Quarterly Report (10-q)

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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

Form 10-Q

 

Mark One

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2021

 

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______ to _______

 

Commission File No. 000-55260

 

MakingORG, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada		6770		39-2079723
(State or Other Jurisdiction of Incorporation or Organization)		(Primary Standard Industrial Classification Number)		(IRS Employer Identification Number)

 

385 S. Lemon Avenue #E 301

Walnut, CA 91789

[phone]

(Address and telephone number of principal executive offices)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

None

 

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value

 

Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-K (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐     No ☒

 

Applicable Only to Issuer Involved in Bankruptcy Proceedings During the Preceding Five Years. N/A

 

Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes ☐     No ☒

 

Applicable Only to Corporate Registrants

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:

 

Class	Outstanding as of August 10, 2021
Common Stock: $0.001	35,540,000

  

   

PART 1	FINANCIAL INFORMATION
Item 1	Financial Statements (Unaudited)		3
	Balance Sheets		3
	Statements of Operations		4
	Statements of Change in Stockholders’ Deficit		5
	Statements of Cash Flows		6
	Notes to the Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		20
Item 4.	Controls and Procedures		20
PART II.	OTHER INFORMATION
Item 1	Legal Proceedings		21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		21
Item 3	Defaults Upon Senior Securities		21
Item 4	Mine safety disclosures		21
Item 5	Other Information		21
Item 6	Exhibits		22
	Signatures		23

  

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PART I.

FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

MAKINGORG, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		June 30, 2021				December 31, 2020
		(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents		$	20,918			$	30,700
Accounts receivable – related party			27,041				48,934
Inventories			19,232				-
Due from related party			-				12,256
Advances to vendor and others			17,272				2,000
Total Current Assets			84,463				93,890
Right-of-use assets - operating leases			66,361				98,653
Total Assets		$	150,824			$	192,543
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Interest payable		$	116,000			$	104,000
Accrued liabilities			1,534				4,747
Lease liabilities - operating leases			66,361				70,534
Related party loan			393,618				340,286
Total Current Liabilities			577,513				519,567
Long-Term Liabilities
Convertible note payable			200,000				200,000
Lease liabilities - operating leases, noncurrent			-				12,756
Total Long-Term Liabilities			200,000				212,756
Total Liabilities			777,513				732,323
Commitment and Contingencies
Stockholders’ Deficit
Preferred stock, par value $0.001; 50,000,000 shares authorized, zero shares issued and outstanding			-				-
Common stock, par value $0.001; 150,000,000 shares authorized, 35,540,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020			35,540				35,540
Additional paid-in capital			583,882				583,882
Accumulated other comprehensive income			3,076				2,491
Accumulated deficit			(1,249,187	)			(1,161,693	)
Total Stockholders’ Deficit			(626,689	)			(539,780	)
Total Liabilities and Stockholders’ Deficit		$	150,824			$	192,543

 

See accompanying notes to unaudited condensed consolidated financial statements.

  

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MAKINGORG, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

  

		For the three months ended June 30,								For the six months ended June 30,
		2021				2020				2021				2020
Net Sales-Related Party		$	59,439			$	10,780			$	71,844			$	131,527
Cost of Sales			39,626				7,734				47,191				71,976
Gross Profit			19,813				3,046				24,653				59,551
OPERATING EXPENSES
Selling, general and administrative			25,092				15,429				47,716				24,397
Professional fees			34,176				25,649				51,632				35,949
TOTAL OPERATING EXPENSES			59,268				41,078				99,348				60,346
LOSS FROM OPERATIONS			(39,455	)			(38,032	)			(74,695	)			(795	)
OTHER INCOME (EXPENSE)
Interest income			1				115				1				227
Interest expense			(6,000	)			(19,600	)			(12,000	)			(39,200	)
Loss on inventory write-down			-				(2,404	)			-				(4,611	)
TOTAL OTHER EXPENSE			(5,999	)			(21,889	)			(11,999	)			(43,583	)
LOSS BEFORE INCOME TAX			(45,454	)			(59,921	)			(86,694	)			(44,378	)
Income tax			800				780				800				3,282
NET LOSS		$	(46,254	)		$	(60,701	)		$	(87,494	)		$	(47,660	)
OTHER COMPREHENSIVE ITEM:
Foreign currency translation income (loss)			721				699				585				(2,124	)
TOTAL COMPREHENSIVE LOSS		$	(45,533	)		$	(60,002	)		$	(86,909	)		$	(49,784	)
NET LOSS PER COMMON SHARE: BASIC AND DILUTED		$	(0.001	)		$	(0.002	)		$	(0.002	)		$	(0.001	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: BASIC AND DILUTED			35,540,000				35,540,000				35,540,000				35,540,000

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

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MAKINGORG, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

 

														Accumulated
										Additional				Other								Total
		Common Stock								Paid-in				Comprehensive				Accumulated				Stockholders’
		Shares				Amount				Capital				Income (loss)				Deficit				Deficit
Balance, December 31, 2019			35,540,000			$	35,540			$	583,882			$	(2,882	)		$	(995,843	)		$	(379,303	)
Foreign currency translation loss			-				-				-				(2,124	)			-				(2,124	)
Net loss			-				-				-				-				(47,660	)			(47,660	)
Balance, June 30, 2020			35,540,000			$	35,540			$	583,882			$	(5,006	)		$	(1,043,503	)		$	(429,087	)
Balance, December 31, 2020			35,540,000			$	35,540			$	583,882			$	2,491			$	(1,161,693	)		$	(539,780	)
Foreign currency translation income			-				-				-				585				-				585
Net loss			-				-				-				-				(87,494	)			(87,494	)
Balance, June 30, 2021			35,540,000			$	35,540			$	583,882			$	3,076			$	(1,249,187	)		$	(626,689	)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

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MAKINGORG, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

   

		For the six months ended June 30,
		2021				2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(87,494	)		$	(47,660	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Loss on inventories write-down			-				4,612
Amortization of debt discount			-				27,200
Amortization of Right-of-use assets			33,003				-
Changes in assets and liabilities:
Accounts receivable – related party			16,078				-
Inventories			(19,271	)			33,794
Advances to vendor and others			(15,302	)			13,303
Interest payable			12,000				12,000
Lease Liabilities			1,033				(15,250	)
Accrued liabilities			(3,252	)			(1,487	)
Customer deposit – related party			-				(6,614	)
CASH FLOWS (USED IN) PROVIDED BY OPERATING ACTIVITIES			(63,205	)			19,898
CASH FLOWS FROM FINANCING ACTIVITIES
New loan from related party			53,332				18,656
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES			53,332				18,656
EFFECT OF EXCHANGE RATE CHANGES			91				(1,498	)
NET CHANGES IN CASH AND CASH EQUIVALENTS			(9,782	)			37,056
Cash and cash equivalents, beginning of periods			30,700				94,211
Cash and cash equivalents, end of periods		$	20,918			$	131,267
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid		$	-			$	-
Income taxes paid		$	800			$	3,282
NON-CASH TRANSACTION:
Due to related party for expenses paid on behalf of the Company		$	12,361			$	-

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

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MakingORG, Inc. and Subsidiaries

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

   

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

 

MakingORG, Inc. (“MakingORG”) was incorporated under the laws of the State of Nevada on August 10, 2012. The trading symbol is “CQCQ” and the fiscal year end is December 31. On October 20, 2016, MakingORG filed documents registering its intention to transact interstate business in the state of California. On November 29, 2016, MakingORG incorporated HK Feng Wang Group Limited (“HKFW”) under the laws of Hong Kong. On August 22, 2017, HKFW incorporated Chongqing Beauty Kenner Biotechnology Co., Ltd (“CBKB”) under the laws of the People’s Republic of China (“PRC”).

  

MaingORG, Inc. and its subsidiaries (“the Company”) purchase Acer truncatum bunge seed oil from China, outsource to third party to manufacture Acer truncatum bunge related health products, and sell to end users and distributors in the United States and PRC.

  

In January 2020, the World Health Organization declared an outbreak of the coronavirus (“COVID-19”) to be a Public Health Emergency of International Concern, subsequently declared COVID-19 a global pandemic, and recommended containment and mitigation measures worldwide on March 11, 2020. The Company had experienced some adverse impacts on its business in the PRC Segment, such as limited access to its staff in the PRC in the beginning of the outbreak and restrictions on business travel within the PRC and between USA and PRC. Even though the operations in the PRC segment fully resumed by the end of June 30, 2021, the pandemic has created global economic uncertainties and led to negative impact on the financial markets. The extent of the COVID-19 impact to the Company will depend on numerous factors and developments related to COVID-19. Consequently, any potential impacts of COVID-19 remain highly uncertain and cannot be predicted with confidence.

   

NOTE 2 – GOING CONCERN

 

Pursuant to ASU 2014-15, the Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these consolidated financial statements. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. The Company currently suffered recurring loss from operations, generated negative cash flow from operating activities and has an accumulated deficit and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These conditions raise substantial doubt as to its ability to continue as a going concern. These consolidated financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

The Company had a net loss of $87,494 and $165,850 for the six months ended June 30, 2021 and the year ended December 31, 2020, respectively. In addition, the Company had an accumulated deficit of $1,249,187 and $1,161,693 as of June 30, 2021 and December 31, 2020, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital. The Company’s consolidated financial statements do not include any adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

   

Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company may seek additional funding through issuance of additional common stock and/or borrowings from financial institutions or the majority shareholder to support its normal business operations. In light of management’s efforts, there is no assurance that the Company will be successful in this or any of its endeavors or become financially viable to continue as a going concern.

 

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NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

 

Principles of Consolidation

 

The Company’s unaudited consolidated financial statements include the accounts of MakingORG, and its wholly owned subsidiaries, HKFW and CBTB. All intercompany transactions and balances were eliminated in consolidation.

   

Use of Estimates

 

The preparation of unaudited consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the Company’s unaudited consolidated financial statement date and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

 

Cash and Cash Equivalents

  

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.

    

Revenue Recognition

 

The Company adopted Topic 606, Revenue from Contracts with Customers, using the modified retrospective transition method on January 1, 2018. In general, the Company’s performance obligation is to transfer it products to its end user or distributor. Revenues from product sales are recognized when the customer obtains control of the Company’s finished goods product, which occurs at a point in time, typically upon delivery to the customer.

 

The Company's revenue mainly generates from sale of acer truncatum bunge related health products, such as Nervonic Acid Oil, coffee and tea. The Company evaluated its product sales contracts and determined that those contracts are generally capable of being distinct and accounted for as separate performance obligations. Performance obligation is satisfied when the finished goods product delivered to the customer.

 

Shipping and handling costs paid by the Company are included in cost of sales.

 

Recently Issued Accounting Pronouncement Not Yet Adopted

 

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In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This standard amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related earnings per share (“EPS”) guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2023 and interim periods within those annual periods and early adoption is permitted in annual reporting periods ending after December 15, 2020. The Company does not expect this pronouncement to have a material impact on its condensed unaudited consolidated financial statements.

    

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-12). The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The Company expects to delay adoption until January 1, 2023 and is evaluating the impact that the adoption of ASU 2016-13 will have on its condensed unaudited consolidated financial statements.

 

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.

 

NOTE 4 – ADVANCES TO VENDOR AND OTHERS

 

Advances to vendor and others includes primarily deposit for packaging materials. As of June 30, 2021 and December 31, 2020, advances to vendor and others were $17,272 and $2,000, respectively.

 

NOTE 5 – RELATED PARTY TRANSACTIONS

 

Due from Related Party

 

The Company loaned RMB 80,000 (approximately $12,256) to the Entity A, a related party whose shareholder is a board member of CBKB, who is also the landlord of the office the Company leased in China. The loan has a term of six months and matured on March 31, 2021, with a monthly interest rate of 1%. According to the loan agreement, the loan principal could be applied to the monthly lease payment for two months (RMB 40,000 per month). The Entity A was not able to pay back the loan on the loan maturity date, agreed to waive April and May 2021 lease payments to settle the loan principal in accordance with the loan agreement. The Entity A paid all the outstanding loan interests of RMB 4,800 back on April 1, 2021. 

 

During the six months ended June 30, 2021 and 2020, the Company’s loan to related party were $0 and $12,256, respectively.

 

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Loan from Related Party

 

During the six months ended June 30, 2021 and 2020, the Company borrowed additional loan from the sole officer in the amounts of 53,332 and $18,656, respectively. As of June 30, 2021 and December 31, 2020, the Company obligated to the officer, for an unsecured, non-interest-bearing demand loan with a balance of $393,618 and $340,286, respectively.

 

Sales to Related Party

 

During the six months ended June 30, 2021 and 2020, the net sales to Entity A were $71,844 and $131,527, accounted for 100% of the sales the Company generated, respectively. The accounts receivable as of June 30, 2021 and December 31, 2020 were $27,041 and $48,934, which accounted for 100% of the accounts receivable of the Company, respectively.

 

Lease Agreement

 

On June 1, 2020, the Company entered into a lease agreement with Entity A in Chongqing, China for the period from June 1, 2020 to May 31, 2021. Pursuant to the lease agreement, the Company pays a monthly rent of RMB40,000 (approximately $5,800) paid quarterly before the start of each quarter. The lease is for a one-year term and the Company has the priority to renew the lease. The Company tend to keep leasing the property after the lease term ends. Therefore, based on the lease agreement, we did the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Refer to Note 8 – Lease for details.

 

NOTE 6 – BUSINES CONCENTRATION AND RISKS

 

Concentration of Risk

 

The Company maintains cash with banks in the USA, People’s Republic of China (“PRC” or “China”), and Hong Kong. Should any bank holding cash become insolvent, or if the Company is otherwise unable to withdraw funds, the Company would lose the cash with that bank; however, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts. In China, a depositor has up to RMB500,000 insured by the People’s Bank of China Financial Stability Bureau (“FSD”). In Hong Kong, a depositor has up to HKD500,000 insured by Hong Kong Deposit Protection Board (“DPB”). In the United States, the standard insurance amount is $250,000 per depositor in a bank insured by the Federal Deposit Insurance Corporation (“FDIC”).

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. As of June 30, 2021 and December 31, 2020, $20,918 and $30,700 of the Company’s cash and cash equivalents, were insured, respectively.

 

With respect to accounts receivable, the Company generally does not require collateral and does not have an allowance for doubtful accounts. No uncollectible accounts receivable in the past years.

 

Major customer

 

For the six months ended June 30, 2021 and 2020, the net sales to Entity A – the only customer, were $71,844 and $131,527, accounted 100% of the sales the Company generated, respectively. Accounts receivable due from Entity A were $27,041 and $48,934 as of June 30, 2021 and December 31, 2020, which accounted 100% of the accounts receivable of the Company, respectively. 

  

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Major vendor

 

For the six months ended June 30, 2021 and 2020, the Company’s purchase from one vendor were $53,490 and $32,314, which accounted 100% of total purchase of the Company, respectively.

   

NOTE 7 – CONVERTIBLE NOTE PAYABLE

 

On September 1, 2016, the Company entered into a convertible note agreement in the principal amount of $200,000 with an unrelated party. The note bears an interest of 12% per annum and the holder is able to convert all unpaid interest and principal into common shares at $3.50 per share at the maturity date. The note matures on September 1, 2018. The Company recognized a discount on the note of $38,857 at the agreement date. The interest expense was due every six months commencing on March 1, 2017 until the principal amount of this convertible note is paid in full.

     

On September 1, 2018 and 2019, the Company entered into two Amended and Restated 12% Convertible Promissory Note for one year with no consideration. The Company recognized a discount on the note of $40,000 and $54,000 at the amended agreement dates, respectively. Since the conversion feature of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.

 

On September 1, 2020, the convertible note agreement was extended to September 1, 2022 with no additional consideration and no discount on the note.

 

The Company recognized interest expense related to the convertible note of $6,000 and $19,600 for the three months ended June 30, 2021 and 2020, respectively. The Company recognized interest expense related to the convertible note of $12,000 and $39,200, respectively, for the six months ended June 30, 2021 and 2020. As of June 30, 2021 and December 31, 2020, net balance of the convertible note amounted to $200,000 and $200,000, respectively.

   

NOTE 8 – LEASE

 

The Company adopted ASC 842 on January 1, 2019. The Company entered into an operating lease for its China office with Entity A with monthly rent of RMB40,000 (approximately $5,800). The lease is for one year and the Company has the priority to renew it. The Company intended to renew the lease. Leases is classified as operating at the inception of the lease. Operating leases result in the recognition of ROU assets and lease liabilities on the balance sheet. ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease terms of the commencement date. Because the leases do not provide an explicit or implicit rate of return, the Company determines incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments on an individual lease basis. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar term, which is 5.25%. The lease does not contain any residual value guarantees or material restrictive covenants. The remaining term as of June 30, 2021 was 11 months including the renewal term. The Company currently has no finance lease.

   

The components of lease expense consist of the following:

 

				Six Month Ended June 30,
		Classification		2021				2020
Operating lease cost		S, G&A expense		$	35,316			$	10,000
Net lease cost				$	35,316			$	10,000

   

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Balance sheet information related to leases consists of the following:

 

Assets		Classification		June 30, 2021				December 31, 2020
Operating lease ROU assets		Right-of-use assets		$	66,361			$	98,653
Total lease assets				$	66,361			$	98,653
Liabilities
Current portion
Operating lease liabilities		Current maturities of operating lease liabilities		$	66,361			$	70,534
Non-current portion
Operating lease liabilities		Long-term portion of operating lease liabilities			-				12,756
Total lease liabilities				$	66,361			$	83,290
Weighted average remaining lease term
Operating leases					0.92				1.42
Weighted average discount rate
Operating leases					5.25	%			5.25-7.33	%

 

Cash flow information related to leases consists of the following:

 

		Six Month Ended June 30,
		2021				2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases *		$	-			$	24,738
Right-of-use assets obtained in exchange for lease obligations:
Operating leases			34,961				9,524

   

·

The company and Entity A mutually agreed to deduct the June 2021 lease payment from the outstanding account receivable due from Entity A on June 1, 2021. April and May 2021 lease payments were mutually agreed to settled with RMB80,000 loan principal due on March 31, 2021.

 

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Future minimum lease payment under non-cancellable lease as of June 30, 2021 are as follows:

 

Ending June 30,		Operating Leases
2021		$	37,007
2022			30,839
Total lease payments			67,846
Less: Interest			(1,485	)
Present value of lease liabilities		$	66,361

 

NOTE 10 – STOCKHOLDERS’ DEFICIT

 

Common Stock

 

As of June 30, 2021 the Company had 35,540,000 shares of common stock issued and outstanding.

 

NOTE 11 – INCOME TAXES

 

The Company accounts for income taxes under ASC 740, “Income Taxes”. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. It also requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

 

The Company is subject to taxation in the United States and certain state jurisdictions. The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 21.0% to the net loss before provision for income taxes. HKFW in Hong Kong are governed by the Inland Revenue Ordinance Tax Law of Hong Kong, and are generally subject to a profits tax at the rate of 16.5% on the estimated assessable profits. CBNB in the PRC is governed by the Income Tax Law of the PRC concerning the private enterprises, which are generally subject to tax at 25.0% on income reported in the statutory financial statements after appropriated adjustments. PRC also give tax discount to small enterprise whose annual taxable income exceeding 1 million but not exceeding 3 million.

 

The Company’s income tax expense is mainly contributed by its subsidiary in PRC.

 

In addition, the 2017 Tax Act also creates a new requirement that certain income (i.e., Global Intangible Low-Taxed Income (“GILTI”)) earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFCs’ U.S. shareholder income. GILTI is the excess of the shareholder’s net CFC tested income over the net deemed tangible income return, which is currently defined as the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income. The Company has elected to recognize the tax on GILTI as a period expense in the period the tax is incurred. For the six months ended June 30, 2021 and 2020, no GILTI tax obligation existed, and the GILTI tax expense was $0.

 

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Provision (benefit) for income tax for the six months ended June 30, 2021 consisted of:

 

Six months ended June 30, 2021		Federal				State				Foreign				Total
Current		$	-			$	800			$	-			$	800
Deferred			-				-				-				-
Total		$	-			$	800			$	-			$	800

 

Provision (benefit) for income tax for the six months ended June 30, 2020 consisted of:

 

Six months ended June 30, 2020		Federal				State				Foreign				Total
Current		$	-			$	800			$	2,482			$	3,282
Deferred			-				-				-				-
Total		$	-			$	800			$	2,482			$	3,282

 

Net deferred tax assets consist of the following components as of:

 

		June 30, 2021				December 31, 2020
Deferred tax asset:
Net operating loss carry forwards		$	128,914			$	159,635
Valuation allowance			(128,914	)			(159,635	)
Net deferred tax asset		$	-			$	-

 

Due to the change in ownership provisions of the Income Tax laws of United States of America, net operating loss carry forwards of approximately $440,000, which expires in 2032, for federal income tax reporting purposes are subject to annual limitations. When a change in ownership occurs, net operating loss carry forwards may be limited as to use in future years. Tax filings for the Company for the years after 2015 and 2016 are available for examination by state tax jurisdictions and federal tax purposes.

 

NOTE 12 – SEGMENT REPORTING

 

The Company operates in one industry segment, selling Acer truncatum bunge related health products through its wholly owned subsidiary in China. As of June 30, 2021 and December 31, 2020, the subsidiary had amounts of $129,278 and $107,916, respectively, in total assets, excluding inter-company balances, and it generated $71,844 and $131,527 for the six months ended June 30, 2021 and 2020, respectively, in revenue. There was no revenue generated from inter-company transactions.

 

NOTE 13– SUBSEQUENT EVENT

 

The Company has evaluated all subsequent events through the date the unaudited consolidated financial statements were issued and determine that there were no subsequent events or transactions that require recognition or disclosures in the unaudited consolidated financial statements.

   

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

As used in this Form 10-Q, references to “MakingORG”,” the “Company,” “we,” “our” or “us” refer to MakingORG, Inc. and subsidiaries unless the context otherwise indicates.

 

Forward-Looking Statements

 

The following discussion should be read in conjunction with our financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. We assume no obligation to update forward-looking statements, except as otherwise required under the applicable federal securities laws.

 

Plan of Operation

 

Our sole officer and director intend to sell Acer truncatum bunge related health product in the United States and PRC, we might just identify and negotiate with another company for the business combination or merger of that entity with and into our company. We would seek, investigate and, if such investigation warrants, acquire an interest in one or more business opportunities presented to it by persons or firms who or which desire to seek the perceived advantages of a publicly held corporation. At this time, we have no plan, proposal, agreement, understanding or arrangement to acquire or merge with any specific business or company, and the Company has not identified any specific business or company for investigation and evaluation. No member of management or promoter of the Company has had any material discussions with any other company with respect to any acquisition of that company.

 

We will not restrict our search for another target company to any specific business, industry or geographical location, and the Company may participate in a business venture of virtually any kind or nature. The discussion of the proposed plan of operation under this caption and throughout this Annual Report is purposefully general and is not meant to be restrictive of the Company’s virtually unlimited discretion to search for and enter into potential business opportunities.

 

The following discussion should be read in conjunction with the unaudited interim financial statements contained in this Report and in conjunction with the Company’s Form 10-K filed on April 15, 2021. Results for interim periods may not be indicative of results for the full year.

 

Critical Accounting Policies and Estimates

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The new revenue recognition standard provides a five-step analysis of contracts to determine when and how revenue is recognized. The core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB deferred the effective date of ASU No. 2014-09 for all entities by one year to annual reporting periods beginning after December 15, 2017. The FASB has issued several updates subsequently, including implementation guidance on principal versus agent considerations, on how an entity should account for licensing arrangements with customers, and to improve guidance on assessing collectability, presentation of sales taxes, noncash consideration, and contract modifications and completed contracts at transition. In general, the Company’s performance obligation is to transfer it products to its end user or distributor. Revenues from product sales are recognized when the customer obtains control of the Company’s finished goods product, which occurs at a point in time, typically upon delivery to the customer.

 

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The preparation of unaudited consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the unaudited consolidated financial statements, and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates.

 

As most of the businesses, our operations are affected by the ongoing COVID-19 pandemic. The ultimate disruption that may result from the virus is uncertain, but it may result in a material adverse impact on our financial position, operations and cash flows.

 

Results of Operations

 

For the three months ended June 30, 2021 and 2020

  

		Three Months Ended June 30,
		2021				2020				Change				Percent
Net Sales		$	59,439			$	10,780			$	48,659				451	%
Cost of Sales			39,626				7,734				31,892				412	%
Gross Profit			19,813				3,046				16,767				550	%
Operating expenses:
Selling, general and administrative			25,092				15,429				9,663				63	%
Professional fees			34,176				25,649				8,527				33	%
Total operating expenses			59,268				41,078				18,190				44	%
Loss from operations			(39,455	)			(38,032	)			(1,423	)			4	%
Other income (expenses):
Interest income			1				115				(114	)			-99	%
Interest expense			(6,000	)			(19,600	)			13,600				-69	%
Loss on inventory write-down			-				(2404	)			2,404				-100	%
Total other income (expenses)			(5,999	)			(21,889	)			15,890				-73	%
Loss before income taxes			(45,454	)			(59,921	)			14,467				-24	%
Income tax expense			800				780				20				3	%
Net loss		$	(46,254	)		$	(60,701	)		$	14,447				-24	%

  

Net sales

 

The Company consolidated net sales for the three months ended June 30, 2021 and 2020 was $59,439 and $10,780, respectively. The cost of sales for the three months ended June 30, 2021 and 2020 was $39,626 and $7,734, respectively, resulting in a gross profit of $19,813 and $3,046 for the three months ended June 30, 2021 and 2021, respectively. Revenue increase was due to the increase in related party sales in PRC when COVID-19 was less serious in the three months ended June 30, 2021 compared with the same period in 2020. The sales concentrate on one customer which consists of 100% of the revenue.

 

Total operating expenses

 

During the three months ended June 30, 2021, total operating expenses were $59,268, which consisted of professional fees of $34,176, China salary and China office and other expenses of $5,400 and rent expenses of $19,692. During the three months ended June 30, 2020, total operating expenses were $41,078, which mainly consisted of professional fees of $25,649, and China expense of $15,429. Total operating expenses increased $18,191, or 44%, primarily as a result of the increase in professional fees and rent in China for the three months ended June 30, 2021 compared with the three months ended June 30, 2020.

 

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Total other income (expenses)

 

During the three months ended June 30, 2021, the Company had total other expenses of $5,999, which consists primarily of interest expense of $6,000. During the three months ended June 30, 2020, the Company total other expenses were $21,889, which consisted of interest income of $115, interest expense of $19,600 and loss on inventory write-down of $2,404.

 

Net loss

 

For the three months ended June 30, 2021, the Company had a net loss of $46,254, compared with a net loss of $60,701 for the three months ended June 30, 2020. The decrease in net loss was predominantly due to the reasons stated above.

  

For the six months ended June 30, 2021 and 2020

 

		Six Months Ended June 30,
		2021				2020				Change				Percent
Net Sales		$	71,844			$	131,527			$	(59,683	)			-45	%
Cost of Sales			47,191				71,976				(24,785	)			-34	%
Gross Profit			24,653				59,551				(34,898	)			-59	%
Operating expenses:
Selling, general and administrative			47,716				24,397				23,319				96	%
Professional fees			51,632				35,949				15,683				44	%
Total operating expenses			99,348				60,346				39,002				65	%
Loss from operations			(74,695	)			(795	)			(73,900	)			9,296	%
Other income (expenses):
Interest income			1				227				(226	)			-100	%
Interest expense			(12,000	)			(39,200	)			27,200				-69	%
Loss on inventory write-down			-				(4,611	)			4,611				-100	%
Total other income (expenses)			(11,999	)			(43,583	)			31,584				-72	%
Loss before income taxes			(86,694	)			(44,378	)			(42,316	)			95	%
Income tax expense			800				3,282				(2,482	)			-76	%
Net loss		$	(87,494	)		$	(47,660	)		$	(39,834	)			84	%

 

Net sales

 

The Company’s consolidated net sales for the six months ended June 30, 2021 and 2020 was $71,844 and $131,527, respectively. The cost of sales for the six months ended June 30, 2021 and 2020 was $47,191 and $71,976, respectively, resulting in a gross profit of $24,653 and $59,551 for the six months ended June 30, 2021 and 2020, respectively. Revenue decreased due to decrease in related party sales in PRC. The sales concentrate on one customer which consists of 100% of the revenue.

 

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Total operating expenses

 

During the six months ended June 30, 2021, total operating expenses were $99,348, which consisted of professional fees of $51,632, China salary and China office expense of $11,952 and rent expenses of $35,316, and expenses of $448 in U.S. During the six months ended June 30, 2020, total operating expenses were $60,346, which consisted of professional fees of $35,949, China salary and China office expenses of $11,004, rent expenses of $7,648 and $5,745 expenses in U.S. Total operating expenses increased $39,002, or 65%, primarily as a result of the increase in professional fees, China salary and rent expenses for the six months ended June 30, 2021 compared with the six months ended June 30, 2020.

 

Total other income (expenses)

 

During the six months ended June 30, 2021, the Company had other expense of $11,999, which consists of interest income of $1 and interest expenses of $12,000.  During the six months ended June 30, 2020, the Company had other expense of $43,583, which consists of interest income of $227, interest expenses of 39,200 and loss on inventory write-down of $4,611. The decrease of $31,584 or 72% in other income (expenses) is caused primarily by the decrease of interest expense for the six months ended June 30, 2021 compared to the same period in 2020.

 

Net loss

 

During the six months ended June 30, 2021, the Company had a net loss of $87,494, an increase of $39,834 or 84% as compared with a net loss of $47,660 for the six months ended June 30, 2020. The increase in net loss was predominantly due to the reasons stated above.

  

Liquidity and Capital Resources

 

As of June 30, 2021, the Company had cash and cash equivalents and total assets of $20,918 and $150,824, respectively. As of said date, the Company has total liabilities of $777,513, of which $200,000 is due to convertible note payable and $393,618 is due to our sole officer and director as an unsecured, non-interest-bearing demand loan. As of June 30, 2021, and December 31, 2020, the Company had working capital amount of $(493,050) and $(425,677), respectively.

 

Other than an oral agreement with Ms. Cui to fund the expenses of the Company, we currently have no agreements, arrangements or understandings with financial institution or any person to obtain funds through bank loans, lines of credit or any other sources. Since the Company has no such arrangements or plans currently in effect, its inability to raise funds for the above purposes will have a severe negative impact on its ability to remain a viable company.

 

Cash Flows from Operating Activities

 

For the six months ended June 30, 2021, net cash flows provided in operating activities was $63,206 resulting from a net loss of $87,494, a decrease in inventories of $19,271, a decrease in advances to vendor and others of $15,302, a decrease in accrued liabilities of $3,252, an increase of interest payable of $12,000, amortization of right-of use assets of $33,003. For the six months ended June 30, 2020, net cash flows provided in operating activities was $19,898 resulting from a net loss of $47,660, an increase caused by inventories of $33,794, an increase caused by prepaid expenses and other current assets of $13,303, a decrease caused by accrued liabilities of $1,487, an increase caused by loss on inventory write-down of $4,612, increase of interest payable of $12,000, a decrease caused by net lease liability of $15,250, increase caused by amortization of debt discount of $27,200, and decrease caused by return of customer deposit of $6,614. 

 

Cash Flows from Investing Activities

 

For the six months ended June 30, 2021 and 2020, the Company did not have any cash flow from investing activities.

 

Cash Flows from Financing Activities

 

For the six months ended June 30, 2021 and 2020, loans from the Company’s sole officer and director provided $53,332 and $18,656, respectively.

 

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Going Concern Consideration

 

These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to repay its debt obligations, to obtain necessary equity financing to continue operations, and the attainment of profitable operations. Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company may seek additional funding through additional issuance of common stock and/or borrowings from financial institutions or the majority shareholder to support its normal business operations. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

The Company had net loss of $87,494 and $47,660 for the six months ended June 30, 2021 and 2020, respectively. In addition, the Company had an accumulated deficit of $1,249,187 and generated negative cash flow from operating activities as of and for the six months ended June 30, 2021. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital. The Company’s consolidated financial statements do not include any adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

  

Convertible Note Payable

 

On September 1, 2016, the Company entered into a Convertible Note Agreement in the principal amount of $200,000 with an unrelated party. The note bears interest at 12% per annum and the holder is able to convert all unpaid interest and principal into common shares at $3.50 per share. The note matures on September 1, 2018. The Company recognized a discount on the note of $38,857 at the agreement date. The interest expense was due every six months commencing on March 1, 2017 until the principal amount of this convertible note is paid in full.

 

On September 1, 2018, the Company entered into an Amended and Restated 12% Convertible Promissory Note. Pursuant to an Amended and Restated 12% Convertible Promissory Note, both parties agreed to extend a Convertible Note Agreement to September 1, 2019 with no additional consideration. The Company recognized a discount on the note of $40,000 at the amended agreement date.

 

On September 1, 2019, the Company entered into an amended and restated 12% convertible promissory note. Pursuant to the amended convertible promissory note, both parties agreed to extend the convertible note agreement to September 1, 2020 with no additional consideration. The Company recognized a discount on the note of $54,400 at the amended agreement date. Since the conversion feature of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.

 

The Company recognized interest expense related to the convertible note of $12,000 and $39,200, respectively, for the six months ended June 30, 2021 and 2020. As of June 30, 2021 and December 31, 2020, net balance of the convertible note amounted to $200,000.

 

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Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosure About Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this item.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

 

Based on that evaluation, as of June 30, 2021, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes that have affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the period covered by this report. 

       

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

 

Item 1A. Risk Factors.

 

As a smaller reporting company, we are not required to provide the information required by this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

Unregistered Sales of Equity Securities

 

None.

 

Purchases of equity securities by the issuer and affiliated purchasers

 

None.

 

Use of Proceeds

 

None

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

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Table of Contents

   

Item 6. Exhibits

 

31.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

  

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	MakingORG, Inc.
Dated: August 16, 2021	By:	/s/ Juanzi Cui
		Name: Juanzi Cui President, Chief Executive Officer and Chief Financial Officer (principal executive officer and principal financial and accounting officer)

 

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