Corporate Structure and Operations - The company operates through subsidiaries in the UK and a Variable Interest Entity (VIE) in China, consolidating financial results under U.S. GAAP[19] - The company has evaluated its VIE Agreements and determined it is the primary beneficiary for accounting purposes, allowing for consolidation of financial results[24] - The company relies on VIE Agreements to control Mingda Tianjin, which may not be effective, exposing it to risks of losing control over operations[213] - The principal shareholder, Mr. Siping Xu, owns 98.27% of Mingda Tianjin's equity, complicating potential changes to the corporate structure[215] - The company established its PRC subsidiary through direct investment rather than mergers or acquisitions, which is not classified under the M&A Rules[208] Regulatory Environment - The company is not currently subject to cybersecurity review as it does not have over one million users' personal information, which mitigates certain regulatory risks[38] - The company has not received any inquiries or sanctions regarding its overseas listing from the China Securities Regulatory Commission (CSRC) as of the report date[38] - The CSRC promulgated the Trial Measures effective March 31, 2023, requiring domestic companies to complete filing procedures for overseas offerings within three working days[44] - The CSRC's Trial Measures mandate that domestic companies seeking to list securities overseas must complete filing procedures within three working days of application submission[163] - Existing Issuers, including the company, are not immediately required to file for compliance but must do so for any subsequent offerings[164] - The CSRC has implemented a centralized filing management system for overseas listings, which does not require prior approval from the CSRC[209] - Regulatory uncertainties regarding the M&A Rules could lead to severe penalties or operational restrictions if compliance is not met[216] Financial Performance - Revenue generated through the PRC operating entities for the year ended December 31, 2023, was $41,954, a decrease of $392,417, or 90%, from $434,371 in the same period of 2022[82] - Revenue for the year ended December 31, 2022, was $434,371, a decrease of $4,012,393, or 90%, from $4,446,764 in the same period of 2021[83] - The average commission rate achieved by the PRC operating entities in 2023, 2022, and 2021 was 0.47%, 0.5%, and 0.72%, respectively[81] - During the year ended December 31, 2023, revenue from one major customer represented 28% of total revenue, indicating a high dependency on a concentrated customer base[106] - Accounts receivable balances as of December 31, 2023, were $164,170, down from $967,819 in 2022, reflecting a significant reduction in outstanding receivables[108] Investment and Earnings - The company intends to retain future earnings to finance business expansion and does not anticipate paying cash dividends in the foreseeable future[52] - The company has not distributed any earnings or settled any amounts owed under the VIE Agreements as of the date of the annual report[50] - Current PRC regulations permit WFOE to pay dividends to MDJH Hong Kong only out of its accumulated profits, if any[56] - The PRC government imposes controls on the conversion of RMB into foreign currencies, which may hinder the company’s ability to remit foreign currency for dividend payments[57] - If the company is considered a PRC tax resident enterprise, dividends paid to overseas shareholders may be subject to PRC withholding tax at a rate of up to 10.0%[58] Market Conditions - The PRC operating entities' business is significantly affected by fluctuations in the real estate market, which has seen rapid growth but also volatility in prices and demand[62] - The PRC operating entities have been reducing their operations in China since 2021 and have expanded into European markets by establishing subsidiaries in the UK and Germany[82] - The PRC operating entities' sales performance is influenced by various factors, including buyer appetite and government policies, which may lead to fluctuations in revenue[81] - The gradual relaxation of home purchase restrictions is expected to increase residents' willingness to buy houses, positively impacting the real estate economy[75] Legal and Compliance Risks - The company is subject to legal and operational risks associated with its substantial operations in China, which could impact the value of its securities[38] - The VIE structure poses unique risks, including potential changes in PRC laws that could affect operational control and the value of securities[35] - The PRC legal system's rapid evolution creates uncertainties in the interpretation and enforcement of laws, which could adversely affect business operations[147] - The enforcement of foreign judgments in China is uncertain, particularly regarding judgments from U.S. courts[160] - The company may experience difficulties in legal processes and investigations due to the complexities of operating within the PRC legal framework[161] Currency and Financial Risks - Fluctuations in the RMB against the U.S. dollar may materially affect the company's financial results, as its operating entities conduct business in RMB while reporting in U.S. dollars[192] - Limited hedging options are available in China to mitigate foreign currency exchange risk, which may lead to significant currency exchange losses[195] Competitive Landscape - The PRC operating entities face intense competition in the real estate services industry, which may impact their revenue and market position[86] - The trademark "Mingda Jiahe" is critical for competitive advantage, and any failure to protect it could negatively impact the business[113] Future Outlook - The company has adjusted its growth strategies to focus on overseas operations due to the decline in the Chinese real estate market[83] - The COVID-19 pandemic did not have a material impact on business operations and financial results in 2023[76] - MD Japan has not commenced operations and has not generated any revenue as of the report date, with potential adverse impacts from economic conditions in Japan and COVID-19 related restrictions[125] - The EU's Next Generation EU program includes grants and loans exceeding €800 billion to support economic recovery, but political uncertainties may pose risks to future economic performance[128] - The UK subsidiaries may incur losses due to ongoing political and economic uncertainty stemming from Brexit, with potential regulatory complexities arising from the Trade Cooperation Agreement[131]
MDJM(UOKA) - 2023 Q4 - Annual Report