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, 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.
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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.
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 leases.
The Company believes 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 the 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 June 30, 2022 and 2021
Three Months Ended
June 30,
2022 2021 Change Percent
Net Sales $ - $ 59,439 $ (59,439 ) -100 %
Cost of Sales - 39,626 (39,626 ) -100 %
Gross Profit - 19,813 (19,813 ) -100 %
Operating expenses:
Selling, general and administrative 15,465 25,092 (9,627 ) -38 %
Professional fees 13,952 34,176 (20,224 ) -59 %
Total operating expenses 29,417 59,268 (29,851 ) -50 %
Loss from operations (29,417 ) (39,455 ) 10,038 -25 %
Other income (expenses):
Interest income 102 1 101 10100 %
Interest expense (6,000 ) (6,000 ) - - %
Total other income (expenses) (5,898 ) (5,999 ) 101 -2 %
Loss before income taxes (35,315 ) (45,454 ) 10,139 -22 %
Income tax expense - 800 (800 ) -100 %
Net loss $ (35,315 ) $ (46,254 ) $ 10,939 -24 %
Net sales, cost of sales and gross profit
Unaudited condensed consolidated net sales for the three months ended June 30,
2022 and 2021 was $0 and $59,439, respectively. The cost of sales for the three
months ended June 30, 2022 and 2021 was $0 and $39,626, respectively, resulting
in a gross profit of $0 and $19,813 for the three months ended June 30, 2022 and
2021, respectively. The net sales decrease was due to the decrease of related
party sales in PRC.
Total operating expenses
For the three months ended June 30, 2022, total operating expenses were $29,417,
which consisted of professional fee of $13,952. Rent expenses in China of
$2,485, office and other expenses in China of $12,980. For the three months
ended June 30, 2021, total operating expenses were $59,268, which mainly
consisted of professional fee of $34,176, China salary and China office and
other expenses of $5,400 and rent expense of $19,692. Total operating expenses
decreased $29,852, or 50%, primarily as a result of decrease in professional
fees and rent in China for the three months ended June 30, 2022 compared with
the three months ended June 30, 2021.
Total other income (expenses)
During the three months ended June 30, 2022, the Company had total other
expenses of $5,898, which consists of interest income of $102, interest expense
of $6,000. During the three months ended June 30, 2021, the Company total other
expenses were $5,999, which consisted of interest expense of $6,000, and
interest income of $1.
Net loss
During the three months ended June 30, 2022, the Company had a net loss of
$35,315, as compared with a net loss of $46,254 for the three months ended June
30, 2021. The decrease in net loss was predominantly due to the reasons stated
above.
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For the six months ended June 30, 2022 and 2021
Six Months Ended
June 30,
2022 2021 Change Percent
Net Sales $ - $ 71,844 $ (71,844 ) -100 %
Cost of Sales - 47,191 (47,191 ) -100 %
Gross Profit - 24,653 (24,653 ) -100 %
Operating expenses:
Selling, general and administrative 39,425 47,717 (8,292 ) -17 %
Professional fees 31,545 51,632 (20,087 ) -39 %
Total operating expenses 70,970 99,349 (28,379 ) -29 %
Loss from operations (70,970 ) (74,696 ) 3,726 -5 %
Other income (expenses):
Interest income 102 1 101 10100 %
Interest expense (12,000 ) (12,000 ) - - %
Total other income (expenses) (11,898 ) (11,999 ) 101 -1 %
Interest expense
Loss before income taxes (82,868 ) (86,694 ) 3,826 -4 %
Income tax expense - 800 (800 ) -100 %
Net loss $ (82,868 ) $ (87,494 ) $ 4,626 -5 %
Net sales, cost of sales and gross profit
The Company consolidated net sales for the six months ended June 30, 2022 and
2021 was $0 and $71,844, respectively. The cost of sales for the six months
ended June 30, 2022 and 2021 was $0 and $47,191, respectively, resulting in a
gross profit of $0 and $24,653 for the six months ended June 30, 2022 and 2021,
respectively. The net sales decrease was due to the decrease of related party
sales in PRC.
Total operating expenses
During the six months ended June 30, 2022, total operating expenses were
$70,970, which consisted of professional fees of $31,545, China salary and China
office expense of $21,713 and rent expenses of $17,712. During the six months
ended June 30, 2021, total operating expenses were $99,348, which mainly
consisted of professional fees of $51,632, 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.
Total other income (expenses)
During the six months ended June 30, 2022, the Company had interest expense of
$11,898, which consists of interest income of $102, interest expenses of 12,000.
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.
Net loss
During the six months ended June 30, 2022, the Company had a net loss of $82,868
a decrease of $4,626 or 5% as compared with a net loss of $87,495 for the six
months ended June 30, 2020. The decrease in net loss was predominantly due to
the reasons stated above.
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Liquidity and Capital Resources
As of June 30, 2022, the Company had cash and cash equivalents and total assets
of $42,139 and $119,575, respectively. As of said date, the Company has total
liabilities of $746,167, of which $200,000 is due to convertible note payable
and $387,918 is due to our sole officer and director as an unsecured,
non-interest bearing demand loan. As of June 30, 2022, and December 31, 2021,
the Company had negative working capital amount of $426,592 and $367,790,
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, 2022, net cash flows used in operating
activities was $64,476 resulting from a net loss of $82,868, an increase in
prepaid expenses and other current assets of $810, an increase in accrued
liabilities of $7,202, increase of interest payable of $12,000. For the six
months ended June 30, 2021, net cash flows provided in operating activities was
$63,205 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.
Cash Flows from Investing Activities
For the six months ended June 30, 2022 and 2021, the Company did not have any
cash flow from investing activities.
Cash Flows from Financing Activities
For the six months ended June 30, 2022 and 2021, advances from the Company's
sole officer and director provided $1,500 and $53,332, respectively.
Going Concern Consideration
As of June 30, 2022, the Company had an accumulated deficit of $1,245,175 and
its current liabilities exceeded its current assets, resulting in a negative
working capital of $426,592. 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 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 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
$6,000 and $6,000, respectively, for the three months ended June 30, 2022 and
2021. Unamortized debt discount as of June 30, 2022 and December 31, 2021 were
$0 and $0, respectively. As of June 30, 2022, and December 31, 2021, net
balances of the convertible note were $200,000 and $200,000, respectively.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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MAKINGORG, INC. 
