EDGAR 10-K Filing

Company CIK: 1569083
Filing Year: 2021
Filename: 1569083_10-K_2021_0001640334-21-000935.json

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ITEM 1. BUSINESS
Item 1. Business.
As used in this Annual Report on Form 10-K (this “Report”), references to the “Company,” the “Company,” “we,” “our” or “us” refer to MakingORG, Inc., unless the context otherwise indicates.
Forward-Looking Statements
Certain statements contained in this report, including statements regarding our business, financial condition, our intent, belief or current expectations, primarily with respect to the future operating performance of the Company and other statements contained herein regarding matters that are not historical facts, are "forward-looking" statements. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential,” or “continue” or the negative of these similar terms. Future filings with the Securities and Exchange Commission, future press releases and future oral or written statements made by us or with our approval, which are not statements of historical fact, may contain forward-looking statements. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.
All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law.
Overview
The Company was incorporated in the State of Nevada on August 10, 2012 to be in the power sports business.
On July 29, 2014, Vladimir Nedrygaylo, the principal shareholder of Drimex Inc. consummated the transactions contemplated by the Stock Purchase Agreement dated as of June 24, 2014 which provided for the sale of 5,000,000 shares of common stock (not adjusted for the forward split described below) of the Company (the “Shares”) to Juanzi Cui. The consideration paid for the Shares, which represented 84.7% of the issued and outstanding share capital of the Company on a fully-diluted basis, was $325,000. The source of the cash consideration for the Shares was personal fund of Mrs. Cui. In connection with the transaction, Mr. Nedrygaylo released the Company from all debts owed to him. Mrs. Cui became the Company’s sole officer and director.
On August 22, 2014, the Company amended and restated Articles of Incorporation, changed the name of the Company from “Drimex, Inc.” to “MakingORG, Inc.” and increased the amount of authorized shares of common stock from 75,000,000 to 150,000,000, with a par value of $0.001 per share.
Effective August 22, 2014, the Company effected a 6 for 1 forward split on its common stock outstanding in the form of a dividend, under which each stockholder of record on that date received 5 additional shares of the Corporation's $0.001 par value common stock for every 1 share owned. All share and per share amounts presented in this Annual Report and the financial statements and notes thereto had been adjusted for the stock split.
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 matured 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 of March 1, 2017 until the principal amount of this convertible note was 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.
On September 1, 2019, 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, 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 on the amended agreement date.
On October 20, 2017, the Company filed documents registering their intention to transact interstate business in the state of California.
Juanzi Cui, who took control of the Company as described above, intended that the Company open a line of organic food stores or stores-in-stores within the Asian communities in the United States.
On November 29, 2016, the Company 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”).
The Company and its subsidiaries purchase Acer truncatum bunge seed oil from China, outsource to third parties to manufacture Acer truncatum bunge related health product, and sell to end users and distributors in the United States and PRC.
CBKB entered into a Strategic Cooperation Framework Agreement with Hangzhou Life Century Hualian Supermarket Chain Co., Ltd. (“HLCH”), dated May 25, 2018, pursuant to which the Company agreed to assist HLCH in identifying brand-specific, high tech characteristics products, such as acer truncatum nervonic acid oil, acer truncatum seed oil capsule, acer truncatum edible oil, acer truncatum oil with nervonic acid formula, acer truncatum coffe, acer truncatum tea, canned acer truncatum, acer truncatum cosmetics, acer truncatum skin care products, hair wash products and acer trunncatrum food. At such time, the Company ceased being a shell company.
Competition
The Company is an insignificant participant among firms which engage in business combinations with development stage enterprises. There are many established management and financial consulting companies and venture capital firms which have significantly greater financial and personnel resources, technical expertise and experience than the Company. In view of the Company's limited financial resources and management availability, the Company will continue to be at a significant competitive disadvantage vis-a-vis the Company's competitors.
Regulation and Taxation
The Investment Company Act of 1940 defines an "investment company" as an issuer which is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading of securities. While the Company does not intend to engage in such activities, the Company could become subject to regulation under the Investment Company Act of 1940 in the event the Company obtains or continues to hold a minority interest in a number of development stage enterprises. The Company could be expected to incur significant registration and compliance costs if required to register under the Investment Company Act of 1940. Accordingly, management will continue to review the Company's activities from time to time with a view toward reducing the likelihood the Company could be classified as an "investment company."
The Company intends to structure a merger or acquisition in such manner as to minimize Federal and state tax consequences to the Company and to any target company.
Employees
The Company currently has two full-time employees. All functions including development, strategy, negotiations and administration are currently being provided by Mrs. Cui, the sole executive officer and director, on a voluntary basis.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
Smaller reporting companies are not required to provide the information required by this Item 1A.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None

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ITEM 2. PROPERTIES
Item 2. Properties
The Company had an operating lease for its office space from a third party in the United States. 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 lease does 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 lease expired on August 31, 2020. Rental expenses for the years ended December 31, 2020 and 2019 were $6,448 and $8,625, respectively.
The Company signed a lease agreement with a related party in China in June 2020, an entity in which CBKB’s supervisor is a shareholder. It calls for a monthly rent of RMB40,000 (approximately $5,800). The lease is for one year and subject to renewal. Lease 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 terms 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 5.25%. The lease does not contain any residual value guarantees or material restrictive covenants. The remaining terms as of December 31, 2020 was 5 months and subject to the priority of signing a new lease agreement within a 60-day written notice before the current lease agreement is due. The Company currently has no finance leases.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
There is no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
On April 8, 2014, the Company listed on the OTCQB under the symbol "DRIM". On August 25, 2014, the trading symbol of the Company became "CQCQ". The Company is now quoted on the OTC Pink Sheets. The high and low sales prices as reported on the OTC as of the end of each quarter commencing on January 1, 2020 through December 31, 2020 was $4.20 and $0.50. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
The last reported sales price of our common stock on the OTCMarkets on April 14, 2021, was $3.25.
Dividend Policy
We have not declared or paid dividends on our common stock since our formation, and we do not anticipate paying dividends in the foreseeable future. Declaration or payment of dividends, if any, in the future, will be at the discretion of our Board of Directors and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the Board of Directors. There are no contractual restrictions on our ability to declare or pay dividends.
Holders
As of April 15, 2021, there were 35,540,000 shares of common stock issued and outstanding, which were held by 312 stockholders of record.
Equity Compensation Plans
We do not have any equity compensation plans.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
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 of 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, both parties agreed to extend the Convertible Note Agreement to September 1, 2019 with no additional consideration.
On September 1, 2019, the convertible note agreement was extended 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 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 convertible note agreement was extended to September 1, 2022 with no additional consideration.
The Company recognized interest expense related to the convertible note of $60,267 and $68,800, respectively, for the years ended December 31, 2020 and 2019, respectively. The unamortized debt discount on December 31, 2020 and 2019 were $0 and $36,267, respectively. As of December 31, 2020, and 2019, net balance of the convertible note amounted to $200,000 and $163,733, respectively.
Purchases of Equity Securities by the Small Business Issuer and Affiliated Purchasers
None.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data.
Smaller reporting companies are not required to provide the information required by this Item 6.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with the Company’s consolidated financial statements, which are included elsewhere in this Form 10-K.
Overview
MakingORG, Inc. (“MakingORG”) was incorporated under the laws of the State of Nevada on August 10, 2012. The trading symbol of the Company 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”).
On November 29, 2016, the Company 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”).
The Company and its subsidiaries purchase Acer truncatum bunge seed oil in China, outsource to third parties to manufacture Acer truncatum bunge related health product, and sell to distributors in PRC.
CBKB entered into a Strategic Cooperation Framework Agreement with Hangzhou Life Century Hualian Supermarket Chain Co., Ltd. (“HLCH”), dated May 25, 2018, pursuant to which the Company agreed to assist HLCH in identifying brand-specific, high tech characteristics products, such as acer truncatum nervonic acid oil, acer truncatum seed oil capsule, acer truncatum edible oil, acer truncatum oil with nervonic acid formula, acer truncatum coffe, acer truncatum tea, canned acer truncatum, acer truncatum cosmetics, acer truncatum skin care products, hair wash products and acer trunncatrum food. This agreement did not continue due to HLCH did not operate well.
In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has spread around the world and infections have been reported globally. China governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. As a result, the Company closed its China operations from the end of January 2020 to the end of March 2020.
In January 2020, the World Health Organization declared an outbreak of the coronavirus (“COVID-19”) to be a Public Health Emergency of International Concern, subsequently declared COVID-19 a global pandemic, and recommended containment and mitigation measures worldwide on March 11, 2020. The Company had experienced some adverse impacts on its business in the PRC Segment, such as limited access to its staff in the PRC in the beginning of the outbreak and restrictions on business travel within the PRC and between USA and PRC. Even though the operations in the PRC segment fully resumed by the end of 2020, the pandemic has created global economic uncertainties and led to negative impact on the financial markets. The extent of the COVID-19 impact to the Company will depend on numerous factors and developments related to COVID-19. Consequently, the ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but is anticipated to have a material adverse impact on our business, financial condition and results of operations.
Plan of Operation
Management intends 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 extent of the impact of COVID-19 on our business and financial results will depend on future developments, including the duration and spread of the outbreak within the markets in which we operate, the related impact on our customers and suppliers and the possibility of an economic recession after the virus has subsided, the widely use of vaccine globally, all of which are highly uncertain and ever-changing. Any of these factors could materially increase our costs, negatively impact our sales and damage our results of operations and liquidity. The severity and duration of any such impacts, including after the virus has subsided, cannot be predicted.
Sources of Opportunities
The Company anticipates that business opportunities for possible acquisition will be referred by various sources, including its officers and directors, professional advisers, securities broker-dealers, venture capitalists, members of the financial community, and others who may present unsolicited proposals.
The Company will seek a potential business opportunity from all known sources but will rely principally on personal contacts of its officer and director and consultants as well as indirect associations between them and other business and professional people. It is not presently anticipated that the Company will engage professional firms specializing in business acquisitions or reorganizations.
Evaluation of Opportunities
The analysis of new business opportunities will be undertaken by or under the supervision of the officer and director of the Company. Management intends to concentrate on identifying prospective business opportunities which may be brought to its attention through present associations with management. In analyzing prospective business opportunities, management will consider such matters as the available technical, financial and managerial resources; working capital and other financial requirements; history of operation, if any; prospects for the future; present and expected competition; the quality and experience of management services which may be available and the depth of that management; the potential for further research, development or exploration; specific risk factors not now foreseeable but which then may be anticipated to impact the proposed activities of the Company; the potential for growth or expansion; the potential for profit; the perceived public recognition or acceptance of products, services or trades; name identification; and other relevant factors. The officer and director of the Company will meet personally with management and key personnel of the firm sponsoring the business opportunity as part of her investigation. To the extent possible, the Company intends to utilize written reports and personal investigation to evaluate the above factors. The Company will not acquire or merge with any company for which audited consolidated financial statements cannot be obtained.
It may be anticipated that any opportunity in which the Company participates will present certain risks. Many of these risks cannot be adequately identified prior to selection of the specific opportunity, and the Company’s stockholders must, therefore, depend on the ability of management to identify and evaluate such risk. In the case of some of the opportunities available to the Company, it may be anticipated that the promoters thereof have been unable to develop a going concern or that such business is in its development stage in that it has not generated significant revenues from its principal business activities prior to the Company’s anticipation. There is a risk, even after the Company’s participation in the activity and the related expenditure of the Company’s funds that the combined enterprises will still be unable to become a going concern or advance beyond the development stage. Many of the opportunities may involve new and untested products, processes, or market strategies which may not succeed. Such risks will be assumed by the Company and, therefore, its stockholders.
The Company will not restrict its search for any specific kind of business but may acquire a venture which is in its preliminary or development stage, which is already in operation, or in essentially any stage of its corporate life. It is currently impossible to predict the status of any business in which the Company may become engaged, in that such business may need additional capital, may merely desire to have its shares publicly traded, or may seek other perceived advantages which the Company may offer.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the Company may become a party to a merger, consolidation, reorganization, joint venture, franchise or licensing agreement with another corporation or entity. It may also purchase stock or assets of an existing business. On the consummation of a transaction, it is possible that the present management and shareholders of the Company will not be in control of the Company. In addition, the Company’s officer and director may, as part of the terms of the acquisition transaction, resign and be replaced by new officers and directors without a vote of the Company’s stockholders.
It is anticipated that any securities issued in any such reorganization would be issued in reliance on exemptions from registration under applicable Federal and state securities laws. In some circumstances, however, as a negotiated element of this transaction, the Company may agree to register such securities either at the time the transaction is consummated, under certain conditions, or at specified time thereafter. The issuance of substantial additional securities and their potential sale into any trading market which may develop in the Company’s common stock may have a depressive effect on such market. While the actual terms of a transaction to which the Company may be a party cannot be predicted, it may be expected that the parties to the business transaction will find it desirable to avoid the creation of a taxable event and thereby structure the acquisition in a so called “tax free” reorganization under Sections 368(a) (1) or 351 of the Internal Revenue Code of 1986, as amended (the “Code”). In order to obtain tax free treatment under the Code, it may be necessary for the owners of the acquired business to own 80% or more of the voting stock of the surviving entity. In such event, the shareholders of the Company, including investors in this offering, would retain less than 20% of the issued and outstanding shares of the surviving entity, which could result in significant dilution in the equity of such shareholders.
As part of the Company’s investigation, the officer and director of the Company will meet personally with management and key personnel, may visit and inspect material facilities, obtain independent analysis or verification of certain information provided, check references of management and key personnel, and take other reasonable investigative measures, to the extent of the Company’s limited financial resources and management expertise.
The manner in which each Company participates in an opportunity will depend on the nature of the opportunity, the respective needs and desires of the Company and other parties, the management of the opportunity, and the relative negotiating strength of the Company and such other management.
With respect to any mergers or acquisitions, negotiations with target company management will be expected to focus on the percentage of the Company which target company shareholders would acquire in exchange for their stockholdings in the target company. Depending upon, among other things, the target company’s assets and liabilities, the Company’s stockholders will in all likelihood hold a lesser percentage ownership interest in the Company following any merger or acquisition. The percentage ownership may be subject to significant reduction in the event the Company acquires a target company with substantial assets. Any merger or acquisition effected by the Company can be expected to have a significant dilutive effect on the percentage of shares held by the Company’s then stockholders.
The Company will not have sufficient funds (unless it is able to raise funds in a private placement) to undertake any significant development, marketing and manufacturing of any products which may be acquired.
Accordingly, following the acquisition of any such product, the Company will, in all likelihood, be required to either seek debt or equity financing or obtain funding from third parties, in exchange for which the Company would probably be required to give up a substantial portion of its interest in any acquired product. There is no assurance that the Company will be able either to obtain additional financing or interest third parties in providing funding for the further development, marketing and manufacturing of any products acquired.
It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity the costs therefore incurred in the related investigation would not be recoverable.
Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in a loss to the Company of the related costs incurred.
Management believes that the Company may be able to benefit from the use of “leverage” in the acquisition of a business opportunity. Leveraging a transaction involves the acquisition of a business through incurring significant indebtedness for a large percentage of the purchase price for that business.
Through a leveraged transaction, the Company would be required to use less of its available funds for acquiring the business opportunity and, therefore, could commit those funds to the operations of the business opportunity, to acquisition of other business opportunities or to other activities. The borrowing involved in a leveraged transaction would ordinarily be secured by the assets of the business opportunity to be acquired. If the business opportunity acquired is not able to generate sufficient revenues to make payments on the debt incurred by the Company to acquire that business opportunity, the lender would be able to exercise the remedies provided by law or by contract. These leveraging techniques, while reducing the amount of funds that the Company must commit to acquiring a business opportunity, may correspondingly increase the risk of loss to the Company. No assurance can be given as to the terms or the availability of financing for any acquisition by the Company. During periods when interest rates are relatively high, the benefits of leveraging are not as great as during periods of lower interest rates because the investment in the business opportunity held on a leveraged basis will only be profitable if it generates sufficient revenues to cover the related debt and other costs of the financing. Lenders from which the Company may obtain funds for purposes of a leveraged buy-out may impose restrictions on the future borrowing, distribution, and operating policies of the Company. It is not possible at this time to predict the restrictions, if any, which lenders may impose or the impact thereof on the Company.
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.
Prior to the adoption of ASC 842 on January 1, 2019:
Leases, mainly leases of offices, where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Payments made under operating leases are recognized as an expense on a straight-line basis over the lease term. The Company had no finance leases for any of the periods stated herein.
Upon and thereafter the adoption of ASC 842 on January 1, 2019:
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 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 the adoption.
The preparation of 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 consolidated financial statements, and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates.
Results of Operations
For the years ended December 31, 2020 and December 31, 2019
Years Ended
December 31,
Change
Percent
Net Sales - related party
$ 238,587
$ 375,251
$ (136,664 )
(36 )%
Cost of Sales
145,470
200,182
(54,712 )
(27 )%
Gross Profit
93,117
175,069
(81,952 )
(47 )%
Operating expenses:
Selling, general and administrative
97,191
49,097
48,094
98 %
Professional fees
92,996
560,171
(467,175 )
(83 )%
Total operating expenses
190,187
609,268
(419,081 )
(69 )%
Other income (expenses):
Interest income
89 %
Interest expense
(60,267 )
(68,800 )
8,533
(12 )%
Other income
3,948
3,921
14522 %
Loss on inventory write-down
(9,420 )
(8,325 )
(1,095 )
13 %
Total other income (expenses)
(65,451 )
(76,946 )
11,495
(15 )%
Loss before income taxes
(162,521 )
(511,145 )
348,624
(68 )%
Income tax expense
3,329
6,047
(2,718 )
(45 )%
Net loss
$ (165,850 )
$ (517,192 )
$ 351,342
(68 )%
Net sales, cost of sales and gross profit
The Company consolidated net sales for the years ended December 31, 2020 and 2019 was $238,587 and $375,251, respectively, a net decrease of $136,664 or 36% in year 2020 compare with 2019. The cost of sales for the years ended December 31, 2020 and 2019 was $145,470 and $200,182, respectively, a net decrease of $54,712 or 27% in year 2020 compare with 2019, resulting in a gross profit of $93,117 and $175,069 for the years ended December 31, 2020 and 2019, respectively, a net decrease of $81,952 or $47% in 2020 compared with 2019. The net sales decrease was due to the decreased sales in PRC for related party sales caused mainly by the spread of COVID-19 in 2020.
Total operating expenses
During the year ended December 31, 2020, total operating expenses were $190,187, which consisted of professional fees of $92,996, rent expenses of $46,329, China salary and office expense of $44,084, miscellaneous expenses of $6,778. During the year ended December 31, 2019, total operating expenses were $609,268, which consisted of professional fees of $560,171, rent expenses of $8,625, China salary and China office expense of $33,034, marketing expense of $4,456, bank charges of $1,223, permits and licenses of $1,725, and others of $34. Total operating expenses decreased $419,081, or 69% from 2020 to 2019, primarily as a result of the decrease in professional fees for the year ended December 31, 2020 from 2019.
Total other income (expense)
During the year ended December 31, 2020, total other expenses were $65,451, which consisted of interest expense of $60,267, interest income of $288, other income of $3,948 and loss on inventory write-down of $9,420. During the year ended December 31, 2019, the Company total other expenses were $76,946, which consisted of interest expense of $68,800, interest income of $152, other income of $27 and loss on inventory write-down of $8,325. Total other expense decreased $11,495, or 15%, primarily due to the decrease of interest expense for beneficial conversion feature and the increase of other income for the year ended December 31, 2020 compared to 2019.
Net loss
During the year ended December 31, 2020, the Company had a net loss of $165,850, a decrease of loss of $351,342 or 68% compared with the net loss of $517,192 for the year ended December 31, 2019. The decrease of net loss was due to the reasons stated above.
Liquidity and Capital Resources
As of December 31, 2020, the Company had cash and cash equivalents and total assets of $30,700 and $192,543, compared to the cash and cash equivalents and total assets of $94,211 and $177,689, respectively as of December 31, 2019. As of December 31, 2020, the Company had total liabilities of $732,323, of which $200,000 is convertible note payable and $340,286 is due to our sole officer and director as an unsecured, non-interest bearing demand loan. As of December 31, 2019, the Company had total liabilities of $556,992, of which $163,733 is convertible note payable and $285,869 is due to our sole officer and director as an unsecured, non-interest bearing demand loan.
As of December 31, 2020, and 2019, the Company had negative working capital amount of $425,677 and $384,891, respectively.
Other than an oral agreement with Mrs. Cui to fund the expenses of the Company, we currently have no agreements and arrangements with 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.
Our operations may be affected by the ongoing COVID-19 pandemic. The ultimate disruption that may result from the virus is uncertain, but it may result in a material adverse impact on our financial position, operations and cash flows.
Cash Flows from Operating Activities
For the year ended December 31, 2020, net cash flows used in operating activities was $107,338, resulting from a net loss of $165,850, an increase by inventory write-down of $9,420, an increase in amortization of debt discount of $36,267, decreased by amortization of right-of-use of assets of $250, decreased by lease liabilities of $14,534, decreased by changes in accounts receivable of $46,292, accrued liability of $10,403 and customer deposit of $6,741, increased by inventory, prepaid expenses and interest payable of $91,045. For the year ended December 31, 2019, net cash flows used in operating activities was $16,387 resulting from a net loss of $517,192, an decrease in inventories of $29,949, a decrease in prepaid expenses and other current assets of $28,076, an increase in accrued liabilities of $13,346, an increase in interest payable of $24,000, an increase in customer deposit - related party of $6,734, and amortization of debt discount of $44,800, amortization of right-of-use assets of $375, loss on inventory write-down of $8,325 and shares issued for compensation of $462,000. The increase of cash flows used in operating activities from 2020 to 2019 was $90,951 or 555%.
Cash Flows from Investing Activities
For the year ended December 31, 2020, cash flow used in paying loan to related party is $11,594, while there was no cash flow from investing activity in 2019.
Cash Flows from Financing Activities
The Company financed the operations primarily from the advances from the Company’s sole officer and director. For the years ended December 31, 2020 and 2019, cash flows provided by advances from the Company’s sole officer and director of $54,417 and $54,966, respectively, a decrease of $549 or 1%.
Going Concern Consideration
The Company had net loss of $165,850 and $517,192 for the years ended December 31, 2020 and 2019 respectively. In addition, the Company had an accumulated deficit of $1,161,693 and $995,843 and generated negative cash flow from operating activities as of and for years ended December 31, 2020 and 2019, respectively. 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.
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.
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, 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.
On September 1, 2019, the convertible note agreement was extended 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 convertible promissory note agreement was extended to September 1, 2022 with no additional consideration.
The Company recognized interest expense related to the convertible note of $60,267 and $68,800, respectively, for the years ended December 31, 2020 and 2019, respectively. The unamortized debt discount on December 31, 2020 and 2019 was zero and $36,267, respectively. As of December 31, 2020, and 2019, net balance of the convertible note amounted to $200,000 and $163,733, respectively.
Operating Lease
The Company has an operating lease for its office space from a third party in the United States. 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 contract 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 lease does 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 lease expired on August 31, 2020. The Company has operating leases for its office. Rental expenses for the years ended December 31, 2020 and 2019 were $6,448 and $8,625, respectively.
The Company signed a new lease agreement with a related party in China in June 2020, an entity in which CBKB’s supervisor is a shareholder. It calls for a monthly rent of RMB40,000 (approximately $5,800). The lease is for one year and subject to renewal. 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 terms 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 5.25%. The lease does not contain any residual value guarantees or material restrictive covenants. The remaining term as of December 31, 2020 is 5 months and subject to the priority of signing a new lease agreement within a 60-day written notice before the current lease agreement is due. The Company currently has no finance leases.
As of December 31, 2020, future minimum annual lease payment under operating lease was as follows:
Ending December 31,
Operating
Leases
$ 73,533
12,256
Total lease payments
85,789
Less: Interest
(2,499 )
Present value of lease liabilities
$ 83,290
Material Definitive Agreement
MakingOrg, Inc.’s subsidiary, Chonogquing Beauty Kenner Biotechnology Co., Ltd., entered into a Strategic Cooperation Framework Agreement (the “Agreement”) with Hangzhou Life Century Hualian Supermarket Chain Co., Ltd. (“HLCH”), dated May 25, 2018, pursuant to which the Company agreed to assist HLCH in identifying brand-specific, high tech characteristics products, such as acer truncatum nervonic acid oil, acer truncatum seed oil capsule, acer truncatum edible oil, acer truncatum oil with nervonic acid formula, acer truncatum coffe, acer truncatum tea, canned acer truncatum, acer truncatum cosmetics, acer truncatum skin care products, hair wash products and acer trunncatrum food. The Company has initiated the marketing effort per agreement, however, the result has not met the expectation and the Company is still finding solutions.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 8. Financial Statements.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of MakingORG, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of MakingORG, Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, accumulated deficit and generated negative cash flows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Adoption of ASU No. 2016-02
As discussed in Note 3 to the financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Simon & Edward, LLP
Los Angeles, California
April 15, 2021
We have served as the Company’s auditor since 2016.
MAKINGORG, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
December 31, 2019
ASSETS
Current Assets
Cash and cash equivalents
$ 30,700
$ 94,211
Accounts receivable - related party
48,934
-
Inventories (net of inventory reserve of $0 and $19,426)
-
43,532
Due from related party
12,256
-
Prepaid expenses and other current assets
2,000
34,358
Total Current Assets
93,890
172,101
Right-of-use assets - operating leases
98,653
5,588
Total Assets
$ 192,543
$ 177,689
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Interest payable
$ 104,000
$ 80,000
Accrued liabilities
4,747
14,876
Customer deposit - Related Party
-
6,676
Lease liabilities - operating leases
70,534
5,838
Due to related party
340,286
285,869
Convertible note payable, net of discount $0 and $36,267
-
163,733
Total Current Liabilities
519,567
556,992
Long-Term Liabilities
Convertible note payable, noncurrent
200,000
-
Lease liabilities - operating lease, noncurrent
12,756
-
Total Long-term Liabilities
212,756
-
TOTAL LIABILITIES
732,323
556,992
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 shares issued and outstanding as of
December 31, 2020 and 2019
35,540
35,540
Additional paid-in capital
583,882
583,882
Accumulated other comprehensive income (loss)
2,491
(2,882 )
Accumulated deficit
(1,161,693 )
(995,843 )
Total Stockholders’ Deficit
(539,780 )
(379,303 )
Total Liabilities and Stockholders’ Deficit
$ 192,543
$ 177,689
See accompanying notes to consolidated financial statements.
MAKINGORG, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the years ended
December 31,
Net Sales-Related Party
$ 238,587
$ 375,251
Cost of Sales
145,470
200,182
Gross Profit
93,117
175,069
OPERATING EXPENSES
Selling, general and administrative
97,191
49,097
Professional fees
92,996
560,171
TOTAL OPERATING EXPENSES
190,187
609,268
LOSS FROM OPERATIONS
(97,070 )
(434,199 )
OTHER INCOME (EXPENSE)
Interest income
Interest expense
(60,267 )
(68,800 )
Other income
3,948
Loss on inventory write-down
(9,420 )
(8,325 )
TOTAL OTHER INCOME (EXPENSE)
(65,451 )
(76,946 )
LOSS BEFORE INCOME TAX
(162,521 )
(511,145 )
Income tax
3,329
6,047
NET LOSS
$ (165,850 )
$ (517,192 )
OTHER COMPREHENSIVE ITEM:
Foreign currency translation income (loss)
5,373
(2,169 )
TOTAL COMPREHENSIVE LOSS
$ (160,477 )
$ (519,361 )
NET LOSS PER COMMON SHARE: BASIC AND DILUTED
$ (0.005 )
$ (0.015 )
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: BASIC AND DILUTED
35,540,000
35,540,000
See accompanying notes to consolidated financial statements.
MAKINGORG, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
Accumulated
Additional
Other
Total
Common Stock
Paid-in
Comprehensive
Accumulated
Stockholders’
Shares
Amount
Capital
Income
Deficit
Deficit
Balance, December 31, 2018
35,430,000
35,430
67,592
(713 )
(478,651 )
(376,342 )
Foreign currency translation loss
-
-
-
(2,169 )
-
(2,169 )
Common stock issued for service
110,000
461,890
-
-
462,000
Issuance of promissory note
-
-
54,400
-
-
54,400
Net loss
-
-
-
-
(517,192 )
(517,192 )
Balance, December 31, 2019
35,540,000
$ 35,540
$ 583,882
$ (2,882 )
$ (995,843 )
$ (379,303 )
Foreign currency translation gain
-
-
-
5,373
-
5,373
Net loss
-
-
-
-
(165,850 )
(165,850 )
Balance, December 31, 20120
35,540,000
$ 35,540
$ 583,882
$ 2,491
$ (1,161,693 )
$ (539,780 )
See accompanying notes to consolidated financial statements.
MAKINGORG, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended
December 31,
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$ (165,850 )
$ (517,192 )
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on inventories write-down
9,420
8,325
Shares issued for compensation
-
462,000
Amortization of debt discount
36,267
44,800
Amortization of Right-of-use assets
(250 )
(375 )
Changes in assets and liabilities:
Accounts receivable - related party
(46,292 )
-
Inventories
34,442
(29,949 )
Prepaid expenses and other current assets
32,603
(28,076 )
Interest payable
24,000
24,000
Accrued liabilities
(10,403 )
13,346
Customer deposit - related party
(6,741 )
6,734
Lease liabilities
(14,534 )
-
CASH FLOWS USED IN OPERATING ACTIVITIES
(107,338 )
(16,387 )
CASH FLOWS FROM INVESTING ACTIVITIES
Due from related party
(11,594 )
-
CASH FLOWS USED IN INVESTING ACTIVITIES
(11,594 )
-
CASH FLOWS FROM FINANCING ACTIVITIES
Due to related party
54,417
54,966
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
54,417
54,966
EFFECT OF EXCHANGE RATE CHANGES ON CASH
1,004
(1,740 )
NET CHANGE IN CASH AND CASH EQUIVALENTS
(63,511 )
36,839
Cash and cash equivalents, beginning of period
94,211
57,372
Cash and cash equivalents, end of period
$ 30,700
$ 94,211
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid
$ -
$ -
Income taxes paid
$ 4,129
$ -
NON-CASH TRANSACTION:
Deferred consulting fee paid in common stock
$ -
$ 462,000
Beneficial conversion feature recognition
$ -
$ 54,400
See accompanying notes to consolidated financial statements.
MAKINGORG, INC. AND SUBSIDIARIES
NOTES TO 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.
In January 2020, the World Health Organization declared an outbreak of the coronavirus (“COVID-19”) to be a Public Health Emergency of International Concern, subsequently declared COVID-19 a global pandemic, and recommended containment and mitigation measures worldwide on March 11, 2020. The Company had experienced some adverse impacts on its business in the PRC Segment, such as limited access to its staff in the PRC in the beginning of the outbreak and restrictions on business travel within the PRC and between USA and PRC. Even though the operations in the PRC segment fully resumed by the end of 2020, the pandemic has created global economic uncertainties and led to negative impact on the financial markets. The extent of the COVID-19 impact to the Company will depend on numerous factors and developments related to COVID-19. Consequently, any potential impacts of COVID-19 remain highly uncertain and cannot be predicted with confidence.
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 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 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 from operations, generated negative cash flow from operating activities and 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 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.
The Company had net loss of $165,850 and $517,192 for the years ended December 31, 2020 and 2019, respectively. In addition, the Company had an accumulated deficit of $1,161,693 and $995,843 as of December 2020 and 2019, respectively. 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.
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
Principles of Consolidation
The Company’s consolidated financial statements refer to MakingORG, Inc. and its subsidiaries. All intercompany transactions and balances were eliminated in consolidation.
Use of Estimates
The preparation of 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 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 December 31, 2020 and 2019.
Inventories
Inventories consist of (a) packing materials (b) raw materials and (b) 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. As of December 31, 2020 and 2019, inventory reserve amounted to $0 and $19,426, respectively.
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 years ended December 31, 2020 and 2019, the Company recognized revenue from sale of acer truncatum bunge related health products in an amount of $238,587 and $375,251, respectively.
Advertising Expenses
Advertising costs are expensed as incurred. Advertising expenses incurred for the years ended December 31, 2020 and 2019 totaled zero and $4,456, 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 there is no research and development expense for the year ended December 31, 2020 and 2019.
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 MakingORG 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 the 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.
The Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from RMB into U.S. dollars are recorded in stockholders’ equity as part of accumulated other comprehensive income. The exchange rates used for financial statements are as follows:
Average Rate for the Years
Ended December 31,
China yuan (RMB)
RMB 6.900133
RMB 6.907209
United States dollar ($)
$ 1.000000
$ 1.000000
Exchange Rate on
December 31,
December 31,
China yuan (RMB)
RMB 6.527650
RMB 6.966764
United States dollar ($)
$ 1.000000
$ 1.000000
Related Parties
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
Lease
Prior to the adoption of ASC 842 on January 1, 2019:
Leases, mainly leases of offices, where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Payments made under operating leases are recognized as an expense on a straight-line basis over the lease term. The Company had no finance leases for any of the periods stated herein.
Upon and thereafter the adoption of ASC 842 on January 1, 2019:
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.
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, 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.
Recently Issued Accounting Pronouncement Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which is intended to simplify various aspects related to accounting for income taxes. The standard is effective for fiscal years, and interim period within those years, beginning after December 15, 2020, with early adoption permitted. The standard will be adopted upon the effective date for us beginning January 1, 2021. The Company is currently evaluating the effects of the standard on its consolidated financial statements and related disclosures.
In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company believes the adoption will modify the way the Company analyzes financial instruments, but it does not anticipate a material impact on results of operations. The Company is in the process of determining the effects the adoption will have on its consolidated financial statements.
NOTE 4 - INVENTORIES
The components of the Company’s inventories were packaging materials, raw materials and finished goods. Inventories consisted of the following as of December 31, 2020 and 2019:
December 31,
Raw materials
$ -
$ 34,112
Finished goods
-
28,846
Inventory reserve
(-
)
(19,426 )
Total inventories
$ -
$ 43,532
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 December 31, 2020 and 2019, prepaid expenses and other current assets was $2,000 and $34,358, respectively.
NOTE 6 - RELATED PARTY TRANSACTIONS
Due from Related Party
For the year ended December 31, 2020, the Company loaned RMB 80,000 (approximately $12,256) to its related party, an entity in which CBKB’s supervisor is a shareholder. The entity is also the landlord from which the Company leased office from in China. The loan was for a term of six months, with a monthly interest rate of 1%. The loan was not paid back to the Company by the due date on March 31, 2021. Based on the agreement, the loan can be applied to the monthly lease for two more month (RMB 40,000 per month). Therefore, the Company does not have to pay the office lease in China until May 31, 2021. The entity paid all the interest of RMB 4,800 to the Company on April 1, 2021.
Due to Related Party
During the years ended December 31, 2020 and 2019, the Company’s sole officer loaned the Company $54,417 and $54,966, respectively. As of December 31, 2020, and 2019, the Company was obligated to the officer, for unsecured, non- demand loan with balances of $340,286 and $285,869, respectively.
Sales to Related Party
The Company sells its product to its related party, an entity in which CBKB’s supervisor is a shareholder. During the year ended December 31, 2020 and 2019, consolidated net sales to the related party were $238,587 and $375,251, respectively. As of December 31, 2020 and 2019, the Company consolidated customer deposit - related party were $0 and $6,676, respectively. The accounts receivable from related party were $48,934 and $0 as of December 31, 2020 and 2019, respectively.
Consulting Agreement
On January 4, 2019, the Company entered into a Consulting Agreement with a related party, legal person of CBKB. The agreement term is from January 4, 2019 to January 3, 2020. Pursuant to the Consulting Agreement, the Company agreed to issue 110,000 shares with a fair value of the Company’s common stock to the related party to devote appropriate time and attention to providing advice to the Company in regards to the sales and marketing in China; or such other services as the Company and the related party may agree. The consulting fees were $0 and $462,000 for the year ended December 31, 2020 and 2019, respectively.
Lease Agreement
On June 1, 2020, the Company entered into a lease agreement with its related party in China, an entity in which CBKB’s supervisor is a shareholder. The agreement term is from June 1, 2020 to May 31, 2021. Pursuant to the lease agreement, the Company pays a monthly rent of RMB40,000 (approximately $5,800) paid quarterly before the start of each quarter. The lease is for a one-year term and the Company has the priority to sign a new lease agreement by a written notice to the landlord 60 days before the current lease term ends if the Company decided to keep renting the property. The Company tend to keep leasing the property after the lease term ends. Therefore, based on the lease agreement, we did the recognition of right-of-use (“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 5.25%. Lease expense is recognized on a straight-line basis over the lease term.
NOTE 7 - BUSINES CONCENTRATION AND RISKS
Concentration of Risk
The Company maintains cash with banks in the USA, People’s Republic of China (“PRC” or “China”), and Hong Kong. Should any bank holding cash become insolvent, or if the Company is otherwise unable to withdraw funds, the Company would lose the cash with that bank; however, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts. In China, a depositor has up to RMB500,000 insured by the People’s Bank of China Financial Stability Bureau (“FSD”). In Hong Kong, a depositor has up to HKD500,000 insured by Hong Kong Deposit Protection Board (“DPB”). In the United States, the standard insurance amount is $250,000 per depositor in a bank insured by the Federal Deposit Insurance Corporation (“FDIC”).
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. As of December 31, 2020 and 2019, $30,587 and $93,656 of the Company’s cash and cash equivalents, were insured, and the remaining balance of approximately $0 and $555 was not insured. With respect to accounts receivable, the Company generally does not require collateral and does not have an allowance for doubtful accounts.
Major customer
For the years ended December 31, 2020 and 2019, the Company’s revenues from one major customer were:
Years Ended December 31,
Amount
% of Total Revenue
Amount
% of Total Revenue
Customer A
$ 238,587
100 %
$ 375,251
100 %
Major vendor
For the years ended December 31, 2020 and 2019, the Company’s purchase from one major vendor was:
Years Ended December 31,
Amount
% of Total Purchase
Amount
% of Total Purchase
Vendor A
$ 97,095
100 %
$ 265,577
100 %
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 of 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 matured 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 Convertible Note Agreement was extended 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 convertible note agreement was extended 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 was characterized as a beneficial conversion feature (“BCF”). A BCF was 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 was recorded net of the discount related to the BCF and the Company amortized the discount to interest expense over the life of the debt using the effective interest method.
On September 1, 2020, the convertible note agreement was extended to September 1, 2022 with no additional consideration and no discount on the note.
The Company recognized interest expense related to the convertible note of $60,267 and $68,800, respectively, for the years ended December 31, 2020 and 2019, respectively. The unamortized debt discount as of December 31, 2020 and 2019 were $0 and $36,267, respectively. As of December 31, 2020, and 2019, net balances of the convertible note amounted to $200,000 and $163,733, respectively.
NOTE 9 - LEASE
The Company has an operating lease for its office space from a third party in the United States. 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 contract provided 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 resulted in the recognition of ROU assets and lease liabilities on the balance sheet. ROU assets and operating lease liabilities were recognized based on the present value of lease payments over the lease term as of the commencement date. Because the leases did not provide an explicit or implicit rate of return, the Company determined 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 was 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 was recognized on a straight-line basis over the lease term. The lease did not contain any residual value guarantees or material restrictive covenants. Leases with a lease term of 12 months or less were not recorded on the balance sheet and lease expense was recognized on a straight-line basis over the lease term. The lease expired on August 31, 2020.
The Company signed a new lease agreement with a related party in China in June 2020, an entity in which CBKB’s supervisor is a shareholder. It calls for a monthly rent of RMB40,000 (approximately $5,800). The lease is for one year and subject to renewal. 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 terms 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 5.25%. The lease does not contain any residual value guarantees or material restrictive covenants. The remaining term as of December 31, 2020 was 5 months and is subject to the priority of signing a new lease agreement within a 60-day written notice before the current lease agreement is due. The Company currently has no finance leases.
The components of lease expense consist of the following:
Years Ended December 31,
Classification
Operating lease cost
Selling, General & Administrative expenses
$
46,329
$
8,625
Net lease cost
$
46,329
$
8,625
Balance sheet information related to leases consists of the following:
Classification
December 31,
December 31,
Assets
Operating lease ROU assets
Right-of-use assets
$ 98,653
$ 5,588
Total leased assets
$ 98,653
$ 5,588
Liabilities
Current portion
Operating lease liabilities
Current maturities of operating lease liabilities
$ 70,534
$ 5,838
Non-current portion
Operating lease liabilities
Long-term portion of operating lease liabilities
12,756
-
Total lease liabilities
$ 83,290
$ 5,838
Weighted average remaining lease term
Operating leases
1.42
0.67
Weighted average discount rate
Operating leases
5.25-7.33
%
7.33 %
Cash flow information related to leases consists of the following:
Years Ended
December 31,
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$ 47,027
$ 8,241
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
139,275
7,866
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 December 31, 2020 was as follows:
Ending December 31,
Operating Leases
$ 73,533
12,256
Total lease payments
85,789
Less: Interest
(2,499 )
Present value of lease liabilities
$ 83,290
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 year ended, the Company incurred non-cash stock compensation expense for this consulting fee of $462,000. No common stock was issued in 2020.
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.
The following table reconciles the Company’s statutory tax rates to effective tax rates for the years ended December 31, 2020 and 2019:
Years Ended December 31,
US statutory rate
21 %
21 %
Tax rate difference
- %
(1 )%
PRC tax discount
6 %
4 %
Loss not subject to income tax
(29 )%
(25 )%
Effective tax rate
(2 )%
(1 )%
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 years ended December 31, 2020 and 2019, no GILTI tax obligation existed and the GILTI tax expense was $nil.
Provision (benefit) for income tax for the year ended December 31, 2020 consisted of:
Year ended December 31, 2020
Federal
State
Foreign
Total
Current
$ -
$ 800
$ 2,529
$ 3,329
Deferred
-
-
-
-
Total
$ -
$ 800
$ 2,529
$ 3,329
Provision (benefit) for income tax for the year ended December 31, 2019 consisted of:
Year ended December 31, 2019
Federal
State
Foreign
Total
Current
$ -
$ 800
$ 5,247
$ 6,047
Deferred
-
-
-
-
Total
$ -
$ 800
$ 5,247
$ 6,047
Net deferred tax assets consist of the following components as of:
December 31,
Deferred tax asset:
Net operating loss carry forwards
$ 159,635
$ 269,052
Valuation allowance
(159,635 )
(269,052 )
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 $440,000, 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 after 2015 and 2016 are available for examination by state tax jurisdictions and federal tax purposes.
NOTE 12 - SEGMENT REPORTING
The geographical distributions of the Company’s financial information for the year ended December 31, 2020 and 2019 were as follows:
For the Years ended
December 31,
Geographic Areas
Revenue
PRC
238,587
375,251
USA
-
-
Total Revenue
$ 238,587
$ 375,251
Income (Loss) from Operations
PRC
$ 5,877
$ 142,035 )
USA
(102,947 )
(576,234 )
Total Income (Loss) from operations
$ (97,070 )
$ (434,199 )
Net Income (Loss)
PRC
$ 7,582
$ 136,967 )
USA
(173,432 )
(654,159 )
Total Net Income (Loss)
$ (165,850 )
$ (517,192 )
The geographical distribution of the Company’s financial information as of December 31, 2020 and 2019 were as follows:
December 31,
Geographic Areas
Reportable Assets
PRC
170,916
167,774
USA
47,384
35,672
Elimination Adjustment
(25,757 )
(25,757 )
Total Reportable Assets
$ 192,543
$ 177,689
NOTE 13 - SUBSEQUENT EVENT
The Company has evaluated all subsequent events through the date the consolidated financial statements were issued and determine that there were no subsequent events or transactions that require recognition or disclosures in the consolidated financial statements.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
There were no changes in or disagreements with accountants on accounting and financial disclosure during the year ended December 31, 2020.
Item 9A. Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the Company conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of December 31, 2020. Based on this evaluation, our principal executive officer and principal financial officer has concluded that, because of the material weaknesses in our internal control over financial reporting due to lack of segregation of duties discussed below, the Company's disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that the Company's disclosure and controls are designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Notwithstanding the material weaknesses discussed below, our principal executive officer and principal financial officer has concluded that the consolidated financial statements included in this Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements and that receipts and expenditures of company assets are made in accordance with management authorization; and (iii) provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2020 based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. Based on management's assessment, including consideration of the control deficiencies discussed below, management has concluded that the Company's internal control over financial reporting was not effective as of December 31, 2020 due to the fact that there were two material weaknesses in its internal control over financial reporting. Specifically, through the investigation discussed above, management identified a lack of segregation of duties as well as errors in financial statement presentation and disclosure.
The specific material weaknesses identified by our management were as follows:
•
Lack of Segregation of Duties
•
Lack of well-established procedures to identify, approve and report related party transaction
Management is aware that there is a lack of segregation of duties and lack of well-established procedures to identify, approve and report related party transaction at the Company due to the lack of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of hiring employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management will periodically reevaluate this situation.
In order to mitigate the foregoing material weakness, we have engaged an outside accounting consultant with significant experience in the preparation of financial statements in conformity with U.S. GAAP to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity to U.S. GAAP. Management believes that this will lessen the possibility that a material misstatement of our annual or interim financial statements will be prevented or detected on a timely basis, and we will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to the exemption provided to issuers that are not "large accelerated filers" nor "accelerated filers" under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
Set forth below are the names, ages and present principal occupations or employment, and material occupations, positions, offices or employments for the past five years of our current director and executive officer.
Name
Age
Position
Juanzi Cui
President, Chief Executive Officer, Chief Financial Officer and Secretary and as a director
Juanzi Cui, age 50, has been the President of the Chongqing Municipal Health Management Association since March of 2014. Since 2011 she has been the Chairman of the Chongqing Huang Xin Technology Limited Liability Corporation. Since 2007 she has been the Vice President and Secretary General of Dietitians Association of Chongqing. Since 2006 she is the Chief Executive Officer and President of the Chongqing City Ziman Nutrition and Health Vocational Training School.
The director of the Company serves for a term of one year or until the successor is elected at the Company's annual stockholders’ meeting and is qualified, subject to removal by the Company's stockholders. The officer serves, at the pleasure of the board of directors, for a term of one year and until the successor is elected at the annual meeting of the board of directors.
There are no familial relationships among any of our officers or directors. None of our directors or officers is a director in any other reporting companies. None of our directors or officers has been affiliated with any company that has filed for bankruptcy within the last ten years. The Company is not aware of any proceedings to which any of the Company’s officers or directors, or any associate of any such officer or director, is a party adverse to the Company or has a material interest adverse to the Company.
Code of Ethics; Financial Expert
Because of the small size and limited resources of the Company, we do not currently have a Code of Ethics applicable to our principal executive, financial and accounting officers. We do not have a “financial expert” on the board or an audit committee or nominating committee.
Potential Conflicts of Interest
Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our directors. Thus, there is a potential conflict of interest in that our directors and officers have the authority to determine issues concerning management compensation and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executives or directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires executive officers and directors of the Company and persons who own more than 10% of a registered class of the Company's equity securities to file reports of ownership and changes in their ownership with the Securities and Exchange Commission, and forward copies of such filings to the Company. Our sole executive officer and director complied with the Section 16(a) filing requirements since she acquired control of the Company.
Involvement in Certain Legal Proceedings
There are no legal proceedings that have occurred within the past ten years concerning our directors, or control persons which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one's participation in the securities or banking industries, or a finding of securities or commodities law violations.
Item 11. Executive Compensation.
Summary Compensation
Since our incorporation in August 2012, we have not paid any compensation to our directors or executive officers in consideration for their services rendered to our Company in their capacity as such. We have no employment agreements with any of our directors or executive officers. We have no pension, health, annuity, bonus, insurance, stock options, profit sharing or similar benefit plans
Since our incorporation, no stock options or stock appreciation rights were granted to any of our directors or executive officers. We have no equity incentive plans.
Outstanding Equity Awards
Since our incorporation, none of our directors or executive officers has held unexercised options, stock that had not vested, or equity incentive plan awards.
Compensation of Directors
Since our incorporation in August 2012, no compensation has been paid to any of our directors in consideration for their services rendered in their capacity as directors. No arrangements are presently in place regarding compensation to directors for their services as directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table lists, as of April 11, 2019, the number of shares of common stock of our Company that are beneficially owned by (i) each person or entity known to our Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each executive officer and director of our Company; and (iii) all executive officers and directors as a group. Information relating to beneficial ownership of common stock by our principal shareholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.
The percentages below are calculated based on 35,540,000 shares of our common stock issued and outstanding as of April 15, 2021. We do not have any outstanding options, warrants or other securities exercisable for or convertible into shares of our common stock. Unless otherwise indicated, the address of each person listed is c/o Making ORG, Inc., 385 S. Lemon Avenue #E 301, Walnut, CA 91789.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
During the years ended December 31, 2020 and 2019, the Company’s sole officer loaned the Company $54,417 and $54,966, respectively. As of December 31, 2020 and 2019, the Company was obligated to the officer, for an unsecured, non-interest bearing demand loan with a balance of $340,286 and $285,869, respectively.
Director Independence
We are not subject to listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our board comprised of a majority of “independent directors.”
Item 14. Principal Accounting Fees and Services.
Our principal independent accountant is Simon & Edward, LLP. Their pre-approved fees billed to the Company are set forth below:
Fiscal Year Ended
December 31,
Fiscal Year Ended
December 31,
Audit Fees
$ 24,500
$ 22,000
Audit Related Fees
$ 0
$ 0
Tax Fees
$ 3,500
$ 3,500
All Other Fees
$ 0
$ 0
As of December 31, 2020, the Company did not have a formal documented pre-approval policy for the fees of the principal accountant. The Company does not have an audit committee. The percentage of hours expended on the principal accountant's engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was 0%.
PART IV
Item 15. Exhibits. Financial Statement Schedules.
Exhibits
Exhibit No.
Description
3.1
Amended and Restated Articles of Incorporation of MakingORG, Inc. (1)
3.2
Bylaws (2)
10.1
Service Contract with Anchor Freight Services, Inc. (2)
10.2
Strategic Cooperation Framework Agreement, dated May 25, 2018, by and between the MakingORG, Inc. and Hangzhou Life Century Hualian Supermarket Chain Co., Ltd. (3)
31.1
Rule 13a-14(a)/15d-14(a) Certifications*
32.1
Section 1350 Certification, Principal Executive Officer*
32.2
Section 1350 Certification, Principal Financial Officer*
_______
*
Filed herewith
(1)
Incorporated by reference to the corresponding exhibit to the Company’s Current Report on Form 8-K filed on August 22, 2014.
(2)
Incorporated by reference to the corresponding exhibit to the Company’s registration statement on Form S-1 on filed on February 8, 2013.
(3)
Incorporated by reference to the corresponding exhibit to the Company’s Current Report on Form 8-K filed on May 29, 2018.
SIGNATURES
Purusant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MAKINGORG, INC.
Dated: April 15, 2021
By:
/s/ Juanzi Cui
Name:
Juanzi Cui
Title:
President, Chief Executive Officer, Chief
Financial Officer and Secretary and Director
(Principal Executive, Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Dated: April 15, 2021
By:
/s/ Juanzi Cui
Name:
Juanzi Cui
Title:
President, Chief Executive Officer, Chief
Financial Officer and Secretary and as a director
(Principal Executive, Financial and Accounting Officer)

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of MakingORG, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of MakingORG, Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, accumulated deficit and generated negative cash flows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Adoption of ASU No. 2016-02
As discussed in Note 3 to the financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Simon & Edward, LLP
Los Angeles, California
April 15, 2021
We have served as the Company’s auditor since 2016.
MAKINGORG, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
December 31, 2019
ASSETS
Current Assets
Cash and cash equivalents
$ 30,700
$ 94,211
Accounts receivable - related party
48,934
-
Inventories (net of inventory reserve of $0 and $19,426)
-
43,532
Due from related party
12,256
-
Prepaid expenses and other current assets
2,000
34,358
Total Current Assets
93,890
172,101
Right-of-use assets - operating leases
98,653
5,588
Total Assets
$ 192,543
$ 177,689
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Interest payable
$ 104,000
$ 80,000
Accrued liabilities
4,747
14,876
Customer deposit - Related Party
-
6,676
Lease liabilities - operating leases
70,534
5,838
Due to related party
340,286
285,869
Convertible note payable, net of discount $0 and $36,267
-
163,733
Total Current Liabilities
519,567
556,992
Long-Term Liabilities
Convertible note payable, noncurrent
200,000
-
Lease liabilities - operating lease, noncurrent
12,756
-
Total Long-term Liabilities
212,756
-
TOTAL LIABILITIES
732,323
556,992
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 shares issued and outstanding as of
December 31, 2020 and 2019
35,540
35,540
Additional paid-in capital
583,882
583,882
Accumulated other comprehensive income (loss)
2,491
(2,882 )
Accumulated deficit
(1,161,693 )
(995,843 )
Total Stockholders’ Deficit
(539,780 )
(379,303 )
Total Liabilities and Stockholders’ Deficit
$ 192,543
$ 177,689
See accompanying notes to consolidated financial statements.
MAKINGORG, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the years ended
December 31,
Net Sales-Related Party
$ 238,587
$ 375,251
Cost of Sales
145,470
200,182
Gross Profit
93,117
175,069
OPERATING EXPENSES
Selling, general and administrative
97,191
49,097
Professional fees
92,996
560,171
TOTAL OPERATING EXPENSES
190,187
609,268
LOSS FROM OPERATIONS
(97,070 )
(434,199 )
OTHER INCOME (EXPENSE)
Interest income
Interest expense
(60,267 )
(68,800 )
Other income
3,948
Loss on inventory write-down
(9,420 )
(8,325 )
TOTAL OTHER INCOME (EXPENSE)
(65,451 )
(76,946 )
LOSS BEFORE INCOME TAX
(162,521 )
(511,145 )
Income tax
3,329
6,047
NET LOSS
$ (165,850 )
$ (517,192 )
OTHER COMPREHENSIVE ITEM:
Foreign currency translation income (loss)
5,373
(2,169 )
TOTAL COMPREHENSIVE LOSS
$ (160,477 )
$ (519,361 )
NET LOSS PER COMMON SHARE: BASIC AND DILUTED
$ (0.005 )
$ (0.015 )
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: BASIC AND DILUTED
35,540,000
35,540,000
See accompanying notes to consolidated financial statements.
MAKINGORG, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
Accumulated
Additional
Other
Total
Common Stock
Paid-in
Comprehensive
Accumulated
Stockholders’
Shares
Amount
Capital
Income
Deficit
Deficit
Balance, December 31, 2018
35,430,000
35,430
67,592
(713 )
(478,651 )
(376,342 )
Foreign currency translation loss
-
-
-
(2,169 )
-
(2,169 )
Common stock issued for service
110,000
461,890
-
-
462,000
Issuance of promissory note
-
-
54,400
-
-
54,400
Net loss
-
-
-
-
(517,192 )
(517,192 )
Balance, December 31, 2019
35,540,000
$ 35,540
$ 583,882
$ (2,882 )
$ (995,843 )
$ (379,303 )
Foreign currency translation gain
-
-
-
5,373
-
5,373
Net loss
-
-
-
-
(165,850 )
(165,850 )
Balance, December 31, 20120
35,540,000
$ 35,540
$ 583,882
$ 2,491
$ (1,161,693 )
$ (539,780 )
See accompanying notes to consolidated financial statements.
MAKINGORG, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended
December 31,
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$ (165,850 )
$ (517,192 )
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on inventories write-down
9,420
8,325
Shares issued for compensation
-
462,000
Amortization of debt discount
36,267
44,800
Amortization of Right-of-use assets
(250 )
(375 )
Changes in assets and liabilities:
Accounts receivable - related party
(46,292 )
-
Inventories
34,442
(29,949 )
Prepaid expenses and other current assets
32,603
(28,076 )
Interest payable
24,000
24,000
Accrued liabilities
(10,403 )
13,346
Customer deposit - related party
(6,741 )
6,734
Lease liabilities
(14,534 )
-
CASH FLOWS USED IN OPERATING ACTIVITIES
(107,338 )
(16,387 )
CASH FLOWS FROM INVESTING ACTIVITIES
Due from related party
(11,594 )
-
CASH FLOWS USED IN INVESTING ACTIVITIES
(11,594 )
-
CASH FLOWS FROM FINANCING ACTIVITIES
Due to related party
54,417
54,966
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
54,417
54,966
EFFECT OF EXCHANGE RATE CHANGES ON CASH
1,004
(1,740 )
NET CHANGE IN CASH AND CASH EQUIVALENTS
(63,511 )
36,839
Cash and cash equivalents, beginning of period
94,211
57,372
Cash and cash equivalents, end of period
$ 30,700
$ 94,211
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid
$ -
$ -
Income taxes paid
$ 4,129
$ -
NON-CASH TRANSACTION:
Deferred consulting fee paid in common stock
$ -
$ 462,000
Beneficial conversion feature recognition
$ -
$ 54,400
See accompanying notes to consolidated financial statements.
MAKINGORG, INC. AND SUBSIDIARIES
NOTES TO 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.
In January 2020, the World Health Organization declared an outbreak of the coronavirus (“COVID-19”) to be a Public Health Emergency of International Concern, subsequently declared COVID-19 a global pandemic, and recommended containment and mitigation measures worldwide on March 11, 2020. The Company had experienced some adverse impacts on its business in the PRC Segment, such as limited access to its staff in the PRC in the beginning of the outbreak and restrictions on business travel within the PRC and between USA and PRC. Even though the operations in the PRC segment fully resumed by the end of 2020, the pandemic has created global economic uncertainties and led to negative impact on the financial markets. The extent of the COVID-19 impact to the Company will depend on numerous factors and developments related to COVID-19. Consequently, any potential impacts of COVID-19 remain highly uncertain and cannot be predicted with confidence.
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 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 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 from operations, generated negative cash flow from operating activities and 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 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.
The Company had net loss of $165,850 and $517,192 for the years ended December 31, 2020 and 2019, respectively. In addition, the Company had an accumulated deficit of $1,161,693 and $995,843 as of December 2020 and 2019, respectively. 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.
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
Principles of Consolidation
The Company’s consolidated financial statements refer to MakingORG, Inc. and its subsidiaries. All intercompany transactions and balances were eliminated in consolidation.
Use of Estimates
The preparation of 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 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 December 31, 2020 and 2019.
Inventories
Inventories consist of (a) packing materials (b) raw materials and (b) 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. As of December 31, 2020 and 2019, inventory reserve amounted to $0 and $19,426, respectively.
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 years ended December 31, 2020 and 2019, the Company recognized revenue from sale of acer truncatum bunge related health products in an amount of $238,587 and $375,251, respectively.
Advertising Expenses
Advertising costs are expensed as incurred. Advertising expenses incurred for the years ended December 31, 2020 and 2019 totaled zero and $4,456, 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 there is no research and development expense for the year ended December 31, 2020 and 2019.
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 MakingORG 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 the 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.
The Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from RMB into U.S. dollars are recorded in stockholders’ equity as part of accumulated other comprehensive income. The exchange rates used for financial statements are as follows:
Average Rate for the Years
Ended December 31,
China yuan (RMB)
RMB 6.900133
RMB 6.907209
United States dollar ($)
$ 1.000000
$ 1.000000
Exchange Rate on
December 31,
December 31,
China yuan (RMB)
RMB 6.527650
RMB 6.966764
United States dollar ($)
$ 1.000000
$ 1.000000
Related Parties
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
Lease
Prior to the adoption of ASC 842 on January 1, 2019:
Leases, mainly leases of offices, where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Payments made under operating leases are recognized as an expense on a straight-line basis over the lease term. The Company had no finance leases for any of the periods stated herein.
Upon and thereafter the adoption of ASC 842 on January 1, 2019:
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.
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, 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.
Recently Issued Accounting Pronouncement Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which is intended to simplify various aspects related to accounting for income taxes. The standard is effective for fiscal years, and interim period within those years, beginning after December 15, 2020, with early adoption permitted. The standard will be adopted upon the effective date for us beginning January 1, 2021. The Company is currently evaluating the effects of the standard on its consolidated financial statements and related disclosures.
In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company believes the adoption will modify the way the Company analyzes financial instruments, but it does not anticipate a material impact on results of operations. The Company is in the process of determining the effects the adoption will have on its consolidated financial statements.
NOTE 4 - INVENTORIES
The components of the Company’s inventories were packaging materials, raw materials and finished goods. Inventories consisted of the following as of December 31, 2020 and 2019:
December 31,
Raw materials
$ -
$ 34,112
Finished goods
-
28,846
Inventory reserve
(-
)
(19,426 )
Total inventories
$ -
$ 43,532
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 December 31, 2020 and 2019, prepaid expenses and other current assets was $2,000 and $34,358, respectively.
NOTE 6 - RELATED PARTY TRANSACTIONS
Due from Related Party
For the year ended December 31, 2020, the Company loaned RMB 80,000 (approximately $12,256) to its related party, an entity in which CBKB’s supervisor is a shareholder. The entity is also the landlord from which the Company leased office from in China. The loan was for a term of six months, with a monthly interest rate of 1%. The loan was not paid back to the Company by the due date on March 31, 2021. Based on the agreement, the loan can be applied to the monthly lease for two more month (RMB 40,000 per month). Therefore, the Company does not have to pay the office lease in China until May 31, 2021. The entity paid all the interest of RMB 4,800 to the Company on April 1, 2021.
Due to Related Party
During the years ended December 31, 2020 and 2019, the Company’s sole officer loaned the Company $54,417 and $54,966, respectively. As of December 31, 2020, and 2019, the Company was obligated to the officer, for unsecured, non- demand loan with balances of $340,286 and $285,869, respectively.
Sales to Related Party
The Company sells its product to its related party, an entity in which CBKB’s supervisor is a shareholder. During the year ended December 31, 2020 and 2019, consolidated net sales to the related party were $238,587 and $375,251, respectively. As of December 31, 2020 and 2019, the Company consolidated customer deposit - related party were $0 and $6,676, respectively. The accounts receivable from related party were $48,934 and $0 as of December 31, 2020 and 2019, respectively.
Consulting Agreement
On January 4, 2019, the Company entered into a Consulting Agreement with a related party, legal person of CBKB. The agreement term is from January 4, 2019 to January 3, 2020. Pursuant to the Consulting Agreement, the Company agreed to issue 110,000 shares with a fair value of the Company’s common stock to the related party to devote appropriate time and attention to providing advice to the Company in regards to the sales and marketing in China; or such other services as the Company and the related party may agree. The consulting fees were $0 and $462,000 for the year ended December 31, 2020 and 2019, respectively.
Lease Agreement
On June 1, 2020, the Company entered into a lease agreement with its related party in China, an entity in which CBKB’s supervisor is a shareholder. The agreement term is from June 1, 2020 to May 31, 2021. Pursuant to the lease agreement, the Company pays a monthly rent of RMB40,000 (approximately $5,800) paid quarterly before the start of each quarter. The lease is for a one-year term and the Company has the priority to sign a new lease agreement by a written notice to the landlord 60 days before the current lease term ends if the Company decided to keep renting the property. The Company tend to keep leasing the property after the lease term ends. Therefore, based on the lease agreement, we did the recognition of right-of-use (“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 5.25%. Lease expense is recognized on a straight-line basis over the lease term.
NOTE 7 - BUSINES CONCENTRATION AND RISKS
Concentration of Risk
The Company maintains cash with banks in the USA, People’s Republic of China (“PRC” or “China”), and Hong Kong. Should any bank holding cash become insolvent, or if the Company is otherwise unable to withdraw funds, the Company would lose the cash with that bank; however, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts. In China, a depositor has up to RMB500,000 insured by the People’s Bank of China Financial Stability Bureau (“FSD”). In Hong Kong, a depositor has up to HKD500,000 insured by Hong Kong Deposit Protection Board (“DPB”). In the United States, the standard insurance amount is $250,000 per depositor in a bank insured by the Federal Deposit Insurance Corporation (“FDIC”).
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. As of December 31, 2020 and 2019, $30,587 and $93,656 of the Company’s cash and cash equivalents, were insured, and the remaining balance of approximately $0 and $555 was not insured. With respect to accounts receivable, the Company generally does not require collateral and does not have an allowance for doubtful accounts.
Major customer
For the years ended December 31, 2020 and 2019, the Company’s revenues from one major customer were:
Years Ended December 31,
Amount
% of Total Revenue
Amount
% of Total Revenue
Customer A
$ 238,587
100 %
$ 375,251
100 %
Major vendor
For the years ended December 31, 2020 and 2019, the Company’s purchase from one major vendor was:
Years Ended December 31,
Amount
% of Total Purchase
Amount
% of Total Purchase
Vendor A
$ 97,095
100 %
$ 265,577
100 %
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 of 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 matured 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 Convertible Note Agreement was extended 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 convertible note agreement was extended 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 was characterized as a beneficial conversion feature (“BCF”). A BCF was 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 was recorded net of the discount related to the BCF and the Company amortized the discount to interest expense over the life of the debt using the effective interest method.
On September 1, 2020, the convertible note agreement was extended to September 1, 2022 with no additional consideration and no discount on the note.
The Company recognized interest expense related to the convertible note of $60,267 and $68,800, respectively, for the years ended December 31, 2020 and 2019, respectively. The unamortized debt discount as of December 31, 2020 and 2019 were $0 and $36,267, respectively. As of December 31, 2020, and 2019, net balances of the convertible note amounted to $200,000 and $163,733, respectively.
NOTE 9 - LEASE
The Company has an operating lease for its office space from a third party in the United States. 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 contract provided 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 resulted in the recognition of ROU assets and lease liabilities on the balance sheet. ROU assets and operating lease liabilities were recognized based on the present value of lease payments over the lease term as of the commencement date. Because the leases did not provide an explicit or implicit rate of return, the Company determined 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 was 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 was recognized on a straight-line basis over the lease term. The lease did not contain any residual value guarantees or material restrictive covenants. Leases with a lease term of 12 months or less were not recorded on the balance sheet and lease expense was recognized on a straight-line basis over the lease term. The lease expired on August 31, 2020.
The Company signed a new lease agreement with a related party in China in June 2020, an entity in which CBKB’s supervisor is a shareholder. It calls for a monthly rent of RMB40,000 (approximately $5,800). The lease is for one year and subject to renewal. 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 terms 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 5.25%. The lease does not contain any residual value guarantees or material restrictive covenants. The remaining term as of December 31, 2020 was 5 months and is subject to the priority of signing a new lease agreement within a 60-day written notice before the current lease agreement is due. The Company currently has no finance leases.
The components of lease expense consist of the following:
Years Ended December 31,
Classification
Operating lease cost
Selling, General & Administrative expenses
$
46,329
$
8,625
Net lease cost
$
46,329
$
8,625
Balance sheet information related to leases consists of the following:
Classification
December 31,
December 31,
Assets
Operating lease ROU assets
Right-of-use assets
$ 98,653
$ 5,588
Total leased assets
$ 98,653
$ 5,588
Liabilities
Current portion
Operating lease liabilities
Current maturities of operating lease liabilities
$ 70,534
$ 5,838
Non-current portion
Operating lease liabilities
Long-term portion of operating lease liabilities
12,756
-
Total lease liabilities
$ 83,290
$ 5,838
Weighted average remaining lease term
Operating leases
1.42
0.67
Weighted average discount rate
Operating leases
5.25-7.33
%
7.33 %
Cash flow information related to leases consists of the following:
Years Ended
December 31,
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$ 47,027
$ 8,241
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
139,275
7,866
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 December 31, 2020 was as follows:
Ending December 31,
Operating Leases
$ 73,533
12,256
Total lease payments
85,789
Less: Interest
(2,499 )
Present value of lease liabilities
$ 83,290
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 year ended, the Company incurred non-cash stock compensation expense for this consulting fee of $462,000. No common stock was issued in 2020.
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.
The following table reconciles the Company’s statutory tax rates to effective tax rates for the years ended December 31, 2020 and 2019:
Years Ended December 31,
US statutory rate
21 %
21 %
Tax rate difference
- %
(1 )%
PRC tax discount
6 %
4 %
Loss not subject to income tax
(29 )%
(25 )%
Effective tax rate
(2 )%
(1 )%
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 years ended December 31, 2020 and 2019, no GILTI tax obligation existed and the GILTI tax expense was $nil.
Provision (benefit) for income tax for the year ended December 31, 2020 consisted of:
Year ended December 31, 2020
Federal
State
Foreign
Total
Current
$ -
$ 800
$ 2,529
$ 3,329
Deferred
-
-
-
-
Total
$ -
$ 800
$ 2,529
$ 3,329
Provision (benefit) for income tax for the year ended December 31, 2019 consisted of:
Year ended December 31, 2019
Federal
State
Foreign
Total
Current
$ -
$ 800
$ 5,247
$ 6,047
Deferred
-
-
-
-
Total
$ -
$ 800
$ 5,247
$ 6,047
Net deferred tax assets consist of the following components as of:
December 31,
Deferred tax asset:
Net operating loss carry forwards
$ 159,635
$ 269,052
Valuation allowance
(159,635 )
(269,052 )
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 $440,000, 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 after 2015 and 2016 are available for examination by state tax jurisdictions and federal tax purposes.
NOTE 12 - SEGMENT REPORTING
The geographical distributions of the Company’s financial information for the year ended December 31, 2020 and 2019 were as follows:
For the Years ended
December 31,
Geographic Areas
Revenue
PRC
238,587
375,251
USA
-
-
Total Revenue
$ 238,587
$ 375,251
Income (Loss) from Operations
PRC
$ 5,877
$ 142,035 )
USA
(102,947 )
(576,234 )
Total Income (Loss) from operations
$ (97,070 )
$ (434,199 )
Net Income (Loss)
PRC
$ 7,582
$ 136,967 )
USA
(173,432 )
(654,159 )
Total Net Income (Loss)
$ (165,850 )
$ (517,192 )
The geographical distribution of the Company’s financial information as of December 31, 2020 and 2019 were as follows:
December 31,
Geographic Areas
Reportable Assets
PRC
170,916
167,774
USA
47,384
35,672
Elimination Adjustment
(25,757 )
(25,757 )
Total Reportable Assets
$ 192,543
$ 177,689
NOTE 13 - SUBSEQUENT EVENT
The Company has evaluated all subsequent events through the date the consolidated financial statements were issued and determine that there were no subsequent events or transactions that require recognition or disclosures in the consolidated financial statements.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
There were no changes in or disagreements with accountants on accounting and financial disclosure during the year ended December 31, 2020.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the Company conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of December 31, 2020. Based on this evaluation, our principal executive officer and principal financial officer has concluded that, because of the material weaknesses in our internal control over financial reporting due to lack of segregation of duties discussed below, the Company's disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that the Company's disclosure and controls are designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Notwithstanding the material weaknesses discussed below, our principal executive officer and principal financial officer has concluded that the consolidated financial statements included in this Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements and that receipts and expenditures of company assets are made in accordance with management authorization; and (iii) provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2020 based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. Based on management's assessment, including consideration of the control deficiencies discussed below, management has concluded that the Company's internal control over financial reporting was not effective as of December 31, 2020 due to the fact that there were two material weaknesses in its internal control over financial reporting. Specifically, through the investigation discussed above, management identified a lack of segregation of duties as well as errors in financial statement presentation and disclosure.
The specific material weaknesses identified by our management were as follows:
•
Lack of Segregation of Duties
•
Lack of well-established procedures to identify, approve and report related party transaction
Management is aware that there is a lack of segregation of duties and lack of well-established procedures to identify, approve and report related party transaction at the Company due to the lack of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of hiring employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management will periodically reevaluate this situation.
In order to mitigate the foregoing material weakness, we have engaged an outside accounting consultant with significant experience in the preparation of financial statements in conformity with U.S. GAAP to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity to U.S. GAAP. Management believes that this will lessen the possibility that a material misstatement of our annual or interim financial statements will be prevented or detected on a timely basis, and we will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to the exemption provided to issuers that are not "large accelerated filers" nor "accelerated filers" under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
Set forth below are the names, ages and present principal occupations or employment, and material occupations, positions, offices or employments for the past five years of our current director and executive officer.
Name
Age
Position
Juanzi Cui
President, Chief Executive Officer, Chief Financial Officer and Secretary and as a director
Juanzi Cui, age 50, has been the President of the Chongqing Municipal Health Management Association since March of 2014. Since 2011 she has been the Chairman of the Chongqing Huang Xin Technology Limited Liability Corporation. Since 2007 she has been the Vice President and Secretary General of Dietitians Association of Chongqing. Since 2006 she is the Chief Executive Officer and President of the Chongqing City Ziman Nutrition and Health Vocational Training School.
The director of the Company serves for a term of one year or until the successor is elected at the Company's annual stockholders’ meeting and is qualified, subject to removal by the Company's stockholders. The officer serves, at the pleasure of the board of directors, for a term of one year and until the successor is elected at the annual meeting of the board of directors.
There are no familial relationships among any of our officers or directors. None of our directors or officers is a director in any other reporting companies. None of our directors or officers has been affiliated with any company that has filed for bankruptcy within the last ten years. The Company is not aware of any proceedings to which any of the Company’s officers or directors, or any associate of any such officer or director, is a party adverse to the Company or has a material interest adverse to the Company.
Code of Ethics; Financial Expert
Because of the small size and limited resources of the Company, we do not currently have a Code of Ethics applicable to our principal executive, financial and accounting officers. We do not have a “financial expert” on the board or an audit committee or nominating committee.
Potential Conflicts of Interest
Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our directors. Thus, there is a potential conflict of interest in that our directors and officers have the authority to determine issues concerning management compensation and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executives or directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires executive officers and directors of the Company and persons who own more than 10% of a registered class of the Company's equity securities to file reports of ownership and changes in their ownership with the Securities and Exchange Commission, and forward copies of such filings to the Company. Our sole executive officer and director complied with the Section 16(a) filing requirements since she acquired control of the Company.
Involvement in Certain Legal Proceedings
There are no legal proceedings that have occurred within the past ten years concerning our directors, or control persons which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one's participation in the securities or banking industries, or a finding of securities or commodities law violations.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
Summary Compensation
Since our incorporation in August 2012, we have not paid any compensation to our directors or executive officers in consideration for their services rendered to our Company in their capacity as such. We have no employment agreements with any of our directors or executive officers. We have no pension, health, annuity, bonus, insurance, stock options, profit sharing or similar benefit plans
Since our incorporation, no stock options or stock appreciation rights were granted to any of our directors or executive officers. We have no equity incentive plans.
Outstanding Equity Awards
Since our incorporation, none of our directors or executive officers has held unexercised options, stock that had not vested, or equity incentive plan awards.
Compensation of Directors
Since our incorporation in August 2012, no compensation has been paid to any of our directors in consideration for their services rendered in their capacity as directors. No arrangements are presently in place regarding compensation to directors for their services as directors.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table lists, as of April 11, 2019, the number of shares of common stock of our Company that are beneficially owned by (i) each person or entity known to our Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each executive officer and director of our Company; and (iii) all executive officers and directors as a group. Information relating to beneficial ownership of common stock by our principal shareholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.
The percentages below are calculated based on 35,540,000 shares of our common stock issued and outstanding as of April 15, 2021. We do not have any outstanding options, warrants or other securities exercisable for or convertible into shares of our common stock. Unless otherwise indicated, the address of each person listed is c/o Making ORG, Inc., 385 S. Lemon Avenue #E 301, Walnut, CA 91789.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
During the years ended December 31, 2020 and 2019, the Company’s sole officer loaned the Company $54,417 and $54,966, respectively. As of December 31, 2020 and 2019, the Company was obligated to the officer, for an unsecured, non-interest bearing demand loan with a balance of $340,286 and $285,869, respectively.
Director Independence
We are not subject to listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our board comprised of a majority of “independent directors.”

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services.
Our principal independent accountant is Simon & Edward, LLP. Their pre-approved fees billed to the Company are set forth below:
Fiscal Year Ended
December 31,
Fiscal Year Ended
December 31,
Audit Fees
$ 24,500
$ 22,000
Audit Related Fees
$ 0
$ 0
Tax Fees
$ 3,500
$ 3,500
All Other Fees
$ 0
$ 0
As of December 31, 2020, the Company did not have a formal documented pre-approval policy for the fees of the principal accountant. The Company does not have an audit committee. The percentage of hours expended on the principal accountant's engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was 0%.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits. Financial Statement Schedules.
Exhibits
Exhibit No.
Description
3.1
Amended and Restated Articles of Incorporation of MakingORG, Inc. (1)
3.2
Bylaws (2)
10.1
Service Contract with Anchor Freight Services, Inc. (2)
10.2
Strategic Cooperation Framework Agreement, dated May 25, 2018, by and between the MakingORG, Inc. and Hangzhou Life Century Hualian Supermarket Chain Co., Ltd. (3)
31.1
Rule 13a-14(a)/15d-14(a) Certifications*
32.1
Section 1350 Certification, Principal Executive Officer*
32.2
Section 1350 Certification, Principal Financial Officer*
_______
*
Filed herewith
(1)
Incorporated by reference to the corresponding exhibit to the Company’s Current Report on Form 8-K filed on August 22, 2014.
(2)
Incorporated by reference to the corresponding exhibit to the Company’s registration statement on Form S-1 on filed on February 8, 2013.
(3)
Incorporated by reference to the corresponding exhibit to the Company’s Current Report on Form 8-K filed on May 29, 2018.