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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of December 2023
Commission File Number: 001-36885
TANTECH HOLDINGS LTD |
(Translation of registrant’s name into English) |
c/o Zhejiang Forest Bamboo Technology Co., Ltd.
No. 10 Cen Shan Road, Shuige Industrial Zone
Lishui City, Zhejiang Province 323000
+86-578-226-2305
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ |
Form 40-F ☐ |
Explanatory Note:
The Registrant is furnishing this Report on Form 6-K to provide its unaudited interim financial statements for the six months ended June 30, 2023 and incorporate such financial statements into the Registrant’s registration statements referenced below.
This Form 6-K is hereby incorporated by reference into the registration statements of the Registrant on Form S-8 (File Number 333-203387), Form S-8 (File Number 333-205821), Form F-3 (File Number 333-213240), as amended, Form F-3 (File Number 333-248197), Form F-3 (File Number 333-251509) and Form F-3 (File Number 333-274274) and into each prospectus outstanding under the foregoing registration statements, to the extent not superseded by documents or reports subsequently filed or furnished by the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
2 |
Financial Statements and Exhibits.
The following exhibit is attached.
Exhibit |
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Description |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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101.INS |
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Inline XBRL Instance Document |
101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
3 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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TANTECH HOLDINGS LTD |
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Date: December 5, 2023 |
By: |
/s/ Wangfeng Yan |
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Name: Wangfeng Yan |
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Title: Chief Executive Officer |
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4 |
EXHIBIT 99.1
TANTECH HOLDINGS LTD AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
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Page |
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Condensed Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022 |
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F-2 |
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F-3 |
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F-4 |
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F-5 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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F-6 - F-24 |
| F-1 |
| Table of contents |
Tantech Holdings Ltd and Subsidiaries
Condensed Consolidated Balance Sheets
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June 30, |
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December 31, |
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2023 |
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2022 |
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(Unaudited) |
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Assets |
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Current Assets |
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Cash and cash equivalents |
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$ | 24,718,222 |
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$ | 18,976,684 |
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Restricted cash |
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23,350 |
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4,827 |
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Accounts receivable, net |
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41,161,573 |
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40,174,332 |
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Financing receivable |
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42,875,260 |
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43,864,192 |
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Inventories, net |
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1,283,555 |
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898,686 |
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Advances to suppliers, net |
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496,299 |
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1,291,998 |
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Prepaid taxes |
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543,190 |
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494,467 |
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Prepaid expenses and other receivables, net |
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946,709 |
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1,051,631 |
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Total Current Assets |
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112,048,158 |
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106,756,817 |
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Other non-current Assets |
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Property, plant and equipment, net |
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1,616,261 |
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1,656,442 |
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Intangible assets, net |
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171,822 |
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184,822 |
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Right of use assets |
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1,278,053 |
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1,417,088 |
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Long-term investment |
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22,935,942 |
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24,116,835 |
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Total Non-current Assets |
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26,002,078 |
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27,375,187 |
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Total Assets |
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$ | 138,050,236 |
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$ | 134,132,004 |
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Liabilities and Shareholders’ Equity |
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Current Liabilities |
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Short-term bank loans |
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$ | 3,044,823 |
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$ | 3,636,591 |
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Accounts payable |
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2,765,618 |
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2,118,705 |
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Due to related parties |
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1,141,918 |
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1,047,512 |
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Customer deposits |
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988,760 |
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1,826,996 |
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Taxes payable |
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1,416,585 |
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1,251,975 |
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Loan payable to third parties |
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711,266 |
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— |
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Convertible note |
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2,003,000 |
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— |
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Lease liabilities-current |
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242,128 |
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161,480 |
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Accrued liabilities and other payables |
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2,964,888 |
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3,497,532 |
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Total Current Liabilities |
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15,278,986 |
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13,540,791 |
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Loan payable to third parties -long term |
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3,506,793 |
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3,395,861 |
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Lease liabilities-non-current |
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1,040,062 |
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1,259,958 |
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Total Liabilities |
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19,825,841 |
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18,196,610 |
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Shareholders’ Equity |
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Common shares, $0.24 par value, 500,000,000 shares authorized, 3,457,906 and 1,217,906 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively* |
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829,899 |
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292,299 |
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Additional paid-in capital |
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84,751,034 |
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79,454,309 |
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Statutory reserves |
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7,580,896 |
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7,490,398 |
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Retained earnings |
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41,010,825 |
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39,090,079 |
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Accumulated other comprehensive loss |
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(13,685,840 | ) |
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(8,242,727 | ) |
Total Shareholders’ Equity attributable to the Company |
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120,486,814 |
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118,084,358 |
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Non-controlling interest |
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(2,262,419 | ) |
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(2,148,964 | ) |
Total Shareholders’ Equity |
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118,224,395 |
|
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115,935,394 |
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Total Liabilities and Shareholders’ Equity |
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$ | 138,050,236 |
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$ | 134,132,004 |
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*Retroactively restated for one-for-twenty-four reverse split with effective date of November 9, 2022.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-2 |
| Table of contents |
Tantech Holdings Ltd and Subsidiaries
Unaudited Condensed Consolidated Statements of Income (Loss) and Comprehensive Loss
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For the Six Months Ended June 30, |
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2023 |
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2022 |
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Revenues |
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$ | 19,741,709 |
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$ | 26,969,417 |
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Cost of revenues |
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15,686,879 |
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21,887,449 |
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Gross Profit |
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4,054,830 |
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5,081,968 |
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Operating expenses |
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Selling expenses |
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118,040 |
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145,080 |
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General and administrative expenses |
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2,027,218 |
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1,528,535 |
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Research and development expenses |
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15,724 |
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236,568 |
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Total operating expenses |
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2,160,982 |
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1,910,183 |
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Income from operations |
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1,893,848 |
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3,171,785 |
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Other income (expenses) |
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Change in fair value of convertible note |
|
|
(3,010 | ) |
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— |
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Interest income |
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22,349 |
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191,905 |
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Interest expense |
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(265,579 | ) |
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(106,978 | ) |
Financing interest income, net |
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1,206,998 |
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52,248 |
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Rental income from related parties |
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41,703 |
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69,641 |
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Other income, net |
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289,068 |
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30,804 |
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Total other income |
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1,291,529 |
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237,620 |
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Income before provision for income taxes |
|
|
3,185,377 |
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3,409,405 |
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Provision for income taxes |
|
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1,292,853 |
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|
|
1,537,161 |
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Net income |
|
|
1,892,524 |
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|
|
1,872,244 |
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Less: net loss attributable to noncontrolling interest |
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(118,720 | ) |
|
|
(227,218 | ) |
Net income attributable to common shareholders of Tantech Holdings Ltd. |
|
$ | 2,011,244 |
|
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$ | 2,099,462 |
|
|
|
|
|
|
|
|
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Net income |
|
|
1,892,524 |
|
|
|
1,872,244 |
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Other comprehensive loss: |
|
|
|
|
|
|
|
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Foreign currency translation adjustment |
|
|
(5,437,848 | ) |
|
|
(5,947,918 | ) |
Comprehensive loss |
|
|
(3,545,324 | ) |
|
|
(4,075,674 | ) |
Less: Comprehensive loss attributable to noncontrolling interest |
|
|
(113,455 | ) |
|
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(219,856 | ) |
Comprehensive loss attributable to common shareholders of Tantech Holdings Ltd. |
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$ | (3,431,869 | ) |
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$ | (3,855,818 | ) |
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Earnings per share attributable to Tantech |
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Basic |
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$ | 1.06 |
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$ | 2.72 |
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Diluted |
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$ | 1.06 |
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$ | 2.66 |
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Weighted Average Shares Outstanding |
|
|
|
|
|
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Basic |
|
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1,903,906 |
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|
|
773,083 |
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Diluted |
|
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1,903,906 |
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|
|
789,308 |
|
*Retroactively restated for one-for-twenty-four reverse split with effective date of November 9, 2022.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-3 |
| Table of contents |
Tantech Holdings Ltd and Subsidiaries
Unaudited Condensed Consolidated Statements of Shareholders’ Equity
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Accumulated |
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|||||||||||||||
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Additional |
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Other |
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Non |
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Total |
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||||||||||||
|
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Common Shares |
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Paid in |
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Comprehensive |
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Statutory |
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Retained |
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Controlling |
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Shareholders’ |
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|||||||||||
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Shares |
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Amount |
|
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Capital |
|
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Income (loss) |
|
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Reserves |
|
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Earnings |
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Interest |
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Equity |
|
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Balance at December 31, 2022 |
|
|
1,217,906 |
|
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$ | 292,299 |
|
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$ | 79,454,309 |
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$ | (8,242,727 | ) |
|
$ | 7,490,398 |
|
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$ | 39,090,079 |
|
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$ | (2,148,964 | ) |
|
$ | 115,935,394 |
|
|
|
|
|
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|
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|
|
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|
|
|
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|
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|
|
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Proceeds received from issuance of common shares |
|
|
2,240,000 |
|
|
|
537,600 |
|
|
|
5,296,725 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,834,325 |
|
Appropriation of retained earnings to statutory reserve fund |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
90,498 |
|
|
|
(90,498 | ) |
|
|
— |
|
|
|
— |
|
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,443,113 | ) |
|
|
— |
|
|
|
— |
|
|
|
5,265 |
|
|
|
(5,437,848 | ) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,011,244 |
|
|
|
(118,720 | ) |
|
|
1,892,524 |
|
Balance at June 30, 2023 |
|
|
3,457,906 |
|
|
$ | 829,899 |
|
|
$ | 84,751,034 |
|
|
$ | (13,685,840 | ) |
|
$ | 7,580,896 |
|
|
$ | 41,010,825 |
|
|
$ | (2,262,419 | ) |
|
$ | 118,224,395 |
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
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Additional |
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Other |
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|
|
|
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Non |
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Total |
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||||||||||||
|
|
Common Shares |
|
|
Paid in |
|
|
Comprehensive |
|
|
Statutory |
|
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Retained |
|
|
Controlling |
|
|
Shareholders’ |
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|||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income (loss) |
|
|
Reserves |
|
|
Earnings |
|
|
Interest |
|
|
Equity |
|
||||||||
Balance at December 31, 2021 |
|
|
266,640 |
|
|
$ | 63,995 |
|
|
$ | 69,566,786 |
|
|
$ | 1,071,149 |
|
|
$ | 6,874,614 |
|
|
$ | 36,684,794 |
|
|
$ | (1,724,627 | ) |
|
$ | 112,536,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds received from issuance of common shares |
|
|
953,333 |
|
|
|
228,800 |
|
|
|
9,891,600 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,120,400 |
|
Cancellation of common shares due to reverse split |
|
|
(36 | ) |
|
|
(9 | ) |
|
|
9 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Appropriation of retained earnings to statutory reserve fund |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
322,253 |
|
|
|
(322,253 | ) |
|
|
— |
|
|
|
— |
|
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,955,280 | ) |
|
|
— |
|
|
|
— |
|
|
|
7,362 |
|
|
|
(5,947,918 | ) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,099,462 |
|
|
|
(227,218 | ) |
|
|
1,872,244 |
|
Balance at June 30, 2022 |
|
|
1,219,937 |
|
|
$ | 292,786 |
|
|
$ | 79,458,395 |
|
|
$ | (4,884,131 | ) |
|
$ | 7,196,867 |
|
|
$ | 38,462,003 |
|
|
$ | (1,944,483 | ) |
|
$ | 118,581,437 |
|
*Retroactively restated for one-for-twenty-four reverse split with effective date of November 9, 2022.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-4 |
| Table of contents |
Tantech Holdings Ltd and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
|
|
For the Six Months Ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net income |
|
$ | 1,892,524 |
|
|
$ | 1,872,244 |
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation expense |
|
|
141,934 |
|
|
|
200,439 |
|
Amortization of intangible asset |
|
|
4,133 |
|
|
|
4,280 |
|
Reversal of doubtful accounts |
|
|
(145,280 | ) |
|
|
(383,677 | ) |
Inventory reserve |
|
|
53,275 |
|
|
|
- |
|
Amortization of right of use assets |
|
|
72,879 |
|
|
|
110,533 |
|
Change in fair value of convertible note |
|
|
3,010 |
|
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(2,930,080 | ) |
|
|
(3,962,927 | ) |
Advances to suppliers |
|
|
780,781 |
|
|
|
100,864 |
|
Inventory |
|
|
(495,841 | ) |
|
|
40,355 |
|
Prepaid expenses and other receivables |
|
|
34,226 |
|
|
|
331,977 |
|
Accounts payable |
|
|
773,948 |
|
|
|
920,171 |
|
Accrued liabilities and other payables |
|
|
(391,098 | ) |
|
|
628,198 |
|
Customer deposits |
|
|
(783,527 | ) |
|
|
(2,425,102 | ) |
Taxes payable, net of prepaid taxes |
|
|
160,119 |
|
|
|
185,887 |
|
Lease liabilities |
|
|
(72,879 | ) |
|
|
22,160 |
|
Net cash used in operating activities |
|
|
(901,876 | ) |
|
|
(2,354,598 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment |
|
|
(184,760 | ) |
|
|
(21,879 | ) |
Financing receivable |
|
|
(1,212,686 | ) |
|
|
(45,192,439 | ) |
Net cash used in investing activities |
|
|
(1,397,446 | ) |
|
|
(45,214,318 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Net proceeds from equity financing |
|
|
5,834,325 |
|
|
|
10,120,400 |
|
Proceeds (repayment of) from loans from third party |
|
|
1,001,343 |
|
|
|
(3,186,566 | ) |
Repayment of bank loans |
|
|
(432,900 | ) |
|
|
(308,600 | ) |
Proceeds from loans from related parties, net |
|
|
106,877 |
|
|
|
9,333,670 |
|
Proceeds from convertible note |
|
|
1,999,990 |
|
|
|
— |
|
Net cash provided by financing activities |
|
|
8,509,635 |
|
|
|
15,958,904 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, restricted cash and cash equivalents |
|
|
(450,252 | ) |
|
|
(1,154,256 | ) |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash, restricted cash and cash equivalents |
|
|
5,760,061 |
|
|
|
(32,764,268 | ) |
|
|
|
|
|
|
|
|
|
Cash, restricted cash and cash equivalents, beginning of period |
|
|
18,981,511 |
|
|
|
43,566,881 |
|
|
|
|
|
|
|
|
|
|
Cash, restricted cash and cash equivalents, end of period |
|
$ | 24,741,572 |
|
|
$ | 10,802,613 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure information: |
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ | 1,011,005 |
|
|
$ | 1,341,579 |
|
Interest paid |
|
$ | 72,687 |
|
|
$ | 106,978 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-5 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Organization and Nature of Business
Tantech Holdings Ltd (“Tantech” or “Tantech BVI”) is a holding company established under the laws of the British Virgin Islands on November 9, 2010. Tantech engages in the research and development, production and distribution of various products made from bamboo, manufacture and selling electric vehicles and non-electric vehicles, as well as investment in mining exploration. On August 3, 2021, Tantech completed dismantling its VIE structure. As of June 30, 2023, details of the subsidiaries of the Company and their principal business activities are set out below:
Name of Entity |
|
Date of Incorporation |
|
Place of Incorporation |
|
% of Ownership |
|
Principal Activities |
Tantech Holdings Ltd (“Tantech” or “Tantech BVI”) |
|
November 9, 2010 |
|
BVI |
|
Parent |
|
Holding Company |
|
|
|
|
|
|
|
|
|
USCNHK Group Limited (“USCNHK”) |
|
October 17, 2008 |
|
Hong Kong |
|
100% by the Parent |
|
Holding Company |
|
|
|
|
|
|
|
|
|
EAG International Vantage Capitals Limited (“Euroasia”) |
|
April 27, 2015 |
|
Hong Kong |
|
100% by the Parent |
|
Holding Company |
|
|
|
|
|
|
|
|
|
EPakia Inc. (“EPakia”) |
|
May 19, 2022 |
|
United States |
|
100% by the Parent |
|
Biodegradable packaging business |
|
|
|
|
|
|
|
|
|
EPakia Canada Inc. (“EPakia Canada”) |
|
July 12, 2022 |
|
Canada |
|
100% by the Parent |
|
Biodegradable packaging business |
|
|
|
|
|
|
|
|
|
Tantech Holdings (Lishui) Co. Ltd. (“Lishui Tantech”) |
|
April 7, 2016 |
|
Lishui, Zhejiang Province, China |
|
100% by USCNHK |
|
Holding Company |
|
|
|
|
|
|
|
|
|
Euroasia New Energy Automotive (Jiangsu) Co. Ltd. (“Euroasia New Energy”) |
|
October 24, 2017 |
|
Zhangjia Gang, Jiangsu Province, China |
|
100% by Euroasia |
|
Holding Company |
|
|
|
|
|
|
|
|
|
Shanghai Jiamu Investment Management Co., Ltd (“Jiamu”) |
|
July 14, 2015 |
|
Shanghai, China |
|
100% by Euroasia |
|
Holding Company |
|
|
|
|
|
|
|
|
|
Hangzhou Wangbo Investment Management Co., Ltd (“Wangbo”) |
|
February 2, 2016 |
|
Hangzhou, Zhejiang Province, China |
|
100% by Jiamu |
|
Holding Company |
|
|
|
|
|
|
|
|
|
Hangzhou Jiyi Investment Management Co., Ltd (“Jiyi”) |
|
February 2, 2016 |
|
Hangzhou, Zhejiang Province, China |
|
100% by Jiamu |
|
Holding Company |
|
|
|
|
|
|
|
|
|
Shangchi Automobile Co., Ltd. (“Shangchi Automobile”) |
|
Acquired on July 12, 2017 |
|
Zhangjia Gang, Jiangsu Province, China |
|
51% by Wangbo and 19% by Jiyi |
|
Manufacturing and sale of specialty electric and non-electric vehicles and power batteries |
|
|
|
|
|
|
|
|
|
Shenzhen Yimao New Energy Sales Co., Ltd. (“Shenzhen Yimao”) |
|
November 13, 2018 |
|
Shenzhen, Guangdong Province, China |
|
100% by Shangchi Automobile |
|
Electric vehicles sales |
|
|
|
|
|
|
|
|
|
Lishui Xincai Industrial Co., Ltd. (“Lishui Xincai”) |
|
December 14, 2017 |
|
Lishui, Zhejiang Province, China |
|
100% by Lishui Tantech |
|
Holding Company |
|
|
|
|
|
|
|
|
|
Zhejiang Tantech Bamboo Charcoal Co., Ltd. (“Tantech Charcoal”) |
|
September 5, 2002 |
|
Lishui, Zhejiang Province, China |
|
100% by Lishui Xincai |
|
Manufacturing, selling and trading various products made from bamboo and charcoal |
|
|
|
|
|
|
|
|
|
Lishui Jikang Energy Technology Co., Ltd. (“Jikang Energy”) |
|
January 2, 2020 |
|
Lishui, Zhejiang Province, China |
|
100% by Lishui Xincai |
|
Holding Company |
|
|
|
|
|
|
|
|
|
Hangzhou Tanbo Tech Co., Ltd. (“Tanbo Tech”) |
|
December 8, 2015 |
|
Hangzhou, Zhejiang Province, China |
|
100% by Lishui Xincai |
|
Exploring business opportunities outside Lishui area |
|
|
|
|
|
|
|
|
|
Zhejiang Tantech Bamboo Technology Co., Ltd. (“Tantech Bamboo”) |
|
December 31, 2005 |
|
Lishui, Zhejiang Province, China |
|
100% by Jikang Energy |
|
Manufacturing and sale of various products made from bamboo |
|
|
|
|
|
|
|
|
|
Zhejiang Shangchi New Energy Automobile Co., Ltd. (“Zhejiang Shangchi”) |
|
November 12, 2020 |
|
Lishui, Zhejiang Province, China |
|
100% by Lishui Tantech |
|
Sales of automobiles |
|
|
|
|
|
|
|
|
|
Lishui Smart New Energy Automobile Co., Ltd. (“Lishui Smart”) |
|
November 16, 2020 |
|
Lishui, Zhejiang Province, China |
|
100% by Lishui Tantech |
|
Research, development and manufacturing new energy automobiles |
|
|
|
|
|
|
|
|
|
Gangyu Trading (Jiangsu) Co., Ltd. (“Gangyu Trading”) |
|
August 10, 2021 |
|
Zhangjiagang Jiangsu Province, China |
|
100% by Euroasia New Energy |
|
Marketing and selling electric vehicles |
|
|
|
|
|
|
|
|
|
Shangchi (Zhejiang) Intelligent Equipment Co., Ltd. (“Shangchi Intelligent Equipment”) |
|
August 26, 2021 |
|
Pinghu Zhejiang Province, China |
|
100% by Euroasia |
|
Manufacturing and sales company focusing on new energy vehicles |
|
|
|
|
|
|
|
|
|
Shanghai Wangju Industrial Group Co., Ltd. (“Shanghai Wangju”) |
|
September 23, 2021 |
|
Shanghai, China |
|
100% by Jiamu |
|
Investing in the factoring industry |
|
|
|
|
|
|
|
|
|
Eurasia Holdings (Zhejiang) Co., Ltd. (“Eurasia Holdings”) |
|
July 15, 2021 |
|
Hangzhou Zhejiang province, China |
|
100% by Euroasia |
|
Marketing and selling electric vehicles |
|
|
|
|
|
|
|
|
|
Hangzhou Eurasia Supply Chain Co., Ltd. (“Eurasia Supply”) |
|
August 4 2021 |
|
Hangzhou Zhejiang province, China |
|
100% by Eurasia Holdings |
|
Supply chain business |
|
|
|
|
|
|
|
|
|
Zhejiang Shangchi Medical Equipment Co., Ltd. (“Shangchi Medical”) |
|
November 13, 2021 |
|
Pinghu Zhejiang Province, China |
|
100% by Shangchi Intelligent Equipment |
|
Manufacturing and sales company focusing on new energy vehicles |
|
|
|
|
|
|
|
|
|
Shenzhen Shangdong Trading Co., Ltd. (“Shenzhen Shangdong”) |
|
July 13, 2016 |
|
Shenzhen Guangdong Province, China |
|
100% by Shanghai Wangju |
|
Investing in the factoring industry |
|
|
|
|
|
|
|
|
|
China East Trade Co., Ltd. (“China East”) |
|
February 15, 2018 |
|
Hong Kong |
|
100% by Euroasia |
|
Investing in the factoring industry |
|
|
|
|
|
|
|
|
|
First International Commercial Factoring (Shenzhen) Co., Ltd. (“First International”) |
|
July 27, 2017 |
|
Shenzhen Guangdong Province, China |
|
75% by Shenzhen Shangdong 25% by China East |
|
Investing in the factoring industry |
| F-6 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies
Principal of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The consolidated financial statements include the financial statements of Tantech BVI and its subsidiaries (collectively, the “Company”). All significant inter-company balances and transactions are eliminated upon consolidation.
Non-controlling interest
Non-controlling interest represents 30% of the equity interest in Shangchi Automobile and its subsidiary Shenzhen Yimao owned by Zhangjiagang Jinke Chuangtou Co., Ltd., which is not under the Company’s control.
Use of Estimates
In preparing the unaudited condensed consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include the fair value estimates used in the useful lives of property and equipment and intangible assets, allowances pertaining to the allowance for doubtful accounts of accounts receivable, financing receivables, advance to suppliers and other receivables, the valuation of inventories, the impairment of long-lived assets, the realizability of deferred tax assets, right-of-use assets, convertible notes and lease liabilities.
Fair Value of Financial Instruments
The Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurements”, defines fair value, establishes a three-level valuation hierarchy for fair value measurements and enhances disclosure requirements.
The three levels are defined as follows:
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3 - inputs to the valuation methodology are unobservable.
Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, restricted cash, accounts receivable, advances to suppliers, other receivables, accounts payable, customer deposits, accrued expenses, short term bank loans and bank acceptance notes payable approximates their recorded values due to their short-term maturities.
Assets and Liabilities Measured or Disclosed at Fair Value on a recurring basis
The following tables represent the fair value hierarchy of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2023:
|
|
As of June 30, 2023 |
|
|||||||||||||
|
|
Fair Value Measurement at the Reporting Date using |
|
|||||||||||||
|
|
Quoted price in active markets for identical assets Level 1 |
|
|
Significant other observable inputs Level 2 |
|
|
Significant unobservable inputs Level 3 |
|
|
Total |
|
||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Convertible note |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,003,000 |
|
|
$ |
2,003,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ | — |
|
|
$ | — |
|
|
$ | 2,003,000 |
|
|
$ | 2,003,000 |
|
| F-7 |
| Table of contents |
The following is a reconciliation of the beginning and ending balances for convertible note measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2023:
|
|
June 30, |
|
|
|
|
2023 |
|
|
Opening balance |
|
$ | - |
|
New convertible loans issued |
|
|
1,999,990 |
|
Change in fair value of convertible loan |
|
|
3,010 |
|
Ending balance |
|
$ | 2,003,000 |
|
The Company did not have financial liabilities measured at fair value on a recurring basis as of December 31, 2022.
Cash and cash equivalents
For purposes of the statements of cash flows, the Company considers all highly liquid instruments purchased with an original maturity of three months or less and money market accounts to be cash equivalents. All cash balances are in bank accounts in PRC and are not insured by the Federal Deposit Insurance Corporation or other programs.
Restricted Cash
As of June 30, 2023 and December 31, 2022, the Company’s restricted cash represents the cash of $23,350 and $4,827 remains frozen in the bank accounts of one of the Company’s subsidiaries as the result of the ongoing lawsuit filed by Mr. Hengwei Chen to against the Company (see Note 14).
| F-8 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
Concentrations of credit risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, trade accounts receivable and advances to suppliers. All of the Company’s cash is maintained with banks within the People’s Republic of China of which no deposits are covered by insurance. The Company has not experienced any losses in such accounts. A significant portion of the Company’s sales are credit sales which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas. The Company also makes cash advances to certain suppliers to ensure the stable supply of key raw materials. The Company performs ongoing credit evaluations of its customers and key suppliers to help further reduce credit risk.
Accounts receivable
Accounts receivable are presented at invoiced amount net of an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer’s payment history, its current credit-worthiness and current economic trends. Accounts are written off after efforts at collection prove unsuccessful.
Financing receivable
Financing receivables represent receivables arising from the Company’s factoring business. Financing receivables are measured at amortized cost and reported on the consolidated balance sheets based on the outstanding principal adjusted for any write-off, and the allowance. Amortized cost of a financing receivables is equal to the unpaid principal balance plus interest receivable. The Company recognizes financial interest income over the terms of the financing receivables using the effective interest rate method.
Inventory
The Company values its inventories at the lower of cost, determined on a weighted average basis, or net realizable value. The Company reviews its inventories periodically to determine if any markdown is necessary for potential obsolescence or if a write-down is necessary if the carrying value exceeds net realizable value.
Advances to suppliers
In order to ensure a steady supply of raw materials, the Company is required from time to time to make cash advances when placing its purchase orders. The Company reviews its advances to suppliers on a periodic basis and makes general and specific allowances when there is doubt as to the ability of a supplier to refund an advance or provide supplies to the Company.
Property, Plant and Equipment, net
Property and equipment are stated at cost less accumulated depreciation. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use.
Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets. The estimated useful lives for significant property and equipment are as follows:
Buildings |
|
20 years |
Machinery and equipment |
|
5 - 10 years |
Transportation equipment |
|
4 - 5 years |
Office equipment |
|
4 - 5 years |
Electronic equipment |
|
3 - 5 years |
Repairs and maintenance costs are normally charged to earnings in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.
| F-9 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
Construction in progress includes direct costs of construction or acquisition of equipment, interest expense associated with the loans used for the construction and design fees incurred. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until it is completed and ready for its intended use.
Intangible assets
Intangible assets are acquired individually or as part of a group of assets, and are initially recorded at cost. The cost of a group of assets acquired in a transaction is allocated to the individual assets based on their relative fair values. Intangible assets are carried at cost less accumulated amortization and any recorded impairment. Intangible assets with finite useful lives are amortized using a straight-line method over the period of estimated useful life. The estimated useful lives of the Company’s intangible assets are as follows:
|
|
Estimated Useful Life |
Licenses and permits |
|
Indefinite |
Software |
|
5 - 10 years |
Land use right |
|
50 years |
Patents |
|
10 years |
The Company evaluates intangible assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired.
Long term investments
The Company accounts for investment in equity investees over which it has significant influence but does not own a majority of the equity interest or lack of control using the equity method. For investment in equity investees over which the Company does not have significant influence or the underlying shares the Company invested in are not considered in-substance common shares and have no readily determinable fair value, the cost method accounting is applied.
The Company records the equity method investments at historical cost and subsequently adjusts the carrying amount each period for share of the earnings or losses of the investee and other adjustments required by the equity method of accounting. Dividends received from the equity method investments are recorded as reductions in the cost of such investments. The Company records the cost method investments at historical cost and subsequently record any dividends received from the net accumulated earnings of the investee as income. Dividends received in excess of earnings are considered a return of investment and are recorded as reductions in the cost of the investments.
Investment in equity investees are evaluated for impairment when facts or circumstances indicate that the fair value of the investment is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near term prospects of the investments; and (v) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, the Company evaluates the recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available.
| F-10 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
Customer Deposits
Customer deposits represent amounts received from customers in advance of shipments relating to the sales of the Company’s products.
Loan Payable to Third Parties
Loan payable to third parties represent amounts the Company borrowed from third parties for working capital purpose.
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.
The Company adopted ASC 842 on January 1, 2019 on a modified retrospective basis and elected the practical expedients permitted under the transition guidance, which allows the Company to carryforward the historical lease classification, the assessment on whether a contract is or contains a lease, and the initial direct costs for any leases that exist prior to adoption of the new standard. Leases with an initial term of 12 months or less are not recognized on the balance sheet and the associated lease payments are included in the consolidated statements of comprehensive income (loss) on a straight-line basis over the lease term. The standard did not materially impact our consolidated net earnings and cash flows.
Revenue Recognition
The Company adopted ASC Topic 606 Revenue from Contracts with Customers (“ASC 606”) on January 1, 2018 using the modified retrospective approach. There is no adjustment to the opening balance of retained earnings at January 1, 2018 since there was no change to the timing and pattern of revenue recognition upon adoption of ASC 606. Under ASC 606, revenue is recognized when control of promised goods or services is transferred to the Company’s customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services. The Company’s revenues are primarily derived from the following sources:
Sales of products: The Company recognizes sales revenue, net of sales taxes and estimated sales returns, at the time the product is delivered to the customer and control is transferred (point of sale).
For the Company’s electric vehicles sales contracts, the Company provides a warranty for 12 months from the products are delivered. The Company determines such product warranty is an assurance-type warranty and is not a separated performance obligation in revenue recognition, because the nature of warranty is to provide assurance that a product will function as expected and in accordance with customer’s specification. The Company estimates the warranty costs when the promised good is delivered to the customer and accrues as warranty liabilities.
Commission income: The Company acts as an agent without assuming the risks and rewards of ownership of the goods and reports the revenue on a net basis. Revenue is recognized based on the completion of the contracted service.
Government manufacturing rebate income: The Company sells electric vehicles in China and is eligible for a government manufacturing rebate on each qualifying electric vehicle sold. The government manufacturing rebates are recognized as part of revenue when sales are finalized, amount of rebate can be reasonably estimated and collection is assured. The collectability of rebates can be assured as long as the sales are deemed qualifying based on the criteria set by the government.
Revenue is reported net of all value added taxes. The Company does not routinely permit customers to return products and historically, customer returns have been immaterial.
Cost of Revenues
Cost of revenues includes cost of raw materials purchased, inbound freight cost, cost of direct labor, depreciation expense and other overhead. Write-down of inventory for lower of cost or net realizable value adjustments is also recorded in cost of revenues.
| F-11 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
Shipping and Handling
Shipping and handling costs are expensed as incurred and included in selling expenses.
Subsidy Income
The Company periodically receives various government grants such as “High Technology Projects Subsidy” and “Scientific Research Grant”. There is no guarantee the Company will continue to receive such grants in the future.
Foreign Currency Translation
The Company’s financial information is presented in U.S. dollars. The functional currency of the Company’s subsidiaries in the PRC is the RMB, the currency of the PRC. Any subsidiary transactions, which are denominated in currencies other than RMB, are translated into RMB at the exchange rate quoted by the People’s Bank of China prevailing at the dates of the transactions, and exchange gains and losses are included in the statements of comprehensive income (loss) as foreign currency transaction gain or loss. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830, “Foreign Currency Matters”. The financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange rates for assets and liabilities and average exchange rates for revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in shareholders’ equity. Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:
|
|
June 30, 2023 |
|
|
June 30, 2022 |
|
|
December 31, 2022 |
|
|||||||||
US$: RMB exchange rate |
|
Period End |
|
$ | 0.1379 |
|
|
Period End |
|
$ | 0.1493 |
|
|
Period End |
|
$ | 0.1450 |
|
|
|
Average |
|
$ | 0.1443 |
|
|
Average |
|
$ | 0.1543 |
|
|
Average |
|
$ | 0.1486 |
|
Research and development costs
Research and development expenses include costs directly attributable to the conduct of research and development projects, including the cost of salaries and other employee benefits, testing expenses, consumable equipment and consulting fees prior to the establishment of technological feasibility. All costs associated with research and development are expensed as incurred.
Comprehensive Income (loss)
Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under GAAP are recorded as an element of shareholders’ equity but are excluded from net income (loss). Other comprehensive income (loss) consists of foreign currency translation adjustment from those subsidiaries not using the U.S. dollar as their functional currency.
Income Taxes
The Company’s subsidiaries in China are subject to the income tax laws of the PRC. No taxable income was generated outside the PRC as of June 30, 2023. The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or future deductibility is uncertain.
| F-12 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
ASC 740 10 25 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It 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, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. The statute of limitation on the PRC tax authority’s audit or examination of previously filed tax returns expires three years from the date they were filed. There were no material uncertain tax positions as of June 30, 2023 and December 31, 2022.
Value Added Tax (“VAT”)
The Company is subject to VAT for selling merchandise. The applicable VAT rate is 11% or 13% or 17% (depending on the type of goods involved) for products sold in the PRC. The applicable VAT rate of 17% and 11% decreased to 16% and 10% starting from May 2018, and further decreased to 13% and 9% from April 1, 2019. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Under the commercial practice of the PRC, the Company pays VAT based on tax invoices issued. The tax invoices may be issued subsequent to the date on which revenue is recognized, and there may be a considerable delay between the date on which the revenue is recognized and the date on which the tax invoice is issued. In the event the PRC tax authorities dispute the date on which revenue is recognized for tax purposes, the PRC tax office has the right to assess a penalty based on the amount of taxes which is determined to be late or deficient, with any penalty being expensed in the period when a determination is made by the tax authorities that a penalty is due. During the reporting periods, the Company had no dispute with PRC tax authorities and there was no tax penalty incurred.
Earnings per Share (“EPS”)
The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”), and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. As of June 30, 2023 and December 31, 2022, the total number of registered and unregistered warrants outstanding both were 26,765. For the six months ended June 30, 2023, no warrants were included in diluted income per share since the exercise prices for the warrants were more than the average market price. For the six months ended June 30, 2022, 16,225 warrants were included in diluted income per share since the exercise prices for the warrants were lower than the average market price.
Statement of Cash Flows
In accordance with ASC 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
Risks and Uncertainties
The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, in addition to the general state of the PRC economy. The Company’s operating results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
The Company’s sales, purchases and expense transactions are denominated in RMB, and primarily all of the Company’s assets and liabilities are also denominated in RMB. The RMB is not freely convertible into foreign currencies under the current law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China, the central bank of China. Remittances in currencies other than RMB may require certain supporting documentation in order to affect the remittance.
| F-13 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
The Company does not carry any business interruption insurance, products liability insurance or any other insurance policy except for a limited property insurance policy. As a result, the Company may incur uninsured losses, increasing the possibility that investors would lose their entire investment in the Company.
Recent accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.
In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. The amendments are effective for the Company beginning after December 15, 2023, and are applied prospectively to business combinations that occur after the effective date. The Company does not expect the adoption of ASU 2021-04 to have a material effect on the consolidated financial statements.
Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the consolidated financial statements.
| F-14 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 – Accounts Receivable
Accounts receivable consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Accounts receivable |
|
$ | 44,964,778 |
|
|
$ | 44,331,093 |
|
Allowance for doubtful accounts |
|
|
(3,803,205 | ) |
|
|
(4,156,761 | ) |
Accounts receivable, net |
|
$ | 41,161,573 |
|
|
$ | 40,174,332 |
|
The movement of allowance for doubtful accounts are as follows:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Balance at beginning of period |
|
$ | 4,156,761 |
|
|
$ | 3,717,708 |
|
Change of allowance for doubtful accounts |
|
|
(156,981 | ) |
|
|
738,922 |
|
Translation adjustments |
|
|
(196,575 | ) |
|
|
(299,869 | ) |
Balance at end of period |
|
$ | 3,803,205 |
|
|
$ | 4,156,761 |
|
Note 4 - Financing Receivable
The Company’s financing receivable was $42,875,260 and $43,864,192 as of June 30, 2023 and December 31, 2022, respectively. Starting in June, 2022, the Company provided factoring financing service. The financing receivable is secured by pledged accounts receivable with stated owned entities and reputable companies, which has carrying value of $43,899,055 and is in excess of the financing provided. The term of the financing receivables is generally within 12 months with annual interest of 6.5%. The interest and principal of financing are due upon maturity. The principal amounted to $40,335,750 and $42,412,500 as of June 30, 2023 and December 31, 2022, respectively; interest receivable of the financing amounted to $2,539,510 and $1,451,692 as of June 30, 2023 and December 31, 2022, respectively. For the six months ended June 30, 2023 and 2022, the Company recognized net financing interest income of $1,206,998 and $52,248, respectively.
Note 5 – Inventory
Inventory consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Raw materials |
|
$ | 387,984 |
|
|
$ | 158,093 |
|
Finished products |
|
|
320,005 |
|
|
|
351,867 |
|
Work in process |
|
|
575,566 |
|
|
|
388,726 |
|
Total Inventory |
|
$ | 1,283,555 |
|
|
$ | 898,686 |
|
For the six months ended June 30, 2023 and 2022, the Company recorded inventory reserve of $53,275 and $nil, respectively.
Note 6 – Advances to Suppliers
Advances to Suppliers consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Advances to suppliers |
|
$ | 544,996 |
|
|
$ | 1,357,625 |
|
Allowance for doubtful accounts |
|
|
(48,697 | ) |
|
|
(65,627 | ) |
Advances to suppliers, net |
|
$ | 496,299 |
|
|
$ | 1,291,998 |
|
| F-15 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6 – Advances to Suppliers (continued)
The movement of allowance for doubtful accounts are as follows:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Balance at beginning of period |
|
$ | 65,627 |
|
|
$ | 38,746 |
|
Change of allowance for doubtful accounts |
|
|
(14,353 | ) |
|
|
49,038 |
|
Write off |
|
|
- |
|
|
|
(18,030 | ) |
Translation adjustments |
|
|
(2,577 | ) |
|
|
(4,127 | ) |
Balance at end of period |
|
$ | 48,697 |
|
|
$ | 65,627 |
|
Note 7 – Property, Plant and Equipment, net
Property, plant and equipment stated at cost less accumulated depreciation consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Building |
|
$ | 4,554,216 |
|
|
$ | 4,831,806 |
|
Machinery and Production equipment |
|
|
1,468,742 |
|
|
|
1,214,709 |
|
Electronic equipment |
|
|
184,591 |
|
|
|
193,652 |
|
Office equipment |
|
|
47,456 |
|
|
|
49,899 |
|
Automobiles |
|
|
266,713 |
|
|
|
292,251 |
|
Construction in progress |
|
|
1,095 |
|
|
|
377,300 |
|
Subtotal |
|
|
6,522,813 |
|
|
|
6,959,617 |
|
Less: Accumulated depreciation |
|
|
(4,906,552 | ) |
|
|
(5,303,175 | ) |
Property, plant and equipment, net |
|
$ | 1,616,261 |
|
|
$ | 1,656,442 |
|
Depreciation expense was $141,934 and $200,439 for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023 and December 31, 2022, building with net book value of $298,000 and $351,128 respectively, were pledged as collateral for bank loans (Note 10).
Note 8 – Intangible Assets, net
Intangible assets stated at cost less accumulated depreciation amortization consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Software |
|
$ | 29,602 |
|
|
$ | 31,126 |
|
Land use rights* |
|
|
276,376 |
|
|
|
290,606 |
|
Patents |
|
|
4,137,000 |
|
|
|
4,350,000 |
|
Subtotal |
|
|
4,442,978 |
|
|
|
4,671,732 |
|
Less: Accumulated amortization |
|
|
(4,271,156 | ) |
|
|
(4,486,910 | ) |
Intangible assets, net |
|
$ | 171,822 |
|
|
$ | 184,822 |
|
________________________________
*There is no private ownership of land in China. Land is usually owned by the local government and the government grants land use rights for specified terms. The Company acquired land use rights from the local government in December 2002 for period of 50 years. As of June 30, 2023 and December 31, 2022, land use rights with net book value of $167,668 and $179,207, respectively, were pledged as collateral for bank loans (Note 10).
Amortization expense for intangible assets totaled $4,133 and $4,280 for the six months ended June 30, 2023 and 2022, respectively.
| F-16 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9 – Leases
Effective January 1, 2019, the Company adopted ASC 842, the new lease accounting standard using a modified retrospective transition method which allowed the Company not to recast comparative periods presented in its consolidated financial statements. In addition, the Company elected the package of practical expedients, which allowed the Company to not reassess whether any existing contracts contain a lease, to not reassess historical lease classification as operating or finance leases, and to not reassess initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The Company combines the lease and non-lease components in determining the ROU assets and related lease obligation. Adoption of this standard resulted in the recording of operating lease ROU assets and corresponding operating lease liabilities as disclosed below and had no impact on retained earnings as of June 30, 2023. ROU assets and related lease obligations are recognized at commencement date based on the present value of remaining lease payments over the lease term.
Supplemental balance sheet information related to operating leases was as follows:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Right-of-use assets, net |
|
$ | 1,278,053 |
|
|
$ | 1,417,088 |
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities - current |
|
|
242,128 |
|
|
|
161,480 |
|
Operating lease liabilities - non-current |
|
|
1,040,062 |
|
|
|
1,259,958 |
|
Total operating lease liabilities |
|
$ | 1,282,190 |
|
|
$ | 1,421,438 |
|
The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of June 30, 2023:
Remaining lease term and discount rate: |
|
|
|
|
Weighted average remaining lease term (years) |
|
|
8.23 |
|
Weighted average discount rate |
|
|
4.50 | % |
The following is a schedule of maturities of lease liabilities as of June 30, 2023:
Twelve months ending June 30, |
|
|
|
|
2024 |
|
$ | 293,475 |
|
2025 |
|
|
195,650 |
|
2026 |
|
|
170,828 |
|
2027 |
|
|
170,828 |
|
2028 |
|
|
170,828 |
|
Thereafter |
|
|
512,486 |
|
Total future minimum lease payments |
|
|
1,514,095 |
|
Less: imputed interest |
|
|
231,905 |
|
Total |
|
$ | 1,282,190 |
|
| F-17 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10 – Short-term Bank Loans
The Company’s short-term bank loans consist of the following:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Loan payable to Bank of China Lishui Branch |
|
$ | 2,217,423 |
|
|
$ | 2,331,591 |
|
Loan payable to Shanghai Pudong Development (“SPD”) Bank Lishui Branch |
|
|
827,400 |
|
|
|
1,305,000 |
|
Total |
|
$ | 3,044,823 |
|
|
$ | 3,636,591 |
|
On December 22, 2022, Tantech Charcoal entered into a short-term loan agreement with Bank of China (Lishui Branch) to borrow approximately $2,217,423 (RMB16,079,936) for one year with fixed annual interest rate of 4.35%. The purpose of the loan was for purchasing bamboo charcoal materials. The loan was collateralized by building and land use right of Tantech Bamboo with maximum guaranteed amount up to approximately $3.6 million (RMB25,960,000). Zhengyu Wang and his wife, Yefang Zhang pledged personal property as collateral to secure the loan with maximum guaranteed amount up to approximately $0.2 million (RMB1,140,000). The loan was also guaranteed by two related parties, Lishui Jiuanju Commercial Trade Co., Ltd. (“LJC”), and Forasen Group Co., Ltd., one unrelated third party, Zhejiang Meifeng Tea Industry Co., Ltd., and other three related individuals, Zhengyu Wang, Chairman of the Board and previous CEO of the Company, his wife, Yefang Zhang, and his relative, Aihong Wang.
On September 29, 2022, Tantech Bamboo entered into a short-term loan agreement with SPD (Luishui Branch) to borrow $1,379,000 (RMB10.0 million) for one year with fixed annual interest rate 3.90%. The purpose of the loan was to fund working capital needs. The loan was guaranteed by three related parties, Zhengyu Wang and his wife, Yefang Zhang and Forasen Group Co., Ltd., a company owned by Zhengyu Wang and Yefang Zhang., and one unrelated third party, Lishui Zhongyun Mitai Industrial Co., Ltd., The loan was also collateralized by building and land use right of Tantech Energy with maximum guaranteed amount up to approximately $4.0 million (RMB29,090,000). During six months ended June 30,2023, the Company repaid $413,700 (RMB3.0 million). As of June 30, 2023, the outstanding balance was $827,400 (RMB6.0 million).
As of June 30, 2023, total bank loans payable amounted to $3,044,823.
For the six months ended June 30, 2023 and 2022, the interest expense related to bank loans was $72,687 and $106,978, respectively.
Note 11 – Loan payable to third parties
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Loan payable to third parties |
|
$ | 711,266 |
|
|
$ | — |
|
Loan payable to third parties-long term |
|
|
3,506,793 |
|
|
|
3,395,861 |
|
Total |
|
$ | 4,218,059 |
|
|
$ | 3,395,861 |
|
On December 17, 2021, the Company borrowed $7.0 million from two third parties, the amounts are unsecured with interest rate 6% per annum and with one year term from December 17, 2021 to December 16, 2022, the balance was $3,395,861 as of December 16, 2022, the remaining balance was extended to December 15, 2024 interest rate 6% per annum. As of June 30, 2023, the remaining principal and interest balance was $3,506,793. If the Company fails to repay the debt, the Company shall pay the third parties for the liquidated damages at the rate of thousandths of the amount in arrears per day, and also compensate the legal costs, execution fees, etc. incurred in realizing the creditor’s rights.
In February, 2023, the Company borrowed $694,955 from one third party, the amounts are unsecured with interest rate 6% per annum and with one year term, the principal and interest balance was $711,266 as of June 30, 2023. If the Company fails to repay the debt, the Company shall pay the third parties for the liquidated damages at the rate of thousandths of the amount in arrears per day, and also compensate the legal costs, execution fees, etc. incurred in realizing the creditor’s rights.
| F-18 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 12 – Convertible note
On June 29, 2023, the Company entered into a securities purchase agreement with Streeterville Capital, LLC (“Streeterville”), pursuant to which the Company issued the Investor an unsecured promissory note on June 29, 2023 in the original principal amount of $2,160,000 (the “Note”), convertible into ordinary shares, par value $0.24 per share, of the Company, for $2,000,000 in gross proceeds. The transaction contemplated by the Purchase Agreement closed on June 29, 2023. The Note bears interest at a rate of 7% per annum compounding daily. All outstanding principal and accrued interest on the Note will become due and payable twelve months after the purchase price of the Note is delivered by Purchaser to the Company (the “Purchase Price Date”). The Note includes an original issue discount of $140,000 along with $20,000 for Streeterville’s fees, costs and other transaction expenses incurred in connection with the purchase and sale of the Note. The Company may prepay all or a portion of the Note at any time by paying 105% of the outstanding balance elected for pre-payment. The fair value of the Note was $2,003,000 as of June 30, 2023. For the six months ended June 30, 2023, the Company recognized a loss of change in fair value of convertible note of $3,010.
The Company has elected to recognize the convertible note at fair value and therefore there was no further evaluation of embedded features for bifurcation. The Company engaged third party valuation firm to perform the valuation of convertible note. The fair value of the convertible note is calculated using the Scenario-based Discounted Cash Flows with Monte Carlo Simulation Model (the "Monte Carlo Model”). The major assumptions used in the Monte Carlo Model are as follows:
|
|
For six months ended June 30, 2023 |
|
|
Risk-free interest rate |
|
|
5.419 | % |
Expected life |
|
1 year |
|
|
Share price |
|
$ | 2.68 |
|
Volatility |
|
|
142 | % |
Note 13 – Related Party Balances and Transactions
Due to related parties
The balances due to related parties were as follows:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Forasen Group and its affiliates, controlled by Mr. Zhengyu Wang, Chairman and previous CEO of the Company until December 6, 2019 |
|
$ | 959,485 |
|
|
$ | 857,746 |
|
Mr. Wangfeng Yan, the CEO of the Company since December 7, 2019 and his affiliates |
|
|
182,433 |
|
|
|
189,766 |
|
Total |
|
$ | 1,141,918 |
|
|
$ | 1,047,512 |
|
As of June 30, 2023 and December 31, 2022, the Company borrowed $959,485 and $857,746, respectively, from Forasen Group and its affiliates, controlled by Mr. Zhengyu Wang, Chairman and previous CEO of the Company, for working capital purpose.
Mr. Wangfeng Yan, the CEO of the Company, and his affiliates, also made advances to the Company. The balance due to Mr. Wangfeng Yan and his affiliates was $182,433 and $189,766 as of June 30, 2023 and December 31, 2022, respectively. All balances of due to the related parties were unsecured, interest-free and due upon demand.
Lease arrangement with related party
On July 13, 2021, Tantech Bamboo signed a lease agreement with Zhejiang Nongmi Food Co., Ltd. (“Nongmi Food”) to lease part of its production facilities of approximately 1,180 square meters to Nongmi Food for ten years with monthly rent of approximately $2,200 (RMB15,338). Nongmi Food is controlled by Ms. Yefang Zhang who is the director of the Company. For the six months ended June 30, 2023 and 2022, the Company recorded rent income of $12,183 and $19,541 from Nongmi Food., respectively.
On July 13, 2021, Tantech Bamboo signed a lease agreement with Zhejiang Nongmi Biotechnology Co., Ltd. (“Nongmi Biotechnology”) to lease part of its production facilities of approximately 1,914 square meters to Nongmi Biotechnology for ten years with monthly rent of approximately $5,500 (RMB38,280). Nongmi Biotechnology is controlled by Ms. Yefang Zhang who is the director of the Company. For the six months ended June 30, 2023 and 2022, the Company recorded rent income of $29,520 and $50,100 from Nongmi Biotechnology, respectively.
| F-19 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 13 – Related Party Balances and Transactions (continued)
Guaranty provided by related parties
The Company’s major shareholder Mr. Zhengyu Wang, his wife Ms. Yefang Zhang and his relative Ms. Aihong Wang, as well as related party entities controlled by Mr. Wang, and LJC the company controlled by the CEO, Mr. Wangfeng Yan provided guarantees to the Company’s bank loans (See Note 10).
Guaranty provided for related party
In July 2020, Tantech Bamboo provided a guarantee with Bank of China Lishui Branch for Forasen Food for maximum amount of approximately $1.4 million (RMB10 million) by pledging certain land and building as the collateral for the loan and notes. The guarantee will expire on July 8, 2023. Forasen Food is controlled by Ms. Yefang Zhang who is the Company’s director.
Note 14 – Commitments and Contingencies
Operating leases
On November 13, 2020, Luishui Smart leased factory facilities and office space from Tantech Energy under operating leases for five years from November 13, 2020 to November 12, 2025 with annual rent of approximately $26,000 (RMB180,000).
Shangchi Automobile leased certain factory facilities under operating leases through August 9, 2022. The annual rent under operating lease agreement was approximately $144,000 (RMB1 million). On August 10, 2022, Shangchi Automobile renewed the operating lease agreement with the landlord to January 31, 2023, with annual rent of approximately $69,000 (RMB476,712), the renew lease agreement is being negotiated.
Shenzhen Yimao signed operating lease agreement for office space for one year from January 17, 2022 to January 16, 2023 with annual rent of approximately $6,400 (RMB44,352), this agreement was terminated on January 16, 2023.
Tantech Charcoal leased factory facilities and office space from Tantech Energy under operating leases for ten years from January 1, 2022 to December 31, 2031 with annual rent of approximately $179,000 (RMB1,238,784).
On April 18, 2022, Tantech signed a new operating lease agreement for office space for one year from April 18, 2022 to April 30, 2023, with annual rent of $76,680.
On September 1, 2023, Tantech signed a new operating lease agreement for office space for one year from September 1, 2023 to August 31, 2024, with annual rent of $45,600.
On April 2023, Epakia Canada signed a new operating lease agreement for office space for six months from April 1, 2023 to September 30, 2023, with monthly rent of $1,715.
The rental expense for the six months ended June 30, 2023 and 2022 were $154,050 and $242,249, respectively.
Contingencies
On March 23, 2021, Mr. Hengwei Chen filed a lawsuit against Shangchi Automobile and the Company for a debt dispute of approximately $1.6 million (RMB11.35 million). Mr. Chen was the former general manager of Shangchi Automobile before the Company acquired Shangchi Automobile in 2017. On December 15, 2021, the Court ordered Shangchi Automobile to pay Mr. Hengwei Chen approximately $1.2 million (RMB8.95 million). The Company filed an appeal on January 4, 2022, but the Court made the final judgement to maintain the original ruling on June 29, 2022. The Company recorded the disputed amount and further accrued interest of $0.7 million (RMB4.7 million) in the accrued liabilities based on the best estimate of the management as of June 30, 2023. On September 7, 2022, the Court issued an order to freeze the disputed amount of total $1.2 million (RMB8.7 million) in the Company’s certain bank accounts to enforce the execution. As of the date of this filing, the Company has paid $22,597 (RMB163,862).
| F-20 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 15 – Shareholders’ Equity
Share Consolidation
On February 24, 2022, the Company’s Board approved a share consolidation of the Company’s common shares at the ratio of one-for-ten reverse split with the effective date of February 25, 2022. The objective of the share consolidation is to enable the company to regain compliance with NASDAQ Marketplace Rule 5550(a)(2) and maintain its listing on Nasdaq.
As a result of the share consolidation, each 10 common shares outstanding automatically combines and converts to one issued and outstanding common share without any action on the part of the shareholder. The share consolidation reduces the number of common shares issued and outstanding from 63,994,606 to 6,399,460. The authorized number of common shares will be reduced by the same one-for-ten ratio from 600 million to 60 million.
On October 28, 2022, the Company’s Board approved a share consolidation of the Company’s common shares at the ratio of one-for-twenty-four reverse split with the effective date of November 9, 2022. The objective of the share consolidation is to enable the company to regain compliance with NASDAQ Marketplace Rule 5550(a)(2) and maintain its listing on Nasdaq.
As a result of the share consolidation, each 24 common shares outstanding automatically combines and converts to one issued and outstanding common share without any action on the part of the shareholder. The share consolidation reduces the number of common shares issued and outstanding from 29,278,601 to 1,219,937. The authorized number of common shares will be reduced by the same one-for-twenty-four ratio from 60 million to 2.5 million.
On May 26, 2023, the Company’s Board approved to change the authorized number of common shares from 2.5 million to 500 million.
All share information included in the consolidated financial statements and notes thereto have been retroactively adjusted for the one-for-ten reverse split and one-for-twenty-four reverse split occurred on the first day of the first period presented.
Issuance of common shares
On March 14, 2022, the Company paid cash to certain minor shareholders and cancelled 36 shares due to reverse split reconciliation.
On March 18, 2022, the Company completed an offering of 833,333 common shares at an offering price of $12.0 per share for total net proceeds of $8,825,000 after deducting legal costs related to the offering. In addition, the Company granted the underwriters a 45-day option to purchase an additional 15% of common shares at the public offering price to cover over-allotments, if any. On March 22, 2022, the underwriter of the Offering exercised its Over-allotment Option to purchase an additional 120,000 common shares at a price of $12.0 per common share, for total net proceeds of $1,295,400 after deducing legal costs related to the offering.
On February 21, 2023, the Company entered into a securities purchase agreement with nine individual purchasers, pursuant to which the Company agreed to sell an aggregate of 1,000,000 common shares at a price of $2.80 per share, the net proceeds of $2,779,325 after deducting related expenses. The transaction was closed on March 22, 2023.
On June 26, 2023, the Company entered into a securities purchase agreement with six individual purchasers, pursuant to which the Company agreed to sell an aggregate of 1,240,000 common shares at a price of $2.5 per share, the net proceeds of $3,055,000 after deducting related expenses. The transaction was closed on June 30, 2023.
November 2020 Offering Warrants
In connection with and upon closing of the offering on November 24, 2020, the Company issued registered warrants to purchase up to 11,477 common shares and unregistered warrants to purchase up to 13,773 common shares. Such registered and unregistered warrants are immediately exercisable, expire five years from the date of issuance and have an exercise price of $12.0 per share. The exercise price of such warrants was reduced from $434.4 per share to $12.0 per share by virtue of the Company’s entry into a securities purchase agreement on March 18, 2022. The placement agent also received unregistered warrants in connection with this offering exercisable for up to 1,515 common shares at $435.6 per share, exercisable between May 24, 2021 to November 24, 2023.
Management determined that these warrants meet the requirements for equity classification under ASC 815-40 because they are indexed to its own shares. The warrants were recorded at their fair value on the date of issuance as a component of shareholders’ equity.
As of June 30, 2023, the total number of common shares underlying registered and unregistered warrants outstanding was 26,765. These warrants have weighted average of remaining life of 2.29 years and weighted average exercise price of $35.98.
| F-21 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 16 – Noncontrolling Interests
A reconciliation of non-controlling interest as of June 30, 2023 and December 31, 2022 is as follows:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Beginning Balance |
|
$ | (2,148,964 | ) |
|
$ | (1,724,627 | ) |
Proportionate shares of net loss |
|
|
(118,721 | ) |
|
|
(434,873 | ) |
Foreign currency translation adjustment |
|
|
5,266 |
|
|
|
10,536 |
|
Total |
|
$ | (2,262,419 | ) |
|
$ | (2,148,964 | ) |
As of June 30, 2023 and December 31, 2022, the noncontrolling interests balances represented the noncontrolling shareholder’s 30% equity interests in Shangchi Automobile (formerly known as Suzhou E-Motors) and its subsidiary Shenzhen Yimao.
Note 17 – Long Term Investments
On January 10, 2018, the Company invested approximately $16.6 million (or RMB120 million) to acquire 18% equity interest in Libo Haokun Stone Co., Ltd. (“Libo Haokun”). Libo Haokun holds a government-issued permit and has the exclusive right to mine a 0.11‑square-kilometer marble quarry in the central area of Guizhou province, China. Libo Haokun obtained the permit to mine the quarry from the local government in September 2016. The permit was renewed in July 2020 and is further renewable by July 2023. On October 16, 2023, the government has approved to extend the right for more 5 years.
On November 29, 2019, the Company entered into an investment agreement (the “Investment Agreement”) with Jingning Zhonggang Mining Co., Ltd. (“Jingning Zhonggang”) through Lishui Tantech to acquire 18% of the equity interest of Fuquan Chengwang Mining Co., Ltd. (“Fuquan Chengwang”), a wholly-owned subsidiary of Jingning Zhonggang, at a price of $6.4 million (RMB46.32 million). The consideration equals 18% of RMB257.35 million, the value of the mining right under a permit being renewed by Fuquan Chengwang according to an evaluation report. Fuquan Chengwang is a basalt mining company.
Pursuant to the Investment Agreement, Tantech is obligated to pay the consideration within 30 days after Fuquan Chengwang completes the recording process with the local industrial and commerce administration for transfer of the share ownership. Pursuant to the Investment Agreement, after the transfer of the 18% share ownership, if the value of Fuquan Chengwang is lower than RMB257.35 million according to the financial statements audited by an accounting firm approved by the Tantech, Jingning Zhonggang will be obligated to refund to Tantech the overpaid amount. The payment could be in the form of cash, shares, or other assets with the same value, as selected by Tantech.
After a series of transactions and reorganization, as of December 31, 2019, the Company and Jingning Zhonggang owns 18% and 82% of Libo Haokun, respectively, through Jingning Meizhongkuang Industry Co., Ltd. (“Jingning Meizhongkuang”). Jingning Meizhongkuang owns 100% of Fuquan Chengwang. The Agreements would enable Tantech to indirectly hold a 18% stake in Fuquan Chengwang through holding 18% of the equity interest of Jingning Meizhongkuang.
On April 3, 2020, Lishui Ansheng Energy Technology Co., a third party, signed an investment agreement with Jingning Meizhongkuang to invest in Fuquan Chengwang by paying $6.4 million (RMB 46.5 million) to exchange 18% of the interest of Fuquan Chengwang. After the transaction, the Company’s indirect interest in Fuquan Chengwang was diluted from 18% to 14.76% through holding 18% of the equity interest of Jingning Meizhongkuang.
Fuquan Chengwang received the renewed mining permit in March 2021, and expiration date is March 2024. The mining permit provides it the right to mine a 0.2607-square-kilometer basalt quarry in Fuquan City, Guizhou Province, China.
Due to the fact that the Company did not have significant influence over the equity investees, the investments were accounted for using the cost method. For the six months ended June 30, 2023 and 2022, the Company did not recognize any impairment losses for the long-term investments.
| F-22 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 18 – Earnings per share
Basic net income attributable to common shareholders of Tantech Holdings Ltd is based on the weighted-average shares outstanding during the relevant period, Diluted net income attributable to common shareholders of Tantech Holdings Ltd is based on the weighted-average common shares outstanding during the relevant period adjusted for the dilutive effect of unexercised warrants.
The following table presents a reconciliation of basic and diluted earing per share:
|
|
|
|
|
||||
|
|
For the six months ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
|
|
|
|
|
||
Net income attributable to common shareholders of Tantech Holdings Ltd. |
|
$ | 2,011,244 |
|
|
$ | 2,099,462 |
|
Weighted average shares Outstanding - Basic |
|
|
1,903,906 |
|
|
|
773,083 |
|
Dilutive securities -unexercised warrants |
|
|
— |
|
|
|
16,225 |
|
Weighted average shares outstanding – diluted |
|
|
1,903,906 |
|
|
|
789,308 |
|
Earnings per share - Basic |
|
$ | 1.06 |
|
|
$ | 2.72 |
|
Earnings per share – Diluted |
|
$ | 1.06 |
|
|
$ | 2.66 |
|
Note 19 – Segment Information
The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Due to business strategic changes, the Company merged consumer products segment and trading segment, and we start to provided biodegradable packaging business during year ended December 31, 2022. As a result, the Company has determined that it has three operating segments as defined by ASC 280, “Segment Reporting”: consumer products, electric vehicles (“EV”) and biodegradable packaging. Consumer products segment manufactures, sell and trade Charcoal Doctor branded products and BBQ charcoal in China. The EV segment manufactures and sell electric vehicles. Biodegradable packaging segment provided biodegradable packaging business. Management, including the chief operating decision maker, reviews operation results of consumer products, electric vehicles, and biodegradable packaging separately.
Adjustments and eliminations of inter-company transactions were not included in determining segment (loss) profit, as they are not used by the chief operating decision maker.
The following table presents summary information by segment for the six months ended June 30, 2023 and 2022, respectively.
|
|
Consumer Products |
|
|
EV |
|
|
Biodegradable packaging |
|
|
Total |
|
||||||||||||||||||||
|
|
Six months |
|
|
Six months |
|
|
Six months |
|
|
Six months |
|
|
Six months |
|
|
Six months |
|
|
Six months |
|
|
Six months |
|
||||||||
|
|
ended |
|
|
ended |
|
|
ended |
|
|
ended |
|
|
ended |
|
|
ended |
|
|
ended |
|
|
ended |
|
||||||||
|
|
June 30, 2023 |
|
|
June 30, 2022 |
|
|
June 30, 2023 |
|
|
June 30, 2022 |
|
|
June 30, 2023 |
|
|
June 30, 2022 |
|
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||||||||
Revenue from external customers |
|
$ | 18,828,336 |
|
|
$ | 26,290,353 |
|
|
$ | 104,100 |
|
|
$ | 679,064 |
|
|
$ | 809,273 |
|
|
$ | — |
|
|
$ | 19,741,709 |
|
|
$ | 26,969,417 |
|
Cost of revenue |
|
|
14,906,908 |
|
|
|
21,221,909 |
|
|
|
40,998 |
|
|
|
665,540 |
|
|
|
738,973 |
|
|
|
— |
|
|
|
15,686,879 |
|
|
|
21,887,449 |
|
Gross profit |
|
|
3,921,428 |
|
|
|
5,068,444 |
|
|
|
63,102 |
|
|
|
13,524 |
|
|
|
70,300 |
|
|
|
— |
|
|
|
4,054,830 |
|
|
|
5,081,968 |
|
Interest Expenses |
|
|
204,468 |
|
|
|
106,978 |
|
|
|
61,111 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
265,579 |
|
|
|
106,978 |
|
Depreciation & amortization |
|
|
114,677 |
|
|
|
125,705 |
|
|
|
31,390 |
|
|
|
79,014 |
|
|
|
— |
|
|
|
— |
|
|
|
146,067 |
|
|
|
204,719 |
|
Capital expenditure |
|
|
440 |
|
|
|
13,951 |
|
|
|
184,320 |
|
|
|
7,928 |
|
|
|
— |
|
|
|
— |
|
|
|
184,760 |
|
|
|
21,879 |
|
Segment assets |
|
|
133,218,575 |
|
|
|
131,546,807 |
|
|
|
3,896,852 |
|
|
|
4,680,964 |
|
|
|
934,809 |
|
|
|
— |
|
|
|
138,050,236 |
|
|
|
136,227,771 |
|
Segment profit |
|
$ | 2,875,654 |
|
|
$ | 2,788,556 |
|
|
$ | (443,609 | ) |
|
$ | (916,312 | ) |
|
|
(539,521 | ) |
|
|
— |
|
|
$ | 1,892,524 |
|
|
$ | 1,872,244 |
|
All of the Company’s long-lived assets are located in the PRC. Geographic information about the revenues, which are classified based on customers, is set out as follows:
|
|
For the six months ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Revenue from China |
|
$ | 19,216,905 |
|
|
$ | 26,969,417 |
|
Revenue directly from foreign countries |
|
|
524,804 |
|
|
|
— |
|
Total Revenue |
|
$ | 19,741,709 |
|
|
$ | 26,969,417 |
|
| F-23 |
| Table of contents |
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 20 – Major Customers and Suppliers
The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:
For the six months ended June 30, 2023, four major customers accounted for approximately 25%, 25%, 23%, and 20% of the Company’s total sales, respectively. For the six months ended June 30, 2022, four major customers accounted for approximately 21%, 20%, 17%, and 10%of the Company’s total sales, respectively.
As of June 30, 2023, three customers accounted for approximately 34%, 28% and 26% of the Company’s accounts receivable balance, respectively. As of December 31, 2022, three customers accounted for approximately 33%, 25% and 25% of the Company’s accounts receivable balance.
The Company also had certain major suppliers whose purchases individually represented 10% or more of the Company’s total purchases. For the six months ended June 30, 2023, three major suppliers accounted for approximately 27%, 18%% and 10% of the Company’s total purchases, respectively. For the six months ended June 30, 2022, three major suppliers accounted for approximately 27%, 18%, 14% and 12% of the Company’s total purchases, respectively.
Note 21 – Subsequent Events
From August 2023 to September 2023, Streeterville delivered conversion notice for convertible notes in principle of $150,000. The Company issued an aggregate of 89,183 ordinary shares, par value $0.24 per share, of the Company, to Streeterville.
On August 10, 2023, the Company formed a wholly-owned subsidiary, Zhejiang Zhuguxingqi Technology Co., Ltd., in Lishui, China, this subsidiary will be primarily engaged in bamboo charcoal products and wood products trading business.
| F-24 |
EXHIBIT 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes that appear elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors. Forward-looking statements speak only as of the date of this report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form 20-F in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements.
A. Operating Results
Overview of Company
Historically, we have been a specialized manufacturer of bamboo charcoal-based products with primary business focus in consumer products and low emission BBQ charcoal. After completing a series of re-organizations, dismantling prior VIE structure and business strategic changes, through our operating subsidiaries, we are now engaging in research, development, production and distribution of various charcoal products and vehicles, as well as trading bamboo charcoal products. We also have investments in mining exploration. For more detailed information about our recent developments, please refer to Notes 1 of the footnotes accompanying the financial statements included in this report.
As the result of the business strategic changes, during the year ended December 31, 2021 the Company merged its trading segment into its consumer products segment. We start to provide biodegradable packaging business during the year ended December 31, 2022. Now the Company had three reporting segments: consumer product segment, electric vehicle (“EV”) segment, and biodegradable packaging segment.
Our consumer products include purification and deodorization products, household cleaning products and barbecue charcoals designed for domestic market. Purification and deodorization products and household cleaning products are sold under the brand name “Charcoal Doctor.” Purification and deodorization products include air purification products, deodorant products and bamboo vinegar. Household cleaning products include toilet cleaning products, kitchen cleaning products, personal care products and clothing detergent products.
The largest category of our consumer products is purification and deodorization products. Made from dry distilled carbonized bamboo, our purification and deodorization products have the ability to absorb harmful substances and air-borne odors, including benzene, formaldehyde, ammonia and carbon tetrachloride. These products also come in many shapes and varieties for a multitude of purposes including pillows, cushion insoles, wrist pads, clothes hangers and other products. Bamboo vinegar is an additive that can be used in food processing, medical and hygiene products and fertilizer. Although it currently only accounts for a small portion of our revenue, bamboo vinegar products are crucial for us to maintain close ties with the agricultural industry which we believe will be a key area for growth in the coming years. Cleaning products, including disinfectants, detergents, lotions, specialized soaps and toilet cleaners are relatively new in our consumer products but provide us another opportunity for growth. Purchased from third parties and sold through our distribution channel, barbecue charcoals designed for China’s domestic market have also been a key source of revenue for us in recent years.
We are in the process to transform our business to focus more on the specialty electric vehicles (EVs) market. Our acquisition of Shangchi Automobile completed in the second quarter of 2017, and we recently established two subsidiaries in Zhejiang to shift our business strategy and focus on researching, developing and selling specialty EVs, such as electric driverless street sweepers. We are building our presence methodically, in order to maximize the impact of our R&D investments and technology advancements in specialty-use EVs rather than the more competitive, domestic general consumer EV market. We are confident in our position and remain fully committed to the EV segment, which we expect will be a key long-term growth driver for us. We expect our specialty EV business, especially driverless street sweepers, will grow with the growing sensitivity to cleaner environments and the demand for zero-emission vehicles, as well as favorable government policies and support in terms of subsidies, grants and/or tax rebates.
| 1 |
During year ended December 31, 2022, we have started to biodegradable packaging business. Biodegradable packaging is a type of packaging that is designed to break down naturally in the environment, without leaving behind harmful pollutants or waste. The market for biodegradable packaging has been growing rapidly in recent years, driven by increased awareness of environmental issues and the desire to reduce plastic waste. We generated approximately $0.8 million revenue from biodegradable packaging business in fiscal 2022.
If our expansions into these new businesses are not successful, our future results of operations and growth prospects may be materially and adversely affected. There could be trends, uncertainties or events that may have a material effect on our sales or revenue of consumer products. If we cannot increase our consumer products and electric vehicle revenues or find new business opportunities to continue the growth, our total revenue may be decreasing.
Factors Affecting Our Results of Operations
Government Policy May Impact Our Business and Operating Results
We have seen negative impact of unfavorable government policy regarding rebates upon our EV business in recent years. In addition, our business and operating results will be affected by China’s overall economic growth and government policy. Unfavorable changes in government policies could affect the demand for our products and could materially and adversely affect our results of operations. Our bamboo charcoal-based consumer products are currently not subject to such government restrictions; however, any future changes in the government’s policy on the bamboo charcoal industry may have a negative effect on the supply of our raw materials.
Price Inelasticity of Raw Materials May Reduce Our Profit
As a specialized manufacturer of bamboo charcoal-based products, we rely on the continuous and stable supply of bamboo charcoal to ensure our operation and expansion. Although bamboo (and as a result bamboo charcoal) is a renewable supply, price inelasticity at any given time may increase the likelihood of bidding wars, resulting in an increase in raw material prices and thus reduce our profit. In addition, as we are competing based upon low price, we will risk losing customers by increasing our selling prices.
Competition in Consumer Product
Our products face competition from other producers. In our consumer product segment, we face competition from a number of companies that have similar product portfolios. Many of such competitors’ products are not bamboo-based; instead, we compete based on our products’ functional use. Many such competitors are able to provide functionally similar products without relying on bamboo or bamboo charcoal components.
Although our Charcoal Doctor brand is one of the largest and most famous in the charcoal bag and bamboo charcoal market, the bamboo charcoal-based consumer product industry is relatively fragmented and subject to relatively low barriers of entry.
Our Charcoal Doctor air purification products compete with products from charcoal-based competitors such as Zhejiang Maitanweng Ecological Development Co., Ltd., Zhejiang Jiejiegao Charcoal Industry Co., Ltd., and Quzhou Modern Charcoal Industry, Co., Ltd.
Our Charcoal Doctor toilet cleaner competitors include non-charcoal-based competitors such as SC Johnson & Son (Shanghai) Inc. (which makes the Mr. Muscle brand in China), Blue Moon Chinese Co., Ltd., Shanghai White Cat Group Ltd., Beijing Green Umbrella Chemical Co., Ltd. and Weilai (Guangzhou) Consumer products Co., Ltd.
Results of Operation
The following table summarizes the selected results of our operation during the six months ended June 30, 2023 and 2022, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
(All amounts, other than percentages, in thousands of U.S. dollars)
| 2 |
|
|
| Six months ended June 30, |
|
| Six months ended June 30, |
|
|
|
|
|
|
|
||||||||||||
|
|
| 2023 |
|
| 2022 |
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
| As a |
|
|
|
|
| As a |
|
|
|
|
|
|
|
||||||
|
|
|
|
|
| percentage |
|
|
|
|
| percentage |
|
| Dollar ($) |
|
| Percentage |
|
||||||
|
|
| Dollars in |
|
| of sales |
|
| Dollars in |
|
| of sales |
|
| Increase |
|
| Increase |
|
||||||
| Statement of Operations Data: |
| thousands |
|
| revenue |
|
| thousands |
|
| revenue |
|
| (Decrease) |
|
| (Decrease) |
|
||||||
| Revenues |
| $ | 19,742 |
|
|
| 100.0 | % |
| $ | 26,969 |
|
|
| 100.0 | % |
| $ | (7,227 | ) |
|
| (26.8 | )% |
| Cost of revenues |
|
| 15,687 |
|
|
| 79.5 | % |
|
| 21,887 |
|
|
| 81.2 | % |
|
| (6,200 | ) |
|
| (28.3 | )% |
| Gross profit |
|
| 4,055 |
|
|
| 20.5 | % |
|
| 5,082 |
|
|
| 18.8 | % |
|
| (1,027 | ) |
|
| (20.2 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling expenses |
|
| 118 |
|
|
| 0.6 | % |
|
| 145 |
|
|
| 0.5 | % |
|
| (27 | ) |
|
| (18.6 | )% |
| General and administrative expenses |
|
| 2,027 |
|
|
| 10.3 | % |
|
| 1,528 |
|
|
| 5.7 | % |
|
| 499 |
|
|
| 32.7 | % |
| Research and development expenses |
|
| 16 |
|
|
| 0.1 | % |
|
| 237 |
|
|
| 0.9 | % |
|
| (221 | ) |
|
| (93.2 | )% |
| Total operating expenses |
|
| 2,161 |
|
|
| 10.9 | % |
|
| 1,910 |
|
|
| 7.1 | % |
|
| 251 |
|
|
| 13.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income from operations |
|
| 1,894 |
|
|
| 9.6 | % |
|
| 3,172 |
|
|
| 11.8 | % |
|
| (1,278 | ) |
|
| (40.3 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other income (expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Chang in fair value of convertible note |
|
| (3 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3 | ) |
| —% |
|
|
| Interest income |
|
| 22 |
|
|
| 0.1 | % |
|
| 192 |
|
|
| 0.7 | % |
|
| (170 | ) |
|
| (88.5 | )% |
| Interest expense |
|
| (266 | ) |
|
| (1.3 | )% |
|
| (107 | ) |
|
| (0.4 | )% |
|
| (159 | ) |
|
| (148.6 | )% |
| Financing interest income, net |
|
| 1,207 |
|
|
| 6.1 |
|
|
| 52 |
|
|
| 0.2 | % |
|
| 1,155 |
|
|
| 2221.2 | % |
| Rental income from related parties |
|
| 42 |
|
|
| 0.2 | % |
|
| 70 |
|
|
| 0.3 | % |
|
| (28 | ) |
|
| (40.0 | )% |
| Other income, net |
|
| 289 |
|
|
| 1.5 | % |
|
| 30 |
|
|
| 0.1 | % |
|
| 259 |
|
|
| 863.3 | % |
| Total other income (expenses) |
|
| 1,291 |
|
|
| 6.5 | % |
|
| 237 |
|
|
| 0.9 | % |
|
| 1,054 |
|
|
| 444.7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income before income tax expense |
|
| 3,185 |
|
|
| 16.1 | % |
|
| 3,409 |
|
|
| 12.6 | % |
|
| (224 | ) |
|
| (6.6 | )% |
| Income tax expense |
|
| 1,293 |
|
|
| 6.5 | % |
|
| 1,537 |
|
|
| 5.7 | % |
|
| (244 | ) |
|
| (15.9 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
| 1,892 |
|
|
| 9.6 | % |
|
| 1,872 |
|
|
| 6.9 | % |
|
| 20 |
|
|
| 1.1 | % |
| Net income attributable to common shareholders of Tantech Holdings Ltd |
| $ | 2,011 |
|
|
| 10.2 | % |
| $ | 2,099 |
|
|
| 7.8 | % |
| $ | (88 | ) |
|
| (4.2 | )% |
Revenues
Revenues decreased by approximately $7.2 million, or 26.8%, to approximately $19.7 million in the six months ended June 30, 2023 from approximately $27.0 million in the same period of 2022. The decrease was mainly attributable to a decrease of approximately $7.5 million in revenues from consumer products and decrease of approximately $0.6 million in revenues from EV segment, due to weak consumer demand as the result of soft economy, partially offset by an increase of approximately $0.8 million in revenues from biodegradable packaging business which we started in fiscal 2022.
Consumer product segment
Revenues from consumer product segment decreased by approximately $7.5 million, or 28.4%, to approximately $18.8 million in the six months ended June 30, 2023 from approximately $26.3 million in the same period of 2022. The decrease was primarily attributable to the reduced demand after the pandemic for our bamboo charcoal, which is used in active charcoal masks, air purification and sanitation products.
Electric Vehicle (“EV”) segment
On July 12, 2017, the Company completed the acquisition of 70% of the equity interest of Suzhou E-Motors, which was renamed as Shangchi Automobile in 2019, a specialty electric vehicles and power batteries manufacturer based in Zhangjiagang City, Jiangsu Province, People’s Republic of China. The Company believes that the acquisition brings new advanced technologies and economic synergies in the electric vehicle market and broadens the Company’s customer base and cross-selling opportunities.
| 3 |
The revenue for our EV segment was approximately $0.1 million in the six months ended June 30, 2023, as compared to sales of approximately $0.7 million in the same period of 2022, primarily due to decreased export sales.
Biodegradable packaging business
In the second half of fiscal year 2022, the Company started biodegradable packaging business. The Company generated revenue of approximately $0.8 million from biodegradable packaging business in the six months ended June 30, 2023. We expect the revenue from biodegradable packaging business will continue to increase in the future.
Cost of revenues
Our cost of revenues decreased by approximately $6.2 million, or 28.3%, to approximately $15.7 million in the six months ended June 30, 2023 from approximately $21.9 million in the same period of 2022. As a percentage of revenues, the cost of revenue slightly decreased to 79.5% in the six months ended June 30, 2023 from 81.2% in the same period of 2022. The slightly decrease in cost of revenues as a percentage of revenues in the six months ended June 30, 2023 was mainly attributable to the decreased costs from our bamboo charcoal segment.
Gross profit
Our gross profit decreased by approximately $1.0 million, or 20.2%, to approximately $4.1 million in the six months ended June 30, 2023 from approximately $5.1 million in the same period of 2022. The gross profit margin was 20.5% in the six months ended June 30, 2023, as compared to 18.8% in the same period of 2022. On segment basis, gross margins for consumer product segment, EV segment and biodegradable packaging business segment were 20.8%, 60.6% and 8.7%, respectively, for the six months ended June 30, 2023, compared to 19.3%, 2.0% and nil, respectively, for the same period of 2022. The increase in overall gross margin was primarily attributable to the higher gross margin for our bamboo charcoal segment as the result of decreased cost of sales.
Selling expenses
Selling expenses kept at approximately $0.1 million in the six months ended June 30, 2023 and 2022. As a percentage of sales, our selling expenses were 0.6% of revenues in the six months ended June 30, 2023, as compared to 0.5% of revenues in the same period of 2022.
General and administrative expenses
Our general and administrative expenses increased by approximately $0.5 million, or 32.7%, to approximately $2.0 million in the six months ended June 30, 2023 from approximately $1.5 million in the same period of 2022. As a percentage of revenues, general and administrative expenses increased to 10.3% in the six months ended June 30, 2023, compared to 5.7% in the same period of 2022. The increase was primarily attributable to a decrease of approximately $0.2 million in recovery of account receivable and increase of approximately $0.2 million in employee salaries from biodegradable packaging business.
Research and development expenses
Research and development expenses decreased by approximately $0.2 million, or 93.2%, to $15,724 in the six months ended June 30, 2023 from approximately $0.2 million in the same period of 2022 due to less research and development activities in the six months ended June 30, 2023.
Total operating expenses
Total operating expenses increased by approximately $0.3 million, or 13.1%, to approximately $2.2 million in the six months ended June 30, 2023 from approximately $1.9 million in the same period of 2022, which was mainly due to an increase of approximately $0.5 million in general and administrative expenses, offset by a decrease in research and development expenses of approximately $0.2 million in the six months ended June 30, 2023.
| 4 |
Interest expenses
Our interest expenses increased by approximately $0.2 million, or 148.6%, to approximately $0.3 million in the six months ended June 30, 2023 from approximately $0.1 million in the same period of 2022, which was due to an increase in the interest expenses for the third parties loan payables from the same period of 2022.
Financing interest income, net
Starting in June 2022, we provided commercial factoring services to customers who seek financing from their receivables. The Company recognized net financing interest income of approximately $1.2 million and approximately $0.05 million in the six months ended June 30, 2023 and 2022, respectively.
Rental income from related parties
Since fiscal 2021, the company has signed certain lease agreements with related parties to lease part of production facilities to related parties. The Company recorded rent income of approximately $0.04 million and approximately $0.07 million for the six months ended June 30, 2023 and 2022, respectively.
Other income, net
Net other income was approximately $0.3 million in the six months ended June 30, 2023 compared to approximately $0.03 million in the same period of 2022. Other income was primarily related to the government subsidy income.
Income before income taxes
Our income before income taxes was approximately $3.2 million in the six months ended June 30, 2023, compared to approximately $3.4 million in the same period of 2022. The decrease of income before income taxes was primarily a decrease of approximately $1.0 million in gross profit and an increase of approximately $0.3 million in operating expenses, offset by an increase of approximately $1.2 million in financing interest income and an increase of approximately $0.3 million in other income.
Income taxes expense
Our income taxes expense was approximately $1.3 million in the six months ended June 30, 2023, a decrease of approximately $0.2 million or 15.9% from approximately $1.5 million in the same period of 2022. The decreased income tax provision was in line with decreased taxable income in the six months ended June 30, 2023 compared to the same period of 2022.
Net income attributable to common share holders
Our net income attributable to common shareholders was approximately $1.9 million in the six months ended June 30, 2023 and 2022, respectively.
B. Liquidity and Capital Resources
We are a holding company incorporated in the British Virgin Islands. We may need dividends and other distributions on equity from our PRC subsidiaries to satisfy our liquidity requirements. Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiaries are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. Our PRC subsidiaries may also allocate a portion of their after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends.
As of June 30, 2023, we had cash and restricted cash of approximately $24.7 million. Our current assets were approximately $112.0 million and our current liabilities were approximately $15.3 million, which resulted in a current ratio of 7.3:1. Retained earnings as of June 30, 2023 was approximately $41.0 million.
| 5 |
Our accounts receivable turnover in days were 371 days and 290 days for the six months ended June 30, 2023 and for the year ended December 31, 2022, respectively. Although we typically do not grant special payment terms to our customers, some of our customers, who are large retailers and wholesale chains, tend to require longer payment terms but are unlikely to default. The instances of slow payments and long-aging receivables may have negative impact on our short-term operating cash flow and future liquidity. We periodically review our accounts receivable and allowance level in order to ensure our methodology used to determine allowances is reasonable and accrued additional allowances if necessary. We have recently put a lot of efforts into accounts receivable collection through tightening our customer credit policy and strengthening monitoring of uncollected receivables. If the Company has difficulty collecting, the following steps will be taken, including but not limited to: cease any additional shipments to the customers, visit the customers to request payments on past due invoices, and if necessary, take legal recourse. If all of these steps are unsuccessful, management will determine whether or not the receivable will be reserved or written off.
For the accounts receivable, the Company provided bad debt allowance of approximately $3.8 million against the aged accounts receivable balances. Subsequent to June 30, 2023 and through October 25, 2023, the Company collected approximately $12.6 million or 28% of the accounts receivable balance as of June 30, 2023.
As of June 30, 2023 and December 31, 2022, the Company had advances to suppliers of approximately $0.5 million and $1.3 million, respectively. In order to ensure a steady supply of raw materials, the Company is required from time to time to make cash advances when placing its purchase orders. Due to recent tightened environmental protection policies in China, many smaller suppliers have gone out of business. The Company monitors the advances to suppliers account and the allowance level periodically in order to ensure the related allowance is reasonable. We have since enhanced our collections or realization on advance to suppliers through tightening vendor prepayment policy and strengthening monitoring of unrealized prepayment. If the Company has difficulty collecting, the following steps will be taken: cease additional purchases from these suppliers, visit the suppliers to request return of the prepayments promptly, and if necessary, take legal recourse. If all of these steps are unsuccessful, management will determine whether or not the prepayment will be reserved or written off.
The following table sets forth summary of our cash flows for the periods indicated:
(All amounts in thousands of U.S. dollars)
|
|
| Six months |
|
| Six months |
|
||
|
|
| ended June 30, |
|
| ended June 30, |
|
||
|
|
| 2023 |
|
| 2022 |
|
||
| Net cash used in operating activities |
| $ | (902 | ) |
| $ | (2,355 | ) |
| Net cash used in investing activities |
|
| (1,397 | ) |
|
| (45,214 | ) |
| Net cash provided by financing activities |
|
| 8,510 |
|
|
| 15,959 |
|
| Effect of exchange rate changes on cash, restricted cash and cash equivalents |
|
| (451 | ) |
|
| (1,154 | ) |
| Net increase (decrease) in cash, restricted cash and cash equivalents |
|
| 5,760 |
|
|
| (32,764 | ) |
| Cash, restricted cash and cash equivalents, beginning of period |
|
| 18,982 |
|
|
| 43,567 |
|
| Cash, restricted cash and cash equivalents, end of period |
| $ | 24,742 |
|
| $ | 10,803 |
|
Operating Activities
Net cash used in operating activities was approximately $0.9 million in the six months ended June 30, 2023, compared to approximately $2.4 million in the same period of 2022. The change in net cash used in operating activities was primarily attributable to the following factors:
An increase of approximately $2.9 million in accounts receivable due to slowly collect.
Offset by the impacts from the following factors:
A net income of approximately $1.9 million in the six months ended June 30, 2023.
Investing Activities
Net cash used in investing activities was approximately $1.4 million in the six months ended June 30, 2023, compared to net cash used in investing activities of approximately $45.2 million in the same period of 2022. The net cash used in investing activities in the six months ended June 30, 2023 was primarily attributable to an increase of approximately $1.2 million in financing receivables.
| 6 |
Financing Activities
Net cash provided by financing activities was approximately $8.5 million in the six months ended June 30, 2023, compared to approximately $16.0 million in the same period of 2022. Net cash provided by financing activities in the six months ended June 30, 2023 was primarily from two offerings of 2,240,000 common shares in aggregate, which resulted in net proceeds of approximately $5.8 million in the six months ended June 30, 2023. In addition, we also had net proceeds of approximately $2.0 million from the issuance of a convertible note.
Our primary source of cash is currently generated from the sales of our products and bank borrowings equity financings. In the future, we may raise additional capital by issuing common shares to meet our cash needs. While facing uncertainties in regards to the size and timing of capital raise, we expect to be able to meet our working capital and capital expenditure requirements by using our cash on hand, cash flows from operations and bank borrowings in the next twelve months.
Loan Facilities
As of June 30, 2023, the balance of our bank loans was approximately $3.0 million. The details of all our short-term bank loans are as follows:
| No. |
|
| Type |
| Contracting Party |
| Valid Date |
| Duration |
| Amount |
|
||
| 1 |
|
| Short-term bank loan |
| Shanghai Pudong Development Bank |
| September 29, 2023 |
| 12 months |
| $ | 827,400 |
|
|
| 2 |
|
| Short-term bank loan |
| Bank of China |
| December 22, 2023 |
| 12 months |
| $ | 2,217,423 |
|
|
On December 22, 2022, Tantech Charcoal entered into a short-term loan agreement with Bank of China (Lishui Branch) to borrow $2,217,423 (RMB16,079,936) for one year with fixed annual interest rate of 4.35%. The purpose of the loan was for purchasing bamboo charcoal materials. The loan was collateralized by building and land use right of Tantech Bamboo with maximum guaranteed amount up to approximately $3.6 million (RMB25,960,000). Zhengyu Wang and his wife, Yefang Zhang, pledged personal property as collateral to secure the loan with maximum guaranteed amount up to approximately $0.2 million (RMB1,140,000). The loan was also guaranteed by two related parties, Lishui Jiuanju Commercial Trade Co., Ltd. (“LJC”) and Forasen Group Co., Ltd., one unrelated third party, Zhejiang Meifeng Tea Industry Co., Ltd., and three related individuals, Zhengyu Wang, Chairman of the Board and former CEO of the Company, his wife, Yefang Zhang, and his relative, Aihong Wang. On September 29, 2022, Tantech Bamboo entered into a short-term loan agreement with SPD (Luishui Branch) to borrow $1,379,000 (RMB10.0 million) for one year with fixed annual interest rate of 3.90%. The purpose of the loan was to fund working capital needs. The loan was guaranteed by three related parties, Zhengyu Wang and his wife, Yefang Zhang, and Forasen Group Co., Ltd., a company owned by Zhengyu Wang and Yefang Zhang, and an unrelated third party, Lishui Zhongyun Mitai Industrial Co., Ltd. The loan was also collateralized by building and land use right of Tantech Energy with a maximum guaranteed amount up to approximately $4.0 million (RMB29,090,000). During six months ended June 30,2023, the Company repaid $413,700 (RMB3.0 million). As of June 30, 2023, the outstanding balance was $827,400 (RMB6.0 million).
Although we currently do not have any material unused sources of liquidity, giving effect to the foregoing bank loans and other financing activities, we believe that our currently available working capital should be adequate to sustain our operations at our current levels through at least for the next twelve months. We will consider additional borrowing or other sources based on our working capital needs and capital expenditure requirements. There is no seasonality of our borrowing activities.
Statutory Reserves
Under PRC regulations, all our subsidiaries in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC GAAP. In addition, these companies are required to set aside at least 10% of their after-tax net profits each year, if any, to fund the statutory reserves until the balance of the reserves reaches 50% of their registered capital. The statutory reserves are not distributable in the form of cash dividends to the Company and can be used to make up cumulative prior year losses.
Restrictions on net assets also include the conversion of local currency into foreign currencies, tax withholding obligations on dividend distributions, the need to obtain State Administration of Foreign Exchange approval for loans to a non-PRC consolidated entity. We did not have these restrictions on our net assets as of June 30, 2023 and December 31, 2022. We are also a party to certain debt agreements that are secured with pledges on our real property in Tianning located in Lishui, China. But such debt agreements do not restrict our net assets and instead only impose restrictions on the pledged property.
| 7 |
The following table provides the amount of our statutory reserves, the amount of restricted net assets, consolidated net assets, and the amount of restricted net assets as a percentage of consolidated net assets, as of June 30, 2023 and December 31, 2022.
|
|
| As of |
|
| As of |
|
||
|
|
| June 30, |
|
| December 31, |
|
||
|
|
| 2023 |
|
| 2022 |
|
||
| Statutory Reserves |
| $ | 7,580,896 |
|
| $ | 7,490,398 |
|
| Total Restricted Net Assets |
| $ | 7,580,896 |
|
| $ | 7,490,398 |
|
| Consolidated Net Assets |
| $ | 118,224,395 |
|
| $ | 115,935,394 |
|
| Restricted Net Assets as Percentage of Consolidated Net Assets |
|
| 6.4 | % |
|
| 6.5 | % |
Total restricted net assets accounted for approximately 6.4% and 6.5% of our consolidated net assets as of June 30, 2023 and December 31, 2022 respectively. As our subsidiaries usually set aside only 10% of after-tax net profits each year to fund the statutory reserves and are not required to fund the statutory reserves when they incur losses, we believe the potential impact of such restricted net assets on our liquidity is limited.
Capital Expenditures
We had capital expenditures of approximately $0.2 million and approximately $0.02 million for the six months ended June 30, 2023 and 2022, respectively, for the addition and renovation of our workshops and office buildings, purchasing of equipment in connection with our business activities and purchasing of long-term investment.
We expect that our capital expenditures will increase in the future as our business continues to develop and expand. We have used cash generated from our subsidiaries’ operations to fund our capital commitments in the past and anticipate using such funds and proceeds received from our offerings through issuance of common shares and other sources to fund capital expenditure commitments in the future.
C. Research and development, patents and licenses, etc.
We are committed to researching and developing applications of bamboo charcoal, activated bamboo charcoal and EVs such as street sweepers. We believe scientific and technological innovations will help the Company achieve its long-term strategic objectives. R&D is an integral part of our operations and the crux of its competitive advantage and differentiation strategy.
Our R&D team is well educated and has far-reaching research capabilities. During the six months ended June 30, 2023, we had one dedicated researcher and analyst mainly focusing on Charcoal Doctor product development and applications. Quality control is an important aspect of the team’s work and ensuring quality at every stage of the process has been a key driver in maintaining and developing brand value for the Company.
Our Intellectual Property
We rely on our technology patents to protect our domestic business interests and ensure our position as a bamboo carbon technology pioneer in our industry. However, we do not believe that our business, as a whole, is dependent on, or that its profitability would be materially affected by the revocation, termination, expiration or infringement upon any particular patent. We currently hold three patents on charcoal products and five patents on vehicles. Since the filing of our annual report for the year ended December 31, 2020 in July 2022, we have obtained the following patents, which are effective as of the date of application.
| 8 |
Recent Renewed Patents on Vehicles
|
|
|
|
| Patent |
|
|
|
|
|
|
| Patent Description |
| Holder |
| Type |
| Application |
| Expiration |
| Patent Number |
| Energy-absorbing and anti-collision equipment on side of fuel tank |
| Shangchi Automobile |
| Utility Mode |
| November 26,2020 |
| November 25,2030 |
| ZL202022776533.2 |
| Variable light front windshield |
| Shangchi Automobile |
| Utility Mode |
| November 26,2020 |
| November 25,2030 |
| ZL202022779980.3 |
| Sound insulation and noise prevention hood with reinforcing ribs for front engine |
| Shangchi Automobile |
| Utility Mode |
| November 12,2020 |
| November 15,2030 |
| ZL202022605348.7 |
| Multifunctional expanding bucket for sweeping vehicle |
| Shangchi Automobile |
| Utility Mode |
| November 12,2020 |
| November 15,2030 |
| ZL202022601008.7 |
D. Trend information
Market Trends
Other than as disclosed elsewhere in this financial report, we are not aware of any trends, uncertainties, demands, commitments or events for the six months ended June 30, 2023 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition.
E. Off-balance Sheet Arrangements
Except for the above-mentioned guaranty, we have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements.
Critical Accounting Policies
We prepare our financial statements in conformity with accounting principles generally accepted by the United States of America (“U.S. GAAP”), which requires us to make judgments, estimates and assumptions that affect our reported amount of assets, liabilities, revenue, costs and expenses, and any related disclosures. Although there were no material changes made to the accounting estimates and assumptions in the past three years, we continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.
We believe that the following accounting policies involve a higher degree of judgment and complexity in their application and require us to make significant accounting estimates. Accordingly, these are the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations.
Use of Estimates
In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include the fair value estimates used in the useful lives of property and equipment and intangible assets, allowances pertaining to the allowance for doubtful accounts of accounts receivable, advance to suppliers and other receivables, the valuation of inventories, the impairment of long-lived assets, and the realizability of deferred tax assets.
Research and development costs
Research and development expenses include costs directly attributable to the conduct of research and development projects, including the cost of salaries and other employee benefits, testing expenses, consumable equipment and consulting fees. All costs associated with research and development are expensed as incurred.
| 9 |
Revenue Recognition
The Company adopted ASC Topic 606 Revenue from Contracts with Customers (“ASC 606”) on January 1, 2018 using the modified retrospective approach. There is no adjustment to the opening balance of retained earnings at January 1, 2018 since there was no change to the timing and pattern of revenue recognition upon adoption of ASC 606. Under ASC 606, revenue is recognized when control of promised goods or services is transferred to the Company’s customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services. The Company’s revenues are primarily derived from the following sources:
Sales of products: The Company recognizes sales revenue, net of sales taxes and estimated sales returns, at the time the product is delivered to the customer and control is transferred (point of sale).
For the Company’s electric vehicles sales contracts, the Company provides a warranty for 12 months from the products are delivered. The Company determines such product warranty is an assurance-type warranty and is not a separated performance obligation in revenue recognition, because the nature of warranty is to provide assurance that a product will function as expected and in accordance with customer’s specification. The Company estimates the warranty costs when the promised good is delivered to the customer and accrues as warranty liabilities.
Commission income: The Company acts as an agent without assuming the risks and rewards of ownership of the goods and reports the revenue on a net basis. Revenue is recognized based on the completion of the contracted service.
Government manufacturing rebate income: The Company sells electric vehicles in China and is eligible for a government manufacturing rebate on each qualifying electric vehicle sold. The government manufacturing rebates are recognized as part of revenue when sales are finalized, amount of rebates can be reasonably estimated and collection is assured. The collectability of rebates can be assured as long as the sales are deemed qualifying based on the criteria set by the government.
Revenue is reported net of all value added taxes. The Company does not routinely permit customers to return products and historically, customer returns have been immaterial.
Long-term investments
The Company accounts for investment in equity investees over which it has significant influence but does not own a majority of the equity interest or lack of control using the equity method. For investment in equity investees over which the Company does not have significant influence or the underlying shares the Company invested in are not considered in-substance common shares and have no readily determinable fair value, the cost method accounting is applied.
The Company records the equity method investments at historical cost and subsequently adjusts the carrying amount each period for share of the earnings or losses of the investee and other adjustments required by the equity method of accounting. Dividends received from the equity method investments are recorded as reductions in the cost of such investments. The Company records the cost method investments at historical cost and subsequently record any dividends received from the net accumulated earnings of the investee as income. Dividends received in excess of earnings are considered a return of investment and are recorded as reductions in the cost of the investments.
Investment in equity investees is evaluated for impairment when facts or circumstances indicate that the fair value of the investment is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near term prospects of the investments; and (v) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, the Company evaluates the recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available.
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Recent accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.
In October 2021, the FASB issued ASU No. 2021-08, “‘Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. The amendments are effective for the Company beginning after December 15, 2023, and are applied prospectively to business combinations that occur after the effective date. The Company does not expect the adoption of ASU 2021-04 to have a material effect on the consolidated financial statements.
Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the consolidated financial statements.
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F. Tabular Disclosure of Contractual Obligations
Below is a table setting forth all of our contractual obligations as of June 30, 2023, which consists of our short-term loan agreements and due to related parties:
|
|
| Payment Due by Period |
|
|||||||||||||||||
|
|
|
|
| Less than |
|
| 1 – 3 |
|
| 3 – 5 |
|
| More than |
|
||||||
| Contractual Obligations |
| Total |
|
| 1 year |
|
| years |
|
| years |
|
| 5 years |
|
|||||
| Short-term bank loans |
| $ | 3,044,823 |
|
| $ | 3,044,823 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| Due to related parties |
|
| 1,141,918 |
|
|
| 1,141,918 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Loan payable to third parties |
|
| 4,218,059 |
|
|
| 711,266 |
|
|
| 3,506,793 |
|
|
| — |
|
|
| — |
|
| Operating lease commitment |
|
| 1,514,095 |
|
|
| 293,475 |
|
|
| 366,478 |
|
|
| 341,656 |
|
|
| 512,486 |
|
| Total |
| $ | 9,918,895 |
|
| $ | 5,191,482 |
|
| $ | 3,873,271 |
|
| $ | 341,656 |
|
| $ | 512,486 |
|
G. Safe Harbor
See Special Note Regarding Forward-Looking Statements
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