VIE Structure and Regulatory Risks - The company operates through subsidiaries in the UK and a Variable Interest Entity (VIE) in China, consolidating financial results under U.S. GAAP due to contractual arrangements[18]. - The VIE structure poses unique risks, including potential changes in PRC laws that could affect operational control and the value of securities[36]. - The Exclusive Option Agreement allows WFOE to purchase equity interests in Mingda Tianjin at any time, subject to PRC law[33]. - The company's ability to settle amounts owed under VIE Agreements relies on payments made from the VIE to WFOE, which may be affected by PRC laws and regulations[59]. - The company relies on VIE Agreements for control over Mingda Tianjin, which may not be effective and could result in significant operational risks[195]. - The VIE structure exposes the company to regulatory risks, including potential penalties if compliance with PRC laws is not maintained[197]. - The company may face challenges in enforcing VIE Agreements under PRC law, which could limit its ability to consolidate financial results[200]. - Any changes in the interpretation of VIE regulations by the PRC government could adversely affect the company's operations and share value[199]. - The VIE Agreements may lead to adverse tax consequences due to PRC regulations on transfer pricing arrangements[202]. - The company's ability to remit profits from Mingda Tianjin may depend on compliance with SAFE registration requirements, which are outside its control[192]. - The company has identified a material weakness in internal controls over financial reporting, although steps have been taken to address this issue[214]. Financial Performance and Revenue - The company's revenue decreased by 90% for the year ended December 31, 2022, compared to the same period in 2021 due to the impact of the COVID-19 pandemic and government regulations on the real estate market[73]. - In 2022, the PRC operating entities generated revenue of $434,371, a decrease of $4,012,393, or 90%, from $4,446,764 in 2021[78]. - Revenue for the PRC operating entities in 2021 was $4,446,764, a decrease of $1,421,961, or 24%, from $5,868,725 in 2020[77]. - The average commission rates achieved by the PRC operating entities in 2022, 2021, and 2020 were 0.5%, 0.72%, and 1.01%, respectively[76]. - The PRC operating entities won 0%, 50%, and 50% of the total bids submitted in 2022, 2021, and 2020, respectively[75]. - The PRC operating entities plan to reduce their scale of operations and decrease ongoing programs, which could adversely affect their results of operations[79]. - The PRC operating entities face intense competition, which may lead to decreased commission rates or service fees[80]. - The PRC operating entities' revenue generation is project-based, with each project potentially lasting over five years, complicating revenue forecasting[85]. - The PRC operating entities' operating income has historically been lower in the first quarter due to seasonal variations in the real estate market[84]. - The PRC operating entities' revenue from one major customer represented 79% of total revenue for the year ended December 31, 2022, up from 61% in 2020[101]. - Accounts receivable balances as of December 31, 2022, were $967,819, a decrease from $2,137,711 in 2021[102]. - The PRC operating entities face long cycles for settling accounts receivable, impacting working capital and cash flow[102]. Regulatory Environment and Compliance - The company is categorized as an existing enterprise under the Trial Administrative Measures of Overseas Securities Offering and Listing, thus not immediately required to file for compliance[40]. - The company has not received any inquiries or sanctions regarding its overseas listing from the CSRC or other PRC authorities as of the report date[40]. - The CSRC has implemented new filing procedures for domestic companies seeking to list overseas, which must be completed within three working days of submission[45]. - The company is classified as an Existing Issuer, meaning it is not immediately required to file for compliance but must ensure future offerings comply with relevant regulations[46]. - The revised Provisions on Strengthening Confidentiality and Archives Administration require domestic companies to obtain approval for disclosing documents containing state secrets when engaging in overseas listings[47]. - The Cybersecurity Review Measures require online platform operators with personal information of at least one million users to apply for a cybersecurity review before listing overseas[145]. - As of the annual report date, the company has not been identified as a critical information infrastructure operator and does not anticipate being subject to cybersecurity reviews[147]. - The SEC and PCAOB have called for more stringent criteria for auditors of emerging market companies, which may add uncertainties to the company's continued listing in the U.S.[156]. - The HFCA Act requires foreign companies to certify they are not controlled by foreign governments if PCAOB cannot audit them, with potential trading prohibitions after three consecutive years of non-inspection[158]. - The PCAOB has determined it can now inspect registered public accounting firms in mainland China and Hong Kong, but future access may be obstructed by PRC authorities[163]. - The company’s SEC reports are not subject to review by PRC regulatory authorities, which may affect the scrutiny of disclosures[186]. - The company established its PRC subsidiary through direct investment rather than mergers or acquisitions, which may exempt it from certain M&A Rules[189]. - The CSRC's approval is not required for the listing and trading of the company's Ordinary Shares on the Nasdaq Capital Market, based on current legal counsel advice[188]. - The M&A Rules and related regulations may complicate future acquisitions by foreign investors, potentially delaying or inhibiting growth strategies[193]. Business Operations and Market Conditions - The company has expanded into European markets by establishing subsidiaries in the UK and Germany and acquiring properties such as Fernie Castle and the Robin Hill Property to mitigate the adverse impacts of the pandemic[73]. - The PRC operating entities' sales performance is influenced by the availability of mortgage financing, which is affected by PRC regulations and interest rates[88]. - The PRC operating entities must comply with various licensing and regulatory requirements, with potential penalties for non-compliance[109][112]. - The PRC operating entities are subject to stricter labor contract regulations, which may limit their ability to manage employment practices effectively[114]. - The PRC operating entities face significant risks from natural disasters and health epidemics, which could materially disrupt operations and adversely affect financial results[118]. - Political uncertainties in the European Union, particularly due to Brexit, could adversely impact the real estate market and the financial condition of the German subsidiary MD German, which has not yet generated revenue[124]. - The EU's Next Generation EU program, comprising over €800 billion in grants and loans, aims to support economic recovery and modernization, potentially benefiting the overall economic landscape[124]. - The Chinese government continues to exert significant control over economic growth, which may adversely affect the demand for services provided by the PRC operating entities[135]. - Future actions by the Chinese government regarding VIE agreements could significantly impact the financial performance and operations of the PRC operating entities[136]. - The PRC operating entities face substantial uncertainties regarding the interpretation and application of PRC laws and regulations, which may impair their ability to operate profitably[137]. - The Chinese government has significant oversight and discretion over business operations, which could result in material changes to operations and the value of securities[140]. - Recent policies from the Chinese government have significantly affected certain industries, and future regulations could adversely impact the company's business and financial condition[141]. Financial Management and Dividend Policy - The company does not anticipate paying cash dividends in the foreseeable future, as it intends to retain earnings for business expansion[51]. - Current PRC regulations allow WFOE to pay dividends to MDJH Hong Kong only from accumulated profits, and at least 10% of after-tax profits must be set aside for statutory reserves[54]. - The company may face difficulties in obtaining foreign currency for dividend payments due to PRC government controls on currency conversion and remittance[55]. - If the company is considered a PRC tax resident enterprise, dividends paid to overseas shareholders may be subject to a withholding tax of up to 10%[56]. - Dividends from PRC operating entities to offshore subsidiaries may be subject to a 10% withholding tax, which could be reduced to 5% under certain conditions[183]. - The company has not commenced the application process for a Hong Kong tax resident certificate, which is necessary for potential tax benefits[184]. - The company does not intend to pay dividends for the foreseeable future, focusing on retaining earnings for business operations and expansion[212]. Management and Ownership - The Chief Executive Officer, Mr. Siping Xu, owns 87.4% of the company's Ordinary Shares, granting him significant voting influence over corporate matters[210]. - The company is deemed a "controlled company" under Nasdaq rules, allowing it to follow certain exemptions from corporate governance requirements[211]. - There is a risk of conflicts of interest with Mingda Tianjin Shareholders, which may adversely affect the company's ability to control Mingda Tianjin[204]. - The company relies on the approvals and licenses held by Mingda Tianjin, and any deterioration in this relationship could materially affect business operations[206]. - The exercise of the option to purchase shares in Mingda Tianjin may be subject to limitations and substantial costs, including tax adjustments[208].