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.
15
Table of Contents
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.
16
Table of Contents
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.
17
Table of Contents
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.
18
Table of Contents
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.
19
Table of Contents
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
© Edgar Online, source Glimpses
MAKINGORG, INC. 
