Company: MKDWW
Filing Date: 2025-03-13
Form Type: 424B4
Source: 0001493152-25-010187
Chunk: 119

Company: MKDWELL Tech Inc.
Filing Date: 2025-03-13
Form: 424B4
Chunk 119
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 they require management’s highest degree of judgment, estimates and assumptions, including (i) Revenue recognition; (ii) Accounts receivable, net; (iii) Inventories, net, (iv) Impairment of long-lived assets and (v) Income taxes. While management believes their judgments, estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates under different assumptions and conditions. We believe that the following critical accounting estimates involve the most significant judgments used in the preparation of our financial statements.

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Allowance for credit loss

On January 1, 2023, we adopted ASC 326 Financial Instruments – Credit Losses (“ASC 326”) using the modified retrospective approach through a cumulative-effect adjustment to accumulated deficit. 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.

The allowance for credit loss for accounts receivable were nil and US$0.002 million for the six months ended June 30, 2023 and 2024 respectively. The company reversed US$4,298 and made US$1,781 of allowance for credit loss for the six months ended June 30, 2023 and 2024 respectively. For the year ended June 30, 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 0.01%.

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