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Makingorg, Inc. – ‘10-Q’ for 9/30/22

On:  Tuesday, 10/10/23, at 2:26pm ET   ·   For:  9/30/22   ·   Accession #:  1640334-23-1787   ·   File #:  0-55260

Previous ‘10-Q’:  ‘10-Q’ on 8/15/22 for 6/30/22   ·   Latest ‘10-Q’:  This Filing

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

10/10/23  Makingorg, Inc.                   10-Q        9/30/22   46:2.3M                                   Pubco Reporting … Inc/FA

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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form  i 10-Q 

Mark One

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

For the quarterly period ended  i September 30, 2022

 i ☐    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.  i 000-55260

 i 385 S. Lemon Avenue # i E 301

 i Walnut,  i CA  i 91789

( i 213)  i 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:

 i 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.  i 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).  i 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  i ☐    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

The FASB issued ASU 2020-06 (“Update”) to simplify the accounting for convertible instruments by eliminating large sections of the existing guidance in this area. It also eliminates several triggers for derivative accounting, including a requirement to settle certain contracts by delivering registered shares. These changes are intended to make GAAP easier to apply and, therefore, reduce the frequency of errors in this part of the literature. Early adoption is permitted for fiscal years beginning after December 15, 2020. For SEC filers, excluding smaller reporting companies, this Update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, this Update is effective for fiscal years beginning after December 15, 2023, including interim periods therein. The Company is evaluating the impact of this guidance on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses”. The standard, including subsequently issued amendments (ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11), requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact of this guidance on its consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.

On March 1, 2022,  i the Company entered into a new lease agreement with Entity A for the same office location for the period from March 1, 2022 to February 28, 2023. Pursuant to the lease agreement, monthly rent is lowered to RMB20,000 (approximately $ i 3,200), payable by the 5th of each month with the first two-month rent free. The lease is for a  i one-year term and the Company has the right of first refusal to renew the lease. The Company tends to keep leasing the property after the lease term ends. The Company recognized right-of-use assets and lease liabilities on the balance sheet since the lease term started. Refer to Note 8 – Lease for details.

On September 1, 2020, the convertible note agreement was extended to September 1, 2022 with no additional consideration and no discount on the note.

On September 1, 2022, the Company amended and restated the 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 and no discount on the note.

 The Company recognized interest expense related to the convertible note of $ i 18,000 and $ i 18,000 for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022 and December 31, 2021, net balance of the convertible note amounted to $ i 200,000 and $ i 200,000 with $ i 146,000 and $ i 128,000 interest payable, respectively.

Balance sheet information related to leases consists of the following:

Cash flow information related to leases consists of the following: 

Future minimum lease payment under non-cancellable lease as of September 30, 2022 are as follows: 

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  i 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  i 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  i 25% on income reported in the statutory financial statements after appropriate adjustments.  i PRC also gives tax discount to small enterprises whose annual taxable income are between one million to three million.

The Company’s income tax expense is mainly contributed by its subsidiary in PRC.

In addition, the 2017 Tax Act also creates a new requirement that certain income (i.e., Global Intangible Low-Taxed Income (“GILTI”)) earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFCs’ U.S. shareholder income. GILTI is the excess of the shareholder’s net CFC tested income over the net deemed tangible income return, which is currently defined as the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income. The Company has elected to recognize the tax on GILTI as a period expense in the period the tax is incurred. For the nine months ended September 30, 2022 and 2021, no GILTI tax obligation existed, and the GILTI tax expense was $ i 0.

Income tax provision for the nine months ended September 30, 2022 and 2021 were $ i 0 and $ i 1,488, respectively.

Net deferred tax assets consist of the following components:

Due to the change in ownership provisions of the Income Tax laws of United States of America, net operating loss carry forwards of approximately $ i 556,000, will carry indefinitely 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 to use in future years. Tax filings for the Company for the years after 2018 are available for examination by state tax jurisdictions and federal tax purposes.

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