MAKINGORG, INC. - Quarter Report: 2017 September (Form 10-Q)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q 

Mark One

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

For the quarterly period ended September 30, 2017

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

For the transition period from ______ to _______

Commission File No. 000-55260

17800 Castleton St., #386

City of Industry, CA 91748

(213) 805-5799

(Address and telephone number of principal executive offices)

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

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.

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

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

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

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

Applicable Only to Corporate Registrants

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

PART I.

FINANCIAL INFORMATION

See accompanying notes to unaudited financial statements.

See accompanying notes to unaudited financial statements.

See accompanying notes to unaudited financial statements.

MakingORG, Inc. and Subsidiaries

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017

(Unaudited)

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

MakingORG, Inc. was incorporated under the laws of the State of Nevada on August 10, 2012. The Company intends to establish a line of health food stores or stores-in-stores within the Asian communities in the United States. The trading symbol of the Company is "CQCQ".

On October 20, 2016, the Company filed documents registering its intention to transact interstate business in the state of California. On November 29, 2016, the Company incorporated HK Feng Wang Group Limited (“HKFW”) under the laws of Hong Kong. On August 22, 2017, HK Feng Wang Group Limited incorporated Chongqing Beauty Kenner Biotechnology Co., Ltd (“CBKB”) under the laws of the People’s Republic of China (“PRC”).

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The unaudited accompanying condensed consolidated financial statements include the accounts of MakingORG, Inc. and its subsidiaries as shown in the organization structure in Note 1 above. All significant intercompany transactions and balances were eliminated in consolidation.

Basis of Presentation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.

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

Accounting Basis

The Company uses the accrual basis of accounting and has adopted a calendar year end.

Use of Estimates

The preparation of the 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 financial statement date, and 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. The Company had $65,834 and $165,481 cash and cash equivalents as of September 30, 2017 and December 31, 2016, respectively.

Inventories

Inventories consist of (a) packing materials and (b) raw materials, which are stated at the lower of cost or market under the first-in-first-out method. The Company reviews its inventories periodically for possible excess and obsolescence to determine if any reserves are necessary.

Revenue Recognition

The Company recognizes revenue when (1) delivery of product has occurred or services have been rendered, (2) there is persuasive evidence of a sale arrangement, (3) selling prices are fixed or determinable, and (4) collectability from the customer is reasonably assured.

Segment Reporting 

The Company follows FASB ASC Topic 280, “Segment Reporting” for its segment reporting. The Company and its subsidiaries managed and reviewed its business as three operating segments. The business of the Company was managed and reviewed as US segment. The business of HKFW was managed and reviewed as Hong Kong segment. The business of CBKB was managed and reviewed as PRC segment.

ASC-280-10-50-12 states, a public entity shall report separately information about an operating segment that meets any of the following quantitative thresholds:

Recently Issued Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of the Company’s financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

NOTE 3 – 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 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 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 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 financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company is in the process of initiating its profitable operations, so that it may be able to raise additional funds through its 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. 

NOTE 4 – INVENTORIES

The components of the Company’s inventory were packaging materials and inventory in transit. Inventory consisted of the following as of September 30, 2017 and December 31, 2016:

NOTE 5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets primarily include prepaid consulting fee, deposit for product processing fee and security deposit for rent. As of September 30, 2017, and December 31, 2016, prepaid expenses and other current assets were $12,861 and $12,150, respectively.

NOTE 6 – DUE TO RELATED PARTY

During the nine months ended September 30, 2017 and 2016, the Company's sole officer loaned the Company $900 and $28,088, respectively. As of September 30, 2017 and December 31, 2016, the Company was obligated to the officer, for an unsecured, non-interest bearing demand loan with a balance of $75,479 and $74,579, respectively.

NOTE 7 – 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 was paid in full.

The Company recognized interest expense related to the convertible note of $32,571 for the nine months ended September 30, 2017. The unamortized debt discount at September 30, 2017 was $17,810. As of September 30, 2017, net balance of the convertible note amounted to $182,190.

 NOTE 8 – COMMITMENTS

Operating Lease

The Company has operating leases for its office. Rental expenses for the three months ended September 30, 2017 and 2016 were $3,000 and nil, respectively. Rental expenses for the nine months ended September 30, 2017 and 2016 were $9,000 and nil, respectively. As of September 30, 2017, total future minimum annual lease payments under operating lease was as follows, by years: 

NOTE 9 – INCOME TAXES

The Company provides 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 34% to the net loss before provision for income taxes. HKFW in Hong Kong are governed by the Inland Revenue Ordinance Tax Law of Hong Kong, and are generally subject to a profits tax at the rate of 16.5% on the estimated assessable profits. CBNB in the PRC is governed by the Income Tax Law of the PRC concerning the private enterprises, which are generally subject to tax at 25% on income reported in the statutory financial statements after appropriated adjustments.

Provision (benefit) for income tax for the three months ended September 30, 2017 consisted of:

Provision (benefit) for income tax for the three months ended September 30, 2016 consisted of:

Provision (benefit) for income tax for the nine months ended September 30, 2017 consisted of:

Provision (benefit) for income tax for the nine months ended September 30, 2016 consisted of:

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

Due to the change in ownership provisions of the Income Tax laws of United States of America, net operating loss carry forwards of approximately $263,000, 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.

NOTE 10 – SEGMENT INFORMATION

Except total assets, PRC and Hong Kong segment do not meet any ASC 280 quantitative thresholds in the reported consolidated amounts. The following table shows the Company’s total assets segments as of September 30, 2017 and December 31, 2016:

NOTE 11 – SUBSEQUENT EVENT

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

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

As used in this Form 10-Q, references to “MakingORG”,” the “Company,” “we,” “our” or “us” refer to MakingORG, Inc. unless the context otherwise indicates.

Forward-Looking Statements

The following discussion should be read in conjunction with our financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. We assume no obligation to update forward-looking statements, except as otherwise required under the applicable federal securities laws.

Plan of Operation

Given our limited resources and the fact that we have never generated any revenues from the sale of our products, we are no longer focused on operating a business and have abandoned our initial business plan. Although our sole officer and director intends to have the Company open a line of health food stores or stores-in-stores within the Asian communities in the United States, 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 Quarterly Report is purposefully general and is not meant to be restrictive of the Company's virtually unlimited discretion to search for and enter into potential business opportunities.

The following discussion should be read in conjunction with the unaudited interim financial statements contained in this Report and in conjunction with the Company's Form 10-K filed on April 17, 2017. Results for interim periods may not be indicative of results for the full year.

Critical Accounting Policies and Estimates

For revenue from product sales, the Company will recognize revenue in accordance with paragraph 605-10-S99-1 of the FASB Accounting Standards Codification (“ASC”) for revenue recognition. ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgment regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowance, and other adjustments will be provided for in the same period the related sales are recorded.

The preparation of 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 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 three months ended September 30, 2017 and 2016

Revenue

The Company did not generate any revenue during the three months ended September 30, 2017 and 2016.

Total operating expenses

During the three months ended September 30, 2017, total operating expenses were $25,518, which consisted of professional fees of $19,752, rent expenses of $3,000, office expenses of $2,335 and bank service charge of $431. During the three months ended September 30, 2016, total operating expenses were $4,652, which included professional fees of $4,250, bank service charge of $144, and office expenses of $258. Total operating expenses increased by $20,866, or 449%, from the three months ended September 30, 2016 to 2017 primarily due to the increase in rent expenses and the professional fees.

Total other income (expenses)

During the three months ended September 30, 2017 and 2016, the Company incurred interest expense of $10,857 and $3,619, respectively.

Net loss

During the three months ended September 30, 2017, the Company had a net loss of $36,375, compared with a net loss of $8,271 for the three months ended September 30, 2016.

For the nine months ended September 30, 2017 and 2016

Revenue

The Company did not generate any revenue during the nine months ended September 30, 2017 and 2016.

Total operating expenses

During the nine months ended September 30, 2017, total operating expenses were $94,852, which consisted of professional fees of $65,257, marketing and product exam expense of $10,275, research and development expense of $7,000, rent expenses of $9,000, website expense of $1,800, bank service charge of $960, and office expenses of $560. During the nine months ended September 30, 2016, total operating expenses were $20,332, which included professional fees of $19,722, bank service charge of $144, and office expenses of $466. Total operating expenses increased by $74,520, or 367%, from nine months ended September 30, 2016 to 2017 primarily due to the increase in marketing and product exam expense, research and development expense, rent expenses and the professional fees.

Total other income (expenses)

During the nine months ended September 30, 2017 and 2016, the Company incurred interest expense of $32,571 and $3,619, respectively.

Net loss

During the nine months ended September 30, 2017, the Company had a net loss of $128,223, as compared with a net loss of $23,951 for the nine months ended September 30, 2016.

Liquidity and Capital Resources

As of September 30, 2017, the Company had cash and cash equivalents and total assets of $65,834 and $101,531, respectively. As of same date, the Company had total liabilities of $302,408, of which $182,190 was due to convertible note payable and $75,479 was due to the sole officer and director as an unsecured, non-interest bearing demand loan. As of September 30, 2017, and December 31, 2016, the Company had working capital amount of ($200,877) and $94,977, respectively.

Other than an oral agreement with Mrs. Cui to fund the expenses of the Company, we currently have no agreements, arrangements or understandings 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.

Cash Flows from Operating Activities

For the nine months ended September 30, 2017, net cash flows used in operating activities was $100,547 resulting from a net loss of $128,223, amortization of debt discount of $14,571, an increase in inventory of $22,836, an increase in prepaid expenses and other current assets of $711, and an increase in accounts payable of $15,152 and accrued liabilities of $21,500. For the nine months ended September 30, 2016, net cash flows used in operating activities was $22,632 resulting from a net loss of $23,951, amortization of debt discount of $1,619, and an decrease in accrued liabilities of $300.

Cash Flows from Investing Activities

For the nine months ended September 30, 2017 and 2016, the Company did not have any cash flow from investing activities.

Cash Flows from Financing Activities

For the nine months ended September 30, 2017, advances from the Company’s sole officer and director provided $900. For the nine months ended September 30, 2016, net cash flows provided by financing activities was $228,088, resulting from proceeds from convertible note of $200,000 and advances from the Company’s sole officer and director of $28,088.

Going Concern Consideration

The Company had no revenues and incurred a net loss of $128,223 for the nine months ended September 30, 2017 and a net loss of $23,951 for the nine months ended September 30, 2016. In addition, the Company had an accumulated deficit of $263,887 at September 30, 2017. 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 financial statements do not include any adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Convertible Note Payable

On September 1, 2016, the Company entered into a Convertible Note Agreement in the principal amount of $200,000 with an unrelated party. The note bears interest at 12% per annum and the holder is able to convert all unpaid interest and principal into common shares at $3.50 per share. The note matures on September 1, 2018. The Company recognized a discount on the note of $38,857 at the agreement date. The interest expense was due every six months commencing on March 1, 2017 until the principal amount of this convertible note was paid in full.

The Company recognized interest expense related to the convertible note of $32,571 for the nine months ended September 30, 2017. The unamortized debt discount at September 30, 2017 was $17,810. As of September 30, 2017, net balance of the convertible note amounted to $182,190.

Operating Lease

The Company has operating leases for its office. Rental expenses for the three months ended September 30, 2017 and 2016 were $3,000 and nil, respectively. Rental expenses for the nine months ended September 30, 2017 and 2016 were $9,000 and nil, respectively. As of September 30, 2017, total future minimum annual lease payments under operating lease was as follows, by years:

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable because we are an emerging growth company.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective as of June 30, 2017 to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure for the reason described below.

Because of our limited operations, we have limited number of employees which prohibits a segregation of duties. In addition, we lack a formal audit committee with a financial expert. As we grow and expand our operations we will engage additional employees and experts as needed. However, there can be no assurance that our operations will expand.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

As an emerging growth company, we are not required to provide the information required by this item.

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

Unregistered Sales of Equity Securities

None.

Purchases of equity securities by the issuer and affiliated purchasers

None.

Use of Proceeds

None

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

SIGNATURES

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