UOKA 20-F Report ended Dec. 31, 2024

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

☐    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended December 31, 2024

OR

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

OR

☐    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from to

Commission file number: 001-38768

MDJM LTD

(Exact Name of Registrant as Specified in its Charter)

N/A

(Translation of Registrant’s Name into English)

Cayman Islands

(Jurisdiction of Incorporation or Organization)

Fernie Castle, Letham

Cupar, Fife, KY15 7RU

United Kingdom

+ 44-01337 829 349

(Address of principal executive offices)

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Siping Xu, Chief Executive Officer

Telephone: + 44-01337 829 349

Email: charlie.cai@mdjmjh.com

At the address of the Company set forth above

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

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Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

An aggregate of 25,216,523 Ordinary Shares, par value $0.001 per share, as of December 31, 2024.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

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If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐

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If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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TABLE OF CONTENTS

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INTRODUCTION

“We,” “us,” “our,” “our Company,” and the “Company” are to MDJM LTD (“MDJM”), a Cayman Islands company. Unless the context otherwise requires, in this annual report on Form 20-F references to:

This annual report on Form 20-F includes our audited consolidated financial statements for the years ended December 31, 2024, 2023, and 2022. In this annual report, we refer to assets, obligations, commitments, and liabilities in our consolidated financial statements in United States dollars. These dollar references are based on the exchange rate of RMB to United States dollars and pound sterling (“GBP”) to United States dollars, determined as of a specific date or for a specific period. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of United States dollars which may result in an increase or decrease in the amount of our obligations and the value of our assets.

This annual report contains translations of certain Renminbi and GBP amounts into U.S. dollars at specified rates. Unless otherwise stated, the following exchange rates are used in this annual report:

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Part I

Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

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Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

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Item 3. KEY INFORMATION

We are a holding company incorporated in the Cayman Islands and not a Chinese operating company. As a holding company with no material operations of our own, we conduct our operations through our subsidiaries in the UK and, prior to March 2025, through the VIE in China. For the fiscal years ended December 31, 2024, 2023, and 2022, for accounting purposes, we controlled and received the economic benefits of the VIE through certain contractual arrangements (the “VIE Agreements”), which enabled us to consolidate the financial results of the VIE in our consolidated financial statements under U.S. GAAP. The VIE Agreements were terminated on March 1, 2025. Our securities are securities of MDJM, the offshore holding company in the Cayman Islands, instead of securities of the VIE in China. The VIE structure provided contractual exposure to foreign investment in China-based companies where Chinese law prohibits direct foreign investment in the operating companies. For a description of the VIE Agreements, see “— The VIE Agreements.”

The following diagram illustrates our corporate structure as of the date of this annual report:

Investors are purchasing securities of the holding company, MDJM, instead of securities of our operating entities. Our operations are conducted through MD UK and Mansions.

The VIE Agreements

Due to PRC legal restrictions on foreign ownership in the real estate sector, neither we nor our subsidiaries owned any equity interest in Mingda Tianjin. Instead, for accounting purposes, we controlled and received the economic benefits of Mingda Tianjin’s business operation through the VIE Agreements, which enabled us to consolidate the financial results of the VIE in our consolidated financial statements under U.S. GAAP for the fiscal years ended December 31, 2024, 2023, and 2022. WFOE, Mingda Tianjin, and the Mingda Tianjin Shareholders entered into the VIE Agreements on April 28, 2018. The VIE Agreements were designed to provide WFOE with the power, rights, and obligations to Mingda Tianjin as set forth under the VIE Agreements. We had evaluated the guidance in Financial Accounting Standards Board Accounting Standards Codification 810 and determined that we were regarded as the primary beneficiary of the VIE for accounting purposes, as a result of our direct ownership in WFOE and the provisions of the VIE Agreements.

Each of the VIE Agreements is described in detail below:

Exclusive Business Cooperation Agreement

Pursuant to the Exclusive Business Cooperation Agreement between Mingda Tianjin and WFOE, WFOE provided Mingda Tianjin with technical support, consulting services, intellectual services, and other management services relating to Mingda Tianjin’s day-to-day business operations and management, on an exclusive basis, utilizing its advantages in technology, human resources, and information. Additionally, Mingda Tianjin granted an irrevocable and exclusive option to WFOE to purchase from Mingda Tianjin, any or all of Mingda Tianjin’s assets at the lowest purchase price permitted under PRC laws. Should WFOE exercise such option, the parties would enter into a separate asset transfer or similar agreement. For services rendered to Mingda Tianjin by WFOE under this agreement, WFOE was entitled to collect a service fee approximately equal to the net income of Mingda Tianjin after the deduction of the required PRC statutory reserve.

The Exclusive Business Cooperation Agreement would remain in effect for 10 years, unless it was terminated by WFOE with 30-day prior notice. Mingda Tianjin did not have the right to terminate that agreement unilaterally.

The Chief Executive Officer of WFOE, Mr. Siping Xu, managed Mingda Tianjin pursuant to the terms of the Exclusive Business Cooperation Agreement before its termination. WFOE had absolute authority relating to the management of Mingda Tianjin, including decisions with regard to expenses, salary raises and bonuses, hiring, firing, and other operational functions. The Exclusive Business Cooperation Agreement did not prohibit related party transactions. Our audit committee was required to review and approve in advance any related party transactions, including transactions involving WFOE or Mingda Tianjin.

Share Pledge Agreement

Under the Share Pledge Agreement among WFOE, and the Mingda Tianjin Shareholders, the Mingda Tianjin Shareholders pledged all of their equity interests in Mingda Tianjin to WFOE to guarantee the performance of Mingda Tianjin’s obligations under the Exclusive Business Cooperation Agreement. Under the terms of the Share Pledge Agreement, in the event that Mingda Tianjin or the Mingda Tianjin Shareholders breached their respective contractual obligations under the Exclusive Business Cooperation Agreement, WFOE, as pledgee, would be entitled to certain rights, including the right to collect dividends generated by the pledged equity interests. The Mingda Tianjin Shareholders also agreed that upon occurrence of any event of default, as set forth in the Share Pledge Agreement, WFOE was entitled to dispose of the pledged equity interest in accordance with applicable PRC laws. The Mingda Tianjin Shareholders further agreed not to dispose of the pledged equity interests or take any actions that would prejudice WFOE’s interest.

The purposes of the Share Pledge Agreement were to (1) guarantee the performance of Mingda Tianjin’s obligations under the Exclusive Business Cooperation Agreement, (2) make sure the Mingda Tianjin Shareholders did not transfer or assign the pledged equity interests, or create or allow any encumbrance that would prejudice WFOE’s interests without WFOE’s prior written consent, and (3) provide WFOE control over Mingda Tianjin. In the event Mingda Tianjin breached its contractual obligations under the Exclusive Business Cooperation Agreement, WFOE would have been entitled to foreclose on the Mingda Tianjin Shareholders’ equity interests in Mingda Tianjin and (1) exercise its option to purchase or designate third parties to purchase part or all of their equity interests in Mingda Tianjin and in this situation, WFOE may terminate the VIE Agreements after acquisition of all equity interests in Mingda Tianjin or form a new VIE structure with the third parties designated by WFOE; or (2) dispose of the pledged equity interests and be paid in priority out of proceeds from the disposal, in which case the VIE structure would be terminated.

Exclusive Option Agreement

Under the Exclusive Option Agreement, the Mingda Tianjin Shareholders irrevocably granted WFOE (or its designee) an exclusive option to purchase, to the extent permitted under PRC law, once or at multiple times, at any time, part or all of their equity interests in Mingda Tianjin. The option price was equal to the capital paid in by the Mingda Tianjin Shareholders subject to any appraisal or restrictions required by applicable PRC laws and regulations.

Under the Exclusive Option Agreement, WFOE was entitled to, at any time under any circumstances, purchase, or have its designated person purchase, at its discretion, to the extent permitted under PRC law, all or part of the Mingda Tianjin Shareholders’ equity interests in Mingda Tianjin. The Exclusive Option Agreement, together with the Share Pledge Agreement, Exclusive Business Cooperation Agreement, and the Power of Attorney, enabled us to consolidate the financial results of the VIE in our consolidated financial statements under U.S. GAAP.

Powers of Attorney

Under each of the Powers of Attorney, the Mingda Tianjin Shareholders authorized WFOE to act on their behalf as their exclusive agent and attorney with respect to all rights as shareholders, including: (a) attending shareholders’ meetings; (b) exercising all the shareholder’s rights, including voting, that shareholders were entitled to under the laws of China and the articles of association of Mingda Tianjin, including the sale or transfer or pledge or disposition of shares in part or in whole; and (c) designating and appointing on behalf of shareholders the legal representative, the executive director, supervisor, the chief executive officer and other senior management members of Mingda Tianjin.

The term of each of the Powers of Attorney was the same as the term of the Exclusive Option Agreement. The Powers of Attorney were irrevocable and continuously valid from the date of execution of the Powers of Attorney, so long as the Mingda Tianjin Shareholders were shareholders of Mingda Tianjin.

Risks Associated with Being Based in the PRC

We are subject to certain legal and operational risks associated with having subsidiaries in China, which could cause the value of our securities to significantly decline or become worthless. PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and as a result these risks may result in significant depreciation or a complete loss of the value of our securities, or a complete hindrance of our ability to offer, or continue to offer, our securities to investors. The PRC government has adopted a series of regulatory actions and issued statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. As of the date of this annual report, we, our subsidiaries, and the VIE have not been involved in any investigations on cybersecurity review initiated by any PRC regulatory authority, nor has any of them received any inquiry, notice, or sanction. As confirmed by our PRC counsel, Beijing ANLI (Tianjin) Partners, we are not subject to cybersecurity review with the Cyberspace Administration of China, or the CAC, under the Cybersecurity Review Measures that became effective on February 15, 2022, since we currently do not have over one million users’ personal information and do not anticipate that we will be collecting over one million users’ personal information in the foreseeable future, which we understand might otherwise subject us to the Cybersecurity Review Measures; we are also not subject to network data security review by the CAC under the Regulations on the Network Data Security Administration (the “Security Administration Regulations”), since we currently do not have over 10 million users’ personal information and do not collect data that affects or may affect national security and we do not anticipate that we will be collecting over 10 million users’ personal information or data that affects or may affect national security in the foreseeable future, which we understand might otherwise subject us to the Security Administration Draft. See “—D. Risk Factors—Risks Relating to Doing Business in the PRC—Greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business and our offering.”

On February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the “Trial Measures,” and five supporting guidelines, which came into effect on March 31, 2023. As advised by our PRC counsel, Beijing ANLI (Tianjin) Partners, Mingda Tianjin falls under the category of existing enterprises that have completed their overseas listings before the effective date of the Trial Measures (namely, March 31, 2023). Therefore, we are not immediately required to file for compliance. However, in the event that we intend to undertake new offerings or fundraising activities in the future, we should ensure compliance with the relevant regulations and file for compliance accordingly. See “—D. Risk Factors—Risks Relating to Doing Business in the PRC—The Opinions, the Trial Measures, and the revised Provisions recently issued by PRC authorities may subject us to additional compliance requirements in the future.” Other than the foregoing, as of the date of this report, according to our PRC counsel, Beijing ANLI (Tianjin) Partners, no relevant laws or regulations in the PRC explicitly require us to seek approval from the CSRC or any other PRC governmental authorities for our overseas listing. As of the date of this annual report, neither we nor our subsidiaries have received any inquiry, notice, warning, or sanction regarding our overseas listing from the CSRC or any other PRC governmental authorities. Since these statements and regulatory actions are newly published, however, official guidance and related implementation rules have not been issued. It is highly uncertain what the potential impact such modified or new laws and regulations will have on the daily business operations of our subsidiaries, our ability to accept foreign investments, and our listing on a U.S. exchange. The Standing Committee of the National People’s Congress (the “SCNPC”) or PRC regulatory authorities may in the future promulgate laws, regulations, or implement rules that require us or our subsidiaries to obtain regulatory approval from Chinese authorities for listing in the U.S.

In addition, our Ordinary Shares may be prohibited from trading on a national exchange or over-the-counter under the Holding Foreign Companies Accountable Act (the “HFCA Act”), if the Public Company Accounting Oversight Board (United States) (the “PCAOB”) is unable to inspect our auditor for two consecutive years beginning in 2021. Our auditor, RBSM LLP, is an independent registered public accounting firm with the PCAOB, and as an auditor of publicly traded companies in the U.S., is subject to laws in the U.S., pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. The PCAOB currently has access to inspect the working papers of our auditor and our auditor is not subject to the determinations announced by the PCAOB on December 16, 2021. If trading in our Ordinary Shares is prohibited under the HFCA Act in the future because the PCAOB determines that it cannot inspect or fully investigate our auditor at such future time, Nasdaq may determine to delist our Ordinary Shares and trading in our Ordinary Shares could be prohibited. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”) was signed into law by former President Biden, which contained, among other things, an identical provision to the Accelerating Holding Foreign Companies Accountable Act and amended the HFCA Act by requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. On August 26, 2022, the CSRC, the Ministry of Finance of the PRC (the “MOF”), and the PCAOB signed a Statement of Protocol (the “Protocol”), governing inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new determination. See “—D. Risk Factors—Risks Relating to Doing Business in the PRC—Joint statement by the SEC and the PCAOB, rule changes by Nasdaq, and the HFCA Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our continued listing or future offerings of our securities in the U.S.”

Permissions Required from PRC Authorities

The VIE was not operating in an industry that prohibited or limited foreign investment. As a result, as advised by our PRC counsel, Beijing ANLI (Tianjin) Partners, other than those requisite for a domestic company in China to engage in the businesses similar to those of the VIE, neither our Company, each of our subsidiaries, nor the VIE was required to obtain any permission from Chinese authorities, including the CSRC, the CAC, or any other governmental agency that is required to approve the operations of the VIE. However, if our Company or any of our subsidiaries does not receive or maintain the approvals, or we inadvertently conclude that such approvals are not required, or applicable laws, regulations, or interpretations change such that we are required to obtain approval in the future, we may be subject to investigations by competent regulators, fines or penalties, ordered to suspend any relevant operations and rectify any non-compliance, prohibited from engaging in relevant business or conducting any offering, and these risks could result in a material adverse change in the operations of our PRC subsidiary, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.

Prior to the termination of the VIE Agreements, the VIE had received from PRC authorities all requisite licenses, permissions, or approvals needed to engage in the businesses conducted in China, and no permission or approval had been denied. Such licenses and permissions included the Business License and Registration Certificate of Tianjin Real Estate Brokerage Agency. The following table provides details on the licenses and permissions held by the VIE.

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On February 17, 2023, the CSRC promulgated the Trial Measures and five supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of initial public offerings or listing applications. If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings, and fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.

According to the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies from the CSRC, or “the CSRC Notice,” domestic companies that have already been listed overseas before the effective date of the Trial Measures (namely, March 31, 2023) shall be deemed as existing issuers (the “Existing Issuers”). Existing Issuers are not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings. As advised by our PRC counsel, Beijing ANLI (Tianjin) Partners, Mingda Tianjin fell under the category of Existing Issuers. Therefore, we were not immediately required to file for compliance.

On February 24, 2023, the CSRC, together with the MOF, the National Administration of State Secrets Protection and the National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing, which were issued by the CSRC and the National Administration of State Secrets Protection and the National Archives Administration of China in 2009, or the “Provisions.” The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,” and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, among other things, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities, including securities companies, securities service providers, and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities, including securities companies, securities service providers, and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. Any failure or perceived failure by our Company or our subsidiaries to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.

As there are still uncertainties regarding the interpretation and implementation of such regulatory guidance, we cannot assure you that we will be able to comply with new regulatory requirements relating to our future overseas capital-raising activities and we may become subject to more stringent requirements with respect to matters such as cross-border investigation, data privacy, and enforcement of legal claims. See “—D. Risk Factors—Risks Relating to Doing Business in the PRC—The Opinions, the Trial Measures, and the revised Provisions recently issued by PRC authorities may subject us to additional compliance requirements in the future.”

Except as described above, we are currently not required to obtain permission from any of the PRC authorities to operate and issue our securities to foreign investors. In addition, we and our subsidiaries are not required to obtain permission or approval relating to our securities from the PRC authorities, including the CSRC or the CAC, for our subsidiaries’ operations, nor have we or our subsidiaries or Mingda Tianjin received any denial for our subsidiaries or Mingda Tianjin’s operations with respect to our offerings. However, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the “Opinions,” which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems, will be taken to deal with the risks and incidents of China-concept overseas listed companies, cybersecurity, data privacy protection requirements, and similar matters. The Opinions and any related implementing rules to be enacted may subject us to compliance requirements in the future. Given the current regulatory environment in the PRC, we are still subject to the uncertainty of different interpretation and enforcement of the rules and regulations in the PRC adverse to us, which may take place quickly with little advance notice. See “—D. Risk Factors—Risks Relating to Doing Business in the PRC—The Opinions recently issued by the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council may subject us to additional compliance requirement in the future.”

Asset Transfers Between Our Company, Our Subsidiaries, and the VIE

As of the date of this annual report, our Company, our subsidiaries, and the VIE have not distributed any earnings or settled any amounts owed under the VIE Agreements. Our Company and our subsidiaries do not have any plan to distribute earnings in the foreseeable future.

In 2024, net proceeds of $2,426,460 from a private placement with several investors on September 18, 2024, and from the exercise of Series A and B warrants associated with such private placement were not deposited into MDJM’s bank account. Instead, the proceeds were deposited directly into MD UK’s bank account. In 2022, MDJM transferred $1,480,000 into the account of MD UK as an investment. In addition, MDJM paid a net amount of $103,794 on behalf of subsidiaries in 2022, which consisted of attorney fees in connection with the establishment of new business, and other business - related expenses. There were no other assets transferred between MDJM, its subsidiaries, and the VIE during the fiscal years ended December 31, 2024, 2023, and 2022.

Dividends or Distributions Made to Our Company and U.S. Investors and Tax Consequences

As of the date of this annual report, none of our subsidiaries nor the VIE have made any dividends or distributions to our Company and our Company has not made any dividends or distributions to our shareholders. We intend to keep any future earnings to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Subject to the passive foreign investment company rules, the gross amount of distributions we make to investors with respect to our Ordinary Shares (including the amount of any taxes withheld therefrom) will be taxable as a dividend, to the extent that the distribution is paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles.

Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium account, provided that in no circumstances may a dividend be paid out of the share premium account if this would result in the company being unable to pay its debts due in the ordinary course of business.

If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds from our Hong Kong subsidiary, MDJH Hong Kong, and our UK subsidiary, MD UK. MD UK will rely on payments from its subsidiaries Mansions and Fernie Castle Culture.

Current PRC regulations permit WFOE to pay dividends to MDJH Hong Kong only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our operating entities in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if WFOE incurs debt on its own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments.

Cash dividends, if any, on our Ordinary Shares will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%.

Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC project. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including, without limitation, that (a) the Hong Kong resident enterprise must be the beneficial owner of the relevant dividends; and (b) the Hong Kong resident enterprise must directly hold no less than 25% share ownership in the PRC project during the 12 consecutive months preceding its receipt of the dividends. In current practice, a Hong Kong resident enterprise must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by WFOE to its immediate holding company, MDJH Hong Kong. As of the date of this annual report, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority. MDJH Hong Kong intends to apply for the tax resident certificate when WFOE plans to declare and pay dividends to MDJH Hong Kong. See “—D. Risk Factors—Risks Relating to Doing Business in the PRC—There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.”

Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments, and trade and service-related foreign exchange transactions, can be made in foreign currencies, without prior approval of State Administration of Foreign Exchange (“SAFE”), by complying with certain procedural requirements. Specifically, without prior approval of SAFE, cash generated from the operations in the PRC may be used to pay dividends to our Company. As of the date of this annual report, WFOE has conducted the foreign exchange registration related to our Company under the existing PRC foreign exchange regulations, which enables WFOE to legally distribute its earnings to our Company.

Prior to March 1, 2025, our Company’s ability to settle amounts owed under the VIE Agreements relied upon payments made from the VIE to WFOE in accordance with the VIE Agreements. For services rendered to the VIE by WFOE under the Exclusive Business Cooperation Agreement, WFOE was entitled to collect a service fee from the VIE. Pursuant to the Exclusive Option Agreement, WFOE may at any time and under any circumstances purchase all or part of the equity interests in the VIE when and to the extent permitted by PRC laws. The VIE Agreements were terminated on March 1, 2025.

A. [Reserved]

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Risks Relating to our Business and Industry

Our UK subsidiaries’ operating results are subject to conditions typically affecting hospitality service providers in the UK, any of which could reduce our revenue and limit opportunities for growth.

Our UK subsidiaries’ operating results are subject to conditions typically affecting hospitality service providers in the UK, including, among others:

Changes in any of these conditions could adversely affect our UK subsidiaries’ occupancy rates or otherwise adversely affect our results of operations and financial condition.

Our UK subsidiaries may not be able to successfully identify, secure, or operate additional hotel properties.

In addition to managing the Robin Hill Property and Fernie Castle (see “Item 4. Information on the Company—B. Business Overview—Overview”), we, through the UK subsidiaries, may open or manage more hotels in markets where we have a presence and in other areas in the UK to further grow our business. We and our UK subsidiaries may not be successful in identifying, leasing, managing, and operating additional hotel properties at desirable locations and on commercially reasonable terms, or at all. In more developed cities, it may be difficult to increase the number of hotels because we or our competitors may already have operations in such cities, rental prices may increase, or our competitors may be able to gain leases of properties before we can do so. In some cases, our competitors may be willing to enter into less favorable purchase, lease, or hotel management arrangements in order to prevent us from securing a particular property. Alternatively, in less developed cities, demand for new hotels may not increase as rapidly as we may expect. In addition, even if we or our UK subsidiaries are able to successfully identify and lease or manage new hotel properties, new hotels may not generate the returns we expect. Furthermore, we or our UK subsidiaries may incur costs in connection with evaluating properties and negotiating with property owners, lessors, and franchised hotel owners, including properties that we or our UK subsidiaries are subsequently unable to lease or manage. If we or our UK subsidiaries fail to successfully identify or compete for additional hotel properties, our ability to execute our growth strategy could be impaired and our business and prospects may be materially and adversely affected.

Our UK subsidiaries are subject to various hospitality industry, health and safety, construction, fire prevention, and environmental laws and regulations that may subject them to liability.

We cannot assure you that our UK subsidiaries or their employees comply with or will comply with all present and future laws and regulations related to their business, including hospitality industry, health, safety, construction, fire prevention, and environmental laws and regulations. Such non-compliance may subject our UK subsidiaries to monetary damages, the imposition of fines or other administrative penalties or investigations against them, or the suspension of their operations, which in turn could materially and adversely affect our financial condition and results of operations. Furthermore, new regulations could also require our UK subsidiaries to retrofit or modify any hospitality properties that they may own, operate, or manage, either currently or in the future, or incur other significant expenses. Any failure by our UK subsidiaries to control the use of, or to adequately restrict the discharge of, hazardous substances in their operations, or otherwise operate in compliance with environmental laws, could subject them to potentially significant monetary damages and fines or suspension of their business operations, which could materially and adversely affect our financial condition and results of operations.

Accidents, injuries, or prohibited activities in the hotels that our UK subsidiaries operate or may operate or manage in the future may adversely affect their and our reputation and subject them or us to liability.

There are inherent risks of accidents, injuries, or prohibited activities (such as illegal drug use, gambling, violence, or prostitution by guests) taking place in hospitality properties. The occurrence of one or more accidents, injuries, or prohibited activities at any hospitality property that our UK subsidiaries operate or may operate or manage in the future could adversely affect their safety reputation among guests, harm our brand, decrease our UK subsidiaries’ overall occupancy rates, and increase our costs by requiring our UK subsidiaries to implement additional safety measures. In addition, if accidents, injuries, or prohibited activities occur at any of these properties, we or our UK subsidiaries may be held liable for costs or damages and fines. Our and our UK subsidiaries’ current property and liability insurance policies may not provide adequate or any coverage for such losses, and we or our UK subsidiaries may be unable to renew our insurance policies or obtain new insurance policies without increases in premiums and deductibles or decreases in coverage levels, or at all.

If our UK subsidiaries are unable to access funds to maintain the condition and appearance of the hospitality properties that they operate or may operate or manage in the future, the attractiveness of such properties and their and our reputation could suffer and occupancy rates may decline.

In order to maintain the condition and attractiveness of our UK subsidiaries’ hospitality properties that they operate or may operate or manage in the future, ongoing renovations and other leasehold improvements, including periodic replacement of furniture, fixtures, and equipment, are required. Such investments and expenditures require ongoing funding and, to the extent our UK subsidiaries cannot fund these expenditures from existing cash or cash flow generated from operations, our UK subsidiaries must borrow or raise capital through financing. Our UK subsidiaries may not be able to access capital. If our UK subsidiaries fail to make investments necessary to maintain or improve the properties, the attractiveness of our UK subsidiaries’ hospitality property and their and our reputation could suffer, which could lead to our UK subsidiaries losing market share to competitors.

Changes in international trade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in the UK, where our UK subsidiaries conduct operations.

Political events, international trade disputes, and other business interruptions could harm or disrupt international commerce and the global economy, and they could have a material adverse effect on us and our customers, our service providers, and our other partners. Moreover, international trade disputes, tariffs and other protectionist measures may materially and adversely affect our business.

Brexit may have adverse effects on our business, results of operations, or strategic plans. The UK Government concluded a Trade Cooperation Agreement (TCA) with the EU, which became provisionally applicable on January 1, 2021 and went into force permanently on May 1, 2021, following formal approval by both the UK and the EU. Brexit has led to ongoing political and economic uncertainty and periods of increased volatility in both the UK and in wider European markets for some time. Brexit’s long-term effects are still yet to be determined at this time and will depend on the effects of the implementation and application of the TCA and any other relevant agreements between the UK and EU. It remains possible that there will be increased regulatory and legal complexities, including those relating to tax, trade, and employees.

Our UK subsidiaries are exposed to risks of the changing policies in residential property management, real estate agencies, and hospitality and butler service businesses. The trade and financial sanctions imposed on Russia due to its invasion of Ukraine have caused turbulence in the global markets, which could also affect policies and economic conditions in the UK. Recent shifts in U.S. tariff policies, including increased tariffs on goods imported from China, the UK and other regions, as well as the potential for additional protectionist measures, may impact the operations of our suppliers, manufacturers, and other business partners, which in turn, may affect our business and operations.

Our UK subsidiaries will be subject to the general risks associated with these uncertainties in the UK real estate market. Trade disputes and tariffs could increase the cost of key supplies to our operations, for goods such as food, beverages, furniture, and technology sourced from abroad. These increased costs may not be fully passed on to customers without affecting demand, potentially leading to reduced profit margins. Additionally, tariffs could disrupt supply chains and lead to delays in renovation or refurbishment projects, negatively impacting guest experiences and operational efficiency. In addition, political uncertainty surrounding international trade disputes and the potential of their escalation to a trade war and global recession could have a negative effect on customer confidence and consumer decisions, which could dampen the tourism and hospitality industries and materially and adversely affect our business. We also may have access to fewer business opportunities, and our operations may be negatively impacted as a result. The current and future actions or escalations by either the United States or China that affect trade relations may cause global economic turmoil and potentially have a negative impact on our markets, our business, or our results of operations, as well as the financial condition of our clients, and we cannot provide any assurances as of the date of this annual report as to whether such actions will occur or the form that they may take.

Our financial condition, results of operations, and cash flows was adversely affected by the COVID-19 pandemic during the year ended December 31, 2022.

The COVID-19 pandemic caused business disruptions beginning in January 2020, including the closure of the majority of businesses in mainland China. Between March and December 2022, many cities in China employed strict lock-down policies in response to resurgences of the COVID-19 pandemic and consumer demand declined in China, which, together with constant regulation of the real estate market by the central and local governments, negatively impacted both the supply and demand for real estate, causing the real estate market in China to decline in 2022. As a result, our revenue decreased by 90% during the year ended December 31, 2022, as compared with the same period in 2021. The general impact of the pandemic on the Chinese economy implicates potential larger-scale effects on the PRC operating entities’ industry and business. To mitigate the adverse impacts of the COVID-19 pandemic and the decline in consumer demand in China, the PRC operating entities have been reducing their operations in China since 2021 and we have expanded into the European markets by establishing subsidiaries in the UK and Germany and acquiring Fernie Castle and the Robin Hill Property (defined below). See “Item 4. Information on the Company—B. Business Overview—Overview.” During the years ended December 31, 2024 and 2023, the COVID-19 pandemic did not have a material impact on our business operations and financial results.

Our UK subsidiaries face risks related to natural disasters, health epidemics, and other outbreaks, which could significantly disrupt their operations.

Our UK subsidiaries’ business could be materially and adversely affected by natural disasters, health epidemics, or other public safety concerns affecting the UK. Natural disasters may give rise to severe interruptions to real estate-related business and adversely affect the UK subsidiaries’ ability to provide services to clients. In recent years, there have been outbreaks of epidemics in the UK and globally, such as COVID-19. The UK subsidiaries’ business operations could be disrupted by such epidemics. In addition, the results of operations of the UK subsidiaries could be adversely affected to the extent that any health epidemic harms the UK economy in general. A prolonged outbreak of any of these illnesses or other adverse public health developments in the UK or elsewhere in the world could have a material adverse effect on the UK subsidiaries’ business operations. Such outbreaks could significantly impact the real estate industry, which could severely disrupt the UK subsidiaries’ operations and adversely affect their business, financial condition, and results of operations.

The PRC operating entities have reduced their scale of operations and decreased their on-going programs, and their, and consequently our, results of operations and profitability have been adversely affected.

Our revenue generated through the PRC operating entities for the year ended December 31, 2024, was $nil, a decrease of $41,954, or 100%, from $$41,954 in the same period of 2023. The decrease of revenue for 2024 was primarily because the PRC operating entities stopped operating in China for the fiscal year ended December 31, 2024.

Our 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. The decrease of revenue for 2023 was primarily because sales in the new residential housing market in China decreased, and the Company turned its focus to the UK market.

Such adjustment of strategies, especially the PRC operating entities’ reduction of their scale of operations and decrease of their on-going programs, have had a material and adverse effect on their, and consequentially our, liquidity, financial condition, and results of operations.

If we or the UK subsidiaries fail to hire, train, and retain qualified managerial and other employees, our business and results of operations could be materially and adversely affected.

We place substantial reliance on the real estate industry experience and knowledge of our senior management team as well as their relationships with other industry participants. Mr. Siping Xu, our chairman and chief executive officer, is particularly important to our future success, due to his substantial experience and reputation in the real estate industry. Neither we nor the UK subsidiaries carry, and do not intend to procure, key person insurance on any of our senior management team. The loss of the services of one or more members of our senior management team due to their departure, or otherwise, could hinder our ability to effectively manage our business and implement our growth strategies. Finding suitable replacements for our current senior management could be difficult, and competition for such personnel of similar experience is intense. If we fail to retain our senior management, our business and results of operations could be materially and adversely affected.

The UK subsidiaries provide hospitality services, and their staffs interact with customers on a daily basis. As a result, the professionality of the staffs is critical to maintaining the quality and consistency of our services and our brand and reputation. It is important for the UK subsidiaries to attract qualified managerial and other employees who have experience in real estate related services and are committed to their service approach. There may be a limited supply of qualified individuals in cities in the UK where the UK subsidiaries have operations. They must hire and train qualified managerial and other employees to maintain consistent quality of services across their operations in various geographic locations. They must also provide continuous training to their managerial and other employees so that they are equipped with up-to-date knowledge of various aspects of the UK subsidiaries’ operations and can meet their demand for high-quality services. If the UK subsidiaries fail to do so, the quality of services may decrease in one or more of the markets where they operate, which in turn, may cause a negative perception of their brand and adversely affect their business.

As our Japanese subsidiary MD Japan commences operations in Japan, it may incur losses if economic conditions in Japan worsen.

Instability in the Japanese stock market and foreign currency exchange rates may have an adverse impact on our Japanese subsidiary MD Japan’s asset and liability management as well as its results of operations. Various other factors, including the COVID-19 pandemic and measures being implemented in response to the pandemic such as restrictions on travel, store operations, and other economic activities, the decreasing and aging demographics in Japan, stagnation or deterioration of economic and market conditions in other countries, growing global competition and trade conflicts, may also have a material negative impact on the Japanese economy. Japan in-bound travel restrictions and declarations of state of emergencies within Japan leading to closings of facilities and other COVID-19-related factors are adversely impacting future operating revenue of MD Japan’s potential businesses.

Although MD Japan has not commenced its operations and has not generated any revenue as of the date of this report and is still in the process of developing its business plan, any of the aforementioned factors could have a material and adverse impact on its development, potential results of operations, future business, and consequently adversely affect our business, financial condition, and results of operations.

Our Japanese subsidiary MD Japan’s business operations are exposed to risks of natural disasters, terrorism, and other disruptions caused by external events.

As with other Japanese companies, MD Japan will be exposed to heightened risks of large-scale natural disasters, particularly earthquakes. MD Japan’s risk management policies and procedures may be insufficient to address the consequences of these external events, resulting in its inability to continue to operate a part or the whole of its business. In addition, its redundancy and backup measures may not be sufficient to avoid a material disruption in its operations, and its contingency and business continuity plans may not address all eventualities that may occur in the event of a material disruption caused by a large-scale natural disaster. Such external events may result in loss of facility and human and other resources, suspension or delay in all or part of MD Japan’s operations, inability to implement business strategic measures or respond to changes in the market or regulatory environment as planned, and other disruptions to its operations. In addition, MD Japan may be required to incur significant costs and expenses, including those incurred for preventive or remedial measures, to deal with the consequences of such external events. As a result, MD Japan’s future business, operating results, and financial condition may be materially and adversely affected.

Potential political shocks and uncertainties in the European Union (the “EU”), including the development of Brexit, could have unpredictable consequences for the real estate market and the wider economy, and our German subsidiary’s ability to protect itself against these risks is limited.

Since the global financial crisis and subsequent European sovereign debt crisis between 2009 and 2012, political uncertainty in Europe has been elevated. The withdrawal of the UK from the EU (“Brexit”) in particular, but also, the increasing attractiveness to voters of populist political movements in other member states has raised concerns about a potential unwinding of aspects of European integration that could have implication to the German and UK real estate markets our subsidiaries operate in. While the European economic architecture and crisis response capabilities were strengthened substantially over the past decade, since 2020, the crisis caused by the COVID-19 pandemic has led to a massive deterioration of the fiscal situation for many EU and Economic and Monetary Union countries again. To support the economic recovery and modernization, the EU has launched the unprecedented, multi-year Next Generation EU program, comprising grants and loans of more than €800 billion (at current prices) and committing the member states to pursue ambitious national structural reform and investment plans to receive the funds. This has improved the prospects for growth-enhancing structural reforms and further integration among EU member states, both viewed as important tools to reduce the Eurozone’s vulnerabilities to future crises. However, given the political uncertainties, e.g., stemming from coming parliamentary and presidential elections in several countries, there remain downside risks to the future economic performance and political cohesion in Europe. More recently, the trade and financial sanctions imposed on Russia due to its invasion of Ukraine, have caused turbulence in the global markets, especially in the relevant European industries. Although our German subsidiary, MD German, has not commenced its operations and has not generated any revenue as of the date of this report, any of the aforementioned factors could materially and adversely affect its development and future business. If these risks materialize, they may ultimately result in material impediments in MD German’s potential business development as its business will be under the impact of decreased economic output and increased uncertainty, which would materially adversely affect its operating results and financial condition. An escalation of political risks could have consequences for the financial system, public debt sustainability, the value of the euro and the greater economy as a whole, potentially leading to impediments in business levels, acquisition of assets and losses across MD German’s businesses.

If, in an extreme tail risk scenario, one or more members of the Eurozone defaults on their debt obligations or decides to leave the common currency, this would result in the reintroduction of one or more national currencies. Should a Eurozone country conclude it must exit the common currency, the resulting need to reintroduce a national currency and restate existing contractual obligations could have unpredictable financial, legal, political, and social consequences, leading not only to significant losses on sovereign debt but also on private debt in that country. Our German subsidiary MD German’s ability to plan for such a contingency in a manner that would reduce its exposure to non-material levels is likely to be limited. If the overall economic climate deteriorates as a result of Brexit or further departures from the Eurozone, MD German’s future business could be adversely affected, and it could incur substantial losses.

​

Risks Relating to Doing Business in the PRC

Our current corporate structure and business operations may be affected by the Foreign Investment Law.

On November 8, 2023, the Ministry of Commerce issued and implemented the “Notice of the General Office of the Ministry of Commerce on Further Implementing the Tax Reduction and Exemption Policies for Imported Equipment of Foreign Investment Projects Encouraged by the State for Development by Foreign Investment Enterprises,” which stipulates that enterprises or their investors should accurately, truthfully, and completely fill in foreign investment information and timely fill in change reports if the information to be filled in changes, that the foreign investment information reporting system should be implemented, and that supervise and inspect the information of foreign investment projects encouraged by the government should be supervised and inspected. If future laws, administrative regulations, or provisions mandate further actions to be taken with respect to our existing corporate structure, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Furthermore, under the FIL, foreign investors or the foreign investment enterprise should be imposed legal liabilities for failing to report investment information in accordance with the requirements.

In addition, the FIL provides that foreign invested enterprises established according to the existing laws regulating foreign investment may maintain their structure and corporate governance within a five-year transition period, which means that we may be required to adjust the structure and corporate governance of certain of our PRC subsidiary in such transition period. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations.

On December 29, 2023, the Standing Committee of the National People’s Congress revised and passed the Company Law of the People’s Republic of China (2023 Revision), which came into force on July 1, 2024. The five-year transition period set by the Foreign Investment Law expired on December 31, 2024. In light of the implementation of the new Company Law, foreign-invested enterprises that fall within the transition period may need to implement changes to comply with the mandatory provisions of the Company Law. These changes may include adjustments to the highest decision-making authority, legal representative or director selection methods, and decision-making mechanisms. Enterprises must revise their articles of association as necessary and apply to the registration authority for changes, including making registration amendments, filing articles of association, or making director-related filings, as required by law.

Uncertainties in the interpretation and enforcement of PRC laws and regulations and changes in policies, rules, and regulations in China, which may be quick with little advance notice, could limit the legal protection available to you and us.

The PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In the late 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The legislation over the past three decades has significantly increased the protection afforded to various forms of foreign or private-sector investment in China. The PRC operating entities are subject to various PRC laws and regulations generally applicable to companies in China. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, however, the interpretations of many laws, regulations, and rules are not always uniform and enforcement of these laws, regulations, and rules involve uncertainties.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, however, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy in the PRC legal system than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies, internal rules, and regulations (some of which are not published in a timely manner or at all) that may have retroactive effect and may change quickly with little advance notice. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainties over the scope and effect of our contractual, property (including intellectual property), and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations.

Given the Chinese government’s significant oversight and discretion over the conduct of our business, the Chinese government may intervene or influence our operations at any time, which could result in a material change in our operations and/or the value of our securities.

The Chinese government has significant oversight and discretion over the conduct of our business and may intervene or influence our operations at any time as the government deems appropriate to further regulatory, political and societal goals, which could result in a material change in our operations and/or the value of our securities.

The Chinese government has recently published new policies that significantly affected certain industries, such as the education and Internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our business, financial condition and results of operations. Furthermore, if China adopts more stringent standards with respect to certain areas such as environmental protection or corporate social responsibilities, we may incur increased compliance costs or become subject to additional restrictions in our operations. Certain areas of the law, including intellectual property rights and confidentiality protections in China may also not be as effective as in the United States or other countries. In addition, we cannot predict the effects of future developments in the PRC legal system on our business operations, including the promulgation of new laws, or changes to existing laws or the interpretation or enforcement thereof. These uncertainties could limit the legal protections available to us and our investors, including you.

Any actions by the Chinese government, including any decision to intervene or influence the operations of our PRC subsidiary or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to the operations of our PRC subsidiary, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.

The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. The ability of our subsidiaries to operate in China may be impaired by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, foreign investment limitations, and other matters. The central or local governments of China may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our PRC subsidiary’s compliance with such regulations or interpretations. As such, our PRC subsidiary may be subject to various government and regulatory interference in the provinces in which they operate. It could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. It may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply.

Furthermore, it is uncertain when and whether we will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. Although we believe our Company and our PRC subsidiary are currently not required to obtain permission from any Chinese authorities and have not received any notice of denial of permission to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry, particularly in the event permission to list on U.S. exchanges may be later required, or withheld or rescinded once given.

Accordingly, government actions in the future, including any decision to intervene or influence the operations of our PRC subsidiary at any time or to exert control over an offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to the operations of our PRC subsidiary, may limit or completely hinder our ability to offer or continue to offer securities to investors, and/or may cause the value of such securities to significantly decline or be worthless.

Greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business and our offering.

On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures, which took effect on February 15, 2022. The Cybersecurity Review Measures provide that, in addition to critical information infrastructure operators (“CIIOs”) that intend to purchase Internet products and services, net platform operators engaging in data processing activities that affect or may affect national security must be subject to cybersecurity review by the Cybersecurity Review Office of the PRC. According to the Cybersecurity Review Measures, a cybersecurity review assesses potential national security risks that may be brought about by any procurement, data processing, or overseas listing. The Cybersecurity Review Measures require that an online platform operator which possesses the personal information of at least one million users must apply for a cybersecurity review by the CAC if it intends to be listed in foreign countries.

On September 24, 2024, the CAC published the Security Administration Regulations, which provides that, effective January 1, 2025, data processing operators engaging in data processing activities that affect or may affect national security must be subject to network data security review by the relevant Cyberspace Administration of the PRC. According to the Security Administration Draft, data processing operators who possess personal data of at least 10 million users or collect data that affects or may affect national security must be subject to network data security review by the relevant Cyberspace Administration of the PRC.

As of the date of this annual report, we have not received any notice from any authorities identifying our PRC subsidiary or the VIE as CIIOs or requiring us to go through cybersecurity review or network data security review by the CAC. As confirmed by our PRC counsel, Beijing ANLI (Tianjin) Partners, neither the operations of our PRC subsidiary nor our listing are expected to be affected, and that we will not be subject to cybersecurity review by the CAC under the Cybersecurity Review Measures, nor will any such entity be subject to the Security Administration Regulations, given that our PRC subsidiary possesses personal data of fewer than one million individual clients and does not collect data that affects or may affect national security in its business operations as of the date of this annual report and does not anticipate that it will be collecting over one million users’ personal information or data that affects or may affect national security in the near future. There remains uncertainty, however, as to how the Cybersecurity Review Measures and the Security Administration Regulations will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures and the Security Administration Draft. If any such new laws, regulations, rules, or implementation and interpretation come into effect, we will take all reasonable measures and actions to comply and to minimize the adverse effect of such laws on us. We cannot guarantee, however, that we will not be subject to cybersecurity review and network data security review in the future. During such reviews, we may be required to suspend our operation or experience other disruptions to our operations. Cybersecurity review and network data security review could also result in negative publicity with respect to our Company and diversion of our managerial and financial resources, which could materially and adversely affect our business, financial conditions, and results of operations.

On September 24, 2024, the State Council of the PRC (the “State Council”) issued the “Regulations on the Administration of Network Data Security,” which stipulates that if important data collected and generated by network data processors operating within the territory of the PRC need to be provided overseas, they shall undergo a data export security assessment organized by the national cyberspace administration. If network data processors identify and declare important data in accordance with relevant national regulations but have not been informed or publicly notified as important data by relevant regions or departments, they do not need to declare it for an export security assessment.

On February 12, 2025, the State Internet Information Office issued the Management Measures for the Audit of Personal Information Protection Compliance, which will come into effect on May 1, 2025. Personal information processors handling the personal information of more than 10 million individuals are required to conduct a personal information protection compliance audit at least once every two years. For other personal information processors, there is no specified frequency for audits, but regular compliance audits are still required. While there are no detailed regulations on the conditions under which personal information processors must conduct their own compliance audits, the triggering conditions for regulatory audits are outlined in detail. These conditions include significant risks associated with personal information processing activities that seriously affect individual rights or lack adequate security measures, potential infringements on the rights of many individuals, and the occurrence of personal information security incidents.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against us or our directors and officers that reside outside the United States based on foreign laws. It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China.

We are a company incorporated under the laws of the Cayman Islands, and we conduct most of our operations in China through the PRC operating entities, and almost all of the assets of the PRC operating entities are located in China. In addition, five out of our six directors and officers, namely Siping Xu, Mengnan Wang, Yuan Gong, Zhenlei Hu, and Wei Guan, reside in the PRC; another director, Liding Sun, resides in the United States. All or a substantial portion of the assets of our directors and officers are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon these five directors and officers, or to enforce against them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. As a result, it may be difficult for you to effect service of process upon us or those persons inside mainland China. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us, or such persons predicated upon the civil liability provisions of the securities laws of the U.S. or any state.

The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written arrangement with the U.S. that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security, or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the U.S.

It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the authorities in China may establish a regulatory cooperation mechanism with its counterparts of another country or region to monitor and oversee cross-border securities activities, such regulatory cooperation with the securities regulatory authorities in the United States may not be efficient in the absence of a practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or “Article 177,” which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigations or evidence collection activities within the territory of the PRC. Article 177 further provides that Chinese entities and individuals are not allowed to provide documents or materials related to securities business activities to foreign agencies without prior consent from the securities regulatory authority of the PRC State Council and the competent departments of the PRC State Council. While detailed interpretation of or implementing rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.

The Opinions, the Trial Measures, the revised Provisions, and the Data Provisions recently issued by the PRC authorities may subject us to additional compliance requirements in the future.

The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions, which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies. The Opinions proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection. The aforementioned policies and any related implementation rules to be enacted may subject us to additional compliance requirements in the future. On February 17, 2023, the CSRC promulgated the Trial Measures and five supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of initial public offerings or listing application. If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.

According to the CSRC Notice, the domestic companies that have already been listed overseas before the effective date of the Trial Measures (namely, March 31, 2023) shall be deemed as Existing Issuers. Existing Issuers are not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings.

As advised by our PRC counsel, Beijing ANLI (Tianjin) Partners, Mingda Tianjin falls under the category of Existing Issuers. Therefore, the Company is not immediately required to file for compliance. However, in the event that the Company intends to undertake new offerings or fundraising activities in the future, it should ensure compliance with the relevant regulations and file for compliance accordingly.

On February 24, 2023, the CSRC, together with the MOF, the National Administration of State Secrets Protection and the National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing, which were issued by the CSRC and the National Administration of State Secrets Protection and the National Archives Administration of China in 2009, or the “Provisions.” The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,” and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, among other things, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities, including securities companies, securities service providers, and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities, including securities companies, securities service providers, and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. Any failure or perceived failure by our Company or our subsidiaries to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.

In addition, the State Internet Information Office’s Provisions on Promoting and Regulating the Cross-Border Flow of Data (the “Data Provisions”), issued on March 22, 2024, outlines data compliance requirements for overseas-listed enterprises. The provisions state that data processors, except for operators of critical information infrastructure, are exempt from the data exit security assessment if they have provided personal information of fewer than 100,000 people (excluding sensitive personal information) overseas cumulatively since January 1 of that year. Furthermore, data processors, unless they are operators of critical information infrastructure, who provide important data overseas or who have cumulatively provided personal information of more than 1 million people (excluding sensitive personal information) or more than 10,000 people overseas since January 1 of the same year, must apply for a data export security assessment. This application should be submitted to the national network information department via the provincial network information department where they are located. Data processors not considered operators of critical information infrastructure who provide personal information of more than 100,000 but fewer than 1 million people (excluding sensitive personal information), or less than 10,000 people overseas starting from January 1 of the same year, must either enter into a standard personal information export contract with the overseas recipient in accordance with the law or obtain personal information protection certification. The validity period of the data export security assessment results is three years, calculated from the date the assessment results are issued. As advised by our PRC legal counsel, Beijing ANLI (Tianjin) Partners, we are currently exempt from the data exit security assessment. However, there remains uncertainties as to how the Data Provisions will be interpreted or implemented, and whether they will affect us. If it is determined in the future that the data exit security assessment becomes applicable to us, we may be subject to review when conducting data processing activities, and may face challenges in addressing its requirements and make necessary changes to our internal policies and practices. We may incur substantial costs in complying with the Data Provisions, which could result in material adverse changes in our business operations and financial position.

Joint statement by the SEC and the PCAOB, rule changes by Nasdaq, and the HFCA Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our continued listing or future offerings of our securities in the U.S.

On April 21, 2020, the then SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.

On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply a minimum offering size requirement for companies primarily operating in a “Restrictive Market,” (ii) adopt a new requirement relating to the qualification of management or the board of directors for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditor. On October 4, 2021, the SEC approved Nasdaq’s revised proposal for the rule changes.

On May 20, 2020, the U.S. Senate passed the HFCA Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCA Act. On December 18, 2020, the HFCA Act was signed into law.

On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act.

On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether the board of directors of a company is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.

On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act.

On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by PRC and Hong Kong authorities in those jurisdictions.

Our auditor, RBSM LLP, is an independent registered public accounting firm with the PCAOB, and as an auditor of publicly traded companies in the U.S., is subject to laws in the U.S., pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. The PCAOB currently has access to inspect the working papers of our auditor and our auditor is not subject to the determinations announced by the PCAOB on December 16, 2021. However, the recent developments would add uncertainties to our offerings and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us since a substantial portion of our operations are conducted in China. Furthermore, if the PCAOB is unable to inspect our accounting firm in the future, the HFCA Act, as amended, which requires that the PCAOB be permitted to inspect an issuer’s public accounting firm within two years, will prohibit trading in our securities, and, as a result, an exchange may determine to delist our securities and trading in our securities could be prohibited. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, the Consolidated Appropriations Act was signed into law by former President Biden, which contained, among other things, an identical provision to the Accelerating Holding Foreign Companies Accountable Act and amended the HFCA Act by requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. In addition, delisting may cause a significant decrease in or a total loss of the value of our securities. Although a shareholder’s ownership of our Company may not decrease directly from delisting, the ownership may become worth much less, or, in some cases, lose its entire value.

On August 26, 2022, the CSRC, the MOF, and the PCAOB signed the Protocol, governing inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new determination.

Regulations relating to offshore investment activities by PRC residents may limit our ability to acquire PRC companies or inject capital into the PRC subsidiary and could adversely affect our business. PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us, or otherwise expose us or our PRC resident shareholders to liabilities or penalties.

In July 2014, the State Administration of Foreign Exchange (the “SAFE”) promulgated the Circular on Issues Concerning Foreign Exchange Administration Over the Overseas Investment and Financing and Roundtrip Investment by Domestic Residents Via Special Purpose Vehicles, or “Circular 37,” which replaced Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Corporate Financing and Roundtrip Investment through Offshore Special Purpose Vehicles, or “Circular 75.” Circular 37 requires PRC residents to register with local branches of the SAFE in connection with their direct establishment or indirect control of an offshore entity, referred to in Circular 37 as a “special purpose vehicle” for the purpose of holding domestic or offshore assets or interests. Circular 37 further requires amendment to a PRC resident’s registration in the event of any significant changes with respect to the special purpose vehicle, such as an increase or decrease in the capital contributed by PRC individuals, share transfer or exchange, merger, division, or other material event. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future. In February 2015, SAFE promulgated a Circular on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or “SAFE Circular 13,” effective in June 2015. Under SAFE Circular 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE. Under these regulations, PRC residents’ failure to comply with specified registration procedures may result in restrictions being imposed on the foreign exchange activities of the relevant PRC entity, including the payment of dividends and other distributions to its offshore parent, as well as restrictions on capital inflows from the offshore entity to the PRC entity, including restrictions on its ability to contribute additional capital to its PRC subsidiaries. Further, failure to comply with the SAFE registration requirements could result in penalties under PRC law for evasion of foreign exchange regulations.

In addition to SAFE Circular 37 and SAFE Circular 13, our ability to conduct foreign exchange activities in China may be subject to the interpretation and enforcement of the Implementation Rules of the Administrative Measures for Individual Foreign Exchange promulgated by SAFE in January 2007 (as amended and supplemented, the “Individual Foreign Exchange Rules”). Under the Individual Foreign Exchange Rules, any PRC individual seeking to make a direct investment overseas or engage in the issuance or trading of negotiable securities or derivatives overseas must make the appropriate registrations in accordance with SAFE provisions, the failure of which may subject such PRC individual to warnings, fines, or other liabilities.

Mr. Siping Xu, Xia Ding, Qiang Ma, Liang Zhang, Meina Guo, Mengnan Wang, Jie Zhang, and Lei Cai (each, a “Beneficial Owner,” and together, the “Beneficial Owners”), who are our beneficial owners and are PRC residents, have completed the initial foreign exchange registrations. We may not be informed of the identities of all the PRC residents holding direct or indirect interest in our company, however, and we have no control over any of our future beneficial owners. We cannot assure you that our ultimate shareholders who are PRC residents will in the future provide sufficient supporting documents required by the SAFE or complete the required registration with the SAFE in a timely manner, or at all. Such failure or inability of our PRC residents beneficial owners to comply with these SAFE regulations may subject us or our PRC resident beneficial owners to fines and legal sanctions, restrict our cross-border investment activities, or limit our PRC subsidiary’s ability to distribute dividends to or obtain foreign-exchange-dominated loans from us, or prevent us from being able to make distributions or pay dividends, as a result of which our business operations and our ability to distribute profits to you could be materially and adversely affected.

PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using proceeds from our future financing activities to make loans or additional capital contributions to the PRC operating entities, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Any funds we transfer to the PRC subsidiary, either as a shareholder loan or as an increase in registered capital through our Hong Kong subsidiary, are subject to approval by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested enterprises, or “FIEs,” in China, capital contributions to our PRC subsidiary, which is an FIE, are subject to the approval of or filing with the Ministry of Commerce of the PRC (“MOFCOM”) or its local counterparts and registration with a local bank authorized by SAFE. There is, in effect, no statutory limit on the amount of capital contribution that we can make to our PRC subsidiary. The reason is that there is no statutory limit on the amount of registered capital for our PRC subsidiary, and we are allowed to make capital contributions to our PRC subsidiary by subscribing for their initial registered capital and increased registered capital, provided that the PRC subsidiary complete the relevant filing and registration procedures.

On the other hand, any foreign loan provided by us to our PRC subsidiary is required to be registered with SAFE or its local branches or filed with SAFE in its information system, and our PRC subsidiary may not procure foreign loans which exceed the difference between its total investment amount and registered capital (the “Current Foreign Debt Mechanism”) or, as an alternative, only procure loans subject to the calculation approach and limitations as provided in the PBOC’s Circular on Matters concerning the Macro-Prudential Management of Full-Covered Cross-Border Financing, or “PBOC Notice No. 9” (the “PBOC Notice No. 9 Mechanism”), which shall not exceed 200% of the net asset of the relevant PRC subsidiary. According to PBOC Notice No. 9, after a transition period of one year since its promulgation, PBOC and SAFE will determine the cross-border financing administration mechanism for the FIEs after evaluating the overall implementation of PBOC Notice No. 9. As of the date hereof, neither PBOC nor SAFE has promulgated and made public any further rules, regulations, notices, or circulars in this regard. It is uncertain which mechanism will be adopted by PBOC and SAFE in the future and what statutory limits will be imposed on us when providing loans to our PRC subsidiary. Currently, our PRC subsidiary has the flexibility to choose between the Current Foreign Debt Mechanism and the PBOC Notice No. 9 Mechanism. However, if a more stringent foreign debt mechanism becomes mandatory, our ability to provide loans to our PRC subsidiary may be significantly limited, which may adversely affect our business, financial condition, and results of operations.

If we seek to make capital contribution into our PRC subsidiary or provide any loan to our PRC subsidiary in the future, we may not be able to obtain the required government approvals or complete the required registrations on a timely basis, if at all. If we fail to receive such approvals or complete such registrations, our ability to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

On April 3, 2024, the SAFE issued the Guidelines for Capital Account Foreign Exchange Business (2024 Edition), which came into effect on May 6, 2024. The guidelines aim to further optimize the management of capital account foreign exchange business, enhance the convenience of cross-border investment and financing, streamline business processes, and facilitate the handling of capital account foreign exchange transactions by institutions, individuals, and other entities.

We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

In February 2015, SAT issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or “SAT Circular 7.” SAT Circular 7 provides comprehensive guidelines relating to indirect transfers of PRC taxable assets (including equity interests and real properties of a PRC resident enterprise) by a non-resident enterprise. In addition, in October 2017, SAT issued an Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or “SAT Circular 37,” effective in December 2017, which, among others, amended certain provisions in SAT Circular 7 and further clarify the tax payable declaration obligation by non-resident enterprise. Indirect transfer of equity interest and/or real properties in a PRC resident enterprise by their non-PRC holding companies are subject to SAT Circular 7 and SAT Circular 37.

SAT Circular 7 provides clear criteria for an assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. As stipulated in SAT Circular 7, indirect transfers of PRC taxable assets are considered as reasonable commercial purposes if the shareholding structure of both transaction parties falls within the following situations: i) the transferor directly or indirectly owns 80% or above equity interest of the transferee, or vice versa; ii) the transferor and the transferee are both 80% or above directly or indirectly owned by the same party; iii) the percentages in bullet points i) and ii) shall be 100% if over 50% the share value of a foreign enterprise is directly or indirectly derived from PRC real properties. Furthermore, SAT Circular 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets. Where a non-resident enterprise transfers PRC taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an indirect transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such indirect transfer to the relevant tax authority and the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding, or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.

According to SAT Circular 37, where the non-resident enterprise fails to declare the tax payable pursuant to Article 39 of the PRC Enterprise Income Tax Law (the “EIT Law”), the tax authority may order it to pay the tax due within required time limits, and the non-resident enterprise shall declare and pay the tax payable within such time limits specified by the tax authority. If the non-resident enterprise, however, voluntarily declares and pays the tax payable before the tax authority orders it to do so within required time limits, it shall be deemed that such enterprise has paid the tax in time.

We face uncertainties as to the reporting and assessment of reasonable commercial purposes and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries, and investments. In the event of being assessed as having no reasonable commercial purposes in an indirect transfer transaction, we may be subject to filing obligations or taxed if we are a transferor in such transactions and may be subject to withholding obligations (to be specific, a 10% withholding tax for the transfer of equity interests) if we are a transferee in such transactions, under SAT Circular 7 and SAT Circular 37. For transfer of shares by investors who are non-PRC resident enterprises, our PRC subsidiary may be requested to assist in the filing under the SAT circulars. As a result, we may be required to expend valuable resources to comply with the SAT circulars or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that we should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.

On December 6, 2024, the State Council issued the Implementation Regulations of the Enterprise Income Tax Law of the People’s Republic of China, which came into effect on January 20, 2025. Non-resident enterprises that establish institutions or locations within China are allowed to deduct expenses related to the production and operation of their overseas headquarters, provided they can submit proof of the scope, quota, allocation basis, and method of expense collection issued by the headquarters, and reasonably allocate them. According to the EIT Law, for non-resident enterprises subject to source withholding of enterprise income tax, taxable income shall be calculated using the following methods: (1) For equity investment income, such as dividends and bonuses, as well as income from interest, rent, and franchise fees, the full amount of income shall be considered taxable; (2) For taxable income from the transfer of property, the taxable income shall be the balance remaining after deducting the net value of the property from the total income; and (3) For other types of income, taxable income shall be calculated using the methods specified in the first two items. If a non-resident enterprise entrusts a business agent to engage in production and business activities within China—including having the agent frequently sign contracts on its behalf or store and deliver goods—the business agent shall be deemed to represent an institution or location established by the non-resident enterprise within China.

Because the PRC operating entities conduct their business in RMB and the price of our Ordinary Shares is quoted in U.S. dollars, changes in currency conversion rates may affect the value of your investments.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the RMB and the U.S. dollar remained within a narrow band. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future.

The PRC operating entities conduct their business and maintain their books and records in RMB, and the financial statements that we file with the SEC and provide to our shareholders are presented in U.S. dollars. Changes in the exchange rate between the RMB and U.S. dollar affect the value of our assets and the results of our operations in U.S. dollars. The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions and perceived changes in the economy of the PRC and the United States. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenue, and financial condition.

Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into more hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.

Under the EIT Law, we may be classified as a “resident enterprise” of China, which could result in unfavorable tax consequences to us and our non-PRC shareholders.

Under the EIT Law that became effective in January 2008, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation rules to the EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances, and properties of an enterprise. In April 2009, the State Administration of Taxation, or the “SAT,” issued the Circular on Issues Concerning the Identification of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance with the Actual Standards of Organizational Management, or “SAT Circular 82,” which was amended in December 2017. SAT Circular 82 specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are located or resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued the Measures for the Administration of Enterprise Income Tax of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises (for Trial Implementation), or “SAT Bulletin 45,” which took effect in September 2011 and was amended in April 2015, to provide more guidance on the implementation of SAT Circular 82 and clarify the reporting and filing obligations of such “Chinese-controlled offshore incorporated resident enterprises.” SAT Bulletin 45 provides procedures and administrative details for the determination of resident status and administration on post-determination matters. Although both SAT Circular 82 and SAT Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreign individuals, the determining criteria set forth in SAT Circular 82 and SAT Bulletin 45 may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups, or by PRC or foreign individuals.

If we are deemed to be a PRC “resident enterprise,” we will be subject to the EIT on our worldwide income at a uniform tax rate of 25%, although dividends distributed to us from the existing PRC subsidiary and any other PRC subsidiaries which we may establish from time to time could be exempt from the PRC dividend withholding tax due to our PRC “resident recipient” status. This could have a material and adverse effect on our overall effective tax rate, our income tax expenses, and our net income. Furthermore, dividends, if any, paid to our shareholders may be decreased as a result of the decrease in distributable profits. In addition, if we were considered a PRC “resident enterprise,” any dividends we pay to our non-PRC investors, and the gains realized from the transfer of our Ordinary Shares may be considered income derived from sources within the PRC and be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty). It is unclear whether holders of our Ordinary Shares would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. This could have a material and adverse effect on the value of your investment in us and the price of our Ordinary Shares. Although up to the date of this report, we have not been notified or informed by the PRC tax authorities that we have been deemed to be a resident enterprise for the purpose of the EIT Law, we cannot assure you that we will not be deemed to be a resident enterprise in the future.

The PRC subsidiary is subject to restrictions on paying dividends or making other payments to our offshore subsidiaries, which may have a material adverse effect on our ability to conduct our business.

We are a holding company incorporated in the Cayman Islands. We may need dividends and other distributions on equity from the PRC subsidiary through our offshore subsidiaries to satisfy our liquidity requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If the PRC subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to our offshore subsidiaries.

Current PRC regulations permit the PRC subsidiary to pay dividends to our offshore subsidiaries only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, the PRC subsidiary is required to set aside at least 10% of its accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. The PRC subsidiary may also allocate a portion of its respective after-tax profits based on PRC accounting standards to employee welfare and bonus funds at its discretion. These reserves are not distributable as cash dividends. These limitation on the ability of the PRC subsidiary to pay dividends or make other distributions to our offshore subsidiaries, and consequently could materially and adversely limit our ability to grow, make investments, or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of the PRC subsidiary, and dividends payable by the PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.

Under the EIT Law and its implementation rules, the profits of a foreign invested enterprise generated through operations, which are distributed to its immediate holding company outside the PRC, will be subject to a withholding tax rate of 10%. Pursuant to the Double Tax Avoidance Arrangement, a withholding tax rate of 10% may be lowered to 5% if the PRC enterprise is at least 25% held by a Hong Kong enterprise for at least 12 consecutive months prior to distribution of the dividends and is determined by the relevant PRC tax authority to have satisfied other conditions and requirements under the Double Tax Avoidance Arrangement and other applicable PRC laws. However, based on the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or the “SAT Circular 81,” which became effective on February 20, 2009, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. According to Circular on Several Issues regarding the “Beneficial Owner” in Tax Treaties, which became effective as of April 1, 2018, when determining an applicant’s status as the “beneficial owner” regarding tax treatments in connection with dividends, interests, or royalties in the tax treaties, several factors will be taken into account. Such factors include whether the business operated by the applicant constitutes actual business activities, and whether the counterparty country or region to the tax treaties does not levy any tax, grant tax exemption on relevant incomes, or levy tax at an extremely low rate. This circular further requires any applicant who intends to be proved of being the “beneficial owner” to file relevant documents with the relevant tax authorities.

Further, the SAT promulgated the Notice on How to Understand and Recognize the “Beneficial Owner” in Tax Treaties on October 27, 2009, which limits the “beneficial owner” to individuals, projects, or other organizations normally engaged in substantive operations, and sets forth certain detailed factors in determining the “beneficial owner” status. In current practice, a Hong Kong enterprise must obtain a tax resident certificate from the relevant Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. The PRC subsidiary is wholly-owned by our Hong Kong subsidiary. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that our Hong Kong subsidiary will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority. As of the date of this annual report, we have not commenced the application process for a Hong Kong tax resident certificate from the relevant Hong Kong tax authority, and there is no assurance that our Hong Kong subsidiary will be granted such a Hong Kong tax resident certificate.

Even after our Hong Kong subsidiary obtains the Hong Kong tax resident certificate, it is required by applicable tax laws and regulations to file required forms and materials with relevant PRC tax authorities to prove that it can enjoy the 5% lower PRC withholding tax rate. MDJH Hong Kong intends to obtain the required materials and file with the relevant tax authorities when it plans to declare and pay dividends, but there is no assurance that the PRC tax authorities will approve the 5% withholding tax rate on dividends received from MDJH Hong Kong.

On December 6, 2024, the State Council issued the Implementation Regulations of the Enterprise Income Tax Law of the People’s Republic of China, which came into effect on January 20, 2025. According to the regulations, equity investment income, such as dividends and bonuses, earned by resident enterprises from foreign enterprises that are directly or indirectly controlled by them outside of China, may be eligible to be deducted from the overseas income tax paid by the foreign enterprises. This deduction applies to the portion of the actual income tax paid by the foreign enterprises abroad. Direct control refers to a resident enterprise directly holding more than 20% of the shares of the foreign enterprise, while indirect control refers to the resident enterprise holding more than 20% of the shares of the foreign enterprise through an indirect shareholding structure.

The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC.

We are regulated by the SEC and our reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review by the CSRC, a PRC regulator that is responsible for oversight of the capital markets in China. Accordingly, you should review our SEC reports, filings, and our other public pronouncements with the understanding that no local regulator has done any review of us, our SEC reports, other filings, or any of our other public pronouncements.

The failure to comply with PRC regulations relating to mergers and acquisitions of domestic projects by offshore special purpose vehicles may subject us to severe fines or penalties and create other regulatory uncertainties regarding our corporate structure.

On August 8, 2006, MOFCOM, joined by the CSRC, the State-owned Assets Supervision and Administration Commission of the State Council, the SAT, the SAIC, and the SAFE, jointly promulgated regulations entitled the Provisions Regarding Mergers and Acquisitions of Domestic Projects by Foreign Investors (the “M&A Rules”), which became effective as of September 8, 2006, and were amended on June 22, 2009. The M&A Rules, among other things, have certain provisions that require offshore special purpose vehicles formed for the purpose of acquiring PRC domestic companies and controlled directly or indirectly by PRC individuals and companies, to obtain the approval of MOFCOM prior to engaging in such acquisitions and to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock market. On September 21, 2006, the CSRC published on its official website a notice specifying the documents and materials that are required to be submitted for obtaining CSRC approval.

Our PRC legal counsel has advised us, based on their understanding of the current PRC law, rules, and regulations, that the CSRC’s approval is not required for the listing and trading of our Ordinary Shares on the Nasdaq Capital Market, given that we established our PRC subsidiary by means of direct investment rather than by merger with or acquisition of PRC domestic companies as defined in the M&A Rules.

Our PRC legal counsel, however, has further advised us that there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant PRC governmental agencies, including the CSRC, would reach the same conclusion as we do. If prior CSRC approval for overseas financings is required and not obtained, we may face severe regulatory actions or other sanctions from MOFCOM, the CSRC, or other PRC regulatory agencies. In such event, these regulatory agencies may impose fines or other penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from overseas financings into the PRC, restrict or prohibit payment or remittance of dividends to us, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation, and prospects, as well as the trading price of our Ordinary Shares. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to delay or cancel overseas financings, to restructure our current corporate structure, or to seek regulatory approvals that may be difficult or costly to obtain.

Article 224 of the current Securities Law stipulates that domestic enterprises that directly or indirectly issue securities abroad or list their securities for trading abroad shall comply with the relevant regulations of the State Council. Therefore, approval by the CSRC is not currently required.

On February 17, 2023, the CSRC promulgated the Trial Measures and five supporting guidelines, which came into effect on March 31, 2023. On the same day, the CSRC issued the CSRC Notice. Based on the aforementioned regulations, the CSRC has implemented a centralized filing management system to oversee the direct and indirect overseas listing activities of domestic enterprises. As such, companies operating under this system are not required to obtain prior approval from the CSRC.

The M&A Rules, along with certain foreign exchange regulations discussed below, will be interpreted or implemented by the relevant government authorities in connection with our future offshore financings or acquisitions, and we cannot predict how they will affect our acquisition strategy.

The M&A Rules and certain other PRC regulations establish complex procedures for certain acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

The M&A Rules and recently adopted PRC regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Mergers or acquisitions that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance to MOFCOM when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, or the “Prior Notification Rules,” issued by the State Council in August 2008 is triggered. In addition, the Provisions of the Ministry of Commerce on the Implementation of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “Security Review Rules”) issued by MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by MOFCOM, and the Security Review Rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. It is clear that our business would not be deemed to be in an industry that raises “national defense and security” or “national security” concerns. MOFCOM or other government agencies, however, may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in the PRC, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand our market share through future acquisitions would as such be materially and adversely affected.

Risks Relating to Our Ordinary Shares and the Trading Market

Because we are a Cayman Islands company and all of our business is conducted in the PRC through the PRC operating entities and in the UK through our UK subsidiaries, you may be unable to bring an action against us or our officers and directors or to enforce any judgment you may obtain.

We are incorporated in the Cayman Islands and conduct our operations in China through the PRC operating entities and in the UK through our UK subsidiaries. All of our assets are located outside of the United States. In addition, five out of our six directors and officers, namely Siping Xu, Mengnan Wang, Yuan Gong, Zhenlei Hu, and Wei Guan, reside in the PRC; another director, Liding Sun, resides in the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these five directors and officers in the United States in the event that you believe we have violated your rights, either under United States federal or state securities laws or otherwise, or if you have a claim against us. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may not permit you to enforce a judgment against our assets or the assets of our directors and officers.

Since our chief executive officer owns 38.70% of our Ordinary Shares, he has the ability to elect directors and approve matters requiring shareholder approval by way of ordinary resolution or special resolution.

Mr. Siping Xu, our Chief Executive Officer and Chairman, is currently the beneficial owner of 10,338,205 shares, or 38.70% of our outstanding Ordinary Shares. As result, Mr. Xu is able to exert significant voting influence over fundamental and significant corporate matters and transactions. He has the power to elect all directors and approve all matters requiring shareholder approval without the votes of any other shareholder. He has significant influence over a decision to enter into any corporate transaction and has the ability to prevent any transaction that requires the approval of shareholders, regardless of whether or not our other shareholders believe that such transaction is in our best interests. Such concentration of voting power could have the effect of delaying, deterring, or preventing a change of control or other business combination, which could, in turn, have an adverse effect on the market price of our Ordinary Shares or prevent our shareholders from realizing a premium over the then-prevailing market price for their Ordinary Shares.

We do not intend to pay dividends for the foreseeable future.

We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our Ordinary Shares if the market price of our Ordinary Shares increases.

If we fail to establish and maintain an effective system of internal control over financial reporting, we may not be able to accurately and timely disclose information about our financial results or prevent fraud. Any inability to accurately and timely disclose financial results could harm our business and reputation and cause the market price of our Ordinary Shares to decline.

A system of financial controls and procedures is necessary to ensure that information about our financial results is recorded, processed, summarized, and reported in an accurate and timely fashion. Effective internal control over financial reporting is necessary for us to provide reliable financial reports and prevent fraud. If we cannot disclose required information or provide reliable financial reports, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation may be harmed. Prior to our initial public offering, management and our independent registered public accounting firm identified that we had a material weakness because we lacked sufficient personnel with an appropriate level of knowledge of U.S. GAAP and financial reporting. Although we have taken certain steps to address this deficiency, including (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function, (ii) engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control, and (iii) appointing independent directors, establishing an audit committee, and strengthening corporate governance, and it is no longer a material weakness based on the assessment of management, it is possible that we may have a material weakness identified in the future if the controls and procedures we have implemented are inadequate.

If we become directly subject to the scrutiny, criticism, and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price, and reputation.

U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism, and negative publicity by investors, financial, commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism, and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies, or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism, and negative publicity, the publicly traded stock of many U.S.-listed Chinese companies sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism, and negative publicity will have on us, our business, and our stock price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from developing our growth. If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of our stock.

If securities or industry analysts do not publish research or reports about our business, or if they publish a negative report regarding our Ordinary Shares, the price of our Ordinary Shares and trading volume could decline.

The trading market for our Ordinary Shares may depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade us, the price of our Ordinary Shares would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the price of our Ordinary Shares and the trading volume to decline.

The market price of our Ordinary Shares may be volatile or may decline regardless of our operating performance.

The market price of our Ordinary Shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

If we cease to qualify as a foreign private issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers, and we would incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer.

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as United States domestic issuers, and we are not required to disclose in our periodic reports all of the information that United States domestic issuers are required to disclose. While we currently expect to continue qualifying as a foreign private issuer, we may cease to qualify as a foreign private issuer in the future.

Because we are a foreign private issuer and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would have if we were a domestic issuer.

Nasdaq Listing Rules require listed companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted to, and we may, follow home country practice in lieu of the above requirements, or we may choose to comply with the Nasdaq requirement within one year of listing. The corporate governance practice in our home country, the Cayman Islands, does not require a majority of our board to consist of independent directors. Currently, a majority of our board of directors are independent directors. In addition, the Nasdaq Listing Rules also require U.S. domestic issuers to have a compensation committee, a nominating/corporate governance committee composed entirely of independent directors, and an audit committee with a minimum of three members. We, as a foreign private issuer, are not subject to these requirements.

Furthermore, Nasdaq Listing Rule 5635 provides that shareholder approval is required of U.S. domestic companies listed on the Nasdaq Capital Market prior to (i) issuances in connection with the acquisition of the stock or assets of another company if upon issuance the issued shares will equal to 20% or more of the number of shares or voting power outstanding prior to the issuance, or if certain specified persons have a 5% or greater interest in the assets or company to be acquired (Rule 5635(a)); (ii) issuances or potential issuances that will result in a change of control (Rule 5635(b)); (iii) issuances in connection with equity compensation arrangements (Rule 5635(c)); and (iv) 20% or greater issuances in transactions other than public offerings, as defined in the Nasdaq rules (Rule 5635(d)). Notwithstanding this general requirement, Nasdaq Listing Rule 5615(a)(3)(A) permits foreign private issuers to follow their home country practice rather than these shareholder approval requirements. The Cayman Islands do not require shareholder approval prior to any of the foregoing types of issuances. The Company, therefore, is not required to obtain such shareholder approval prior to entering into a transaction with the potential to issue securities as described above. The Board of Directors of the Company has elected to follow the Company’s home country rules as to such issuances and will not be required to seek shareholder approval prior to entering into such a transaction. Therefore, our shareholders may be afforded less protection than they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers. For more information regarding our corporate governance, please see “Item 16.G. Corporate Governance.”

Other than those described above, there are no significant differences between our corporate governance practices and those followed by U.S. domestic companies under Nasdaq Capital Market corporate governance listing standards. However, in the future, we may consider following home country practice in lieu of the requirements under Nasdaq listing rules with respect to certain other corporate governance standards which may afford less protection to investors.

Anti-takeover provisions in our amended and restated memorandum and articles of association may discourage, delay, or prevent a change in control.

Some provisions of our amended and restated memorandum and articles of association, may discourage, delay, or prevent a change in control of our company or management that shareholders may consider favorable, including, among other things, the following:

If we cannot satisfy, or continue to satisfy, the continued listing requirements and other rules of the Nasdaq Capital Market, our securities may be delisted, which could negatively impact the price of our securities and your ability to sell them.

Our securities are listed on the Nasdaq Capital Market. In order to maintain our listing on the Nasdaq Capital Market, we are required to comply with certain rules of the Nasdaq Capital Market, including those regarding minimum stockholders’ equity, minimum share price, minimum market value of publicly held shares, and various additional requirements. The Nasdaq Listing Rules require a company to maintain a minimum closing bid price of US$1.00 per share. On October 23, 2024, we received a notice from Nasdaq that we failed to comply with the minimum closing bid price requirement set forth in Rule 5550(a)(2) of the Nasdaq Listing Rules as the closing bid price per Ordinary Share had been below US$1.00 for a period of 30 consecutive business days. The Nasdaq notification letter does not result in the immediate delisting of our securities. Pursuant to Rule 5810(c)(3)(A) of the Nasdaq Listing Rules, we have a compliance period of 180 calendar days, or until April 21, 2025 to regain compliance with Nasdaq’s minimum bid price requirement. If we do not regain compliance during such 180-day period, we may be eligible for an additional 180 calendar days, provided that we meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq except for Nasdaq Listing Rule 5550(a)(2), and provides Nasdaq with a written notice of its intention to cure this deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

Even if we currently meet the other listing requirements and other applicable rules of the Nasdaq Capital Market, and even if we regain compliance with Nasdaq Listing Rule 5550(a)(2), we may not be able to continue to satisfy these requirements and applicable rules. If we are unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting.

If the Nasdaq Capital Market subsequently delists our securities from trading, we could face significant consequences, including:

The sale of our Ordinary Shares could encourage short sales by third parties, which could contribute to the future decline of our shares price.

On September 18, 2024, we completed a private placement with several investors, wherein a total of 2,722,224 units were issued at an offering price of $0.90 per unit, for a total purchase price of approximately $2.45 million. Each unit includes one Ordinary Share, one Series A warrant to purchase one Ordinary Share at an exercise price of $1.35 per share, and one Series B warrant to purchase such number of Ordinary Shares as determined on the Reset Date, as defined therein. As of the date of this annual report, we have issued an aggregate of 12,918,667 Ordinary Shares in connection with the private placement.

In many circumstances, large issuances of equity for companies have the potential to cause a significant downward pressure on the price of ordinary shares. This is especially the case if the shares being placed into the market exceed the market’s ability to take up the increased share issuance. Such an event could place further downward pressure on the price of our Ordinary Shares. Regardless of our activities, the opportunity exists for short sellers and others to contribute to the future decline of our share price. If there are significant short sales of our Ordinary Shares, the price decline that would result from our acquisition activities will cause the share price to decline more, which may cause other shareholders of our Ordinary Shares to sell their shares, thereby contributing to sales of Ordinary Shares in the market. We may execute similar transactions in the future, and if there are many more of our Ordinary Shares on the market for sale than the market will absorb, the price of our Ordinary Shares will likely further decline, which could result in our inability to regain compliance with the minimum closing bid price required for continued listing on Nasdaq set forth in Nasdaq Listing Rule 5550(a)(2) or repeated inability to meet such requirement.

Our board of directors may decline to register transfers of Ordinary Shares in certain circumstances.

Our board of directors may, in its sole discretion, decline to register any transfer of any Ordinary Shares which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any share unless (i) the instrument of transfer is lodged with us, accompanied by the certificate for the shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument of transfer is properly stamped, if required; (iv) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four; (v) the shares conceded are free of any lien in favor of us; or (vi) a fee of such maximum sum as Nasdaq Capital Market may determine to be payable, or such lesser sum as our board of directors may from time to time require, is paid to us in respect thereof.

If our directors refuse to register a transfer they shall, within one month after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement in one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year.

This, however, is unlikely to affect market transactions of the Ordinary Shares held by our public shareholders. Since our Ordinary Shares are listed, the legal title to such Ordinary Shares and the registration details of those Ordinary Shares in the Company’s register of members remain with the Depository Trust Company. All market transactions with respect to those Ordinary Shares are carried out without the need for any kind of registration by the directors, as the market transactions are all conducted through the Depository Trust Company systems.

The laws of the Cayman Islands may not provide our shareholders with benefits comparable to those provided to shareholders of corporations incorporated in the United States.

Our corporate affairs are governed by our amended and restated memorandum and articles of association, by the Companies Act (Revised) of the Cayman Islands and by the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law in the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands and from English common law. Decisions of the Privy Council (which is the final Court of Appeal for British Overseas Territories such as the Cayman Islands) are binding on a court in the Cayman Islands. Decisions of the English courts, and particularly the Supreme Court and the Court of Appeal are generally of persuasive authority but are not binding in the courts of the Cayman Islands. Decisions of courts in other Commonwealth jurisdictions are similarly of persuasive but not binding authority. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has a less developed body of securities laws relative to the United States. Therefore, our public shareholders may have more difficulty protecting their interests in the face of actions by our management, directors or controlling shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

You may be unable to present proposals before annual general meetings or extraordinary general meetings not called by shareholders.

Cayman Islands law provides shareholders with only limited rights to requisition a general meeting and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s amended and restated articles of association. Our amended and restated articles of association allow our shareholders holding shares representing in aggregate not less than 10% of our voting share capital in issue, to requisition a general meeting of our shareholders, in which case our directors are obliged to call such meeting. Advance notice of at least 21 clear days is required for the convening of our annual general shareholders’ meeting and at least 14 clear-day notice any other general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least one shareholder present or by proxy, representing not less than one-third in nominal value of our total issued voting shares.

If we are classified as a passive foreign investment company (“PFIC”), United States taxpayers who own our Ordinary Shares may have adverse United States federal income tax consequences.

A non-U.S. corporation such as ourselves will be classified as a PFIC for any taxable year if, for such year, either

Passive income generally includes dividends, interest, rents, and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our Ordinary Shares, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.

Based on our operations and the composition of our assets we do not expect to be treated as a PFIC under the current PFIC rules. It is possible that, however, for our 2025 taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income. We will make this determination following the end of any particular tax year.

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Item 4.INFORMATION ON THE COMPANY

On October 28, 2020, MD UK was formed pursuant to English laws. MDJM holds 100% of the equity interest in MD UK. MD UK commenced its operations in 2021, focusing on developing and launching real estate development projects and hospitality programs, including hotel operations.

On June 15, 2021, Mansions was formed as a limited company under English laws, engaging in the hotel management business. Mansions commenced operations in 2021. 51% of the equity interest in Mansions was held by MD UK, 41% of the equity interest was held by Ocean Tide Wealth Limited, a specialist mortgage broker in the United Kingdom, and the remaining 8% was held by Mingzhe Zhang. On May 20, 2022, MD UK acquired 41% of the equity interests in Mansions from Ocean Tide Wealth Limited with a consideration of one British pound sterling and 8% of the equity interests in Mansions from Mingzhe Zhang with a consideration of one British pound sterling. After the acquisitions, MD UK holds 100% of the equity interests in Mansions.

On January 14, 2022, MD Japan was formed pursuant to Japanese laws. MDJM holds 100% of the equity interest in MD Japan. As of the date of this report, MD Japan has not been operative or generated any revenue.

On February 16, 2022, MD German was formed pursuant to German laws. MDJM holds 100% of the equity interest in MD German. As of the date of this report, MD German has not been operative or generated any revenue.

On December 16, 2022, Mansions changed its name from “Mansions Estate Agent Ltd” to “Mansions Catering and Hotel Ltd.” MD UK and Mansions submitted requests and information required to expand their business to hotel operations to the Companies House of UK in December 2022.

On August 22, 2023, we incorporated Fernie Castle Culture in the UK. Fernie Castle Culture expects to engage in the management of the brand name of “Fernie” and developing “Fernie” brand name related products and services, including cultural products and services.

Mingda Tianjin started offering primary real estate agency services in 2002. Mr. Siping Xu, our chief executive officer, controls 98.27% of Mingda Tianjin. As of December 31, 2024, for accounting purposes, we controlled and received the economic benefits of the VIE through the VIE Agreements, which enabled us to consolidate the financial results of the VIE in our consolidated financial statements under U.S. GAAP. The VIE Agreements are described under “—B. Business Overview—The VIE Agreements.” MDJM is a holding company with no business operation other than holding the shares in MDJH Hong Kong, also a pass-through entity with no business operation. WFOE was exclusively engaged in the business of managing the operations of Mingda Tianjin. On March 1, 2025, WFOE entered into agreements of termination with Mingda Tianjin and the shareholders of the VIE, pursuant to which the VIE Agreements were terminated. As a result, the financial results of the VIE will not be consolidated in our consolidated financial statements beginning with our annual report for the fiscal year ending December 31, 2025.

Our principal executive offices are located at Fernie Castle, Letham, Cupar, Fife, KY15 7RU, United Kingdom, and our phone number is +44-01337 810 381. Our registered office in Cayman Islands is located at Harneys Fiduciary (Cayman) Limited, 4th Floor, Harbour Place, 103 South Church Street, P.O. Box 10240, Grand Cayman, KY1-1002, and the phone number of our registered office is+1 345 949 8599. We maintain a corporate website at ir.mdjmjh.com. The information contained in, or accessible from, our website or any other website does not constitute a part of this annual report. Our agent for service of process in the United States is Cogency Global Inc., 122 East 42nd Street, 18th Floor, New York, NY 10168.

The SEC maintains a website at www.sec.gov that contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC using its EDGAR system.

For information regarding our principal capital expenditures, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital Expenditure.”

On September 18, 2024, we completed a private placement with several investors, wherein a total of 2,722,224 units were issued at an offering price of $0.90 per unit, for a total purchase price of approximately $2.45 million (the “Offering”). In connection with the Offering, we entered into a Securities Purchase Agreement with investors containing customary representations and warranties. Each unit includes one Ordinary Share, one Series A warrant to purchase one Ordinary Share at an exercise price of $1.35 per share, and one Series B warrant to purchase such number of Ordinary Shares as determined on the Reset Date, as defined therein. We received net cash proceeds of approximately $2.17 million (after deducting the placement agent fee and expenses of the Offering), to be used for working capital and general corporate purposes. The Ordinary Shares to be issued to the investors have been registered through a registration statement on Form F-3 (File No. 333-282701), initially filed with the SEC on October 17, 2024, and declared effective on October 30, 2024.

On October 23, 2024, we received a notice from Nasdaq that we failed to comply with the minimum closing bid price requirement set forth in Rule 5550(a)(2) of the Nasdaq Listing Rules as the closing bid price per Ordinary Share had been below US$1.00 for a period of 30 consecutive business days. The Nasdaq notification letter does not result in the immediate delisting of our securities. Pursuant to Rule 5810(c)(3)(A) of the Nasdaq Listing Rules, we have a compliance period of 180 calendar days, or until April 21, 2025 to regain compliance with Nasdaq’s minimum bid price requirement. If we do not regain compliance during such 180-day period, we may be eligible for an additional 180 calendar days, provided that we meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq except for Nasdaq Listing Rule 5550(a)(2), and provides Nasdaq with a written notice of its intention to cure this deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

Overview

We operate our business through MD UK and Mansions. While we conducted business in the PRC prior to the fiscal year ended December 31, 2024 through the PRC operating entities, including Mingda Tianjin, which was a VIE in the PRC, we have no business operations in the PRC as of the date of this annual report.

Mansions engages in the asset management business and expects to provide comprehensive UK real estate-related services, including property leasing, property sales, furnishings, routine property maintenance and management, and hospitality and butler services to overseas real estate owners. Mansions implements customized management plans holistically curtailed to the needs of its real estate owner clients. It facilitates a variety of ancillary services, including its real estate marketing and planning services, real estate agency services, advertisement planning services, 24-7 multilingual customer service meeting the demand of an international market, and professional onsite butler team. We believe that the establishment of Mansions is a significant step for our global expansion strategy. Mansions commenced operations in 2021 and generated $48,375 (GBP 37,849), $102,909 (GBP 82,729), and $16,263 (GBP13,207) of revenue during the years ended December 31, 2024, 2023, and 2022, respectively.

MD UK commenced its operations in 2021. MD UK focuses on developing and launching real estate development projects and hospitality programs, including hotel operations. See “—Our Services—The UK Operations.”

Mingda Tianjin primarily provided primary real estate agency services to its real estate developer clients. Mingda Tianjin’s main market was in the Tianjin Autonomous Municipality, one of the richest cities in the PRC, ranking fifth in the PRC based upon GDP per capita in 2022, according to the China Statistical Yearbook. Since 2014, Mingda Tianjin had expanded its market presence to other first and second tier cities in China, including Chengdu of Sichuan province.

The PRC operating entities’ primary real estate agency services offerings included providing primary agency sales services to residential real estate developers at any stage of the development and sale of a residential real estate project. The PRC operating entities typically served large and mid-sized real estate developers, such as Ping An Real Estate Co., Ltd., China Vanke Co., Ltd., China Merchants Property Development Co., Ltd., Tianjin Metro Resources Investment Co., Ltd., Jingrui Real Estate (Group) Co., Ltd., Tianjin Real Estate Development (Group) Co., Ltd., Tianjin Teda Development Co., Ltd., and Tianjin City Investment Binhai Real Estate Management Co., Ltd., or promising emerging local developers in the markets in which they operated. The PRC operating entities primarily generated revenue through sales commissions which were either fixed or progressive. They generated 0%, 29.0%, and 96.4% of their total revenue through their primary agency sales services in fiscal years ended December 31, 2024, 2023, and 2022, respectively.

The PRC operating entities commenced their operations in 2002. Their revenue was $nil, $41,954, and $434,371 for the years ended December 31, 2024, 2023, and 2022, respectively. Their net (loss) was $(631,355), $(662,821), and $(1,847,047) for the years ended December 31, 2024, 2023, and 2022, respectively.

Competitive Strengths

We believe that the following strengths differentiate the UK subsidiaries from their competitors:

Growth Strategies

Our board of directors has adjusted the growth strategies to reduce the scale of operations of the PRC operating entities and shift our focus onto developing the overseas operations that are currently propelled by our UK, Japanese, and German subsidiaries. From 2021 to 2023, the PRC operating entities continually reduced their real estate agency programs and decreased the size of their sales team on relevant projects. Due to such downscaling, the PRC operating entities did not have any operations in China in 2024 and do not have any operations as of the date of this annual report. The services provided by the PRC operating entities, including real estate marketing and planning services, real estate agency services, and advertisement planning services, have translated into experiences that may help our other subsidiaries in the UK, Germany, Japan, and other prospective markets to gain competitive advantages. Currently, the UK subsidiaries are the focus of future growth and market expansion, with the following strategies:

Our Services

The UK operations

Two of the UK subsidiaries, MD UK and Mansions, commenced operations in August 2021. Fernie Castle Culture Limited does not currently have any operation.

Mansions engages in the asset management business and expects to provide comprehensive UK real estate-related services, including property leasing, property sales, furnishings, routine property maintenance and management, and hospitality and butler services to overseas real estate owners. Mansions implements customized management plans holistically tailored to the needs of its real estate owner clients. It facilitates a variety of ancillary services, including its real estate marketing and planning services, real estate agency services, advertisement planning services, 24-7 multilingual customer services meeting the demands of an international market, and professional onsite butler team. Mansions also manages the operations of the two hotels that MD UK recently purchased, as described below. We believe that the establishment of Mansions is a significant step for our global expansion strategy. Mansions commenced operations in 2021 and generated $48,375 (GBP 37,849), $102,909 (GBP 82,729), and $16,263 (GBP13,207) revenue during the years ended December 31, 2024, 2023, and 2022, respectively.

MD UK focuses on developing and launching real estate development projects and hospitality programs, including hotel operations, which are managed through Mansions.

On August 3, 2022, MD UK entered into an Offer to Sell (the “Agreement”) with Braveheart Hotels Limited, a United Kingdom company (“Braveheart”). Pursuant to the Agreement, MD UK agreed to purchase Fernie Castle, Letham, Cupar, Fife, KY15 7RU, United Kingdom (the “Property”) from Braveheart for a price of GBP1,580,000 and Braveheart agreed to sell such Property and to deliver entry with vacant possession of the Property to MD UK on August 5, 2022, or such other date as MD UK and Braveheart may agree in writing. The parties closed this deal on August 5, 2022. MD UK plans to transform the property into a multi-functional cultural venue, encompassing a fine dining restaurant, a hotel, and spaces for parties and weddings. The Company plans to fund the remodeling effort through self-funding, along with obtaining the necessary services through equity compensation. As of the date of the annual report, the remodeling is not yet complete.

On December 6, 2022, MD UK entered into a Contract for the Sale of Freehold Land (the “Robin Hill Agreement”) with Pioneer Hotels Limited, a United Kingdom company (“Pioneer”). Pursuant to the Robin Hill Agreement, MD UK agreed to purchase the Robin Hill Hotel and the Villa, Braddons Hill Road, Torquay TQ1 1HF (the “Robin Hill Property”) from Pioneer for a price of GBP850,000 and Pioneer agreed to sell such Robin Hill Property and to deliver the completed transfer deed, in original and counterpart, of the Robin Hill Property to MD UK on December 6, 2022, or within 10 working days after December 6, 2022. The parties closed this deal on December 6, 2022. MD UK has finished the renovation of the Robin Hill Property and it was open to the public in March 2023.

PRC operations

The PRC operating entities generated their revenue primarily through providing primary real estate agency services to their real estate developer clients. Primary real estate agency services refer to agency services provided for the primary real estate market, newly constructed and completed residential and commercial real properties. The PRC operating entities’ primary real estate agency services were for residential and business projects. In addition to the traditional agency services provided for the primary real estate market, the PRC operating entities provided integrated agency services that incorporate any stage(s) in the residential real estate project value chain, which ranged from planning and design to marketing and sales, and delivery and after-sale services, where they served both their real estate developer clients, the prospective property buyers, and the property buyers.

The PRC operating entities’ principal business was providing primary real estate agency services. The PRC operating entities derived substantially all of their primary real estate agency service revenue from gross commission income received serving as a broker or sales agent at the closing of real estate transactions. The PRC operating entities provided primary real estate agency services to real estate developers of mainly residential properties. For the years ended December 31, 2023 and 2022, the PRC operating entities’ average residential property broker commission rate was 0.47% and 0.5%, respectively, which represented the average/standard commission rate earned by primary sales agents in a home sale transaction. For the year ended December 31, 2024, the PRC operating entities did not provide primary real estate agency services.

Through Mingda Tianjin and its two branch offices in Chengdu (the “Chengdu Branch Office”) (deconsolidated in 2024) and in Suzhou (deconsolidated in 2022), the PRC operating entities owned and operated a primary real estate agency service business in the following local markets, Tianjin, Chengdu, and Suzhou, which represented 100%, 0%, and 0% of their agency revenue for the year ended December 31, 2023, and represented 95%, 5%, and 0% of their agency revenue for the year ended December 31, 2022, respectively. The Chengdu Branch Office commenced generating revenue in 2019. The PRC operating entities did not generate any agency revenue for the year ended December 31, 2024. As of December 31, 2024, Mingda Tianjin had no employees.

For the years ended December 31, 2024, 2023, and 2022, the PRC operating entities completed the sale of 0 units, 6 units, and 82 units, respectively.

The following table sets forth the total gross floor area (“GFA”) and value of properties sold for the periods indicated:

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Service Engagements

For both of the PRC operating entities’ primary agency sales service and their consulting service offerings, the PRC operating entities were typically considered by their developer clients and consulting service clients for engagement through a bidding process, where each of the potential bidders would submit a detailed service plan and an estimated cost and service fee.

The PRC operating entities typically entered into the bidding processes of real estate projects in the following two manners. First, they were invited to participate in the bidding process by real estate developer clients with whom they had previously collaborated, or where developer clients had included the PRC operating entities in their shortlist based upon their reputation. Second, the PRC operating entities reached out to real estate projects in the bidding stage based upon the market intelligence they collected.

Primary Agency Sales Services

The PRC operating entities’ integrated, end-to-end primary agency sales services included the following services:

Consulting Services

The PRC operating entities offered a variety of services to developers who have obtained land development rights. They provided project feasibility studies that included general information on market conditions and trends and information concerning the demographics and the existing and projected amenities in the area where the project would be located. They also provided, if needed, a comprehensive analysis of the real estate transaction history of nearby development projects, including average selling price and sale activities, marketing and advertising campaigns employed, amenities and services offered, and demographics targeted by these projects. They then worked with developers to define the targeted demographic and determine the floor plan, optimal unit size, price schedule, interior and landscaping design criteria, and services and amenities for each development phase.

Planning and Design Services

The PRC operating entities provided project planning and design services, which included concept and architectural design, budgeting, financial analysis, and projections. We believe careful planning was essential to control costs, quality, and timing of the PRC operating entities’ projects.

Marketing and Sales

As part of the primary real estate agency services provided to the PRC operating entities’ developer clients, they devised customized marketing and sales strategies, established standardized policies and procedures for the operation and sales team to execute such strategies, and implemented and/or supervise the marketing and sales plans to seek to complete the sales targets. As such, they typically analyzed the characteristics of the development project and the target market and advised their developer clients on both the overall marketing and advertising strategy, and specific marketing and advertising plans for various phases of the development.

The PRC operating entities’ sales and operating team were also responsible for designing sales offices and sample show rooms tailored to the target buyers and target markets. Their team worked with third-party service providers to prepare the advertising, promotion, and selling plans for each project. The sales force and sales associates hired and trained by them at each project were responsible for following through on the entire sales and leasing process, including setting monthly sales or leasing targets, controlling prices, implementing special promotions, monitoring external agency performance, and processing customer feedback.

The PRC operating entities’ track record of rolling out attractive and differentiated projects specifically catered to targeted buyers in each of the markets in which they operated. In 2022, the PRC operating entities successfully completed seven projects in Tianjin and worked on nine other projects. In 2023, the PRC operating entities successfully completed three projects in Tianjin and worked on six other projects as of December 31, 2023. In 2024, the PRC operating entities did not work on any projects.

Delivery and After-Sale Services

The PRC operating entities assisted buyers in arranging for and providing information relating to financing. They also assisted their customers in various title registration procedures relating to the clients’ properties, complementing the title registration services provided by the real estate developers. The PRC operating entities offered various communication channels to customers to provide feedback about their products or services. They also sought feedback from buyers regarding after-sale services.

The PRC operating entities monitored the progress of construction of their property projects and conducted pre-delivery property inspections to ensure timely delivery. Once a property development was completed, had passed the requisite government inspections, and was ready for delivery, the PRC operating entities notified the customers and handed over keys and possession of the properties.

Comprehensive Solution

If needed, the PRC operating entities helped their developer clients develop comprehensive plans tailored to their development projects, ranging from overall development strategies and plans to architectural design, marketing, and advertising strategies to operating ad profit models. They typically worked closely with designated client staff to prepare detailed advice on the entire development and if needed, detailed frameworks for high quality execution of their plans. They also provided solutions to the post-completion and after-sales operation process.

Advertising Services

The PRC operating entities also offered real estate advertising design services to their real estate developer clients through their in-house advertising design team.

Major Customers

Mansions’ customers are primarily overseas investors and real estate owners in the UK, including high net worth individuals and some individuals with particular needs, such as parents of children who study or work abroad. In December 2022, Mansions expanded its business into hotel operations, and its primary customers have since then further included customers of its hotels.

The PRC operating entities’ customers were primarily real estate developers. They also served real estate design institutes and agencies, urban planning bureaus of various levels of governments, urban rail transportation companies, and urban infrastructure development companies. The PRC operating entities relied on their developer customers for revenue generated from their services primarily as primary real estate sales provider.

For the year ended December 31, 2024, the PRC operating entities did not generate any revenue.

For the year ended December 31, 2023, the PRC operating entities’ top customer represented approximately 28% of their total revenue. The accounts receivable from this customer (project) were $0 as of December 31, 2023.

For the year ended December 31, 2022, the PRC operating entities’ top customer represented approximately 79% of their total revenue. The accounts receivable from this customer (project) were $80,159 as of December 31, 2022.

The PRC operating entities entered into primary sales service agreements with their real estate developer clients that were long term in nature, with a non-fixed term of the length of the projects, on a project-to-project basis. The terms were typically for multiple years, but varied depending on whether all planned phases of each project were materialized.

While the PRC operating entities had not encountered circumstances where their real estate developer clients terminated their service agreements, there were circumstances where the PRC operating entities’ real estate developer clients refused to pay the related service commissions. See “—Legal Proceedings” for detailed information.

Marketing and Brand Promotion

The UK Market

The main marketing promotion methods of Mansions are currently divided into online and offline channels. Offline marketing efforts happen mainly in the form of in-person visits and exhibitions. Mansions’ introduction and business-related information are made into a complete set of publicity materials, which are delivered and distributed in-person by business personnel and customers. Mansions uses its official website and WeChat official account for online marketing efforts and has created electronic brochures for promotion purposes. These electronic brochures are also distributed via WeChat or e-mail during business negotiations with customers. Mansions also launched promotional campaigns on the websites of its hotels, social media platforms, such as X (formerly Twitter), Instagram, and Facebook, and search engines, such as Google, TripAdvisor, Booking.com, and Airbnb.

The PRC Market

The PRC operating entities employed a variety of marketing and brand promotion methods to enhance their brand recognition and attract property buyers, including the following:

Advertisements. The PRC operating entities had advertising arrangements with various consumer media outlets in the markets that they operated, including television stations, newspapers, and industry publications. They also advertised and distributed informational brochures, posters, and flyers at various real estate conferences, exhibitions, and trade shows.

Prospective Buyers Database. Since 2002, the PRC operating entities had established and maintained a database of all prospective buyers who had visited the sales offices of projects for which they acted as primary sales agent. The PRC operating entities developed standardized data collection procedures to ensure the accuracy and timeliness of entry of data into their systems. They collected real estate related information from such prospective buyers. As such, they regularly followed up with the prospective buyers who met the target buyer profile of new real estate projects where their sales staff made cold calls to prospective buyers. The PRC operating entities’ collection and use of client information and transaction-related information were subject to Section 111 of General Provisions of the Civil Law of the People’s Republic of China, effective as of 2017. We believe that the PRC operating entities were compliant with the rules and regulations of Section 111 of General Provisions of the Civil Law of the People’s Republic of China, effective as of 2017.

Brand Center. The PRC operating entities established a brand center to carry out long-term maintenance and positioning of their brand image, clarify their brand image, and create, cultivate, and enhance their corporate value. Other centers were formed, including an overseas development division, an overseas assets management division, a comprehensive management center, a financial operation center, and a market research and development center, and each center promoted one another.

Additionally, the PRC operating entities promoted their real estate projects to other real estate agents who were their third-party referral service providers. The PRC operating entities’ third-party referral providers informally brought prospective buyers to their attention or invited prospective buyers to visit the sales offices of real estate projects that they are engaged. They did not rely on third-party referrals, and this constituted a small part of their operation. Third-party referral service providers were paid a commission if prospective buyers referred by them successfully closed a real estate purchase from projects the PRC operating entities service.

Competition

The UK Market

Mansions competes both with the five major global real estate companies with accumulated experiences and qualifications, such as Jones Lang LaSalle and Savills, and with agents with longer operation history and lower fees, such as Crown Home Buying & Letting and Hanland Global. The UK real estate market is competitive as the number of market participants is relatively limited. Mansions intends to improve its competitive position by providing customized services and humanized experiences at a competitive fee rate.

UK subsidiaries’ principal competitors in hotel operations are traditional hotel and resort operators, internet-based alternative lodging sites operators, and package holidays and tour operators. UK subsidiaries face intense competition for individual guests and group reservations from major hospitality chains with well-established and recognized brands, as well as from other smaller hotel chains, independent and local hotel owners and operators, and alternative lodging sites. UK subsidiaries compete for customers primarily based on location, room rates, quality of the accommodations, customer satisfaction, and amenities. Our competitors may have similar or greater commercial and financial resources which allow them to improve their properties in ways that affect our ability to compete for guests effectively and adversely affect our revenue and profitability and limit or slow our future growth.

Employees

See “Item 6. Directors, Senior Management and Employees—D. Employees.”

Seasonality

Our UK operations are affected by seasonality common in the hotel industry, with summer being the peak season for customer travel and winter being the off-season. To address such seasonal challenge, the Company seeks to promote the unique cultural value of its assets as an attraction and combines both online and offline business development strategies to minimize the impact of seasonality on business operations.

Legal Proceedings

Other than the following, we and the PRC operating entities are not currently a party to any litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business, operating results, cash flows, or financial condition.

On March 18, 2022, the Chengdu Branch Office of Mingda Tianjin filed a civil complaint in the People’s Court of Dujiangyan City, Sichuan Province, alleging breach of contract and unpaid service fee against Chengdu TEDA New City Construction Development Co., Ltd (“Chengdu TEDA”). The total claimed amount is approximately $757,861 (RMB5,380,734 translated at the December 31, 2023 exchange rate). On July 15, 2022, the Court made a favorable judgment that Chengdu TEDA need to pay the full amount claimed within five days. On July 29, 2022, Chengdu TEDA filed an appeal. On December 23, 2022, the Intermediate People’s Court of Chengdu City, Sichuan Province made a final judgment, and demanded that Chengdu TEDA pay RMB5,157,182 plus liquidated damages and interest to the Company in five days. The Company received the payment of $838,625 (RMB5,954,151 translated at the December 31, 2023 exchange rate) on February 27, 2023.

On January 9, 2023, the Chengdu Branch Office of Mingda Tianjin filed a civil complaint in the People’s Court of Dujiangyan City, Sichuan Province, alleging breach of contract and an unpaid service fee against Chengdu TEDA. Total claimed amount is approximately $263,725 (RMB1,872,419 translated at the December 31, 2023 exchange rate).

On January 5, 2023, Mingda Tianjin and Chengdu Branch Office of Mingda filed a lawsuit against Chengdu TEDA, demanding payment of RMB1,872,419.34 in outstanding sales agency fees and overdue payment penalties. On March 28, 2023, the court made a first-instance judgment, which ruled that: (i) Chengdu TEDA shall pay Mingda RMB1,872,419.34 in outstanding sales agency fees within 10 days of the effective date of the judgment; and (ii) Chengdu TEDA shall pay Mingda the overdue payment penalties within 10 days of the effective date of the judgment. The penalty is based on the amount of RMB1,872,419, and is calculated at four times the same period loan market quoted interest rate (LPR) from July 1, 2022 until the payment of the amount is made.

Because Chengdu TEDA did not fulfill the obligations of the above judgment, Mingda Tianjin applied to the court for compulsory execution, and on May 5, 2023, the Dujiangyan Municipal People’s Court of Sichuan Province filed a case for the application of Mingda Tianjin. After the enforcement by the court, Mingda Tianjin received part of the enforcement refund of $127,842 (RMB907,662 translated at the December 31, 2023 exchange rate) on September 1, 2023, and since Chengdu TEDA had no other property for enforcement, the court issued the Civil Ruling on November 2, 2023, which terminated the enforcement procedure. After the termination of the execution procedure, Mingda Tianjin still has the right to request Chengdu TEDA to continue to fulfill its obligation to pay the remaining amount, and if Mingda Tianjin discovers that Chengdu TEDA has any property available for execution, it may apply to the court for resumption of execution at any time. As of the date of this annual report, Chengdu TEDA has not been found to have any other property available for execution, and the case status remains “execution terminated.” As of December 31, 2024, the remaining balance from this vendor was still outstanding. Given the deterioration of the real estate market in China, management has determined that the Company is unlikely to recover the remaining balance. Consequently, a 100% Current Expected Credit Loss (“CECL”) rate has been applied to accounts receivable outstanding for more than 365 days.

Foreign Private Issuer Status

We are a foreign private issuer within the meaning of the rules under the Exchange. As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:

Regulations

As a company with global operations, our operating entities are subject to the laws and regulations of the PRC and the multiple foreign jurisdictions in which we operate as well as the rules, reporting obligations and interpretations of all such requirements and obligations by various governing bodies, which may differ among jurisdictions. In addition, changes to such laws, regulations, rules, reporting obligations and related compliance obligations could result in significant costs but are not expected to have a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods.

Regulations in the European Economic Area

The EU pursues common standards of laws and regulations to create consistency across the internal market and reduce compliance and regulatory burdens for businesses operating on a cross-border basis. The Agreement on the European Economic Area (EEA) extends this objective to Iceland, Liechtenstein, and Norway. Members of the EEA have agreed to enact legislation similar to that passed in the EU in many areas. To the extent that activities are carried out within a Member State’s jurisdiction, the authorities of that host Member State supervise the conduct of such activities. The UK ceased to be a Member State of the EU as of 11 pm on January 31, 2020, and entered into a “Transition Period” pursuant to the UK/EU Withdrawal Act 2020, during which Transition Period EU law continued to be applicable in the UK. On December 31, 2020, the Transition Period terminated, and EU law was no longer applicable within the UK. As of the end of the Transition Period, new UK requirements must be complied with when conducting regulated activity in the UK.

The UK subsidiaries, MD UK, Mansions, and Fernie Castle Culture, operate their business in the UK; the German subsidiary, MD German, operates its business in Germany. The operations of our UK and German subsidiaries are subject to the laws and regulations of the relevant jurisdictions as well as the rules, reporting obligations and interpretations of all such requirements and obligations by various governing bodies, which may involve the EU laws and agencies, or the states of the UK and Germany. In addition, changes to such laws, regulations, rules, reporting obligations and related compliance obligations could result in significant costs but are not expected to have a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods.

PRC Regulations

The PRC operating entities operate their business in China under a legal regime consisting of the National People’s Congress, which is the country’s highest legislative body, the State Council, which is the highest authority of the executive branch of the PRC central government, and several ministries and agencies under its authority, including the SAIC, and their respective local offices, and Ministry of Housing & Urban-Rural Development (the “MHURD”) and their respective local offices. This section summarizes the principal PRC regulations applicable to the PRC operating entities’ business.

Regulations on Real Estate Service-Related Activities

The principal regulations governing the real estate service industry in China are (i) the Law on Administration of the Urban Real Estate issued by the Standing Committee of National People’s Congress (“NPCSC”) in July 1994, last amended in 2019 pursuant to Chairman’s Order No. 72, and (ii) the Administrative Measures for Real Estate Brokerage jointly issued by the MHURD, the National Development and Reform Commission (the “NDRC”) and the Ministry of Human Resources & Social Security (“MOHRSS”) in 2010, and further amended on March 1, 2016 and effective as of April 1, 2016.

On May 28, 2020, the Third Session of the Thirteenth National People’s Congress voted and passed the “Civil Code of the People’s Republic of China” (“Civil Code”), which became effective on January 1, 2021. The property law, contract law, inheritance law, and tort liability law were compiled and updated in the Civil Code, which now serves as the legal basis for civil entities carrying out production and business activities.

On August 5, 2021, the Tianjin Municipal Housing and Construction Commission issued the Tianjin Real Estate Development Enterprise Credit Management Measures, using “credits” to evaluate real estate brokerage behavior based on honest operation and fair competition. The new measures require dynamic evaluation of the credit of Tianjin real estate development enterprises and the implementation of differentiated supervision and credit restraint for real estate development enterprises within the jurisdiction based on their credit status. For example, enterprises with good credit enjoy priority in approval procedures, acceptance of the withdrawal of regulatory funds applications, recommendation to participate in the evaluation of excellence, and exemption from dynamic verification of qualifications and other aspects of incentives, and enterprises with poor credit will be subject to intensified regular supervision and random checks, interviews with its principal, strict administrative approval, strict supervision of commodity house pre-sale funds, would not be recommended for merit appraisals and evaluations, and the personal credit record of the legal representative or the principal person in charge of the enterprise and the actual controller will be affected as well as the possibility of those persons being subject to other disciplinary measures.

On February 8, 2022, the PBOC and China Banking and Insurance Regulatory Commission (the “CBIRC”) jointly issued the “Notice on Excluding Loans for Affordable Rental Housing from the Management of Real Estate Loan Concentration.” According to the notice, loans issued by financial institutions to affordable rental housing projects with a certification of qualification will not be included in the management of real estate loan concentration.

On February 16, 2022, the CBIRC and the Ministry of Housing and Urban-Rural Development jointly issued the “Guiding Opinions on Supporting the Development of Rental Housing for Low-Income Families by Banking and Insurance Institutions.” The opinions adhere to the positioning that “houses are for living, not for speculation,” and aim to establish a multi-level, widely covered, risk-controllable, and sustainable financial service system for rental housing. The opinions also increase support for the construction and operation of rental housing for low-income families.

On March 2, 2022, the Ministry of Housing and Urban-Rural Development issued a decision to amend the “Regulations on the Qualification Management of Real Estate Development Enterprises.” Real estate development enterprises are divided into two qualification levels, level one and level two, based on their enterprise conditions. Level one real estate development enterprises are not subject to any limitations on the construction scale of real estate projects they undertake, while those level two real estate development enterprises can only undertake development and construction projects with a building area of 250,000 square meters or less.

On May 24, 2022, the Ministry of Housing and Urban-Rural Development, the MOF, and the PBOC issued the “Notice on Implementing Stage-Specific Support Policies for Housing Provident Fund.” Enterprises affected by the COVID-19 pandemic may apply for deferred payment of housing provident fund according to regulations, and make up for the payment after the expiration. During this period, employees can normally withdraw and apply for housing provident fund loans, which will not be affected by the deferment. For depositors affected by the COVID-19 pandemic who cannot repay housing provident fund loans normally, overdue treatment will not be imposed, and no overdue records will be reported to credit reporting agencies. Local governments can increase the limit of housing provident fund withdrawals for renting according to local rent levels and reasonable living areas, supporting depositors to withdraw as needed and better meet their actual needs for paying rent.

On November 23, 2022, the PBOC and the CBIRC issued the Notice on Doing a Good Job in Financial Support for the Stable and Healthy Development of the Real Estate Market. The notice adheres to the position that houses are for living, not for speculation, and maintains a reasonable and moderate level of real estate financing. It treats all types of real estate enterprises, including state-owned and private enterprises, equally. The notice encourages financial institutions to focus on supporting well-governed, focused on their main business, and with good qualifications to achieve stable development of real estate enterprises.

On January 10, 2023, the PBOC’s Tianjin Branch, the CBIRC’s Tianjin Bureau, and the Tianjin Financial Work Bureau issued the Notice on Effectively Carrying out Current Financial Support for the Stable and Healthy Development of the Real Estate Market, which mainly focus on calling for strengthening housing financial services. The notice proposed that financial institutions should increase the implementation of differentiated housing credit policies, making good use of the policy of lowering the first-home loan interest rate before the end of the year, actively supporting rigid and improved housing credit demand, and encouraging the development of separate housing financial service plans for new urban residents. For eligible resident families who apply for commercial personal housing loans, financial institutions should give reasonable minimum down payment ratios and interest rates based on customer qualifications on the basis of the national and Tianjin housing credit policy lower limits, and should not add any extra fees or bundle the sale of other products in internal rules or actual operations. Financial institutions should further optimize business processing procedures, compress the time required for various links such as application, approval, signing, mortgage, and loan, encourage the use of pre-approval mode to carry out business, and improve efficiency. Financial institutions should also announce and improve online service channels, continue to provide housing financial services during the epidemic, and help both buyers and sellers complete transactions and achieve loan disbursements without leaving their homes. Financial institutions should actively implement the financial collaboration requirements of “Internet + Real Estate Registration,” accelerate the transformation of internal systems and operation processes, carry out the “deposit and transfer registration” business, reduce the transaction costs of second-hand housing market transfers, and explore the development of relevant cross-bank businesses on the basis of achieving “deposit and transfer registration” within their own systems.

On March 3, 2023, the Ministry of Natural Resources and the CBIRC issued the Notice on Coordinating Efforts to Provide Convenient and Efficient “with Pledge Transfer” Services for Real Estate Registration and Finance. The notice aims to deepen cooperation between real estate registration and finance services. Real estate registration institutions will continue to extend registration services to banking and financial institutions, and integrate registration services for pre-registration, transfer, and mortgage, support joint application and processing of transfer and mortgage pre-registration, and joint application and processing of “double pre-registration” to transfer registration. The notice encourages the use of electronic real estate registration certificates through system interconnection or the “Internet + Real Estate Registration” to support online and efficient “with pledge transfer” services.

On January 15, 2023, the General Office of the Chengdu Municipal People’s Government issued a notice regarding the Interim Measures for the Operation and Management of Affordable Rental Housing in Chengdu. The notice states that affordable rental housing should include properties developed and constructed by state-owned enterprises, public institutions, research institutes, colleges, universities, and other market entities. These properties must obtain project recognition certificates, land ownership documents, surveying, and mapping reports, among other requirements. Chengdu will establish a database for affordable rental housing to be managed through the Chengdu Affordable Rental Housing Management Service Platform. This platform will oversee the supervision of state-owned enterprises in Chengdu. The notice also specifies that the annual rent increase for affordable rental housing cannot exceed 5%. Property owners of such housing will be eligible for tax benefits, financial, and other support policies according to the regulations. Moreover, it is essential to ensure that the housing provided meets the requirements for affordable rental housing and is not illegally listed for sale, sold in disguise, operated under the guise of affordable rental housing, or used to deceive in order to obtain preferential policies. Real estate brokerage firms and their employees are prohibited from providing subletting services for guaranteed rental housing, illegally collecting, providing, or disclosing others’ information. Additionally, except for the property owner or operating entity, no rental information for guaranteed rental housing can be published on the websites, rental transaction platforms, apps, or mini-programs of real estate brokerage institutions without the consent of the industry regulatory department.

On July 10, 2023, the State Administration for Financial Supervision and Administration of the People’s Bank of China issued a notice on extending the period of policies related to financial support for the stable and healthy development of the real estate market. If the relevant policies of the Notice of the People’s Bank of China and the China Banking and Insurance Regulatory Commission on Doing a Good Job in the Current Work of Financial Support for the Stable and Healthy Development of the Real Estate Market have an applicable period, the applicable period will be uniformly extended to December 31, 2024.

On August 30, 2023, the General Office of the Tianjin Municipal People’s Government issued a notice on the issuance of a new round of measures to optimize the business environment in Tianjin. The notice proposes improving the level of intelligent real estate registration, simplifying the process of paying real estate registration taxes and fees, and launching the “Real Estate Transaction Tax Calculator” on the “Jinxindeng” app. It also promotes the “One Stop Real Estate Registration” throughout the city, moves the application scenario for real estate registration to the sales office, and opens the online processing function for construction in progress mortgage on the bank end. For projects that obtain land through public transfer, enterprises can simultaneously apply for the acquisition of electronic real estate registration certificates or physical real estate property rights certificates when obtaining the Land Delivery Confirmation. Additionally, the notice details plans to reconstruct the real estate registration information platform, build a real estate registration data sharing platform, and establish a security guarantee system. The notice also emphasizes fully promoting online transfers of personal stock housing transactions with collateral and continuously expanding the scope of real estate registration and gas heat linkage transfer.

On September 1, 2023, the Tianjin Municipal Commission of Housing and Urban-Rural Development, Tianjin Municipal Bureau of Planning and Natural Resources, Tianjin Branch of the People’s Bank of China, and Tianjin Supervision Bureau of the State Financial Supervision and Administration issued the Notice on Further Adjusting and Optimizing Real Estate Policies to Better Meet the Rigid and Improved Housing Needs of Residents. The notice proposes several measures to support the rigid housing demand, including continuing to implement a package of policies and measures to promote the virtuous cycle and healthy development of the real estate industry, promoting the accurate connection between housing supply and demand, and supporting the reasonable housing purchase demands of college graduates. If college graduates who are not registered residents of this city and do not own houses in the housing purchase restricted areas can purchase one set of housing with labor contracts, enterprise registration certificates, and graduation certificates. The notice also outlines adjustments to regional purchase restriction measures by adjusting the housing purchase restriction areas to six districts within the city. Residents who purchase new commercial housing or second-hand housing within these areas will still be subject to the city’s housing purchase restriction and qualification policies. Improvements to housing credit policies include the following: In non-housing purchase restricted areas of the city, residential households purchasing houses and applying for commercial personal housing loans should follow the differentiated housing credit policies of cities that do not implement purchase restriction measures and extend the maximum term of commercial personal housing loans in the city. Additionally, the notice encourages the distribution of housing subsidies by urging the people’s governments of each district to provide certain subsidies to homebuyers who purchase newly built commercial housing in their respective areas, to reduce the burden of housing purchases. The specific subsidy standards, operating procedures, and implementation times shall be determined and organized by the people’s governments of each district. Creating a good public opinion environment is also a focus. This involves strengthening positive publicity and public opinion guidance in the real estate market, timely releasing information on the operation and policies of the real estate market, and stabilizing housing consumption expectations. The notice also emphasizes continuously strengthening the rectification of negative public opinion in the real estate sector, resolutely cracking down on various institutions and individuals who create and disseminate false information and creating a favorable public opinion environment in the real estate market.

On November 27, 2023, several key Chinese regulatory bodies, including the People’s Bank of China, the State Administration for Financial Supervision, the CSRC, the SAFE, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Finance, and the All-China Federation of Industry and Commerce issued a notice on strengthening financial support measures to aid the development and growth of the private economy. The notice proposes actively providing continuity services in funding and encourages the host and leading banks of syndicated loans to actively assume leadership and coordination roles. For private enterprises facing temporary difficulties, yet possessing a market for their products, prospects for project development, and competitive market technology, the notice advises connecting with their financing needs in advance based on market-oriented principles, and cautions against abruptly stopping, pressuring, withdrawing, or cutting off loans. It emphasizes implementing policies, such as the Notice on Doing a Good Job in Financial Support for the Stable and Healthy Development of the Real Estate Market, maintaining stability in key financing channels like credit and bonds, and reasonably meeting the financial needs of private real estate enterprises.

On January 5, 2024, the People’s Bank of China and the State Administration for Financial Supervision and Administration issued the “Opinions on Financial Support for the Development of the Housing Rental Market.” The document proposes policies to support the supply-side structural reform of the housing rental sector, with a focus on supporting the professionalization and large-scale development of housing rental enterprises that own their properties. It also aims to establish and improve the financial support system for housing rental, strengthen the innovation of housing rental credit products and service models, expand diversified investment and financing channels in the housing rental market, and enhance the management of housing rental finance.

On January 5, 2024, the Financial Supervision Administration of the Ministry of Housing and Urban-Rural Development issued a notice on establishing a coordination mechanism for urban real estate financing. The aim is to leverage the leading and coordinating role of urban people’s governments, utilize policy toolboxes effectively for urban implementation, more accurately support the reasonable financing needs of real estate projects, and promote the stable and healthy development of the real estate market. The Financial Supervision Administration proposed establishing a coordination mechanism for urban real estate financing, screening and determining support objects, meeting reasonable financing needs, and ensuring effective financing management.

On February 21, 2024, the Ministry of Housing and Urban-Rural Development issued a notice on effective housing development planning and annual planning. The notice states that it will establish a linkage mechanism incorporating the elements of “people, housing, land, and money.” Cities are required to accurately analyze housing demand based on local conditions, improve the “guarantee+market” housing supply system, and scientifically formulate annual housing development plans. The annual housing development plan should specify the scale, structure, and location of various types of housing and land supply, and calculate the reasonable financing needs of real estate projects. It is necessary to further clarify the supply of affordable housing units and the structure of unit types. Additionally, the stable and healthy development of the real estate market, as well as the waiting time for housing security, should be incorporated into target management.

Regulation on the Establishment of Real Estate Services Companies

Under applicable regulations, real estate services include real estate consulting services, real estate appraisal services, and real estate brokerage services. Real estate brokerage services include real estate agency sales services that we provide, and as such, we are subject to regulations related to real estate services companies and real estate brokerage companies. Under PRC laws, a company is required to obtain a business license from the SAIC before it can commence business. To qualify as a real estate services company, a company must register with the local offices of the SAIC in each locality where it operates. Thus, pursuant to the Administrative Measures for Real Estate Brokerage, we are required to file with the real estate regulatory authorities at the county level or above within 30 days after effecting the SAIC registration. To continue its real estate service operation, a real estate service company or branch offices of a real estate service company must meet certain organizational, financial, and operational criteria, such as possessing sufficient funding and employing qualified personnel, keep proper records, and comply with prescribed procedures in delivering its services. While real estate service companies and their branch offices are not required to obtain approval from local real estate regulatory authorities or other local government bodies prior to commencement of operations, local governments may impose different regulations with respect to operation eligibility and deadlines for primary real estate agency service providers and/or their branch offices to meet such eligibility requirements. Typically, local governments may impose eligibility standards including but not limited to registered capital, minimum number of qualified real estate brokers and/or sales associates, and/or minimum size of the operating premises. For local governments requesting service providers to comply with eligibility requirements, there may be a deadline imposed, and service providers’ inability to comply may result in fines, penalties, and/or the suspension of operation.

On April 27, 2023, the Ministry of Housing and Urban-Rural Development and the State Administration for Market Regulation jointly issued the “Opinions on Standardizing Real Estate Brokerage Services.” The document requires the strict implementation of the real estate brokerage agency filing system and the enhancement of management of brokerage practitioners in accordance with the “Real Estate Economic Management Measures.” It calls for effective measures to be taken to protect customer personal information and to strengthen the supervision of funds in stock housing transactions. Unless specified by the parties involved in the transaction, the purchase price should be included in the fund supervision account. Each regulatory department will intensify efforts to rectify illegal and irregular behaviors and include relevant illegal and irregular information of real estate brokerage institutions in the national enterprise credit information disclosure system, as regulated.

The “Opinions on Standardizing Real Estate Brokerage Services” clarify 10 regulatory measures: strengthening the management of practitioners by strictly implementing the filing system for brokerage institutions and comprehensively promoting the real name registration of brokerage practitioners; clarifying the content of brokerage services, which are divided into basic and extended services - basic services being essential for facilitating housing transactions and extended services being optional and offered separately; determining brokerage service fees reasonably, allowing negotiation based on the service content, quality, and market conditions, with encouragement for brokerage agencies to reduce fees for housing sales and rental brokerage services and guidance for both parties to jointly bear the costs; implementing clear pricing by ensuring that brokerage institutions do not mix or bundle fees and providing a fee list to the trading parties before charging, which specifies the standards and amounts to be signed and confirmed by the involved parties; prohibiting the manipulation of brokerage service fees by preventing brokerage institutions from abusing their dominant market position to charge unfair or excessively high fees and ensuring that real estate internet platforms do not interfere with the charging standards set by the brokerage institutions; standardizing the signing of transaction contracts by requiring brokerage agencies facilitating housing transactions to manage the online signing and filing of sales and lease contracts through the designated housing online signing and filing system; strengthening personal information protection by preventing brokerage agencies and practitioners from illegally collecting, using, processing, transmitting, buying, selling, providing, or disclosing others’ personal information; enhancing management services by establishing and improving a housing transaction management service platform and strengthening the management of trading properties, brokerage institutions, and practitioners; intensifying efforts to rectify illegal and irregular behaviors by including the standardization of real estate brokerage services as a critical part of the rectification of the real estate market order and exposing typical cases; and strengthening industry self-discipline management, with industry organizations imposing self-discipline penalties on brokerage firms and practitioners who engage in non-standard fees or infringe upon the legitimate rights and interests of customers’ personal information.

On December 1, 2023, the Chengdu Housing and Urban Rural Development Bureau, the Office of the Cybersecurity and Information Technology Committee of the Chengdu Municipal Committee of the Communist Party of China, and the Chengdu Market Supervision Administration jointly issued a notice on further regulating the behavior of real estate brokerage services. The notice requires that real estate brokerage institutions which have not applied for filing or have submitted incomplete and inaccurate information when applying for a business license must apply to the housing and construction administrative department at their registered location to correct or complete the filing procedures and obtain online signing authority within 30 days from the date of receiving their business license. The housing and construction administrative department is instructed to intensify its inspection efforts and to conduct regular or irregular supervision and inspections of the practice behavior of real estate brokerage institutions within its jurisdiction. It is also specified that if real estate brokers are involved with a real estate internet information platform or APP client, they must ensure thorough house source reviews and releases, maintain transparency and openness of information, actively verify house sources, protect customer privacy, and ensure the protection of personal information when using related functions.

Regulation of Real Estate Agency Companies, Brokers, and Agents

Pursuant to the Regulatory Measures on the Sale of Commercial Houses promulgated by the Ministry of Construction (“MOC”), effective June 1, 2001, a real estate developer may entrust a real estate service organization as a broker to pre-sell or sell primary residential housing. The regulatory measures provide that the real estate broker must not make any false statements regarding a property to clients and must present clients with relevant title certificates or sale permits of the properties and the related letter of authorization. Thus, according to these regulatory measures, we are not permitted to act as agents to sell primary residential housing for which requisite certificates, permits, or authorization letters have not been obtained. The PRC operating entities’ real estate developer clients typically obtain the requisite certificates, permits, or authorization letters needed for the pre-sale sale of primary residential housing.

On December 29, 2006, the MOC and the PBOC promulgated the Circular Concerning Strengthening the Management of Real Estate Services and Regulating the Trade Settlement Capital Account, which provided a number of specific directives to regulate the real estate services industry. Under the Circular, the PRC operating entities are not permitted to receive cash purchase payments on behalf of their clients in secondary real estate transactions and they are required to establish separate security deposit accounts for their clients in these transactions.

On July 29, 2016, the MHURD, the NDRC, the PBOC, the SAIC, the Ministry of Industry and Information Technology (“MIIT”), the SAT, and the China Banking Regulatory Commission promulgated and issued the Opinion on Strengthening the Management of Real Estate Services and Promoting the Growth of the Industry (the “MHURD Opinion”), effective immediately. Residential real estate buyers typically require mortgage loans, and therefore many real estate brokerage firms have partnered with financial institutions. As such, the MHURD Opinion specifically prohibits real estate brokerage companies from limiting the mortgage loan options of residential real estate buyers, bundling financial services with real estate services, providing down payment loans in violation of PRC laws, or obtaining commissions or kickbacks for directing mortgage loans to specific financial institutions. Moreover, the MHURD Opinion requires filing records with local governments by real estate brokerage and service companies and providing relevant information on all employees engaged in real estate brokerage services.

Violation of the aforementioned regulations may result in fines for a real estate brokerage company, a requirement to remedy non-compliance within a specified period of time, a record entered into the database for non-compliant activities or the real estate company being restricted from entering into online contracts or barred from operating in the real estate market.

With respect to the regulation of real estate agents, pursuant to the Interim Regulation on Professional Qualification for Real Estate Brokers and the Implementing Measures on the Examinations of Professional Qualification for Real Estate Brokers issued by the Ministry of Personnel and MOC in December 2001, to practice as a qualified real estate broker an individual must first obtain a qualification certificate for real estate brokers, and then obtain a real estate broker license. An individual broker who fails to obtain the required qualification certificate or license will not be permitted to engage in real estate agency services on the PRC operating entities’ behalf.

However, in August 2014, the MOHRSS promulgated and issued the Notice on Effective Follow-up of the Cancellation of Professional Qualification for Certain Professionals, pursuant to which a real estate broker is no longer required to obtain the relevant qualification certificate before entering the industry. As such, an individual is permitted to engage in real estate agency services on the PRC operating entities’ behalf without the real estate broker license.

In June 2015, the MOHRSS and the MHURD issued the Notice on Issuing “Regulations on the Professional Qualification for Real Estate Brokers” and “Conducting Qualification Examination for Real Estate Professionals,” effective as of July 2015. Regulations on the Professional Qualification for Real Estate Brokers provides that real estate broker associates and real estate brokers are subject to certain examinations in order to qualify to engage in real estate brokerage services. To qualify for the real estate broker associate examinations, an applicant must have obtained a high school diploma or equivalent. To qualify for the real estate broker examinations, an applicant must have either (1) obtained an associate degree and worked in the real estate industry for a specified period of time, or (2) worked in the real estate industry for at least six years after obtaining the Certificate of Real Estate Broker Associate. Real estate brokerage professionals are required to register their certificates at the China Institute for Real Estate Appraisers and Agents. Conducting Qualification Examination for Real Estate Professionals provides that to pass the real estate broker associate examinations, individuals must pass both of the two required tests within two consecutive years, and that to pass the real estate broker examinations, individuals must pass all of the four required tests within four consecutive years.

On April 7, 2021, the State Council issued the Opinions on Serving the “Six Stability” and “Six Guarantees” to Further Improve Work Related to the “Reform of Decentralization, Management, and Service,” which proposed to lower the access threshold of intermediary services, to break down industry barriers, to break local protection tendency, to introduce competition mechanism, to promote the quality of intermediary services, and to establish a reasonable pricing mechanism. It further proposes to strengthen the supervision of intermediaries, to promote intermediaries’ disclosure of their service conditions, processes, time limits and fees, and to resolutely investigate and punish arbitrary charges, disguised price increases, and other unhealthy competition behaviors.

On July 13, 2021, the Notice of the Ministry of Housing and Urban-Rural Development and Other Eight Departments on Continued Rectification and Regulation of the Real Estate Market Order requires special rectification activities to be carried out for behaviors that disrupt the market order and violate consumers’ rights and interests, such as falsification, bundled sales, disguised price increases, and failure to submit opening reports, in the sale and purchase of houses as well as housing leases. Real estate agents and agents need to make extra effort to remain in compliance.

12 cities (Shenzhen, Guangzhou, Dongguan, Chengdu, Xi’an, Ningbo, Wuxi, Hefei, Sanya, Shaoxing, Quzhou, and Jinhua) have successively introduced the second-hand housing guiding price mechanism. The initiative requires that, firstly, real estate brokerage agencies and real estate listing platforms reasonably publish the prices of properties and not publish properties with inflated prices; and, secondly, relevant institutions involved in second-hand housing transactions take the guiding pricing set by the authority into consideration while conducting business and as an important reference in relevant business development. Although the policy does not explicitly command the second-hand housing loans to be completely based on the guiding price of second-hand housing, the relevant institutions involved in second-hand housing transactions are required to take this as a reference basis. Observing the trend set by these cities, it is possible that other cities will be the next to follow the practice of referencing guiding pricing in the approval of second-hand housing loans, which would have a considerable cooling effect on the market.

On December 30, 2022, the Chengdu Housing and Urban-Rural Development Bureau issued the Management Measures for Credit Information of Real Estate Brokerage Agencies and Practitioners in Chengdu, which further strengthened the management of the real estate brokerage industry and regulated real estate brokerage behavior. The housing administrative department evaluates credit information, and the evaluation results include credit scores, credit ratings, and regulatory status. On February 28, 2023, the Tianjin Municipal Housing and Urban-Rural Development Commission revised the Tianjin Real Estate Brokerage Industry Credit Management Measures to further strengthen the management of the real estate brokerage industry and regulate real estate brokerage behavior. The housing and urban development administrative department evaluates credit information, and the evaluation results include credit scores, credit ratings, and regulatory status. Real estate brokerage firms with good credit can reduce the frequency and scope of regular supervision and inspection, and be given priority in applying for bidding, administrative licenses, and market access, with simplified procedures and other convenient service measures in accordance with the law. In the approval, public service, and other government affairs, the “credit commitment system” is applicable. For untrustworthy enterprises, the responsible persons will be interviewed, and they will be included in the key regulatory agencies, with an increase in the frequency and scope of regular supervision and inspection.

On February 28, 2023, the Tianjin Municipal Commission of Housing and Construction issued the “Tianjin Real Estate Brokerage Industry Credit Management Measures,” aimed at further regulating the behavior of real estate brokerage institutions and personnel in Tianjin. This initiative includes strengthening credit information collection, establishing credit evaluation indicators, and categorizing the credit rating of real estate brokerage institutions into five levels: A to E. The credit evaluation period is set for one year, during which the credit scores of real estate brokerage firms are subject to dynamic management.

On January 17, 2024, the Office of the Ministry of Housing and Urban-Rural Development issued a notice regarding typical cases of infringement of citizens’ personal information by the real estate intermediary industry. The notice aimed to further strengthen the protection of personal information within the real estate intermediary sector and to serve as a deterrent through educational warnings. It reported five typical cases where citizens’ personal information was infringed upon by the industry.

Regulation of Real Estate Intermediary Service Charges

With respect to real estate brokerage services (including primary agency sales services), the Administrative Measures for Real Estate Brokerage require real estate brokerage companies to expressly state their service charges. With respect to real estate consulting services, the PRC government issues pricing guidelines. However, specific charges are decided through negotiations between clients and consulting service providers.

Pursuant to the Notice on Relaxing Restrictions issued by the NDRC and the Ministry of Housing and Urban-Rural Development, real estate intermediary service fees are no longer subject to fee restrictions. The government may issue suggested fee guidance. Local governments retain the power to impose fee restrictions as they see fit. In the markets where we currently operate, the relevant local governments have not imposed fee restrictions.

Regulations on Housing Prices and Real Estate Tax

On January 7, 2010, the general office of the PRC State Council issued a circular to all ministries and provincial-level local governments to control the rapid increase in housing prices in order to attempt to cool down the real estate market in China. The circular reiterated that the purchasers of a second residential property for their households must make down payments of not less than 40% of the purchase price and the real estate developers must commence the sale within the mandated period as set forth in the pre-sale approvals and at the publicly announced prices.

On March 16, 2011, the NDRC issued the Provisions on Selling Real Estate at Expressly Marked Prices, which were implemented on May 1, 2011, to regulate price manipulation and arbitrary price increases by, among other things, requiring developers to re-register with the appropriate government department before increasing real estate prices.

Local government authorities of several municipalities and cities such as Beijing, Zhengzhou, Jinan, Chengdu, and Hefei have successively promulgated more detailed regulations to restrict residents who have not resided in the local area for a certain period of time (ranging from one year to five years, evidenced by their individual income tax payment track records) from purchasing residential property in those areas.

On February 15, 2012, the Ministry of Land and Resources issued the Circular on Issues Relevant to the Regulation and Control of the Real Property Market, which provides that governments must strictly maintain the current range of restrictions on the real estate market.

On April 17, 2014, the General office of the PRC State Council issued a notice that, among other things, specifically emphasizes the importance of adopting real estate tax.

In April 2018, the Standing Committee of the National People’s Congress has included promulgating real estate tax laws in its preliminary programs. Such real estate tax laws are in the promulgation process.

On October 23, 2021, the Standing Committee of the National People’s Congress authorized the State Council to carry out pilot real estate tax reform in some areas for a period of five years, with the pilot implementation start time and pilot cities determined by the State Council.

On March 16, 2022, a representative of the MOF stated in an interview that the pilot real estate tax reform was in progress according to the authorization of the Standing Committee of the National People’s Congress. The representative further stated that although some cities had already carried out surveys and preliminary studies, the conditions for expanding the real estate tax reform pilot to include more cities were not feasible this year, based on a variety of comprehensive factors. Therefore, Shanghai and Chongqing are the only two localities in China to have implemented the pilot real estate tax.

On September 30, 2022, the MOF and the SAT released the Notice on Supporting Residents in Purchasing New Homes regarding Personal Income Tax Policies. From October 1, 2022 to December 31, 2023, taxpayers who sell their own homes and repurchase a new home within one year will be eligible for a tax refund for the personal income tax already paid on the sale of their current home. If the purchase price of the new home is equal to or greater than the sale price of the current home, the entire amount of personal income tax paid will be refunded. If the purchase price of the new home is less than the sale price of the current home, the refund will be based on the proportion of the purchase price to the sale price. On the same day, the SAT issued the Announcement on Matters Related to the Collection and Administration of the Individual Income Tax Policy for Supporting Residents in Purchasing Housing to support to clarify the policy content, policy operational requirements, and service measures.

On May 31, 2023, the Sichuan Provincial Taxation Bureau of the State Administration of Taxation issued a notice on the pre-collection and approved collection rates for land value-added tax. Taxpayers engaged in real estate development, referred to here as taxpayers, who transfer different types of real estate are subject to varying pre-collection rates of land value-added tax. Notably, affordable housing is exempt from pre-collection. The rates are set at 1% for ordinary residential properties, 2% for non-ordinary residential properties, and 2.5% for other types of real estate. In instances where a taxpayer transfers real estate at a significantly lower price without justifiable reasons or submits a false declaration, the tax authority will determine the income from the transfer based on the evaluated price of the real estate. Approved collection rates are defined as follows: 5% for ordinary residential properties, 7% for non-ordinary residential properties, and 8% for other types of real estate in Chengdu; in other cities and states, the rates are 5% for ordinary residential properties, 6% for non-ordinary residential properties, and 7% for other types of real estate.

On September 21, 2023, the Office of the People’s Government of Baodi District, Tianjin, announced a subsidy program for the purchase of new commercial residential properties in the district. The subsidy is applicable from September 21, 2023, through December 31, 2023. Eligible buyers who complete the purchase deed tax payment and obtain the tax payment certificate by the end of the specified period can apply for a subsidy. The subsidy amounts to 1% of the total purchase price as stated in the commercial housing sales contract, with the maximum subsidy capped at $6,850 (RMB50,000). The subsidy will be calculated in yuan and rounded to the nearest whole number.

On January 1, 2024, the Ministry of Finance, the State Administration of Taxation, and the Ministry of Housing and Urban Rural Development issued a notice reaffirming their commitment to support housing purchases through beneficial personal income tax policies. These policies will be effective from January 1, 2024, to December 31, 2025. Under these policies, taxpayers who sell their residence and buy another within one year are eligible for a refund on the personal income tax paid on the sale of their previous residence. The refund amount is contingent upon the price of the newly purchased property. If the price of the new residence is equal to or exceeds the sale price of the previous one, the full personal income tax amount paid will be refunded. If the new residence is less costly, the refund will be proportional to the price difference.

Regulations on Real Estate Related Advertisement

On December 29, 2006, the MHURD and the PBOC jointly promulgated and issued a circular to further strengthen the regulation of the PRC real estate services industry (the “Joint Circular”). According to the Joint Circular, a real estate brokerage company is prohibited from displaying information on properties until entering into a brokerage contract with the relevant clients, and from displaying any false, misrepresented, or unverified information. The real estate brokerage company and its brokers shall not conceal transaction price and other transaction information from the parties to such transactions.

Advertising Law of the People’s Republic of China, as amended in 2015 and 2018, and Interim Regulation of Real Estate Advertising, as published in 2015, set forth the regulations for real estate advertisements. Both state that real estate advertisements shall make truthful representations, with the total area of the apartment listed being specified as either building area or built-in building area. Furthermore, the advertisements shall not include any of the following: (1) making the promise that the property will appreciate in value or otherwise provide return on the investment; (2) indicating the location of the property using the traveling time to another specified property as a reference; (3) violating regulations concerning pricing; and (4) making misrepresentations on infrastructures, commercial centers, cultural and educational facilities that are still under planning or under construction.

Although China amended the Advertising Law of the People’s Republic of China and the Provisions on Real Estate Advertising in 2021, there were no major adjustments in relation to real estate advertisements.

Regulations on Foreign Investment

Guidance Catalogue of Industries for Foreign Investment

Investment activities in the PRC by foreign investors are principally governed by the Guidance Catalogue of Industries for Foreign Investment, or the Guidance Catalog, which was promulgated and is amended from time to time by MOFCOM and the NDRC. The Guidance Catalog lays out the basic framework for foreign investment in China, classifying businesses into three categories with regard to foreign investment: “encourage,” “restricted,” and “prohibited.” Industries not listed in the catalog are generally deemed as falling into a fourth category “permitted” unless specifically restricted by other PRC laws. In addition, in June 2018 the MOFCOM and the NDRC promulgated the Negative List, which became effective on July 28, 2018, and was further updated on June 30, 2019, June 23, 2020, and December 27, 2021 (effective January 1, 2022). Pursuant to the current and the updated Negative List, real estate service section falls within the permitted catalogue. None of the PRC operating entities is engaged in any business related to the industries listed in the Catalogue (as amended by the Negative List).

On March 12, 2022, the NDRC and MOFCOM issued the “Market Access Negative List (2022 Edition),” establishing a system for collecting and reporting cases that violate the market access negative list, conducting market access efficiency evaluations, improving response mechanisms, and regularly reporting. Relevant information will be publicly available on the NDRC portal website and the “Credit China” website.

Foreign Investment Law

On March 15, 2019, the National People’s Congress approved the Foreign Investment Law of the PRC, or the Foreign Investment Law, which came into effect on January 1, 2020 and replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law of the PRC and the Wholly Foreign-invested Enterprise Law of the PRC, together with their implementation rules and ancillary regulations. The organization form, organization and activities of foreign-invested enterprises shall be governed, among others, by the PRC Company Law and the PRC Partnership Enterprise Law. Foreign-invested enterprises established before the implementation of the Foreign Investment Law may retain the original business organization and so on within five years after the implementation of this Law.

The Foreign Investment Law is formulated to further expand opening-up, vigorously promote foreign investment and protect the legitimate rights and interests of foreign investors. According to the Foreign Investment Law, foreign investments are entitled to pre-entry national treatment and are subject to negative list management system. The pre-entry national treatment means that the treatment given to foreign investors and their investments at the stage of investment access shall not be less favorable than that of domestic investors and their investments. The negative list management system means that the state implements special administrative measures for access of foreign investment in specific fields. The Foreign Investment Law does not mention the relevant concept and regulatory regime of VIE structures. However, since it is relatively new, uncertainties still exist in relation to its interpretation and implementation.

From January 1, 2021, the Supreme People’s Court’s Provisions on Several Issues Concerning the Trial of Dispute Cases of Foreign Invested Enterprises (I), as amended in 2020, came into effect. The full text of the 24 articles provides for the validity of contracts pertaining to the establishment and change of foreign-invested enterprises, the settlement of disputes between cooperating parties, and the validity of agreements on behalf of shareholding in the field of foreign investment.

On January 27, 2021, the Catalogue of Sectors Encouraging Foreign Investment, published in 2020, was officially implemented, further expanding the scope of encouraged foreign investment. The main focus of this catalogue was to further the active role of foreign investment in the supply chain and industrial chain, and to encourage foreign investment in producer service industries and in central and western regions. On October 26, 2022, the NDRC and the MOFCOM released the Catalogue of Encouraged Industries for Foreign Investment (2022 edition), which has been implemented from January 1, 2023. This revision mainly includes the following three changes: (i) continue to encourage foreign investment in advanced manufacturing; (ii) continue to guide foreign investment in modern services; and (iii)continue to guide foreign investment in advantageous industries in central and western regions and the northeast. The scope of encouraging foreign investment is further expanded to lead and support foreign investment in areas such as high-end manufacturing, research and development, modern services, and the central and western regions and the northeast. The comprehensive strengthening of foreign investment promotion and services will promote the high-quality development of the use of foreign investment, further stabilize the expectations of foreign-invested enterprises, and strengthen the confidence of foreign investors.

According to the Negative List, if a domestic enterprise engaged in business in the area of investment prohibited by the Negative List issues shares abroad and lists them for trading, then: (i) it shall be approved by the relevant competent state authorities; (ii) the foreign investor shall not participate in the operation and management of the enterprise; and (iii) the shareholding ratio of the foreign investor shall be implemented with reference to the relevant provisions on the management of domestic securities investment by foreign investors. The PRC operating entities’ main business, real estate development, does not fall under the content of the special management measures stipulated in the Negative List and is not affected by the provisions of the list.

Foreign investors’ investment, earnings and other legitimate rights and interests within the territory of China shall be protected in accordance with the law, and all national policies on supporting the development of enterprises shall equally apply to foreign-invested enterprises. Among others, the state guarantees that foreign-invested enterprises participate in the formulation of standards in an equal manner and that foreign-invested enterprises participate in government procurement activities through fair competition in accordance with the law. Further, the state shall not expropriate any foreign investment except under special circumstances. In special circumstances, the state may levy or expropriate the investment of foreign investors in accordance with the law for the needs of the public interest. The expropriation and requisition shall be conducted in accordance with legal procedures and timely and reasonable compensation shall be given. In carrying out business activities, foreign-invested enterprises shall comply with relevant provisions on labor protection.

Regulations on Intellectual Property Rights

The State Council and the National Copyright Administration of the PRC have promulgated various rules and regulations and rules relating to protection of software in China. Under these rules and regulations, software owners, licensees, and transferees may register their rights in software with Copy Protection Center of China or its local branches and obtain software copyright registration certificates. Although such registration is not mandatory under PRC law, software owners, licensees, and transferees are encouraged to go through the registration process and registered software rights may be entitled to better protections.

The PRC Trademark Law, adopted in 1982 and last amended in 2019, with its implementation rules adopted in 2002 and revised in 2014, protects registered trademarks. The Trademark Office of the SAIC handles trademark registrations and grants a protection term of 10 years to registered trademarks.

On March 3, 2021, the Supreme People’s Court issued the Interpretation on the Application of Punitive Damages in Civil Cases of Infringement of Intellectual Property Rights, clarifying the criteria for severity determination and base amount punitive damages calculation and rendering the punitive damage provisions stipulated in the relevant laws implementable.

On March 23, 2023, the China National Intellectual Property Administration released the Annual Work Guidelines for Promoting the High - Quality Development of Intellectual Property Rights (2023). These guidelines focus on strengthening the legal protection of intellectual property rights through collaboration with the Ministry of Justice. Key updates include revising the Detailed Rules for the Implementation of the Patent Law, the Guidelines for Patent Examination, and the Measures for the Registration and Management of Collective Trademarks and Certification Trademarks, alongside enhancing intellectual property rights supervision.

Subsequently, on June 25, 2023, the State Administration for Market Regulation announced the implementation of the “Regulations on Prohibiting the Abuse of Intellectual Property to Exclude and Restrict Competition,” effective from August 1, 2023. These regulations intensify the monitoring of intellectual property abuse that could hinder competition, reinforcing anti-monopoly policies within the realm of intellectual property.

Furthering these developments, on November 29, 2023, the National Certification and Accreditation Administration, in conjunction with the China National Intellectual Property Administration, declared the implementation of the revised national standard for enterprise intellectual property compliance management, GB/T 29490-2023, replacing the previous standard GB/T 29490-2013, starting January 1, 2024. The transition period, lasting two years, allows organizations with existing certifications under the old standard to undergo version change review either during annual supervision or re-certification review, or to independently initiate such review according to the new standards. Certifications that pass such review will be issued under the new standard, maintaining the original certificate’s validity period or establishing a new three-year validity if re-certification is conducted. During 2024, certifications can still be processed under the old standard, but from January 1, 2025, all new applications must adhere to the updated standards. After December 31, 2025, certificates that have not transitioned to the new standard will be subject to suspension or revocation.

See “Item 5. Operating and Financial Review and Prospects—C. Research and Development, Patents and Licenses, etc.—Intellectual Property.”

Regulations on Foreign Currency Exchange

Pursuant to the Foreign Exchange Administration Rules, as amended from time to time up until the date of this annual report, and various regulations issued by the SAFE and other relevant PRC government authorities, Renminbi is freely convertible to the extent of current account items, such as trade and service-related receipts and payments, interest, and dividends. Capital account items, such as direct equity investments, loans, and repatriation of investment, unless expressly exempted by laws and regulations, still require prior approval from the SAFE or its provincial branch for conversion of Renminbi into a foreign currency, such as U.S. dollars, and remittance of the foreign currency outside of China. Payments for transactions that take place within China shall be made in Renminbi. Foreign currency revenue received by PRC companies may be repatriated into China or retained outside of China in accordance with requirements and terms specified by the SAFE.

Under the Foreign Exchange Administration Rules, foreign-invested enterprises in China may, without the approval of the SAFE, make a payment from their foreign exchange accounts at designated foreign exchange banks for paying dividends with certain evidencing documents (e.g., board resolutions and tax certificates), or for trade and services-related foreign exchange transactions by providing commercial documents evidencing such transactions. They are also allowed to retain foreign currency (subject to a cap approved by SAFE) to satisfy foreign exchange liabilities. In addition, foreign exchange transactions involving overseas direct investment or investment and trading in securities and derivative products abroad are subject to registration with the SAFE or its local counterparts and approval from or filling with other relevant PRC government authorities, if necessary.

SAFE Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or “SAFE Circular 37,” issued by the SAFE and becoming effective on July 4, 2014, regulates foreign exchange matters in relation to the use of special purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing and conduct round trip investment in China. Under SAFE Circular 37, an SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate domestic or offshore assets or interests, while “round trip investment” refers to the direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises within the PRC through a new entity, merger or acquisition and other ways to obtain the ownership, control rights and management rights. SAFE Circular 37 requires that, before making contribution to an SPV, PRC residents or entities are required to complete foreign exchange registration with the SAFE or its local branch. In the event of any change in the basic information such as the domestic individual shareholder, name, operation term, etc. in connection with such SPV, or if there is a capital increase, decrease, equity transfer or swap, merge, spinoff or other material changes in connection with such SPV, the PRC residents or entities shall complete foreign exchange alteration registration formality for offshore investment. SAFE Circular 37 further provides that option or share-based incentive tool holders of a non-listed SPV can exercise the options or share incentive tools to become a shareholder of such non-listed SPV, subject to registration with the SAFE or its local branch. In addition, according to the procedural guidelines as attached to SAFE Circular 37, PRC residents or entities are only required to register the SPV directly established or controlled (first level).

On February 13, 2015, the SAFE further promulgated the Circular on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment (“SAFE Circular 13”), which took effect on June 1, 2015. SAFE Circular 13 has amended SAFE Circular 37 by requiring PRC residents or entities to register with qualified banks rather than the SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

Mr. Siping Xu, Yang Li, Xia Ding, Qiang Ma, Liang Zhang, Zhengyuan Huang, Meina Guo, Mengnan Wang, Jie Zhang, and Lei Cai, who are our beneficial owners and are PRC residents, have completed the initial foreign exchange registrations.

On January 7, 2021, the PBOC and the SAFE decided to lower the macro-prudential adjustment parameter for cross-border financing for enterprises from 1.25 to 1. This adjustment lowered the upper limit for cross-border financing for enterprises and financial institutions, which in turn reduced cross-border capital inflows.

On November 5, 2021, the SAFE issued the Measures for Discretionary Administrative Fines in Foreign Exchange Management to regulate the discretionary power of administrative fines in foreign exchange management. Previously, the macro-prudential adjustment parameter for cross-border financing for enterprises was adjusted upward in response to the COVID-19 pandemic and to encourage cross-border financing, and in early 2021, China adjusted the parameter downward to prevent and control foreign debt risks. In addition, SAFE has issued corresponding regulations to standardize foreign exchange transactions, personal regular foreign exchange business, and administrative fines for foreign exchange management, indicating a trend of increasing standardization in China’s foreign exchange management.

On May 11, 2022, the SAFE issued the Administrative Punishment Measures of the SAFE, which came into effect on June 1, 2022. The revised content focuses on: (i) refining the jurisdiction and filing standards, regulating electronic evidence collection activities, clarifying the handling period, and further enhancing law enforcement transparency; (ii) fully implementing the administrative law enforcement publicity system, the legal review system for law enforcement decisions, and the entire process record system for law enforcement, strengthening law enforcement supervision; and (iii) improving the statement defense and hearing procedures, refining hearing standards, and fully protecting the legitimate rights and interests of administrative counterparties. The Administrative Punishment Measures of the SAFE standardizes the administrative punishment behavior of the SAFE and its branches, and ensures and supervises the foreign exchange bureau to perform its duties in accordance with the law, and protects the legitimate rights and interests of citizens, legal persons, and other organizations.

Later on, the SAFE issued the Notice on Further Promoting Measures to Serve the Real Economy in the Foreign Exchange Market. The notice enriches the foreign exchange market products for customers and supports the China Foreign Exchange Trading System and Shanghai Clearing House to improve the level of foreign exchange market services and further promote the development of the foreign exchange market.

On May 30, 2022, the SAFE issued a document issued a document stating that within the pilot areas determined by the SAFE, qualified high-tech enterprises and “specialized and new technologies” enterprises can participate in the cross-border financing facilitation pilot business in accordance with these guidelines, independently borrow foreign debt within a certain amount.

On May 27, 2022, the PBOC, the CSRC, and the SAFE jointly issued the notice on Further Facilitating Matters Related to Overseas Institutional Investors Investing in the Chinese Bond Market. The notice supports overseas institutional investors to invest in the Chinese bond market directly or through the mutual market access program, enabling them to independently choose trading venues and facilitating cross-border fund management.

On July 26, 2022, the SAFE issued the Implementation Rules for International Payments and Receipts Statistics Reporting Business through Banks. The rules adjusted the scope of exemption from reporting, further clarified the content of basic information elements, increased the threshold for exemption from reporting, added requirements for the deadline of “not reporting, not paying,” and deleted the requirement for “filing with the SAFE.”

On November 10, 2022, the PBOC and the SAFE jointly issued the Regulations on the Management of Funds of Overseas Institutional Investors Investing in the Chinese Bond Market, which has been implemented from January 1, 2023. The regulations aim to improve and clarify the requirements for the management of funds invested by overseas institutional investors in the Chinese bond market. The main contents of the regulations include: (i) the unified regulation of the management rules for the funds involved in the investment, account, and payment and settlement, as well as the monitoring of statistics for overseas institutional investors investing in the Chinese bond market; (ii) the improvement of spot foreign exchange management, allowing overseas institutional investors to conduct transactions through third-party financial institutions other than settlement agents; (iii) the optimization of foreign exchange risk management policies, further expanding the foreign exchange hedging channels for overseas institutional investors, and cancelling the counterparty limit for over-the-counter transactions; (iv) the optimization of the currency matching management of inflows and outflows, improving the convenience of capital outflows for overseas institutional investors, and encouraging long-term investment in the Chinese bond market; and (v) clarifying the foreign exchange management requirements for sovereign institutions. Sovereign institutional investors who invest through custodians or settlement agents, such as commercial banks, should register with the bank.

On November 23, 2022, the PBOC issued the Notice on Matters Related to Fund Management of Overseas Institutions’ Onshore Bond Issuance, which unified the management rules for fund registration, account opening, fund remittance and usage, statistical monitoring, etc., for panda bonds issued in the interbank and exchange markets.

On June 20, 2022, the Tianjin Branch of the SAFE announced that qualified domestic banks can participate in the pilot program for foreign exchange facilitation for goods and services trade, by registering with the Tianjin Branch of SAFE and recommending eligible enterprises.

On August 26, 2022, the Tianjin Branch of the SAFE issued a notice clarifying the management measures for special handling of “no reporting, no payment” for reporting entities of banks within its jurisdiction and institutions conducting foreign-related income transactions through these banks.

Overall, the government has promulgated a series of foreign exchange policies. These foreign exchange policies are conducive to further facilitating foreign institutional investors to invest in China’s bond market, enhancing the attractiveness of China’s bond market to foreign institutional investors, and providing convenience for foreign institutional investors to invest in China’s bond market in accordance with laws and regulations. The series of foreign exchange policies shows Chinese government’s determination to expand and open the financial market.

On December 4, 2023, the SAFE issued a notice aimed at deepening reforms to enhance the facilitation of cross-border trade and investment. This initiative seeks to expand foreign exchange management reforms nationally, extending pilot policies that facilitate cross-border financing. One significant change is the relaxation of restrictions on the scale of initial expenses for overseas direct investments (ODI). Previously, the cumulative amount of remittance for preliminary expenses by domestic enterprises for overseas direct investment was capped at the equivalent of $3 million or 15% of the total investment proposed by the Chinese side. This cap has now been removed, allowing for greater flexibility in funding overseas ventures. Additionally, the notice permits the domestic equity transferor, including both institutions and individuals, to directly remit equity transfer consideration funds in foreign currency paid by domestic entities. It also allows for the foreign exchange funds raised by domestic enterprises during overseas public offerings to be transferred to the capital account settlement account. Funds in these accounts are now eligible for independent foreign exchange settlement. Furthermore, the domestic equity transferor can transfer equity transfer consideration funds received from foreign-invested enterprises—these funds can be in RMB obtained through direct foreign exchange settlement or RMB funds in accounts awaiting payment—directly to the domestic equity transferor’s RMB account. This reform aims to streamline financial transactions related to foreign investments and enhance the operational efficiency of cross-border investments by Chinese enterprises.

On March 11, 2024, the SAFE announced the release of the “Guidelines for Statistical Services of Foreign Financial Assets, Liabilities, and Transactions (2024 Edition).” These guidelines are designed to enhance the collection and analysis of data concerning foreign financial assets and liabilities along with international balance of payments transaction flows. The primary entities required to report under these guidelines include domestic non-financial enterprises listed overseas, designated entities holding overseas equity (encompassing both individuals and institutions), and key domestic non-financial enterprises. These guidelines specify the exact information that needs to be reported, the methods of reporting, and the standards that must be adhered to in the reporting process.

Following this, on April 3, 2024, the SAFE issued a notice to further optimize the management of trade foreign exchange business, effective June 1, 2024. This new policy eliminates the need for enterprises to handle the “List of Trade Foreign Exchange Income and Expenditure Enterprises” at various SAFE branches, instead allowing registration directly with domestic banks. Enterprises are required to update their directory information at a domestic bank within 30 days following any changes in the enterprise’s name, unified social credit code, legal representative, contact information, or registered address. The bank is tasked with verifying the authenticity of the updated information and maintaining records for five years. This notice represents a significant move towards streamlining foreign exchange processes and reducing administrative burdens for businesses engaged in international trade.

Regulations on Loans to and Direct Investment in PRC Entities by Offshore Holding Companies

According to the Provisional Regulations on Statistics and Supervision of Foreign Debt promulgated by the SAFE on September 24, 1997, last amended on November 29, 2020, and the Interim Provisions on the Management of Foreign Debts promulgated by the SAFE, the National Development and Reform Commission, and the MOF and effective from March 1, 2003, loans by foreign companies to their subsidiaries in China, which accordingly are foreign-invested enterprises, are considered foreign debt, and such loans must be registered with the local branches of the SAFE. Under the provisions, these foreign-invested enterprises must register with the local branches of the SAFE within 15 days from the date on which the loan agreements for the foreign debt are executed. In addition, the total amount of the accumulated foreign debt borrowed by a foreign-invested enterprise is not allowed to exceed the difference between the total investment and the registered capital of the foreign-invested enterprise. In addition, the total amount of accumulated foreign debt borrowed by a foreign-invested enterprise is limited to the difference between the total investment and the registered capital of the foreign-invested enterprise. Total investment of a foreign-invested enterprise is the total amount of capital that can be used for the operation of the foreign-invested enterprise, as approved by MOFCOM or its local counterpart, and may be increased or decreased upon approval by MOFCOM or its local counterpart. Registered capital of a foreign-invested enterprise is the total amount of capital contributions made to the foreign-invested enterprise by its foreign holding company or owners, as approved by MOFCOM or its local counterpart and registered at the SAIC or its local counterpart.

According to applicable PRC regulations on foreign-invested enterprises, capital contributions from a foreign holding company to its PRC subsidiaries, which are considered foreign-invested enterprises, may only be made when the approval by MOFCOM or its local counterpart is obtained. In approving such capital contributions, MOFCOM or its local counterpart examines the business scope of each foreign-invested enterprise under review to ensure it complies with the Catalogue (as amended by the Negative List) lists the industries and economic activities in which foreign investment in the PRC is encouraged, restricted or prohibited. Any industry not listed in the Catalogue is a permitted industry. Pursuant to the Catalogue (as amended by the Negative List), real estate service section falls within the permitted catalogue. None of the PRC operating entities is engaged in any businesses related to the industries listed in the Catalogue (as amended by the Negative List).

The PRC operating entities, such as Mingda Tianjin and the Chengdu Branch Office, are foreign-invested enterprises subject to the regulations discussed above.

On January 26, 2021, the MOF issued the Notice on Improving the Market Constraint Mechanism and Strictly Preventing Foreign Debt Risks and Local Debt Risks, demanding that enterprises intending to borrow medium- and long-term foreign debts to establish a sound corporate governance structure, management decision-making mechanism, and financial management system, to standardize information disclosure, to pay close attention to exchange rate movements, and to effectively prevent and control foreign debt risks.

On January 5, 2023, the NDRC issued the Management Measures for the Review and Registration of Medium- and Long-Term Foreign Debts of Enterprises. It includes six chapters and 37 articles, covering general principles, foreign debt scale and usage, foreign debt review and registration, foreign debt risk management and supervision, legal responsibilities, and supplementary provisions. The new measures include the indirect borrowing of foreign debt by domestic enterprises from overseas being included in the management scope, and a requirement for the actual use of funds raised by foreign debt to be consistent with the registered content, with no misappropriation allowed. At the same time, other regulatory measures have been strengthened.

According to the press conference on the Management Measures for the Review and Registration of Medium- and Long-Term Foreign Debts of Enterprises held by the NDRC, the NDRC stated that the formulation of this measures aims to further improve the management of enterprise medium and long-term foreign debt, enhance standardization, institutionalization, transparency, and convenience, effectively prevent foreign debt risks, and promote healthy and orderly development of overseas financing by enterprises.

Based on the recent policies and regulations issued by the Chinese government, it is evident that the government has strengthened its oversight of indirect borrowing of external debt by domestic enterprises. In the future, VIE structured enterprises may be affected to some extent in their ability to raise funds abroad due to the increased scrutiny and approval requirements set forth by the NDRC.

On December 4, 2023, the SAFE issued a notice on further deepening reforms to promote the facilitation of cross-border trade and investment. This notice cancels the requirement for approval to open foreign debt accounts in other regions and allows non-financial enterprises with reasonable needs to open such accounts in banks outside the foreign exchange branch of their registered location.

Regulations on Employee Share Options

Under the Implementation Rules of the Administrative Measures for Individual Foreign Exchange, or the Individual Foreign Exchange Rules, issued on January 5, 2007 by the SAFE, PRC citizens who are granted shares or share options by an overseas listed company according to its employee share option or share incentive plan are required, through the PRC subsidiary of such overseas listed company or any other qualified PRC agent, to register with the SAFE and complete certain other procedures related to the share option or other share incentive plan. Foreign exchange income received from the sale of shares or dividends distributed by the overseas listed company may be remitted into a foreign currency account of such PRC citizen or be exchanged into Renminbi. Our and the PRC operating entities’ PRC citizen employees who have been granted share options, or PRC option holders, have been subject to the Individual Foreign Exchange Rules since the listing of our Ordinary Shares on Nasdaq. If we or our PRC citizen employees fail to comply with these regulations, we or our PRC option holders may be subject to fines and legal sanctions.

On June 28, 2021, CSRC issued the Guidelines on the Content and Format of Information Disclosure by Companies Issuing Public Securities No. 2 - Content and Format of Annual Reports, stipulating that the company shall disclose the specific implementation of the stock incentive plan, employee stock ownership plan, or other employee incentives in the reporting period. The stock incentives granted to directors and senior management shall be separately presented by the company according to the unlocked shares, unlocked shares, exercisable shares, exercised shares, exercise price, and market price at the end of the reporting period. Companies are encouraged to disclose in detail the appraisal mechanism for senior management, and the establishment and implementation of the incentive mechanism during the reporting period.

On October 12, 2021, the SAT issued a notice of Several Measures for Further Deepening the ‘Streamlining Administration and Delegating Power, Improving Services’ Reform in the Taxation Field to Cultivate and Stimulate Market Entities’ Vitality. The notice includes 15 new measures, one of which is to strengthen the management of individual income tax on equity incentive plans. According to China’s current tax law, although dividends and income from overseas enterprises received by Chinese employees are considered as income from outside China, they are still subject to individual income tax in China. In addition, when a domestic resident enterprise acts as the filing obligor, it needs to choose the option of “direct control” or “indirect agreement control” in the relationship with the foreign enterprise when filing. This indicates that the notice expands the scope of filing from listed companies to non-listed companies, and from domestic resident enterprises to offshore company structures, including agreement control or VIE structures, established by domestic target enterprises overseas, and clarifies the time limit and requirements.

On August 18, 2023, the Ministry of Finance and the State Administration of Taxation issued a notice to continue implementing personal income tax policies related to equity incentives for listed companies. Individuals receiving equity incentives such as stock options, stock appreciation rights, restricted stocks, and equity rewards, which comply with relevant laws and regulations of the Ministry of Finance and the State Administration of Taxation, will not include these in their comprehensive income for the current year. Instead, these will be taxed separately at the full amount using the comprehensive income tax rate table. The calculation formula is as follows: taxable amount is equal to equity incentive income times applicable tax rate minus quick calculation deduction amount. If a resident receives two or more equity incentives within a tax year, the taxes will be calculated and paid according to the provisions of the announcement.

Regulations on Dividend Distribution

The principal regulations governing the distribution of dividends paid by wholly foreign owned enterprises include the Company Law of the PRC. Under the Company Law of the PRC, wholly foreign owned enterprises in China may pay dividends only out of their accumulated profits, if any, as determined in accordance with the PRC accounting standards and regulations. In addition, a wholly foreign owned enterprise in China is required to set aside at least 10% of its after-tax profits based on PRC accounting standards each year to its general reserves until its cumulative total reserve funds reaches 50% of its registered capital. These reserve funds, however, may not be distributed as cash dividends. For each of the PRC operating entities that has achieved profit under the PRC accounting standards, it has set aside at least 10% of its after-tax profits to meet the statutory reserve requirements.

A wholly foreign-owned enterprise may, at its discretion, allocate a portion of its after-tax profits calculated based on the PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes. None of the PRC operating entities has set aside its after-tax profits, if any, to fund these discretionary staff welfare and bonus funds. We have not implemented any policy or plan for the PRC operating entities to maintain discretionary staff welfare and bonus funds.

On January 5, 2022, the CSRC released the Guidelines for the Supervision of Listed Companies No. 3 - Cash Dividends of Listed Companies, to supervise listed companies in improving the internal decision-making procedures and mechanisms for profit distribution, supporting listed companies to adopt differentiated and diversified ways to return value to investors, improving dividend supervision regulations, strengthening supervision and inspection efforts, and further modifying, supplementing, and improving the work of cash dividends for listed companies. On December 15, 2023, the revised version, ‘Guidelines for the Supervision of Listed Companies No. 3- Cash Dividends of Listed Companies (Revised in 2023),’ was officially implemented by the CSRC, abolishing the earlier version. This revision encourages listed companies to increase the frequency of cash dividends, provided they meet the conditions for profit distribution, and aims to stabilize investor dividend expectations. It also strengthens disclosure requirements and other institutional constraints on listed companies that fail to issue cash dividends, in order to supervise dividend distribution and promote the further optimization of dividend methods and pacing. The guidelines emphasize monitoring listed companies with high financial investments but low dividend levels, urging them to improve their dividend practices, enhance asset utilization efficiency, and better focus on their core business to provide returns to investors. Special attention should be paid to companies with high debt-to-asset ratios and poor cash flows from operating activities, as well as those with a large proportion of cash dividends. Corresponding regulatory measures should be taken to prevent adverse effects on the companies’ production, operations, and debt repayment capabilities.

See “Item 3. Key Information.”

Our principal office is located at Fernie Castle, Letham, Cupar, Fife, KY15 7RU, United Kingdom, which we purchased and have owned since August 5, 2022, pursuant to the Agreement with Braveheart on August 3, 2022. See “—B. Business Overview—Overview.”

As of December 31, 2024, the PRC operating entities did not maintain local offices in China, as the Company’s focus has shifted to operations in the UK.

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Item 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

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Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

We operate our business through MD UK and Mansions. Prior to the fiscal year ended December 31, 2024, we also operated through Mingda Tianjin, which was a VIE in the PRC. The following condensed consolidating statements summarize the nature of assets held by, and operations of, “Parent,” “MDJH Hong Kong,” “WFOE,” “VIE,” and “Other Subsidiaries.” “Parent” refers to MDJM LTD, a Cayman Islands exempted company listed on Nasdaq. “MDJH Hong Kong” refers to MDJCC Limited, a Hong Kong corporation, which is wholly owned by MDJM LTD. “WFOE” refers to Beijing Mingda Jiahe Technology Development Co., Ltd, which is a wholly owned Chinese subsidiary of MDJM LTD. “VIE” refers to Mingda Tianjin, in which we have no equity interests. “Other Subsidiaries” refer to MD Local Global Limited, a UK company, which is wholly owned by MDJM LTD, and Mansions Catering and Hotel Ltd, a UK company, which is 100% owned by MD Local Global Limited.

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MDJM LTD

SELECTED CONDENSED CONSOLIDATING BALANCE SHEETS

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