ReTo Eco-Solutions, Inc F-3, filed Sep 24, 2024
ReTo Eco-Solutions, Inc. (RETO)
As filed with the Securities and Exchange Commission on September 24, 2024
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM F-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
ReTo Eco-Solutions, Inc.
(Exact name of registrant as specified in its charter)
Not Applicable
(Translation of registrant’s name into English)
| British Virgin Islands | Not Applicable | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
c/o Beijing REIT Technology Development Co., Ltd.
X-702, Tower A, 60 Anli Road, Chaoyang District
Beijing,
People’s Republic of China 100101
Tel: (+86) 10-64827328
(Address and telephone number of registrant’s principal executive offices)
Vcorp Agent Services, Inc.
25 Robert Pitt Dr., Suite 204
Monsey, New York 10952
Tel: (888) 528-2677
(Name, address, and telephone number of agent for service)
Copies of Correspondence to:
Wei Wang, Esq.
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, NY 10105
Phone: (212) 370-1300
Fax: (212) 370-7889
Approximate date of commencement of proposed sale to the public: From time to time after this registration statement becomes effective.
If only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ☐
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a registration statement pursuant to General Instruction I.C. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.C. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. The selling shareholders cannot sell these securities until the registration statement that we have filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where their offer or sale is not permitted.
Subject to Completion, dated September 24, 2024
PROSPECTUS
ReTo Eco-Solutions, Inc.
15,363,768 Class A Shares
This prospectus relates to the resale, from time to time, of up to an aggregate of 15,363,768 Class A shares, par value US$0.10 per share (the “Class A Shares”), of ReTo Eco-Solutions, Inc. (“ReTo,” collectively with its consolidated subsidiaries, the “Company,” “we,” “us,” “our” or similar terminology), which may be offered and sold from time to time by shareholders set forth in the “Selling Shareholders” section of this prospectus (the “Selling Shareholders”). 14,095,200 Class A Shares were acquired by certain Selling Shareholders in a private placement (the “Private Placement”) pursuant to that certain securities purchase agreement, dated as of August 30, 2024 (the “Securities Purchase Agreement”), by and among us and the purchasers named therein. Those Class A Shares were issued to the Selling Shareholders pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon Regulation S promulgated thereunder. 1,268,568 Class A Shares were acquired by one Selling Shareholder as consideration for its consulting services in connection with the Private Placement. Those Class A Shares were issued to this Selling Shareholder pursuant to Section 4(a)(2) of the Securities Act.
The Selling Shareholders will receive all of the net proceeds from the sale of the Class A Shares offered hereby. The Selling Shareholders may resell the Class A Shares offered for resale through this prospectus to or through underwriters, broker-dealers, or agents, who may receive compensation in the form of discounts, concessions or commissions. We will not receive any proceeds from the sale of these shares by the Selling Shareholders, but we will bear all costs, fees and expenses in connection with the registration of the Class A Shares offered by the Selling Shareholders. The Selling Shareholders will bear all commissions and discounts, if any, attributable to the sale of the Class A Shares offered for resale through this prospectus.
The Selling Shareholders will determine where they may sell the shares through public or private transactions at market prices prevailing at the time of sale, at prices related to the prevailing market prices, or at negotiated prices. For information regarding the Selling Shareholders and the times and manner in which they may offer or sell Class A Shares, see “Selling Shareholders” and “Plan of Distribution.” Our Class A Shares are listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “RETO.” As of September 20, 2024, the closing sale price of our Class A Shares was US$1.35.
ReTo is a business company incorporated in the British Virgin Islands (“BVI”). As a holding company with no material operations of its own, ReTo conducts substantially all of its operations through its subsidiaries established in the People’s Republic of China (the “PRC” or “China”). Investors in the Class A Shares should be aware that they may never directly hold equity interests in the Chinese operating entities, but rather purchasing equity solely in ReTo, our BVI holding company, which does not directly own substantially all of our business in China conducted by our subsidiaries. Class A Shares registered under this Registration Statement are shares of our BVI holding company instead of shares of our subsidiaries in China. When used herein, the references to laws and regulations of “China” or the “PRC” are only to such laws and regulations of mainland China, excluding, for the purpose of this prospectus only, Taiwan, Hong Kong and Macau.
As we conduct substantially all of our operations in China, we are subject to legal and operational risks associated with having substantially all of our operations in China, which risks could result in a material change in our operations and/or the value of the securities we are registering for sale or could significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of our securities to significantly decline or be worthless. The PRC government initiated a series of regulatory actions and made a number of public statements on the regulation of business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement. We have relied on the opinion of our PRC counsel, Yuan Tai Law Offices, that as of the date of this prospectus, we are not directly subject to these regulatory actions or statements, as we have not implemented any monopolistic behavior and our business does not involve large-scale collection of user data, implicate cybersecurity, or involve any other type of restricted industry. None of our PRC subsidiaries currently operates in an industry that prohibits or limits foreign investment. As a result, as advised by our PRC counsel, Yuan Tai Law Offices, other than those requisite for a domestic company in mainland China to engage in the businesses similar to those of our PRC subsidiaries, none of our PRC subsidiaries is required to obtain any permission from Chinese authorities, including the China Securities Regulatory Commission (the “CSRC”), the Cyberspace Administration of China (the “CAC”), or any other governmental agency that is required to approve its current operations.
On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”), effective on March 31, 2023, which requires the filing with the CSRC of the overseas offering and listing plans and the follow-on offering plans by PRC domestic companies under certain conditions, and the filing with the CSRC by their underwriters associated with such companies’ overseas securities offering and listing. The Company is required to file with CSRC for both the Private Placement and the issuance of shares to the consultant as consideration for its consulting services. The filing has not submitted yet and the Company is in the progress of preparing for the filing. The failure of the Company to submit the filing with CSRC timely may subject the Company to sanctions by the CSRC or other PRC regulatory agencies, which may include fines and penalties on our operations in China, limitations on our operating privileges in China, restrictions on or prohibition of the payments or remittance of dividends by our PRC subsidiary in China, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our Class A Shares. See “Risk Factors — Risks Relating to Doing Business in China — We cannot predict whether or for how long we will be able to complete the filing procedure with the CSRC for the Private Placement and the issuance of shares to the consultant.”
In addition, any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers or any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our securities, cause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause our securities to significantly decline in value or become worthless. These statements and regulatory actions by the PRC government are official guidance and related implementation rules have not been issued. Thus, it is highly uncertain what potential impact such modified or new laws and regulations will have on our daily business operations or our ability to accept foreign investments and list on a U.S. or other foreign exchange. The Standing Committee of the National People’s Congress (the “SCNPC”) or other PRC regulatory authorities may in the future promulgate laws, regulations or implementing rules that require our company or any of our subsidiaries to obtain regulatory approval from Chinese authorities before offering securities in the U.S. Any future Chinese, U.S., British Virgin Islands or other laws, rules and regulations that place restrictions on capital raising or other activities by companies with extensive operations in China could adversely affect our business and results of operations. See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China” in our Annual Report on Form 20-F for the year ended December 31, 2023 (the “2023 Annual Report”), which is incorporated by reference into this prospectus, for a detailed description of various risks related to doing business in China and other information that should be considered before making a decision to purchase any of our securities.
The Holding Foreign Companies Accountable Act (the “HFCAA”), which was signed into law on December 18, 2020, requires a foreign company to submit that it is not owned or manipulated by a foreign government or disclose the ownership of governmental entities and certain additional information, if the PCAOB is unable to inspect completely a foreign auditor that signs the company’s financial statements. If the PCAOB is unable to inspect the Company’s auditors for three consecutive years, the Company’s securities will be prohibited from trading on a national exchange.
On December 2, 2021, the Securities and Exchange Commission (the “SEC”) adopted final amendments to its rules implementing the HFCAA. Such final rules establish procedures that the SEC will follow in (i) determining whether a registrant is a “Commission-Identified Issuer” (a registrant identified by the SEC as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction) and (ii) prohibiting the trading of an issuer that is a Commission-Identified Issuer for three consecutive years under the HFCAA. The SEC began identifying Commission-Identified Issuers for the fiscal years beginning after December 18, 2020. A Commission-Identified Issuer is required to comply with the submission and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended, for example, September 30, 2021, the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering the fiscal year ended September 30, 2022.
Furthermore, as more stringent criteria have been imposed by the SEC and the Public Company Accounting Oversight Board (the “PCAOB”) recently, our securities may be prohibited from trading if our auditor cannot be fully inspected. On December 16, 2021, the PCAOB issued its determination that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, and the PCAOB included in the report of its determination a list of the accounting firms that are headquartered in mainland China or Hong Kong. This list does not include our auditor, YCM CPA, Inc. Our auditor is based in the U.S., registered with PCAOB and subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. On August 26, 2022, the CSRC, the Ministry of Finance of the PRC (the “MOF”), and the PCAOB signed a Statement of Protocol (the “Protocol”), taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. However, uncertainties exist with respect to the implementation of this framework and there is no assurance that the PCAOB will be able to execute, in a timely manner, its future inspections and investigations in a manner that satisfies the Protocol if it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, investors may be deprived of the benefits of such inspection. On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary.
On December 29, 2022, the Consolidated Appropriations Act, 2023 was signed into law, which amended the HFCAA (i) to reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two, and (ii) so that any foreign jurisdiction could be the reason why the PCAOB does not have complete access to inspect or investigate a company’s auditor. As it was originally enacted, the HFCAA applied only if the PCAOB’s inability to inspect or investigate was due to a position taken by an authority in the foreign jurisdiction where the relevant public accounting firm is located. As a result of the Consolidated Appropriations Act, 2023, the HFCAA now also applies if the PCAOB’s inability to inspect or investigate the relevant accounting firm is due to a position taken by an authority in any foreign jurisdiction. The denying jurisdiction does not need to be where the accounting firm is located.
These developments could add uncertainties to the trading of our securities, including the possibility that the SEC may prohibit trading in our securities if the PCAOB cannot fully inspect or investigate our auditor and we fail to appoint a new auditor that is accessible to the PCAOB and that Nasdaq can delist our Class A Shares. If it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, investors may be deprived of the benefits of such inspection. Any audit reports not issued by auditors that are completely inspected by the PCAOB, or a lack of PCAOB inspections of audit work undertaken in China that prevents the PCAOB from regularly evaluating our auditors’ audits and their quality control procedures, could result in a lack of assurance that our financial statements and disclosures are adequate and accurate, then such lack of inspection could cause our securities to be delisted from the stock exchange.
As a holding company, ReTo relies on dividends and other distributions on equity paid by its operating subsidiaries for cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to its shareholders or to service any expenses it may incur. Our PRC subsidiaries’ ability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, as determined in accordance with mainland China accounting standards and regulations. In addition, under PRC law, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. These reserves are not distributable as cash dividends. If any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to ReTo. To date, there have not been any such dividends or other distributions from our PRC subsidiaries to our subsidiary located outside of China, ReTo or its shareholders outside of China. Furthermore, as of the date of this prospectus, neither ReTo nor any of its subsidiaries have ever paid dividends or made distributions to U.S. investors. ReTo is permitted under PRC laws and regulations as an offshore holding company to provide funding to its PRC subsidiaries in China through shareholder loans or capital contributions, subject to satisfaction of applicable government registration, approval and filing requirements. According to the relevant PRC regulations on foreign-invested enterprises in China, there are no quantity limits on ReTo’s ability to make capital contributions to its PRC subsidiaries. However, our PRC subsidiaries may not procure loans which exceed the higher of (i) difference between their total investment amount as recorded in the Foreign Investment Comprehensive Management Information System and their respective registered capital and (ii) 2.5 times of their net worth. In the future, cash proceeds raised from overseas financing activities may continue to be transferred by ReTo to the PRC subsidiaries via capital contribution or shareholder loans, as the case may be. We intend to retain most, if not all, of our available funds and any future earnings for the development and growth of our business in China. We do not expect to pay dividends or distribute earnings in the foreseeable future.
To date, fund transfers have occurred between ReTo and its subsidiaries. The sources of funds of ReTo to its subsidiaries primarily consisted of proceeds from equity and debt financings.
We maintain bank accounts in China, including cash in Renminbi in the amount of approximately RMB 8.99 million and cash in USD in the amount of approximately US$1.27 million as of December 31, 2023. Funds are transferred between ReTo and its subsidiaries for their daily operation purposes. The transfer of funds between our PRC subsidiaries are subject to the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases (2020 Second Revision, the “Provisions on Private Lending Cases”), which was implemented on January 1, 2021, to regulate the financing activities between natural persons, legal persons and unincorporated organizations. The Provisions on Private Lending Cases set forth that private lending contracts will be upheld as invalid under the circumstance that (i) the lender swindles loans from financial institutions for relending; (ii) the lender relends the funds obtained by means of a loan from another profit-making legal person, raising funds from its employees, illegally taking deposits from the public; (iii) the lender who has not obtained the lending qualification according to the law lends money to any unspecified object of the society for the purpose of making profits; (iv) the lender lends funds to a borrower when the lender knows or should have known that the borrower intended to use the borrowed funds for illegal or criminal purposes; (v) the lending is in violation of public orders or good morals; or (vi) the lending is in violation of mandatory provisions of laws or administrative regulations. We have relied on the opinion of our PRC counsel, Yuan Tai Law Offices, that the Provisions on Private Lending Cases does not prohibit using cash generated from one subsidiary to fund another subsidiary’s operations. We have not been notified of any other restriction which could limit our PRC subsidiaries’ ability to transfer cash between subsidiaries. As of the date of this prospectus, we have no cash management policies that dictate how funds are transferred between ReTo and its subsidiaries.
Most of our cash is in Renminbi, and the PRC government could prevent the cash maintained in mainland China or Hong Kong from leaving, could restrict deployment of the cash into the business of our subsidiaries and restrict the ability to pay dividends.
Investing in our Class A Shares remains subject to our amended and restated memorandum and articles of association currently adopted, as amended or as amended and restated from time to time and the BVI Business Companies Act (Revised Edition) 2020 and involves substantial risk. See “Risk Factors” beginning on page 21 of this prospectus for a discussion of certain risks and other factors that you should consider before purchasing our Class A Shares.
Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is _________, 2024.
TABLE OF CONTENTS
i
You should carefully read this prospectus and the information described under the heading “Where You Can Find More Information.” Neither we nor the Selling Shareholders have authorized anyone to give any information or make any representation about our company that is different from, or in addition to, that contained in this prospectus, including in any of the materials that have been incorporated by reference into this prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it as authorized by us. You should rely only on the information contained or incorporated by reference in this prospectus.
You should not assume that the information contained in this prospectus is accurate on any date subsequent to the date set forth on the front of the document or that any information that has been incorporated by reference is correct on any date subsequent to the date of the document incorporated by reference, even though this prospectus and any accompanying supplement to this prospectus is delivered or securities are sold on a later date. Neither the delivery of this prospectus, nor any sale made hereunder, shall under any circumstances create any implication that there has been no change in our affairs since the date hereof or that the information incorporated by reference herein is correct as of any time subsequent to the date of such information.
The distribution of this prospectus may be restricted by law in certain jurisdictions. You should inform yourself about and observe any of these restrictions. If you are in a jurisdiction where offers to sell, or solicitations of offers to purchase, the securities offered by this document are unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this prospectus does not extend to you.
In this prospectus, unless otherwise indicated or the context implies otherwise:
| ● | “Act” refers to The BVI Business Companies Act (Revised Edition) 2020; |
| ● | “Beijing REIT” refers to Beijing REIT Technology Development Co., Ltd., a PRC limited liability company and a wholly-owned subsidiary of REIT Holdings; |
| ● | “BVI” refers to the British Virgin Islands; |
| ● | “China” or the “PRC” refers to the People’s Republic of China and the term “Chinese” has a correlative meaning for the purpose of this prospectus; |
| ● | “Class A Shares” refers to Class A Shares of par value US$0.10 per share issued in ReTo; | |
| ● | “Class B Shares” refers to Class B Shares of par value US$0.01 per share issued in ReTo; | |
|
● |
“common share” refers to common shares issued in ReTo prior to the 2024 Share Redesignation; | |
| ● | “Share” refers to Class A Shares and Class B Shares of ReTo; |
| ● | “CSRC” refers to the China Securities Regulatory Commission; |
| ● | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; |
| ● | “FINRA” refers to the Financial Industry Regulatory Authority, Inc.; | |
| ● | “Hainan Fangyuyuan” refers to Hainan Fangyuyuan United Logistics Co., Ltd. (formerly known as Yangpu Fangyuyuan United Logistics Co., Ltd.), a limited liability company incorporated in mainland China; |
| ● | “Hainan Kunneng” refers to Hainan Kunneng Direct Supply Chain Management Co., Ltd., a limited liability company incorporated in mainland China and a subsidiary of Hainan Fangyuyuan; |
ii
| ● | “Hainan Yile IoT” refers to Hainan Yile IoT Technology Co., Ltd, a PRC limited liability company and a subsidiary of REIT Mingde; |
| ● | “Hong Kong” refers to the Hong Kong Special Administrative Region of the PRC; | |
| ● | “Honghe REIT” refers to Honghe REIT Ecological Technology Co., Ltd., a PRC limited liability company and a wholly-owned subsidiary of Sunoro Hengda; |
| ● | “IoV Technology Research” refers to Hainan Yile IoV Technology Research Institute Co., Ltd., a PRC limited liability company and a subsidiary of REIT Mingde; |
| ● | “JOBS Act” refers to the Jumpstart Our Business Startups Act, enacted in April 2012; |
| ● | “M&A” refers to the amended and restated memorandum and articles of association of ReTo currently adopted, as amended or as amended and restated from time to time; |
| ● | “Macau” refers to the Macao Special Administrative Region of the PRC; |
| ● | “mainland China” refers to the People’s Republic of China, excluding, for the purpose of this prospectus, Taiwan, Hong Kong and Macau; |
| ● | “MOFCOM” refers to China’s Ministry of Commerce; |
| ● | “PCAOB” refers to the Public Company Accounting Oversight Board of the United States; |
| ● | “PRC subsidiaries” refers to the Company’s subsidiaries that were incorporated in mainland China; |
| ● | “REIT Changjiang” refers to REIT MingSheng Environment Protection Construction Materials (Changjiang) Co., Ltd., a PRC limited liability company, which was disposed in December 2021; |
| ● | “REIT Construction” refers to Hainan REIT Construction Engineering Co., Ltd., a PRC limited liability company, which was dissolved on February 9, 2023; | |
| ● | “REIT Equipment” refers to Beijing REIT Equipment Technology Co., Ltd. (formerly known as Beijing REIT Ecological Engineering Technology Co., Ltd.), a PRC limited liability company and a wholly-owned subsidiary of Sunoro Hengda; |
| ● | “REIT Holdings” refers to REIT Holdings (China) Limited, a Hong Kong limited company and a wholly-owned subsidiary of ReTo; |
| ● | “REIT Mingde” refers to Hainan REIT Mingde Investment Holding Co., Ltd., a PRC limited liability company and a wholly-owned subsidiary of REIT Technology Development Co., Ltd.; |
| ● | “REIT Ordos” Refers to REIT Ecological Technology Co., Ltd., a limited liability company incorporated in mainland China and a wholly-owned subsidiary of REIT Holdings; |
| ● | “REIT Technology” refers to REIT Technology Development Co., Ltd., a PRC limited liability company and a wholly-owned subsidiary of REIT Holdings; |
| ● | “Renminbi” or “RMB” refers to the legal currency of the People’s Republic of China; |
| ● | “ReTo” refers to ReTo Eco-Solutions, Inc., a BVI business company (registered in the BVI with company number 1885527); |
| ● | “SAFE” refers to China’s State Administration of Foreign Exchange; |
iii
| ● | “SEC” refers to the U.S. Securities and Exchange Commission; |
| ● | “Securities Act” refers to the Securities Act of 1933, as amended; | |
| ● | “Sunoro Hengda” refers to Sunoro Hengda (Beijing) Technology Co., Ltd., a limited liability company incorporated in mainland China and a wholly-owned subsidiary of Sunoro Holdings; | |
| ● | “Sunoro Holdings” refers to Sunoro Holdings Limited, a Hong Kong limited company and a wholly-owned subsidiary of ReTo; |
| ● | “Xinyi REIT” refers to REIT New Materials Xinyi Co., Ltd, a joint venture established by Beijing REIT; |
| ● | “U.S. dollars”, “US$” and “$” refer to the legal currency of the United States; and |
| ● | “We”, “us”, “our”, or the “Company” refers to ReTo Eco-Solutions, Inc. and its subsidiaries, unless the context requires otherwise. |
Our reporting and functional currency is the Renminbi. Solely for the convenience of the reader, this prospectus contains translations of some RMB amounts into U.S. dollars, at specified rates. Except as otherwise stated in this prospectus, all translations from RMB to U.S. dollars are made at RMB7.0999 to US$1.00, the rate published by the Federal Reserve Board on December 31, 2023. No representation is made that the RMB amounts referred to in this prospectus could have been or could be converted into U.S. dollars at such rate.
Except as otherwise stated in this prospectus, all numbers of our Shares and related data have been updated to reflect the 10-for-1 share combination effective May 15, 2023 (the “2023 Share Combination”) and the 10-for-1 share combination effective March 1, 2024 (the “2024 Share Combination”). On August 8, 2024, we (a) redesignated the existing common shares, par value US$0.10 each, as Class A Shares with the same rights as the existing common shares (the “2024 Share Redesignation”) and (b) created an additional 2,000,000 shares each to be designated as Class B shares, par value US$0.01 each (the “Class B Shares”), with each share to entitle the holder thereof to 1,000 votes but with transfer restrictions, pre-emption rights and no right to any dividend or distribution of the surplus assets on liquidation.
Our fiscal year end is December 31. References to a particular “fiscal year” are to our fiscal year ended December 31 of that calendar year.
We own or have rights to trademarks or trade names that we use in connection with the operation of our business, including our corporate names, logos and website names. In addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect the content of our products. This prospectus may also contain trademarks, service marks and trade names of other companies, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to, and should not be read to, imply a relationship with or endorsement or sponsorship of us. Solely for convenience, some of the copyrights, trade names and trademarks referred to in this prospectus or the documents incorporated by reference herein are listed without their ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trade names and trademarks. All other trademarks are the property of their respective owners.
iv
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference herein contain forward-looking statements that reflect our current expectations and views of future events. Readers are cautioned that known and unknown risks, uncertainties and other factors, including those over which we may have no control and others listed in the “Risk Factors” section of this prospectus, may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.
You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:
| ● | the potential impact on our business of the economic, political and social conditions of the PRC; | |
| ● | any changes in the laws of the PRC or local province that may affect our operations; | |
| ● | the impact of COVID-19 on our operations; | |
| ● | our ability to operate as a going concern; | |
| ● | the liquidity of our securities; | |
| ● | inflation and fluctuations in foreign currency exchange rates; | |
| ● | the ability to navigate geographic market risks of our eco-friendly constructions materials; | |
| ● | the ability to maintain a reserve for warranty or defective products and installation claims; | |
| ● | our on-going ability to obtain all mandatory and voluntary government and other industry certifications, approvals, and/or licenses to conduct our business; | |
| ● | our ability to maintain effective supply chain of raw materials and our products; | |
| ● | slowdown or contraction in industries in China in which we operate; | |
| ● | our ability to maintain or increase our market share in the competitive markets in which we do business; | |
| ● | our ability to diversify our product and service offerings and capture new market opportunities; | |
| ● | our estimates of expenses, capital requirements and needs for additional financing and our ability to fund our current and future operations; | |
| ● | the costs we may incur in the future from complying with current and future laws and regulations and the impact of any changes in the regulations on our operations; and | |
| ● | the loss of key members of our senior management. |
These forward-looking statements involve numerous risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results of operations or the results of other matters that we anticipate could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in “Risk Factors” and other sections included or incorporated by reference in this prospectus. You should thoroughly read this prospectus and the documents incorporated herein by reference with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.
The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in or incorporated by reference in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus, the documents incorporated by reference into this prospectus and the documents we have filed as exhibits to the registration statement, of which this prospectus forms a part, completely and with the understanding that our actual future results may be materially different from what we expect.
v
Investors in our securities are not purchasing an equity interest in our operating entities in mainland China but instead are purchasing an equity interest in a British Virgin Islands holding company.
This summary highlights selected information that is presented in greater detail elsewhere, or incorporated by reference, in this prospectus. It does not contain all of the information that may be important to you and your investment decision. Before investing in the securities that we are offering, you should carefully read this entire prospectus, including the matters set forth under the section of this prospectus captioned “Risk Factors” and the financial statements and related notes and other information that we incorporate by reference herein, including, but not limited to, our 2023 Annual Report and our other SEC reports.
Overview
We, through our operating subsidiaries in China, are engaged in the manufacture and distribution of eco-friendly construction materials (aggregates, bricks, pavers and tiles), made from mining waste (iron tailings), as well as equipment used for the production of these eco-friendly construction materials. In addition, we provide consultation, design, project implementation and construction of urban ecological protection projects through our operating subsidiaries in China. We also provide parts, engineering support, consulting, technical advice and service, and other project-related solutions for our manufacturing equipment and environmental protection projects. As more fully described below under the heading “Our Products and Services,” through the newly acquired subsidiaries, we expand our product and service offerings to include Roadside Assistance (“RSA”) services, and software development services and solutions utilizing Internet of Things (“IoT”) technologies.
We currently provide a full spectrum of products and services related to recycling and reuse of solid wastes, from producing eco-friendly construction materials and manufacturing equipment used to produce construction materials, to project installation. We differentiate us from our competitors through strong research and development capabilities and advanced technologies and systems.
Our products are eco-friendly, as they contain approximately 70% of reclaimed iron tailings in place of traditional cement. The use of reclaimed iron tailings assists in the protection of the environment by saving space in landfills used for the disposal of these materials, and assisting in the remediation and reclamation of abandoned or closed mining sites. In addition, we believe less energy is consumed when manufacturing our eco-friendly construction materials as compared with other traditional building materials. We believe our eco-friendly construction materials, with superior water permeability and competitive prices, are in greater demand than traditional materials as governments and others increase their focus on reducing the environmental impact of their activities.
Due to China’s recent emphasis on environmental protection, we believe there is a unique opportunity to grow our company, which we expect will be driven by demand for our eco-friendly construction materials and equipment used to produce these materials as well as our project construction expertise. We believe our technological know-how, production capacity, reputation and offerings of products and services will enable us to seize this opportunity.
Our clients are located throughout mainland China, and internationally in Middle East, Southeastern Asia, Africa, Europe and North America. We are actively pursuing additional clients for our products, equipment and projects, internationally in Bangladesh, North America and in additional provinces of China. We seek to establish long-term relationships with our clients by producing and delivering high-quality products and equipment and then providing technical support and consulting services after equipment is delivered and projects are completed.
Holding Company Structure
ReTo is a holding company and a business company incorporated in the British Virgin Islands (the “BVI”) with no material operations of its own. We conduct substantially all of our operations through our subsidiaries established in mainland China. Our equity structure is a direct holding structure, that is, ReTo, the BVI entity listed in the U.S., controls Beijing REIT, REIT Ordos, and other PRC operating entities through REIT Holdings or Sunoro Holdings.
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We face various risks and uncertainties relating to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offshore offerings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept foreign investments, or list and conduct offerings on a United States or other foreign exchange. These risks could result in a material adverse change in our operations and the value of our Class A Shares, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline. For a detailed description of risks relating to doing business in China, see “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China” in our 2023 Annual Report, which is incorporated by reference into this prospectus.
The PRC government’s significant discretion and authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations in this nature may cause the value of our securities to significantly decline or become worthless. For more details, see “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business in China — The PRC government’s significant oversight and discretion over the conduct of our business and may intervene or influence our operations at any time which could result in a material adverse change in our operation and/or the value of our Common Shares” in our 2023 Annual Report, which is incorporated by reference into this prospectus.
Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and cause our Class A Shares to decrease in value or become worthless. For more details, see “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business in China — There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations. The rules and regulations in China can change quickly with little advance notice and uncertainties in the interpretation and enforcement of PRC laws, rules and regulations could limit the legal protections available to you and us” in our 2023 Annual Report, which is incorporated by reference into this prospectus.
Cash and Other Assets Transfers between the Holding Company and Its Subsidiaries
For the fiscal years ended December 31, 2021, 2022 and 2023, funds equivalent to approximately $2.6 million, $4.2 million and $0.1 million, respectively, were provided to the PRC subsidiaries as shareholder loans, which were accounted as loan receivable from the respective PRC subsidiary. These funds have been used by the Company’s PRC subsidiaries for their operations.
As of the date of this prospectus, there have not been any dividends or other distributions from our PRC subsidiaries to REIT Holdings, Sunoro Holdings, and ReTo, all of which are located outside of mainland China. ReTo, as a BVI holding company, may rely on dividends and other distributions on equity paid by its PRC subsidiaries for its cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to its shareholders, subject to ReTo’s M&A and the Act or to service any expenses and other obligations it may incur.
Within our direct holding structure, the cross-border transfer of funds from ReTo to its PRC subsidiaries is permitted under laws and regulations of the PRC currently in effect. Specifically, ReTo is permitted to provide funding to its PRC subsidiaries in the form of shareholder loans or capital contributions, subject to satisfaction of applicable government registration, approval and filing requirements in China. There are no quantity limits on ReTo’s ability to make capital contributions to its PRC subsidiaries under the PRC law and regulations. However, the PRC subsidiaries may only procure shareholder loans from REIT Holding in an amount equal to the difference between their respective registered capital and total investment amount as recorded in the Chinese Foreign Investment Comprehensive Management Information System or three times of its net assets, at the discretion of such PRC subsidiary. For additional information, see “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China — PRC regulation on loans to, and direct investment in, PRC entities by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the proceeds of our offerings to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business” in our 2023 Annual Report, which is incorporated by reference into this prospectus.
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Subject to the passive foreign investment company rules, the requirements of ReTo’s M&A and the Act, the gross amount of any distribution that we make to investors with respect to our securities (including any amounts withheld to reflect PRC withholding taxes) will be taxable as a dividend, to the extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Any proposed dividend would be subject to ReTo’s M&A and the Act; specifically, ReTo may only pay a dividend if ReTo’s directors are satisfied, on reasonable grounds, that, immediately after the dividend is paid, the value of its assets will exceed its liabilities and it will be able to pay its debts as they fall due.
The PRC Enterprise Income Tax Law (the “EIT Law”) and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by PRC companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the tax agreement between mainland China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant tax authorities determine that our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced 5% withholding rate will apply to dividends received by our Hong Kong subsidiary from our PRC subsidiaries. This withholding tax will reduce the amount of dividends we may receive from our PRC subsidiaries.
We maintain bank accounts in China, including cash in Renminbi in the amount of approximately RMB8.99 million and cash in USD in the amount of approximately US$1.27 million as of December 31, 2023. Funds are transferred between ReTo and its subsidiaries for their daily operation purposes. The transfer of funds between our PRC subsidiaries are subject to the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases (2020 Second Revision, the “Provisions on Private Lending Cases”), which was implemented on January 1, 2021 to regulate the financing activities between natural persons, legal persons and unincorporated organizations. The Provisions on Private Lending Cases set forth that private lending contracts will be upheld as invalid under the circumstance that (i) the lender swindles loans from financial institutions for relending; (ii) the lender relends the funds obtained by means of a loan from another profit-making legal person, raising funds from its employees, illegally taking deposits from the public; (iii) the lender who has not obtained the lending qualification according to the law lends money to any unspecified object of the society for the purpose of making profits; (iv) the lender lends funds to a borrower when the lender knows or should have known that the borrower intended to use the borrowed funds for illegal or criminal purposes; (v) the lending is in violation of public orders or good morals; or (vi) the lending is in violation of mandatory provisions of laws or administrative regulations. We have relied on the opinion of our PRC counsel, Yuan Tai Law Offices, that the Provisions on Private Lending Cases does not prohibit using cash generated from one subsidiary to fund another subsidiary’s operations. We have not been notified of any other restriction which could limit our PRC subsidiaries’ ability to transfer cash between subsidiaries. We have adopted certain cash management policies that dictate the internal approval process on transferring funds between our holding company and our subsidiaries. Such policies dictate the purpose, amount and procedure of cash transfers. Each transfer of cash among our subsidiaries is subject to internal approvals from at least two manager-level personnel, with required procedures including submitting supporting documentation (such as payment receipts or invoices), responsible personnel reviewing the documentation, and executing the payment. A single employee is not allowed to complete each and every stage of a cash transfer, but rather only specific parts of the whole procedure.
There is no assurance that the PRC government will not intervene or impose restrictions on the ability of us or our subsidiaries to transfer cash. Most of our cash is in Renminbi, and the PRC government could prevent the cash maintained in our bank accounts in mainland China from leaving mainland China, could restrict deployment of the cash into the business of our subsidiaries and restrict the ability to pay dividends. For details regarding the restrictions on our ability to transfer cash between us, and our subsidiaries, see “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China — The PRC government could prevent the cash maintained in our bank accounts in mainland China from leaving mainland China, restrict deployment of the cash into the business of its subsidiaries and restrict the ability to pay dividends to U.S. investors, which could materially adversely affect our operations” in our 2023 Annual Report, which is incorporated by reference into this prospectus. We currently do not have cash management policies that dictate how funds are transferred between our BVI holding company and our subsidiaries.
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Restrictions on Our Ability to Transfer Cash Out of China and to U.S. Investors
Our PRC subsidiaries’ ability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. In addition, under PRC law, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. These reserves are not distributable as cash dividends. If any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to ReTo.
To address persistent capital outflows and the RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and the State Administration of Foreign Exchange, or SAFE, implemented a series of capital control measures in the subsequent months, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. The PRC government may continue to strengthen its capital controls and our PRC subsidiaries’ dividends and other distributions may be subject to tightened scrutiny in the future. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of mainland China. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any.
Effect of Holding Foreign Companies Accountable Act
The HFCAA, which was signed into law on December 18, 2020, requires a foreign company to submit that it is not owned or manipulated by a foreign government or disclose the ownership of governmental entities and certain additional information, if the PCAOB is unable to inspect completely a foreign auditor that signs the company’s financial statements. If the PCAOB is unable to inspect the Company’s auditors for three consecutive years, the Company’s securities will be prohibited from trading on a national exchange.
On December 2, 2021, the SEC adopted final amendments to its rules implementing the HFCAA. Such final rules establish procedures that the SEC will follow in (i) determining whether a registrant is a “Commission-Identified Issuer” (a registrant identified by the SEC as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction) and (ii) prohibiting the trading of an issuer that is a Commission-Identified Issuer for three consecutive years under the HFCAA. The SEC began identifying Commission-Identified Issuers for the fiscal years beginning after December 18, 2020. A Commission-Identified Issuer is required to comply with the submission and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended, for example, September 30, 2021, the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering the fiscal year ended September 30, 2022.
On December 16, 2021, the PCAOB issued its determination that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, and the PCAOB included in the report of its determination a list of the accounting firms that are headquartered in mainland China or Hong Kong. This list did not include YCM CPA Inc., our current auditor. Our auditor, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. On August 26, 2022, the PCAOB signed a Statement of Protocol with the CSRC and MOF, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong without any limitations on scope. However, uncertainties exist with respect to the implementation of this framework and there is no assurance that the PCAOB will be able to execute, in a timely manner, its future inspections and investigations in a manner that satisfies the Statement of Protocol. On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary.
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On December 29, 2022, the Consolidated Appropriations Act, 2023 was signed into law, which amended the HFCAA (i) to reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two, and (ii) so that any foreign jurisdiction could be the reason why the PCAOB does not have complete access to inspect or investigate a company’s auditor. As it was originally enacted, the HFCAA applied only if the PCAOB’s inability to inspect or investigate was due to a position taken by an authority in the foreign jurisdiction where the relevant public accounting firm is located. As a result of the Consolidated Appropriations Act, 2023, the HFCAA now also applies if the PCAOB’s inability to inspect or investigate the relevant accounting firm is due to a position taken by an authority in any foreign jurisdiction. The denying jurisdiction does not need to be where the accounting firm is located.
These developments could add uncertainties to the trading of our securities, including the possibility that the SEC may prohibit trading in our securities if the PCAOB cannot fully inspect or investigate our auditor and we fail to appoint a new auditor that is accessible to the PCAOB and that Nasdaq can delist our Class A Shares.
If it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, investors may be deprived of the benefits of such inspection. Any audit reports not issued by auditors that are completely inspected by the PCAOB, or a lack of PCAOB inspections of audit work undertaken in China that prevents the PCAOB from regularly evaluating our auditors’ audits and their quality control procedures, could result in a lack of assurance that our financial statements and disclosures are adequate and accurate, then such lack of inspection could cause our securities to be delisted from the stock exchange.
For details on the effects of HFCAA on us, see “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China — Our Common Shares may be delisted under the HFCAA if the PCAOB is unable to inspect our auditors. The delisting of our Common Shares, or the threat of their being delisted, may materially and adversely affect the value of your investment” in our 2023 Annual Report, which is incorporated by reference into this prospectus.
Regulatory Permissions and Developments
We have been advised by our PRC Counsel, Yuan Tai Law Offices, that pursuant to the relevant laws and regulations in China, none of our PRC subsidiaries’ currently engaged business is stipulated on the Special Administrative Measures for the Access of Foreign Investment (Negative List) (2021 Version) (the “2021 Negative List”) promulgated by the Ministry of Commerce (the “MOFCOM”) and the National Development and Reform Commission of the People’s Republic of China (“NDRC”) which entered into force on January 1, 2022. Therefore, our PRC subsidiaries are able to conduct their business without being subject to restrictions imposed by the foreign investment laws and regulations of the PRC. Certain of the business scope of our PRC subsidiaries are listed on the 2021 Negative List, such as value-added telecommunication business, which the ratio of investment by foreign investors in a foreign-invested telecommunication enterprise that engages in the operation of a value-added telecommunication business (except e-commerce, domestic multi-party communication, storage and forwarding class and call center) shall not exceed 50%. Based on the confirmation of the PRC subsidiaries, these subsidiaries have not been actually engaged in such business activities.
Certain of the business stated on the business license of our PRC subsidiaries are subject to additional licenses and permits, such as value-added telecommunication certification and construction enterprise qualifications. Based on the confirmation of the PRC subsidiaries, these subsidiaries have not been actually engaged in business activities those require special licenses or permits and they will only carry out business activities after obtaining corresponding licenses or permits. Currently, none of our PRC subsidiaries is required to obtain additional licenses or permits beyond a regular business license for their operations currently being conducted. Each of our PRC subsidiaries is required to obtain a regular business license from the local branch of the State Administration for Market Regulation (“SAMR”). Each of our PRC subsidiaries has obtained a valid business license for its respective business scope, and no application for any such license has been denied.
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As of the date of this prospectus, ReTo and its PRC subsidiaries are not subject to permission requirements from the CSRC , the Cyberspace Administration of China (the “CAC”) or any other entity that is required to approve of its PRC subsidiaries’ operations. Recently, the PRC government initiated a series of regulatory actions and made a number of public statements on the regulation of business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement.
Among other things, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”) and Anti-Monopoly Law of the People’s Republic of China promulgated by the Standing Committee of the National People’s Congress (the “SCNPC”) which became effective in 2008 and amended and put into effect as from August 1, 2022 (the “Anti-Monopoly Law”), established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions of the State Council on the Standard for Declaration of Concentration of Business Operators, issued by the State Council in 2008 and amended on September 19, 2018, are triggered. Moreover, the Anti-Monopoly Law requires that transactions which involve the national security, the examination on the national security shall also be conducted according to the relevant provisions of the State Council. In addition, the PRC Measures for the Security Review of Foreign Investment which became effective in January 2021 require acquisitions by foreign investors of PRC companies engaged in military-related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition.
On July 6, 2021, the relevant PRC governmental authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. As official guidance and related implementation rules on these opinions have not been issued yet, the interpretation of these opinions remains unclear at this stage. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business in China — Approval of the CSRC or other PRC government authorities may be required in connection with our future offerings under PRC law, and if required, we cannot predict whether or for how long we will be able to obtain such approval” in our 2023 Annual Report, which is incorporated by reference into this prospectus.
On December 28, 2021, the Measures for Cybersecurity Review (2021 Version) was promulgated and became effective on February 15, 2022, which iterates that any “online platform operators” controlling personal information of more than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review. The Measures for Cybersecurity Review (2021 Version), further elaborates the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or maliciously used by foreign governments after listing abroad. We have relied on the opinion of our PRC counsel, Yuan Tai Law Offices, that as a result of: (i) we do not hold personal information on more than one million users in our business operations; and (ii) data processed in our business does not have a bearing on national security and thus may not be classified as core or important data by the authorities, we are not required to apply for a cybersecurity review under the Measures for Cybersecurity Review (2021 Version).
As advised by our PRC legal counsel, Yuan Tai Law Offices, the PRC governmental authorities may have wide discretion in the interpretation and enforcement of these laws, including the interpretation of the scope of “critical information infrastructure operators.” In anticipation of the strengthened implementation of cybersecurity laws and regulations and the continued expansion of our business, we may face challenges in addressing its requirements and make necessary changes to our internal policies and practices in data processing. As of the date of this prospectus, we have not been involved in any investigations on cybersecurity review made by the CAC on such basis, and we have not received any inquiry, notice, warning, or sanctions in such respect.
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On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and took effect on November 1, 2021. Personal information refers to information related to identified or identifiable natural persons which is recorded by electronic or other means and excluding anonymized information. The Personal Information Protection Law provides that a personal information processor could process personal information only under prescribed circumstances such as with the consent of the individual concerned and where it is necessary for the conclusion or performance of a contract to which such individual is a party to the contract. If a personal information processor shall provide personal information to overseas parties, various conditions shall be met, which includes security evaluation by the national network department and personal information protection certification by professional institutions. The Personal Information Protection Law raises the protection requirements for processing personal information, and many specific requirements of the Personal Information Protection Law remain to be clarified by the CAC, other regulatory authorities, and courts in practice. We may be required to make further adjustments to our business practices to comply with the personal information protection laws and regulations.
None of our PRC subsidiaries currently operates in an industry that prohibits or limits foreign investment. As a result, as advised by our PRC counsel, Yuan Tai Law Offices, other than those requisite for a domestic company in mainland China to engage in the businesses similar to those of our PRC subsidiaries, none of our PRC subsidiaries is required to obtain any permission from Chinese authorities, including the CSRC, the CAC, or any other governmental agency that is required to approve its current operations. However, if our PRC subsidiaries do not receive or maintain the approvals, or we inadvertently conclude that such approvals are not required, or applicable laws, regulations, or interpretations change such that our PRC subsidiaries are required to obtain approval in the future, we may be subject to investigations by competent regulators, fines or penalties, ordered to suspend our PRC subsidiaries’ relevant operations and rectify any non-compliance, prohibited from engaging in relevant business or conducting any offering, and these risks could result in a material adverse change in our PRC subsidiaries’ operations, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless. As of the date of this prospectus, we and our PRC subsidiaries have received from PRC authorities all requisite licenses, permissions, or approvals needed to engage in the businesses currently conducted in China, and no permission or approval has been denied.
On February 17, 2023, CSRC released the Trial Measures together with five guidelines, which became effective on March 31, 2023. The Trial Measures lay out the filing regulation arrangement for both direct and indirect overseas listing by PRC domestic companies, and clarify the determination criteria for indirect overseas listing in overseas markets. Any future securities offerings and listings outside of mainland China by our Company, including but not limited to, follow-on offerings, secondary listings and going private transactions, will be subject to the filing requirements with the CSRC under the Trial Measures. As of the date of this prospectus, we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC or any other PRC governmental authorities with respect to our listing on Nasdaq. The Company is required to file with CSRC for both the Private Placement and the issuance of shares to the consultant as consideration for its consulting services. The filing has not submitted yet and the Company is in the progress of preparing for the filing. We cannot predict whether or for how long we will be able to complete the filing procedure with the CSRC. Our failure to timely submit the filing with CSRC may result in legal liabilities borne by the Company, including warning and rectification of non-compliance, a fine between RMB 1.0 million (approximately $150,000) and RMB 10.0 million (approximately $1.5 million), which could result in a material adverse change in our operations, limit our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.
As the Trial Measures were newly published and there is uncertainty with respect to the filing requirements and their implementation, we cannot be sure that we will be able to complete such filings in a timely manner, or at all. Any failure or perceived failure of us to fully comply with such new regulatory requirements could significantly limit or completely hinder our ability to offer or continue to offer securities to investors, cause significant disruption to our business operations, and severely damage our reputation, which could materially and adversely affect our financial condition and results of operations and could cause the value of our securities to significantly decline or be worthless. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business in China — Approval of the CSRC or other PRC government authorities may be required in connection with our future offerings under PRC law, and if required, we cannot predict whether or for how long we will be able to obtain such approval” in our 2023 Annual Report, which is incorporated by reference into this prospectus and “Risk Factors — Risks Relating to Doing Business in China — We cannot predict whether or for how long we will be able to complete the filing procedure with the CSRC for the Private Placement and the issuance of shares to the consultant” in this prospectus.
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Except as disclosed above, in connection with our issuance of securities to foreign investors, under current PRC laws, regulations and regulatory rules, as of the date of this prospectus, we and our PRC subsidiaries, (i) are not required to obtain permissions from the PRC authorities, including the CSRC or the CAC, and (ii) have not received or were denied such permissions by any PRC authority. We are subject to the risks of uncertainty of any future actions of the PRC government in this regard including the risk that we inadvertently conclude that the permission or approvals discussed here are not required, that applicable laws, regulations or interpretations change such that we and our PRC subsidiaries are required to obtain approvals in the future.
Our Products and Services
Eco-Friendly Construction Materials
We manufacture eco-friendly construction materials (aggregates, bricks, pavers and tiles) through our subsidiary, Xinyi REIT, which operates our plant in Xinyi, Jiangsu Province. We refer to our construction materials as eco-friendly because we produce them from reclaimed iron mine tailings. Tailings are the materials left over after the process of separating the valuable fraction from the worthless fraction of an ore. Iron ore tailings generally consist of hard rock and sand. Waste rock and tailings constitute the largest (by volume) industrial solid waste generated in the mining process. Xinyi REIT has utilized construction and demolition waste (which is the disposed bricks and/or concrete after the old building is dismantled) as the raw materials to produce the products. By recycling iron tailings and utilizing the construction and demolition waste, we believe that our construction materials manufacturing process is a viable and environmentally friendly solution to disposal problems associated with these materials.
Traditional bricks in China consist primarily of clay, which is mixed with water and silt, pressed into a mold for shaping, then fired in a kiln, or furnace. We use reclaimed iron tailings or construction and demolition waste primarily as a substitute for rocks. Through vibration technology, with these raw materials input, the finished products can come out with different shape and types. Since the whole production is cured without fire, this process has the benefits of less space required for production and less pollution generated to the environment. We believe iron tailings or construction and demolition waste reduce both the density and heat conductivity of our construction materials without sacrificing their durability and strength. Our construction materials’ density and strength meet or exceed China national standards. In addition, because we use iron tailings or construction and demolition waste in the manufacturing process, we believe our construction materials are consistent with China’s recent environmental protection policies, such as energy conservation included in the 2016 China’s 14th Five-Year Plan (2021-2025).
In addition to iron tailings and construction and demolition waste, our construction materials contain river sand and granite. Our eco-friendly construction materials are produced on a fully automatic production line primarily based upon our proprietary technology.
Our eco-friendly construction materials include, without limitation, the following:
| ● | Ground works materials. Essential materials for sponge cities to assist in water absorption, flood control and water retention. These construction materials can be used for urban roads, pedestrian streets and sidewalks, city squares, landmarks, parking lots, and docks. |
| ● | Landscape retaining materials. These construction materials are mainly used for gardens, roads, bridges, city squares, retaining walls and slope construction. |
| ● | Hydraulic engineering materials. Construction material for sponge city construction, they can be used for hydraulic ecological projects such as slope protection and river transformation. |
| ● | Wall materials. These construction materials are used for insulation, decoration, and for building walls. |
Eco-friendly Construction Materials Manufacturing Equipment
We produce manufacturing equipment used to create eco-friendly construction materials. We sell our equipment to customers in China, South Asia, North America, the Middle East, North Africa and Southeast Asia. The equipment consists of large-scale fully automated production equipment with hydraulic integration. The equipment can be used to produce various types of eco-friendly construction materials that can be used for a variety of projects such as ground works, hydraulic engineering, landscape retention and wall projects.
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Our equipment used to manufacture construction materials include, without limitation, the following:
| ● | REIT-Classic RT9A, RT9B, RT15A, RT15B. These are fully automated block production lines and can be universally used for the manufacture of bricks, tiles, pavers with and without face mix, curbstones, hollow blocks and similar construction materials. | |
| ● | REITRT10 Series Equipment. REITRT10 series equipment is used to produce bricks, tiles, pavers with and without face mix, curbstones, hollow blocks and similar construction materials. |
| ● | Horizontal Pull Holes Device. Horizontal Pull Holes Device is used to produce interlocking bricks, water conservancy blocks and slope protection blocks. |
| ● | REIT-I Concrete Block Splitter. Synchronized concrete block cutting machine with four blades. The blades are guided by ultra-wear resistant guide leads and driven by a large bore hydraulic drive, which lowers the operating pressure of the hydraulic unit and increases the splitting force. |
| ● | REIT Foam Insert Device. This device is used to insert a foam plate into the mold and produce thermal insulation blocks. |
| ● | Gravity Separator for Iron Mine. Gravity separator is used to collect iron from the mine. |
| ● | REIT RT18 Equipment. In 2023, we developed REIT RT18 equipment and a fully automatic production line comprised of the equipment. REIT RT18 equipment is one of our biggest production block making machines available for producing bricks, tiles, pavers (with and without face mix), curbstones, hollow blocks and similar construction materials. |
Roadside Assistance Services
Following the acquisition of REIT Mingde, we, through Hainan Yile IoT, provide RSA services to drivers within Hainan Province, China, through our network of RSA services providers of tow providers and automotive repair services. Our RSA services include towing, jump start, tire change, automobile repair services, and other services. We do not directly provide the RSA services but coordinate with our contracted RSA service providers who are licensed to provide such services. Our RSA services area covers the entire island of Hainan province, including 18 cities and counties. Upon receipt of a request for RSA services, we will contact our tow providers and other RSA service providers in close proximity to the vehicles and arrange the vehicles to be towed or repaired. We operate a proprietary platform, which connects insurance companies, tow providers, automobile repair services, and other service providers as well as the drivers. The platform is accessible to users via web interface and mobile applications, consisting of a central management system, a mobile application for RSA service providers to accept orders and dispatch service teams, a mobile application for drivers to send requests and monitor status, and a mobile application for insurance companies to monitor and review the request status.
Our RSA services are available to insured drivers and uninsured drivers. Our services to insured drivers are based on the type of insurance policy they have with their insurance company as well as the terms of our service contract with their insurance companies. Uninsured drivers pay our services fee based on our prevailing rates at the time of services. We maintain a 24/7 service team to ensure timely responses to RSA services requests.
Our RSA services commenced in 2020 and we have established a network of an aggregate of 38 RSA services providers. Hainan Yile IoT has signed written agreements with all of its RSA services providers and settles payments to these service providers on a periodical basis.
We are paid by the drivers receiving RSA services or if they are insured, by their insurance companies. Hainan Yile IoT has entered into annual agreements with four major insurance companies in China, including, without limitation, China Life Property & Casualty Insurance Company Limited and China Pacific Insurance (Group) Co., Ltd. Pursuant to these agreements, we agree to provide RSA services to the insured drivers of these insurance companies upon requests and receive fees based on the services provided.
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Software Solutions
Through Hainan Yile IoT, we are also engaged in the design, development and sales of customized software solutions based on the client specifications. We have developed the following software solutions for our clients during the fiscal years ended December 31, 2023, 2022 and 2021:
| - | Logistics management system – comprehensive software solutions for the management of multimodal logistics, encompassing functions including customer management, supplier management, order management, and vehicle management. |
| - | Retail management system – comprehensive software solutions for retail management, including functions such as invoicing, reporting, data statistics, online marketing. |
| - | Fleet management system – comprehensive software solutions providing client with capabilities to manage its fleet including functions such as vehicle management, vehicle application, vehicle alarm, and location control. |
| - | Vehicle rental management system – comprehensive software solutions providing client with capabilities to manage its car rental services, including functions such as vehicle management, vehicle rental (rental renewal), and remote fuel and electricity disconnection. |
In connection with the sales of software solutions, we also include hardware sales and/or service subscriptions based on the clients’ requirements, which are charged separately.
Our Projects
We have acted as general contractor and consultant for the construction of sponge cities since 2014 and as general contractor for ecological restoration projects since 2019. We are also responsible for the planning, construction and design of such projects.
Representative Projects
Sponge City – Changjiang County, Hainan Province
We were the general contractor for a sponge city project where an entire village was relocated and constructed in a former mining area. The project took 16 months to complete resulting in revenue of approximately RMB 14 million ($2.2 million) for us. We made all construction materials out of recycled iron tailings. A total of 86 single-family homes were built with a total construction area of 9,400 square meters (101,000 square feet). An estimated 1,810,000 pieces of bricks were used for walls, 90,000 roof tiles, and 4,200 square meters (approximately 45,000 square feet) of ground was covered with our construction materials. The completed project has won recognitions at various government levels in Hainan Province and has been designated as a demonstration or model project for promotion of sponge city construction.
Sponge City – Haikou City, Hainan Province
We acted as a consultant for a sponge city project in Haikou City, Hainan Province. We also paved 50,000 square meters for this project. To assist with the nationwide efforts to promote pilot cities in sponge city construction, we will collaborate with international institutions in sponge city construction such as Jude Technology Corporation located in Germany. By gradually increasing our efforts, and expanding the scale in the planning, design and construction of sponge cities, we aim to become a key enterprise in sponge city construction.
Ecological Restoration Projects – Datong City, Shanxi Province
Pursuant to a strategic cooperation agreement entered into with Hunyuan County People’s Government, we have acted as the general contractor in connection with the restoration of abandoned coal mines and disposal of solid wastes in Hunyuan County, Datong City, Shanxi Province. We were in charge of the project feasibility study, design, implementation and supervision of the project. This project covered several affected villages and had an aggregate area of approximately 386 acres.
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History and Development of the Company
Corporate History
ReTo is a BVI business company with limited liability, established under the laws of the BVI on August 7, 2015 as a holding company to develop business opportunities in China.
On November 29, 2017, ReTo completed its initial public offering (“IPO”) of 32,200 common shares at a public offering price of $500 per share. In connection with the IPO, the Company’s common shares began trading on the Nasdaq Capital Market beginning on November 29, 2017 under the symbol “RETO.”
ReTo owns 100% equity interest of REIT Holdings, a limited liability company established in Hong Kong. Beijing REIT was established on May 12, 1999 under the laws of PRC. Over the years, Beijing REIT established four subsidiaries consisting of: Gu’an REIT Machinery Manufacturing Co., Ltd. (“Gu’an REIT”), which was incorporated on May 12, 2008; REIT Equipment (known as Beijing REIT Ecological Engineering Technology Co., Ltd. at that time, which changed its name to Beijing REIT Equipment Technology Co., Ltd. on August 9, 2023), which was incorporated on April 24, 2014; Langfang Ruirong Mechanical and Electrical Equipment Co., Ltd., which was incorporated on May 12, 2014 and was subsequently dissolved in 2021; and REIT Technology Development (America), Inc., a California corporation, which was incorporated on February 27, 2014 and was dissolved in March 2022.
On February 7, 2016, Beijing REIT and its individual original shareholders entered into an equity transfer agreement, pursuant to which these shareholders agreed to transfer all of their ownership interests in Beijing REIT with a carrying value of RMB 24 million (or $3,466,260) to REIT Holdings. After this equity transfer, Beijing REIT became a wholly foreign-owned enterprise and amended the registration with the State Administration of Market Regulation on March 21, 2016.
REIT Changjiang was incorporated in Hainan Province, China, on November 22, 2011 with the original registered capital of RMB 100 million (approximately $15.7 million). REIT Changjiang was engaged in hauling and processing construction and mining waste, with which it produces recycled aggregates and bricks for environmental-friendly uses prior to the disposition of REIT Changjiang in December 2021.
On June 1, 2015, REIT Construction was incorporated as a wholly owned subsidiary of REIT Changjiang. On October 25, 2021, REIT Changjiang transferred all of its 100% equity interest of REIT Construction to REIT Mingde for no consideration, after which REIT Mingde became a 100% owner of REIT Construction’s equity interest. On February 9, 2023, REIT Construction was dissolved due to the termination of the project for which it was established.
On July 15, 2015, Beijing REIT established a joint venture, Xinyi REIT, together with Xinyi City Transportation Investment Co., Ltd. (“Xinyi TI”), a third party. Beijing REIT owns 70% equity interest of Xinyi REIT, with the remaining 30% owned by Xinyi TI. On May 23, 2023, Xinyi TI transferred all of its 30% equity interest of Xinyi REIT to Beijing REIT for a total consideration of RMB 18 million (approximately $2.50 million), after which Beijing REIT became a 100% owner of Xinyi REIT’s equity interest.
On September 20, 2015, Beijing REIT acquired 100% of the equity interest of Nanjing Dingxuan Environment Protection Technology Development Co., Ltd. (“Nanjing Dingxuan”) from a third party for no consideration given the company’s registered capital was not paid and had no assets or operations. Nanjing Dingxuan was engaged in providing technical support and consulting services for environmental protection projects but its operation was suspended in 2021 and the company was further dissolved on August 30, 2022.
In February 2016, Beijing REIT established a joint venture, REIT Q GREEN Machines Private Limited (“REIT India”), together with an Indian company, Q Green Techcon Private Limited (“Q Green”). Beijing REIT owns 51% equity interest of REIT India with the remaining 49% owned by Q Green.
On October 22, 2018, REIT Ordos was incorporated as a wholly owned subsidiary of REIT Holdings.
On August 29, 2019, Datong Ruisheng Environmental Engineering Co., Ltd. (“Datong Ruisheng”) was incorporated as a wholly owned subsidiary of Beijing REIT. Datong Ruisheng is engaged in potential ecological restoration projects in Datong, Shanxi Province. On April 3, 2023, Beijing REIT transferred all of its equity interest of Datong Ruisheng to REIT Ordos for no consideration, after which REIT Ordos became a 100% owner of Datong Ruisheng’s equity interest.
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On November 11, 2019, Yangbi Litu Ecological Technology Co., Ltd. (“Yangbi Litu”) was jointly established by REIT Ordos and Yunnan Litu Technology Development Co., Ltd. (“Yunnan Litu”). REIT Ordos owned 55% of the ownership interest in Yangbi Litu, with the remaining 45% equity interest owned by Yunnan Litu. Because the Company’s ownership interest in Yunnan Litu was 55%, the Company held an aggregate 79.75% equity interest in Yangbi Litu, directly and indirectly. Yangbi Litu will be engaged in providing services in comprehensive ecological restoration and sales of environmentally friendly equipment and new materials. On July 13, 2020, REIT Ordos transferred its 55% equity interest in Yunnan Litu to a third-party individual and two third-party companies for a nominal price. As a result, the Company’s equity ownership interest in Yangbi Litu decreased from 79.75% to 55%. On July 13, 2020, ReTo transferred its 55% equity interests in Yunnan Litu to third parties for a nominal price given the inactivity of Yunnan Litu’s business operations since its inception and ReTo’s ongoing focus on its own organic business growth.
On January 2, 2020, Beijing REIT signed a share transfer agreement with third party, Hebei Huishitong Techonology Inc. (“Huishitong”) and sold 100% of its ownership interest in Gu’an REIT to Huishitong for total consideration of RMB 39.9 million (approximately $5.7 million).
On September 7, 2020, Beijing REIT entered into a share transfer agreement with the original shareholder of Shexian Ruibo Environmental Science and Technology Co., Ltd. (“Shexian Ruibo”) for the acquisition of 41.67% of the equity interests in Shexian Ruibo for a total consideration of $3.6 million (RMB 25 million), including a cash payment of $2.7 million (RMB 18.5 million) and non-cash contribution of six patents valued at $0.9 million (RMB 6.5 million). Beijing REIT made a cash payment of $2.7 million (RMB 18.5 million) on October 20, 2020 and the six patents had been transferred to Shexian Ruibo prior to September 15, 2020.
In December 2020, we incorporated Guangling REIT Ecological Cultural Tourism Co., Ltd. (“Guangling REIT”) in mainland China as a wholly owned subsidiary of REIT Ordos. Guangling REIT will be engaged in the business of ecological restoration and management, and construction and operation of health and cultural tourism projects.
On November 12, 2021, Beijing REIT and REIT Holdings entered into an equity transfer agreement to sell 100% equity interest in REIT Changjiang to the purchasers, in exchange for a total consideration of RMB 60,000,000 (approximately $9.4 million) in cash. The purchasers have issued to Beijing REIT and REIT Holdings a promissory note in the principal amount of RMB 60,000,000, reflecting the purchase price to be paid in accordance with the equity transfer agreement. As of December 31, 2023, we received a total of RMB 57.0 million (approximately US$8.26 million) from the purchasers with the remaining RMB 3.9 million (approximately US$0.6 million) expected to be paid by the purchasers by June 30, 2024. In December 2021, we completed the disposition of REIT Changjiang following the approval of our shareholders and board of directors.
On December 27, 2021, REIT Technology acquired 100% equity interest of REIT Mingde. As a result of this acquisition, the Company also acquired, indirectly through RETI Mingde, 100% of the equity interest of Hainan Fangyuyuan (known as Yangpu Fangyuyuan United Logistics Co., Ltd. at that time, which changed its name to Hainan Fangyuyuan United Logistics Co., Ltd. on December 7, 2023) and 61.548% of the equity interest of Hainan Yile IoT, which, in turn, owned 90% of the equity interest of IoV Technology Research (which was transferred to REIT Mingde on April 3, 2023 for no consideration), 85% of the equity interest of Shanxi Global Travel Co., Ltd. and 45% of the equity interest of Hainan Beiqi Yinjian Yile Smart Travel Technology Co., Ltd. Hainan Fangyuyuan is engaged in facilitating logistic services through its cloud based platform in China. IoV Technology Research provides RSA services in Hainan Province, China.
On December 27, 2021, Hainan Fangyuyuan and Shanghai Ruida Fenghe Management Consulting Partnership (Limited Partnership) incorporated Hainan Kunneng as a limited liability company to engage in the development of an international commodity trading platform (as of the date of this prospectus, the platform is still under development and has not launched) for the Hainan International Trade Zone, using digital supply chain technologies. Hainan Fangyuyuan owns 51% of Hainan Kunneng’s equity interest while Shanghai Ruida Fenghe Management Consulting Partnership (Limited Partnership) owns 49%. Hainan Kunneng commenced operations in January 2022.
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On August 24, 2022, due to the addition of a new shareholder, REIT Mingde became a 90% owner of Hainan Fangyuyuan’s equity interest. On December 18, 2023, REIT Mingde transferred all of its 90% equity interest of Hainan Fangyuyuan to REIT Ordos for a total consideration of RMB 1.
On August 25, 2022, Hainan Coconut Network Freight Co., Ltd., (“Hainan Coconut”) was incorporated as a wholly owned subsidiary of Hainan Fangyuyuan. Hainan Coconut plans to build an online freight and logistics platform to provide logistics and transportation services. On September 5, 2023, Hainan Fangyuyuan transferred all of its equity interest of Hainan Coconut to two third-party individuals for no consideration. At that time, Hainan Coconut had not commenced its operations.
On September 30, 2022, Gansu Ruishi Tongda Ecological Management Co., Ltd. was incorporated as a limited liability company in mainland China and REIT Ecological owns 70% of its equity interest. Its business scope includes project management, project investment and financing, and other ecological management projects. It was dissolved on March 7, 2023.
On November 29, 2022, Honghe REIT was incorporated as a limited liability company in mainland China and a wholly-owned subsidiary of REIT Ordos. Its business scope includes EOD projects and related ecological restoration projects. On August 9, 2023, REIT Ordos transferred all of its equity interest of Honghe REIT to Sunoro Hengda for no consideration, after which Sunoro Hengda became a 100% owner of Honghe REIT’s equity interest.
On April 12, 2023, ReTo entered into an instrument of transfer with the original shareholder of Sunoro Holdings for the acquisition of 100% of the equity interests in Sunoro Holdings, for a total consideration of HKD 1. Sunoro Holdings is a holding company with no operation.
On April 16, 2023, Inner Mongolia REIT Ecological Environment Management Co., Ltd. (“Mongolia REIT”) was incorporated as a wholly owned subsidiary of REIT Ordos. Mongolia REIT is engaged in ecological restoration and management.
On May 8, 2023, Inner Mongolia Guorui Daojing Information Technology Co., Ltd. (“Mongolia Guorui”) was jointly established by REIT Mingde and Beijing Daojing Technology Co., Ltd. (“Beijing Daojing”). REIT Mingde owned 51% of the ownership interest in Mongolia Guorui, with the remaining 49% equity interest owned by Beijing Daojing. Mongolia Guorui is engaged in providing services and equipment research and development in the field of intelligent emergency management. On August 3, 2023, Sunoro Hengda was incorporated as a limited liability company in mainland China and a wholly-owned subsidiary of Sunoro Holdings. Sunoro Hengda is a holding company with no operation.
On May 10, 2022, Beijing REIT transferred all of its 100% equity interest of REIT Equipment to REIT Ordos for no consideration. On August 7, 2023, REIT Ordos transferred all of its 100% equity interest of REIT Equipment to Sunoro Hengda for no consideration, after which Sunoro Hengda became a 100% owner of REIT Equipment’s equity interest. REIT Equipment manufactures specialized equipment for producing building materials, and develops and constructs municipal engineering projects.
On November 16, 2023, Huainan Sunoro Environmental Protection Technology Co., Ltd. (“Huainan Sunoro”) was incorporated as a limited liability company in mainland China and a wholly-owned subsidiary of REIT Equipment. Huainan Sunoro was engaged in the research and development of resource recycling technologies, development of waste asphalt recycling technology, energy recovery system development, and technical consulting services for resource recycling. Huainan Sunoro was dissolved on March 26, 2024.
On January 5, 2024, REIT Ordos transferred 39% equity interest of Hainan Fangyuyuan to REIT Technology for consideration of RMB1, after which REIT Ordos and REIT Technology became 51% and 39% owner of Hainan Fangyuyuan’s equity interest, respectively.
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Corporate Structure
The chart below summarizes our corporate structure as of the date of this prospectus:
| * | REIT Ecological Technology Co., Ltd. holds 51% equity interest of Hainan Fangyuyuan United Logistics Co., Ltd. and REIT Technology Development Co., Ltd. holds 39% equity interest of Hainan Fangyuyuan United Logistics Co., Ltd. |
| ** | The 80% equity interest held by REIT Ordos in Mongolia REIT includes 20% of the equity interests of Mongolia REIT to be returned to the Company under a collaboration agreement, dated November 20, 2023, by and between REIT Ordos and a third party. Pursuant to the collaboration agreement, the parties agreed to collaborate on an ecological restoration project managed through Mongolia REIT, and the third-party company agreed to contribute RMB 10 million (approximately $1.4 million) for 20% of Mongolia REIT’s equity interests, provided that REIT Ordos fully pays for its 80% of Mongolia REIT’s equity interests, totaling RMB 40 million, within one year of the agreement. REIT Ordos transferred 20% of Mongolia REIT’s equity interests to the third-party company on November 27, 2023, in anticipation of fulfilling its obligation pursuant to the agreement. As of the date of this prospectus, the third party only paid RMB7 million (approximately $0.98 million). The parties agreed to rescind the agreement with the Company to refund RMB 7 million to the third-party company and the third party company to return the 20% of the equity interests of Mongolia REIT. |
Recent Developments
Share Combinations and Change of Authorized Shares
On May 9, 2023, our board of directors approved a share combination pursuant to section 40A of the BVI Act, or the 2023 Share Combination, of our authorized, issued and outstanding common shares at a ratio of 10-for-1 so that every 10 shares (or part thereof) are combined into one (1) share (with the fractional shares rounding up to the next whole share). As a result of the 2023 Share Combination, the par value of the common shares was changed from $0.001 per share to $0.01 per share, effective on May 15, 2023.
On July 31, 2023, our board of directors approved a change of the maximum number of shares that we are authorized to issue, from 20,000,000 shares of a single class each with a par value of US$0.01 to an unlimited number of shares of a single class each with a par value of US$0.01, effective on July 31, 2023.
On February 1, 2024, our board of directors approved another share combination pursuant to section 40A of the BVI Act, or the 2024 Share Combination, of the existing common shares at a ratio of 10-to-1 so that every 10 shares (or part thereof) are combined into one (1) share (with the fractional shares rounding up to the next whole share). As a result of the 2024 Share Combination, the par value of the existing common shares was changed from $0.01 per share to $0.1 per share, effective on March 1, 2024.
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Public Offering in May 2023
On May 18, 2023, we entered into a securities purchase agreement to sell an aggregate of 200,000 common shares, par value US$0.1 per share, at a price of $33 per share to certain investors pursuant to the prospectus supplement, for aggregate gross proceeds of $6,600,000. We intend to use proceeds received from the offering to fund the growth of our business in China for working capital and general business purposes.
The sale of the common shares is being made pursuant to a “shelf” registration statement on Form F-3 (File No. 333-267101) initially filed with the SEC on August 26, 2022.
Public Offering and Concurrent Private Placement in September 2023
On September 29, 2023, we entered into a securities purchase agreement (the “Original Public Offering SPA”) to sell an aggregate of 1,500,000 common shares, at a price of $10.00 per share to certain investors pursuant to the prospectus supplement. On March 13, 2024, we entered into an amendment to the Original Public Offering SPA with such investors to change the per share purchase price from $10.00 to $4.00 for the sale of an aggregate of 1,500,000 common shares, and to change the terms of the closing of the transactions.
In addition, on September 29, 2023, in a concurrent private placement, or the 2023 Private Placement, we entered into separate securities purchase agreements (the “Original Private Placement SPA”) for the 2023 Private Placement, in reliance upon Regulation S of the Securities Act, to sell to certain other investors (the “Reg S Investors”) an aggregate of 1,000,000 common shares, at a price per share of $10.00. On March 13, 2024, we entered into an amendment to the Original Private Placement SPA with the Reg S Investors to change the per share purchase price from $10.00 to $4.00 for the sale of an aggregate of 1,000,000 common shares, and to change the terms of the closing of the 2023 Private Placement.
The 2023 September Public Offering and the 2023 Private Placement closed on March 13, 2024 and we received aggregate gross proceeds of approximately $10 million. We incurred expenses of approximately $0.40 million. We intend to use the net proceeds to fund the growth of our business in China or other regions, acquire or invest in technologies, products and/or businesses that we believe will enhance our value as well as for working capital and general corporate purposes.
Share Redesignation and Issuance of Class B Shares
On August 8, 2024, we (a) redesignated the existing common shares, par value US$0.10 each, as Class A Shares, par value US$0.10 each, with the same rights as the existing common shares and (b) created an additional 2,000,000 shares to be designated as Class B Shares, par value US$0.01 each, with each share to entitle the holder thereof to 1,000 votes but with transfer restrictions, pre-emption rights and no right to any dividend or distribution of the surplus assets on liquidation.
On August 14, 2024, as approved by our board of directors and our shareholders at the 2024 Annual General Meeting of Shareholders (the “2024 Annual Meeting”), the Company issued 1,000,000 Class B Shares to REIT International Development (Group) Co., Limited (“REIT International”) at par value for a total consideration of $10,000. The issuance of the Class B Shares was in reliance on the registration exemption contained in Section 4(a)(2) of the Securities Act. Mr. Hengfang Li, our Chief Executive Officer and Chairman of the Board, Mr. Guangfeng Dai, our President, Chief Operating Officer and director, Mr. Zhizhong Hu, our Chief Technology Officer and director, and Mr. Degang Hou, our Chief Internal Control Officer, holds 40%, 20%, 20% and 20% ownership, respectively, of REIT International and have the respective voting and investment power with respect to the 39,032 Class A Shares and 1,000,000 Class B Shares held by REIT International. Upon issuance of 1,000,000 Class B Shares, REIT International in the aggregate holds approximately 5.1% of our total issued and outstanding Shares and 98.1% of the aggregate voting power of our total issued and outstanding Shares.
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Foreign Private Issuer Status
We are a foreign private issuer within the meaning of the rules under the Exchange Act. As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:
| ● | we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company; | |
| ● | for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies; | |
| ● | we are not required to provide the same level of disclosure on certain issues, such as executive compensation; | |
| ● | we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information; | |
| ● | we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and | |
| ● | we are not required to comply with Section 16 of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction. |
Implications of Being a Controlled Company
We are a “controlled company” as defined under the Nasdaq Listing Rules, because REIT International REIT International will be able to exercise 98.1% of the aggregate voting power of our total issued and outstanding Shares. For so long as we are a “controlled company”, we are permitted to elect to rely on certain exemptions from corporate governance rules, including:
| ● | an exemption from the rule that a majority of our board of directors must be independent directors; |
| ● | an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and |
| ● | an exemption from the rule that our director nominees must be selected or recommended solely by independent directors. |
Although we do not intend to rely on the “controlled company” exemption under the Nasdaq Listing Rules, we could elect to rely on this exemption in the future. As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements. Our status as a “controlled company” could cause our Class A Shares to look less attractive to certain investors or otherwise harm the trading price of Class A Shares. Please see “Risk Factors — Risks Related to Our Capital Structure — We are a “controlled company” within the meaning of the Listing Rules of Nasdaq and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.”
Corporate Information
Our principal executive offices in China are located at c/o Beijing REIT Technology Development Co., Ltd., X-702, 60 Anli Road, Chaoyang District, Beijing, People’s Republic of China 100101. Our telephone number at this address is (+86) 10-64827328. Our registered agent in the BVI is Vistra (BVI) Limited of Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, British Virgin Islands. Investors should submit any inquiries to the address and telephone number of our principal executive offices.
Our principal website is www.retoeco.com. The information contained on this website is not a part of this prospectus.
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Summary of Risk Factors
Below please find a summary of the principal risks we face, organized under relevant headings. For a detailed description of the risk factors ReTo and our subsidiaries may face, see “Item 3. Key Information — D. Risk Factors” in our 2023 Annual Report, which is incorporated by reference into this prospectus.
Risks Related to Doing Business in China
We face risks and uncertainties related to doing business in China in general, including, but not limited to, the following:
| ● | Changes in China’s economic, political or social conditions or government policies or in relations between China and the United States; |
| ● | The impact on our operations and value of our Class A Shares by PRC government’s significant oversight, control, intervention and/or influence over our business operation; | |
| ● | The complex and evolving laws and regulations regarding privacy and data protection, including China’s new Data Security Law, Cybersecurity Review Measures, Personal Information Protection Law, that our business is subject to; |
| ● | Uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations; | |
| ● | The risks of delisting or the threat of being delisted under the HFCAA if the PCAOB is unable to inspect our auditor; | |
| ● | The approval of the CSRC, CAC or other Chinese regulatory agencies which may be required in connection with our offshore offerings under Chinese law and, if required, our inability to obtain such approval or complete such filing; | |
| ● | We cannot predict whether or for how long we will be able to complete the filing procedure with the CSRC in connection with the Private Placement and the issuance of shares to the consultant; | |
| ● | The potential treatment as a resident enterprise for PRC tax purposes under the EIT Law and the risk of being subject to PRC income tax on our global income; | |
| ● | Foreign exchange controls in China, which could limit our use of funds that would be raised in future offerings, which could have a material adverse effect on our business; | |
| ● | The complex procedures under the PRC laws and regulation in connection with certain acquisitions of China-based companies by foreign investors; |
| ● | PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion, which may restrict or prevent ReTo from making additional capital contributions or loans to its PRC subsidiaries; |
| ● | Any limitation on the ability of our PRC subsidiaries to make payments to us; | |
| ● | Fluctuations in exchange rates; | |
| ● | The adverse impact on our business by the tensions in international trade and rising political tensions; | |
| ● | The potential supply chain disruptions; and | |
| ● | Any severe or prolonged downturn in the global or Chinese economy. |
17
Risks Related to Our Business and Industry
We are subject to risks and uncertainties related to our business and industry, including, but not limited to, the following:
| ● | The potential slowdown of the industries in which our customers operate; |
| ● | Any decline in the availability or increase in the cost of raw materials; |
| ● | Any disruption in the supply chain of raw materials and our products; |
| ● | Wage increases in China; |
| ● | Our reliance on a limited number of vendors and the potential loss of any significant vendor; |
| ● | Certain risks in collecting our accounts receivable; |
| ● | Failure to protect our intellectual property rights; |
| ● | The substantial doubt about our ability to continue as a going concern in the report of our independent registered public accounting firm on our financial statements for the years ended December 31, 2023, 2022 and 2021; |
| ● | Failure to maintain a reserve for warranty or defective products and installation claims; |
| ● | Product defects and unanticipated use or inadequate disclosure with respect to our products; |
| ● | Various hazards that may cause personal injury or property damage and increase our operating costs, which may exceed the coverage of our insurance; |
| ● | Any material costs and losses as a result of claims based on failure of our products to meet regulatory requirements or contractual specifications; |
| ● | Substantial liabilities to comply with environmental laws and regulations; |
| ● | Inability to implement and maintain effective internal control over financial reporting; |
| ● | Our continued investing in technology, resources, and new business capabilities; |
| ● | Any failure to offer high quality services and support; |
| ● | The competitiveness of the software and information technology service market in which we participate; |
| ● | Our reliance on a limited number of customers; |
| ● | Security incidents and attacks on our products or solutions; |
| ● | Lack of business insurance; | |
| ● | Loss of any benefits we have received from certain government subsidies and incentives; |
| ● | Changes in practices of insurance companies in the markets in which we provide our RSA services; |
| ● | Defects or errors in our products or solutions; |
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| ● | Our reliance on the stable performance of servers, and any disruption to our servers due to internal and external factors; |
| ● | Our use of open source or third-party software; and | |
| ● | The impact on investor confidence and our reputation that as well as additional risks and uncertainties that may result from the restatement of our unaudited condensed consolidated financial statements for the six months ended June 30, 2023. |
Risks Related to Our Class A Shares
We face risks and uncertainties related to our Class A Shares, including, but not limited to, the following:
| ● | The volatility of trading prices of our Class A Shares; |
| ● | Any negative reports by securities or industry analysts publish about our business; | |
| ● | Failure to meet the continued listing requirements of Nasdaq; and | |
| ● |
Substantial future sales or perceived sales of our Class A Shares in the public market. |
Risks Related to Our Capital Structure
We are subject to risks and uncertainties related to our capital structure, including, but not limited to, the following:
| ● | Our dual-class share structure with different voting rights will limit shareholders’ ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Shares may view as beneficial. |
| ● | Our dual-class capital structure may render Class A Shares ineligible for inclusion in certain stock market indices, and thus adversely affect the trading price and liquidity of our Class A Shares. |
| ● | REIT International, whose interests may conflict with yours, can exercise significant influence over the Company. The concentrated ownership of our Shares may prevent you and other shareholders from influencing significant decisions or may prevent or discourage unsolicited acquisition proposals or offers for our shares, and that may adversely affect the trading price of our Class A Shares. |
| ● | We are a “controlled company” within the meaning of the Listing Rules of Nasdaq and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies. |
19
| Issuer | ReTo Eco-Solutions, Inc. |
Securities being registered for resale by the Selling Shareholders named in the prospectus |
15,363,768 Class A Shares issued by us to the Selling Shareholders. |
| Offering prices | The securities offered by this prospectus may be offered and sold at prevailing market prices, privately negotiated prices or such other prices as the Selling Shareholders may determine. See “Plan of Distribution.” |
| Use of proceeds |
The Selling Shareholders will receive all of the net proceeds from the sale of any Class A Shares offered by them under this prospectus.
We will pay all costs, fees and expenses incurred in connection with the registration of the Class A Shares covered by this prospectus. See “Use of Proceeds.” |
| Market for our Class A Shares | Our Class A Shares are listed on Nasdaq Capital Market under the trading symbols “ReTo.” |
| Risk factors | Prospective investors should carefully consider the “Risk Factors” for a discussion of certain factors that should be considered before buying the securities offered hereby. |
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Investing in our Class A Shares is highly speculative and involves a significant degree of risk. In addition to the risks set forth below, you should carefully consider the risks described under “Item 3. Key Information — D. Risk Factors” in the 2023 Annual Report, which is incorporated by reference herein. Such risks are not exhaustive, before making an investment in our Company. The risks discussed therein could materially and adversely affect our business, prospects, financial condition, results of operations, cash flows, ability to pay dividends and the trading price of our shares. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, prospects, financial condition, results of operations, cash flows and ability to pay dividends, and you may lose all or part of your investment.
This prospectus also contains forward-looking statements having direct and/or indirect implications on our future performance. Our actual results may differ materially from those anticipated by these forward-looking statements due to certain factors, including the risks and uncertainties faced by us, as described elsewhere in this prospectus.
Risks Relating to Doing Business in China
We cannot predict whether or for how long we will be able to complete the filing procedure with the CSRC and complete such filing.
The Company is required to file with CSRC for both the Private Placement and the issuance of shares to the consultant as consideration for its consulting services. The filing has not submitted yet and the Company is in the progress of preparing for the filing. We cannot predict whether or for how long we will be able to complete the filing procedure with the CSRC Our failure to timely submit and complete the filing with CSRC may result in legal liabilities borne by the Company, including warning and rectification of non-compliance, a fine between RMB 1.0 million (approximately $150,000) and RMB 10.0 million (approximately $1.5 million), which could result in a material adverse change in our operations, limit our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.
In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our Class A Shares.
Risks Related to Our Capital Structure
Our dual-class share structure with different voting rights will limit shareholders’ ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Shares may view as beneficial.
We have adopted a dual-class share structure such that our Shares consist of Class A Shares and Class B Shares. Each Class A Share is entitled to one vote and each Class B Share is entitled to 1,000 votes on all matters subject to vote at general meetings of the Company, and with such other rights, preferences, and privileges as set forth in our M&A. Holder of our Class B Shares has significant control over the outcome of matters put to a vote of shareholders and has significant control over our business, including decisions regarding mergers, consolidations, liquidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. The holder of Class B Shares may take actions that are not in the best interest of us or our other shareholders. It may discourage, delay or prevent a change in control of our company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of our Class A Shares. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A Shares may view as beneficial.
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Our dual-class capital structure may render Class A Shares ineligible for inclusion in certain stock market indices, and thus adversely affect the trading price and liquidity of our Class A Shares.
We cannot predict whether our dual-class capital structure will result in a lower or more volatile market price of our Class A Shares, adverse publicity or other adverse consequences. Certain index providers have announced and implemented restrictions on including companies with multiple-class share structures in certain of their indices. For example, in July 2017, FTSE Russell announced that it would require new constituents of its indices to have greater than 5% of the company’s voting rights in the hands of public shareholders, and S&P Dow Jones announced in the same month that it would no longer admit companies with multiple-class share structures to certain of its indices. Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400 and S&P SmallCap 600, which together make up the S&P Composite 1500. Also in 2017, MSCI, a leading stock index provider, opened public consultations on its treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices; however, in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. Under the announced policies, our dual-class capital structure might make our Class A Shares ineligible for inclusion in any of these indices, and as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track these indices will not be investing in our Class A Shares. It is unclear what effect, if any, these policies will have on the valuations of publicly-traded companies excluded from such indices, but it is possible that they may adversely affect valuations, as compared to similar companies that are included.
REIT International, whose interests may conflict with yours, can exercise significant influence over the Company. The concentrated ownership of our Shares may prevent you and other shareholders from influencing significant decisions or may prevent or discourage unsolicited acquisition proposals or offers for our shares, and that may adversely affect the trading price of our Class A Shares.
REIT International own approximately 100% of our Class B Shares, which represents approximately 5.1% of the outstanding Shares and 98.1% of the voting power of the Company. Mr. Hengfang Li, our Chief Executive Officer and Chairman of the Board, Mr. Guangfeng Dai, our President, Chief Operating Officer and director, Mr. Zhizhong Hu, our Chief Technology Officer and director, and Mr. Degang Hou, our Chief Internal Control Officer, holds 40%, 20%, 20% and 20% ownership, respectively, of REIT International and have the respective voting and investment power with respect to the 39,032 Class A Shares and 1,000,000 Class B Shares held by REIT International. For so long as REIT International holds at least a majority of the voting interests of the Company, it will have the ability, through our board of directors, to significantly influence decision-making with respect to our business direction and policies. Matters over which REIT International will, directly or indirectly, exercise significant influence include: (i) the election of the board of directors; (ii) business combinations and other merger transactions requiring shareholder approval, including proposed transactions that would result in our shareholders receiving a premium price for their shares; and (iii) amendments of the M&A or increases or decreases in the size of our board of director. Even if REIT International’s voting interests fall below a majority, it may continue to be able to strongly influence the Company’s decisions. In addition, such concentrated control may prevent or discourage unsolicited acquisition proposals or offers for our shares that you may feel are in your best interest as one of our shareholders. As a result, such concentrated control may adversely affect the market price of our Class A Shares.
We are a “controlled company” within the meaning of the Listing Rules of Nasdaq and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.
In addition to being a foreign private issuer, we are a “controlled company” as defined under the Listing Rules of Nasdaq, because REIT International is able to exercise 98.1% of the aggregate voting power of our total issued and outstanding Shares. For as long as we remain a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from corporate governance rules, including an exemption from the rule that a majority of our board of directors must be independent directors or that we have to establish a nominating committee and a compensation committee composed entirely of independent directors. As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.
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We will not receive any proceeds from the sale of our Class A Shares offered by this prospectus. The Selling Shareholders will receive all of the proceeds.
We will pay all costs, fees and expenses incurred in connection with the registration of the Class A Shares covered by this prospectus.
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Information relating to our Shares and certain provisions of ReTo’s M&A is incorporated by reference from our 2023 Annual Report under the caption “Item 10. Additional Information – 10.B. Memorandum and articles of association” and our proxy statement for the 2024 Annual Meeting (the “2024 Proxy Statement”), which was filed as Exhibit 99.1 to the report on Form 6-K with the SEC on July 2, 2024. Such information does not purport to be complete and is qualified in its entirety by the provisions of ReTo’s M&A and applicable provisions of the laws of BVI. You should read ReTo’s M&A which was filed as Exhibit 3.1 to our Form 6-K with the SEC on August 14, 2024 for the provisions that are important to you.
The Company is authorized to issue an unlimited number of Shares designated as follows: (a) an unlimited number of Class A Shares and (b) up to a maximum of 2,000,000 Class B Shares. As of September 20, 2024, there were 19,352,636 Class A Shares and 1,000,000 Class B Shares outstanding, all of which were fully paid. For a description of the Shares, including the rights and obligations thereto, please refer to our 2023 Annual Report and our 2024 Proxy Statement, which are incorporated by reference herein.
See “Where You Can Find More Information” elsewhere in this prospectus for information on where you can obtain copies of our amended and restated memorandum and articles of association, which have been filed with and are publicly available from the SEC.
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We are registering an aggregate of 15,363,768 Class A Shares issued by us to the Selling Shareholders. The Class A Shares were issued to the Selling Shareholders pursuant to an exemption from registration under the Securities Act in reliance upon Regulation S promulgated thereunder or Section 4(a)(2) of the Securities Act.
The Class A Shares beneficially owned by the Selling Shareholders are being registered to permit public resale of these securities, and the Selling Shareholders may offer these shares for resale from time to time as described in the “Plan of Distribution.”
The following table sets forth the names of the Selling Shareholders, the number of Class A Shares owned beneficially by the Selling Shareholders as of September 20, 2024, and the number of shares that may be offered for resale by the Selling Shareholders from time to time. These shares may also be sold by donees, pledgees, and other transferees or successors in the interest of the Selling Shareholders.
The Selling Shareholders may decide to sell all, some, or none of the Class A Shares listed below. We currently have no agreements, arrangements or understandings with the Selling Shareholders regarding the sale of any of the securities covered by this prospectus. We cannot provide you with any estimate of the number of Class A Shares that the Selling Shareholders will hold in the future.
For the purposes of this table, beneficial ownership is determined in accordance with Rule 13d-3 promulgated under the Exchange Act, and includes voting power and investment power with respect to such shares. In calculating the percentage ownership or percent of equity vote for a given individual or group, the number of Class A Shares outstanding for that individual or group includes unissued shares subject to options, warrants, rights or conversion privileges exercisable within sixty days held by such individual or group, but are not deemed outstanding by any other person or group.
The applicable percentages of ownership are based on an aggregate of 19,352,636 Class A Shares and 1,000,000 Class B Shares outstanding on September 20, 2024.
| Class A Shares Currently Owned (1) | Class A | Class A Shares Beneficially
Owned After Resale (2) Beneficially Owned After Resale | ||||||||||||||||||||||||||
| Selling Shareholder | Number | Percentage of Class A Share | Percentage of Shares | Shares Offered for Resale | Number | Percentage of Class A Shares | Percentage of Shares | |||||||||||||||||||||
| Jasha Group Ltd. | 1,231,432 | 6.4 | % | 6.1 | % | 1,231,432 | - | - | - | |||||||||||||||||||
| Ever Best Trading Corporation Limited | 980,616 | 5.1 | % | 4.8 | % | 980,616 | - | - | - | |||||||||||||||||||
| Golden Bridge Capital Limited | 905,797 | 4.7 | % | 4.5 | % | 905,797 | - | - | - | |||||||||||||||||||
| Golden Bridge Capital Management Limited | 913,043 | 4.7 | % | 4.5 | % | 913,043 | - | - | - | |||||||||||||||||||
| Tung Yat Securities Limited | 724,638 | 3.7 | % | 3.6 | % | 724,638 | - | - | - | |||||||||||||||||||
| Starlight Golden Stone Pte. Ltd. | 1,086,957 | 5.6 | % | 5.3 | % | 1,086,957 | - | - | - | |||||||||||||||||||
| Token Technology Inc. | 1,260,870 | 6.5 | % | 6.2 | % | 1,260,870 | - | - | - | |||||||||||||||||||
| RoyRay Investment Inc. | 913,043 | 4.7 | % | 4.5 | % | 913,043 | - | - | - | |||||||||||||||||||
| Hydrogen Capital Group Ltd | 1,811,594 | 9.4 | % | 8.9 | % | 1,811,594 | - | - | - | |||||||||||||||||||
| Nova Horizons Ltd | 1,404,891 | 7.3 | % | 6.9 | % | 1,404,891 | - | - | - | |||||||||||||||||||
| Open Vision Ltd | 905,797 | 4.7 | % | 4.5 | % | 905,797 | - | - | - | |||||||||||||||||||
| Chao Liu | 72,464 | 0.4 | % | 0.4 | % | 72,464 | - | - | - | |||||||||||||||||||
| Jiaxin Zhao | 942,029 | 4.9 | % | 4.6 | % | 942,029 | - | - | - | |||||||||||||||||||
| Duanwen Zhao | 942,029 | 4.9 | % | 4.6 | % | 942,029 | - | - | - | |||||||||||||||||||
| Jaash Investment Limited | 1,268,568 | 6.6 | % | 6.2 | % | 1,268,568 | - | - | - | |||||||||||||||||||
| Total | 15,363,768 | 79.4 | % | 75.5 | % | 15,363,768 | ||||||||||||||||||||||
| * | Less than one percent. |
| (1) | Because each of the Selling Shareholders may offer all or some of the Class A Shares that such shareholder holds in the offering contemplated by this prospectus, (b) the offering of Class A Shares is not being underwritten on a firm commitment basis, and (c) the Selling Shareholders could purchase additional Class A Shares from time to time, no estimate can be given as to the number of shares or percent of our Class A Shares that will be held by the Selling Shareholders upon termination of the offering. |
| (2) | Assumes the sale of all of the Class A Shares (being offered pursuant to this prospectus) to third parties, if any. |
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The Class A Shares covered by this prospectus may, subject to the M&A and the Act, be offered and sold from time to time by the Selling Shareholders. The term “Selling Shareholders” includes pledgees, donees, transferees or other successors in interest selling shares received after the date of this prospectus from each of the Selling Shareholders as a pledge, gift, partnership distribution or other non-sale related transfer. The number of shares beneficially owned by Selling Shareholders will decrease as and when they effect any such transfers. The plan of distribution for the Selling Shareholders’ shares sold hereunder will otherwise remain unchanged, except that the transferees, pledgees, donees or other successors will be Selling Shareholders hereunder. To the extent required, we may amend and supplement this prospectus from time to time to describe a specific plan of distribution. The Selling Shareholders will act independently of us in making decisions with respect to the timing, manner and size of each sale. Once sold under this registration statement, of which this prospectus forms a part, the Class A Shares will be freely tradable in the hands of persons other than our affiliates.
We will not receive any of the proceeds from the sale by the Selling Shareholders of the Class A Shares. We will bear all fees and expenses incident to our obligation to register the Class A Shares.
The Selling Shareholders may make these sales at prices and under terms then prevailing or at prices related to the then current market price. The Selling Shareholders may also make sales in negotiated transactions. The Selling Shareholders may, subject to the M&A and the Act, offer their shares from time to time pursuant to one or more of the following methods:
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| ● | one or more block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; |
| ● | public or privately negotiated transactions; |
| ● | on the Nasdaq Capital Market (or through the facilities of any national securities exchange or U.S. inter- dealer quotation system of a registered national securities association, on which the shares are then listed, admitted to unlisted trading privileges or included for quotation); |
| ● | through underwriters, brokers or dealers (who may act as agents or principals) or directly to one or more purchasers; |
| ● | a combination of any such methods of sale; and |
| ● | any other method permitted pursuant to applicable law. |
In connection with distributions of the shares or otherwise, the Selling Shareholders may:
| ● | enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the shares in the course of hedging the positions they assume; |
| ● | sell the shares short after the effective date of the registration statement of which this prospectus forms a part and redeliver the shares to close out such short positions; |
| ● | enter into option or other transactions with broker-dealers or other financial institutions which require the delivery to them of shares offered by this prospectus, which they may in turn resell; and |
| ● | pledge shares to a broker-dealer or other financial institution, which, upon a default, they may in turn resell. |
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In addition to the foregoing methods, the Selling Shareholders may, subject to the M&A and the Act, offer their shares from time to time in transactions involving principals or brokers not otherwise contemplated above, in a combination of such methods as described above or any other lawful methods. The Selling Shareholders may, subject to the M&A and the Act, also transfer, donate or assign their shares to lenders, family members and others and each of such persons will be deemed to be a Selling Shareholder for purposes of this prospectus. A Selling Shareholder or their successors in interest may, subject to the M&A and the Act, from time to time pledge or grant a security interest in some or all of the Class A Shares, and if the Selling Shareholder default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the Class A Shares from time to time under this prospectus; provided, however in the event of a pledge or then default on a secured obligation by the Selling Shareholder, in order for the shares to be sold under this registration statement, unless permitted by law, we must distribute a prospectus supplement and/or amendment to this registration statement amending the list of Selling Shareholders to include the pledgee, secured party or other successors in interest of the Selling Shareholder under this prospectus.
The Selling Shareholders may also sell their shares pursuant to Rule 144 under the Securities Act, provided the Selling Shareholders meet the criteria and conform to the requirements of such rule, the M&A and the Act.
The Selling Shareholders may effect such transactions directly or indirectly through underwriters, broker-dealers or agents acting on their behalf. Broker-dealers or agents may receive commissions, discounts or concessions from the Selling Shareholders, in amounts to be negotiated immediately prior to the sale (which compensation as to a particular broker-dealer might be in excess of customary commissions for routine market transactions). If the Class A Shares are sold through underwriters or broker-dealers, the Selling Shareholders will be responsible for underwriting discounts or commissions or agent’s commissions. Neither we, nor the Selling Shareholders, can presently estimate the amount of that compensation. If a Selling Shareholder notifies us that a material arrangement has been entered into with a broker- dealer for the sale of shares through a block trade, special offering, exchange, distribution or secondary distribution or a purchase by a broker or dealer, we will file a prospectus supplement, if required by Rule 424 under the Securities Act, setting forth: (i) the name of each of the Selling Shareholders and the participating broker-dealers; (ii) the number of shares involved; (iii) the price at which the shares were sold; (iv) the commissions paid or discounts or concessions allowed to the broker-dealers, where applicable; (v) a statement to the effect that the broker-dealers did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus; and any other fact material to the transaction.
The Selling Shareholders and any other person participating in a distribution of the shares covered by this prospectus will be subject to applicable provisions of the M&A, the Act and the Exchange Act, including, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the shares by the Selling Shareholders and any other such person. Furthermore, under Regulation M, any person engaged in the distribution of the shares may not simultaneously engage in market-making activities with respect to the particular shares being distributed for certain periods prior to the commencement of, or during, that distribution. All of the above may affect the marketability of the shares and the ability of any person or entity to engage in market-making activities with respect to the shares. We have advised the Selling Shareholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply.
In offering the shares covered by this prospectus, the Selling Shareholders, and any broker-dealers and any other participating broker-dealers who execute sales for the Selling Shareholders, may be deemed to be “underwriters” within the meaning of the Securities Act in connection with these sales. Any profits realized by the Selling Shareholders and the compensation of such broker-dealers may be deemed to be underwriting discounts and commissions. We are not aware that any Selling Shareholder has entered into any arrangements with any underwriters or broker-dealers regarding the sale of its Class A Shares.
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We are being represented by Ellenoff Grossman & Schole LLP, New York, New York, with respect to certain legal matters of U.S. federal securities and New York State law. The validity of the Class A Shares and certain other matters of BVI law will be passed upon for us by Mourant Ozannes, a BVI partnership. Certain legal matters as to PRC law will be passed upon for us by Yuan Tai Law Offices.
The audited financial statements of the Company incorporated by reference in this prospectus and elsewhere in the registration statement have been so incorporated by reference in reliance upon the report of YCM CPA Inc., an independent registered public accounting firm, given the authority of said firm as experts in auditing and accounting, upon the authority and consent of said firm as experts in accounting and auditing.
The registered business address of YCM CPA Inc. is 4482 Barranca Pkwy, Ste 239, Irvine, California 92604.
28
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference the information we file with it, which means that we can disclose important information to you by referring you to another document that we have filed separately with the SEC. You should read the information incorporated by reference herein because it is an important part of this prospectus. We incorporate by reference into this prospectus and the registration statement of which this prospectus is a part the information or documents listed below that we have filed with the SEC:
| ● | our 2023 Annual Report on Form 20-F for the fiscal year ended December 31, 2023 filed with the SEC on May 15, 2024; | |
| ● | our Reports of Foreign Private Issuer on Form 6-K filed with the SEC on May 22, 2024, June 20, 2024, July 2, 2024, August 8, 2024, August 14, 2024 and August 30, 2024, including all the exhibits thereto; | |
| ● | the description of the Company’s common shares contained in the Form 8-A12B, filed with the SEC on November 28, 2017, and any further amendment or report filed hereafter for the purpose of updating such description; and | |
| ● | with respect to each offering of the securities under this prospectus, all our subsequent annual reports on Form 20-F and any report on Form 6-K that indicates that it is being incorporated by reference that we file or furnish with the SEC on or after the date on which the registration statement is first filed with the SEC and until the termination or completion of the offering by means of this prospectus. |
Except to the extent such information is deemed furnished and not filed pursuant to securities laws and regulations, all documents subsequently filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act and, to the extent specifically designated therein, reports on Form 6-K furnished by us to the SEC, in each case, prior to the filing of a post-effective amendment to this registration statement indicating that all securities offered under this registration statement have been sold, or deregistering all securities then remaining unsold, shall be deemed to be incorporated by reference in this registration statement and to be a part hereof from the date of filing or furnishing of such documents.
Any statement contained herein or in a document all or a portion of which is incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this registration statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this registration statement.
Upon written or oral request, we shall provide without charge to each person, including any beneficial owner, a copy of any or all of the documents that are incorporated by reference to this prospectus but not delivered with this prospectus. You may request a copy of these filings by contacting us at ReTo Eco-Solutions, Inc., c/o Beijing REIT Technology Development Co., Ltd., X-702, Tower A, 60 Anli Road, Chaoyang District, Beijing, People’s Republic of China 100101, Attention: Chief Executive Officer, telephone: (+86) 10-64827328.
29
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form F-3 that we filed with the SEC registering the securities that may be offered and sold hereunder. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, the exhibits filed therewith or the documents incorporated by reference therein. For further information about us and the securities offered hereby, reference is made to the registration statement, the exhibits filed therewith and the documents incorporated by reference therein. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance, we refer you to the copy of such contract or other document filed as an exhibit to the registration statement. We are required to file reports and other information with the SEC pursuant to the Exchange Act, including annual reports on Form 20-F and reports of foreign private issuer on Form 6-K.
The SEC maintains a website at www.sec.gov that contains reports and other information regarding issuers, like us, that file electronically with the SEC. The information on our website (www.retoeco.com), other than the Company’s SEC filings, is not, and should not be, considered part of this prospectus and is not incorporated by reference into this document.
As a foreign private issuer, ReTo is exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
Under BVI law, holders of our Shares are entitled, upon giving written notice to us, to inspect (i) our M&A, (ii) our register of members, (iii) our register of directors and (iv) minutes of meetings and resolutions of members, and to make copies of, and take extracts from the, these documents and records. However, our directors can refuse access if they are satisfied that to allow such access would be contrary to our interests.
30
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 8. Indemnification of Directors and Officers.
The Act allows a BVI company to indemnify any current or former director against any expense, judgment, fine or amount paid in settlement and reasonably incurred in connection with any legal, administrative or investigative proceedings brought against the director because the director served as a director of the company if: (i) the director acted honestly and in good faith and in what the director believed to be in the best interests of the company; and (ii) (in the case of criminal proceedings) the director had no reasonable cause to believe that the director’s conduct was unlawful. An indemnity that breaches the Act is void.
The Act allows a BVI company to pay any expenses incurred by any current or former director in defending any legal, administrative or investigative proceedings before the proceedings are finally concluded if the company is given an undertaking from, or on behalf of, the director to repay all amounts paid by the company if it is ultimately determined that the director is not entitled to be indemnified by the company.
With regard to conflicts of interest, any director of the Company who is interested in a transaction into which the Company has entered or will enter may vote on a matter relating to that transaction as long as he or she has disclosed the interest to each other director of the Company.
We are permitted under the M&A to purchase directors and officers insurance for each of the directors and officers of the Company whether or not the Company has the power to indemnify that person under the M&A.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to Regulation 14 of the M&A, the Company has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Item 9. Exhibits.
The following exhibits are filed herewith or incorporated by reference:
| * | Filed herewith. |
Item 10. Undertakings.
| (a) | The undersigned registrant hereby undertakes: |
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
II-1
| (ii) | to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
| (iii) | to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement, | |
| provided, however, that subsections (i), (ii) and (iii) above do not apply if the information required to be included in a post-effective amendment by those subsections is contained in reports filed with or furnished to the SEC by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement. | ||
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. | |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. | |
| (4) | To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Securities Act of 1933 need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3, a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Securities Act of 1933 if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3. |
| (5) | That, for the purpose of determining liability under the Securities Act of 1933, as amended, to any purchaser: |
| (i) | Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of this registration statement as of the date the filed prospectus was deemed part of and included in this registration statement; and | ||
| (ii) | Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933, as amended, shall be deemed to be part of and included in this registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date. |
| (b) | The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, as amended, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934, as amended), that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (c) | Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
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Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Beijing, China, on the 24th day of September, 2024.
| RETO ECO-SOLUTIONS, INC. | |||
| By: | /s/ Hengfang Li | ||
| Name: | Hengfang Li | ||
| Title: | Chief Executive Officer | ||
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Hengfang Li his or her true and lawful attorney-in-fact, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments including post-effective amendments to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on September 24, 2024.
| Name | Title | |
| /s/ Hengfang Li | Chairman of the Board and Chief Executive Officer | |
| Hengfang Li | (Principal Executive Officer) | |
| /s/ Yue Hu | Chief Financial Officer | |
| Yue Hu | (Principal Financial Officer and Principal Accounting Officer) | |
| /s/ Guangfei Dai | President, Chief Operating Officer and Director | |
| Guangfei Dai | ||
| /s/ Zhizhong Hu | Chief Technology Officer and Director | |
| Zhizhong Hu | ||
| /s/ Tonglong Liu | Director | |
| Tonglong Liu | ||
| /s/ Baoqing Sun | Director | |
| Baoqing Sun | ||
| /s/ Lidong Liu | Director | |
| Lidong Liu | ||
| /s/ Austin Huang | Director | |
| Austin Huang |
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SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of ReTo Eco-Solutions, Inc., has signed this Registration Statement in New York, NY on September 24, 2024.
| Authorized U.S. Representative | |||
| By: | /s/ Xinran Li | ||
| Name: | Xinran Li | ||
II-4
Exhibit 5.1
|
|
Mourant Ozannes 5th Floor Waters Edge Building Meridian Plaza Road Town Tortola, British Virgin Islands
T +1 284 852 1700 F +1 284 852 1799 |
|
ReTo Eco-Solutions, Inc. c/o Beijing REIT Technology Development Co., Ltd. Building X-702, ,60 Anli Road Chaoyang District Beijing, People’s Republic of China 100101 |
Date: 24 September 2024
Dear Addressee
ReTo Eco-Solutions, Inc. (the Company)
We have acted as the Company’s British Virgin Islands legal advisers in connection with the registration statement on Form F-3 (the Registration Statement) which has been filed on or around the date of this opinion with the US Securities and Exchange Commission (the SEC) under the US Securities Act of 1933 (the Securities Act). The Registration Statement relates to the offering of:
| (a) | up to an aggregate of 14,095,200 class A shares of US$0.10 par value each in the Company (the SPA Shares, each an SPA Share); and |
| (b) | 1,268,568 class A shares of US$0.10 par value each in the Company (the Consulting Shares, each a Consulting Share) to Jaash Investment Limited (JIL). |
The Company has asked us to provide this opinion in connection with the Registration Statement and the issuance of the SPA Shares and the Consulting Shares.
| 1. | Documents, searches and definitions |
| 1.1 | We have reviewed a copy of each of the following documents for the purposes of this opinion: |
| (a) | the Registration Statement; |
| (b) | a securities purchase agreement dated 30 August 2024 (the Securities Purchase Agreement) between the Company and each of the purchasers listed on the signature pages thereto in connection with the issuance of the SPA Shares; |
| (c) | a financial advisory and consulting agreement dated 30 August 2024 (the Consulting Agreement) between the Company and JIL in connection with the issuance of the Consulting Shares to JIL; |
| (d) | the Company’s certificate(s) of incorporation (the Certificate of Incorporation) and memorandum and articles of association as amended and restated on 8 August 2024 (the M&A) obtained from the Company Search; |
| Mourant Ozannes is a British Virgin Islands partnership | mourant.com |
| (e) | the resolutions in writing of the directors of the Company passed on 30 August 2024 (the Director Resolutions); |
| (f) | a certificate of the Company’s registered agent dated 6 September 2024 (the Registered Agent’s Certificate); |
| (g) | a copy of the Company’s register of directors (the Register of Directors) which was affixed to the Registered Agent’s Certificate; |
| (h) | a copy of the Company’s shareholder list dated 20 September 2024 (the Shareholder List) provided by the Company’s transfer agent; and |
| (i) | a certificate of good standing for the Company dated 23 September 2024 issued by the Registrar (the Certificate of Good Standing). |
| 1.2 | We have carried out the following searches (together, the Searches) in relation to the Company: |
| (a) | a search of the records maintained by the Registrar that were on file and available for public inspection on 24 September 2024 (the Company Search); and |
| (b) | a search of the records of proceedings in the BVI Courts available for public inspection contained in the judicial enforcement management system (the electronic register of proceedings) maintained at the registry of the High Court of Justice of the Virgin Islands (the High Court) on 24 September 2024 (the High Court Search). |
| 1.3 | In this opinion: |
| (a) | agreement includes an agreement, deed or other instrument; |
| (b) | BVI means the territory of the British Virgin Islands; |
| (c) | BVI Courts means the Eastern Caribbean Supreme Court, Court of Appeal (Virgin Islands) and the High Court (Civil and Commercial Divisions), and BVI Court means any of them; |
| (d) | Companies Act means the BVI Business Companies Act (Revised Edition) 2020; |
| (e) | Company Records means the Certificate of Incorporation, the M&A, the Register of Directors, the Shareholder List, the Certificate of Good Standing and the Registered Agent’s Certificate; |
| (f) | executed means (unless the context requires otherwise) that a document has been signed, dated and unconditionally delivered; |
| (g) | Insolvency Act means the Insolvency Act, 2003 (as amended); |
| (h) | insolvent has the meaning given in the Insolvency Act; |
| (i) | non-assessable means, in relation to an SPA Share or a Consulting Share, that the purchase price for which the Company agreed to issue that SPA Share or Consulting Share has been paid in full to the Company and that no further sum is payable to the Company in respect of that SPA Share or Consulting Share; |
| (j) | Prospectus means the prospectus that forms part of the Registration Statement; |
| (k) | Registrar means the Registrar of Corporate Affairs appointed under the Companies Act; and |
| (l) | signed means that a document has been duly signed or sealed. |
| Mourant Ozannes is a British Virgin Islands partnership | mourant.com | |
| 2 |
| 2. | Assumptions |
We have assumed (and have not independently verified) that:
| 2.1 | each document examined by us: |
| (a) | whether it is an original or copy, is (along with any date, signature, initial, stamp or seal on it) genuine and complete, up-to-date and (where applicable) in full force and effect; and |
| (b) | was (where it was executed after we reviewed it) executed in materially the same form as the last draft of that document examined by us; |
| 2.2 | in approving the issuance of the SPA Shares and Consulting Shares in accordance with the Registration Statement, the Securities Purchase Agreement and the Consulting Agreement (as applicable), each director of the Company: |
| (a) | acted or will act honestly, in good faith and in what the director believed or believes to be the best interests of the Company; |
| (b) | exercised or will exercise the director’s powers as a director for a proper purpose; and |
| (c) | exercised or will exercise the care, diligence and skill that a reasonable director would exercise in the same circumstances; |
| 2.3 | each director of the Company (and any alternate director) has disclosed or will disclose to each other director any interest of that director (or alternate director) in the transactions contemplated by the Registration Statement, the Securities Purchase Agreement and the Consulting Agreement in accordance with the M&A and the Companies Act; |
| 2.4 | the Director Resolutions were duly passed, are in full force and effect and have not been amended, revoked or superseded; |
| 2.5 | each document examined by us that has been signed by the Company: |
| (a) | has been signed by the person(s) authorised by the Company to sign it; |
| (b) | (where any signatory is a body corporate) it has been signed in accordance with that body corporate’s constitution and then current signing authorities; and |
| (c) | has been dated and unconditionally delivered by the Company; |
| 2.6 | each party to the Securities Purchase Agreement and the Consulting Agreement has (or will have): |
| (a) | the capacity and power; |
| (b) | taken or will take all necessary action; and |
| (c) | obtained or made (or will obtain and will make) all necessary agreements, approvals, authorisations, consents, filings, licences, registrations and qualifications (whether as a matter of any law or regulation applicable to it or as a matter of any agreement binding upon it), |
to execute, and perform its obligations under, the Securities Purchase Agreement and the Consulting Agreement;
| Mourant Ozannes is a British Virgin Islands partnership | mourant.com | |
| 3 |
| 2.7 | the Registration Statement has been duly authorised and approved and the Securities Purchase Agreement and the Consulting Agreement have been duly authorised and executed by each party to it; |
| 2.8 | there are no documents or arrangements to which the Company is party or resolutions of the Company’s directors or shareholders that conflict with, or would be breached by or which prohibit the Company’s entry into, or performance of its obligations under, the Securities Purchase Agreement, the Consulting Agreement, or the issuance of the SPA Shares or the Consulting Shares; |
| 2.9 | the Company has executed, or will execute each document and has done, or will do, each other act and thing, that it is required to execute or do under each relevant document in connection with the issuance of the SPA Shares and the Consulting Shares (including the Registration Statement, the Securities Purchase Agreement and the Consulting Agreement); |
| 2.10 | the SPA Shares and the Consulting Shares have been authorised, issued and delivered in accordance with (and the terms of the issuance and sale of the SPA Shares and Consulting Shares have been duly established in conformity with) the Director Resolutions, all applicable laws, the M&A, the Securities Purchase Agreement and the Consulting Agreement (as applicable); |
| 2.11 | the Company has received: |
| (a) | the consideration provided for in the Securities Purchase Agreement and such consideration per share is not less than the par value per SPA Share; and |
| (b) | the consideration provided for in the Consulting Agreement and such consideration per share is not less than the par value per Consulting Share; |
| 2.12 | the Securities Purchase Agreement and the Consulting Agreement are in full force and effective and legal, binding and enforceable under all applicable laws at the time that the SPA Shares and the Consulting Shares (as applicable) are issued; |
| 2.13 | the Company was not insolvent and will not become insolvent as a result of executing, or performing its obligations under, any document relating to the issuance of the SPA Shares or the Consulting Shares (including the Registration Statement, the Securities Purchase Agreement and the Consulting Agreement) and at the time the Company issued (or issues) the SPA Shares and the Consulting Shares, no steps had (or will have) been taken, or resolutions passed, to appoint a liquidator of the Company or a receiver in respect of the Company or any of its assets; |
| 2.14 | the Company is not carrying on any financial services business (as defined in the Financial Services Commission Act, 2001 (as amended)); |
| 2.15 | none of our opinions will be affected by the laws or public policy of any foreign jurisdiction; |
| 2.16 | the choice of the governing law of the Securities Purchase Agreement and the Consulting Agreement has been made in good faith; |
| 2.17 | in relation to the Searches: |
| (a) | all public records of the Company we have examined are complete and accurate; |
| (b) | all filings required to be made in relation to the Company with the Registrar have been made and there was no information which had been filed that did not appear on the records of the Company at the time of the Company Search; and |
| (c) | the information disclosed by the Searches was at the time of each search, and continues to be, accurate and complete; |
| Mourant Ozannes is a British Virgin Islands partnership | mourant.com | |
| 4 |
| 2.18 | the Company Records were, and remain at the date of this opinion, accurate and complete; and |
| 2.19 | no monies paid to or for the account of any party under the Securities Purchase Agreement or the Consulting Agreement, or property received or disposed of by any party to the Securities Purchase Agreement or the Consulting Agreement, in each case, in connection with the Securities Purchase Agreement or the Consulting Agreement or the performance of the transactions contemplated by the Securities Purchase Agreement or the Consulting Agreement, represent or will represent proceeds of criminal conduct (as defined in the Proceeds of Criminal Conduct Act, 1997 (as amended)). |
| 3. | Opinion |
Subject to the assumptions, observations, qualifications and limitations set out in this opinion, and to matters not disclosed to us, we are of the following opinion.
| 3.1 | Status: the Company is registered under the Companies Act, validly exists under the laws of the BVI and, on the date of issue of the Certificate of Good Standing, is of good standing with the Registrar. |
| 3.2 | Issuance of SPA Shares: the SPA Shares have been validly issued, fully paid and are non-assessable. |
| 3.3 | Issuance of Consulting Shares: the Consulting Shares have been validly issued, fully paid and are non-assessable. |
| 3.4 | High Court Search: the High Court Search does not show any actions or petitions pending against the Company in the BVI Courts at the time of our search. |
| 3.5 | Authorised shares: based solely on our review of the M&A, the Company is authorised to issue an unlimited number of shares designated as follows: |
| (a) | an unlimited number of Class A Shares of US$0.10 par value each; and |
| (b) | up to a maximum of 2,000,000 Class B Shares of US$0.01 par value each, |
or any combination of the above classes of shares.
| 4. | Qualifications and observations |
This opinion is subject to the following qualifications and observations.
| 4.1 | This opinion is subject to all laws relating to bankruptcy, dissolution, insolvency, re-organisation, liquidation, moratorium, court schemes and other laws and legal procedures of general application affecting or relating to the rights of creditors. |
| 4.2 | Where a director fails, in accordance with the Companies Act, to disclose an interest in a transaction entered into by a BVI company, the transaction is voidable. |
| 4.3 | The Company Search will not reveal any document which has not been filed with the Registrar or which was filed but was not registered or did not appear on the Company’s file at the time of the Company Search. |
| 4.4 | The High Court Search will not reveal (among other things) if there are any: |
| (a) | proceedings or appointments that have not been filed or that have been filed but have not been recorded in the High Court’s judicial enforcement management system; |
| Mourant Ozannes is a British Virgin Islands partnership | mourant.com | |
| 5 |
| (b) | proceedings commenced prior to 1 January 2000 if no document has been filed since that date; |
| (c) | proceedings against the Company that have been threatened but not filed; |
| (d) | files that have been sealed pursuant to a court order; or |
| (e) | arbitration proceedings in which the Company is a defendant or respondent. |
| 4.5 | The Insolvency Act requires a receiver appointed in respect of a BVI company (or any of its assets) to file a notice of appointment with the Registrar and (if the company is or has been a regulated person (as defined in the Insolvency Act)) with the British Virgin Islands Financial Services Commission. If the receiver fails to do so, the receiver will be guilty of an offence and liable to a fine. This does not, however, invalidate the receiver’s appointment. |
| 4.6 | Under the Companies Act, a company is of good standing if the Registrar is satisfied that it: |
| (a) | is listed on the register of companies maintained by the Registrar; |
| (b) | has paid to the Registrar all fees, annual fees and penalties due and payable; |
| (c) | has, where applicable, filed its annual return (as defined in the Companies Act) in accordance with section 98A of the Companies Act or it is not yet due to file its annual return; and |
| (d) | has filed with the Registrar a copy of its register of directors which is complete (to the satisfaction of the Registrar as to the requisite information relating to each director and is properly filed) or is not yet due to file its register of directors with the Registrar. |
| 5. | Limitations |
| 5.1 | This opinion is limited to the matters expressly stated in it and it is given solely in connection with the Registration Statement and the issuance of the SPA Shares and Consulting Shares. |
| 5.2 | For the purposes of this opinion, we have only examined the documents listed in paragraph 1.1 above and carried out the Searches. We have not examined any term or document incorporated by reference, or otherwise referred to, whether in whole or part, in the Registration Statement, the Securities Purchase Agreement or the Consulting Agreement and we offer no opinion on any such term or document. |
| 5.3 | We have made no investigation of, and express no opinion with respect to, the laws of any jurisdiction other than the BVI or the effect of the Registration Statement, the Securities Purchase Agreement or the Consulting Agreement under those laws. In particular, we express no opinion as to the meaning or effect of any foreign statutes referred to in the Registration Statement, the Securities Purchase Agreement or the Consulting Agreement. |
| Mourant Ozannes is a British Virgin Islands partnership | mourant.com | |
| 6 |
| 5.4 | We assume no obligation to advise the Company (or any person we give consent to rely on this opinion) in relation to changes of fact or law that may have a bearing on the continuing accuracy of this opinion. |
| 6. | Governing law |
This opinion, and any non-contractual obligations arising out of it, are governed by, and to be interpreted in accordance with, BVI laws in force on the date of this opinion.
| 7. | Consent |
| 7.1 | This opinion may only be used in connection with the offer and sale of the SPA Shares and Consulting Shares while the Registration Statement is effective. |
| 7.2 | We consent to: |
| (a) | the filing of a copy of this opinion as Exhibit 5.1 to the Registration Statement; and |
| (b) | reference to us being made in the section of the Prospectus under the heading Legal Matters and elsewhere in the Prospectus. |
In giving this consent, we do not admit that we are included in the category of persons whose consent is required under section 7 of the Securities Act or the rules and regulations promulgated by the SEC under the Securities Act.
Yours faithfully
Mourant Ozannes (British Virgin Islands)
| Mourant Ozannes is a British Virgin Islands partnership | mourant.com | |
| 7 |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the inclusion in this Registration Statement on Form F-3 of ReTo Eco-Solutions, Inc. of our report dated May 15, 2024, with respect to the consolidated balance sheets of ReTo Eco-Solutions, Inc. and its subsidiaries as of December 31, 2023 and 2022 and the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity, and cash flows for the years ended December 31, 2023, 2022, and 2021. We also consent to the reference to our firm under the heading “Experts” in the Registration Statement.
/s/ YCM CPA, Inc.
PCAOB ID 6781
Irvine, California
September 24, 2024