CQCQ MakingORG Inc (CE)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q 

Mark One

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

For the quarterly period ended September 30, 2022

☐    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

385 S. Lemon Avenue #E 301

Walnut, CA 91789

(213) 805-5799

(Address and telephone number of principal executive offices)

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

None

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

Common Stock, $0.001 par value

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 ☒     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 ☒     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.

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 ☒

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 ☒

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:

PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements.

MAKINGORG, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to unaudited condensed consolidated financial statements.

MAKINGORG, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

MAKINGORG, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

MAKINGORG, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

MakingORG, Inc. and Subsidiaries

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 potential business opportunities.

The following discussion should be read in conjunction with the unaudited interim financial statements contained in this Report and in conjunction with the Company’s Form 10-K filed on April 15, 2022. Results for interim periods may not be indicative of results for the full year.

Critical Accounting Policies and Estimates

There have been no material impacts to our accounting estimates as of September 30, 2022 and December 31, 2021, or the results for the three and nine months ended September 30, 2023 and 2022, from the COVID-19 pandemic. The federal COVID-19 Public Health Emergency declaration in the U.S. ended in May 2023, and COVID-19 restrictions have been lifted in many locations globally. We do not expect future material economic consequences from the COVID-19 pandemic.

Recent Accounting Pronouncements reflected in the Condensed Consolidated and Combined Financial Statements

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50). The ASU requires companies to disclose information about supplier finance programs, including key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts during each annual period, and a description of where the amounts are presented. The new standard does not affect the recognition, measurement, or financial statement presentation of supplier finance obligations. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods, except for rollforward information, which is effective for fiscal years beginning after December 15, 2023. The Company adopted this guidance on January 1, 2023. See Note 17, “Supplemental Financial Information” for further information.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires companies to apply the definition of a performance obligation under ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities relating to contracts with customers acquired in a business combination. Prior to the adoption of this ASU, an acquirer generally recognized assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. The ASU results in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC 606. The ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted this guidance on January 1, 2023 using a prospective method, and the adoption did not have a material impact on the condensed consolidated financial statements.

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, 2022 and 2021

Net sales

The Company’s consolidated net sales for the three months ended September 30, 2022 and 2021 were $39,507 and $362,444, respectively. Cost of sales for the three months ended September 30, 2022 and 2021 were $31,862 and $238,890, respectively, resulting in gross profits of $7,645 and $123,554 for the three months ended September 30, 2022 and 2021, respectively. The Revenue decrease of $322,937 or 89% was due to the decrease in related party sales in PRC when COVID-19 was more serious in the three months ended September 30, 2022 compared with the same period in 2021. The sales concentrates on one customer which consists of 100% of the revenue.

Total operating expenses

For the three months ended September 30, 2022, total operating expense was $11,883, which consisted of professional fees of $300, China salary of $5,886, office other expenses of $5,697. For the three months ended September 30, 2021, total operating expenses were $49,778, which consisted of professional fees of $20,556, China salaries and office expenses of $10,954, rent of $17,668. Total operating expenses decreased $37,895, or 76%, primarily as a result of the decrease in professional fees $20,256 (from $20,556 in 2021 to $300 in 2022, and China office and other expenses decrease of $17,639 (from $29,222 in 2021 to $11,583 in 2022).

Total other income (expenses)

For the three months ended September 30, 2022, the Company had total other expenses of $5,864, which consists primarily of interest expense of $6,000, offset by other income of $121 and interest expense of $15. For the three months ended September 30, 2021, total other expenses were $3,870, which consisted of interest expense of $6,000 offset by other income of $2,130. Offset by the decrease of other income of $2009, Other expenses for the nine months ended September 30, 2022 stayed the same level as the other expenses for the nine months ended September 30, 2021.

Net Income (loss)

For the three months ended September 30, 2022, the Company had a net loss of $10,102, compared with a net income of $69,218 for the three months ended September 30, 2021, a decrease of $79,320 or 115%. The decrease in net loss was due to the reasons stated above.

For the nine months ended September 30, 2022 and 2021

Net sales

The Company’s consolidated sales decreased $394,781, or 91% to $39,507 for the nine months ended September 30, 2022 from $434,288 for the nine months ended September 30, 2021. Cost of sales decreased $254,219 or 89% to $31,862 for the nine months ended September 30, 2022 from 286,081 for the nine months ended September 30, 2021. It resulted in a gross profit increased $140,562 or 95% to $$7,645 for the nine months ended September 31, 2022 from 148,207 for the nine months ended September 31, 2021. Gross profit decreased due to decrease 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.

Total operating expenses

For the nine months ended September 30, 2022, total operating expenses were $82,853, which mainly consists of professional fees of $31,845, China salary of $17,272, office rent of $25,013 and other expenses of $8,723. 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. Total operating expenses decreased $66,273, or 44%, which was a result of the decrease of $25,930 or 34% in rent and other expenses,  and the increase in professional fees paid of $40,343 or 56% for the nine months ended September 30, 2022 compared with the nine months ended September 30, 2021.

Total other income (expenses)

For the nine months ended September 30, 2022, the Company had other expenses of $17,762, which consists of  interest expenses of $18,000, other income of $121 and interest income of $117. 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. Other income/expenses were at a similar level for the nine months ended September 30, 2022, compared with the other income/expenses for the September 30, 2021. The decrease of other income of $2,009 and offset by the increase in interest of $116 for the nine months ended September 30, 2022 compared to the same nine months ended September 30, 2021.

Net Income

For the nine months ended September 30, 2022, the Company had a net loss of $92,970, an increase of net loss of $79,320 or 409% compared to the net loss of $18,276 for the nine months ended September 30, 2021. The decrease in net loss is predominantly due to the reasons stated above.

Liquidity and Capital Resources

As of September 30, 2022, the company had cash and cash equivalents and total assets of $28,583 and $129,636, respectively. As of said date, the Company had total liabilities of $772,370, of which $200,000 was due to convertible note payable, $387,918 was due to the sole officer and director as an unsecured, non-interest-bearing demand loan, and $146,000 was interest payable. 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 a $393,618 was due to the sole officer and director as an unsecured, non-interest-bearing demand loan. As of September 30, 2022, and December 31, 2021, the Company had negative working capital amount of $458,297 and $367,790, respectively.

Other than an oral agreement with Ms. Cui to fund the expenses of the Company, we currently have no agreements, arrangements or understandings with financial institution or any person to obtain funds through bank loans, lines of credit or any other sources. Since the Company has no such arrangements or plans currently in effect, its inability to raise funds for the above purposes will have a severe negative impact on its ability to remain a viable company.

Cash Flows from Operating Activities

For the nine months ended September 30, 2022, net cash flows used in operating activities was $76,461, resulting from a net loss of $92,970, an increase of loss caused by changes in accounts receivable of $33,850, amortization of Right-of-use of assets of $1,058 and accrued liability of $586, offset by the increase of prepaid expenses of $33,907,  interest payable of $18,000 and lease liabilities of $96. 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. The net cash flow used in operating activities for the nine months ended September 30, 2022 was $76,461, a $75,034 increase from $1,427 for the nine months ended September 30, 2021. 

Cash Flows from Investing Activities

For the nine months ended September 30, 2022 and 2021, there were no cash flow used in investing activities.

Cash Flows from Financing Activities

For the nine months ended September 30, 2022, cash flow from investing activities was $1,500, a $51,832 decrease from $53,332 for the nine months ended September 30, 2021. It is solely resulted from the loan from the Company’s sole officer and director.

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 $92,970 for the nine months ended September 30, 2022, a $74,694 increase of net loss from $18,276 for the nine months ended September 30, 2021, In addition, the Company had an accumulated deficit of $1,255,277 as of September 30, 2022, and generated negative cash flow from operating activities for the nine months ended September 30, 2022. 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.

On September 1, 2022, 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, 2024 with no additional consideration.

The Company recognized interest expense related to the convertible note of $18,000 and $18,000, respectively, for the nine months ended September 30, 2022 and 2021. As of September 30, 2022 and December 31, 2021, net balance of the convertible note amounted to $200,000.

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 September 30, 2022, the 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. 

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 reporting 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.

Item 6. Exhibits

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.