| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended | 12 Months Ended |
| Jun. 30, 2024 | Dec. 31, 2023 |
| Restructuring Cost and Reserve [Line Items] | | |
| Basis of Presentation | (a) Basis of presentation The
unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Security
and Exchange Commission and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim
financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in conformity with
U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these statements should be read in conjunction
with the Company’s audited consolidated financial statements for the years ended December 31, 2022 and 2023. In
the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments,
which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures
are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements
have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements
for the year ended December 31, 2023. The results of operations for the six months ended June 30, 2024 are not necessarily indicative
of the results for the full year. | (a) Basis of presentation The
consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America
(“U.S. GAAP”) to reflect the financial position, results of operations and cash flows of the Company. Significant accounting
policies followed by the Company in the preparation of the accompanying consolidated financial statements are summarized below. |
| Principles of consolidation | (b) Principles of consolidation The
unaudited condensed consolidated financial statements presented herein represent prior to the Business Combination which was consummated
on July 31, 2024, include the financial statements of MKD BVI and its subsidiaries. All transactions and balances among the Company have
been eliminated upon consolidation. All intercompany transactions and balances among the Company have been eliminated upon consolidation. MKDWELL
TECH INC. NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In
U.S. dollars, except share and per share data)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES - Continued | (b) Principles of consolidation The
consolidated financial statements include the financial statements of the Company and its subsidiaries. All transactions and balances
among the Company have been eliminated upon consolidation. All intercompany transactions and balances among the Company have been eliminated
upon consolidation. |
| Accounts Receivable, net | (c) Accounts Receivable, net On
January 1, 2023, the Company adopted ASC 326 Financial Instruments – Credit Losses (“ASC 326”) using the modified retrospective
approach through a cumulative-effect adjustment to accumulated deficit. Upon adoption, the Company 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.
The Company 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. The Company has 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. The Company considers historical collection rates, current financial status, macroeconomic factors, and other industry-specific
factors when evaluating for current expected credit losses. MKDWELL
TECH INC. NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In
U.S. dollars, except share and per share data)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – Continued | (f) Accounts Receivable, net On
January 1, 2023, the Company adopted FASB ASC Topic 326 -”Financial Instruments - Credit losses” (“ASC 326”)
using the modified retrospective approach through a cumulative-effect adjustment to accumulated deficit. Upon adoption, the Company 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. The Company 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. The Company has 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. The Company considers historical collection rates, current financial status, macroeconomic factors, and other industry-specific
factors when evaluating for current expected credit losses. MKDWELL
TECH INC. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (In
U.S. dollars, except share and per share data)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – Continued |
| Inventories, net | (d) Inventories, net Inventories,
primarily consisting of raw materials, work-in-process 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 monthly 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 factors such as historical and forecasted consumer demand. Idle
capacity consists of production-related costs of depreciation of machinery and equipment in excess of charges allocated to the Company’s
finished goods in production. Costs in excess of production allocations are expensed in the period incurred rather than added to the
cost of finished goods produced. Idle capacity expenses amounted to nil 49,667 | (g) Inventories, net Inventories,
primarily consisting of raw materials, work-in-process 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 monthly 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 factors such as historical and forecasted consumer demand. |
| Intangible assets, net | (e) Intangible assets, net Intangible
assets are carried at cost less accumulated amortization and any recorded impairment. Intangible assets are amortized using the straight-line
approach over the estimated economic useful lives of the assets as follows: SCHEDULE OF ESTIMATED ECONOMIC USEFUL LIVES
OF THE ASSETS
Category Estimated
useful lives
Land
use right 50
Software 3 | (h) Intangible assets, net Intangible
assets are carried at cost less accumulated amortization and any recorded impairment. Intangible assets are amortized using the straight-line
approach over the estimated economic useful lives of the assets as follows: SCHEDULE OF ESTIMATED ECONOMIC USEFUL LIVES
OF THE ASSETS
Category Estimated
useful lives
Land
use right 50
Software 3 |
| Property, plant and equipment, net | (f) Property, plant and equipment, net Property,
plant and equipment are stated at cost less accumulated depreciation and impairment, if any, and depreciated on a straight-line basis
over the estimated useful lives of the assets. Cost represents the purchase price of the asset and other costs incurred to bring the
asset into its intended use. Estimated useful lives are as follows: SCHEDULE
OF PROPERTY
PLANT AND EQUIPMENT ESTIMATED USEFUL LIVES
Category Estimated
useful lives
Electronic
equipment 3
Machinery
and equipment 3 10
Vehicle 4
Office
equipment 3 5
Building 20 Repair
and maintenance costs are charged to expenses as incurred, whereas the cost of renewals and betterment that extends the useful lives
of property, plant and equipment are capitalized as additions to the related assets. Retirements, sales and disposals of assets are recorded
by removing the costs, accumulated depreciation and impairment with any resulting gain or loss recognized in the unaudited condensed
consolidated statements of income. | (i) Property, plant and equipment, net Property,
plant and equipment are stated at cost less accumulated depreciation and impairment, if any, and depreciated on a straight-line basis
over the estimated useful lives of the assets. Cost represents the purchase price of the asset and other costs incurred to bring the
asset into its intended use. Estimated useful lives are as follows: SCHEDULE
OF PROPERTY
PLANT AND EQUIPMENT ESTIMATED USEFUL LIVES
Category Estimated
useful lives
Electronic
equipment 3
Machinery
and equipment 3 10
Vehicle 4
Office
equipment 3 5
Building 20 Repair
and maintenance costs are charged to expenses as incurred, whereas the cost of renewals and betterment that extends the useful lives
of property, plant and equipment are capitalized as additions to the related assets. Retirements, sales and disposals of assets are recorded
by removing the costs, accumulated depreciation and impairment with any resulting gain or loss recognized in the consolidated statements
of operations. |
| Real estate properties for lease, net | (g) Real estate properties for lease, net Real
estate properties for lease, net includes the plant and land, which are stated at cost less accumulated depreciation, accumulated amortization
and impairment, if any, and depreciated and amortized on a straight-line basis over the estimated useful lives with an estimated residual
value of the assets as follows: SCHEDULE
OF REAL ESTATE PROPERTIES FOR LEASE
Category. Estimated
useful lives
Plant 20
Land
use right 50 Maintenance,
repairs and minor renewals are charged directly to expenses as incurred. Major additions and improvements to the real estate properties
held for lease are capitalized. In
accordance with ASC 360, real estate properties held for lease is subject to valuation adjustments when the carrying amount exceeds fair
value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. The carrying
amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets. For the periods
presented, the Company did not recognize any impairment for real estate properties held for lease. | (j) Real estate properties for lease, net Real
estate properties for lease, net includes the plant and land use right, which are stated at cost less accumulated depreciation, accumulated
amortization and impairment, if any, and depreciated and amortized on a straight-line basis over the estimated useful lives with an estimated
residual value of the assets as follows: SCHEDULE
OF REAL ESTATE PROPERTIES FOR LEASE
Category Estimated
useful lives
Plant 20
Land
use right 50 Maintenance,
repairs and minor renewals are charged directly to expenses as incurred. Major additions and improvements to the real estate properties
held for lease are capitalized. In
accordance with ASC 360, real estate properties held for lease is subject to valuation adjustments when the carrying amount exceeds fair
value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. The carrying
amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets. For the periods
presented, the Company did not recognize any impairment for real estate properties held for lease. MKDWELL
TECH INC. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (In
U.S. dollars, except share and per share data)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – Continued |
| Impairment of long-lived assets | (h) Impairment of long-lived assets The
Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the
long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition.
If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company would recognize an impairment
loss, which is the excess of carrying amount over the fair value of the assets, using the expected future discounted cash flows. No impairments
of long-lived assets were recognized as of December 31, 2023 and June 30, 2024. | (l) Impairment of long-lived assets The
Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the
long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition.
If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company would recognize an impairment
loss, which is the excess of carrying amount over the fair value of the assets, using the expected future discounted cash flows. No |
| Revenue recognition | (i) Revenue recognition The
following table disaggregates the Company’s revenue for the six months ended June 30, 2023 and 2024: SCHEDULE OF DISAGGREGATION OF
REVENUE
2023 2024
For
the six months ended June 30,
2023 2024
(Unaudited)
By
revenue type
Sales of manufactured electronic
products $ 1,135,324 $ 589,231
Commissioned processing service 740,063 72,020
Rental income 158,012 113,952
Others 63,973 35,838
Total $ 2,097,372 $ 811,041 Advance
from customers consists of payments received related to unsatisfied performance obligations at the end of the period. The advance from
customers amounted to US$ 304,489 303,898 SCHEDULE OF CURRENCY EXCHANGE RATES | (o) Revenue recognition The
Company recognizes revenues pursuant to ASC 606, Revenue from Contracts with Customers (“ASC 606”). In accordance with ASC
606, revenues from contracts with customers are recognized when control of the promised goods or services is transferred to the Company’s
customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services,
reduced by value added tax (“VAT”). To achieve the core principle of this standard, the Company applies the following five
steps:
(i) Identification
of the contract, or contracts, with the customer
(ii) Identification
of the performance obligations in the contract
(iii) Determination
of the transaction price
(iv) Allocation
of the transaction price to the performance obligations in the contract
(v) Recognition
of the revenue when, or as, a performance obligation is satisfied. The
Company’s revenues are generated through (i) sales of manufactured electronic products, (ii) commissioned processing service, (iii)
rental income and (iv) others. Each of our significant performance obligations and our application of ASC 606 to our significant revenue
arrangements are discussed in further detail below. Sales
of manufactured electronic products The
Company designs and manufactures industrial embedded systems and automotive electronics. The Company enters framework sales contract
with customers usually for one year. The framework sales contracts provide the general payment and delivery terms, and specific orders
shall be placed to the Company with determined unit price and purchase volume. Payment terms for sales of manufactured electronic products
are generally set at one month after the consideration becomes due and payable. Under
the specific order, the Company identifies only one performance obligation of transferring the agreed-upon products. Shipping and handling
activities are considered to be fulfillment activities rather than promised services and are not, therefore, considered to be separate
performance obligations. The Company provides standard manufacturer’s warranty within the general requirement of industry and PRC
law to protect customers from the risk of purchasing defective products. The warranty is not an incremental service to customers as it
cannot be purchased separately. Therefore, it is an assurance-type warranty, not a separate performance obligation. The Company’s
sales terms provide no right of return outside of a standard quality policy and returns are generally not significant. There was no variable
consideration nor financing component. The revenue from sales of manufactured electronic products is recognized at a point in time upon
the customer’s acceptance of products at the amount of the determined purchase price on the orders. Commissioned
processing service The
Company provides commissioned processing services to customers and enters into framework contracts with them usually for one year. Customers
provide the material and entrust the Company to the production and processing according to the agreed-costed BOM. Specific orders for
commissioned processing shall be placed to the Company, terms in commissioned processing contracts and orders are similar with product
sales contracts. The Company recognizes revenue at a point in time upon the customer’s acceptance of products with the amount of
the determined processing charges on the orders. Rental
income The
Company owns a building and partially leases it out. The Company adopted ASC Topic 842, Leases, and the real estate property rental income
falls within the scope of ASC Topic 842, which is excluded from the scope of ASC Topic 606. The leases are classified as operating leases
and the rental income is recognized over the leased terms on a straight-line basis. MKDWELL
TECH INC. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (In
U.S. dollars, except share and per share data)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – Continued
(o) Revenue
recognition - continued Others Other
revenue represents the revenue generated from various types of services, mainly consists of electricity supply service, technical support
services and other revenues. The
following table disaggregates the Company’s revenue for the years ended December 31, 2022 and 2023: SCHEDULE OF DISAGGREGATION OF
REVENUE
2022 2023
For the years ended
2022 2023
By revenue type
Sales of manufactured electronic products $ 1,543,397 $ 2,340,440
Commissioned processing service 866,993 942,626
Rental income 357,338 256,642
Others 385,758 131,014
Total $ 3,153,486 $ 3,670,722 Contract
Balances When
either party to a revenue contract has performed, the Company presents the contract in the consolidated balance sheet as a contract asset
or a contract liability, depending on the relationship between the Company’s performance and the customer’s payment. The
Company merely incurs costs to obtain a contract with a customer. The Company presents any unconditional rights to consideration separately
as a receivable. The Company has no contract assets as of December 31, 2022 and 2023, respectively. The
Company’s contract liabilities primarily relate to unsatisfied performance obligations when payment has been received from customers
before the Company’s products are delivered and are recorded as “advance from customers” on the condensed consolidated
balance sheets. Advance from customers amounted to US$ 189,193 304,489 91,467 44,169 MKDWELL
TECH INC. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (In
U.S. dollars, except share and per share data)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – Continued |
| Use of Estimates | | (c) Use of estimates The
preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet
date, and the reported revenues and expenses during the reported periods in the consolidated financial statements and accompanying notes.
Significant accounting estimates include, but not limited to, the allowance for credit loss, lower of cost or net realizable value of
inventory, useful lives of long-lived assets, impairment of long-lived assets and valuation allowance on deferred tax assets. Changes
in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences
may be material to the consolidated financial statements. MKDWELL
TECH INC. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (In
U.S. dollars, except share and per share data)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES - Continued |
| Functional Currency and Foreign Currency Translation | | (d) Functional Currency and Foreign Currency Translation The
functional and reporting currency of the Company is the United States Dollar (“US$”). The Company’s operating subsidiaries
in Taiwan, China and mainland China use their respective currencies New Taiwan dollar (“NT$”) and Renminbi (“RMB”)
as their functional currencies. The
financial statements of MKD BVI and its subsidiaries, other than subsidiaries with functional currency of US$, are translated into US$
using the exchange rate as of the balance sheet date for assets and liabilities and average exchange rate for the year for income and
expense items. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable
rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange
at the time of capital contribution. Because
cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the consolidated
statements of cash flows will not necessarily agree with changes in the corresponding balances on the condensed consolidated balance
sheets. Translation adjustments arising from the use of different exchange rates from period to Period are included as a separate component
of accumulated other comprehensive income included in consolidated statements of changes in shareholders’ equity. Gains and losses
from foreign currency transactions are included in the Company’s consolidated statements of operations and comprehensive loss. The
following table outlines the currency exchange rates that were used in preparing the consolidated financial statements: SCHEDULE OF CURRENCY EXCHANGE RATES
December 31, 2022 December 31, 2023
Year-end spot rate Average rate Year-end spot rate Average rate
US$ against RMB US$1=RMB 6.8972 US$1=RMB 6.7290 US$1=RMB 7.0978 US$1=RMB 7.0803
US$ against NT$ US$1=NT$ 30.7300 US$1=NT$ 29.7963 US$1=NT$ 30.6200 US$1=NT$ 31.1525 |
| Cash and Cash Equivalents | | (e) Cash and cash equivalents Cash
and cash equivalents consist of cash on hand and cash held in banks, which are highly liquid and are unrestricted as to withdrawal or
use. |
| Leases | | (k) Leases At
inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a lease if it conveys
the right to control the use of an identified asset for a period of time in exchange for a consideration. To assess whether a contract
is or contains a lease, the Company assess whether the contract involves the use of an identified asset, whether it has the right to
obtain substantially all the economic benefits from the use of the asset and whether it has the right to control the use of the asset. Financing
lease and operating lease as Lessee The
Company classifies a lease as a financing lease at lease commencement when the lease meets any one of the criteria: a.
The lease transfers ownership of the underlying asset to the lessee by the end of the lease term. b.
The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. c.
The lease term is for a major part of the remaining economic life of the underlying asset. d.
The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the
lease payments equals or exceeds substantially all the fair value of the underlying asset. e.
The underlying asset is of such a specialized nature that it is expected to have no alternative use to the Company at the end of the
lease term. When
none of the criteria are met, the Company classifies a lease as an operating lease. For
both operating and financing leases, the Company records a lease liability and corresponding right-of-use (ROU) asset at lease commencement.
Lease terms are based on the non-cancellable term of the lease and may contain options to extend the lease when it is reasonably certain
that the Company will exercise the option. Lease liabilities represent the present value of the lease payments not yet paid, discounted
using the discount rate for the lease at lease commencement. The
Company estimates its incremental borrowing rate for its leases at the commencement date to determine the present value of future lease
payments when the implicit rate is not readily determinable in the lease. In estimating its incremental borrowing rate, the Company considers
its credit rating and publicly available data of borrowing rates for loans of similar amount, currency and term as the lease. Operating
leases are presented as “operating lease right-of-use assets, net” and “operating lease liabilities”. Lease liabilities
that become due within one year of the balance sheet date are classified as current liabilities. At lease commencement, right-of-use
assets represent the right to use underlying assets for their respective lease terms and are recognized at amounts equal to the lease
liabilities adjusted for any lease payments made prior to the lease commencement date, less any lease incentives received and any initial
direct costs incurred by the Company. After
lease commencement, operating lease liabilities are measured at the present value of the remaining lease payments using the discount
rate determined at lease commencement. Right-of-use assets are measured at the amount of the lease liabilities and further adjusted for
prepaid or accrued lease payments, the remaining balance of any lease incentives received, unamortized initial direct costs and impairment
of the ROU assets, if any. Operating lease expense is recognized as a single cost on a straight-line basis over the lease term. Financing
leases are presented as “financing lease right-of-use assets, net” and “financing lease liabilities” on the consolidated
balance sheets. Lease liabilities that become due within one year of the balance sheet date are classified as current liabilities. Financing
lease ROU assets are amortized on a straight-line basis from the lease commencement date. After initial measurement, the carrying value
of financing lease liabilities are increased to reflect interest at a constant rate and reduced to reflect any lease payments made during
the period. MKDWELL
TECH INC. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (In
U.S. dollars, except share and per share data)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – Continued
(k) Leases
– Continued The
Company has made an accounting policy election to exempt leases with an initial term of 12 months or less from being recognized on the
balance sheet. Lease expense for the short-term leases is recognized on a straight-line basis over the lease term as incurred. Sale
and leaseback transactions as Lessee When
the Company enters into sale and leaseback transactions as a lessee, it applies the requirements in ASC 606 by assessing whether a contract
exists and whether it satisfies a performance obligation by transferring control of an asset when determining whether the transfer of
an asset shall be accounted for as a sale of the asset. If the Company transfers the control of an asset to the buyer-lessor, it accounts
for the transfer of the asset as a sale and recognizes a corresponding gain or loss on disposal. The subsequent leaseback of the asset
is accounted for in accordance with ASC842 in the same manner as any other lease. If the Company does not transfer the control of an
asset to the buyer-lessor, the failed sale-leaseback transaction is accounted for as a financing. The Company does not derecognize the
transferred asset and accounts for proceeds received as borrowings for which the current portion is included in “Other current
liabilities” and the non-current portion is included in “Other non-current liabilities” in the consolidated balance
sheets. Operating
leases as Lessor The
Company leases certain plant space to third parties and classifies a lease as either a direct financing lease or an operating lease when
none of the criteria specified as (a) to (e) in the “Financing lease and operating lease as Lessee” policy at lease commencement
is met. For
operating leases, the Company recognized rental income over the non-cancellable lease term on a straight-line basis and is included in
revenue in the statement of profit and loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis on the rental
income. The Company does not have any sales-type or direct financing leases for the years ended December 31, 2022 and 2023. The
Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews
the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the
asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset
from the expected undiscounted future pre-tax cash flows of the related operations. |
| Fair value of financial instruments | | (m) Fair value measurement Accounting
guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required
or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact
and it considers assumptions that market participants would use when pricing the asset or liability. MKDWELL
TECH INC. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (In
U.S. dollars, except share and per share data)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – Continued (m) Fair value measurement – Continued Accounting
guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based
upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs are:
● Level
1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level
2—Include other inputs that are directly or indirectly observable in the marketplace.
● Level
3—Unobservable inputs which are supported by little or no market activity. Accounting
guidance also describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income
approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving
identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present
value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach
is based on the amount that would currently be required to replace an asset. Financial
assets and liabilities of the Company primarily consist of cash and cash equivalents, accounts receivable, net, other receivables included
in prepaid expenses and other current assets, short-term and long-term bank borrowings, lease liabilities, accounts payable, amounts
due to/due from related parties, long-term borrowings, other payables included in accrued expenses and other current liabilities. As
of December 31, 2022 and 2023, the carrying values of these financial instruments, except for other non-current assets, non-current portion
of long-term banks borrowings, and non-current portion of lease liabilities, approximated their respective fair values due to the short-term
maturity of these instruments. The
Company’s non-financial assets, such as property, plant and equipment, real estate property for lease and ROU assets would be measured
at fair value only if they were determined to be impaired. |
| Commitments and contingencies | | (n) Commitments and contingencies In
the normal course of business, the Company is subject to commitments and contingencies, including capital commitments, legal proceedings
and claims arising out of its business that relate to a wide range of matters, such as government investigations and tax matters. The
Company recognizes liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate
of the loss can be made. The Company may consider many factors in making these assessments on liability for contingencies, including
historical and the specific facts and circumstances of each matter. MKDWELL
TECH INC. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (In
U.S. dollars, except share and per share data)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – Continued |
| Cost of revenues | | (p) Cost of revenues Cost
of revenues consists primarily of (i) purchase electronic materials, (ii) payroll, (iii) depreciation and other costs related to the
business operation, (iv) inventories write-down. |
| Selling expenses | | (q) Selling expenses Selling
expenses primarily consist of: (i) salaries and benefits for sales personnel, (ii) freight expenses, (iii) rental and depreciation allocated
to selling department, (iv) quality inspection fees, and (v) certain other expenses. |
| General and administrative expenses | | (r) General and administrative expenses General
and administrative expenses primarily consist of: (i) salaries and benefits for general and administrative personnel, (ii) rental and
depreciation allocated to general and administrative department, (iii) professional service fees; and (iv) other corporate expenses. |
| Research and development expenses | | (s) Research and development expenses Research
and development expenses primarily include (i) salaries and benefits for research and development personnel, (ii) material and supplies
expenses in relation to research and development activities, (iii) design and development expenses, (iv) rental and depreciation allocated
to the research and development department, (v) technological development service fee, and (vi) certain other expense. |
| Other income, net | | (t) Other income, net Other
income primarily consists of compensation income, government grants and foreign currency exchange gain (loss). Government grants represent
cash subsidies received from the PRC government. Government grants are recognized when there is reasonable assurance that the Company
will comply with the conditions attach to it and the grant will be received. Government grants for the purpose of giving immediate financial
support to the Company with no future related costs or obligation is recognized in the Company’s consolidated statements of operations
and comprehensive loss when the grant becomes receivable. |
| Employee benefits | | (u) Employee benefits The
Company’s subsidiaries in PRC participate in a government mandated, multiemployer, defined contribution plan, pursuant to which
certain retirement, medical, housing and other welfare benefits are provided to employees. PRC labor laws require the entities incorporated
in the PRC to pay to the local labor bureau a monthly contribution calculated at a stated contribution rate on the monthly basic compensation
of qualified employees. The Company has no further commitments beyond its monthly contribution. Employee social benefits included as
expenses in the accompanying consolidated statements of comprehensive loss amounted to US$ 81,888 153,741 MKDWELL
TECH INC. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (In
U.S. dollars, except share and per share data)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – Continued |
| Income Taxes | | (v) Income taxes The
Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets
to the amount expected to be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. The
provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for
consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This
interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred
income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The
Company’s operating subsidiaries in PRC are subject to examination by the relevant tax authorities. According to the PRC Tax Administration
and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the
taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment
of taxes is more than US$ 14,089 100,000 The
Company did not accrue any liability, interest or penalties related to uncertain tax positions in its provision for income taxes line
of its consolidated statements of income for the years ended December 31, 2022 and 2023, respectively. The Company does not expect that
its assessment regarding unrecognized tax positions will materially change over the next 12 months. |
| Value added tax (“VAT”) | | (w) Value added tax (“VAT”) The
Company is subject to VAT and related surcharges on revenue generated from sales of manufactured electronic products, commissioned processing
service and rental income. The Company records revenue net of VAT. This VAT may be offset by qualified input VAT paid by the Company
to suppliers. Net VAT balance between input VAT and output VAT is recorded in the line item of other current assets on the consolidated
balance sheets. The Company incurs VAT related surcharges based on net VAT balance paid. The
VAT rate is 13 |
| Non-controlling interest | | (x) Non-controlling interest For
the Company’s majority-owned subsidiaries, a non-controlling interest is recognized to reflect the portion of their equity which
is not attributable, directly or indirectly, to the Company. Consolidated net loss on the consolidated statements of operation and comprehensive
loss includes the net loss attributable to non-controlling interests. The cumulative results of operations attributable to non-controlling
interests, are recorded as non-controlling interests in the Company’s consolidated balance sheets. MKDWELL
TECH INC. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (In
U.S. dollars, except share and per share data)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – Continued |
| Net income (loss) per share | | (y) Net loss per share In
accordance with ASC 260, Earnings per Share, basic net loss per share is computed by dividing net loss attributable to ordinary shareholders
by the weighted average number of ordinary shares outstanding during the period. For the calculation of diluted net loss per share, the
weighted average number of ordinary shares is adjusted by the effect of dilutive potential ordinary shares, including unvested restricted
shares, ordinary shares issuable upon the exercise of outstanding share options using the treasury stock method. The effect mentioned
above is not included in the calculation of the diluted income per share when inclusion of such effect would be anti-dilutive. For the
years ended December 31, 2022 and 2023, there were no dilution impact. |
| Segment reporting | | (z) Segment reporting The
Company uses the management approach in determining its operating segments. The Company’s chief operating decision maker (“CODM”)
identified as the Company’s Chief Executive Officer, relies upon the consolidated results of operations as a whole when making
decisions about allocating resources and assessing the performance of the Company. As a result of the assessment made by CODM, the Company
has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting.
As the Company’s long-lived assets are substantially located in the PRC, no geographical segments are presented. |
| Recently issued accounting pronouncements | | (aa) Recent accounting pronouncements The
Company is an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012
(the “JOBS Act”). Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued subsequent to the
enactment of the JOBS Act until such time as those standards apply to private companies. In
July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement-Reporting Comprehensive Income
(Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation-Stock Compensation (Topic 718),
which amends or supersedes various SEC paragraphs within the Codification to conform to past SEC announcements and guidance issued by
the SEC. The ASU does not provide any new guidance so there is no transition or effective date associated with it. This ASU did not have
a significant impact on the Company’s consolidated financial statements. In
October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure
Update and Simplification Initiative.” This ASU incorporates certain U.S. Securities and Exchange Commission (SEC) disclosure requirements
into the FASB Accounting Standards Codification. The amendments in the ASU are expected to clarify or improve disclosure and presentation
requirements of a variety of Codification Topics, allow users to compare entities subject more easily to the SEC’s existing disclosures
with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s
regulations. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial
statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual
restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from
its rules. For all other entities, the amendments will be effective two years later. However, if by June 30, 2027, the SEC has not removed
the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity.
The Company is currently evaluating the impact the adoption of ASU 2023-06 will have on its consolidated financial statements and related
disclosures. In
November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.”
The amendments in this ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures
about significant segment expenses. This ASU requires disclosure of significant segment expenses that are regularly provided to the chief
operating decision mark (CODM), an amount for other segment items by reportable segment and a description of its composition, all annual
disclosures required by FASB ASU Topic 280 in interim periods as well, and the title and position of the CODM and how the CODM uses the
reported measures. Additionally, this ASU requires that at least one of the reported segment profit and loss measures should be the measure
that is most consistent with the measurement principles used in an entity’s consolidated financial statements. Lastly, this ASU
requires public business entities with a single reportable segment to provide all disclosures required by these amendments in this ASU
and all existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim
periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively.
The Company is currently evaluating the impact the adoption of ASU 2023-06 will have on its consolidated financial statements and related
disclosures. In
December 2023, the FASB issued ASU 2023-09, Income taxes (Topic 740), Improvements to Income Tax Disclosures, which provides guidance
on the requirements such as the requirement that public business entities on an annual basis (1) disclose specific categories in the
rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. For public business
entities (PBEs), the new requirements will be effective for annual periods beginning after December 15, 2024. For entities other than
public business entities (non-PBEs), the requirements will be effective for annual periods beginning after December 15, 2025. Early adoption
is permitted for annual financial statements that have not yet been issued or made available for issuance. The ASU should be applied
prospectively. Retrospective application is permitted. The Company is currently evaluating the impact the adoption of ASU 2023-09 will
have on its consolidated financial statements and related disclosures. In
November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income (Topic 220-40): Expense Disaggregation
Disclosures (“ASU 2024-03”). This update requires, among other things, more detailed disclosure about types of expenses in
commonly presented expense captions such as cost of sales and selling, general, and administrative expenses, and is intended to improve
the disclosures about an entity’s expenses including purchases of inventory, employee compensation, depreciation and amortization.
ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after
December 15, 2027. The Company is currently evaluating the impact on its consolidated financial statements and related disclosures. Other
accounting standards that have been issued by FASB that do not require adoption until a future date are not expected to have a material
impact on the consolidated financial statements upon adoption. The Company does not discuss recent standards that are not anticipated
to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures. |
| Cetus Capital Acquisition Corp [Member] | | |
| Restructuring Cost and Reserve [Line Items] | | |
| Basis of Presentation | (a) Basis of Presentation The
accompanying consolidated balance sheet as of December 31, 2023, which has been derived from audited financial statements, and the unaudited
financial statements as of June 30, 2024 and for the six months ended June 30, 2024 and 2023 have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission (the “SEC”).he accompanying unaudited interim financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for
interim financial information, as set forth by the Financial Accounting Standards Board (“FASB”), and pursuant to the rules
and regulations of the SEC. The unaudited interim financial statements should be read in conjunction with the audited financial statements
and notes thereto for the year ended December 31, 2023 included in the 10-K as filed with the SEC on March 28, 2024. In the opinion of
management, the unaudited financial statements reflect all adjustments, which include only normal recurring adjustments necessary for
the fair statement of the balances and results for the periods presented. The interim results for the six months ended June 30, 2024
are not necessarily indicative of the results that may be expected through December 31, 2024 or for any future periods. CETUS
CAPITAL ACQUISITION CORP. NOTES
TO UNAUDITED FINANCIAL STATEMENTS Note
2 - Summary of Significant Accounting Policies (Continued) | (a) Basis of Presentation The
accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America
(“GAAP”) and pursuant to the rules and regulations of the SEC. CETUS
CAPITAL ACQUISITION CORP. NOTES
TO FINANCIAL STATEMENTS Note
2 - Summary of Significant Accounting Policies (Continued) |
| Use of Estimates | (c) Use of Estimates The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from those estimates. | (c) Use of Estimates The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from those estimates. |
| Cash and Cash Equivalents | (d) Cash and Cash Equivalents The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had cash of $ 181,795 320,971 no | (d) Cash and Cash Equivalents The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had cash of $ 320,971 20,000 no |
| Fair value of financial instruments | (k) Fair value of financial instruments The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 825, “Financial
Instruments,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term
nature. | (k) Fair value of financial instruments The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 825, “Financial
Instruments,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term
nature. |
| Income Taxes | (g) Income Taxes The
Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset
and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed
for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible
amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. The Company’s management determined the United States is the Company’s
only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income
tax expense. There were no no The
provision for income taxes for the six months ended of June 30, 2024 and June 30, 2023 were $ 175,677 210,730 | (g) Income Taxes The
Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset
and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed
for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible
amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. The Company’s management determined the United States is the Company’s
only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income
tax expense. There were no no The
provision for income taxes for the year ended of December 31, 2023 and 2022 were $ 255,097 nil |
| Net income (loss) per share | (i) Net income (loss) per share The
Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net income per share
is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period, excluding
common stock subject to forfeiture. For the six months ended June 30, 2024, the net loss per share was $ 0.10 0.06 | (i) Net income (loss) per share The
Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net income per share
is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period, excluding
common stock subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate of 187,500 0.01 0.00 |
| Recently issued accounting pronouncements | | (o) Recently issued accounting pronouncements In
August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06,
Debt —Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s
Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies
the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard
also introduces additional disclosures for convertible debt and free-standing instruments that are indexed to and settled in an entity’s
own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for
all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis,
with early adoption permitted beginning on January 1, 2021. The Company adopted as of inception of the Company. Management does not believe
that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect
on the Company’s financial statements. |
| Emerging Growth Company | (b) Emerging Growth Company The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which
is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used. | (b) Emerging Growth Company The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which
is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used. |
| Cash Held in Trust Account | (e) Cash Held in Trust Account As
of June 30, 2024 and December 31, 2023, $ 22,127,715 60,158,872 | (e) Cash Held in Trust Account As
of December 31, 2023 and 2022, $ 60,158,872 nil |
| Offering Costs Associated with the IPO | (f) Offering Costs Associated with the IPO Offering
costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related
to the IPO. As of February 3, 2023, offering costs totaled $ 3,752,350 862,500 1,725,000 759,350 137,448 3,200,091 146,759 CETUS
CAPITAL ACQUISITION CORP. NOTES
TO UNAUDITED FINANCIAL STATEMENTS Note
2 - Summary of Significant Accounting Policies (Continued) | (f) Offering Costs Associated with the IPO Offering
costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related
to the IPO. As of February 3, 2023, offering costs totaled $ 3,346,850 862,500 1,725,000 759,350 137,448 3,200,091 146,759 CETUS
CAPITAL ACQUISITION CORP. NOTES
TO FINANCIAL STATEMENTS Note
2 - Summary of Significant Accounting Policies (Continued) |
| Dividends | (h) Dividends The
Board may from time to time declare, and the Company may pay, dividends (payable in cash, property or shares of the Company’s capital
stock) on the Company’s outstanding shares of capital stock, subject to applicable law and the Amended and Restated Certificate
of Incorporation. | (h) Dividends The
Board may from time to time declare, and the Company may pay, dividends (payable in cash, property or shares of the Company’s capital
stock) on the Company’s outstanding shares of capital stock, subject to applicable law and the Amended and Restated Certificate
of Incorporation. |
| Concentration of credit risk | (j) Concentration of credit risk Financial
instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution
which, at times may exceed the Federal depository insurance coverage of $ 250,000 | (j) Concentration of credit risk Financial
instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution
which, at times may exceed the Federal depository insurance coverage of $ 250,000 |
| Derivative Financial Instruments | (l) Derivative Financial Instruments The
Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s
specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging
(“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet
the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under
ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially
require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity
classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as
of each subsequent quarterly period end date while the warrants are outstanding. The
Public Warrants and Rights (see Note 3) and Placement Warrants (see Note 4) were accounted for as equity instruments as they meet all
of the requirements for equity classification under ASC 815. CETUS
CAPITAL ACQUISITION CORP. NOTES
TO UNAUDITED FINANCIAL STATEMENTS Note
2 - Summary of Significant Accounting Policies (Continued) | (l) Derivative Financial Instruments The
Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s
specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging
(“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet
the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under
ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially
require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity
classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as
of each subsequent quarterly period end date while the warrants are outstanding. The
Public Warrants and Rights (see Note 3) and Placement Warrants (see Note 4) were accounted for as equity instruments as they meet all
of the requirements for equity classification under ASC 815. CETUS
CAPITAL ACQUISITION CORP. NOTES
TO FINANCIAL STATEMENTS Note
2 - Summary of Significant Accounting Policies (Continued) |
| Fair Value Measurements | (m) Fair Value Measurements Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
● Level
1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
● Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;
and
● Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement. The
Representative Shares were valued using the fair value of the Class A common stock, adjusted for the probability of consummation of the
Business Combination. As such, these are considered to be non-recurring Level 3 fair value measurements. | (m) Fair Value Measurements Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
● Level
1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
● Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;
and
● Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement. The
Representative Shares were valued using the fair value of the Class A common stock, adjusted for the probability of consummation of the
Business Combination. As such, these are considered to be non-recurring Level 3 fair value measurements. |
| Common Stock Subject to Possible Redemption | (n) Common Stock Subject to Possible Redemption The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified
as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption
rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within
the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’
equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s
control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at
redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet. The
Company has made a policy election in accordance with ASC 480-10-S99-3A and recognizes changes in redemption value in additional paid-in
capital (or accumulated deficit in the absence of additional paid-in capital) over an expected 9-month period leading up to a Business
Combination. As of June 30, 2024, the Company had recorded accretion of $ 9,077,646 3,691,066 38,792,466 For
issued warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional
paid-in capital at the time of issuance at their initial fair value. For issued warrants that do not meet all the criteria for equity
classification, the warrants are required to be recorded at their initial fair value on the date of issuance as liability, and each balance
sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements
of operations. As
of June 30, 2024, the amount of common stock subject to possible redemption reflected in the balance sheet are reconciled in the following
table: SCHEDULE OF COMMON STOCK SUBJECT
TO POSSIBLE REDEMPTION
Gross proceeds $ 57,500,000
Less:
Proceeds allocated to public warrants (230,575 )
Proceeds allocated to public rights (2,290,800 )
Allocation of offering costs related to redeemable shares (3,208,090 )
Redemption of Public Shares (38,792,466 )
Plus:
Accretion of initial carrying value to redemption value 7,739,022
Subsequent measurement of common stock subject to redemption value 1,088,624
Extension funds attributable to common stock subject to redemption 250,000
Common stock subject to possible redemption $ 22,055,715 | (n) Common Stock Subject to Possible Redemption The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified
as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption
rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within
the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’
equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s
control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at
redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet. The
Company has made a policy election in accordance with ASC 480-10-S99-3A and recognizes changes in redemption value in additional paid-in
capital (or accumulated deficit in the absence of additional paid-in capital) over an expected 9-month period leading up to a Business
Combination. As of December 31, 2023, the Company had recorded accretion of $ 7,739,022 For
issued warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional
paid-in capital at the time of issuance. For issued warrants that do not meet all the criteria for equity classification, the warrants
are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the
estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. At
December 31, 2023, the amount of common stock subject to possible redemption reflected in the balance sheet are reconciled in the following
table: SCHEDULE OF COMMON STOCK SUBJECT
TO POSSIBLE REDEMPTION
Gross proceeds $ 57,500,000
Less:
Proceeds allocated to public
warrants (230,575 )
Proceeds allocated to public
rights (2,290,800 )
Allocation of offering
costs related to redeemable shares (3,208,090 )
Plus:
Accretion of initial carrying
value to redemption value $ 7,739,022
Remeasurement of subsequent
measurement of common stock subject to redemption value 214,342
Common stock subject to
possible redemption $ 59,723,899 CETUS
CAPITAL ACQUISITION CORP. NOTES
TO FINANCIAL STATEMENTS Note
2 - Summary of Significant Accounting Policies (Continued) |
| Extinguishment of debt | (m) Extinguishment of debt An
exchange of debt instruments with substantially different terms is accounted for as a debt extinguishment. A debtor could achieve the
same economic effect as an exchange of a debt instrument by making a substantial modification of terms of an existing debt instrument.
A difference between the reacquisition price and the net carrying amount of the extinguished debt is recognized currently in income of
the period of extinguishment as losses or gains and identified as a separate item. Gains and losses are not be amortized to future periods. | |
