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 June 30, 2023

☐     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

19th Floor, No. 9 Shangqingsi Road,Yuzhong District,

Chongqing, China 

+86-023-6330810

(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-Q or any amendment to this Form 10-Q. ☐

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.

See accompanying notes to unaudited consolidated financial statements.

See accompanying notes to unaudited consolidated financial statements.

See accompanying notes to unaudited consolidated financial statements.

See accompanying notes to unaudited consolidated financial statements.

MAKINGORG, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 intends to sell Acer truncatum bunge related health product in the United States and PRC, In the future, the Company may pursue business opportunities, acquisitions, business combinations, joint ventures, or other agreements with businesses in our industry or elsewhere. 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 Quarterly 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/A filed on October 23, 2023. 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 June 30, 2023 and December 31, 2022, or the results for the six months ended June 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 Consolidated and Combined Financial Statements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amended guidance requires incremental reportable segment disclosures, primarily about significant segment expenses. The amendments also require entities with a single reportable segment to provide all disclosures required by these amendments, and all existing segment disclosures. The amendments will be applied retrospectively to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the impact this amended guidance may have on the footnotes to its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amended guidance enhances income tax disclosures primarily related to the effective tax rate reconciliation and income taxes paid information. This guidance requires disclosure of specific categories in the effective tax rate reconciliation and further information on reconciling items meeting a quantitative threshold. In addition, the amended guidance requires disaggregating income taxes paid (net of refunds received) by federal, state, and foreign taxes. It also requires disaggregating individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amended guidance is effective for fiscal years beginning after December 15, 2024. The guidance can be applied either prospectively or retrospectively. The Company is currently in the process of evaluating the impact this amended guidance may have on the footnotes to our 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 with most companies doing business in China, our operations were affected by the ongoing COVID-19 pandemic. The ultimate disruption that may result from the pandemic is uncertain, but it had material adverse impact on our financial positions, operations and cash flows. 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.

Results of Operations

For the three months ended June 30, 2023 and 2022

Net sales, cost of sales and gross profit

Unaudited consolidated net sales for the three months ended June 30, 2023 and 2022 was $12,058 and $0, respectively. The cost of sales for the three months ended June 30, 2023 and 2022 was $6,138 and $0, respectively, resulting in a gross profit of $5,920 and $0 for the three months ended June 30, 2023 and 2022, respectively. The net sales increase was due to the increase of related party sales in PRC after COVID19. 

Total operating expenses

For the three months ended June 30, 2023, total operating expenses were $28,630, which consisted of professional fee of $12,739, China salary, office expenses and rent expense of $15,891. For the three months ended June 30, 2022, total operating expenses were $29,417, which consisted of professional fee of $13,952. Rent expenses in China of $5,504, office and other expenses in China of $10,387. Total operating expenses decreased $787, or 3%, primarily as a result of the decrease in professional fees of $1,213 or 9% and other G&A expenses of $426 or 3% in China for the three months ended June 30, 2023 compared with the three months ended June 30, 2022. Main reason of the decrease was the business recovery in China need more time in China.

Total other income (expenses)

For the three months ended June 30, 2023,  total other expenses were $6,003, which consisted of interest expense of $6,004, and interest income of $1. for the three months ended June 30, 2022, the Company had total other expenses of $5,898, which consists of interest income of $102, interest expense of $6,000.

Net loss

For the three months ended June 30, 2023, the Company had a net loss of $28,713, a $6,602 or 19% decrease of loss as compared with the net loss of $35,315 for the three months ended June 30, 2022. The decrease in net loss was predominantly due to the reasons stated above.

For the six months ended June 30, 2023 and 2022

Net sales, cost of sales and gross profit

The Company’s consolidated net sales for the six months ended June 30, 2023 and 2022 were $12,058 and $0, respectively. The cost of sales for the six months ended June 30, 2023 and 2022 were $6,138 and $0, respectively, resulting in a gross profit of $5,920 and $0 for the six months ended June 30, 2023 and 2022, respectively. The net sales increase was due to the increase of related party sales in PRC after the COVID19 in the second quarter of 2023. 

Total operating expenses

For the six months ended June 30, 2023, total operating expenses were $43,973, which consisted of professional fees of $21,849, China salary of $11,297, China office and other expenses of $6,521 and rent expenses of $2,324, and expenses of $982 in U.S. For the six months ended June 30, 2022, total operating expenses were $70,970, which consisted of professional fees of $31,545, China salary and China office expense of $21,713 and rent expense of $17,712. Total operating expenses for the six months ended June 30, 2023 decreased $26,997 or 38% compared with the six months ended June 30 2022. The reason is due to the less operating activities caused by COVID19 break out in 2023.

Total other income (expenses)

For the six months ended June 30, 2023, the Company had other expenses of $11,998, which consists of interest income of $1, other income of $1 and interest expenses of $12,000. For the six months ended June 30, 2022, the Company had other expenses of $11,898, which consists of interest income of $102, interest expenses of 12,000.

Net loss

For the six months ended June 30, 2023, the Company had a net loss of $50,051, a decrease of net loss of $32,817 or 40% compared with the net loss of $82,868 for the six months ended June 30, 2022. The decrease in net loss was predominantly due to the reasons stated above.

Liquidity and Capital Resources

As of June 30, 2023, the Company had cash and cash equivalents and total assets of $15,587 and $109,011, respectively. As of the said date, the Company has total liabilities of $824,432, of which $200,000 is due to convertible note payable and $387,918 was due to our sole officer and director as an unsecured, non-interest-bearing demand loan. As of June 30, 2023, and December 31, 2022, the Company had negative working capital amount of $493,731 and $458,621, 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, 2023, net cash flows used in operating activities was $8,067 resulting from a net loss of $50,051, a decrease caused by amortization of right-of-use assets of $28,265, increased caused by accounts receivable of $32,266, interest payable of $12,000 and accrued liabilities of $3,617, offset by the increase caused by lease liabilities of $26,087, prepaid expenses of $3,693 and inventory of $28. For the six months ended June 30, 2022, net cash flows used in operating activities was $64,476 resulting from a net loss of $82,868, an increase in prepaid expenses and other current assets of $810, an increase in accrued liabilities of $7,202, increase of interest payable of $12,000.

Cash Flows from Investing Activities

For the six months ended June 30, 2023 and 2022, there was no cash flow from investing activities.

Cash Flows from Financing Activities

For the six months ended June 30, 2023 and 2022, advances from the Company’s sole officer and director provided were $0 and $1,500, respectively.

Going Concern Consideration

As of June 30, 2023, the Company had an accumulated deficit of $1,328,713 and its current liabilities exceeded its current assets, resulting in a negative working capital of $493,731. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital. The Company’s unaudited 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.

These unaudited 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.

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, 2020, 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, 2022 with no additional consideration. The Company recognized a discount on the note of $0 at the amended agreement date.

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 $12,000 and $12,000, respectively, for the six months ended June 30, 2023 and 2022. As of June 30, 2023, and December 31, 2022, net balances of the convertible note were $200,000 and $200,000, respectively.

Operating Lease

The Company has operating lease for its office in China. Rental expenses for the six months ended June 30, 2023 and 2022 were $8,253 and $2,485, respectively. As of June 30, 2023, the remaining lease term was 20 months. Total future minimum annual lease payments under operating lease were as follows:

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, 2023, 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. 

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.

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.