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 potential business
opportunities.
The following discussion should be read in conjunction with the unaudited
interim financial statements contained in this Report and in conjunction with
the Company's Form 10-K filed on April 15, 2021. Results for interim periods may
not be indicative of results for the full year.
Critical Accounting Policies and Estimates
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers
(Topic 606). The new revenue recognition standard provides a five-step analysis
of contracts to determine when and how revenue is recognized. The core principle
is that an entity should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or services.
In August 2015, the FASB deferred the effective date of ASU No. 2014-09 for all
entities by one year to annual reporting periods beginning after December 15,
2017. The FASB has issued several updates subsequently, including implementation
guidance on principal versus agent considerations, on how an entity should
account for licensing arrangements with customers, and to improve guidance on
assessing collectability, presentation of sales taxes, noncash consideration,
and contract modifications and completed contracts at transition. In general,
the Company's performance obligation is to transfer it products to its end user
or distributor. Revenues from product sales are recognized when the customer
obtains control of the Company's finished goods product, which occurs at a point
in time, typically upon delivery to the customer.
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The preparation of unaudited consolidated financial statements in conformity
with generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosures of contingent assets and
liabilities at the date of the unaudited consolidated financial statements, and
the reported amount of revenues and expenses during the reported period. Actual
results could differ from those estimates.
As most of the businesses, our operations are affected by the ongoing COVID-19
pandemic. The ultimate disruption that may result from the pandemic is
uncertain, but it may result in a material adverse impact on our financial
positions, operations and cash flows.
Results of Operations
For the three months ended September 30, 2021 and 2020
Three Months Ended
September 30,
2021 2020 Change Percent
Net Sales $ 362,444 $ 29,532 $ 332,912 1127 %
Cost of Sales 238,890 19,428 219,462 1130 %
Gross Profit 123,554 10,104 113,450 1123 %
Operating expenses:
Selling, general and administrative 29,222 26,145 3,077 12 %
Professional fees 20,556 28,237 (7,681 ) (27 )%
Total operating expenses 49,778 54,382 (4,604 ) (8 )%
Gain/(Loss) from operations 73,776 (44,278 ) (118,054 ) (267 )%
Other income (expenses):
Interest income - 51 (51 ) (100 )%
Interest expense (6,000 ) (15,067 ) 9,067 (60 )%
Other Income 2,130 - 2,130 - %
Loss on inventory write-down - (2404 ) 2,404 (100 )%
Total other expenses (3,870 ) (17,420 ) 13,550 (78 )%
Gain (Loss) before income taxes 69,906 (61,698 ) 131,604 (213 )%
Income tax expense 688 13 675 5192 %
Net Income (loss) $ 69,218 $ (61,711 ) $ 130,929 (212 )%
Net sales
The Company's consolidated net sales for the three months ended September 30,
2021 and 2020 were $362,444 and $29,532, respectively. Cost of sales for the
three months ended September 30, 2021 and 2020 were $238,890 and $19,428,
respectively, resulting in gross profits of $123,554 and $10,104 for the three
months ended September 30, 2021 and 2020, respectively. Revenue increase of
$332,912 or 1127% was due to the increase in related party sales in PRC when
COVID-19 was less serious in the three months ended September 30, 2021 compared
with the same period in 2020. The sales concentrates on one customer which
consists of 100% of the revenue.
Total operating expenses
For the three months ended September 30, 2021, total operating expenses were
$49,778, which consisted of professional fees of $20,556, China salary and China
office and other expenses of $11,554 and rent expenses of $17,668. For the three
months ended September 30, 2020, total operating expenses were $54,382, which
consisted of professional fees of $28,237, China salaries and office expenses of
$4,581, rent of $7,648, and expenses in US of $3,200. Total operating expenses
decreased $4,604, or 8%, primarily as a result of the decrease in professional
fees $7,681 (from $28,237 in 2020 to $20,556 in 2021, offset by the rent
increase of $15,572 (from $17,668 in 2020 to $2,096 in 2021).
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Total other income (expenses)
For the three months ended September 30, 2021, the Company had total other
expenses of $3,870 , which consists primarily of interest expense of $6,000,
offset by other income of $2,130. For the three months ended September 30, 2020,
total other expenses were $17,420, which consisted of interest income of $51,
interest expense of $15,067 and loss on inventory write-down of $2,404. Total
other expenses decreased $13,550, or 78% for the three months ended September
30, 2021, compared with the three months ended September 30, 2020 was mainly the
result of interest expenses paid reduced $9,067 or 60% to $6000 for the nine
months ended September 30, 2021 compared to $15,067 for the nine months ended
September 30, 2020.
Net Income (loss)
For the three months ended September 30, 2021, the Company had a net income of
$69,218, compared with a net loss of $61,711 for the three months ended
September 30, 2020, an increase of $130,929 or 212%. The increase in net income
was due to the reasons stated above.
For the nine months ended September 30, 2021 and 2020
Nine Months Ended
September 30,
2021 2020 Change Percent
Net Sales $ 434,288 $ 161,059 $ 273,229 170 %
Cost of Sales 286,081 91,404 194,677 213 %
Gross Profit 148,207 69,655 78,552 113 %
Operating expenses:
Selling, general and administrative 76,938 50,541 26,397 52 %
Professional fees 72,188 64,186 8,002 12 %
Total operating expenses 149,126 114,727 34,399 30 %
Income (Loss) from operations (919 ) (45,072 ) 44,153 -98 %
Other income (expenses):
Interest income 1 278 (277 ) (100 )%
Interest expense (18,000 ) (54,267 ) 36,267 (67 )%
Other income 2,130 1 2,129 212900 %
Loss on inventory write-down - (7,016 ) 7,016 (100 )%
Total other income (expenses) (15,869 ) (61,004 ) 45,135 -74 %
Income (Loss) before income taxes (16,788 ) (106,076 ) 99,288 (84 )%
Income tax expense 1,488 3,295 (1,807 ) (55 )%
Net income (loss) $ (18,276 ) $ (109,371 ) $ 91,095 (83 )%
Net sales
The Company's consolidated sales increased $273,229, or 170% to $434,288 for the
nine months ended September 30, 2021 from $161,059 for the nine months ended
September 30, 2020. Cost of sales increased $194,677 or 213% to $286,081 for the
nine months ended September 30, 2021 from $91,404 for the nine months ended
September 30, 2020. It resulted in a gross profit increased $78,552 or 113% to
$148,207 for the nine months ended September 31, 2021 from $69,655 for the nine
months ended September 30, 2020. Gross profit increased due to increase in
related party sales in PRC because the Pandemic was less serious in 2021
compared to 2020. The sales concentrates on one customer which consists of 100%
of the revenue.
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Total operating expenses
For the nine months ended September 30, 2021, total operating expenses were
$149,126, which consisted of professional fees of $72,188, China salaries,
office & other expenses of $22,513 and rent expenses of $53,003, and expenses of
$1,422 in U.S. During the nine months ended September 30, 2020, total operating
expenses were $114,727, which consisted of professional fees of $64,186, China
salaries of $21,998, office and other expenses of $10,393 and rent expenses of
$24,274, and other US expenses of $5,745. Total operating expenses increased
$34,399, or 30%, was a result of the increase of $25,611 in rent and other
expenses, offset by the increase in professional fees of $8,002 or 12% for the
nine months ended September 30, 2021 compared with the nine months ended
September 30, 2020.
Total other income (expenses)
For the nine months ended September 30, 2021, the Company had other expenses of
$15,869, which consists of interest income of $1, interest expenses of $18,000
and other income of $2,130. For the nine months ended September 30, 2020, the
Company had other expenses of $61,004, which consists of interest income of
$278, interest expenses of 54,267, other income of $1 and loss on inventory
write-down of $7,016 The decrease of $45,135 or 74% in other income (expenses)
is caused primarily by the decrease of interest expense of $36,267, or 67% for
the nine months ended September 30, 2021 compared to the same period in 2020.
Net Income
For the nine months ended September 30, 2021, the Company had a net loss of
$18,276, a net decrease of $91,095 or 83% compared with a net loss of $109,371
for the nine months ended September 30, 2020. The decrease in net loss
predominantly due to the reasons stated above since COVID-19 was less serious in
2021 compared with 2020.
Liquidity and Capital Resources
As of September 30, 2021, the Company had cash and cash equivalents and total
assets of $82,927 and $322,483, respectively. As of said date, the Company had
total liabilities of $879,246, of which $200,000 was due to convertible note
payable and $393,618 was due to the sole officer and director as an unsecured,
non-interest-bearing demand loan. As of September 30, 2021, and December 31,
2020, the Company had negative working capital amount of $405,624 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 nine months ended September 30, 2021, net cash flows used in operating
activities was $1,427, resulting from a net loss of $18,276, a decrease in
prepaid expenses of $101,248, inventories of $86,805 and lease liabilities of
$35,354, offset by the increase of accrued liabilities of $19,843, amortization
of $50,857, accounts payable of $43,200, interest payable of $18,000 and
customer deposit of $108,356. For the nine months ended September 30, 2020, net
cash flows used in operating activities was $84,127 resulting from a net loss of
$109,371, decrease of accounts receivable of $32,591, lease liabilities of
$14,904, customer deposit of $6,649 and accrued liabilities of $5,289, offset by
the increase caused by the inventory write down of $7,016, amortization of bad
debt of $36,267, inventories of $18,995, interest payable of $18,000, and
prepaid expenses and deposit of $4,399. The net cash flow used in operating
activities decreased $82,701, or 98% for the nine months ended September 30,
2021 compared with the $84,127 for the nine months ended September 30, 2020.
Cash Flows from Investing Activities
For the nine months ended September 30, 2021 and 2020, cash flow used in
investing activities decreased from $11,436 to zero, due to the reduction of
loan to related party.
Cash Flows from Financing Activities
For the nine months ended September 30, 2021, the company had loan from related
party of $53,332, an increase of $23,275, or 77% from $30,057 for the nine
months ended September 30, 2020. The loans were from the Company's sole officer
and director.
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Going Concern Consideration
These consolidated financial statements have been prepared on a going concern
basis, which assumes the Company will continue to realize its assets and
discharge its liabilities in the normal course of business. The continuation of
the Company as a going concern is dependent upon the continued financial support
from its shareholders, the ability of the Company to repay its debt obligations,
to obtain necessary equity financing to continue operations, and the attainment
of profitable operations. Management anticipates that the Company will be
dependent, for the near future, on additional investment capital to fund
operating expenses. The Company may seek additional funding through additional
issuance of common stock and/or borrowings from financial institutions or the
majority shareholder to support its normal business operations. In light of
management's efforts, there are no assurances that the Company will be
successful in this or any of its endeavors or become financially viable and
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The Company had net loss of $18,276 for the nine months ended September 30, 2021
and net loss of $109,371 for the nine months ended September 30, 2020,
respectively. In addition, the Company had an accumulated deficit of $1,179,969
as of September 30, 2021, and generated negative cash flow from operating
activities for the nine months ended September 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
$18,000 and $54,267, respectively, for the nine months ended September 30, 2021
and 2020. As of September 30, 2021 and December 31, 2020, net balance of the
convertible note amounted to $200,000.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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MAKINGORG, INC. 
