Business Description
We are principally engaged in the meat and food processing and distribution
business in the People’s Republic of China (“PRC”). Currently,
we have one fertilizer processing plant located in Shanghai in the PRC. Our
current maximum production capacity is 30,000 metric tons a year. We are currently
building 2 new fertilizer plants in Weihai City, Shandong Province and in Shanghai
in the PRC. One of the new plants located in Weihai City was in operations in
August 2015 with annual production capacity of 100,000 metric tons. Another
new plant located in Shanghai has been completed in June 2016 with annual production
capacity of 100,000 metric tons.
During the period from our formation on November 2014 to October 2015, we did
not generate any significant revenue, and accumulated no significant assets,
as we explored various business opportunities.
On February 10, 2016, Muliang Industry Co., Ltd. (“Muliang Industry”)
entered into an entrusted management agreement with Muliang Agriculture Ltd.’s
wholly owned subsidiary, Shanghai Mufeng Investment Consulting Co., Ltd. (“Shanghai
Mufeng”), which provides that Shanghai Mufeng will be entitled to the
full guarantee for the performance of such entrusted management agreement entered
into by the Company. Muliang Agriculture Ltd. (“Muliang HK”) was
incorporated in Hong Kong, PRC on August 21, 2014. Other than the equity interest
in Shanghai Mufeng, Muliang HK does not own any assets or conduct any operations.
Shanghai Mufeng is also entitled to receive the residual return of the Company.
As a result of the agreement, Shanghai Mufeng will absorb 100% of the expected
gains or losses of the Company, which results in Shanghai Mufeng being the primary
beneficiary of the Company.
Shanghai Mufeng also entered into a pledge of equity agreement with the principal
shareholders of the Company (the “Principal Shareholders”), who
pledged all their equity interest in the entity to Shanghai Mufeng. The pledge
of equity agreement, which were entered into by each Principal Shareholder,
pledged each of the Principal Shareholders’ equity interest in the Company
as a guarantee for the entrustment payment under the Entrusted Management Agreements.
In addition, Shanghai Mufeng entered into an option agreement to acquire the
Principal Shareholders’ equity interest in these entities if or when permitted
by the PRC laws.
Based on these exclusive agreements, the Company will be treated as a variable
interest entity (“VIE”) of Muliang HK as required by generally accepted
accounting principles in the United States (“US GAAP”), because
Muliang HK is the primary beneficiary of the VIE. The profits and losses of
the Company are allocated based upon the Entrusted Management Agreement.
On February 10, 2016, we entered into a Share Exchange Agreement (the “Exchange
Agreement”) with Muliang HK. Pursuant to the terms of the Exchange Agreement,
the shareholders of Muliang HK transferred to Mullan Agritech all of the Muliang
HK Shares in exchange for the issuance of 150,525,000 shares of our common stock
(the “Share Exchange”). As a result of the Share Exchange, Muliang
HK became a wholly-owned subsidiary of us and the shareholders of Muliang HK
acquired approximately 100% of our issued common shares.
The effect of the Share Exchange is such that effectively a reorganization of
the entities has occurred for accounting purposes and is deemed to be a reverse
acquisition. Subsequent to the Share Exchange the financial statements presented
are those of a combined Muliang HK and its subsidiaries, including its VIE,
Muliang Industry, as if the Share Exchange had been in effect retroactively
for all periods presented. As previously noted the “Company” for
financial statement purposes was the consolidation of Muliang HK, Shanghai Mufeng,
Muliang Industry and Muliang Industry’s subsidiaries. Muliang Industry’s
subsidiaries include its wholly-owned subsidiaries which are limited liability
companies in People’s Republic of China (“PRC”), Shanghai
Zongbao Environment Engineering Co., Ltd. (“Zongbao”) and Shanghai
Muliang Agritech Development Co., Ltd. (“Agritech Development”);
its 99% owned subsidiary, Weihai Fukang Bio-Fertilizer Co., Ltd. (“Fukang”),
a PRC limited liability company, and Shanghai Muliang Agricultural Sales Co.,
Ltd. (Muliang Sales), a PRC limited liability company found in July 2015.
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