Corporate Structure and Operations - The company operates as a holding entity in the Cayman Islands, with no direct operations, relying on subsidiaries in the UK and a VIE in China until March 2025[18]. - The VIE Agreements allowed the company to consolidate financial results from Mingda Tianjin for fiscal years ending December 31, 2024, 2023, and 2022 under U.S. GAAP[22]. - The Exclusive Business Cooperation Agreement with Mingda Tianjin enables the company to provide management and technical support, with service fees based on net income after statutory reserves[23]. - The Share Pledge Agreement secures the performance of Mingda Tianjin's obligations, allowing the company to collect dividends and dispose of pledged equity interests in case of default[26]. - The Exclusive Option Agreement grants the company the right to purchase equity interests in Mingda Tianjin at the capital paid in by shareholders, subject to PRC law[29]. Regulatory Compliance and Risks - The company is not currently subject to cybersecurity reviews as it does not have over one million users' personal information, nor does it anticipate reaching that threshold in the foreseeable future[34]. - As of the report date, the company has not received any inquiries or sanctions regarding its overseas listing from the CSRC or other PRC authorities[34]. - The company’s auditor, RBSM LLP, is subject to PCAOB inspections, which is crucial for compliance with the HFCA Act to avoid potential trading prohibitions[36]. - The company is categorized as an existing enterprise under the Trial Administrative Measures, thus not immediately required to file for compliance following the new regulations[34]. - Future compliance with PRC regulations will be necessary for any new offerings or fundraising activities[34]. - The company is not required to obtain permission from PRC authorities for its securities offerings, but it remains subject to potential future compliance requirements due to evolving regulations[44]. - The company may face challenges in obtaining and remitting foreign currency for dividend payments due to PRC government controls[52]. - Future regulatory changes in China could impose additional compliance costs and operational restrictions, impacting the company's business[91]. - The company may face additional compliance requirements due to new regulations aimed at strengthening oversight of overseas listings by China-based companies[105]. - The company may incur substantial costs to comply with the Data Provisions, potentially leading to adverse effects on its business operations and financial position[110]. Financial Performance - Revenue decreased by 90% in 2022 compared to 2021, primarily due to the impact of the COVID-19 pandemic and declining consumer demand in China[69]. - Revenue generated through PRC operating entities for the year ended December 31, 2023, was $41,954, a decrease of 90% from $434,371 in 2022[72]. - The PRC operating entities ceased operations in China for the fiscal year ended December 31, 2024, resulting in revenue of $nil, a decrease of 100% from the previous year[71]. - As of the date of the annual report, no dividends or distributions have been made to the company or its shareholders, and future earnings are intended to finance business expansion[47]. Investment and Capital Structure - The company transferred $1,480,000 to its UK subsidiary as an investment in 2022, and no other assets were transferred between the company, its subsidiaries, and the VIE during the fiscal years ended December 31, 2024, 2023, and 2022[46]. - Current PRC regulations allow the WFOE to pay dividends to the Hong Kong subsidiary only from accumulated profits, and at least 10% of after-tax profits must be set aside for statutory reserves[50]. - The company intends to apply for a tax resident certificate to potentially benefit from a reduced withholding tax rate on dividends under the Double Tax Avoidance Arrangement[54]. - The company has not yet applied for a Hong Kong tax resident certificate, which is necessary to qualify for the reduced withholding tax rate[146]. Market Expansion and Strategy - 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[69]. - The company plans to continue searching for potential acquisition targets in the UK and other European countries, focusing on properties with rich historical value[206]. - The newly launched e-commerce platform, www.uokaus.com, aims to integrate commerce with cultural heritage and support craftsmanship-based retail[202]. - The company aims to develop unique cultural assets and enhance market competitiveness through the creation of Eastern cultural landscape gardens at Fernie Castle[206]. Management and Governance - The Chief Executive Officer, Mr. Siping Xu, owns 38.70% of the company's Ordinary Shares, granting him significant voting power over corporate matters[160]. - The company has identified a material weakness in internal controls over financial reporting prior to its IPO, but has since taken steps to address this issue[162]. Challenges and Risks - The UK subsidiaries face challenges in identifying and managing additional hotel properties, which could impair growth strategies[60]. - Compliance with hospitality industry regulations is critical, as non-compliance may lead to fines or operational suspensions, adversely affecting financial results[61]. - The company is exposed to risks from changing policies in the UK real estate market, which could increase operational costs and affect profit margins[67]. - The company’s operations in Japan may incur losses due to economic instability and external disruptions, impacting future revenue potential[77]. - The company relies heavily on the experience of its senior management team, and losing key personnel could hinder business operations and growth strategies[74]. Audit and Listing Compliance - The PCAOB has secured access to inspect audit firms in mainland China and Hong Kong, but future access may be obstructed by PRC authorities, affecting the company's audit compliance[120]. - The HFCA Act mandates that if the PCAOB cannot inspect the company's auditors for two consecutive years, trading of its securities may be prohibited on U.S. exchanges, posing a risk to the company's market presence[118]. - The company may not be able to continue satisfying Nasdaq listing requirements, which could lead to delisting and negatively impact share price[172]. - The company received a notice from Nasdaq on October 23, 2024, for failing to meet the minimum closing bid price requirement of $1.00 per share, with a compliance period until April 21, 2025[171]. - The company may face significant consequences if delisted from Nasdaq, including reduced liquidity and increased trading restrictions[173]. Revenue Generation and Performance Metrics - Mansions generated revenue of $48,375 (GBP 37,849) in 2024, $102,909 (GBP 82,729) in 2023, and $16,263 (GBP 13,207) in 2022[197]. - The PRC operating entities reported revenue of $nil in 2024, $41,954 in 2023, and $434,371 in 2022, with net losses of $(631,355), $(662,821), and $(1,847,047) for the same years respectively[200]. - The PRC operating entities generated 0%, 29.0%, and 96.4% of their total revenue through primary agency sales services in fiscal years ended December 31, 2024, 2023, and 2022 respectively[199]. - The total value of contracts for new properties sold by the PRC operating entities was $0 million for 2024, $8.97 million for 2023, and $83.12 million for 2022[215]. - The total gross floor area of new properties under contract was 0 thousand square meters for 2024, 1.24 thousand square meters for 2023, and 13.98 thousand square meters for 2022[215].
MDJM(UOKA) - 2024 Q4 - Annual Report