$ 1,500,428 for the nine months ended September 30, 2023 [246] - Net cash used in operating activities was $315,552, primarily due to increases in accounts receivable and inventory [250] - Net cash provided by financing activities was$ 413,492, mainly from related party proceeds of $655,575 [253] - The company anticipates insufficient cash reserves for the next twelve months and may seek additional funding through equity financing or short-term loans [254] Asset and Liability Overview - Current assets increased to$ 19,218,991 as of September 30, 2023, compared to $17,244,572 as of December 31, 2022 [201] - Consolidated cash and cash equivalents amount to$ 3,028, representing 100% of the consolidated financials [205] - Current assets total $19,369,027, with 99% attributed to the VIE (Muliang Industry Co., Ltd. and its subsidiaries) [205] - Total assets are$ 26,454,244, with 99% contributed by the VIE [205] - Total liabilities stand at $8,925,423, with 234% attributed to the VIE [205] - Revenues for the period are$ 6,703,445, entirely from the VIE [205] - Gross profit is $2,915,460, fully derived from the VIE [205] - Net income is$ 1,500,428, entirely from the VIE [205] - The VIE owes $12,225,739 to the WFOE (Shanghai Mufeng) as service fee income payable, accumulated since February 16, 2016 [205] - The VIE has not paid any amounts in cash or other means to settle the payables owed to the WFOE [205] - Muliang Viagoo has the power to direct activities of the VIE and can transfer assets out of the VIE under the VIE arrangements [214] Operational Expenses and Adjustments - Selling expenses decreased by$ 23,908 (24.4%) from $97,798 in Q3 2022 to$ 73,890 in Q3 2023 [238] - General and administrative expenses increased significantly by $191,745 (727.5%) from -$ 26,355 in Q3 2022 to $165,390 in Q3 2023 due to an accounting adjustment [238] - The company expects general and administrative expenses to increase in the near future if it successfully completes its public offering [238] - Total operating expenses surged by$ 371,016 (76.8%), primarily due to a $367,698 increase in general and administrative expenses [245] Business Divestitures and Acquisitions - The company sold industrial land and production facility in Shanghai for RMB 69,554,095.64, with proceeds used to repay debts to Agricultural Bank of China and Shanghai Zhongta Construction and Engineering Co., Ltd. [192] - The company sold 100% of Viagoo Pte Ltd. for a total consideration of US$ 5,254,001.20, including a promissory note, shares, and future payments contingent on a liquidity event [193][194] - The company sold its logistics business, resulting in no logistics revenue for Q3 2023 [234] Future Plans and Commitments - The company is constructing a black goat processing plant in Chuxiong City, Yunnan Province, with an annual slaughter capacity of 200,000 black goats, expected to generate revenue starting in 2023 [189] - Contractual obligations totaled $753,245, all due within one year [256] - No non-cancelable commitments for capital expenditure as of September 30, 2023 [258] Impact of COVID-19 - The company's financial performance was adversely affected by COVID-19 in 2022 but has been steadily recovering since the pandemic ended in China in November 2022 [232]