Muliang Viagoo(MULG) - 2020 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for Muliang Viagoo Technology, Inc. as of September 30, 2020, and for the three and nine-month periods then ended Condensed Consolidated Balance Sheets Total assets and liabilities increased as of September 30, 2020, with the company's working capital deficit improving from year-end 2019 Condensed Consolidated Balance Sheet Highlights (in USD) | Account | Sep 30, 2020 (Unaudited) | Dec 31, 2019 (Audited) | | :--- | :--- | :--- | | Total Current Assets | $13,801,503 | $8,475,278 | | Total Assets | $32,427,467 | $26,733,566 | | Total Current Liabilities | $18,945,822 | $14,688,418 | | Total Liabilities | $20,319,189 | $16,543,712 | | Total Stockholders' Equity | $12,108,278 | $10,189,854 | - Goodwill of $685,080 was recognized as of September 30, 2020, which was not present at the end of 2019, resulting from the acquisition of Viagoo[9][41] Condensed Consolidated Statements of Income and Comprehensive Income For the nine months ended September 30, 2020, revenues and net income declined year-over-year, while the third quarter showed relative stability compared to the prior year Income Statement Summary (in USD) | Metric | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Revenues | $7,201,853 | $9,677,359 | | Gross Profit | $3,125,304 | $3,967,664 | | Income from Operations | $1,462,363 | $2,634,365 | | Net Income | $1,101,798 | $2,266,282 | | EPS (Basic and Diluted) | $0.03 | $0.04 | Q3 Income Statement Summary (in USD) | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Revenues | $3,148,722 | $3,209,235 | | Gross Profit | $1,421,727 | $1,301,115 | | Net Income | $630,712 | $645,444 | Condensed Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity increased as of September 30, 2020, primarily due to net income, common stock issuance, and foreign currency translation adjustments - During the first nine months of 2020, the company issued 1,061,000 shares of common stock, contributing $534,949 to additional paid-in capital[16] - Net income of $1,096,583 was added to retained earnings (reducing the accumulated deficit), and a foreign currency translation gain of $282,157 was recorded in other comprehensive income[16] Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities increased for the nine months ended September 30, 2020, while significant cash was used in financing activities, resulting in a slight overall decrease in the cash balance Cash Flow Summary (in USD) | Activity | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,021,694 | $1,503,482 | | Net cash used in investing activities | ($42,579) | ($289,783) | | Net cash used in financing activities | ($2,080,739) | ($1,148,859) | | Net (decrease) in cash | ($11,795) | ($6,476) | | Cash, end of period | $92,073 | $6,302 | Notes to Condensed Consolidated Financial Statements These notes detail the company's operations, accounting policies, and financial items, including the Viagoo acquisition, a going concern warning, and a planned property sale to address liquidity - The company's core business is developing, manufacturing, and selling organic fertilizers in China, with recent expansion into logistics technology by acquiring Viagoo Pte Ltd[18][39] - The company reported a working capital deficit of $5.1 million and a cash balance of only $92,073 as of September 30, 2020, raising substantial doubt about its ability to continue as a going concern[45] - Subsequent to the reporting period, the company arranged for the sale of a factory property in Shanghai for approximately $10.8 million via a court-organized auction, with proceeds expected to settle debts and provide working capital[159] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the business overview, recent developments including COVID-19 and the Viagoo acquisition, and analyzes financial results, addressing liquidity challenges and plans for asset sales Business Overview and Recent Developments The company's core business is organic fertilizer manufacturing in PRC, with recent diversification into logistics technology via the Viagoo acquisition and recovery from COVID-19 impacts - The company's core business involves processing crop straw into organic fertilizer, which reduces air pollution from straw burning[161] - On June 19, 2020, the company acquired 100% of Viagoo Pte Ltd. for an aggregate price of $2,830,800, paid in 1,011,000 shares of restricted common stock[186] - The COVID-19 outbreak adversely affected business in the first quarter of 2020, but operations gradually resumed and reached full capacity by April 2020[183][184] Results of Operations For the nine months ended September 30, 2020, total revenue and net income significantly declined year-over-year, primarily due to COVID-19, though the third quarter showed signs of stabilization Results of Operations for the Nine Months Ended September 30 | Metric | 2020 | 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $7,201,853 | $9,677,359 | -25.58% | | Gross Profit | $3,125,304 | $3,967,664 | -21.23% | | Income from Operations | $1,462,363 | $2,634,365 | -44.49% | | Net Income | $1,101,798 | $2,266,282 | -51.38% | Results of Operations for the Three Months Ended September 30 | Metric | 2020 | 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $3,148,722 | $3,209,235 | -1.89% | | Gross Profit | $1,421,727 | $1,301,115 | +9.27% | | Income from Operations | $778,178 | $897,491 | -13.29% | | Net Income | $630,712 | $645,444 | -2.61% | - The significant decrease in net income for the nine-month period was mainly due to an $842,360 decrease in gross profit and a $329,642 increase in operating expenses, both resulting from the impact of COVID-19[227] Liquidity and Capital Resources As of September 30, 2020, the company faced a working capital deficit and insufficient cash reserves, necessitating additional funding, with a planned property sale expected to improve liquidity - The company had a working capital deficit of $5,144,319 as of September 30, 2020[234] Cash Flow Summary for Nine Months Ended September 30 (in USD) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,021,694 | $1,503,482 | | Net cash used in investing activities | ($42,579) | ($289,783) | | Net cash used in financing activities | ($2,080,739) | ($1,148,859) | - Management anticipates that current cash reserves are not sufficient to fund operations for the next twelve months and that additional funding will be required[241] Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company qualifies as a smaller reporting company - Disclosure is not applicable because the company qualifies as a smaller reporting company[245] Controls and Procedures As of September 30, 2020, disclosure controls and procedures were deemed effective, with no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2020[246] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[247] PART II – OTHER INFORMATION Legal Proceedings The company discloses two civil proceedings against its subsidiary, Shanghai Zongbao, which are expected to be resolved through the court-supervised sale of a mortgaged property - There are two ongoing civil proceedings against the subsidiary Shanghai Zongbao: one for a loan default with Agricultural Bank of China and another for a construction contract default[250] - The company expects to resolve these proceedings by selling the mortgaged asset, which was auctioned on Taobao's platform for RMB 74,515,000 (approx. $10.8 million), with proceeds expected to cover the debts[250] Risk Factors This section is not applicable as the company qualifies as a smaller reporting company - Disclosure is not applicable because the company qualifies as a smaller reporting company[251] Unregistered Sales of Equity Securities No unregistered sales of equity securities occurred during the three months ended September 30, 2020, that were not previously disclosed - No unregistered sales of equity securities occurred during the three months ended September 30, 2020, that were not previously disclosed[251] Defaults Upon Senior Securities The company reports no material defaults in the payment of principal or interest on any of its indebtedness - There have been no material defaults with respect to any indebtedness of the Company[252] Mine Safety Disclosures This section is not applicable to the company - This item is not applicable[252] Other Information No other information required disclosure under this item - No other information required disclosure under this item[252] Exhibits This section lists the exhibits filed with the quarterly report, including CEO and CFO certifications and XBRL data files - Exhibits filed include CEO/CFO certifications (31.1, 31.2, 32.1, 32.2) and XBRL interactive data files (101 series)[254]