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



Business Overview



We are a holding company incorporated in Nevada. As a holding company with no
material operations of our own, we conduct a substantial majority of our
operations through our subsidiaries established in the People's Republic of
China, or "PRC" or "China," and our variable interest entity, or "VIE." We
control and receive the economic benefits of our VIE's business operations
through certain contractual arrangements. Because of our corporate structure, we
are subject to risks due to uncertainty of the interpretation and the
application of the PRC laws and regulations, including but not limited to a
limitation on foreign ownership of internet technology companies and regulatory
review of overseas listing of PRC companies through a special purpose vehicle,
and the validity and enforcement of the VIE Agreements. We are also subject to
the risks of uncertainty about any future actions of the PRC government in this
regard. In addition, our VIE Agreements may not be effective in providing
control over VIE. If we fail to comply with their rules and regulations, we may
also be subject to sanctions imposed by PRC regulatory agencies, including the
Chinese Securities Regulatory Commission.



We primarily engage in the manufacturing and distribution of organic fertilizer and the sales of agricultural products in the PRC. Our organic fertilizer products are sold under our brand names "Zongbao," "Fukang," and "Muliang."





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



We generated our revenue mainly from our organic fertilizers, which accounted
for approximately 91.7% and 100% of our total revenue for the nine months ended
September 30, 2021, and 2020, respectively. We currently have two integrated
factories in Weihai City, Shandong Province, PRC, to produce our organic
fertilizers, which have been in operation since August 2015. We plan to improve
the technology for our existing straw organic fertilizer production lines in the
following aspects: (i) adopt more advanced automatic control technology for raw
material feed to shorten the processing time of raw material, and (ii)
manufacture powdered organic fertilizer instead of granular organic fertilizer
production in order to avoid the drying and cooling process, as such will
increase our production capacity.



With the focus on producing organic fertilizers, we also sell agriculture food
products, including apples, and as a sales agent for other large agriculture
companies in the PRC. In 2014, we rented 350 mu (about 57.66 acres) of
mountainous land as an apple orchard. The sales of apples generated less than 1%
of our total revenue for the nine months ended September 30, 2021, and 2020. We
expect to generate more revenues from the sales of apples as the apple orchards
become more mature in the next few years.



                                       31





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



We have sold our industrial land and buildings in Shanghai through an
administratively organized private sale before the end of the fiscal year ended
December 31, 2020. We have cleared all liens and legal claims attached to our
subsidiary Zongbao and improved our cash position through the sale. We have
completed the sale in April 2021.



Viagoo Solutions



Viagoo logistic platform aims to provide a solution for shippers to easily
optimize the logistics resources by either listing their assets in the platform
for other shippers to book or requesting the logistic services via the platform.
Furthermore, the flexible sharing model ensures shippers and carriers can get
the best deals to reduce costs by maximizing unused resources.



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



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



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



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



Viagoo Business Model


Viagoo business model has three main revenue streams.





                                       32




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



? VTM provides single job and bulk orders or API connections for a job

posting. The fees are pre-calculated based on distance, areas, volume

matric weight, type of goods, delivery options, and time.

? Task tracking - Shippers can track the delivery status if the option for

tracking is required.

? eWallet option - eWallet will be used for the service purpose, and payment


        will be deducted from the eWallet stored value.

    ?   Reports - Delivery reports are available for shippers to track the
        performance and status of the delivery operation.




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



Viagoo Enterprise Services (VES) - is a cloud-based service that provides the
operation management to support the Transport and Logistics team. Through
various modules, the carrier's transport management can greatly optimize the
resources and achieve higher efficiency.



? Automatic Scheduling - Delivery / Invoice data will be pushed to the VES

for an automatic schedule to the driver via VES mobile app. The criteria

of automatic scheduling are based on location, time preference, and route

zoning. These criteria can be configured and fine-tuned as the business


        progresses.




    ?   Route Optimisation - The system can automatically calculate the best
        routes based on various delivery points and constraints such as "time
        window." With route optimization, the transport planner can handle new

delivery addresses dynamically. Also, if there is a change in delivery

plans due to various unforeseen circumstances such as vehicle breakdown

and customer last-minute cancellation, the system can re-optimize quickly


        by pushing a button.



? VES Driver app - Task tracking - Once the tasks are started, they will be

tracked until they are completed. If e-sign is accepted, customers can

sign and acknowledge the acceptance of goods using VES' mobile sign

feature built into the app or by taking a photo of the signed invoices or


        delivering orders (usually the last page of the document).




    ?   Customer Notification - Customers will be notified via email upon the

completion of the delivery. A copy of the invoice/delivery order and the


        signed copies will be sent to customers (customer email list to be
        maintained in the system) via email.



? Reports - Delivery reports are available for operations managers to track


        the performance and status of the delivery operations.



? VES Temperature Sensor Tracking Services - This is an additional module

for real-time tracking of temperature control (via a GPS temperature

tracking device installed in the truck) trucks to prevent food waste and


        ensure food safety.



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





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



Critical Accounting Policies



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




                                       33





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



Basis of Presentation


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





Principles of Consolidation


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



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



Use of Estimates



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




Accounts Receivable



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



Inventory Valuation



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

the
weighted average method.



Revenue Recognition



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


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





                                       34





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



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



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

realizable and earned.



Income Taxes



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



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



New Accounting Standards



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



? Recognize a right-of-use asset and a lease liability, initially measured

at the present value of the lease payments, in the statement of financial

position

? Recognize interest on the lease liability separately from amortization of


        the right-of-use asset in the statement of comprehensive income

    ?   Classify repayments of the principal portion of the lease liability within

financing activities and payments of interest on the lease liability and

variable lease payments within operating activities in the statement of


        cash flows.



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

? Recognize a right-of-use asset and a lease liability, initially measured

at the present value of the lease payments, in the statement of financial

position

? Recognize a single lease cost, calculated so that the cost of the lease is

allocated over the lease term on a generally straight-line basis



    ?   Classify all cash payments within operating activities in the statement of
        cash flows.




                                       35





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



    ?   Apply ASC 840 in the comparative periods.

? Provide the disclosures required by ASC 840 for all periods that continue


        to be presented in accordance with ASC 840.

    ?   Recognize the effects of applying ASC 842 as a cumulative-effect
        adjustment to retained earnings for the period of adoption.




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



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





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



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



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



Results of Operations


We are principally engaged in the organic fertilizer manufacture and distribution business in the PRC, which account for 91.7% of our total revenue for the nine months ended September 30, 2021.


As a result of the COVID-19 outbreak in December 2019 and continuing in the year
of 2020, the Company's businesses, results of operations, financial position and
cash flows were adversely affected in 2020. However, the COVID-19 was under
control for the nine months ended September 30, 2021 in China. And we are
growing our revenue steadily currently and will keep growing through 2021.




                                       36





Results of Operations for the Three Months Ended September 30, 2021 and 2020



                                               Three Months Ended September 30,
                                                 2021                    2020             Fluctuation
                                                   $                       $                   $               %

Revenues-fertilizer                                3,135,009               3,079,335            55,674          1.81 %
Reveues-logistic                                     206,521                       -           206,521           N/A
Reveues-agricutural products                               -                  69,387                 -           N/A
Subtoal of revenue                                 3,341,530              

3,148,722           262,195          8.33 %
Cost-fertilizer                                    2,058,843               1,644,008           414,835         25.23 %
Cost- logistic                                        95,943                       -            95,943           N/A

Cost- agricultural products                                -               

  82,987                 -           N/A
Subtotal of cost                                   2,154,786               1,726,995           510,778         29.58 %
Gross profit                                       1,186,744               1,421,727          (248,583 )      -17.48 %
Gross margin                                           35.51 %                 45.15 %
Operating expenses:
General and administrative expenses                  348,288               

 487,486          (139,198 )      -28.55 %
Selling expenses                                     122,274                 156,063           (33,789 )      -21.65 %
Total operating expenses                             470,562                 643,549          (172,987 )      -26.88 %
Income(loss) from operations                         716,182                 778,178           (75,596 )       -9.71 %
Other income (expense):
Interest expense                                     (25,884 )              (147,404 )         121,520        -82.44 %
Rent net income                                            -                   2,923            (2,923 )         N/A
Other income (expense), net                           43,773                  15,849            27,924        176.19 %
Total other income (expense)                          17,889                (128,632 )         146,521       -113.91 %
Income before income taxes                           734,071                 649,546            70,925         10.92 %
Income taxes                                           7,469                  18,834           (11,365 )         N/A
Net income (loss)                                    726,602                 630,712            82,290         13.05 %




Revenue



Total revenue for fertilizer increased from $3,079,335 for the three months
ended September 30, 2020, to $3,135,009 for the three months ended September 30,
2021, which represented an increase of $55,674, or approximately 1.81%. The
increase in revenue was mainly due to the restoring confidence in the future
economic growth for most of our customers. Traditionally, we experience some
seasonality in our sales. We tend to sell more fertilizer products in the second
half of the year. Additionally, there has been a general recovery in the economy
after the height of the pandemic. We expect to see a trend of improving sales as
the epidemic moves further into the past.



Cost of sales



Cost of sales for fertilizer increased from $1,644,008 for the three months
ended September 30, 2020, to $2,058,843 for the three months ended September 30,
2021, which represented an increase of approximately $414,835, or 25.23%. The
increase in the cost of revenue for fertilizer was in line with the increase in
revenue.



Gross profit



The gross profit decreased from $1,421,727 for the three months ended September
30, 2020, to a gross profit of $1,186,744 for the three months ended September
30, 2021. The gross margin decreased from 45.15% for the three months ended
September 30, 2020, to 35.51% for the three months ended September 30, 2021.



Expenses



We incurred $122,274 in selling expenses for the three months ended September
30, 2021, compared to $156,063 for the three months ended September 30, 2020. We
incurred $348,288 in general and administrative expenses for the three months
ended September 30, 2021, compared to $487,486 for the three months ended
September 30, 2020. Total selling, general and administrative expenses decreased
by $172,987, or 26.88% for the three months ended September 30, 2021, as
compared to the same period in 2020. Our selling expenses decreased by $33,789,
and our general and administrative expenses decreased by $139,198. We expect our
general and administrative expenses to increase in the near future if we
successfully complete our public offering.



                                       37





Interest income (expense)



We incurred $25,884 in interest expense during the three months ended September
30, 2021, compared with interest expense of $147,404 for the three months ended
September 30, 2020.



Net income


Our net income was $726,602 for the three months ended September 30, 2021, compared with a net income of $630,712 for the three months ended September 30, 2020, representing an increase of $82,290.


Results of Operations for the Nine Months Ended September 30, 2021 and 2020




                                                Nine Months Ended
                                                  September 30,
                                              2021            2020          Fluctuation
                                                $               $                $               %
Revenues-fertilizer                          6,856,190       6,986,986          (130,796 )       -1.87 %
Reveues-logistic                               616,859               -           616,859           N/A
Reveues-agricutural products                       120         214,867          (214,747 )      -99.94 %
Subtoal of revenue                           7,473,169       7,201,853           271,316          3.77 %
Cost-fertilizer                              4,234,896       3,920,444           314,452          8.02 %
Cost- logistic                                 327,845               -           327,845           N/A

Cost- agricultural products                         90         156,105     

    (156,015 )      -99.94 %
Subtotal of cost                             4,562,831       4,076,549           486,282         11.93 %
Gross profit                                 2,910,338       3,125,304          (214,966 )       -6.88 %
Gross margin                                     38.94 %         43.40 %
Operating expenses:
General and administrative expenses          1,057,544       1,396,869     

    (339,325 )      -24.29 %
Selling expenses                               331,678         266,072            65,606         24.66 %
Total operating expenses                     1,389,222       1,662,941          (273,719 )      -16.46 %
Income(loss) from operations                 1,521,116       1,462,363            58,753          4.02 %
Other income (expense):
Interest expense                               (91,529 )      (344,179 )         252,650        -73.41 %
Rent net income                                      -           6,309            (6,309 )         N/A
Other income (expense), net                    103,513          11,738            91,775        781.86 %
Total other income (expense)                    11,984        (326,132 )         338,116       -103.67 %
Income before income taxes                   1,533,100       1,136,231           396,869         34.93 %
Income taxes                                     7,469          34,433           -26,964           N/A
Net income (loss)                            1,525,631       1,101,798           423,833         38.47 %




Revenue



Total revenue for fertilizer slightly decreased from $6,986,986 for the nine
months ended September 30, 2020 to $6,856,190 for the nine months ended
September 30, 2021, which represented a decrease of $130,796, or approximately
negative 1.87%. Traditionally, we experience some seasonality in our sales. We
tend to sell more fertilizer products in the second half of the year.
Additionally, there has been a general recovery in the economy after the height
of the pandemic. We expect to see a trend of improving sales as the epidemic
moves further into the past.



                                       38





Cost of sales



The cost of sales for fertilizer slightly increased from $3,920,444 for the nine
months ended September 30, 2020 to $4,234,896 for the nine months ended
September 30, 2021, which represented an increase of approximately $314,452, or
8.02%. The increase in cost of revenue for fertilizer was due to the increase in
raw materials



Gross profit



The gross profit decreased from $3,125,304 for the nine months ended September
30, 2020 to a gross profit of $2,9104,338 for the nine months ended September
30, 2021. The gross margin decreased from 43.0% for the nine months ended
September 30, 2020 to 38.94% for the nine months ended September 30, 2021.




Expenses



We incurred $331,678 in selling expenses for the nine months ended September 30,
2021, compared to $266,072 for the nine months ended September 30, 2020. We
incurred $1,057,544 in general and administrative expenses for the nine months
ended September 30, 2021, compared to $1,396,869 for the nine months ended
September 30, 2020. Total selling, general and administrative expenses decreased
by $273,719, or 16.46% for the nine months ended September 30, 2021, as compared
to the same period in 2020. Our selling expenses increased by $65,606, and our
general and administrative expenses decreased by $339,325. We expect our general
and administrative expenses to increase in the near future, if we successfully
complete our public offering.



Interest income (expense)


We incurred $91,529 in interest expense during the nine months ended September 30, 2021, compared with an interest expense of $344,179 for the nine months ended September 30, 2020.





Net income


Our net income was $1,525,631 for the nine months ended September 30, 2021, compared with net income of $1,101,798 for the nine months ended September 30, 2020, representing an increase of $423,833.

Liquidity and Capital Resources





Liquidity is the ability of a company to generate funds to support its current
and future operations, satisfy its obligations and otherwise operate on a going
concern basis. At September 30, 2021 and December 31, 2020 our net current
assets (working capital) were $4,469,722 and $5,145,436, respectively.



We have financed our operations over the nine months ended September 30, 2021 and 2020 primarily through proceeds from net cash inflow from operations.

The components of cash flows are discussed below:





                                                            Nine Months Ended
                                                              September 30,
                                                          2021             2020
Net cash provided by (used in) operating activities   $  4,388,257     $  2,021,694
Net cash provided by (used in) investing activities     (1,221,133          (42,579 )
Net cash used in financing activities                   (3,594,247 )     (2,080,739 )
Exchange rate effect on cash                               156,869           89,829
Net cash inflow (outflow)                             $   (270,255 )   $    (11,795 )




                                       39




Cash Provided by Operating Activities





Net cash provided by operating activities was $4,388,257 for the nine months
ended September 30, 2021. The net cash inflow consisted primarily of net income
of $1,525,631, depreciation and amortization of $532,346, a decrease of
$4,660,950 in account receivable, a decrease of $10,746,267 in other receivable,
which were offset by an increase of $979,020 in prepayment, a decrease of
$9,107,812 in accounts payable and accrued payables, and a decrease of
$3,068,139 in other payable.



Net cash provided by operating activities was $2,021,694 for the nine months
ended September 30, 2020. The net cash inflow consisted primarily of net income
of $1,101,798, depreciation and amortization of $711,530, an increase of
$4,678,264 in account payable and accrued payables, an increase of $324,745 in
other payable, a decrease of $82,709 in inventory, which was offset by an
increase of $2,017,922 in prepayment, an increase of $2,918,741 in accounts
receivable.



Cash used in Investing Activities





Net cash used in investing activities was $1,221,133 for the nine months ended
September 30, 2021. The activities referred to the construction in progress

of
$1,221,133.


Net cash used in investing activities was $42,579 for the nine months ended September 30, 2020. The activities consisted of disposal of intangible assets of $33,081 and investment in construction in progress of $75,660.

Cash Used in Financing Activities





Net cash used in financing activities was $3,594,247 for the nine months ended
September 30, 2021. During the period, cash used in financing activities mainly
consisted of the proceeds from related parties of $1,023,389 and repayment of
short-term loan of $4,617,637.



Net cash used in financing activities was $2,080,739 for the nine months ended
September 30, 2020. During the period, cash used in financing activities
consisted of the repayment to related parties of $1,266,476 and repayment of a
short-term loan of $814,263.



We anticipate that our current cash reserves plus cash from our operating
activities will not be sufficient to meet our ongoing obligations and fund our
operations for the next twelve months. As a result, we will need to seek
additional funding in the near future. We currently do not have a specific plan
of how we will obtain such funding; however, we anticipate that additional
funding will be in the form of equity financing from the sale of shares of our
common stock or renewing our current obligations with lenders. We may also seek
to obtain short-term loans from our directors or unrelated parties. Additional
funding may not be available, or at acceptable terms, to us at this time. If we
are unable to obtain additional financing, we may be required to reduce the
scope of our business development activities, which could harm our business
plans, financial condition and operating results.



Contractual Commitments and Commitments for Capital Expenditure





Contractual Commitments



The following table summarizes our contractual obligations at September 30, 2021
and the effect those obligations are expected to have on our liquidity and

cash
flow in future periods.



                                     Payments Due by Period as of September 30, 2021
                                                Less than        2 - 3      4 - 5        Over
                              Total               1 Year         Years      Years       5 Years
Contractual obligations
Loans                     $    1,156,938       $  1,156,938     $    -1     $    -     $       -
Others                                 -                  -           -          -             -
                          $    1,156,938       $  1,156,938     $     -     $    -     $       -




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Commitments for Capital Expenditure

There were no non-cancelable commitments for capital expenditure as of September 30, 2021.





Off Balance Sheet Items



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

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