OTC: ESGH

Business Overview

ESG Inc. (“ESGI”) was incorporated
in October 2022 as a Nevada holding corporation and is headquartered at Chadds Ford, PA and develops and operates sustainable plant-based
ingredients and food production and distribution with the planned expansion into the food related business with the substantial experience
of its management team, including experience and relationships in the industry of mushroom, agriculture and food in the world and the
capital markets in the States.

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

Neither the Company nor ESGI are Chinese operating
companies. They are Nevada holding companies that operate business through Funan Allied United Farmer Products Co., Ltd., which owns Anhui
Allied United Mushroom Technology Co., Ltd. and Anhui Allied United Mushroom Co., Ltd., all of whom are Chinese operating companies.

The Company exercises control over the operations
of its subsidiaries. On February 17, 2023, the China Securities Regulatory Commission, or CSRC, issued the Trial Administrative Measures
of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, which became effective on March 31, 2023. Pursuant
to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill
the filing procedure and report relevant information to the CSRC. Based on the advice of PRC counsel, the Company believes that, as of
the date of this Annual Report, neither the Company nor its PRC subsidiaries is required to obtain approval from the CSRC, CAC or any
other PRC authority solely in connection with the Company’s existing OTC quotation and Exchange Act reporting status in the United
States.

Our subsidiaries are formed and operating in the
People’s Republic of China (together, the “Material PRC Company”) and have been duly established and is validly existing
as a company under the laws of the People’s Republic of China (“PRC Laws”) and has received all authorizations required
by the People’s Republic of China (the “Governmental Authorizations”) for its establishment to the extent such Governmental
Authorizations are required under applicable PRC Laws, and its business license is in full force and effect. The Material PRC Company
has the capacity and authority to own assets, to conduct business, and to sue and be sued in its own name under PRC Laws. The articles
of association, business license and other constitutional documents (if any) of the Material PRC Company complies with the requirements
of applicable PRC Laws and are in full force and effect. The Material PRC Company has not taken any corporate action, nor has any legal
proceedings commenced against it, for its liquidation, winding up, dissolution, or bankruptcy, for the appointment of a liquidation committee,
team of receivers or similar officers in respect of its assets or for any adverse suspension, withdrawal, revocation or cancellation of
its business license.

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All of the equity interests of the Material PRC
Company are owned by ESG, through ESG China Limited, a Hong Kong company, and Hainan ESG Technology Co., Ltd, a PRC company, and we believe
the Material PRC Company has obtained all necessary Governmental Authorizations. The equity interests of the Material PRC Company are
owned by ESG, through its subsidiaries, free and clear of any pledge or other encumbrance under PRC Laws, and there are no outstanding
rights, warrants or options to acquire, or instruments convertible into or exchangeable for, any equity interest in the Material PRC Company
under PRC Laws.

All of our operations are conducted by our
subsidiaries and through our wholly-foreign-owned entity (“WFOE”) based in China which involves unique risks to investors.

The legal and operational risks associated with
being based in or having the majority of the Company’s operations in China could result in a material change in the value of the
securities we are registering for sale or could significantly limit or completely hinder our ability to offer or continue to offer securities
to investors and cause the value of such securities to significantly decline or be worthless. Please see the Risk Factor titled “We
are faced with risks and uncertainties as a foreign enterprise under PRC laws”.

Regulatory Permission

As substantially all of our operations are conducted through PRC subsidiaries,
we are subject to PRC legal and regulatory requirements applicable to those operations. Based on advice of PRC counsel, we believe that,
as of the date of this Annual Report, our PRC subsidiaries have obtained the licenses and approvals required for the business they currently
conduct, and that neither the Company nor its PRC subsidiaries is currently required to obtain approval from the CSRC, CAC or other PRC
authority solely to continue the Company’s existing OTC quotation and reporting status in the United States. However, PRC laws and
regulations in this area are evolving, and if future approvals, filings or permissions are required and are not obtained on a timely basis,
our business, financial condition, results of operations and the value of our common stock could be materially adversely affected.

Business Strategy and Operating Focus

The
Company’s business strategy is to develop and operate sustainable food and food-related businesses, with an emphasis on operational
efficiency, product quality, food safety, and regulatory compliance. Management believes that consumer demand for sustainable and plant-based
food products, together with increasing food-safety and regulatory standards, may create opportunities for businesses that can operate
efficiently and meet applicable quality and compliance requirements.

The
Company seeks to focus its operations on areas where management believes it has relevant experience, including mushroom cultivation,
composting, food processing, and related distribution activities. Management also believes that the food industry may continue to experience
consolidation and increased regulatory scrutiny, which may affect both competitive conditions and operating costs across the industry.
The Company’s objective is to position its operations to respond to these market conditions while maintaining appropriate oversight,
internal controls, and operating discipline.

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Our Operating Subsidiary Companies

ESG is a holding company engaged in sustainable
food production and distribution directly or indirectly through our subsidiaries and currently owns operating subsidiaries in China. Our
operating subsidiaries are involved in direct mushroom composting, growing, food production, distribution as well as import and export
of food. We believe that the growing global demand for sustainable high-quality food presents a unique opportunity for companies engaged
in this critical area that is being paid increasing attention by global investors.

Funan Allied United Farmer Product Co., Ltd. (“AUFP”)
was created in 2017 in China by US mushroom industry participants with the support of strategic investors to revolutionize China’s
mushroom industry and create enhanced standards for food safety, sustainability, greenness, and resulting high-quality food products to
serve Chinese consumers and regional Asian export markets. AUFP engages in the research and development, composting, cultivation, processing,
packaging, and distribution of high-quality white button mushrooms from Fuyang, China. As a bio-sustainable and resources-recyclable company,
with wheat straw and animal manure as the major raw materials, kinds of agricultural waste, AUFP is dedicated to building Fuyang into
the hub to supply high-quality mushroom, compost and organic fertilizer in Asia with the support of industrial experts and capital.

Currently, AUFP owns approximately 56 acres of
industrial land use rights and built bunkers, tunnels and growing facilities, totaling approximately 300,000 square feet, with fresh white
button mushrooms capacity of 7,300 tons per year and production capacity to 90,000 tons of Phase III compost per year, of which two-thirds
are planned to be sold to third party’s farms.

As an AUFP’s subsidiary, Anhui Allied United
Mushroom Technology Co., Ltd. (“AUMT”) operates a Phase III compost manufacturing facility to distribute to its own and third-party
growing facilities in China and east and southeast Asia while Anhui Allied United Mushroom Co. Ltd. (“AUM”), an AUFP subsidiary,
is a company engaged in growing, packing and distributing fresh white button mushrooms in China.

Anhui Allied United Mushroom Technology Co., Ltd.

Anhui Allied United Mushroom Technology Co., Ltd.
(“AUMT”) was created in China in March 2018, to manufacture white button mushroom compost.

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White button mushroom compost is a unique living
organism. It varies according to the environment where it is produced. Making mushroom compost is a complex process that AUMT has been
perfecting. AUMT uses the art of the state phase III composting process to make compost under the supervision of a team of specialists,
taking raw materials from the local area, for our own farms and other mushroom growers.

Phase III composting process is composed of:

Phase I: Bales of straw are
mixed with animal manure, water and gypsum. When mixed, the material is filled into large aerated concrete vessels, called bunkers. During
this phase the compost reaches temperatures of 80 degrees Celsius. After 10–13 days the Phase I process is completed, ready for
the Phase II process to begin.

Phase II: The material is
removed from the bunkers and filled into closed tunnels, where we monitor and control a series of temperature changes – the most
important of which is pasteurization. Pasteurization helps remove any unwanted organisms from the compost. The next and most important
stage of Phase II is the conditioning of the compost. This means that microbes convert ammonia and amines into protein. Phase II takes
approximately 10 days. The climate controlled “tunnel” heats the compost to 58 degrees Celsius for pasteurization and then
conditions it at 48 degrees Celsius.

Phase III: Once the Phase
II process is completed, the compost is cooled and removed from the Phase 2 tunnels. Mushroom spawn is added and the compost is then refilled
into Phase III tunnels. Spawn is usually made with rye or millet grain that has been sterilized and inoculated with mushroom tissue (mycelium).
This Phase III incubation process takes 17-19 days. During this time mycelium grows throughout the substrate. After the 17-19 days incubation
period, the Phase III compost is loaded into specially designed trucks for transport to the growing facility.

Currently AUMT owns 9 bunkers, 31 tunnels and related auxiliary facilities
and equipment with the capacity of 90,000 tons annually of Phase III compost to supply.

Anhui Allied United Mushroom Co., Ltd.

Anhui Allied United Mushroom Co., Ltd. (“AUM”)
was created in China in April 2018, to grow fresh white button mushroom and provide white button mushroom growing management services.
AUM produces high quality fresh white button mushrooms.

The growing process is composed of the following steps:

As the mushroom compost is
filled into the growing rooms, a layer of peat is applied to the surface of the Phase III compost. The layer is called the casing layer
and is essential for the formation of the mushrooms. Over a 3-4 days period, the mushroom tissue grows throughout the compost and up through
the casing layer.

The environment is then altered
to simulate an autumn day, which promotes the formation of mushrooms. As a result, tiny mushroom heads (pins) begin to appear. During
the next two weeks the levels of moisture, temperature, humidity, carbon dioxide and air movement are carefully monitored.

The pins eventually grow into
mushrooms. The mushrooms are picked by hand to maintain the highest possible quality. All our mushrooms are cooled quickly after harvesting
and are packed and transported in refrigerated trucks to wholesale markets or supermarkets.

Currently, AUM owns approximately 335,000 square
feet of growing area, with annual production of fresh white button mushroom of approximately 20,000,000 LBS.

From the fourth quarter of 2024, AUFP began its
processing business by drying, milling, mixing and packing of off-grade mushroom and mushroom stems into mushroom seasoning powder. All
of processed mushroom seasoning powder is exclusively for export according to the signed sale contract.

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Market Overview

Health Diet Trend

We believe that people are searching for vegan
and plant-based options for every aspect of their lifestyle. Mushrooms are a nutritious vegetarian delicacy and contain many vitamins
and minerals but are low on sugar and fat. We believe that they are becoming a preferable and quality ingredient source for plant-based
food. As an innovative food company with the whole production chain of mushrooms, we are committed to innovating and providing sustainable
mushroom-based food and its ingredients.

Mushrooms are popular in most of the developed
countries and are becoming accepted in many developing countries. The market for mushrooms is growing rapidly because of their rich nutritional
value and special taste aroma, and flavor. The global plant-based food market is expected to reach 77.8 billion U.S. dollars in 2025.
The forecast projects that by 2030 the market will have more than doubled. (https://www.statista.com/statistics/1280394/global-plant-based-food-market-value/).

Quality Phase III Compost and Strong Demand

We believe that the key factor for the successful
growing of white button mushrooms is composting. Composting is a delicate and difficult business, especially in large-scale and commercial
indoor growing. ESG believes it is positioning itself as the compost provider in the Asian Pacific area with its management expertise
and experience in composting and advantages of being near a raw material supply.

Our Competitive Strengths

Experienced Management

ESG’s management is composed of professionals
in mushroom composting, growing, food processing and marketing, and the food industry, as well as in capital markets and public companies.
We have experienced experts in white button mushroom production and, especially, composting, on our management team. Experienced and senior
experts are the most important asset to ESG. ESG is designing and executing a comprehensive training system to continue to build up the
management team for our operations and the provisions of management service.

Focusing Key Stages of Food Production

ESG is focusing on the composting business and food processing business,
especially mushroom related, which is two ends of the most value added.

ESG is focusing on research and development in connection with the
improvement of mushroom composting production and of the production of mushroom based food and its ingredients. We concentrate ESG’s
capital and efforts on key stages.

Production Location in the raw material base

A location near the supply of excellent raw materials
such as wheat straw and animal manure are very important in order to control the cost of production and the quality of mushroom. ESG’s
current and planned production facilities are located in excellent places of raw materials to be collected such as Funan in China.

Employees

We currently have around 20 full-time management
employees and 60 full-time operating workers along with around 145 part time harvesters and runners.

Intellectual Property

ESG has 1 invention Patent, 14 Utility Model Patents, registered and
17 Utility Model Patents with pending effectiveness.

Reports to Security Holders

We file reports and other information with the SEC. The
SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that
file electronically with the SEC at http://www.sec.gov.

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