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.
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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, 2022. 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.
In February 2016, the Financial Accounting Standards Board ("FASB") issued
Accounting Standard Update ("ASU") 2016-02, Leases (Topic 842) ("Topic 842"),
which requires lessees to recognize leases on the balance sheet and disclose key
information about leasing arrangements. Topic 842 was subsequently amended by
ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU
2018-10, Codification Improvements to Topic 842, Leases; ASU 2018-11, Targeted
Improvements; and ASU 2019-01, Codification Improvements. The new standard
establishes a right-of-use model ("ROU") that requires a lessee to recognize a
ROU asset and lease liability on the balance sheet for all leases with a term
longer than 12 months. Leases are classified as finance or operating, with
classification affecting the pattern and classification of expense recognition
in the statement of income.
The new standard was effective for the Company on January 1, 2019. A modified
retrospective transition approach is required, applying the new standard to all
leases existing at the date of initial application. An entity may choose to use
either (1) its effective date or (2) the beginning of the earliest comparative
period presented in the financial statements as its date of initial application.
The Company adopted the new standard on January 1, 2019 and used the effective
date as its date of initial application. Consequently, prior period financial
information has not been recast and the disclosures required under the new
standard have not been provided for dates and periods before January 1, 2019.
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The new standard provides a number of optional practical expedients in
transition. The Company elected the "package of practical expedients", which
permits it not to reassess under the new standard its prior conclusions about
lease identification, lease classification and initial direct costs. The Company
did not elect the use-of-hindsight or the practical expedient pertaining to land
easements, the latter not being applicable to the Company. The new standard also
provides practical expedients for an entity's ongoing accounting. The Company
elected the short-term lease recognition exemption for all leases that qualify.
This means, for those leases that qualify, it has not recognized ROU assets or
lease liabilities, and this includes not recognizing ROU assets or lease
liabilities for existing short-term leases of those assets in transition. The
Company also elected the practical expedient to not separate lease and non-lease
components for all of its leases.
The Company believe the most significant effects of the adoption of this
standard relate to (1) the recognition of new ROU assets and lease liabilities
on its condensed consolidated balance sheet for its office operating leases and
(2) providing new disclosures about its leasing activities. There was no change
in its leasing activities as a result of adoption.
Upon adoption, as of January 1, 2019, the Company recognized operating lease
liabilities of $14,079 based on the present value of the remaining minimum
rental payments under current leasing standards for existing operating leases,
as well as corresponding ROU assets of $13,454, the $625 difference attributable
to elimination of the accrued and prepaid rent existing as of January 1, 2019.
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.
Our operations may be 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.
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Results of Operations
For the three months ended March 31, 2022 and 2021
Three Months Ended
March 31,
2022 2021 Change Percent
Net Sales $ - $ 12,405 $ (12,405 ) (100 )%
Cost of Sales - 7,565 (7,565 ) (100 )%
Gross Profit - 4,840 (4,840 ) (100 )%
Operating expenses:
Selling, general and administrative 23,960 22,624 1,336 (6 )%
Professional fees 17,593 17,456 137 1 %
Total operating expenses 41,553 40,080 1,473 (3 )%
Other income (expenses):
Interest expense (6,000 ) (6,000 ) - (0 )%
Other income 2 - 2 100 %
Total other expenses, net (5,998 ) (6,000 ) 2 0 %
Loss before income taxes (47,551 ) (41,240 ) (6,311 ) (9 )%
Income tax expense - -
Net loss $ (47,551 ) $ (41,240 ) $ (6,311 ) (9 )%
Net sales, cost of sales and gross profit
Unaudited condensed consolidated net sales for the three months ended March 31,
2022 and 2021 were $0 and $12,405, respectively. The cost of sales for the three
months ended March 31, 2022 and 2021 were $0 and $7,565, respectively, resulting
in gross profit of$0 and $4,840 for the three months ended March 31, 2022 and
2021, respectively. The net sales decrease was due to the decrease of related
party sales in PRC.
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Total operating expenses
For the three months ended March 31, 2022, total operating expenses were
$41,553, which consisted of professional fee of $17,593. Rent expenses in China
of $15,227, office and other expenses in China of $8,733. For the three months
ended March 31, 2021, total operating expenses were $40,080, which mainly
consisted of professional fee of $17,456, rent expense of $15,624, payroll
expenses of $5,560, office and other expenses of $1,440. Total operating
expenses increased $1,473, or 4%, which is at the similar level for the three
months ended March 31, 2022 compared with the three months ended March 31, 2021.
Total other income (expense)
For the three months ended March 31, 2022, total other expenses were $5,998,
which is the interest expense of $6,000, offset by other income of $2. For the
three months ended March 31, 2021, total other expenses was $6,000.
Net income (loss)
For the three months ended March 31, 2022, net loss was $47,551, an increase of
loss of $6,311 or 15% compared with the net loss of $41,240 for the three months
ended March 31, 2021. The increase of loss was mainly due to lack of sales for
the three months ended March 31, 2022.
Liquidity and Capital Resources
As of March 31, 2022, cash and cash equivalents and total assets were $79,039
and $161,004, respectively, compared to the cash and cash equivalent and total
assets of $108,356 and $220,204, respectively as of December 31, 2021. As of
December 31, 2021, the Company had total liabilities of $756,823, of which
$386,418 was due to related party and $200,000 was convertible note payable. As
of March 31, 2022, total liabilities were $744,873, of which $200,000 was
convertible note payable and $386,418 was due to our sole officer and director
as an unsecured, non-interest bearing demand loan. As of March 31, 2022, and
December 31, 2021, the Company had negative working capital amount of $583,869
and $536,619, respectively.
Other than an oral agreement with Mrs. 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.
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Cash Flows from Operating Activities
For the three months ended March 31, 2022, net cash flows used in operating
activities $29,450 resulted from net loss of $47,551, increased by $6,000 of
interest expense, $13,215 of accrued liabilities and $1,114 of prepaid expenses.
For the three months ended March 31, 2021, net cash flows used in operating
activities $25,854 resulted from net loss of $41,240 increased by $15,468 in
amortization of debt discount, $18,084 in accounts receivable and $6,000 in
interest expense, and decreased by $20,822 in prepaid expenses and $3,344 in
accrued liabilities. The net decrease of cash flows of $3,596 or 14% in
operating activities in three months ended March 31, 2022 compared to 2021 was
mainly due to lack of net sales in 2022.
Cash Flows from Investing Activities
For the three months ended March 31, 2022 and 2021, the Company did not have any
cash flow from investing activities.
Cash Flows from Financing Activities
The Company financed its operations primarily from the advances from the
Company's sole officer and director. For the three months ended March 31, 2022,
there was no cash flow from financing activity. For the three months ended March
31, 2021, cash flows provided by advances from the Company's sole officer and
director was $17,456.
Going Concern Consideration
As of March 31, 2022, the Company had an accumulated deficit of $1,209,858 and
its current liabilities exceeded its current assets, resulting in a negative
working capital of $583,869. The Company's ability to continue as a going
concern is dependent on its ability to raise additional capital. The Company's
unaudited condensed 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.
These unaudited condensed 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.
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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 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
$6,000 and $6,000 respectively, for the three months ended March 31, 2022 and
2021. Unamortized debt discount as of March 31, 2022 and December 31, 2021 were
$0 and $0, respectively. As of March 31, 2022, and December 31, 2021, net
balance of the convertible note were $200,000 and $200,000, respectively.
Operating Lease
The Company has operating leases for its office in China. Rental expenses for
the three months ended March 31, 2022 and 2021 were $15,227 and $25,624,
respectively. As of March 31, 2022, the remaining lease term was 11 months.
Total future minimum annual lease payments under operating lease were as
follows:
Operating
Ending March 31, Leases
2022 $ 25,232
Total lease payments $ 25,232Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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