ESG Inc. Plunges into Deeper Loss Amid Revenue Collapse, Going Concern Risk

TL;DR

**ESG Inc. is bleeding cash and facing an existential threat; steer clear unless you're a high-risk speculator.**

AI Summary

ESG Inc. reported a significant decline in revenue and a widening net loss for the nine months ended September 30, 2025. Total revenues plummeted to $4,568,519 from $7,122,611 in the prior year, a 35.8% decrease. The company posted a net loss of $1,292,271 for the nine-month period, a substantial increase from the $684,686 net loss in the same period of 2024. Gross profit also saw a sharp decline, falling from $850,124 to $231,054 year-over-year. A critical development is the working capital deficiency of $5,005,567 as of September 30, 2025, primarily due to $6,041,532 in short-term bank loans, raising substantial doubt about the company's ability to continue as a going concern. The company also recorded an allowance for expected credit losses of $350,495 due to a payment agreement with a key mushroom powder seasoning customer, Jin Shui Limited, for an outstanding account receivable of 95.8% of total accounts receivable. Strategic outlook includes management's efforts to replace short-term bank loans with long-term financing, though success is not assured.

Why It Matters

ESG Inc.'s deteriorating financial health, marked by a 35.8% revenue drop and a $1.29 million net loss, signals significant distress for investors. The stated 'substantial doubt about the Company's ability to continue as a going concern' due to a $5 million working capital deficiency and reliance on short-term bank loans directly impacts investor confidence and potential for future returns. Employees face job insecurity given the operational struggles, while customers, particularly the single customer representing 95.8% of accounts receivable, face potential supply chain disruptions if the company's financial issues persist. In the competitive plant-based food sector, ESG Inc.'s struggles could open opportunities for more financially stable rivals.

Risk Assessment

Risk Level: high — The company explicitly states 'substantial doubt about the Company's ability to continue as a going concern' due to a working capital deficiency of $5,005,567 as of September 30, 2025. This is exacerbated by $6,041,532 in short-term bank loans and a significant net loss of $1,292,271 for the nine months ended September 30, 2025.

Analyst Insight

Investors should exercise extreme caution and consider divesting from ESGH given the explicit going concern warning and severe financial deterioration. New investors should avoid this stock until management demonstrates a clear path to profitability and resolves its critical liquidity issues, specifically by securing long-term financing.

Financial Highlights

debt To Equity

1.08

revenue

$4,568,519

operating Margin

-25.1%

total Assets

$27,626,463

total Debt

$14,345,213

net Income

-$1,292,271

eps

$0.02

gross Margin

5.1%

cash Position

$109,159

revenue Growth

-35.8%

Revenue Breakdown

Key Numbers

• $4,568,519 — Total Revenues (35.8% decrease for nine months ended Sept 30, 2025, from $7,122,611 in 2024)
• $1,292,271 — Net Loss (Increased from $684,686 in 2024 for nine months ended Sept 30, 2025)
• $5,005,567 — Working Capital Deficiency (As of September 30, 2025, raising going concern doubt)
• $6,041,532 — Short-term Bank Loans (As of September 30, 2025, contributing to working capital deficiency)
• $350,495 — Allowance for Expected Credit Losses (Recorded in Q3 2025 due to payment agreement with Jin Shui Limited)
• 95.8% — Accounts Receivable Concentration (From one customer, Jin Shui Limited, as of September 30, 2025)
• $275,000 — Convertible Notes Payable (Issued to Labrys Fund II, L.P. on August 5, 2025)
• $2,068,213 — Current VAT Receivable (Approved for refund on September 8, 2025)
• $0.02 — Net Loss Per Share (For nine months ended September 30, 2025, same as 2024)
• 25,899,468 — Common Shares Outstanding (As of November 14, 2025)

Key Players & Entities

• ESG Inc. (company) — registrant
• Labrys Fund II, L.P. (company) — convertible note purchaser
• Jin Shui Limited (company) — mushroom powder seasoning customer
• Agricultural Bank of China Funan Branch (company) — short-term loan provider
• Anhui Funan Rural Commercial Bank (company) — short-term loan provider
• Bank of China Funan Branch (company) — short-term loan provider
• State Taxation Administration (regulator) — approved VAT refund
• AUFP (company) — loan guarantor
• ESG Hainan (company) — loan guarantor
• SME Guarantee Corporation (company) — loan guarantor

FAQ

Risk Factors

• Going Concern Uncertainty [high — financial]: The company has a working capital deficiency of $5,005,567 as of September 30, 2025, primarily due to $6,041,532 in short-term bank loans. This raises substantial doubt about the company's ability to continue as a going concern.
• Customer Concentration Risk [high — financial]: As of September 30, 2025, 95.8% of accounts receivable are from a single customer, Jin Shui Limited. This concentration creates significant risk if this customer defaults or reduces business.
• Credit Loss on Receivables [medium — financial]: An allowance for expected credit losses of $350,495 was recorded due to a payment agreement with Jin Shui Limited, indicating potential uncollectibility of a significant portion of receivables.
• Reliance on Short-Term Debt [high — financial]: The company's capital structure is heavily reliant on short-term bank loans totaling $6,041,532. Management's efforts to replace these with long-term financing are not assured.
• Declining Revenue and Gross Profit [high — operational]: Total revenues decreased by 35.8% to $4,568,519 for the nine months ended September 30, 2025, and gross profit fell from $850,124 to $231,054 year-over-year.
• Inventory Management [medium — operational]: Inventories decreased significantly from $2,906,383 at year-end 2024 to $1,342,114 as of September 30, 2025, suggesting potential issues with production or sales forecasting.

Industry Context

The mushroom and related products industry can be competitive, with players focusing on cultivation, processing, and distribution. Trends include demand for specialty mushrooms, value-added products like seasonings, and increasing consumer interest in health and sustainability. Companies often face challenges related to supply chain management, quality control, and fluctuating raw material costs.

Regulatory Implications

Companies in this sector may face regulations related to food safety, agricultural practices, and environmental compliance. Changes in import/export regulations or tariffs could also impact operations, particularly for companies with international sales like ESG Inc. Compliance with financial reporting standards is critical, especially given the going concern issues.

What Investors Should Do

1. Monitor management's progress on refinancing short-term debt.
2. Assess the financial health and payment reliability of Jin Shui Limited.
3. Evaluate the sustainability of the Mushroom powder seasonings segment.
4. Scrutinize operating expense controls.

Key Dates

• 2025-09-30: End of Q3 2025 — Company reported a working capital deficiency of $5,005,567 and a net loss of $1,292,271 for the nine months ended this date, raising going concern doubts.
• 2025-09-08: VAT Refund Approved — A current VAT receivable of $2,068,213 was approved for refund, potentially improving near-term liquidity.
• 2025-08-05: Convertible Notes Issued — $275,000 in convertible notes were issued to Labrys Fund II, L.P., adding to the company's debt obligations.
• 2025-09-30: Accounts Receivable Concentration — 95.8% of accounts receivable were from a single customer (Jin Shui Limited), highlighting significant customer concentration risk.
• 2024-12-31: End of Fiscal Year 2024 — Company had total assets of $29,794,057 and total liabilities of $15,854,164.

Glossary

Working Capital Deficiency

Occurs when a company's current liabilities exceed its current assets, indicating a potential short-term inability to meet its obligations. (ESG Inc. has a significant working capital deficiency of $5,005,567, raising concerns about its ability to continue operations.)

Going Concern

An accounting assumption that a business will continue to operate for the foreseeable future without the threat of liquidation. (The company's financial condition raises substantial doubt about its ability to continue as a going concern.)

Allowance for Expected Credit Losses

An estimate of the amount of accounts receivable that a company expects not to collect. (ESG Inc. recorded an allowance of $350,495 due to a payment agreement with a key customer, indicating potential uncollectibility.)

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for. (A high concentration of accounts receivable (95.8%) from one customer presents a significant risk.)

Gross Profit

The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. (ESG Inc. experienced a sharp decline in gross profit from $850,124 to $231,054 year-over-year.)

Convertible Notes Payable

Debt instruments that can be converted into a predetermined amount of the issuer's equity at certain times during their life. (The company issued $275,000 in convertible notes, adding to its liabilities.)

Year-Over-Year Comparison

ESG Inc. has experienced a significant downturn since its last filing. Total revenues for the nine months ended September 30, 2025, have fallen by 35.8% compared to the prior year, and gross profit has been decimated, turning positive to a negative margin in the three-month period. The company's financial position has deteriorated, marked by a substantial working capital deficiency of $5,005,567, primarily driven by short-term debt, which was not as pronounced in the prior year. New risks have emerged, notably the extreme concentration of accounts receivable with a single customer and the recording of a significant allowance for credit losses.

Key Financial Figures

• $200,000 b — omer agreed to make monthly payments of $200,000 beginning January 1, 2026, with all amoun
• $350,495 — allowance for expected credit losses of $350,495 during the quarter ended September 30,
• $1,124,007 — FP and SME Guarantee Corporation. (5) $1,124,007 and $1,096,206 of loans from Bank of Ch
• $1,096,206 — antee Corporation. (5) $1,124,007 and $1,096,206 of loans from Bank of China were pledge
• $250,000 — L.P. for an aggregate cash purchase of $250,000 in reliance on an exemption from regist
• $420,067 — d in 2019. The payment of approximately $420,067 was posted under the wrong supplier acc
• $1,450,405 — lowing: accounts payable decreased from $1,450,405 to $ 1,300,676 , the accumulated defici
• $1,224,811 — the accumulated deficit decreased from $1,224,811 to $ 1,113,233 and noncontrolling inter
• $3,274,308 — noncontrolling interest increased from $3,274,308 to $ 3,312,459 . The Company assessed t

Filing Documents

• esgh-20250930_10q.htm (10-Q) — 678KB
• esgh-20250930_10qex3z5.htm (EX-3) — 90KB
• esgh-20250930_10qex31z1.htm (EX-31) — 13KB
• esgh-20250930_10qex31z2.htm (EX-31) — 13KB
• esgh-20250930_10qex32z1.htm (EX-32) — 5KB
• esgh-20250930_10qex32z2.htm (EX-32) — 5KB
• 0001520138-25-000360.txt ( ) — 3647KB
• esgh-20250930.xsd (EX-101.SCH) — 27KB
• esgh-20250930_cal.xml (EX-101.CAL) — 45KB
• esgh-20250930_def.xml (EX-101.DEF) — 58KB
• esgh-20250930_lab.xml (EX-101.LAB) — 188KB
• esgh-20250930_pre.xml (EX-101.PRE) — 144KB
• esgh-20250930_10q_htm.xml (XML) — 628KB

Financial Statements (Unaudited)

Financial Statements (Unaudited) 1 Consolidated Balance Sheets as of September 30, 2025 (Unaudited) and December 31, 2024 1 Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2025 and 2024 (Unaudited) 2 Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended September 30, 2025 and 2024(Unaudited) 3 Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2025 and 2024 (Unaudited) 4 Notes to the Unaudited Financial Statements 5 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 17 Item 4.

Controls and Procedures

Controls and Procedures 17 PART II OTHER INFORMATION: Item 1.

Legal Proceedings

Legal Proceedings 18 Item 1A

Risk Factors

Risk Factors 18 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Securities Holders 18 Item 5. Other Information 18 Item 6. Exhibits 19

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements. ESG INC. Consolidated Balance Sheet September 30, December 31, 2025 2024 Assets Current Assets Cash $ 109,159 $ 110,343 Restricted cash - 56,398 Accounts receivable 3,324,630 2,917,093 Inventories 1,342,114 2,906,383 Other receivable 265,837 245,232 Advance to suppliers 208,973 736,094 Value added tax receivable, current 2,068,213 - Total Current Assets 7,318,926 6,971,543 Property, plant and equipment, net 16,456,348 17,184,192 Intangible assets, net 2,957,647 2,934,213 Value added tax receivable 893,542 2,704,109 Total Non-current Assets 20,307,537 22,822,514 Total Assets $ 27,626,463 $ 29,794,057 Liabilities and Shareholders' Equity Current Liabilities Short-term bank loans $ 6,041,532 $ 5,988,024 Convertible notes payable 275,000 - Account payable 2,953,422 4,604,011 Accrued expenses and other current liabilities 2,940,089 3,092,953 Deferred income, current 114,450 121,897 Total Current liabilities 12,324,493 13,684,988 Deferred income 1,022,166 1,073,487 Long-term payable 998,554 1,095,690 Total Non-current liabilities 2,020,720 2,169,177 Total Liabilities 14,345,213 15,854,164 Commitments and Contingencies Shareholders' Equity Common stock 25,900 25,900 Additional paid in capital 11,152,388 11,152,388 Accumulated comprehensive income (loss) ( 148,253 ) ( 711,270 ) Accumulated deficit ( 1,185,713 ) ( 168,600 ) Total Company stockholders' Equity 9,844,323 10,298,418 Noncontrolling interest 3,436,927 3,519,577 Total Equity 13,281,250 13,817,995 Total Liabilities and Stockholders' Equity $ 27,626,463 $ 29,794,057 The accompanying notes are an integral part of these consolidated financial statements. 1 ESG INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) Three Months Ended Nine Months Ended September 30, 2025 September 30, 2024 September 30,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025 (Unaudited) Note 1 – Summary of Significant Accounting Policies Basis of Presentation and Preparation The consolidated financial statements include the accounts of ESG Inc. and its wholly owned subsidiaries (collectively "ESG" or the "Company"). In the opinion of the Company's management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles ("GAAP") requires the use of management estimates. These consolidated financial statements and accompanying notes should be read in conjunction with the Company's annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the "2024 Form 10-K"). Note 2 – 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. As of September 30, 2025, the Company had limited cash and working capital deficiency of $ 5,005,567 . This factor, among others, raise the substantial doubt about the Company's ability to continue as a going concern. These consolidated

financial statements do not include any adjustments that may result from the outcome of these uncertainties

financial statements do not include any adjustments that may result from the outcome of these uncertainties. The working capital deficiency was primarily due to our capital structure. All our bank loans are short term, and the total balance was $ 6,041,532 . Management is working to replace current bank loans with long-term loans to improve our capital structure. However, there is no assurance that all management's plans will be successful. Note 3 – Revenue Net sales disaggregated by significant products for the three and nine months ended September 30, 2025 and 2024 were as follows: Schedule of disaggregation of revenue Three Month Ended % of Total Revenue Geographic Products September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 China, mainland Compost III $ 113,423 $ 416,364 33.0 % 18.6 % China, mainland White Button Mushroom 377,915 1,818,815 77.0 % 81.4 % China, Hongkong Mushroom powder seasonings - - - - Total Total net sales $ 491,338 $ 2,234,549 - - 5 Nine Month Ended % of Total Revenue Geographic Products September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 China, mainland Compost III $ 716,181 $ 2,102,442 36.3 % 29.5 % China, mainland White Button Mushroom 1,659,486 5,020,169 15.7 % 70.5 % China, Hongkong Mushroom powder seasonings 2,192,851 - 48.0 % - Total Total net sales $ 4,077,180 $ 7,122,611 - - Note 4 – Concentration Customer The Company had two customers that individually represented 10% or more of total sales, which accounted for 48.8 % and 17.8 % for the nine months ended September 30, 2025. For the year ended December 31, 2024, there were five customers' sales were over 10% and accounted for 31.1 % , 16.0 % , 14.6 % , 14.0 % , and 12.7 % . Accounts Receivables As of September 30, 2025, the account receivable from one customer accounted for 95.8 % of the total Company's accounts receivable. As of Dec

Management's Discussion and Analysis of Financial

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q (this "Form 10-Q") for the quarterly period ended September 30, 2025, as well as the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed by the Company with the U.S. Securities and Exchange Commission (the "SEC") on April 15, 2025 (the "2024 Form 10-K"). Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks, uncertainties and assumptions. You should read the "Forward-Looking Statements" and "Risk Factors" sections of this Form 10-Q and our 2024 Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements.

Forward-Looking Statements

Forward-Looking Statements This Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this report other than statements of historical fact, including statements regarding our business plans and strategies; projections of revenues, expenses, profitability or cash flows; expectations regarding plant expansions, new product development and processing capabilities; the impact of government policies, subsidies or tax incentives; and anticipated benefits of our composting and mushroom-processing initiatives, are forward-looking statements. Words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "project," "seek," "target," "will," "would" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on management's current beliefs and assumptions and on information currently available to us, but involve a number of risks and uncertainties, m

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