Company: MKDWW
Filing Date: 2025-04-15
Form Type: 424B3
Source: 0001641172-25-004780
Chunk: 135

Company: MKDWELL Tech Inc.
Filing Date: 2025-04-15
Form: 424B3
Chunk 135
---
 Upon adoption, we changed its impairment model to utilize a current expected credit losses model in place of the incurred loss methodology for financial instruments measured at amortized cost. We had not recorded an adjustment to the opening accumulated deficit as of January 1, 2023 due to immaterial cumulative impact of adopting ASC 326.

Account receivables are stated net of provision of credit losses. We have developed a current expected credit loss (“CECL”) model based on historical experience, the age of the accounts receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers. We consider historical collection rates, current financial status, macroeconomic factors, and other industry-specific factors when evaluating for current expected credit losses. Because expected credit losses can vary a number of assumptions about matters that are substantially over time, estimating expected credit uncertain.

The allowance for credit loss for accounts receivable were US$0.18, nil and US$0.01 million for the years ended December 31, 2022, 2023 and 2024 respectively. The company reversed nil, US$0.17 million and nil for the years ended December 31, 2022, 2023 and 2024 respectively. For the year ended December 31, 2024, a 10% increase in our estimate of the allowance for credit loss related to accounts receivable would increase our pre-tax loss by approximately 0.03%.

Net realizable value of inventory

Inventories, net primarily consisting of raw materials, work-in-process, semi-finished products and finished goods, are stated at the lower of cost or net realizable value, with net realized value represented by estimated selling prices in the ordinary course of business, less reasonably predictable costs of disposal and transportation. Cost of inventory is determined using the weighted average cost method.

Adjustments are recorded to write down the cost of inventory to the estimated net realizable value due to slow-moving merchandise and damaged products, which is dependent upon a combination of factors such as historical and forecasted consumer demand. Because the expected write-downs are inherently subject to variability due to numerous assumptions that evolve over time, the estimation of net realizable value of inventory remains inherently uncertain.

The write-down made for inventories were US$0.31 million, US$0.15 million and US$0.10 million for the years ended December 31,2022, 2023 and 202