Note 4 - Split-Off and Discontinued Operations

On May 26, 2026, the Company completed the split-off of ESG China Limited and its subsidiaries pursuant to the Split-Off and Share Exchange Agreement dated April 10, 2026. In connection with the transaction, the Company transferred all of the outstanding equity interests of ESG China Limited in exchange for the surrender, redemption, retirement and cancellation of 10,432,800 shares of the Company’s common stock.

The transaction was a related-party transaction because the Company’s Chief Executive Officer and a director controlled DCG China Limited, one of the counterparties. Upon completion of the transaction, the Company ceased to own or control ESG China Limited and its subsidiaries.

The split-off represented a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the results of the former China operations through May 26, 2026 are presented as discontinued operations for all periods presented. Comparative prior-period results have been reclassified to conform to the current presentation.

Upon deconsolidation, the Company derecognized the assets, liabilities and noncontrolling interests associated with the China operations. The Company also reclassified the remaining cumulative foreign-currency translation loss attributable to ESG Inc. of $46,206 from accumulated other comprehensive loss into discontinued operations. A corresponding reclassification adjustment was included in other comprehensive income, and the reclassification had no effect on total comprehensive income or cash flows.

For the three months ended June 30, 2026, loss from discontinued operations for that period was therefore $46,206. For the six months ended June 30, 2026, operating loss from discontinued operations was $832,136 and total loss from discontinued operations, including the CTA reclassification, was $878,342.

The Company recognized no additional gain or loss from the difference between the carrying amount of the net assets distributed and the related consideration. As of June 30, 2026, no assets or liabilities attributable to the former China operations remained on the Company’s consolidated balance sheet, and the Company had no significant continuing involvement with those operations. Separately, during the second quarter of 2026, the Company recorded a $10,192 attribution adjustment between ESG Inc. and the noncontrolling interest. The adjustment affected only the attribution of consolidated net loss between ESG Inc. and the noncontrolling interest and had no effect on consolidated net loss, loss from discontinued operations, total comprehensive income (loss), or total stockholders’ equity.

Major classes of assets and liabilities of discontinued operations:

Major classes of income and expense of discontinued operations: