The following discussion should be read in conjunction with the Company's
consolidated financial statements, which are included elsewhere in this Form
10-K.
Overview
MakingORG, Inc. ("MakingORG") was incorporated under the laws of the State of
Nevada on August 10, 2012. The trading symbol of the Company 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").
On November 29, 2016, the Company 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").
The Company and its subsidiaries purchase Acer truncatum bunge seed oil in
China, outsource to third parties to manufacture Acer truncatum bunge related
health product, and sell to distributors in PRC.
CBKB entered into a Strategic Cooperation Framework Agreement with Hangzhou Life
Century Hualian Supermarket Chain Co., Ltd. ("HLCH"), dated May 25, 2018,
pursuant to which the Company agreed to assist HLCH in identifying
brand-specific, high tech characteristics products, such as acer truncatum
nervonic acid oil, acer truncatum seed oil capsule, acer truncatum edible oil,
acer truncatum oil with nervonic acid formula, acer truncatum coffe, acer
truncatum tea, canned acer truncatum, acer truncatum cosmetics, acer truncatum
skin care products, hair wash products and acer trunncatrum food. This agreement
did not continue due to HLCH did not operate well.
In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan,
Hubei Province, China. While initially the outbreak was largely concentrated in
China and caused significant disruptions to its economy, it has spread around
the world and infections have been reported globally. China governmental
authorities have issued stay-at-home orders, proclamations and/or directives
aimed at minimizing the spread of COVID-19. As a result, the Company closed its
China operations from the end of January 2020 to the end of March 2020.
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 2020, 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,
the ultimate impact of the COVID-19 pandemic on the Company's operations is
unknown and will depend on future developments, which are highly uncertain and
cannot be predicted with confidence, including the duration of the COVID-19
outbreak, new information which may emerge concerning the severity of the
COVID-19 pandemic, and any additional preventative and protective actions that
governments, or the Company, may direct, which may result in an extended period
of continued business disruption, reduced customer traffic and reduced
operations. Any resulting financial impact cannot be reasonably estimated at
this time but is anticipated to have a material adverse impact on our business,
financial condition and results of operations.
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Plan of Operation
Management intends 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 extent of the impact of COVID-19 on our business and financial results will
depend on future developments, including the duration and spread of the outbreak
within the markets in which we operate, the related impact on our customers and
suppliers and the possibility of an economic recession after the virus has
subsided, the widely use of vaccine globally, all of which are highly uncertain
and ever-changing. Any of these factors could materially increase our costs,
negatively impact our sales and damage our results of operations and liquidity.
The severity and duration of any such impacts, including after the virus has
subsided, cannot be predicted.
Sources of Opportunities
The Company anticipates that business opportunities for possible acquisition
will be referred by various sources, including its officers and directors,
professional advisers, securities broker-dealers, venture capitalists, members
of the financial community, and others who may present unsolicited proposals.
The Company will seek a potential business opportunity from all known sources
but will rely principally on personal contacts of its officer and director and
consultants as well as indirect associations between them and other business and
professional people. It is not presently anticipated that the Company will
engage professional firms specializing in business acquisitions or
reorganizations.
Evaluation of Opportunities
The analysis of new business opportunities will be undertaken by or under the
supervision of the officer and director of the Company. Management intends to
concentrate on identifying prospective business opportunities which may be
brought to its attention through present associations with management. In
analyzing prospective business opportunities, management will consider such
matters as the available technical, financial and managerial resources; working
capital and other financial requirements; history of operation, if any;
prospects for the future; present and expected competition; the quality and
experience of management services which may be available and the depth of that
management; the potential for further research, development or exploration;
specific risk factors not now foreseeable but which then may be anticipated to
impact the proposed activities of the Company; the potential for growth or
expansion; the potential for profit; the perceived public recognition or
acceptance of products, services or trades; name identification; and other
relevant factors. The officer and director of the Company will meet personally
with management and key personnel of the firm sponsoring the business
opportunity as part of her investigation. To the extent possible, the Company
intends to utilize written reports and personal investigation to evaluate the
above factors. The Company will not acquire or merge with any company for which
audited consolidated financial statements cannot be obtained.
It may be anticipated that any opportunity in which the Company participates
will present certain risks. Many of these risks cannot be adequately identified
prior to selection of the specific opportunity, and the Company's stockholders
must, therefore, depend on the ability of management to identify and evaluate
such risk. In the case of some of the opportunities available to the Company, it
may be anticipated that the promoters thereof have been unable to develop a
going concern or that such business is in its development stage in that it has
not generated significant revenues from its principal business activities prior
to the Company's anticipation. There is a risk, even after the Company's
participation in the activity and the related expenditure of the Company's funds
that the combined enterprises will still be unable to become a going concern or
advance beyond the development stage. Many of the opportunities may involve new
and untested products, processes, or market strategies which may not succeed.
Such risks will be assumed by the Company and, therefore, its stockholders.
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The Company will not restrict its search for any specific kind of business but
may acquire a venture which is in its preliminary or development stage, which is
already in operation, or in essentially any stage of its corporate life. It is
currently impossible to predict the status of any business in which the Company
may become engaged, in that such business may need additional capital, may
merely desire to have its shares publicly traded, or may seek other perceived
advantages which the Company may offer.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the Company
may become a party to a merger, consolidation, reorganization, joint venture,
franchise or licensing agreement with another corporation or entity. It may also
purchase stock or assets of an existing business. On the consummation of a
transaction, it is possible that the present management and shareholders of the
Company will not be in control of the Company. In addition, the Company's
officer and director may, as part of the terms of the acquisition transaction,
resign and be replaced by new officers and directors without a vote of the
Company's stockholders.
It is anticipated that any securities issued in any such reorganization would be
issued in reliance on exemptions from registration under applicable Federal and
state securities laws. In some circumstances, however, as a negotiated element
of this transaction, the Company may agree to register such securities either at
the time the transaction is consummated, under certain conditions, or at
specified time thereafter. The issuance of substantial additional securities and
their potential sale into any trading market which may develop in the Company's
common stock may have a depressive effect on such market. While the actual terms
of a transaction to which the Company may be a party cannot be predicted, it may
be expected that the parties to the business transaction will find it desirable
to avoid the creation of a taxable event and thereby structure the acquisition
in a so called "tax free" reorganization under Sections 368(a) (1) or 351 of the
Internal Revenue Code of 1986, as amended (the "Code"). In order to obtain tax
free treatment under the Code, it may be necessary for the owners of the
acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, the shareholders of the Company, including investors in
this offering, would retain less than 20% of the issued and outstanding shares
of the surviving entity, which could result in significant dilution in the
equity of such shareholders.
As part of the Company's investigation, the officer and director of the Company
will meet personally with management and key personnel, may visit and inspect
material facilities, obtain independent analysis or verification of certain
information provided, check references of management and key personnel, and take
other reasonable investigative measures, to the extent of the Company's limited
financial resources and management expertise.
The manner in which each Company participates in an opportunity will depend on
the nature of the opportunity, the respective needs and desires of the Company
and other parties, the management of the opportunity, and the relative
negotiating strength of the Company and such other management.
With respect to any mergers or acquisitions, negotiations with target company
management will be expected to focus on the percentage of the Company which
target company shareholders would acquire in exchange for their stockholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, the Company's stockholders will in all likelihood hold a
lesser percentage ownership interest in the Company following any merger or
acquisition. The percentage ownership may be subject to significant reduction in
the event the Company acquires a target company with substantial assets. Any
merger or acquisition effected by the Company can be expected to have a
significant dilutive effect on the percentage of shares held by the Company's
then stockholders.
The Company will not have sufficient funds (unless it is able to raise funds in
a private placement) to undertake any significant development, marketing and
manufacturing of any products which may be acquired.
Accordingly, following the acquisition of any such product, the Company will, in
all likelihood, be required to either seek debt or equity financing or obtain
funding from third parties, in exchange for which the Company would probably be
required to give up a substantial portion of its interest in any acquired
product. There is no assurance that the Company will be able either to obtain
additional financing or interest third parties in providing funding for the
further development, marketing and manufacturing of any products acquired.
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It is anticipated that the investigation of specific business opportunities and
the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity the costs
therefore incurred in the related investigation would not be recoverable.
Furthermore, even if an agreement is reached for the participation in a specific
business opportunity, the failure to consummate that transaction may result in a
loss to the Company of the related costs incurred.
Management believes that the Company may be able to benefit from the use of
"leverage" in the acquisition of a business opportunity. Leveraging a
transaction involves the acquisition of a business through incurring significant
indebtedness for a large percentage of the purchase price for that business.
Through a leveraged transaction, the Company would be required to use less of
its available funds for acquiring the business opportunity and, therefore, could
commit those funds to the operations of the business opportunity, to acquisition
of other business opportunities or to other activities. The borrowing involved
in a leveraged transaction would ordinarily be secured by the assets of the
business opportunity to be acquired. If the business opportunity acquired is not
able to generate sufficient revenues to make payments on the debt incurred by
the Company to acquire that business opportunity, the lender would be able to
exercise the remedies provided by law or by contract. These leveraging
techniques, while reducing the amount of funds that the Company must commit to
acquiring a business opportunity, may correspondingly increase the risk of loss
to the Company. No assurance can be given as to the terms or the availability of
financing for any acquisition by the Company. During periods when interest rates
are relatively high, the benefits of leveraging are not as great as during
periods of lower interest rates because the investment in the business
opportunity held on a leveraged basis will only be profitable if it generates
sufficient revenues to cover the related debt and other costs of the financing.
Lenders from which the Company may obtain funds for purposes of a leveraged
buy-out may impose restrictions on the future borrowing, distribution, and
operating policies of the Company. It is not possible at this time to predict
the restrictions, if any, which lenders may impose or the impact thereof on the
Company.
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.
Prior to the adoption of ASC 842 on January 1, 2019:
Leases, mainly leases of offices, where substantially all the rewards and risks
of ownership of assets remain with the lessor are accounted for as operating
leases. Payments made under operating leases are recognized as an expense on a
straight-line basis over the lease term. The Company had no finance leases for
any of the periods stated herein.
Upon and thereafter the adoption of ASC 842 on January 1, 2019:
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.
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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 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 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.
The preparation of 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 consolidated financial statements, and the
reported amount of revenues and expenses during the reported period. Actual
results could differ from those estimates.
Results of Operations
For the years ended December 31, 2020 and December 31, 2019
Years Ended
December 31,
2020 2019 Change Percent
Net Sales - related party $ 238,587 $ 375,251 $ (136,664 ) (36 )%
Cost of Sales 145,470 200,182 (54,712 ) (27 )%
Gross Profit 93,117 175,069 (81,952 ) (47 )%
Operating expenses:
Selling, general and administrative 97,191 49,097 48,094 98 %
Professional fees 92,996 560,171 (467,175 ) (83 )%
Total operating expenses 190,187 609,268 (419,081 ) (69 )%
Other income (expenses):
Interest income 288 152 136 89 %
Interest expense (60,267 ) (68,800 ) 8,533 (12 )%
Other income 3,948 27 3,921 14522 %
Loss on inventory write-down (9,420 ) (8,325 ) (1,095 ) 13 %
Total other income (expenses) (65,451 ) (76,946 ) 11,495 (15 )%
Loss before income taxes (162,521 ) (511,145 ) 348,624 (68 )%
Income tax expense 3,329 6,047 (2,718 ) (45 )%
Net loss $ (165,850 ) $ (517,192 ) $ 351,342 (68 )%
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Net sales, cost of sales and gross profit
The Company consolidated net sales for the years ended December 31, 2020 and
2019 was $238,587 and $375,251, respectively, a net decrease of $136,664 or 36%
in year 2020 compare with 2019. The cost of sales for the years ended December
31, 2020 and 2019 was $145,470 and $200,182, respectively, a net decrease of
$54,712 or 27% in year 2020 compare with 2019, resulting in a gross profit of
$93,117 and $175,069 for the years ended December 31, 2020 and 2019,
respectively, a net decrease of $81,952 or $47% in 2020 compared with 2019. The
net sales decrease was due to the decreased sales in PRC for related party sales
caused mainly by the spread of COVID-19 in 2020.
Total operating expenses
During the year ended December 31, 2020, total operating expenses were $190,187,
which consisted of professional fees of $92,996, rent expenses of $46,329, China
salary and office expense of $44,084, miscellaneous expenses of $6,778. During
the year ended December 31, 2019, total operating expenses were $609,268, which
consisted of professional fees of $560,171, rent expenses of $8,625, China
salary and China office expense of $33,034, marketing expense of $4,456, bank
charges of $1,223, permits and licenses of $1,725, and others of $34. Total
operating expenses decreased $419,081, or 69% from 2020 to 2019, primarily as a
result of the decrease in professional fees for the year ended December 31, 2020
from 2019.
Total other income (expense)
During the year ended December 31, 2020, total other expenses were $65,451,
which consisted of interest expense of $60,267, interest income of $288, other
income of $3,948 and loss on inventory write-down of $9,420. During the year
ended December 31, 2019, the Company total other expenses were $76,946, which
consisted of interest expense of $68,800, interest income of $152, other income
of $27 and loss on inventory write-down of $8,325. Total other expense decreased
$11,495, or 15%, primarily due to the decrease of interest expense for
beneficial conversion feature and the increase of other income for the year
ended December 31, 2020 compared to 2019.
Net loss
During the year ended December 31, 2020, the Company had a net loss of $165,850,
a decrease of loss of $351,342 or 68% compared with the net loss of $517,192 for
the year ended December 31, 2019. The decrease of net loss was due to the
reasons stated above.
Liquidity and Capital Resources
As of December 31, 2020, the Company had cash and cash equivalents and total
assets of $30,700 and $192,543, compared to the cash and cash equivalents and
total assets of $94,211 and $177,689, respectively as of December 31, 2019. As
of December 31, 2020, the Company had total liabilities of $732,323, of which
$200,000 is convertible note payable and $340,286 is due to our sole officer and
director as an unsecured, non-interest bearing demand loan. As of December 31,
2019, the Company had total liabilities of $556,992, of which $163,733 is
convertible note payable and $285,869 is due to our sole officer and director as
an unsecured, non-interest bearing demand loan.
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As of December 31, 2020, and 2019, the Company had negative working capital
amount of $425,677 and $384,891, respectively.
Other than an oral agreement with Mrs. Cui to fund the expenses of the Company,
we currently have no agreements and arrangements with 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.
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.
Cash Flows from Operating Activities
For the year ended December 31, 2020, net cash flows used in operating
activities was $107,338, resulting from a net loss of $165,850, an increase by
inventory write-down of $9,420, an increase in amortization of debt discount of
$36,267, decreased by amortization of right-of-use of assets of $250, decreased
by lease liabilities of $14,534, decreased by changes in accounts receivable of
$46,292, accrued liability of $10,403 and customer deposit of $6,741, increased
by inventory, prepaid expenses and interest payable of $91,045. For the year
ended December 31, 2019, net cash flows used in operating activities was $16,387
resulting from a net loss of $517,192, an decrease in inventories of $29,949, a
decrease in prepaid expenses and other current assets of $28,076, an increase in
accrued liabilities of $13,346, an increase in interest payable of $24,000, an
increase in customer deposit - related party of $6,734, and amortization of debt
discount of $44,800, amortization of right-of-use assets of $375, loss on
inventory write-down of $8,325 and shares issued for compensation of $462,000.
The increase of cash flows used in operating activities from 2020 to 2019 was
$90,951 or 555%.
Cash Flows from Investing Activities
For the year ended December 31, 2020, cash flow used in paying loan to related
party is $11,594, while there was no cash flow from investing activity in 2019.
Cash Flows from Financing Activities
The Company financed the operations primarily from the advances from the
Company's sole officer and director. For the years ended December 31, 2020 and
2019, cash flows provided by advances from the Company's sole officer and
director of $54,417 and $54,966, respectively, a decrease of $549 or 1%.
Going Concern Consideration
The Company had net loss of $165,850 and $517,192 for the years ended December
31, 2020 and 2019 respectively. In addition, the Company had an accumulated
deficit of $1,161,693 and $995,843 and generated negative cash flow from
operating activities as of and for years ended December 31, 2020 and 2019,
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.
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.
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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, both parties agreed to extend the 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 convertible note agreement was extended 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.
On September 1, 2020, the convertible promissory note agreement was extended to
September 1, 2022 with no additional consideration.
The Company recognized interest expense related to the convertible note of
$60,267 and $68,800, respectively, for the years ended December 31, 2020 and
2019, respectively. The unamortized debt discount on December 31, 2020 and 2019
was zero and $36,267, respectively. As of December 31, 2020, and 2019, net
balance of the convertible note amounted to $200,000 and $163,733, respectively.
Operating Lease
The Company has an operating lease for its office space from a third party in
the United States. The Company determined if an arrangement is a lease inception
of the contract and whether a contract is or contains a lease by determining
whether it conveys the right to control the use of identified asset for a period
of time. The contract provides the right to substantially all the economic
benefits from the use of the identified asset and the right to direct use of the
identified asset, we consider it to be, or contain, a lease. Leases is
classified as operating at 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 term as 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
7.33%. Lease expense for the lease is recognized on a straight-line basis over
the lease term. The lease does not contain any residual value guarantees or
material restrictive covenants. Leases with a lease term of 12 months or less
are not recorded on the balance sheet and lease expense is recognized on a
straight-line basis over the lease term. The lease expired on August 31, 2020.
The Company has operating leases for its office. Rental expenses for the years
ended December 31, 2020 and 2019 were $6,448 and $8,625, respectively.
The Company signed a new lease agreement with a related party in China in June
2020, an entity in which CBKB's supervisor is a shareholder. It calls for a
monthly rent of RMB40,000 (approximately $5,800). The lease is for one year and
subject to renewal. Leases is classified as operating at 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 December 31, 2020 is 5 months and subject to the priority of signing a new
lease agreement within a 60-day written notice before the current lease
agreement is due. The Company currently has no finance leases.
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As of December 31, 2020, future minimum annual lease payment under operating
lease was as follows:
Operating
Ending December 31, Leases
2021 $ 73,533
2022 12,256
Total lease payments 85,789
Less: Interest (2,499 )
Present value of lease liabilities $ 83,290
Material Definitive Agreement
MakingOrg, Inc.'s subsidiary, Chonogquing Beauty Kenner Biotechnology Co., Ltd.,
entered into a Strategic Cooperation Framework Agreement (the "Agreement") with
Hangzhou Life Century Hualian Supermarket Chain Co., Ltd. ("HLCH"), dated May
25, 2018, pursuant to which the Company agreed to assist HLCH in identifying
brand-specific, high tech characteristics products, such as acer truncatum
nervonic acid oil, acer truncatum seed oil capsule, acer truncatum edible oil,
acer truncatum oil with nervonic acid formula, acer truncatum coffe, acer
truncatum tea, canned acer truncatum, acer truncatum cosmetics, acer truncatum
skin care products, hair wash products and acer trunncatrum food. The Company
has initiated the marketing effort per agreement, however, the result has not
met the expectation and the Company is still finding solutions.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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