Company Quick10K Filing
Quick10K
Makingorg
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2018-05-25 Enter Agreement, Shell Status, Exhibits
ETP Energy Transfer Operating 22,278
IPIX Innovation Pharmaceuticals 31
NUMD Nu-Med Plus 25
HLYK Healthlynked 17
ENZN Enzon Pharmaceuticals 11
MAGE Magellan Gold 9
AGTK Agritek Holdings 1
WWIN Wewin Group 0
VNUE VNUE 0
GAIFB Graham Alternative Investment Fund II 0
CQCQ 2019-06-30
Part I.
Item 1. Financial Statements.
Note 1 - Organization and Nature of Business
Note 2 - Going Concern
Note 3 - Summary of Significant Accounting Policies
Note 4 - Inventories
Note 5 - Prepaid Expenses and Other Current Assets
Note 6 - Due To Related Party
Note 7 - Busines Concentration and Risks
Note 8 - Convertible Note Payable
Note 9 - Lease
Note 10 - Stockholders' Deficit
Note 11 - Income Taxes
Note 12- Subsequent Event
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits
EX-31.1 cqcq_ex311.htm
EX-32.1 cqcq_ex321.htm

Makingorg Earnings 2019-06-30

CQCQ 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 cqcq_10q.htm FORM 10-Q cqcq_10q.htm

 

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

Mark One

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2019

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______ to _______

 

Commission File No. 000-55260

 

MakingORG, Inc.

(Exact name of registrant as specified in its charter)

  

Nevada

 

6770

 

39-2079723

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Number)

 

 (IRS Employer

Identification Number )

 

618 Brea Canyon Rd. Ste A

Walnut, CA 91789

(213) 805-5799

(Address and telephone number of principal executive offices)

 

Securities registered pursuant to Section 12(b) of the Act: 

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

None

 

 

 

 

 

Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-K (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨ 

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

 

 

Emerging growth company

¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ¨ No x

 

Applicable Only to Issuer Involved in Bankruptcy Proceedings During the Preceding Five Years. N/A

 

Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes ¨ No x

 

Applicable Only to Corporate Registrants

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:

 

Class

 

Outstanding as of July 26, 2019

Common Stock: $0.001

 

35,540,000

 

 
 
 
 

     

PART 1

FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

Item 1

Financial Statements (Unaudited)

 

 

 3

 

 

Balance Sheets

 

 

 3

 

 

Statements of Operations

 

 

 4

 

 

Statements of Changes in Stockholders’ Deficit

 

 

5

 

 

Statements of Cash Flows

 

 

 6

 

 

Notes to the Financial Statements

 

 

 7

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

15

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

 

 20

 

Item 4.

Controls and Procedures

 

 

 20

 

 

 

 

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

Item 1

Legal Proceedings

 

 

 21

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

 21

 

Item 3

Defaults Upon Senior Securities

 

 

 21

 

Item 4

Mine safety disclosures

 

 

 21

 

Item 5

Other Information

 

 

 21

 

Item 6

Exhibits

 

 

 22

 

 

Signatures

 

 

 23

 

 

 
2
 
 
 

PART I.

FINANCIAL INFORMATION

 

Item 1. Financial Statements.  

 

MAKINGORG, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

June 30,

2019

 

 

December 31,

2018

 

 

 

(Unaudited)

 

 

 

ASSETS

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$31,630

 

 

$57,372

 

Accounts receivable-related party

 

 

14,767

 

 

 

-

 

Inventory (net of inventory reserve of $16,651 and $11,101)

 

 

16,651

 

 

 

22,201

 

Prepaid expenses and other current assets

 

 

240,707

 

 

 

4,500

 

Total Current Assets

 

 

303,755

 

 

 

84,073

 

 

 

 

 

 

 

 

 

 

Right-of-use assets - operating leases

 

 

9,597

 

 

 

-

 

Deposit

 

 

2,000

 

 

 

2,000

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$315,352

 

 

$86,073

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities

 

 

 

 

 

 

 

 

Interest payable

 

$68,000

 

 

$56,000

 

Accrued liabilities

 

 

11,522

 

 

 

1,554

 

Lease liabilities - operating leases

 

 

8,548

 

 

 

-

 

Due to related party

 

 

270,903

 

 

 

230,903

 

Convertible note payable, net of discount $6,667 and $26,667

 

 

193,333

 

 

 

173,333

 

Total Current Liabilities

 

 

552,306

 

 

 

461,790

 

 

 

 

 

 

 

 

 

 

Long-Term Liabilities

 

 

 

 

 

 

 

 

Lease liabilities - operating leases, noncurrent

 

 

1,486

 

 

 

-

 

Deferred rent

 

 

-

 

 

 

625

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

553,792

 

 

 

462,415

 

 

 

 

 

 

 

 

 

 

Stockholders’ Deficit

 

 

 

 

 

 

 

 

Preferred stock, par value $0.001; 50,000,000 shares authorized,

 

 

 

 

 

 

 

 

zero shares issued and outstanding

 

 

-

 

 

 

-

 

Common stock, par value $0.001; 150,000,000 shares authorized,

 

 

 

 

 

 

 

 

35,540,000 and 35,430,000 shares issued and outstanding as of

 

 

 

 

 

 

 

 

March 31, 2019 and December 31, 2018, respectively

 

 

35,540

 

 

 

35,430

 

Additional paid-in capital

 

 

529,482

 

 

 

67,592

 

Accumulated other comprehensive income (loss)

 

 

(677)

 

 

(713)

Accumulated deficit

 

 

(802,785)

 

 

(478,651)

Total Stockholders’ Deficit

 

 

(238,440)

 

 

(376,342)

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Deficit

 

$315,352

 

 

$86,073

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 
3
 
Table of Contents

 

MAKINGORG, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

 

 

 

 

 

 

 

 

 

 

For the three months

ended June 30,

 

 

For the six months

ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net Sales-Related Party

 

$33,064

 

 

$-

 

 

$33,064

 

 

$-

 

Cost of Sales

 

 

18,294

 

 

 

-

 

 

 

18,294

 

 

 

-

 

Gross Profit

 

 

14,770

 

 

 

-

 

 

 

14,770

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

9,201

 

 

 

9,548

 

 

 

19,586

 

 

 

14,548

 

Professional fees

 

 

152,548

 

 

 

23,070

 

 

 

280,996

 

 

 

46,570

 

TOTAL OPERATING EXPENSES

 

 

161,749

 

 

 

32,618

 

 

 

300,582

 

 

 

61,118

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

 

(146,979)

 

 

(32,618)

 

 

(285,812)

 

 

(61,118)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

10

 

 

 

-

 

 

 

28

 

 

 

-

 

Interest expense

 

 

(16,000)

 

 

(10,829)

 

 

(32,000)

 

 

(21,685)

Loss on inventory write-down

 

 

(2,775)

 

 

-

 

 

 

(5,550)

 

 

-

 

TOTAL OTHER INCOME (EXPENSE)

 

 

(18,765)

 

 

(10,829)

 

 

(37,522)

 

 

(21,685)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS BEFORE INCOME TAX

 

 

(165,744)

 

 

(43,447)

 

 

(323,334)

 

 

(82,803)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax

 

 

800

 

 

 

800

 

 

 

800

 

 

 

800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$(166,544)

 

$(44,247)

 

$(324,134)

 

$(83,603)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE ITEM:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation income (loss)

 

 

(524)

 

 

(1,935)

 

 

36

 

 

 

(460)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL COMPREHENSIVE LOSS

 

$(167,068)

 

$(46,182)

 

$(324,098)

 

$(84,063)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE: BASIC AND DILUTED

 

$(0.005)

 

$(0.001)

 

$(0.009)

 

$(0.002)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: BASIC AND DILUTED

 

 

35,540,000

 

 

 

35,430,000

 

 

 

35,540,000

 

 

 

35,430,000

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 
4
 
Table of Contents

 

MAKINGORG, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Deficit

 

Balance, December 31, 2017

 

 

35,430,000

 

 

$35,430

 

 

$27,592

 

 

$927

 

 

$(282,573)

 

$(218,624)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,475

 

 

 

-

 

 

 

1,475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(39,356)

 

 

(39,356)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2018

 

 

35,430,000

 

 

$35,430

 

 

$27,592

 

 

$2,402

 

 

$(321,929)

 

$(256,505)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,935)

 

 

-

 

 

 

(1,935)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(44,247)

 

 

(44,247)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2018

 

 

35,430,000

 

 

$35,430

 

 

$27,592

 

 

$467

 

 

$(366,176)

 

$(302,687)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

 

 

35,430,000

 

 

$35,430

 

 

$67,592

 

 

$(713)

 

$(478,651)

 

$(376,342)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

560

 

 

 

-

 

 

 

560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for service

 

 

110,000

 

 

 

110

 

 

 

461,890

 

 

 

-

 

 

 

-

 

 

 

462,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(157,590)

 

 

(157,590)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2019

 

 

35,540,000

 

 

 

35,540

 

 

 

529,482

 

 

 

(153)

 

 

(636,241)

 

 

(71,372)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(524)

 

 

-

 

 

 

(524)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(166,544)

 

 

(166,544)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2019

 

 

35,540,000

 

 

$35,540

 

 

$529,482

 

 

$(677)

 

$(802,785)

 

$(238,440)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 
5
 
Table of Contents

 

MAKINGORG, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

For the six months ended June 30,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$(324,134)

 

$(83,603)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Loss on inventories write-down

 

 

5,550

 

 

 

-

 

Shares issued for compensation

 

 

231,000

 

 

 

-

 

Amortization of debt discount

 

 

20,000

 

 

 

9,714

 

Amortization of Right-of-use assets

 

 

(188)

 

 

-

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(14,945)

 

 

52,099

 

Inventories

 

 

-

 

 

 

(10,591)

Prepaid expenses and other current assets

 

 

(5,270)

 

 

7,534

 

Accounts payable

 

 

-

 

 

 

(652)

Accrued liabilities

 

 

22,011

 

 

 

18,134

 

CASH FLOWS USED IN OPERATING ACTIVITIES

 

 

(65,976)

 

 

(7,365)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Loan from related party

 

 

40,000

 

 

 

30,124

 

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

 

 

40,000

 

 

 

30,124

 

 

 

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

 

234

 

 

 

(1,520)

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

(25,742)

 

 

21,239

 

Cash and cash equivalents, beginning of period

 

 

57,372

 

 

 

37,605

 

Cash and cash equivalents, end of period

 

$31,630

 

 

$58,844

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Interest paid

 

$-

 

 

$-

 

Income taxes paid

 

$-

 

 

$800

 

 

 

 

 

 

 

 

 

 

NON-CASH TRANSACTION:

 

 

 

 

 

 

 

 

Deferred consulting fee paid in common stock

 

$462,000

 

 

$-

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 
6
 
Table of Contents

 

MakingORG, Inc. and Subsidiaries

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

 

MakingORG, Inc. (“MakingORG”) was incorporated under the laws of the State of Nevada on August 10, 2012. The trading symbol 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”).

 

MaingORG, Inc. and subsidiaries (“the Company”) purchase Acer truncatum bunge seed oil from China, outsource to third party to manufacture Acer truncatum bunge related health product, and sell to end user and distributor in the United States and PRC.

 

NOTE 2 – GOING CONCERN

 

Pursuant to ASU 2014-15, the Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these unaudited consolidated financial statements. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The accompanying unaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. The Company currently suffered recurring loss, generated negative cash flow from operating activities, has an accumulated deficit and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These conditions raise substantial doubt as to its ability to continue as a going concern. These unaudited consolidated financial statements do not include 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.

 

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 is no assurance that the Company will be successful in this or any of its endeavors or become financially viable to continue as a going concern.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

 

 
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Principles of Consolidation

 

The Company’s unaudited consolidated financial statements include the accounts of MakingORG, and its wholly owned subsidiaries, HKFW and CBTB. All intercompany transactions and balances were eliminated in consolidation.

 

Use of Estimates

 

The preparation of unaudited consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the Company’s unaudited consolidated financial statement date and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are reported realizable value, net of allowance for contractual credits and doubtful accounts, which are recognized in the period the related revenue is recorded. Accounts receivable consists principally of receivables from distributor or end user, arising from the sale of the Company’s product. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Management evaluated that there was no allowance for doubtful accounts as of June 30, 2019 and December 31, 2018, respectively.

 

Inventories

 

Inventories consist of finished goods, which are stated at the lower of cost or net realizable value under the first-in-first-out method. The Company reviews its inventories periodically for possible excess and obsolescence to determine if any reserves are necessary.

 

Revenue Recognition

 

Effective January 1, 2018, the Company adopted Topic 606, Revenue from Contracts with Customers, using the modified retrospective transition method. The adoption of the new revenue standards as of January 1, 2018 did not change the Company’s revenue recognition as the majority of its revenues continue to be recognized when the customer takes control of its product. As the Company did not identify any accounting changes that impacted the amount of reported revenues with respect to its product revenues, no adjustment to retained earnings was required upon adoption.

 

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.

 

The Company’s revenue mainly generates from sale of acer truncatum bunge related health products, such as Nervonic Acid Oil, coffee and tea. The Company evaluated its product sales contracts and determined that those contracts are generally capable of being distinct and accounted for as separate performance obligations. Performance obligation is satisfied when the finished goods product delivered to the customer.

 

Shipping and handling costs paid by the Company are included in cost of sales.

 

During the three and six months ended June 30, 2019, the Company recognized revenue from sale of acer truncatum bunge related health products in an amount of $33,064 and $33,064, respectively. During the three and six months ended June 30, 2018, the Company recognized revenue from sale of acer truncatum bunge related health products in an amount of $nil.

 

 
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Advertising Expenses

 

Advertising costs are expensed as incurred. Advertising expenses incurred for the six months ended June 30, 2019 and 2018 totaled $nil and $1,397, respectively.

 

Research and Development

 

Research and development costs are expensed as incurred and are included in general and administrative expenses in the accompanying consolidated statement of operations and totaled $nil for the six months ended June 30, 2019 and 2018, respectively.

 

Income Taxes

 

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are using enacted tax rate expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, if more likely than not that the company will not realize tax assets through future operation.

 

On December 22, 2017, the U.S. enacted the 2017 Tax Cuts and Jobs Act which contains several key tax provisions that affect the Company, including, but not limited to, a one-time mandatory transition tax on accumulated foreign earnings, changes in the sourcing and calculation of foreign income, and a reduction of the corporate income tax rate to 21% effective January 1, 2018. The Company is required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, remeasuring its U.S. deferred tax assets and liabilities as well as reassessing the net realizability of its deferred tax assets and liabilities.

 

Basic Income (Loss) Per Share

 

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.

 

Foreign Currency Transactions

 

The functional currency for the Company and HKFW is the US dollar. The functional currency for the China subsidiary (CBKB) is the Renminbi (RMB). Assets and liabilities of the China operation are translated from RMB into U.S. dollars at period-end rates, while statements of operations and cash flows are translated at the weighted-average exchange rates for the period. The related translation adjustments are reflected as a foreign currency translation adjustment in accumulated other comprehensive income/(loss) within shareholders’ deficit.

 

Related Parties

 

The Company follows Accounting Standards Codification (“ASC”) 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.

 

Lease

 

The Company determines if an arrangement is or contains a lease at inception. Operating leases with lease terms of more than 12 months are included in operating lease assets, accrued and other current liabilities, and long-term operating lease liabilities on its consolidated balance sheet. Operating lease assets represent its right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments over the lease term. Operating lease assets and liabilities are recognized based on the present value of the remaining lease payments discounted using its incremental borrowing rate. Lease expense is recognized on a straight-line basis over the lease term.

 

 
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Segment Reporting

 

The Company follows Financial Accounting Standards Board (“FASB”) ASC Topic 280, “Segment Reporting” for its segment reporting. The Company aggregates its operating segments into one reporting segment, as management believes that its operating segments have similar operating characteristics and similar long term operating performance.

 

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including the Company’s own credit risk.

 

In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

 

Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

 

Level 2 – inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

 

The carrying amounts of financial assets and liabilities in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accrued expenses and due to related party approximate their fair value due to the short-term duration of those instruments. Notes payable are recorded at agreed values.

 

Stock-Based Compensation

 

The Company accounts for share-based compensation awards to nonemployees in accordance with FASB ASC 718 and FASB ASC 505-50. Under FASB ASC 718 and FASB ASC 505-50, stock compensation granted to non-employees has been determined as the fair value of the consideration received or the fair value of equity instrument issued, whichever is more reliably measured and is recognized as an expense as the goods or services are received.

 

Recent Adopted Accounting Pronouncements

 

In June 2018, the FASB issued ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019. Early adoption is permitted. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

 

 
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In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“Topic 842”) (as subsequently amended by ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01) which requires a lessee to recognize assets and liabilities on the balance sheet for those leases classified as operating leases under previous guidance. Based on a preliminary assessment, the Company expect that its operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use (“ROU”) assets upon adoption, resulting in a significant increase in the assets and liabilities on its consolidated balance sheets. There was no change in its leasing activities as a result of adoption. Upon adoption, as of January 1, 2019, the Company recognized operating lease liabilities of $14,079 based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases, as well as corresponding ROU assets of $13,454, the $625 difference attributable to the offset of the deferred rent existing as of January 1, 2019. See Note 8 for further details.

 

Recently Issued Accounting Pronouncement Not Yet Adopted

 

In June 2016, the FASB issued ASU No. 2016-13, (Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting guidance and requires the use of the new forward-looking “expected loss” model, rather than the “incurred loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable and supportable forecasts. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and other receivables, held-to-maturity debt securities, loans and other instruments. ASU 2016-13 is effective for public entities for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. The Company is evaluating the impact of the adoption of ASU 2016-13 on its financial position and results of operations.

 

NOTE 4 – INVENTORIES

 

The components of the Company’s inventories were packaging materials, raw materials and finished goods. Inventory consisted of the following as of June 30, 2019 and December 31, 2018:

 

 

June 30,

2019

 

December 31,

2018

 

Finished goods

 

$

33,302

 

$

33,302

 

Inventory reserve

 

(16,651

)

 

(11,101

)

Total inventory

 

$

16,651

 

$

22,201

 

NOTE 5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets include primarily prepaid consulting fee, deposit for packaging materials and security deposit for rent. As of June 30, 2019, and December 31,2018 prepaid expenses and other current assets was $240,707 and $4,500, respectively.

 

NOTE 6 – DUE TO RELATED PARTY

 

During the six months ended June 30, 2019 and 2018, the Company’s sole officer loaned the Company $40,000 and $30,124, respectively. As of June 30, 2019, and December 31, 2018, the Company was obligated to the officer, for an unsecured, non-interest bearing demand loan with a balance of $270,903 and $230,903, respectively.

 

The Company sells its product to its related party, an entity in which CBKB’s supervisor is a shareholder. During three and six months ended June 30, 2019, the Company consolidated net sales from related party was $33,064 and $33,064, respectively.

 

 
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NOTE 7 – BUSINES CONCENTRATION AND RISKS

 

Major customer

 

The Company has one major customer that account for 100% and 0% of the accounts receivable as of June 30, 2019 and 2018, respectively, and one customer that account for 100% and 0% of total net sales for the quarter ended June 30, 2019 and 2018, respectively.

 

Major vendor

 

The Company has one major vendor that account for 100% and 0% of purchases for the quarter ended June 30, 2019 and 2018, respectively.

 

NOTE 8 – 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 the amended convertible promissory note, 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.

 

The Company recognized interest expense related to the convertible note of $16,000 and $10,829, respectively, for the three months ended June 30, 2019 and 2018. The Company recognized interest expense related to the convertible note of $32,000 and $21,685, respectively, for the six months ended June 30, 2019 and 2018. The unamortized debt discount at June 30, 2019 and December 31, 2018 was $6,667 and $26,667, respectively. As of June 30, 2019, and December 31, 2018, net balance of the convertible note amounted to $193,333 and $173,333, respectively.

 

NOTE 9 – LEASE

 

The Company has an operating lease for its office space from a third party. 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 contact 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 Company’s leases do 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 remaining term as of June 30, 2019 is 14 months. The Company currently has no finance leases.

 

During the six months ended June 30, 2019, cash paid for amounts included in the measurement of lease liabilities- operating cash flows from operating lease was $4,500.

 

 
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The components of lease expense consist of the following:

 

 

 

 

Classification

 

Three Months

Ended

June 30,

2019

 

 

Six Months

Ended

June 30,

2019

 

Operating lease cost

 

S, G&A expense

 

$2,156

 

 

$4,313

 

 

 

 

 

 

 

 

 

 

 

 

Net lease cost

 

 

 

$2,156

 

 

$4,313

 

 

Balance sheet information related to leases consists of the following:

 

 

 

Classification

 

June 30,

2019

 

Assets

 

 

 

 

 

Operating lease ROU assets

 

Right-of-use assets

 

$9,597

 

 

 

 

 

 

 

 

Total leased assets

 

 

 

$9,597

 

Liabilities

 

 

 

 

 

 

Current portion

 

 

 

 

 

 

Operating lease liabilities

 

Current maturities of operating lease liabilities

 

$8,548

 

 

 

 

 

 

 

 

Non-current portion

 

 

 

 

 

 

Operating lease liabilities

 

Long-term portion of operating lease liabilities

 

 

1,486

 

 

 

 

 

 

 

 

Total lease liabilities

 

 

 

$10,034

 

 

 

 

 

 

 

 

Weighted average remaining lease term

 

 

 

 

 

 

Operating leases

 

 

 

 

1.17

 

 

 

 

 

 

 

 

Weighted average discount rate

 

 

 

 

 

 

Operating leases

 

 

 

 

7.33%

 

Cash flow information related to leases consists of the following:

 

 

 

Six Months

Ended

June 30,

2019

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

Operating cash flows from operating leases

 

$4,046

 

Right-of-use assets obtained in exchange for lease obligations:

 

 

 

 

Operating leases

 

 

3,858

 

 

 
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As previously discussed, the Company adopted Topic 842 by applying the guidance at adoption date, January 1,2019. As required, the following disclosure is provided for periods prior to adoption, which continue to be presented in accordance with ASC 840. Future minimum lease payment under non-cancellable lease as of June 30, 2019 are as follows:

 

Ending December 31,

 

Operating

Leases

 

2019

 

$4,500

 

2020

 

 

6,000

 

Total lease payments

 

 

10,500

 

Less: Interest

 

 

(466)

Present value of lease liabilities

 

$10,034

 

 

NOTE 10 – STOCKHOLDERS’ DEFICIT

 

Common Stock

 

On January 4, 2019, the Company issued 110,000 shares of common stock with a fair value of $462,000 for consulting service. During the six months ended, the Company incurred non-cash stock compensation expense for this consulting fee of $231,000.

 

NOTE 11 – INCOME TAXES

 

The Company accounts for income taxes under ASC 740, “Income Taxes”. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. It also requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

 

The Company is subject to taxation in the United States and certain state jurisdictions. The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 21% to the net loss before provision for income taxes. HKFW in Hong Kong are governed by the Inland Revenue Ordinance Tax Law of Hong Kong, and are generally subject to a profits tax at the rate of 16.5% on the estimated assessable profits. CBNB in the PRC is governed by the Income Tax Law of the PRC concerning the private enterprises, which are generally subject to tax at 25% on income reported in the statutory financial statements after appropriated adjustments.

 

Provision (benefit) for income tax incurred for the three months ended June 30, 2019 and 2018 totaled $800 and $800, respectively. Provision for income tax incurred for the six months ended June 30, 2019 and 2018 totaled $800 and $800, respectively.

 

Net deferred tax assets consist of the following components as of:

 

 

 

June 30,

 

 

 

2019

 

 

2018

 

Deferred tax asset:

 

 

 

 

 

 

Net operating loss carry forwards

 

$150,048

 

 

$89,766

 

Valuation allowance

 

 

(150,048)

 

 

(89,766)

Net deferred tax asset

 

$-

 

 

$-

 

 

Due to the change in ownership provisions of the Income Tax laws of United States of America, net operating loss carry forwards of approximately $522,000, which expires in 2032, for federal income tax reporting purposes are subject to annual limitations. When a change in ownership occurs, net operating loss carry forwards may be limited as to use in future years. Tax filings for the Company for the years 2014 and 2015 are available for examination by stat tax jurisdictions and federal tax purposes.

 

NOTE 12– SUBSEQUENT EVENT

 

The Company has evaluated all subsequent events through the date the unaudited consolidated financial statements were issued and determine that there were no subsequent events or transactions that require recognition or disclosures in the unaudited consolidated financial statements.

 

 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

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, 2019. 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 of its leases.

 

The Company believe the most significant effects of the adoption of this standard relate to (1) the recognition of new ROU assets and lease liabilities on its condensed consolidated balance sheet for its office operating leases and (2) providing new disclosures about its leasing activities. There was no change in its leasing activities as a result of adoption.

 

Upon adoption, as of January 1, 2019, the Company recognized operating lease liabilities of $14,079 based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases, as well as corresponding ROU assets of $13,454, the $625 difference attributable to elimination of the accrued and prepaid rent existing as of January 1, 2019.

 

The preparation of unaudited consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the unaudited consolidated financial statements, and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates.

 

 
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Results of Operations

 

For the three months ended June 30, 2019 and 2018

 

 

 

Three Months Ended

June 30,

 

 

 

 

 

 

 

 

 

2019

 

 

2018

 

 

Change

 

 

Percent

 

Net Sales

 

$33,064

 

 

$-

 

 

$33,064

 

 

 

-%

 

Cost of Sales

 

 

18,294

 

 

 

-

 

 

 

18,294

 

 

 

-%

 

Gross Profit

 

 

14,770

 

 

 

-

 

 

 

14,770

 

 

 

-%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

9,201

 

 

 

9,548

 

 

 

(347)

 

 

-4%

 

Professional fees

 

 

152,548

 

 

 

23,070

 

 

 

129,478

 

 

 

561%

Total operating expenses

 

 

161,749

 

 

 

32,618

 

 

 

129,131

 

 

 

396%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(146,979)

 

 

(32,618)

 

 

(114,361)

 

 

351%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

10

 

 

 

-

 

 

 

10

 

 

 

-%

 

Interest expense

 

 

(16,000)

 

 

(10,829)

 

 

(5,171)

 

 

48%

Loss on inventory write-down

 

 

(2,775)

 

 

-

 

 

 

(2,775)

 

 

-%

 

Total other income (expenses)

 

 

(18,765)

 

 

(10,829)

 

 

(7,936)

 

 

73%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(165,744)

 

 

(43,447)

 

 

(122,297)

 

 

281%

Income tax expense

 

 

800

 

 

 

800

 

 

 

-

 

 

 

-%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(166,544)

 

$(44,247)

 

$(122,297)

 

 

276%

 

Net sales

 

The Company consolidated net sales for the three months ended June 30, 2019 and 2018 was $33,064 and $nil, respectively. The cost of sales for the three months ended June 30, 2019 and 2018 was $18,294 and $nil, respectively, resulting in a gross profit of $14,770 and $nil for the three months ended June 30, 2019 and 2018, respectively. Revenue increased due to the Company entered sales contract with one customer in 2019. The sales concentrate on one customer which consists of 100% of the revenue.

 

Total operating expenses

 

During the three months ended June 30, 2019, total operating expenses were $161,749, which mainly consisted of professional fees of $152,548, rent expenses of $2,157 and China expense of $6,478. During the three months ended June 30, 2018, total operating expenses were $32,618, which consisted of professional fees of $23,070, China salary and China office expense of $5,456 and rent expenses of $3,000. Total operating expenses increased $129,131, or 396%, primarily as a result of the increase in professional fees for the three months ended June 30, 2019 compared with the three months ended June 30, 2018.

 

Total other income (expenses)

 

During the three months ended June 30, 2019, the Company total other expenses were $18,765, which consisted of interest expense of $16,000, interest income of $10, and loss on inventory write-down of $2,775. During the three months ended June 30, 2018, the Company had interest expense of $10,829.

 

Net loss

 

During the three months ended June 30, 2019, the Company had a net loss of $166,544, as compared with a net loss of $44,247 for the three months ended June 30, 2018. The increase in net loss was predominantly due to the reasons stated above.

 

 
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For the six months ended June 30, 2019 and 2018

 

 

 

Six Months Ended

June 30,

 

 

 

 

 

 

 

 

 

2019

 

 

2018

 

 

Change

 

 

Percent

 

Net Sales

 

$33,064

 

 

$-

 

 

$33,064

 

 

 

-%

 

Cost of Sales

 

 

18,294

 

 

 

-

 

 

 

18,294

 

 

 

-%

 

Gross Profit

 

 

14,770

 

 

 

-

 

 

 

14,770

 

 

 

-%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

19,586

 

 

 

14,548

 

 

 

5,038

 

 

 

35%

Professional fees

 

 

280,996

 

 

 

46,570

 

 

 

234,426

 

 

 

503%

Total operating expenses

 

 

300,582

 

 

 

61,118

 

 

 

239,464

 

 

 

392%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(285,812)

 

 

(61,118)

 

 

(224,694)

 

 

368%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

28

 

 

 

-

 

 

 

28

 

 

 

-%

 

Interest expense

 

 

(32,000)

 

 

(21,685)

 

 

(10,315)

 

 

48%

Loss on inventory write-down

 

 

(5,550)

 

 

-

 

 

 

(5,550)

 

 

-%

 

Total other income (expenses)

 

 

(37,522)

 

 

(21,685)

 

 

(15,837)

 

 

73%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(323,334)

 

 

(82,803)

 

 

(240,531)

 

 

290%

Income tax expense

 

 

800

 

 

 

800

 

 

 

-

 

 

 

-%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(324,134)

 

$(83,603)

 

$(240,531)

 

 

288%

 

Net sales

 

The Company consolidated net sales for the six months ended June 30, 2019 and 2018 was $33,064 and $nil, respectively. The cost of sales for the six months ended June 30, 2019 and 2018 was $18,294 and $nil, respectively, resulting in a gross profit of $14,770 and $nil for the six months ended June 30, 2019 and 2018, respectively. Revenue increased due to the Company entered sales contract with one customer in 2019. The sales concentrate on one customer which consists of 100% of the revenue.

 

Total operating expenses

 

During the six months ended June 30, 2019, total operating expenses were $300,582, which mainly consisted of professional fees of $280,996, rent expenses of $4,313 and China expense of $14,278. During the six months ended June 30, 2018, total operating expenses were $61,118, which consisted of professional fees of $46,570, China salary and China office expense of $5,777 and rent expenses of $6,000. Total operating expenses increased $239,464, or 392%, primarily as a result of the increase in professional fees for the six months ended June 30, 2019 compared with the six months ended June 30, 2018.

 

Total other income (expenses)

 

During the six months ended June 30, 2019, the Company total other expenses were $37,522, which consisted of interest expense of $32,000, interest income of $28, and loss on inventory write-down of $5,550. During the six months ended June 30, 2018, the Company had interest expense of $21,685.

 

Net loss

 

During the six months ended June 30, 2019, the Company had a net loss of $324,134, as compared with a net loss of $83,603 for the six months ended June 30, 2018. The increase in net loss was predominantly due to the reasons stated above.

 

 
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Liquidity and Capital Resources

 

As of June 30, 2019, the Company had cash and cash equivalents and total assets of $31,630 and $315,352, respectively. As of said date, the Company has total liabilities of $553,792, of which $193,333 is due to convertible note payable and $270,903 is due to our sole officer and director as an unsecured, non-interest bearing demand loan. As of June 30, 2019, and December 31, 2018, the Company had working capital amount of $(248,551) and $(377,717), 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, 2019, net cash flows used in operating activities was $65,976 resulting from a net loss of $324,134, an increase in accounts receivable of $14,945, an increase in prepaid expenses and other current assets of $5,270, an increase in accrued liabilities of $22,011, loss on inventory write-down of $5,550, shares issued for compensation of $231,000, amortization of right-of use assets of $188 and amortization of debt discount of $20,000. For the six months ended June 30, 2018, net cash flows used in operating activities was $7,365 resulting from a net loss of $83,603, a decrease in accounts receivable of $52,099, a decrease in prepaid expenses and other current assets of $7,534, an increase in inventory of $10,591, an increase in accrued liabilities of $18,134, and amortization of debt discount of $9,714.

 

Cash Flows from Investing Activities

 

For the six months ended June 30, 2019 and 2018, the Company did not have any cash flow from investing activities.

 

Cash Flows from Financing Activities

 

For the six months ended June 30, 2019 and 2018, advances from the Company’s sole officer and director provided $40,000 and $30,124, respectively.

 

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 $324,134 for the six months ended June 30, 2019 and a net loss of $83,603 for the six months ended June 30, 2018. In addition, the Company had an accumulated deficit of $802,785 and generated negative cash flow from operating activities as of and for the six months ended June 30, 2019. 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.

 

 
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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.

 

The Company recognized interest expense related to the convertible note of $16,000 and $10,829, respectively, for the three months ended June 30, 2019 and 2018. The Company recognized interest expense related to the convertible note of $32,000 and $21,685, respectively, for the six months ended June 30, 2019 and 2018. The unamortized debt discount at June 30, 2019 and December 31, 2018 was $6,667 and $26,667, respectively. As of June 30, 2019, and December 31, 2018, net balance of the convertible note amounted to $193,333 and $173,333, respectively.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosure About Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this item.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

 

Based on that evaluation, as of June 30, 2019, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes that have affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the period covered by this report. 

 

 
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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

 

 Item 1A. Risk Factors.

 

As a smaller reporti0ng company, we are not required to provide the information required by this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

Unregistered Sales of Equity Securities

 

None.

 

Purchases of equity securities by the issuer and affiliated purchasers

 

None.

 

Use of Proceeds

 

None

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

 
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Table of Contents

 

Item 6. Exhibits

 

31.1

 

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act 

 

 

 

32.1

 

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

 

101.INS 

 

XBRL Instance Document

 

 

101.SCH 

 

XBRL Taxonomy Extension Schema Document

 

 

101.CAL 

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

101.DEF 

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

101.PRE 

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 
22
 
Table of Contents

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 MakingORG, Inc.
    
Dated: August 13, 2019By:/s/ Juanzi Cui

 

Name: Juanzi Cui

 
 

President, Chief Executive Officer

and Chief Financial Officer

(principal executive officer and principal

financial and accounting officer)

 

 

 
23