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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, 2024

 

☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from __________ to __________

 

Registration No. 000-56532

 

ESG INC. 

(Exact name of registrant as specified in its charter)

 

Nevada   87-1918342
(State or Other Jurisdiction of
Incorporation or Organization)		   (I.R.S. Employer
Identification No.)
     

523 School House Rd.

Kennett Square, PA

   19348
(Address of Principal Executive Offices)   (Zip Code)

 

267-467-5871

(Registrant’s telephone number, including area code)

 

n/a   n/a

(Former Name, former address and former fiscal year, if changed since last report)

 

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

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

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒    No ☐

 

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

 

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 ☒

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 25,899,468 common shares issued and outstanding as of September 30, 2024.

 

 

 

 

 

 

ESG INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

    Page
PART I FINANCIAL INFORMATION:  
     
Item 1. Financial Statements (Unaudited) 1
     
  Consolidated Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023 1
     
  Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited) 2
     
  Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited) 3
     
  Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2024 and 2023 (Unaudited) 4
     
  Notes to the Unaudited Financial Statements 5
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
     
Item 4. Controls and Procedures 16
     
PART II OTHER INFORMATION:  
     
Item 1. Legal Proceedings 17
     
Item 1A Risk Factors 17
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17
     
Item 3. Defaults Upon Senior Securities 17
     
Item 4. Submission of Matters to a Vote of Securities Holders 17
     
Item 5. Other Information 17
     
Item 6. Exhibits 17
     
  Signatures 18

 

-i-

 

Part I. Financial Information

Item 1. Financial Statements (unaudited)

 

ESG INC.

CONSOLIDATED BALANCE SHEETS

 

           
   September 30, 2024
(Unaudited)		   December 31, 2023 
ASSETS          
Current Assets          
Cash   444,835    342,342 
Accounts receivable and other receivables   210,526    79,221 
Advance to suppliers   1,208,222    166,010 
Inventories   1,869,777    1,651,376 
Total Current Assets   3,733,360    2,238,949 
Property, plant and equipment, net   17,948,708    18,694,969 
Intangible assets, net   3,068,514    3,085,906 
Value added tax receivable   2,380,839    2,211,980 
Note receivable   -    41,848 
Total Non-current Assets   23,398,061    24,034,703 
Total Assets   27,131,421    26,273,652 
LIABILITIES AND EQUITY          
Current Liabilities          
Short-term bank loans   6,939,101    6,904,228 
Account payable   2,731,467    1,450,405 
Payable to related party   -    30,000 
Accrued expenses and other liabilities   2,749,583    2,312,772 
Deferred income   1,271,088    1,355,552 
Total Current Liabilities   13,691,239    12,052,957 
Long-term payable   1,334,825    1,423,116 
Total Liabilities   15,026,064    13,476,073 
           
Commitments and Contingencies          
           
Shareholders' Equity (Deficit)          
Common stock, $0.001 par value, 65,000,000 authorized, 25,899,468 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively.   25,900    25,900 
Additional paid in capital   11,152,388    11,152,388 
Accumulated comprehensive income (loss)   (435,822)   (430,206)
Accumulated deficit   (1,708,434)   (1,224,811)
Equity Attributable to stockholders of ESG Inc.   9,034,032    9,523,271 
Equity attributable to noncontrolling interest   3,071,325    3,274,308 
Total Equity   12,105,357    12,797,579 
Total Liabilities and Stockholders' Equity   27,131,421    26,273,652 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

-1-

 

ESG INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

                     
   For the three months ended   For the nine months ended 
   September 30, 2024   September 30, 2023   September 30, 2024   September 30, 2023 
                 
Revenues   2,234,549    518,192    7,122,611    5,959,055 
Cost of goods sold   1,725,979    101,859    6,272,487    4,496,465 
Gross Profit   508,570    416,333    850,123    1,462,590 
Research and development cost   144,582    152,839    404,366    457,306 
Selling expenses   2,292    1,263    4,776    1,863 
General and administrative expense   239,656    279,953    703,078    876,271 
Operating Income   122,041    (17,722)   (262,096)   127,150 
Interest (expense)   (125,380)   62,553    (406,985)   (287,134)
Other Income (loss)   (180)   29,652    (15,605)   133,180 
Income (loss) before Income Taxes   (3,521)   74,483    (684,686)   (26,804)
Income taxes   -    -    -    - 
Consolidated net Income (loss)   (3,521)   74,483    (684,686)   (26,804)
Less: Net income (loss) attributable to noncontrolling interest   (26,218)   28,829    (201,063)   13,337 
Net Income (Loss) Attributable to Shareholders of ESG Inc.   22,697    45,654    (483,623)   (40,141)
Other comprehensive items                    
Foreign currency translation gain (loss) attributable to ESG Inc.   161,997    (191,087)   (5,616)   (562,011)
Foreign currency translation gain (loss) attributable to noncontrolling interest   55,390    (65,336)   (1,920)   (192,165)
Total comprehensive income (loss) attributable to noncontrolling interest   29,173    (36,507)   (202,983)   (602,152)
Total comprehensive Income (loss) Attributable to Shareholders of ESG Inc.   184,693    (145,433)   (489,239)   (178,828)
Net income loss per share - basic and diluted   0.01    (0.01)   (0.02)   (0.01)
Weighted average shares outstanding -  basic and diluted   25,899,468    25,899,468    25,899,468    25,899,468 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

-2-

 

ESG INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

                                         
   Common stock   Additional
paid aid-in		   Accumulated
income		   Accumulated
other
comprehensive		   Total Company's   Noncontrolling     
   Share   Amount   capital   (deficit)   Income   equity   interest   Total 
                                 
Balance at December 31, 2023   25,899,468   $25,900   $11,152,388   $(1,224,811)  $(430,206)  $9,523,271   $3,274,308   $12,797,579 
Net loss   -    -    -    (587,667)   -    (587,667)   (197,821)   (785,488)
Foreign currency translation adjustment   -    -    -    -    (159,580)   (159,580)   (54,564)   (214,144)
Balance at March 31, 2024   25,899,468    25,900    11,152,388    (1,812,478)   (589,786)   8,776,024    3,021,923    11,797,947 
Net income   -    -    -    81,347    -    81,347    22,976    104,323 
Foreign currency translation adjustment   -    -    -    -    (8,033)   (8,033)   (2,746)   (10,779)
Balance at June 30, 2024   25,899,468    25,900    11,152,388    (1,731,131)   (597,819)   8,849,338    3,042,153    11,891,491 
Net income (loss)   -    -    -    22,697    -    22,697    (26,218)   (3,521)
Foreign currency translation adjustment   -    -    -    -    161,997    161,997    55,390    217,387 
Balance at September 30, 2024   25,899,468   $25,900   $11,152,388   $(1,708,434)  $(435,822)  $9,034,032   $3,071,325   $12,105,357 
Balance at  December 31, 2022   25,899,468    25,900    11,152,388    (900,098)   (148,590)   10,129,600    3,438,129    13,567,729 
Net loss   -    -    -    (142,348)   -    (142,348)   (40,100)   (182,448)
Foreign currency translation adjustment   -    -    -    -    43,059    43,059    14,723    57,782 
Balance at March 31, 2023   25,899,468    25,900    11,152,388    (1,042,446)   (105,531)   10,030,311    3,412,752    13,443,063 
Net income   -    -    -    56,553    -    56,553    24,608    81,161 
Foreign currency translation adjustment   -    -    -    -    (413,983)   (413,983)   (141,551)   (555,534)
Balance at June 30, 2023   25,899,468    25,900    11,152,388    (985,893)   (519,514)   9,672,881    3,295,809    12,968,690 
Net income   -    -    -    45,654    -    45,654    28,829    74,483 
Foreign currency translation adjustment   -    -    -    -    (191,087)   (191,087)   (65,336)   (256,423)
Balance at September 30, 2023   25,899,468   $25,900   $11,152,388   $(940,239)  $(710,601)  $9,527,448   $3,259,302   $12,786,750 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

-3-

 

ESG INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

（Unaudited)

 

           
   For The Nine Months Ended 
   September 30, 2024   September 30, 2023 
         
Cash flows from operating activities:          
Net loss  $(684,686)  $(26,804)
Adjustments to reconcile loss to net cash used in operating activities:          
Depreciation and amortization   1,362,759    1,092,743 
Loss on obsolete inventories   201,480    - 
Changes in assets and liabilities:          
Accounts receivable and other receivable   (131,305)   (140,022)
Advance to suppliers   (1,042,212)   (618,092)
Inventory   (218,401)   459,850 
Value added tax receivable   (168,859)   - 
Note receivable   41,848    17,010 
Accounts payable   1,281,062    274,887 
Payable to related party   (30,000)   8,689 
Accrued expenses and other payables   436,811    (33,776)
Deferred income   (97,493)   (59,569)
Net cash provided by operating activities   951,005    974,916 
           
Cash flows from investing activities:          
Acquisition of fixed assets   (385,337)   - 
Net cash used in investing activities   (385,337)   - 
           
Cash flows from financing activities:          
Proceeds from loans   427,460    - 
Payment of debt   (470,206)   (710,969)
Net cash used in financing activities   (42,746)   (710,969)
           
Effect of exchange rate changes on cash   (420,429)   (305,480)
           
Net increase (decrease) in cash   102,493    (41,533)
           
Cash, beginning of the period   342,342    206,621 
           
Cash, end of the period  $444,835   $165,088 
           
Supplemental disclosures of cash flow information:          
Cash paid for interest  $406,985   $287,134 
Cash paid for income tax  $-   $- 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

-4-

 

ESG INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

 

NOTE 1- ORGANIZATION AND DESCRIPTION OF BUSINESS

 

ESG Inc. (“ESG”) was incorporated in July 2021 as a Nevada corporation and headquartered at Kennett Square, PA, USA. ESG is a holding company without operations and is engaged in food production and distribution through its subsidiaries.

 

ESG incorporated ESG China Limited as ESG’s wholly owned subsidiary in Hong Kong on November 18, 2022. ESG China Limited incorporated Hainan ESG Technology Co., Ltd., a China corporation (“Hainan ESG”) with 100% of ownership on January 16, 2023. ESG, ESG China Limited, and Hainan ESG have no operations.

 

On September 28, 2023, ESG entered into a share exchange agreement with Funan Allied United Farmer Products Co., Ltd., a China corporation incorporated in May 2017 (“AUFP”), and 74.52% of shareholders of AUFP, (each a “Shareholder,” and collectively, the “Shareholders”), through Hainan ESG. Pursuant to such agreement, the Shareholders exchanged their equity of AUFP to Hainan ESG for shares of common stock of ESG, and ESG has agreed to offer 10,432,800 of ESG shares. Following this transaction, AUFP became a 74.52% subsidiary of ESG through Hainan ESG.

 

AUFP incorporated Anhui Allied United Mushroom Technology Co., Ltd. (“AUMT”) in China in March 2018 to manufacture white button mushroom compost while AUFP incorporated Anhui Allied United Mushroom Co., Ltd. (“AUM”) in China in April 2018 to grow fresh white button mushrooms and provide mushroom growing management services. AUFP, AUMT, and AUM are operating entities in China.

 

Prior to the share exchange, Mr. Zhi Yang owned 30% of AUFP, Fuyang Zhihan Agricultural Information Co. Ltd. (“Zhihan”) owned 24.52% of AUFP and Mr. Chris Alonzo owned 10% of AUFP. ESG, after the share exchange agreement described above is completed, owns 74.52% of AUFP and its subsidiaries, AUM and AUMT in China. Currently Mr. Zhi Yang and Zhihan control 83.526% of ESG through DCG China Limited , and Mr. Christopher Alonzo owns 5.406% of ESG.

 

Since the Company is effectively controlled by the same controlling shareholders before and after the share exchange agreement, it is considered under common control. Therefore the above mentioned transactions were accounted for as a recapitalization. The reorganization has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying financial statements of the Company.

 

Our operating subsidiaries are involved in direct white button mushroom composting, growing, food production, distribution, as well as import and export of Phase III compost and food to strategize. With the core business philosophy to develop and operate sustainable and technology-driven food businesses consistent with the principles of Environmental, Sustainable, and Governance investing, we believe that the growing global demand for sustainable high quality food presents a unique opportunity to operate companies engaged in this critical area that is being paid increasing attention by global investors.

 

 

 

-5-

 

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation and consolidation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.

 

The consolidated financial statements of the Company include the financial statements of the Company and its 74.52% owned subsidiaries in China. All inter-company transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation. The Equity attributable to minority shareholders who own 25.48% of AUFP and its subsidiaries are non-controlling interest (“NCI”). The NCI were $3,071,325 and $3,274,308 as of September 30, 2024 and December 31, 2023, respectively.

 

Interim Financial Information

 

The 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 financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2023, as 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 as of and for the year ended December 31, 2023.

 

Use of estimates

 

In preparing the consolidated 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 consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include allowance for doubtful accounts, advances to suppliers, valuation of inventories, useful lives of property, plant, and equipment, and intangible assets.

 

Cash and cash equivalent

 

Cash and cash equivalent includes demand deposits with financial institutions that are highly liquid in nature.

 

Account receivable

 

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowance 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, customer’s payment history, its current creditworthiness, and current economic trends. Accounts are written off after efforts at collection prove unsuccessful. As of September 30, 2024 and December 31, 2023, allowance for doubtful accounts was nil  and nil , respectively.

 

Advances to suppliers, net

 

Advances to suppliers represent prepayments made to ensure continuous high-quality supplies and favorable purchase prices for premium quality. These advances are settled upon suppliers delivering raw materials to the Company when the transfer of ownership occurs. The Company review its advances to suppliers on a periodic basis and makes general and specific allowances when there is doubt as to the ability of a supplier to provide supplies to the Company or refund an advance. As of September 30, 2024 and December 31, 2023, advance to suppliers was $1,208,222 and $166,010, respectively and allowance for doubtful accounts was nil and nil, respectively.

 

-6-

 

Inventory

 

Inventory is comprised primarily of raw materials, work-in-progress and finished goods. The value of inventory is determined using the weighted average method. The Company periodically estimates an inventory allowance for estimated unmarketable inventories when necessary. Inventory amounts are reported in net of allowances.

 

Property, plant and equipment, net

 

Property, plant and equipment are stated at cost, less accumulated depreciation. Major repair and improvements that significantly extend original useful lives or improve productivity are capitalized and depreciated over the period benefited. Repair and maintenance costs are expensed as incurred. Depreciation is recorded principally by the straight-line method over the estimated useful lives of our property, plant and equipment which generally have the following ranges: buildings and improvements: 20 years; machinery and equipment: 5-10 years; office equipment: 3-5 years. Construction in progress is not depreciated until ready for service.

 

Intangible assets, net

 

Intangible assets with finite lives are amortized using the straight-line method over their estimated period of benefit. Evaluation of the recoverability of intangible assets is made to take into account events or circumstances that warrant revise estimates of useful lives or that indicate that impairment exists. All of the Company’s intangible assets are subject to amortization. No impairment of intangible assets has been identified as of the balance sheet date.

 

Intangible assets consist of land use rights, patent and purchased software. Intangible assets are stated at cost less accumulated amortization. The land purchased for industrial use has the right of use for 50 years. We amortized the right to use land in 50 years. Patent and software amortized using the straight-line method with estimated useful lives of 12 years and 5 years, respectively.

 

Revenue recognition

 

The Company follows Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606).

 

FASB ASC Topic 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies each performance obligation.

 

Revenue is generated by selling fresh mushrooms to authorized distributors and wholesalers mainly in Yangzi River Delta. Contracts were signed after the communication of the price and quantities with customers. Our sales terms generally do not allow to sell without a deposit being made and do not allow for a right of return. Usually, the deposit from the customer equals or more than the sales amount. Control of the mushrooms is transferred upon receipt or loaded in the truck of carriers at our warehouse, as determined by the specific terms of the contract. Upon transfer of control to the customer, which completes our performance obligation, revenue is recognized.

 

Customer concentration

 

                    
   For the Three Months Ended September 30, (Unaudited)   For the Nine Months Ended September 30, (Unaudited) 
   2024   2023   2024   2023 
Customer A   25%   21%   17%   20%
Customer B   37%   -    20%   - 
Customer C   19%   -    20%   - 
Customer D   16%   -    15%   - 
Customer E   -    43%   -    42%

 

-7-

 

Deferred income

 

Government grants (sometimes referred to as subsidies, subventions, etc.) are as assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. Deferred income consists primarily of government grants related to depreciable assets. Government grants received relating to depreciable assets are recorded as deferred income and recognized in over the life of the related assets. Company records income when receiving a grant which constitutes compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs. As of September 30, 2024 and December 31, 2023, deferred income was $1,271,088 and $1,355,552, respectively. 

 

Research and development expenses

 

Research and development expenses are expensed in the period when incurred. These costs primarily consist of cost of materials used, salaries paid for the Company’s development department, and fees paid to the third parties. The research and development expenses were $144,582 and $152,839 for the three months ended September 30, 2024 and 2023, respectively. The research and development expenses were $404,366 and $457,306 for the nine months ended September 30, 2024 and 2023, respectively.

 

Noncontrolling interests

 

The Company follows FASB ASC Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI (previously referred to as minority interests) be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to non-controlling interests even when such allocation might result in a deficit balance. 

 

The net income (loss) attributed to NCI was separately designated in the accompanying statements of operations and comprehensive income (loss). Losses attributable to NCI in a subsidiary may exceed a non-controlling interest’s interests in the subsidiary’s equity. The excess attributable to NCIs is attributed to those interests. NCIs shall continue to be attributed their share of losses even if that attribution results in a deficit NCI balance.

 

AUFP and its subsidiaries, AUM and AUMT were 25.48% owned by noncontrolling interest and $3,071,325 and $3,274,308 of equity were attributable to noncontrolling interest as of September 30, 2024 and December 31, 2023, respectively. During the three months ended September 30, 2024 and 2023, the Company had net loss of $26,218 and net income of $28,829, respectively, attributable to the noncontrolling interest. The Company had net loss of $201,063 and net income of $13,337, respectively, attributable to the noncontrolling interest for the nine months ended September 30, 2024 and 2023.

 

Foreign currency translation and comprehensive income (loss)

 

The accounts of the Company’s Chinese entities are maintained in Chinese Yuan (“RMB”) and the accounts of the U.S. parent company are maintained in United States dollar (“USD”). The accounts of the Chinese entities were translated into USD in accordance with FASB ASC Topic 830 “Foreign Currency Matters.” All assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates and the statements of operations and cash flows are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) in accordance with FASB ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from foreign currency transactions are reflected in the statements of operations.

 

The Company follows FASB ASC Topic 220-10, “Comprehensive Income (loss).” Comprehensive income (loss) comprises net income (loss) and all changes to the statements of changes in stockholders’ equity, except those due to investments by stockholders, changes in additional paid-in capital and distributions to stockholders. 

 

The exchange rates used to translate amounts in RMB to USD for the purposes of preparing the CFS were as follows:

 

               
   September 30, 2024   September 30, 2023   December 31, 2023 
Period-end date USD: RMB exchange rate   7.0182    7.2952    7.0797 
Average USD for the reporting period: RMB exchange rate   7.1773    7.0327    7.0750 

 

-8-

 

 

Income taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) tax payable or refundable for the current period and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets also include the prior year’s net operating losses carried forward.


The Company accounts for income for income taxes in accordance with ASC 740, Income Taxes. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net effects of temporary difference between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or not be deductible in the future.

 

Contingencies

 

Certain conditions may exist as of the date the consolidated financial statements (“CFS”) are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. In accordance with ASC 450, the Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s CFS.

 

If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

 

NOTE 3- GOING CONCERN

 

The accompanying consolidated financial statements were prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. At September 30, 2024, the Company had negative working capital of $9,957,879. The Company had an accumulated deficit of approximately $1,708,434 and $1,224,811 as of September 30, 2024 and December 31, 2023, respectively. For nine month ended September 30, 2024, the Company had losses of $684,686 and $26,804, respectively. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.

 

To enhance our ability to continue to operate, we are dedicating resources to generate recurring revenues and sustainable operating cash flows. Currently, we are increasing our production capacity to generate more revenues and decrease unit cost.

 

NOTE 4- ACCOUNT RECEIVABLE AND OTHER RECEIVABLES

 

Account receivable and other receivable consisted of the following:

 

          
  

September 30,

2024

(Unaudited)

  

December 31,

2023

 
Accounts receivable  $106,267   $- 
Other receivable   104,259    79,221 
Total  $210,526   $79,221 

 

-9-

 

NOTE 5- PROPERTY, PLANT AND EQUIPMENT

 

The following table summarizes our property, plant and equipment:

 

          
  

September 30,

2024

(Unaudited)

  

December 31,

2023

 
Buildings and improvements  $16,459,599   $16,276,614 
Machinery, equipment and vehicle fleet   9,079,406    8,597,430 
Construction in progress   21,926    21,682 
Property, plant and equipment - cost   25,560,931    24,895,726 
Less: Accumulated depreciation   (7,612,223)   (6,200,757)
Property, plant and equipment - net  $17,948,708   $18,694,969 

 

For the three months ended September 30, 2024 and 2023, depreciation expenses were $444,538 and $364,247, respectively. For the nine months ended September 30, 2024 and 2023, depreciation expenses were $1,312,054 and $1,040,765, respectively.

 

NOTE 6- INVENTORIES

 

Inventories consisted of the following:

 

          
   September 30,     
   2024   December 31, 
   (Unaudited)   2023 
Raw materials  $1,733,520   $1,516,634 
Finished goods   -    - 
Work in progress - compost   91,342    90,326 
 - growing mushrooms   44,915    44,416 
Total  $1,869,777   $1,651,376 

 

NOTE 7- INTANGIBLE ASSETS

 

Intangible assets are stated at cost or acquisition-date fair value less accumulated amortization and consist of the following:

 

          
  

September 30,
2024

(Unaudited)

   December 31,
2023		 
Land use right  $3,365,401   $3,327,987 
Software   7,787    7,701 
Patent   7,124    7,045 
Subtotal   3,380,313    3,342,733 
Less: Accumulated amortization   (311,799)   (256,827)
Total  $3,068,514   $3,085,906 

 

Amortization expenses were $18,288 and $17,594, respectively for the three months ended September 30, 2024 and 2023, respectively, $50,705 and $51,978 for the nine months ended September 30, 2024 and 2023, respectively.

 

-10-

 

Estimated future amortization expense is as follows as of September 30, 2024:

 

     
Years ending December 31,  Amortization expense 
2024   73,151 
2025   73,151 
2026   73,151 
2027   73,151 
2028   73,151 
Thereafter   2,702,759 
Total   3,068,514 

 

NOTE 8- BANK LOANS

 

Short-term bank loans consisted of the following:

 

                              
  

September 30, 2024

(unaudited)

  

Interest

rate

   Due date  

December 31,

2023

  

Interest

rate

   Due date 
Agricultural Bank of China Funan Branch  $812,174.06    4.50%   4/06/25   $845,416    3.70%   4/10/24 
Anhui Funan Rural Commercial Bank   1,994,813    5.60%   12/22/24    1,972,637    5.90%   12/22/24 
Anhui Funan Rural Commercial Bank   854,920    5.60%   3/28/25    1,409,026    5.90%   3/28/24 
Anhui Funan Rural Commercial Bank   1,424,867    5.60%   1/25/25    845,416    5.90%   1/25/24 
Industrial and Commercial Bank of China, Funan (1)   712,433    3.45%   10/12/24    704,513    3.45%   10/12/24 
Bank of China Funan Branch (2)   1,139,893    3.60%   3/13/25    1,127,220    3.60%   3/13/25 
Total  $6,939,101    -    -   $6,904,228    -    - 

 

(1) $712,433 and $704,513 of loans from Industrial and Commercial Bank of China, Funan were pledged by fixed assets as of September 30, 2024 and December 31, 2023, respectively.

(2) $1,139,893 and $1,127,220 of loans from Bank of China were pledged by fixed assets as of September 30, 2024 and December 31, 2023, respectively.

 

 

NOTE 9- ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

Accrued expenses and other current liabilities consisted of the following:

 

          
   September 30, 2024   December 31,  
   (Unaudited)   2023 
         
Advances from customers  $120,674   $63,867 
Salary payable   105,099    181,950 
Tax payable   13,951    16,131 
Other payable   2,509,859    2,050,824 
Total  $2,749,583   $2,312,772 

 

Other payable was primarily comprised of loans from non-bank institutions and deposit from customers. Loans included $284,973 and $281,805 from Funan Agricultural Investment Co. Ltd as of September 30, 2024 and December 31, 2023, respectively and $1,424,867 and $1,409,026 from Funan Small Business financing service center as of September 30, 2024 and December 31, 2023, respectively.

 

-11-

 

NOTE 10- VALUE ADDED TAX RECEIVABLE

 

Selling merchandise in China is generally subject to the value-added tax (“VAT”). The Company and its subsidiaries’ primary operations are classified as agriculture products and its revenue is exempt from VAT and income tax. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). VAT input was primarily due to purchase of property, plant and equipment. As of September 30, 2024 and December 31, 2023, VAT input was $2,380,839 and $2,211,980, respectively. VAT input can deduct VAT output or be refunded when selling non-exempt goods. Anhui Allied United Mushroom Technology and Anhui Allied United Mushroom are engaged in agricultural production in China, and their value-added tax are exempted. The Company plans to produce processed mushrooms in the near future to utilize VAT input to offset VAT output.

 

NOTE 11- ASSET ACQUISITION

 

On May 11, 2021, Anhui Allied United Mushroom Co., Ltd. signed the Agreement (“Agreement”) with Suhua Yang and Hao Yan, the owners of Funan Zhihua Mushroom Co., Ltd. (“Target Company”). As the consideration of transferring 100% equity of Target Company, AUM would pay Shareholders with $2,151,383 (RMB 14,840,028), which is $25,612 (RMB176,667) per month for 84 months at the end of each month after the delivery of the growing rooms. Target Company was dissolved after the asset acquisition.

 

NOTE 12- COMMITMENTS AND CONTINGENCIES

 

Commitments

 

On January 5, 2022, Funan Modern Recycling Agriculture Investment Co., Ltd. (“FMRA”) signed an agreement with AUFP to fund AUFP 115 million RMB ($18.09 million) on the expansion of composting facilities including 6 bunkers and 22 tunnels. According to the agreement, AUFP transfers the land use right of 46,662 square meters which the composting facilities will be constructed on to FMRA and starts to pay rent for 10 years after AUFP uses the facilities. Once rents are paid, FMRA transfers the land use right and deed of composting facilities to AUFP. All the costs related to the transfer of land use right are paid by FMRA.

 

Legal contingencies

 

Management has identified certain legal mattes where we believe an unfavorable outcome is resonably estimated. Management believes that the total liabilities of the Company that may arise as a result of currently pending proceedings will not have a material adverse effect on the Company taken as a whole.

 

On September 3, 2021, Anhui Daquan Construction Company ("Daquan”) filed a lawsuit against Funan Zhihua Mushroom Co., Ltd. (a merged company, “Zhihua”) on unpaid contractual price of $48,744. Zhihua has a dispute on construction quality which did not meet the requirements specified in the contract and filed a lawsuit for $26,095 of damage. On June 6, 2023, Daquan paid $26,095 to Zhihua to settle the lawsuit.

 

On November 10, 2022, Funan Yuanlangju Construction Co., Ltd. filed a lawsuit against AUFP for $60,147. The plaintiff sold construction materials to AUFP. AUFP had a dispute with the plaintiff over the amount of the sale. On July 7, 2023, the two parties reached a settlement that AUFP paid the plaintiff $50,740 in 2023.

 

On December 2, 2022, Liu Pengpeng filed a lawsuit against AUFP for $66,066. Liu Pengpeng signed a contract with AUFP on installation work and drainage construction. Liu Pengpeng breached the contract and failed to complete the construction work on time which caused a loss to AUFP. On July 7, 2023, Liu Pengpeng withdrew the lawsuit. On November 20, 2023, Liu Pengpeng filed a lawsuit for the same claim. The lawsuit was settled in September, 2024. 

   

NOTE 13-  OTHER INCOME (LOSS)

 

Other income (loss) consists of incomes from government grants and losses from obsolete inventory write-offs:

 

                    
   For the three months ended
September 30, (Unaudited)		   For the nine months ended
September 30, (Unaudited)		 
   2024   2023   2024   2023 
Asset-based grant  $29,084    29,652   $97,493    133,180 
Income-based grant   -    -    88,382    - 
Total income from government grants   29,084    29,652    185,875    133,180 
Loss on obsolete inventory write off   (29,264)   -    (201,480)   - 
Other income (loss)  $(180)   29,652   $(15,605)   133,180 

 

-12-

 

NOTE 14- INCOME TAXES 

 

The Company recorded no income taxes for the three and nine months ended September 30, 2024 and 2023. Net income and net loss were not offset among the operating subsidiaries. Net income of $584,785 and $563,375 were exempt from income tax for the three months ended September 2024 and 2023, respectively. Net income of $1,131,025 and $1,647,017 were exempt from income tax for the nine months ended September 30, 2024 and 2023, respectively.

 

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three and nine months ended September 30, 2024 and 2023:

 

          
   For the three months ended 
  

September 30,

2024

   September 30,
2023		 
   (Unaudited)   (Unaudited) 
US federal statutory rates   -21%   -21%
Tax rate difference between PRC and U.S.   -4%   -4%
Effect of income tax exemption on certain income   -141%   -170%
Change in valuation allowance   166%   195%
Effective tax rate  $-   $- 

 

           
   For the nine months ended 
  

September 30,

2024

  

September 30,

2023

 
   (Unaudited)   (Unaudited) 
US federal statutory rates   (21%)   (21%)
Tax rate difference between PRC and U.S.   (4%)   (4%)
Effect of income tax exemption on certain income   (29%)   (1206%)
Change in valuation allowance   54%   1231%
Effective tax rate  $-   $- 
           

 

The provision for income tax expense (benefit) for the nine months ended September 30, 2024 and 2023 consisted of the following:

 

          
   For the nine months ended 
   September 30, 2024   September 30, 2023 
   (Unaudited)   (Unaudited) 
Income tax expense - current  $-   $- 
Income tax benefit -deferred   (374,704)   (371,072)
Increase in valuation allowance   374,704    371,072 
Total income tax expense  $-   $- 

 

          
  

September, 30, 2024

(Unaudited)

   December 31, 2023 
Deferred tax asset          
Net operating loss  $(2,905,848)  $(2,531,144)
Less: valuation allowance   2,905,848    2,531,144 
Net deferred tax asset  $-   $- 

 

-13-

 

NOTE 15- RELATED PARTY TRANSACTION

 

On October 22, 2022, Mr. Zhi Yang, the Company founder and CEO subscribed 12 million shares of common stock. Mr. Yang paid $30,000 for the 12,000,000 shares of ESG Inc. stock. The subscription was canceled on September 28, 2023, and the capital received were payable to Mr. Yang. The payable was paid off on February 5, 2024.

 

NOTE 16- EQUITY

 

The Company authorized 65,000,000 shares of common stock at par value of $0.001 and 10,000,000 shares of preferred stock at par value $0.001. 25,899,468 shares of common stock were issued and outstanding as of September 30, 2024 and December 31, 2023. There were no preferred stock were issued as of September 30, 2024 and December 31, 2023.

 

NOTE 17- SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements

 

-14-

 

 

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

 

OPERATIONS REVIEW

 

Net Operating Revenues 

 

Three Months Ended September 30, 2024 versus Three Months Ended September 30, 2023

 

During the three months ended September 30, 2024, net operating revenues were $122,041, compared to net loss of $17,722 during the three months ended September 30, 2023, an increase of $139,763 or 789%.

 

Nine Months Ended September 30, 2024 versus nine Months Ended September 30, 2023

 

During the nine months ended September 30 2024, net operating loss was $262,096, compared to $127,150 of net operating income during the nine months ended September 30, 2023, a decrease of $389,246, or 306%.

 

The decrease was due to the testing of expanded facility. After the expansion of triple capacity is completed, the Company started testing the expanded facility. From late July the expansion operates at 3 times of the capacity in 2023. We passed the testing phase this quarter and We expect the revenue and gross profit margin will increase in the fourth quarter.

 

Gross Profit Margin

 

Gross profit margin is a ratio calculated by dividing gross profit by net operating revenues. Our gross profit margin increased to 22.76% for the three months ended September 30, 2024, compared to 80.34% for the three months ended September 30, 2023. Our gross profit margin decreased to 11.94% for the nine months ended September 30, 2024, compared to 24.54% for the nine months ended September 30, 2023. The decrease was primarily due to the testing phase of expansion facility. We expect commodity costs to have a favorable impact on our gross profit margin during the fourth quart of 2024 after the expansion operation testing phases out and reaches its full capacity.

 

Research and Development Expenses

 

During the three months ended September 30, 2024, Research and development expenses decreased $8,257, or 5.40%, compared to $416,333 for the three months ended September 30, 2023. During the nine months ended September 30, 2024, Research and development expenses decreased $52,940, or 11.58%, compared to $457,306 for the nine months ended September 30, 2023. The difference was mainly due to the increase of currency exchange rate used to translate financial statements.

 

Selling, General Administrative Expenses

 

During the three months ended September, 2024, selling expenses increased $1,029, or 81.45%, compared to $1,263 for the three months ended September 30, 2023. During the three months ended September 30, 2024, general and administrative expenses decreased $40,297, or 14.39%, compared to $279,953 for the three months ended September 30, 2023. During the nine months ended September 30, 2024, selling expenses increased $2,913, or 156%, compared to $1,863, general and administrative expenses decreased $173,193, or 19.77%, compared to $876,271 for the nine months ended September 30, 2023. The decrease was mainly due to the decrease of professional fee and the fluctuation of foreign currency exchange rate.

 

Interest Expense

 

During the three months ended September 30, 2024, interest expense was decreased $187,933 or 300%, compared to negative $62,533 during the three months ended September 30, 2023. Negative $62,533 of interest expense was due to the interest forgiveness by the loaner during the three months ended September 30, 2023. During the nine months ended September 30, 2024, interest expenses were decreased $119,851, or 41.74%, compared to $287,134 during the nine months ended September 30, 2023. The decrease was primarily due to the impact of the reduce of loans and interest forgiveness.

 

 

-15-

 

Other income (loss)

 

During the three months ended September 30, 2024, other loss was $180, compared to $29,652 of net income during the three months ended September 30, 2023, a decrease of $29,832, or 101%. During the nine months ended September 30, 2024, other loss was $15,605, compared to $133,180 of net income during the nine months ended September 30, 2023. The decrease was mainly due to $29,246 and $201,480 of raw material write-off during the three and nine months ended September 30, 2024, respectively.

 

Income Taxes

 

The Company recorded no income taxes during the three and nine months ended September 30, 2024 and 2023, respectively. 

 

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION

 

Cash Flows from Operating Activities

 

Net cash provided by operating activities during the nine months ended September 30, 2024 and 2023 was $951,005 and $974,916, respectively, a decrease of $23,911, or 2.45%. This decrease was primarily due to the decrease of revenue.

 

Cash Flows from Investing Activities

 

Net cash used in investing activities during the nine months ended September 30, 2024 and 2023 was $385,337 and $0, respectively. The increase was due to the purchase of production machine.

 

Cash Flows from Financing Activities

 

Net cash used in financing activities during the nine months ended September 30, 2024 and 2023 was $42,746 and $710,969, respectively. The Company made debt payment of $470,206 and borrowed $427,460 during the nine months ended September 30, 2024. The Company paid off $710,969 of debt during the nine months ended September 30, 2023.

 

Off-Balance Sheet Arrangements

 

There were no off-balance sheet arrangements as of September 30, 2024 and 2023, or that in the opinion of management that are likely to have, a current or future material effect on our financial condition or results of operations.

 

Contractual Obligations

 

None.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

In connection with the preparation of this quarterly report, an evaluation was carried out by the Company’s management, with the participation of the principal executive officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act (“Exchange Act”) as of September 30, 2024. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including the principal executive officer, to allow timely decisions regarding required disclosures.

 

Based on that evaluation, the Company’s management concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission’s rules and forms, and that such information was not accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.

 

Change in Internal Control over Financial Reporting

 

During the three months ended September 30, 2024, there have been no changes in internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

  

-16-

 

 

PART II. Other Information

 

Item 1. Legal Proceedings

 

Management has identified certain legal matters where we believe an unfavorable outcome is reasonably estimated. Management believes that the total liabilities of the Company that may arise as a result of currently pending proceedings will not have a material adverse effect on the Company, taken as a whole.

 

On September 3, 2021, Anhui Daquan Construction Company ("Daquan”) filed a lawsuit against Funan Zhihua Mushroom Co., Ltd. (a merged company, “Zhihua”) on unpaid contractual price of $48,744. Zhihua has a dispute on construction quality which did not meet the requirements specified in the contract and filed a lawsuit for $26,095 of damages. On June 6, 2023, Daquan paid $26,095 to Zhihua to settle the lawsuit.

 

On November 10, 2022, Funan Yuanlangju Construction Co., Ltd. filed a lawsuit against AUFP for $60,147. The plaintiff sold construction materials to AUFP. AUFP had a dispute with the plaintiff over the amount of the sale. On July 7, 2023, the two parties reached a settlement that AUFP paid the plaintiff $50,740 in 2023.

 

On December 2, 2022, Liu Pengpeng filed a lawsuit against AUFP for $66,066. Liu Pengpeng signed a contract with AUFP on installation work and drainage construction. Liu Pengpeng breached the contract and failed to complete the construction work on time which caused a loss to AUFP. On July 7, 2023, Liu Pengpeng withdrew the lawsuit. On November 20, 2023, Liu Pengpeng filed a lawsuit for the same claim. The lawsuit was settled in September, 2024.

 

Item 1A. Risk Factors

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable to our Company.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

The following exhibits are included as part of this report by reference:

 

31.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
32.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

 

-17-

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  ESG INC.
     
Date: November 13, 2024 By: /s/ Zhi Yang 
  Name:   Zhi Yang 
  Title: President and CEO
    (Principal Executive, Financial and Accounting Officer)

 

-18-

 

 

EXHIBIT 31.1

 

Certification of the Company’s Principal Executive Officer and Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

and Securities and Exchange Commission Release 34-46427

 

I, Zhi Yang, certify that:

 

1.I have reviewed this report on Form 10-Q of ESG Inc.;

 

2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods present in this annual report;

 

4.As the registrant’s sole certifying officer, I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.As the registrant’s sole certifying officer, I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 13, 2024     

 

  /s/ Zhi Yang
  Zhi Yang
  President and CEO
  (Principal Executive Officer, Principal   Financial Officer, and Principal Accounting Officer)

 

 

 

 

EXHIBIT 32.1

 

Certification of Principal Executive Officer and Principal Financial Officer

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Quarterly Report of ESG Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zhi Yang, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

 

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 13, 2024 

 

  /s/ Zhi Yang
  Zhi Yang
  President and CEO
  (Principal Executive Officer, Principal
  Financial Officer, and Principal Accounting Officer)

 

 

 

v3.24.3
Cover
 9 Months Ended
Sep. 30, 2024
shares
Cover [Abstract]  
Document Type 10-Q
Amendment Flag false
Document Quarterly Report true
Document Transition Report false
Document Period End Date Sep. 30, 2024
Document Fiscal Period Focus Q3
Document Fiscal Year Focus 2024
Current Fiscal Year End Date --12-31
Entity File Number 000-56532
Entity Registrant Name ESG INC.
Entity Central Index Key 0001883835
Entity Tax Identification Number 87-1918342
Entity Incorporation, State or Country Code NV
Entity Address, Address Line One 523 School House Rd.
Entity Address, City or Town Kennett Square
Entity Address, State or Province PA
Entity Address, Postal Zip Code 19348
City Area Code 267
Local Phone Number 467-5871
Entity Current Reporting Status Yes
Entity Interactive Data Current Yes
Entity Filer Category Non-accelerated Filer
Entity Small Business true
Entity Emerging Growth Company true
Elected Not To Use the Extended Transition Period false
Entity Shell Company false
Entity Common Stock, Shares Outstanding 25,899,468
v3.24.3
CONSOLIDATED BALANCE SHEET (Unaudited) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Current Assets    
Cash $ 444,835 $ 342,342
Accounts receivable and other receivables 210,526 79,221
Advance to suppliers 1,208,222 166,010
Inventories 1,869,777 1,651,376
Total Current Assets 3,733,360 2,238,949
Property, plant and equipment, net 17,948,708 18,694,969
Intangible assets, net 3,068,514 3,085,906
Value added tax receivable 2,380,839 2,211,980
Note receivable 41,848
Total Non-current Assets 23,398,061 24,034,703
Total Assets 27,131,421 26,273,652
Current Liabilities    
Short-term bank loans 6,939,101 6,904,228
Account payable 2,731,467 1,450,405
Payable to related party 30,000
Accrued expenses and other liabilities 2,749,583 2,312,772
Deferred income 1,271,088 1,355,552
Total Current Liabilities 13,691,239 12,052,957
Long-term payable 1,334,825 1,423,116
Total Liabilities 15,026,064 13,476,073
Shareholders' Equity (Deficit)    
Common stock, $0.001 par value, 65,000,000 authorized, 25,899,468 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively. 25,900 25,900
Additional paid in capital 11,152,388 11,152,388
Accumulated comprehensive income (loss) (435,822) (430,206)
Accumulated deficit (1,708,434) (1,224,811)
Equity Attributable to stockholders of ESG Inc. 9,034,032 9,523,271
Equity attributable to noncontrolling interest 3,071,325 3,274,308
Total Equity 12,105,357 12,797,579
Total Liabilities and Stockholders' Equity $ 27,131,421 $ 26,273,652
v3.24.3
CONSOLIDATED BALANCE SHEET (Unaudited) (Parenthetical) - $ / shares
Sep. 30, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Common stock, par value per share $ 0.001 $ 0.001
Common stock, shares authorized 65,000,000 65,000,000
Common stock, shares issued 25,899,468 25,899,468
Common stock, shares outstanding 25,899,468 25,899,468
v3.24.3
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Statement [Abstract]        
Revenues $ 2,234,549 $ 518,192 $ 7,122,611 $ 5,959,055
Cost of goods sold 1,725,979 101,859 6,272,487 4,496,465
Gross Profit 508,570 416,333 850,123 1,462,590
Research and development cost 144,582 152,839 404,366 457,306
Selling expenses 2,292 1,263 4,776 1,863
General and administrative expense 239,656 279,953 703,078 876,271
Operating Income 122,041 (17,722) (262,096) 127,150
Interest (expense) (125,380) 62,553 (406,985) (287,134)
Other Income (loss) (180) 29,652 (15,605) 133,180
Income (loss) before Income Taxes (3,521) 74,483 (684,686) (26,804)
Income taxes
Consolidated net Income (loss) (3,521) 74,483 (684,686) (26,804)
Less: Net income (loss) attributable to noncontrolling interest (26,218) 28,829 (201,063) 13,337
Net Income (Loss) Attributable to Shareholders of ESG Inc. 22,697 45,654 (483,623) (40,141)
Other comprehensive items        
Foreign currency translation gain (loss) attributable to ESG Inc. 161,997 (191,087) (5,616) (562,011)
Foreign currency translation gain (loss) attributable to noncontrolling interest 55,390 (65,336) (1,920) (192,165)
Total comprehensive income (loss) attributable to noncontrolling interest 29,173 (36,507) (202,983) (602,152)
Total comprehensive Income (loss) Attributable to Shareholders of ESG Inc. $ 184,693 $ (145,433) $ (489,239) $ (178,828)
Net income loss per share - basic $ 0.01 $ (0.01) $ (0.02) $ (0.01)
Net income loss per share - diluted $ 0.01 $ (0.01) $ (0.02) $ (0.01)
Weighted Average Number of Shares Outstanding, Basic 25,899,468 25,899,468 25,899,468 25,899,468
Weighted average shares outstanding - diluted 25,899,468 25,899,468 25,899,468 25,899,468
v3.24.3
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
AOCI Attributable to Parent [Member]
Total Companys Equity [Member]
Noncontrolling Interest [Member]
Total
Beginning balance, value at Dec. 31, 2022 $ 25,900 $ 11,152,388 $ (900,098) $ (148,590) $ 10,129,600 $ 3,438,129 $ 13,567,729
Beginning balance, shares at Dec. 31, 2022 25,899,468            
Net income (142,348) (142,348) (40,100) (182,448)
Foreign currency translation adjustment 43,059 43,059 14,723 57,782
Ending balance, value at Mar. 31, 2023 $ 25,900 11,152,388 (1,042,446) (105,531) 10,030,311 3,412,752 13,443,063
Ending balance, shares at Mar. 31, 2023 25,899,468            
Net income 56,553 56,553 24,608 81,161
Foreign currency translation adjustment (413,983) (413,983) (141,551) (555,534)
Ending balance, value at Jun. 30, 2023 $ 25,900 11,152,388 (985,893) (519,514) 9,672,881 3,295,809 12,968,690
Ending balance, shares at Jun. 30, 2023 25,899,468            
Net income 45,654 45,654 28,829 74,483
Foreign currency translation adjustment (191,087) (191,087) (65,336) (256,423)
Ending balance, value at Sep. 30, 2023 $ 25,900 11,152,388 (940,239) (710,601) 9,527,448 3,259,302 12,786,750
Ending balance, shares at Sep. 30, 2023 25,899,468            
Beginning balance, value at Dec. 31, 2023 $ 25,900 11,152,388 (1,224,811) (430,206) 9,523,271 3,274,308 12,797,579
Beginning balance, shares at Dec. 31, 2023 25,899,468            
Net income (587,667) (587,667) (197,821) (785,488)
Foreign currency translation adjustment (159,580) (159,580) (54,564) (214,144)
Ending balance, value at Mar. 31, 2024 $ 25,900 11,152,388 (1,812,478) (589,786) 8,776,024 3,021,923 11,797,947
Ending balance, shares at Mar. 31, 2024 25,899,468            
Net income 81,347 81,347 22,976 104,323
Foreign currency translation adjustment (8,033) (8,033) (2,746) (10,779)
Ending balance, value at Jun. 30, 2024 $ 25,900 11,152,388 (1,731,131) (597,819) 8,849,338 3,042,153 11,891,491
Ending balance, shares at Jun. 30, 2024 25,899,468            
Net income 22,697 22,697 (26,218) (3,521)
Foreign currency translation adjustment 161,997 161,997 55,390 217,387
Ending balance, value at Sep. 30, 2024 $ 25,900 $ 11,152,388 $ (1,708,434) $ (435,822) $ 9,034,032 $ 3,071,325 $ 12,105,357
Ending balance, shares at Sep. 30, 2024 25,899,468            
v3.24.3
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Cash flows from operating activities:    
Net loss $ (684,686) $ (26,804)
Adjustments to reconcile loss to net cash used in operating activities:    
Depreciation and amortization 1,362,759 1,092,743
Loss on obsolete inventories 201,480
Changes in assets and liabilities:    
Accounts receivable and other receivable (131,305) (140,022)
Advance to suppliers (1,042,212) (618,092)
Inventory (218,401) 459,850
Value added tax receivable (168,859)
Note receivable 41,848 17,010
Accounts payable 1,281,062 274,887
Payable to related party (30,000) 8,689
Accrued expenses and other payables 436,811 (33,776)
Deferred income (97,493) (59,569)
Net cash provided by operating activities 951,005 974,916
Cash flows from investing activities:    
Acquisition of fixed assets (385,337)
Net cash used in investing activities (385,337)
Cash flows from financing activities:    
Proceeds from loans 427,460
Payment of debt (470,206) (710,969)
Net cash used in financing activities (42,746) (710,969)
Effect of exchange rate changes on cash (420,429) (305,480)
Net increase (decrease) in cash 102,493 (41,533)
Cash, beginning of the period 342,342 206,621
Cash, end of the period 444,835 165,088
Supplemental disclosures of cash flow information:    
Cash paid for interest 406,985 287,134
Cash paid for income tax
v3.24.3
Pay vs Performance Disclosure - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Pay vs Performance Disclosure [Table]        
Net Income (Loss) $ 22,697 $ 45,654 $ (483,623) $ (40,141)
v3.24.3
Insider Trading Arrangements
 9 Months Ended
Sep. 30, 2024
Insider Trading Arrangements [Line Items]  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
v3.24.3
ORGANIZATION AND DESCRIPTION OF BUSINESS
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
ORGANIZATION AND DESCRIPTION OF BUSINESS

NOTE 1- ORGANIZATION AND DESCRIPTION OF BUSINESS

 

ESG Inc. (“ESG”) was incorporated in July 2021 as a Nevada corporation and headquartered at Kennett Square, PA, USA. ESG is a holding company without operations and is engaged in food production and distribution through its subsidiaries.

 

ESG incorporated ESG China Limited as ESG’s wholly owned subsidiary in Hong Kong on November 18, 2022. ESG China Limited incorporated Hainan ESG Technology Co., Ltd., a China corporation (“Hainan ESG”) with 100% of ownership on January 16, 2023. ESG, ESG China Limited, and Hainan ESG have no operations.

 

On September 28, 2023, ESG entered into a share exchange agreement with Funan Allied United Farmer Products Co., Ltd., a China corporation incorporated in May 2017 (“AUFP”), and 74.52% of shareholders of AUFP, (each a “Shareholder,” and collectively, the “Shareholders”), through Hainan ESG. Pursuant to such agreement, the Shareholders exchanged their equity of AUFP to Hainan ESG for shares of common stock of ESG, and ESG has agreed to offer 10,432,800 of ESG shares. Following this transaction, AUFP became a 74.52% subsidiary of ESG through Hainan ESG.

 

AUFP incorporated Anhui Allied United Mushroom Technology Co., Ltd. (“AUMT”) in China in March 2018 to manufacture white button mushroom compost while AUFP incorporated Anhui Allied United Mushroom Co., Ltd. (“AUM”) in China in April 2018 to grow fresh white button mushrooms and provide mushroom growing management services. AUFP, AUMT, and AUM are operating entities in China.

 

Prior to the share exchange, Mr. Zhi Yang owned 30% of AUFP, Fuyang Zhihan Agricultural Information Co. Ltd. (“Zhihan”) owned 24.52% of AUFP and Mr. Chris Alonzo owned 10% of AUFP. ESG, after the share exchange agreement described above is completed, owns 74.52% of AUFP and its subsidiaries, AUM and AUMT in China. Currently Mr. Zhi Yang and Zhihan control 83.526% of ESG through DCG China Limited , and Mr. Christopher Alonzo owns 5.406% of ESG.

 

Since the Company is effectively controlled by the same controlling shareholders before and after the share exchange agreement, it is considered under common control. Therefore the above mentioned transactions were accounted for as a recapitalization. The reorganization has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying financial statements of the Company.

 

Our operating subsidiaries are involved in direct white button mushroom composting, growing, food production, distribution, as well as import and export of Phase III compost and food to strategize. With the core business philosophy to develop and operate sustainable and technology-driven food businesses consistent with the principles of Environmental, Sustainable, and Governance investing, we believe that the growing global demand for sustainable high quality food presents a unique opportunity to operate companies engaged in this critical area that is being paid increasing attention by global investors.

 

 
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation and consolidation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.

 

The consolidated financial statements of the Company include the financial statements of the Company and its 74.52% owned subsidiaries in China. All inter-company transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation. The Equity attributable to minority shareholders who own 25.48% of AUFP and its subsidiaries are non-controlling interest (“NCI”). The NCI were $3,071,325 and $3,274,308 as of September 30, 2024 and December 31, 2023, respectively.

 

Interim Financial Information

 

The 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 financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2023, as 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 as of and for the year ended December 31, 2023.

 

Use of estimates

 

In preparing the consolidated 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 consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include allowance for doubtful accounts, advances to suppliers, valuation of inventories, useful lives of property, plant, and equipment, and intangible assets.

 

Cash and cash equivalent

 

Cash and cash equivalent includes demand deposits with financial institutions that are highly liquid in nature.

 

Account receivable

 

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowance 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, customer’s payment history, its current creditworthiness, and current economic trends. Accounts are written off after efforts at collection prove unsuccessful. As of September 30, 2024 and December 31, 2023, allowance for doubtful accounts was nil  and nil , respectively.

 

Advances to suppliers, net

 

Advances to suppliers represent prepayments made to ensure continuous high-quality supplies and favorable purchase prices for premium quality. These advances are settled upon suppliers delivering raw materials to the Company when the transfer of ownership occurs. The Company review its advances to suppliers on a periodic basis and makes general and specific allowances when there is doubt as to the ability of a supplier to provide supplies to the Company or refund an advance. As of September 30, 2024 and December 31, 2023, advance to suppliers was $1,208,222 and $166,010, respectively and allowance for doubtful accounts was nil and nil, respectively.

 

Inventory

 

Inventory is comprised primarily of raw materials, work-in-progress and finished goods. The value of inventory is determined using the weighted average method. The Company periodically estimates an inventory allowance for estimated unmarketable inventories when necessary. Inventory amounts are reported in net of allowances.

 

Property, plant and equipment, net

 

Property, plant and equipment are stated at cost, less accumulated depreciation. Major repair and improvements that significantly extend original useful lives or improve productivity are capitalized and depreciated over the period benefited. Repair and maintenance costs are expensed as incurred. Depreciation is recorded principally by the straight-line method over the estimated useful lives of our property, plant and equipment which generally have the following ranges: buildings and improvements: 20 years; machinery and equipment: 5-10 years; office equipment: 3-5 years. Construction in progress is not depreciated until ready for service.

 

Intangible assets, net

 

Intangible assets with finite lives are amortized using the straight-line method over their estimated period of benefit. Evaluation of the recoverability of intangible assets is made to take into account events or circumstances that warrant revise estimates of useful lives or that indicate that impairment exists. All of the Company’s intangible assets are subject to amortization. No impairment of intangible assets has been identified as of the balance sheet date.

 

Intangible assets consist of land use rights, patent and purchased software. Intangible assets are stated at cost less accumulated amortization. The land purchased for industrial use has the right of use for 50 years. We amortized the right to use land in 50 years. Patent and software amortized using the straight-line method with estimated useful lives of 12 years and 5 years, respectively.

Revenue recognition

 

The Company follows Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606).

 

FASB ASC Topic 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies each performance obligation.

 

Revenue is generated by selling fresh mushrooms to authorized distributors and wholesalers mainly in Yangzi River Delta. Contracts were signed after the communication of the price and quantities with customers. Our sales terms generally do not allow to sell without a deposit being made and do not allow for a right of return. Usually, the deposit from the customer equals or more than the sales amount. Control of the mushrooms is transferred upon receipt or loaded in the truck of carriers at our warehouse, as determined by the specific terms of the contract. Upon transfer of control to the customer, which completes our performance obligation, revenue is recognized.

 

Customer concentration

 

                    
   For the Three Months Ended September 30, (Unaudited)   For the Nine Months Ended September 30, (Unaudited) 
   2024   2023   2024   2023 
Customer A   25%   21%   17%   20%
Customer B   37%   -    20%   - 
Customer C   19%   -    20%   - 
Customer D   16%   -    15%   - 
Customer E   -    43%   -    42%

 

Deferred income

 

Government grants (sometimes referred to as subsidies, subventions, etc.) are as assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. Deferred income consists primarily of government grants related to depreciable assets. Government grants received relating to depreciable assets are recorded as deferred income and recognized in over the life of the related assets. Company records income when receiving a grant which constitutes compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs. As of September 30, 2024 and December 31, 2023, deferred income was $1,271,088 and $1,355,552, respectively. 

 

Research and development expenses

 

Research and development expenses are expensed in the period when incurred. These costs primarily consist of cost of materials used, salaries paid for the Company’s development department, and fees paid to the third parties. The research and development expenses were $144,582 and $152,839 for the three months ended September 30, 2024 and 2023, respectively. The research and development expenses were $404,366 and $457,306 for the nine months ended September 30, 2024 and 2023, respectively.

 

Noncontrolling interests

 

The Company follows FASB ASC Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI (previously referred to as minority interests) be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to non-controlling interests even when such allocation might result in a deficit balance. 

 

The net income (loss) attributed to NCI was separately designated in the accompanying statements of operations and comprehensive income (loss). Losses attributable to NCI in a subsidiary may exceed a non-controlling interest’s interests in the subsidiary’s equity. The excess attributable to NCIs is attributed to those interests. NCIs shall continue to be attributed their share of losses even if that attribution results in a deficit NCI balance.

 

AUFP and its subsidiaries, AUM and AUMT were 25.48% owned by noncontrolling interest and $3,071,325 and $3,274,308 of equity were attributable to noncontrolling interest as of September 30, 2024 and December 31, 2023, respectively. During the three months ended September 30, 2024 and 2023, the Company had net loss of $26,218 and net income of $28,829, respectively, attributable to the noncontrolling interest. The Company had net loss of $201,063 and net income of $13,337, respectively, attributable to the noncontrolling interest for the nine months ended September 30, 2024 and 2023.

 

Foreign currency translation and comprehensive income (loss)

 

The accounts of the Company’s Chinese entities are maintained in Chinese Yuan (“RMB”) and the accounts of the U.S. parent company are maintained in United States dollar (“USD”). The accounts of the Chinese entities were translated into USD in accordance with FASB ASC Topic 830 “Foreign Currency Matters.” All assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates and the statements of operations and cash flows are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) in accordance with FASB ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from foreign currency transactions are reflected in the statements of operations.

The Company follows FASB ASC Topic 220-10, “Comprehensive Income (loss).” Comprehensive income (loss) comprises net income (loss) and all changes to the statements of changes in stockholders’ equity, except those due to investments by stockholders, changes in additional paid-in capital and distributions to stockholders. 

 

The exchange rates used to translate amounts in RMB to USD for the purposes of preparing the CFS were as follows:

 

               
   September 30, 2024   September 30, 2023   December 31, 2023 
Period-end date USD: RMB exchange rate   7.0182    7.2952    7.0797 
Average USD for the reporting period: RMB exchange rate   7.1773    7.0327    7.0750 

 

 

Income taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) tax payable or refundable for the current period and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets also include the prior year’s net operating losses carried forward.


The Company accounts for income for income taxes in accordance with ASC 740, Income Taxes. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net effects of temporary difference between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or not be deductible in the future.

 

Contingencies

 

Certain conditions may exist as of the date the consolidated financial statements (“CFS”) are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. In accordance with ASC 450, the Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s CFS.

 

If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

 
v3.24.3
GOING CONCERN
 9 Months Ended
Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
GOING CONCERN

NOTE 3- GOING CONCERN

 

The accompanying consolidated financial statements were prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. At September 30, 2024, the Company had negative working capital of $9,957,879. The Company had an accumulated deficit of approximately $1,708,434 and $1,224,811 as of September 30, 2024 and December 31, 2023, respectively. For nine month ended September 30, 2024, the Company had losses of $684,686 and $26,804, respectively. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.

 

To enhance our ability to continue to operate, we are dedicating resources to generate recurring revenues and sustainable operating cash flows. Currently, we are increasing our production capacity to generate more revenues and decrease unit cost.

 
v3.24.3
ACCOUNT RECEIVABLE AND OTHER RECEIVABLES
 9 Months Ended
Sep. 30, 2024
Credit Loss [Abstract]  
ACCOUNT RECEIVABLE AND OTHER RECEIVABLES

NOTE 4- ACCOUNT RECEIVABLE AND OTHER RECEIVABLES

 

Account receivable and other receivable consisted of the following:

 

          
  

September 30,

2024

(Unaudited)

  

December 31,

2023

 
Accounts receivable  $106,267   $- 
Other receivable   104,259    79,221 
Total  $210,526   $79,221 
v3.24.3
PROPERTY, PLANT AND EQUIPMENT
 9 Months Ended
Sep. 30, 2024
Property, Plant and Equipment [Abstract]  
PROPERTY, PLANT AND EQUIPMENT

NOTE 5- PROPERTY, PLANT AND EQUIPMENT

 

The following table summarizes our property, plant and equipment:

 

          
  

September 30,

2024

(Unaudited)

  

December 31,

2023

 
Buildings and improvements  $16,459,599   $16,276,614 
Machinery, equipment and vehicle fleet   9,079,406    8,597,430 
Construction in progress   21,926    21,682 
Property, plant and equipment - cost   25,560,931    24,895,726 
Less: Accumulated depreciation   (7,612,223)   (6,200,757)
Property, plant and equipment - net  $17,948,708   $18,694,969 

 

For the three months ended September 30, 2024 and 2023, depreciation expenses were $444,538 and $364,247, respectively. For the nine months ended September 30, 2024 and 2023, depreciation expenses were $1,312,054 and $1,040,765, respectively.

 
v3.24.3
INVENTORIES
 9 Months Ended
Sep. 30, 2024
Inventory Disclosure [Abstract]  
INVENTORIES

NOTE 6- INVENTORIES

 

Inventories consisted of the following:

 

          
   September 30,     
   2024   December 31, 
   (Unaudited)   2023 
Raw materials  $1,733,520   $1,516,634 
Finished goods   -    - 
Work in progress - compost   91,342    90,326 
 - growing mushrooms   44,915    44,416 
Total  $1,869,777   $1,651,376 

 
v3.24.3
INTANGIBLE ASSETS
 9 Months Ended
Sep. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS

NOTE 7- INTANGIBLE ASSETS

 

Intangible assets are stated at cost or acquisition-date fair value less accumulated amortization and consist of the following:

 

          
  

September 30,
2024

(Unaudited)

   December 31,
2023		 
Land use right  $3,365,401   $3,327,987 
Software   7,787    7,701 
Patent   7,124    7,045 
Subtotal   3,380,313    3,342,733 
Less: Accumulated amortization   (311,799)   (256,827)
Total  $3,068,514   $3,085,906 

 

Amortization expenses were $18,288 and $17,594, respectively for the three months ended September 30, 2024 and 2023, respectively, $50,705 and $51,978 for the nine months ended September 30, 2024 and 2023, respectively.

Estimated future amortization expense is as follows as of September 30, 2024:

 

     
Years ending December 31,  Amortization expense 
2024   73,151 
2025   73,151 
2026   73,151 
2027   73,151 
2028   73,151 
Thereafter   2,702,759 
Total   3,068,514 

 
v3.24.3
BANK LOANS
 9 Months Ended
Sep. 30, 2024
Bank Loans  
BANK LOANS

NOTE 8- BANK LOANS

 

Short-term bank loans consisted of the following:

 

                              
  

September 30, 2024

(unaudited)

  

Interest

rate

   Due date  

December 31,

2023

  

Interest

rate

   Due date 
Agricultural Bank of China Funan Branch  $812,174.06    4.50%   4/06/25   $845,416    3.70%   4/10/24 
Anhui Funan Rural Commercial Bank   1,994,813    5.60%   12/22/24    1,972,637    5.90%   12/22/24 
Anhui Funan Rural Commercial Bank   854,920    5.60%   3/28/25    1,409,026    5.90%   3/28/24 
Anhui Funan Rural Commercial Bank   1,424,867    5.60%   1/25/25    845,416    5.90%   1/25/24 
Industrial and Commercial Bank of China, Funan (1)   712,433    3.45%   10/12/24    704,513    3.45%   10/12/24 
Bank of China Funan Branch (2)   1,139,893    3.60%   3/13/25    1,127,220    3.60%   3/13/25 
Total  $6,939,101    -    -   $6,904,228    -    - 

 

(1) $712,433 and $704,513 of loans from Industrial and Commercial Bank of China, Funan were pledged by fixed assets as of September 30, 2024 and December 31, 2023, respectively.

(2) $1,139,893 and $1,127,220 of loans from Bank of China were pledged by fixed assets as of September 30, 2024 and December 31, 2023, respectively.

 

 
v3.24.3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
 9 Months Ended
Sep. 30, 2024
Payables and Accruals [Abstract]  
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

NOTE 9- ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

Accrued expenses and other current liabilities consisted of the following:

 

          
   September 30, 2024   December 31,  
   (Unaudited)   2023 
         
Advances from customers  $120,674   $63,867 
Salary payable   105,099    181,950 
Tax payable   13,951    16,131 
Other payable   2,509,859    2,050,824 
Total  $2,749,583   $2,312,772 

 

Other payable was primarily comprised of loans from non-bank institutions and deposit from customers. Loans included $284,973 and $281,805 from Funan Agricultural Investment Co. Ltd as of September 30, 2024 and December 31, 2023, respectively and $1,424,867 and $1,409,026 from Funan Small Business financing service center as of September 30, 2024 and December 31, 2023, respectively.

 
v3.24.3
VALUE ADDED TAX RECEIVABLE
 9 Months Ended
Sep. 30, 2024
Value Added Tax Receivable  
VALUE ADDED TAX RECEIVABLE

NOTE 10- VALUE ADDED TAX RECEIVABLE

 

Selling merchandise in China is generally subject to the value-added tax (“VAT”). The Company and its subsidiaries’ primary operations are classified as agriculture products and its revenue is exempt from VAT and income tax. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). VAT input was primarily due to purchase of property, plant and equipment. As of September 30, 2024 and December 31, 2023, VAT input was $2,380,839 and $2,211,980, respectively. VAT input can deduct VAT output or be refunded when selling non-exempt goods. Anhui Allied United Mushroom Technology and Anhui Allied United Mushroom are engaged in agricultural production in China, and their value-added tax are exempted. The Company plans to produce processed mushrooms in the near future to utilize VAT input to offset VAT output.
v3.24.3
ASSET ACQUISITION
 9 Months Ended
Sep. 30, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
ASSET ACQUISITION

NOTE 11- ASSET ACQUISITION

 

On May 11, 2021, Anhui Allied United Mushroom Co., Ltd. signed the Agreement (“Agreement”) with Suhua Yang and Hao Yan, the owners of Funan Zhihua Mushroom Co., Ltd. (“Target Company”). As the consideration of transferring 100% equity of Target Company, AUM would pay Shareholders with $2,151,383 (RMB 14,840,028), which is $25,612 (RMB176,667) per month for 84 months at the end of each month after the delivery of the growing rooms. Target Company was dissolved after the asset acquisition.

 
v3.24.3
COMMITMENTS AND CONTINGENCIES
 9 Months Ended
Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 12- COMMITMENTS AND CONTINGENCIES

 

Commitments

 

On January 5, 2022, Funan Modern Recycling Agriculture Investment Co., Ltd. (“FMRA”) signed an agreement with AUFP to fund AUFP 115 million RMB ($18.09 million) on the expansion of composting facilities including 6 bunkers and 22 tunnels. According to the agreement, AUFP transfers the land use right of 46,662 square meters which the composting facilities will be constructed on to FMRA and starts to pay rent for 10 years after AUFP uses the facilities. Once rents are paid, FMRA transfers the land use right and deed of composting facilities to AUFP. All the costs related to the transfer of land use right are paid by FMRA.

 

Legal contingencies

 

Management has identified certain legal mattes where we believe an unfavorable outcome is resonably estimated. Management believes that the total liabilities of the Company that may arise as a result of currently pending proceedings will not have a material adverse effect on the Company taken as a whole.

 

On September 3, 2021, Anhui Daquan Construction Company ("Daquan”) filed a lawsuit against Funan Zhihua Mushroom Co., Ltd. (a merged company, “Zhihua”) on unpaid contractual price of $48,744. Zhihua has a dispute on construction quality which did not meet the requirements specified in the contract and filed a lawsuit for $26,095 of damage. On June 6, 2023, Daquan paid $26,095 to Zhihua to settle the lawsuit.

 

On November 10, 2022, Funan Yuanlangju Construction Co., Ltd. filed a lawsuit against AUFP for $60,147. The plaintiff sold construction materials to AUFP. AUFP had a dispute with the plaintiff over the amount of the sale. On July 7, 2023, the two parties reached a settlement that AUFP paid the plaintiff $50,740 in 2023.

 

On December 2, 2022, Liu Pengpeng filed a lawsuit against AUFP for $66,066. Liu Pengpeng signed a contract with AUFP on installation work and drainage construction. Liu Pengpeng breached the contract and failed to complete the construction work on time which caused a loss to AUFP. On July 7, 2023, Liu Pengpeng withdrew the lawsuit. On November 20, 2023, Liu Pengpeng filed a lawsuit for the same claim. The lawsuit was settled in September, 2024. 

   
v3.24.3
OTHER INCOME (LOSS)
 9 Months Ended
Sep. 30, 2024
Other Income and Expenses [Abstract]  
OTHER INCOME (LOSS)

NOTE 13-  OTHER INCOME (LOSS)

 

Other income (loss) consists of incomes from government grants and losses from obsolete inventory write-offs:

 

                    
   For the three months ended
September 30, (Unaudited)		   For the nine months ended
September 30, (Unaudited)		 
   2024   2023   2024   2023 
Asset-based grant  $29,084    29,652   $97,493    133,180 
Income-based grant   -    -    88,382    - 
Total income from government grants   29,084    29,652    185,875    133,180 
Loss on obsolete inventory write off   (29,264)   -    (201,480)   - 
Other income (loss)  $(180)   29,652   $(15,605)   133,180 

 
v3.24.3
INCOME TAXES
 9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 14- INCOME TAXES 

 

The Company recorded no income taxes for the three and nine months ended September 30, 2024 and 2023. Net income and net loss were not offset among the operating subsidiaries. Net income of $584,785 and $563,375 were exempt from income tax for the three months ended September 2024 and 2023, respectively. Net income of $1,131,025 and $1,647,017 were exempt from income tax for the nine months ended September 30, 2024 and 2023, respectively.

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three and nine months ended September 30, 2024 and 2023:

 

          
   For the three months ended 
  

September 30,

2024

   September 30,
2023		 
   (Unaudited)   (Unaudited) 
US federal statutory rates   -21%   -21%
Tax rate difference between PRC and U.S.   -4%   -4%
Effect of income tax exemption on certain income   -141%   -170%
Change in valuation allowance   166%   195%
Effective tax rate  $-   $- 

 

           
   For the nine months ended 
  

September 30,

2024

  

September 30,

2023

 
   (Unaudited)   (Unaudited) 
US federal statutory rates   (21%)   (21%)
Tax rate difference between PRC and U.S.   (4%)   (4%)
Effect of income tax exemption on certain income   (29%)   (1206%)
Change in valuation allowance   54%   1231%
Effective tax rate  $-   $- 
           

 

The provision for income tax expense (benefit) for the nine months ended September 30, 2024 and 2023 consisted of the following:

 

          
   For the nine months ended 
   September 30, 2024   September 30, 2023 
   (Unaudited)   (Unaudited) 
Income tax expense - current  $-   $- 
Income tax benefit -deferred   (374,704)   (371,072)
Increase in valuation allowance   374,704    371,072 
Total income tax expense  $-   $- 

 

          
  

September, 30, 2024

(Unaudited)

   December 31, 2023 
Deferred tax asset          
Net operating loss  $(2,905,848)  $(2,531,144)
Less: valuation allowance   2,905,848    2,531,144 
Net deferred tax asset  $-   $- 

 
v3.24.3
RELATED PARTY TRANSACTION
 9 Months Ended
Sep. 30, 2024
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTION

NOTE 15- RELATED PARTY TRANSACTION

 

On October 22, 2022, Mr. Zhi Yang, the Company founder and CEO subscribed 12 million shares of common stock. Mr. Yang paid $30,000 for the 12,000,000 shares of ESG Inc. stock. The subscription was canceled on September 28, 2023, and the capital received were payable to Mr. Yang. The payable was paid off on February 5, 2024.

 
v3.24.3
EQUITY
 9 Months Ended
Sep. 30, 2024
Equity [Abstract]  
EQUITY

NOTE 16- EQUITY

 

The Company authorized 65,000,000 shares of common stock at par value of $0.001 and 10,000,000 shares of preferred stock at par value $0.001. 25,899,468 shares of common stock were issued and outstanding as of September 30, 2024 and December 31, 2023. There were no preferred stock were issued as of September 30, 2024 and December 31, 2023.

 
v3.24.3
SUBSEQUENT EVENTS
 9 Months Ended
Sep. 30, 2024
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 17- SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Basis of presentation and consolidation

Basis of presentation and consolidation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.

 

The consolidated financial statements of the Company include the financial statements of the Company and its 74.52% owned subsidiaries in China. All inter-company transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation. The Equity attributable to minority shareholders who own 25.48% of AUFP and its subsidiaries are non-controlling interest (“NCI”). The NCI were $3,071,325 and $3,274,308 as of September 30, 2024 and December 31, 2023, respectively.

 
Interim Financial Information

Interim Financial Information

 

The 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 financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2023, as 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 as of and for the year ended December 31, 2023.

 
Use of estimates

Use of estimates

 

In preparing the consolidated 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 consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include allowance for doubtful accounts, advances to suppliers, valuation of inventories, useful lives of property, plant, and equipment, and intangible assets.

 
Cash and cash equivalent

Cash and cash equivalent

 

Cash and cash equivalent includes demand deposits with financial institutions that are highly liquid in nature.

 
Account receivable

Account receivable

 

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowance 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, customer’s payment history, its current creditworthiness, and current economic trends. Accounts are written off after efforts at collection prove unsuccessful. As of September 30, 2024 and December 31, 2023, allowance for doubtful accounts was nil  and nil , respectively.

 
Advances to suppliers, net

Advances to suppliers, net

 

Advances to suppliers represent prepayments made to ensure continuous high-quality supplies and favorable purchase prices for premium quality. These advances are settled upon suppliers delivering raw materials to the Company when the transfer of ownership occurs. The Company review its advances to suppliers on a periodic basis and makes general and specific allowances when there is doubt as to the ability of a supplier to provide supplies to the Company or refund an advance. As of September 30, 2024 and December 31, 2023, advance to suppliers was $1,208,222 and $166,010, respectively and allowance for doubtful accounts was nil and nil, respectively.

 
Inventory

Inventory

 

Inventory is comprised primarily of raw materials, work-in-progress and finished goods. The value of inventory is determined using the weighted average method. The Company periodically estimates an inventory allowance for estimated unmarketable inventories when necessary. Inventory amounts are reported in net of allowances.

 
Property, plant and equipment, net

Property, plant and equipment, net

 

Property, plant and equipment are stated at cost, less accumulated depreciation. Major repair and improvements that significantly extend original useful lives or improve productivity are capitalized and depreciated over the period benefited. Repair and maintenance costs are expensed as incurred. Depreciation is recorded principally by the straight-line method over the estimated useful lives of our property, plant and equipment which generally have the following ranges: buildings and improvements: 20 years; machinery and equipment: 5-10 years; office equipment: 3-5 years. Construction in progress is not depreciated until ready for service.

 
Intangible assets, net

Intangible assets, net

 

Intangible assets with finite lives are amortized using the straight-line method over their estimated period of benefit. Evaluation of the recoverability of intangible assets is made to take into account events or circumstances that warrant revise estimates of useful lives or that indicate that impairment exists. All of the Company’s intangible assets are subject to amortization. No impairment of intangible assets has been identified as of the balance sheet date.

 

Intangible assets consist of land use rights, patent and purchased software. Intangible assets are stated at cost less accumulated amortization. The land purchased for industrial use has the right of use for 50 years. We amortized the right to use land in 50 years. Patent and software amortized using the straight-line method with estimated useful lives of 12 years and 5 years, respectively.
Revenue recognition

Revenue recognition

 

The Company follows Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606).

 

FASB ASC Topic 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies each performance obligation.

 

Revenue is generated by selling fresh mushrooms to authorized distributors and wholesalers mainly in Yangzi River Delta. Contracts were signed after the communication of the price and quantities with customers. Our sales terms generally do not allow to sell without a deposit being made and do not allow for a right of return. Usually, the deposit from the customer equals or more than the sales amount. Control of the mushrooms is transferred upon receipt or loaded in the truck of carriers at our warehouse, as determined by the specific terms of the contract. Upon transfer of control to the customer, which completes our performance obligation, revenue is recognized.

 
Customer concentration

Customer concentration

 

                    
   For the Three Months Ended September 30, (Unaudited)   For the Nine Months Ended September 30, (Unaudited) 
   2024   2023   2024   2023 
Customer A   25%   21%   17%   20%
Customer B   37%   -    20%   - 
Customer C   19%   -    20%   - 
Customer D   16%   -    15%   - 
Customer E   -    43%   -    42%

 
Deferred income

Deferred income

 

Government grants (sometimes referred to as subsidies, subventions, etc.) are as assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. Deferred income consists primarily of government grants related to depreciable assets. Government grants received relating to depreciable assets are recorded as deferred income and recognized in over the life of the related assets. Company records income when receiving a grant which constitutes compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs. As of September 30, 2024 and December 31, 2023, deferred income was $1,271,088 and $1,355,552, respectively. 

 
Research and development expenses

Research and development expenses

 

Research and development expenses are expensed in the period when incurred. These costs primarily consist of cost of materials used, salaries paid for the Company’s development department, and fees paid to the third parties. The research and development expenses were $144,582 and $152,839 for the three months ended September 30, 2024 and 2023, respectively. The research and development expenses were $404,366 and $457,306 for the nine months ended September 30, 2024 and 2023, respectively.

 
Noncontrolling interests

Noncontrolling interests

 

The Company follows FASB ASC Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI (previously referred to as minority interests) be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to non-controlling interests even when such allocation might result in a deficit balance. 

 

The net income (loss) attributed to NCI was separately designated in the accompanying statements of operations and comprehensive income (loss). Losses attributable to NCI in a subsidiary may exceed a non-controlling interest’s interests in the subsidiary’s equity. The excess attributable to NCIs is attributed to those interests. NCIs shall continue to be attributed their share of losses even if that attribution results in a deficit NCI balance.

 

AUFP and its subsidiaries, AUM and AUMT were 25.48% owned by noncontrolling interest and $3,071,325 and $3,274,308 of equity were attributable to noncontrolling interest as of September 30, 2024 and December 31, 2023, respectively. During the three months ended September 30, 2024 and 2023, the Company had net loss of $26,218 and net income of $28,829, respectively, attributable to the noncontrolling interest. The Company had net loss of $201,063 and net income of $13,337, respectively, attributable to the noncontrolling interest for the nine months ended September 30, 2024 and 2023.

 
Foreign currency translation and comprehensive income (loss)

Foreign currency translation and comprehensive income (loss)

 

The accounts of the Company’s Chinese entities are maintained in Chinese Yuan (“RMB”) and the accounts of the U.S. parent company are maintained in United States dollar (“USD”). The accounts of the Chinese entities were translated into USD in accordance with FASB ASC Topic 830 “Foreign Currency Matters.” All assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates and the statements of operations and cash flows are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) in accordance with FASB ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from foreign currency transactions are reflected in the statements of operations.

The Company follows FASB ASC Topic 220-10, “Comprehensive Income (loss).” Comprehensive income (loss) comprises net income (loss) and all changes to the statements of changes in stockholders’ equity, except those due to investments by stockholders, changes in additional paid-in capital and distributions to stockholders. 

 

The exchange rates used to translate amounts in RMB to USD for the purposes of preparing the CFS were as follows:

 

               
   September 30, 2024   September 30, 2023   December 31, 2023 
Period-end date USD: RMB exchange rate   7.0182    7.2952    7.0797 
Average USD for the reporting period: RMB exchange rate   7.1773    7.0327    7.0750 

 

 
Income taxes

Income taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) tax payable or refundable for the current period and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets also include the prior year’s net operating losses carried forward.


The Company accounts for income for income taxes in accordance with ASC 740, Income Taxes. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net effects of temporary difference between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or not be deductible in the future.

 
Contingencies

Contingencies

 

Certain conditions may exist as of the date the consolidated financial statements (“CFS”) are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. In accordance with ASC 450, the Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s CFS.

 

If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

 
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Schedule customer concentration
                    
   For the Three Months Ended September 30, (Unaudited)   For the Nine Months Ended September 30, (Unaudited) 
   2024   2023   2024   2023 
Customer A   25%   21%   17%   20%
Customer B   37%   -    20%   - 
Customer C   19%   -    20%   - 
Customer D   16%   -    15%   - 
Customer E   -    43%   -    42%
Schedule of foreign currency exchange rates
               
   September 30, 2024   September 30, 2023   December 31, 2023 
Period-end date USD: RMB exchange rate   7.0182    7.2952    7.0797 
Average USD for the reporting period: RMB exchange rate   7.1773    7.0327    7.0750 
v3.24.3
ACCOUNT RECEIVABLE AND OTHER RECEIVABLES (Tables)
 9 Months Ended
Sep. 30, 2024
Credit Loss [Abstract]  
Schedule of foreign currency exchange rates
          
  

September 30,

2024

(Unaudited)

  

December 31,

2023

 
Accounts receivable  $106,267   $- 
Other receivable   104,259    79,221 
Total  $210,526   $79,221 
v3.24.3
PROPERTY, PLANT AND EQUIPMENT (Tables)
 9 Months Ended
Sep. 30, 2024
Property, Plant and Equipment [Abstract]  
Schedule of property and equipment
          
  

September 30,

2024

(Unaudited)

  

December 31,

2023

 
Buildings and improvements  $16,459,599   $16,276,614 
Machinery, equipment and vehicle fleet   9,079,406    8,597,430 
Construction in progress   21,926    21,682 
Property, plant and equipment - cost   25,560,931    24,895,726 
Less: Accumulated depreciation   (7,612,223)   (6,200,757)
Property, plant and equipment - net  $17,948,708   $18,694,969 
v3.24.3
INVENTORIES (Tables)
 9 Months Ended
Sep. 30, 2024
Inventory Disclosure [Abstract]  
Schedule of inventories
          
   September 30,     
   2024   December 31, 
   (Unaudited)   2023 
Raw materials  $1,733,520   $1,516,634 
Finished goods   -    - 
Work in progress - compost   91,342    90,326 
 - growing mushrooms   44,915    44,416 
Total  $1,869,777   $1,651,376 
v3.24.3
INTANGIBLE ASSETS (Tables)
 9 Months Ended
Sep. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of intangible assets
          
  

September 30,
2024

(Unaudited)

   December 31,
2023		 
Land use right  $3,365,401   $3,327,987 
Software   7,787    7,701 
Patent   7,124    7,045 
Subtotal   3,380,313    3,342,733 
Less: Accumulated amortization   (311,799)   (256,827)
Total  $3,068,514   $3,085,906 
Schedule of estimated future amortization expense
     
Years ending December 31,  Amortization expense 
2024   73,151 
2025   73,151 
2026   73,151 
2027   73,151 
2028   73,151 
Thereafter   2,702,759 
Total   3,068,514 
v3.24.3
BANK LOANS (Tables)
 9 Months Ended
Sep. 30, 2024
Bank Loans  
Schedule of short-term bank loans
                              
  

September 30, 2024

(unaudited)

  

Interest

rate

   Due date  

December 31,

2023

  

Interest

rate

   Due date 
Agricultural Bank of China Funan Branch  $812,174.06    4.50%   4/06/25   $845,416    3.70%   4/10/24 
Anhui Funan Rural Commercial Bank   1,994,813    5.60%   12/22/24    1,972,637    5.90%   12/22/24 
Anhui Funan Rural Commercial Bank   854,920    5.60%   3/28/25    1,409,026    5.90%   3/28/24 
Anhui Funan Rural Commercial Bank   1,424,867    5.60%   1/25/25    845,416    5.90%   1/25/24 
Industrial and Commercial Bank of China, Funan (1)   712,433    3.45%   10/12/24    704,513    3.45%   10/12/24 
Bank of China Funan Branch (2)   1,139,893    3.60%   3/13/25    1,127,220    3.60%   3/13/25 
Total  $6,939,101    -    -   $6,904,228    -    - 

 

(1) $712,433 and $704,513 of loans from Industrial and Commercial Bank of China, Funan were pledged by fixed assets as of September 30, 2024 and December 31, 2023, respectively.

(2) $1,139,893 and $1,127,220 of loans from Bank of China were pledged by fixed assets as of September 30, 2024 and December 31, 2023, respectively.

 
v3.24.3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)
 9 Months Ended
Sep. 30, 2024
Payables and Accruals [Abstract]  
Schedule of accrued expenses and other current liabilities
          
   September 30, 2024   December 31,  
   (Unaudited)   2023 
         
Advances from customers  $120,674   $63,867 
Salary payable   105,099    181,950 
Tax payable   13,951    16,131 
Other payable   2,509,859    2,050,824 
Total  $2,749,583   $2,312,772 
v3.24.3
OTHER INCOME (LOSS) (Tables)
 9 Months Ended
Sep. 30, 2024
Other Income and Expenses [Abstract]  
Schedule of other income loss
                    
   For the three months ended
September 30, (Unaudited)		   For the nine months ended
September 30, (Unaudited)		 
   2024   2023   2024   2023 
Asset-based grant  $29,084    29,652   $97,493    133,180 
Income-based grant   -    -    88,382    - 
Total income from government grants   29,084    29,652    185,875    133,180 
Loss on obsolete inventory write off   (29,264)   -    (201,480)   - 
Other income (loss)  $(180)   29,652   $(15,605)   133,180 
v3.24.3
INCOME TAXES (Tables)
 9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Schedule of effective tax rates
          
   For the three months ended 
  

September 30,

2024

   September 30,
2023		 
   (Unaudited)   (Unaudited) 
US federal statutory rates   -21%   -21%
Tax rate difference between PRC and U.S.   -4%   -4%
Effect of income tax exemption on certain income   -141%   -170%
Change in valuation allowance   166%   195%
Effective tax rate  $-   $- 

 

           
   For the nine months ended 
  

September 30,

2024

  

September 30,

2023

 
   (Unaudited)   (Unaudited) 
US federal statutory rates   (21%)   (21%)
Tax rate difference between PRC and U.S.   (4%)   (4%)
Effect of income tax exemption on certain income   (29%)   (1206%)
Change in valuation allowance   54%   1231%
Effective tax rate  $-   $- 
           
Schedule of income tax expense (benefit)
          
   For the nine months ended 
   September 30, 2024   September 30, 2023 
   (Unaudited)   (Unaudited) 
Income tax expense - current  $-   $- 
Income tax benefit -deferred   (374,704)   (371,072)
Increase in valuation allowance   374,704    371,072 
Total income tax expense  $-   $- 
Schedule of net deferred tax assets
          
  

September, 30, 2024

(Unaudited)

   December 31, 2023 
Deferred tax asset          
Net operating loss  $(2,905,848)  $(2,531,144)
Less: valuation allowance   2,905,848    2,531,144 
Net deferred tax asset  $-   $- 

 
v3.24.3
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details Narrative) - shares
 1 Months Ended
Sep. 28, 2023
Sep. 30, 2024
Jan. 16, 2023
Share exchanged 10,432,800    
AUFP [Member]      
Ownership interest 74.52% 74.52%  
ESG [Member]      
Ownership interest     100.00%
Mr. Zhi Yang [Member] | AUFP [Member]      
Ownership interest   30.00%  
Zhihan [Member] | AUFP [Member]      
Ownership interest   24.52%  
Zhihan [Member] | ESG [Member]      
Ownership interest   83.526%  
Mr. Chris Alonzo [Member] | AUFP [Member]      
Ownership interest   10.00%  
Mr. Christopher Alonzo [Member] | ESG [Member]      
Ownership interest   5.406%  
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Revenue Benchmark [Member] - Customer Concentration Risk [Member]
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Customer A [Member]        
Product Information [Line Items]        
Customer concentration 25.00% 21.00% 17.00% 20.00%
Customer B [Member]        
Product Information [Line Items]        
Customer concentration 37.00% 20.00%
Customer C [Member]        
Product Information [Line Items]        
Customer concentration 19.00% 20.00%
Customer D [Member]        
Product Information [Line Items]        
Customer concentration 16.00% 15.00%
Customer E [Member]        
Product Information [Line Items]        
Customer concentration 43.00% 42.00%
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1)
Sep. 30, 2024
Dec. 31, 2023
Sep. 30, 2023
Period End Date [Member]      
Intra-Entity Foreign Currency Balance [Line Items]      
Foreign currency exchange rate, translation 7.0182 7.0797 7.2952
Average USD For The Reporting Period [Member]      
Intra-Entity Foreign Currency Balance [Line Items]      
Foreign currency exchange rate, translation 7.1773 7.0750 7.0327
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Sep. 28, 2023
Property, Plant and Equipment [Line Items]            
Noncontrolling interest $ 3,071,325   $ 3,071,325   $ 3,274,308  
Allowance for doubtful accounts 0   0   0  
Advances to Affiliate 1,208,222   1,208,222   166,010  
Deferred income 1,271,088   1,271,088   1,355,552  
Research and development expenses 144,582 $ 152,839 404,366 $ 457,306    
Loss attributable to noncontrolling interest $ (26,218) $ 28,829 $ (201,063) $ 13,337    
Land Purchased [Member]            
Property, Plant and Equipment [Line Items]            
Intangible asset, useful life 50 years   50 years      
Use Rights [Member]            
Property, Plant and Equipment [Line Items]            
Intangible asset, useful life 50 years   50 years      
Patents [Member]            
Property, Plant and Equipment [Line Items]            
Intangible asset, useful life 12 years   12 years      
Computer Software, Intangible Asset [Member]            
Property, Plant and Equipment [Line Items]            
Intangible asset, useful life 5 years   5 years      
Building and Building Improvements [Member]            
Property, Plant and Equipment [Line Items]            
Property plant and equipment, useful life 20 years   20 years      
Machinery and Equipment [Member] | Minimum [Member]            
Property, Plant and Equipment [Line Items]            
Property plant and equipment, useful life 5 years   5 years      
Machinery and Equipment [Member] | Maximum [Member]            
Property, Plant and Equipment [Line Items]            
Property plant and equipment, useful life 10 years   10 years      
Office Equipment [Member] | Minimum [Member]            
Property, Plant and Equipment [Line Items]            
Property plant and equipment, useful life 3 years   3 years      
Office Equipment [Member] | Maximum [Member]            
Property, Plant and Equipment [Line Items]            
Property plant and equipment, useful life 5 years   5 years      
AUFP [Member]            
Property, Plant and Equipment [Line Items]            
Ownership percentage 74.52%   74.52%     74.52%
Noncontrolling interest $ 3,071,325   $ 3,071,325   3,274,308  
AUM and AUMT [Member]            
Property, Plant and Equipment [Line Items]            
Noncontrolling interest $ 3,071,325   $ 3,071,325   $ 3,274,308  
Subsidiaries in China [Member]            
Property, Plant and Equipment [Line Items]            
Ownership percentage 74.52%   74.52%      
AUFP [Member]            
Property, Plant and Equipment [Line Items]            
Subsidiary ownership percentage noncontrolling owner 25.48%   25.48%      
AUM and AUMT [Member]            
Property, Plant and Equipment [Line Items]            
Subsidiary ownership percentage noncontrolling owner 25.48%   25.48%      
v3.24.3
GOING CONCERN (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]          
Negative working capital $ 9,957,879   $ 9,957,879    
Accumulated deficit 1,708,434   1,708,434   $ 1,224,811
Net Losses $ 3,521 $ (74,483) $ 684,686 $ 26,804  
v3.24.3
ACCOUNT RECEIVABLE AND OTHER RECEIVABLES (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Credit Loss [Abstract]    
Accounts receivable $ 106,267
Other receivable 104,259 79,221
Total $ 210,526 $ 79,221
v3.24.3
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Property, Plant and Equipment [Line Items]    
Property, plant and equipment - cost $ 25,560,931 $ 24,895,726
Less: Accumulated depreciation (7,612,223) (6,200,757)
Property, plant and equipment - net 17,948,708 18,694,969
Building and Building Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Property, plant and equipment - cost 16,459,599 16,276,614
Machinery Equipment and Vehicle Fleet [Member]    
Property, Plant and Equipment [Line Items]    
Property, plant and equipment - cost 9,079,406 8,597,430
Construction in Progress [Member]    
Property, Plant and Equipment [Line Items]    
Property, plant and equipment - cost $ 21,926 $ 21,682
v3.24.3
PROPERTY, PLANT AND EQUIPMENT (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Property, Plant and Equipment [Abstract]        
Depreciation expense $ 444,538 $ 364,247 $ 1,312,054 $ 1,040,765
v3.24.3
INVENTORIES (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Inventory Disclosure [Abstract]    
Raw materials $ 1,733,520 $ 1,516,634
Finished goods
Work in progress - compost 91,342 90,326
 - growing mushrooms 44,915 44,416
Total $ 1,869,777 $ 1,651,376
v3.24.3
INTANGIBLE ASSETS (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]    
Subtotal $ 3,380,313 $ 3,342,733
Less: Accumulated amortization (311,799) (256,827)
Total 3,068,514 3,085,906
Land Use Right [Member]    
Finite-Lived Intangible Assets [Line Items]    
Subtotal 3,365,401 3,327,987
Computer Software, Intangible Asset [Member]    
Finite-Lived Intangible Assets [Line Items]    
Subtotal 7,787 7,701
Patents [Member]    
Finite-Lived Intangible Assets [Line Items]    
Subtotal $ 7,124 $ 7,045
v3.24.3
INTANGIBLE ASSETS (Details 1)
Sep. 30, 2024
USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]  
2024 $ 73,151
2025 73,151
2026 73,151
2027 73,151
2028 73,151
Thereafter 2,702,759
Total $ 3,068,514
v3.24.3
INTANGIBLE ASSETS (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]        
Amortization expenses $ 18,288 $ 17,594 $ 50,705 $ 51,978
v3.24.3
BANK LOANS (Details) - USD ($)
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Short-Term Debt [Line Items]    
Short-term bank loans $ 6,939,101 $ 6,904,228
Agricultural Bank of China Funan Branch [Member]    
Short-Term Debt [Line Items]    
Short-term bank loans $ 812,174 $ 845,416
Interest rate 4.50% 3.70%
Due date Apr. 06, 2025 Apr. 10, 2024
Anhui Funan Rural Commercial Bank [Member]    
Short-Term Debt [Line Items]    
Short-term bank loans $ 1,994,813 $ 1,972,637
Interest rate 5.60% 5.90%
Due date Dec. 22, 2024 Dec. 22, 2024
Anhui Funan Rural Commercial Bank One [Member]    
Short-Term Debt [Line Items]    
Short-term bank loans $ 854,920 $ 1,409,026
Interest rate 5.60% 5.90%
Due date Mar. 28, 2025 Mar. 28, 2024
Anhui Funan Rural Commercial Bank Two [Member]    
Short-Term Debt [Line Items]    
Short-term bank loans $ 1,424,867 $ 845,416
Interest rate 5.60% 5.90%
Due date Jan. 25, 2025 Jan. 25, 2024
Industrial and Commercial Bank of China, Funan [Member]    
Short-Term Debt [Line Items]    
Short-term bank loans [1] $ 712,433 $ 704,513
Interest rate [1] 3.45% 3.45%
Due date [1] Oct. 12, 2024 Oct. 12, 2024
Bank of China Funan Branch [Member]    
Short-Term Debt [Line Items]    
Short-term bank loans [2] $ 1,139,893 $ 1,127,220
Interest rate [2] 3.60% 3.60%
Due date [2] Mar. 13, 2025 Mar. 13, 2025
[1] $712,433 and $704,513 of loans from Industrial and Commercial Bank of China, Funan were pledged by fixed assets as of September 30, 2024 and December 31, 2023, respectively.
[2] $1,139,893 and $1,127,220 of loans from Bank of China were pledged by fixed assets as of September 30, 2024 and December 31, 2023, respectively.
v3.24.3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Payables and Accruals [Abstract]    
Advances from customers $ 120,674 $ 63,867
Salary payable 105,099 181,950
Tax payable 13,951 16,131
Other payable 2,509,859 2,050,824
Total $ 2,749,583 $ 2,312,772
v3.24.3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details Narrative) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Short-Term Debt [Line Items]    
Other payable $ 2,509,859 $ 2,050,824
Funan Agricultural Investment Co.Ltd [Member]    
Short-Term Debt [Line Items]    
Other payable 284,973 281,805
Funan Small Business Financing Service Center [Member]    
Short-Term Debt [Line Items]    
Other payable $ 1,424,867 $ 1,409,026
v3.24.3
VALUE ADDED TAX RECEIVABLE (Details Narrative) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Value Added Tax Receivable    
Value added tax receivable $ 2,380,839 $ 2,211,980
v3.24.3
ASSET ACQUISITION (Details Narrative)
 9 Months Ended
Sep. 30, 2024
USD ($)
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
Equity instrument consideration, rate 100.00%
Payment to shareholders $ 2,151,383
Monthly payment $ 25,612
v3.24.3
COMMITMENTS AND CONTINGENCIES (Details Narrative)
¥ in Thousands
Jun. 06, 2023
USD ($)
Dec. 02, 2022
USD ($)
Nov. 10, 2022
USD ($)
Sep. 03, 2021
USD ($)
Jan. 05, 2022
USD ($)
Jan. 05, 2022
CNY (¥)
Zhihua [Member]            
Schedule of Investments [Line Items]            
Unpaid contractual price       $ 48,744    
Loss contingency, damages value       $ 26,095    
Loss contingency, damages paid, value $ 26,095          
AUFP [Member]            
Schedule of Investments [Line Items]            
Loss contingency, damages paid, value     $ 50,740      
Loss contingency lawsuit filing   $ 66,066 $ 60,147      
AUFP [Member]            
Schedule of Investments [Line Items]            
Principal amount         $ 115,000,000 ¥ 18,090
v3.24.3
OTHER INCOME (LOSS) (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Total income from government grants $ 29,084 $ 29,652 $ 185,875 $ 133,180
Loss on obsolete inventory write off (29,264) (201,480)
Other income (loss) (180) 29,652 (15,605) 133,180
Asset Based Grants [Member]        
Total income from government grants 29,084 29,652 97,493 133,180
Income Based Grants [Member]        
Total income from government grants $ 88,382
v3.24.3
INCOME TAXES (Details)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Tax Disclosure [Abstract]        
US federal statutory rates (21.00%) (21.00%) (21.00%) (21.00%)
Tax rate difference between PRC and U.S. (4.00%) (4.00%) (4.00%) (4.00%)
Effect of income tax exemption on certain income (141.00%) (170.00%) (29.00%) (1206.00%)
Change in valuation allowance 166.00% 195.00% 54.00% 1231.00%
Effective tax rate
v3.24.3
INCOME TAXES (Details 1) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Tax Disclosure [Abstract]        
Income tax expense - current    
Income tax benefit -deferred     (374,704) (371,072)
Increase in valuation allowance     374,704 371,072
Total income tax expense
v3.24.3
INCOME TAXES (Details 2) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Income Tax Disclosure [Abstract]    
Net operating loss $ (2,905,848) $ (2,531,144)
Less: valuation allowance 2,905,848 2,531,144
Net deferred tax asset
v3.24.3
INCOME TAXES (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Tax Disclosure [Abstract]        
Income tax $ 584,785 $ 563,375 $ 1,131,025 $ 1,647,017
v3.24.3
RELATED PARTY TRANSACTION (Details Narrative) - Mr Zhi Yang [Member]
 1 Months Ended
Oct. 22, 2022
USD ($)
shares
Related Party Transaction [Line Items]  
Common Stock, Shares Subscribed but Unissued 12,000,000
Stock Repurchased and Retired During Period, Value | $ $ 30,000
Stock Repurchased and Retired During Period, Shares 12,000,000
Date of payment Feb. 05, 2024
v3.24.3
EQUITY (Details Narrative) - $ / shares
Sep. 30, 2024
Dec. 31, 2023
Equity [Abstract]    
Common stock, shares authorized 65,000,000 65,000,000
Common stock, par value per share $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, par value per share $ 0.001 $ 0.001
Common stock, shares issued 25,899,468 25,899,468
Common stock, shares outstanding 25,899,468 25,899,468
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
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