Market Conditions and Economic Impact - MKD's sales and profitability are directly affected by automotive vehicle production and demand, which have been challenged globally [60]. - Recent economic conditions, including inflation and interest rate fluctuations, have negatively impacted MKD's sales and financial performance in 2023 and 2024 [74]. - Economic uncertainties, including job loss and higher consumer debt, may lead to a decline in consumer spending, adversely affecting MKD's financial condition [92]. - China's slow recovery from the Covid pandemic and associated economic issues have negatively impacted demand for MKD's products in 2023 and 2024 [93]. - A prolonged period of depressed consumer spending could materially affect MKD's business and increase operating expenses [94]. - The cyclical nature of the RV and camper van industry may result in operating losses during economic downturns, influenced by factors such as financing availability and consumer confidence [95]. Operational Challenges - MKD's manufacturing efficiency is crucial for future profitability, and any delays or technical issues could lead to significant revenue loss [76]. - A shortage of materials, particularly microprocessors, could disrupt MKD's production schedule and adversely affect financial results [67]. - Disruptions in the supply of raw materials could materially increase operating costs and decrease profit margins for MKD [87]. - The ongoing global semiconductor supply shortage has had limited impact on MKD's operations due to the availability of substitute components [91]. - The company may face challenges in attracting and retaining qualified personnel, which is essential for its operational success [83]. - MKD's business may be adversely affected by obsolete inventories due to changes in demand and product life cycles, which could lead to excess inventory and operational impacts [84]. Competitive Landscape - The automotive market is highly competitive, with MKD facing pressure from both electric vehicle manufacturers and traditional automotive companies [65]. - The company is under continuous pressure to reduce product prices, which could impact growth and profit margins [78]. - MKD's ability to innovate and develop new products is critical, as failure to do so may result in decreased sales and loss of market share [79]. Regulatory and Compliance Risks - Legal proceedings and disputes could have a material adverse effect on MKD's profitability and financial position [73]. - The PRC government's oversight may influence MKD's operations, potentially resulting in material adverse changes and affecting the value of the company's securities [102]. - MKD's operations are significantly impacted by PRC laws and regulations, which may evolve and affect the company's ability to offer securities and its overall business prospects [110]. - The company submitted the required filing with the CSRC on September 21, 2023, in connection with its business combination, but future regulatory changes may impose additional requirements [122]. - If identified as a Commission-Identified Issuer under the HFCAA, MKD's securities could be prohibited from trading in the U.S. for two consecutive years, significantly impacting capital raising efforts [114]. - The PRC government has indicated an intent to exert more oversight over overseas listings, which may materially change MKD's operations and limit its ability to offer securities to foreign investors [113]. - MKD may face significant penalties if it fails to obtain necessary licenses or if its compliance status is misjudged, potentially affecting its business operations and financial condition [119]. - Regulatory restrictions on loans and capital contributions to PRC subsidiaries may hinder MKD's liquidity and ability to fund business expansion [127]. - Future changes in PRC regulations could impose additional requirements on MKD, affecting its ability to conduct business operations and impacting the trading price of its securities [124]. - SAFE Circular 19 restricts the use of RMB capital converted from foreign currency for certain financial activities, potentially impacting liquidity and business expansion in China [129]. - The ability to provide financial support to PRC subsidiaries is uncertain due to regulatory requirements for government registrations and approvals [130]. - PRC regulations require approvals for converting RMB to foreign currency for capital expenses, affecting the company's ability to pay debts in foreign currencies [132]. - The company may face penalties for failing to make adequate contributions to employee benefit plans as mandated by PRC regulations [134]. - Regulatory compliance is critical for MKD's operations in the PRC, with potential penalties for non-compliance impacting business operations [139]. - Taiwan regulations restrict dividend payments to accumulated profits, which may affect the company's liquidity requirements [144]. - Foreign exchange controls in Taiwan may impact the ability to repatriate dividends or make payments to the company [145]. - Approval from Taiwan authorities is required if shareholding thresholds are met, with penalties for non-compliance [147]. - MKD's products are subject to consumer protection regulations in Taiwan, with potential liabilities for non-compliance affecting business results [148]. Financial and Market Risks - The Company received a deficiency notice from Nasdaq on November 14, 2024, indicating that its Market Value of Publicly Held Shares (MVPHS) was below the required minimum of 15 million or more for a minimum of ten consecutive business days [153]. - On February 10, 2025, the Company received a deficiency letter for not maintaining a minimum bid price of 50 million, leading to an application for transfer to the Nasdaq Capital Market [155]. - The transfer of the Company's Ordinary Shares to the Nasdaq Capital Market was approved and took effect on March 25, 2025 [155]. - The Company may need to raise additional funding through dilutive equity investments or conduct reverse stock splits to meet Nasdaq's listing standards [157]. - The Company faces uncertainty regarding the development of an active trading market for its Ordinary Shares, which may affect liquidity and market price [158]. - The Company's share price may be volatile due to actual or perceived changes in financial results and market conditions [160]. - The Company may issue additional ordinary shares or convertible securities without shareholder approval, potentially diluting existing ownership interests [164]. - The Company does not expect to pay any cash dividends in the near future, as it plans to retain most of its available funds for business development and growth [174]. - The Company's Board has complete discretion regarding dividend distribution, which will depend on future operational results, cash flow, and other relevant factors [175]. - The Company is a foreign private issuer and is exempt from certain U.S. securities regulations, which may result in less timely and extensive information being available to shareholders compared to U.S. domestic companies [177][178]. - If the Company loses its foreign private issuer status, it will incur substantial costs to comply with additional regulatory requirements [179]. - The Company may face difficulties for shareholders in protecting their interests due to its incorporation under BVI law, which offers less protection compared to U.S. laws [191][195]. - Shareholders have limited rights under BVI law to inspect corporate documents, which may hinder their ability to obtain necessary information for shareholder actions [194]. - The Company may not have standing to initiate derivative actions in U.S. federal courts, limiting shareholders' ability to seek legal recourse [196]. - The trading market for the Company's securities could be affected by recent market volatility, including high short interest and retail investor interest [171]. - A potential "short squeeze" could lead to price volatility in the Company's Ordinary Shares, which may not correlate with its operating performance [172]. - The Company may publish its results through press releases, but the information provided will be less extensive than that required for U.S. domestic issuers [178]. - The Company is classified as an "emerging growth company" and will remain so until it has total annual gross revenue of at least 700 million [199]. - The Company may take advantage of exemptions from various reporting requirements, which could make its securities less attractive to investors and lead to a less active trading market [203]. - The Company is not subject to regulatory supervision by the Financial Services Commission of the British Virgin Islands, which means shareholders are not protected by regulatory inspections [207]. - The Company anticipates significant legal, accounting, and compliance costs associated with being a public company, which may materially increase its general and administrative expenses [210]. - The Company's ability to service its debt obligations will depend on future operating performance and may require it to take actions that could adversely affect its business [215]. - The market price of the Ordinary Shares is expected to be highly volatile following the business combination with Cetus Capital, influenced by earnings compared to market expectations [217]. - The Company may incur substantial costs from stockholder litigation and regulatory inquiries, which could divert management's attention and adversely affect its operations [209]. - The Company has provisions in its memorandum and articles of association that could impair takeover attempts, potentially depriving shareholders of opportunities to sell shares at a premium [216]. - The Company is required to establish and maintain effective internal control over financial reporting, which may strain its financial and management systems [213]. - The Company may face challenges in attracting and retaining qualified individuals for its board of directors and executive positions due to increased costs of liability insurance [212]. - The company's stock price has experienced extreme fluctuations, which may not correlate with its actual operating performance [218]. - Future sales of shares by shareholders could adversely affect the market price of the company's Ordinary Shares [220]. - The company faces risks related to the inability to maintain its listing on Nasdaq and to recognize anticipated benefits from business combinations [221]. Currency and Interest Rate Risks - The company's revenues and costs are primarily denominated in Renminbi and New Taiwan Dollars, limiting direct foreign exchange risk [496]. - The value of the Renminbi against the U.S. dollar is subject to government policies and international developments, which could lead to significant fluctuations [497]. - Appreciation of the Renminbi against the U.S. dollar could adversely affect the amount received from conversions for operational needs [498]. - The company has not been exposed to material risks from changes in market interest rates but may face such risks in the future [499]. - Investments in fixed and floating rate interest-earning instruments carry interest rate risk, affecting the fair market value and income generation [500].
MKDWELL Tech Inc.(MKDW) - 2024 Q4 - Annual Report