ReTo Eco-Solutions, Inc 6-K/A, filed May 15, 2024
ReTo Eco-Solutions, Inc. (RETO)
About this 6-K/A
ReTo Eco-Solutions, Inc filed this 6-K/A on May 15, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K/A
(Amendment No. 1)
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of May 2024
Commission file number: 001-38307
RETO ECO-SOLUTIONS, INC.
(Registrant’s name)
c/o Beijing REIT Technology Development Co.,
Ltd.
X-702, 60 Anli Road, Chaoyang District, Beijing
People’s Republic of China 100101
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Explanatory Note:
This Amendment No. 1 (the “Amendment”) to Report of Foreign Private Issuer on Form 6-K/A of ReTo Eco-Solutions, Inc., a British Virgin Islands company (the “Company”), is being filed to amend the Company’s previously filed Report of Foreign Private Issuer on Form 6-K (the “Form 6-K”) with the Securities and Exchange Commission (the “SEC”) on December 27, 2023, in order to restate the unaudited financial results for the six months ended June 30, 2023 of the Company and related disclosures.
The management of the Company, in consultation with its advisors, identified an error made in its previously issued unaudited condensed consolidated financial statements for the six months ended June 30, 2023 in relation to the recognition and measurement of its share-based compensation expenses. The Company failed to identify the proper share prices in calculation of the share-based compensation. Such failure has resulted in errors relating to the overstatement of share-based compensation for the six months ended June 30, 2023. The Company does not expect any tax and cash flow impact related to the correction.
On May 12, 2024, the Company’s audit committee concluded, after discussion with the Company’s management and its advisors, that the Company’s unaudited condensed consolidated financial statements included in the Form 6-K should no longer be relied upon due to the overstatement described above and should be restated.
Attached as Exhibit 99.1 to this Amendment No. 1 to the Form 6-K is a copy of the restated unaudited financial results for the six months ended June 30, 2023 of the Company and related discussions of the Company’s results of operations.
This Amendment speaks as of the original filing date of the Form 6-K and, except as described above, does not modify or update the Form 6-K as heretofore amended.
INCORPORATION BY REFERENCE
This Amendment, including Exhibit 99.1 hereto, shall be deemed to be incorporated by reference into each of (i) the registration statement on Form F-3, as amended (No. 333-267101) of the Company, (ii) the registration statement on Form S-8, as amended (File No. 333-270355) of the Company and (iii) the registration statement on Form S-8, as amended (File No. 333-264499) of the Company, and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Restated Unaudited Financial Results for the Six Months Ended June 30, 2023 |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: May 15, 2024 | RETO ECO-SOLUTIONS, INC. | |
| By: | /s/ Hengfang Li | |
| Name: | Hengfang Li | |
| Title: | Chief Executive Officer | |
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Exhibit 99.1
First Half 2023 Financial Review
| ● | Revenues decreased by approximately $1.7 million, or 57%, to $1.2 million for the six months ended June 30, 2023 from approximately $2.9 million for the six months ended June 30, 2022. |
| ● | Cost of revenues decreased by approximately $1.4 million, or 55%, to approximately $1.1 million for the six months ended June 30, 2023 from $2.5 million for the six months ended June 30, 2022. |
| ● | Operating expenses increased by approximately $1.1 million, or 18%, to approximately $7.1 million for the six months ended June 30, 2023 from $6.0 million for the six months ended June 30, 2022. |
| ● | Net loss increased by approximately $5.9 million, or 102%, to approximately $11.6 million for the six months ended June 30, 2023 from $5.8 million for the six months ended June 30, 2022. |
Financial Results for the First Half 2023
Revenues
Revenues decreased by approximately $1.7 million, or 57%, to $1.2 million for the six months ended June 30, 2023 from approximately $2.9 million for the six months ended June 30, 2022. Revenue from machinery and equipment sales decreased by approximately $1.0 million, or 49%, to $1.0 million for the six months ended June 30, 2023 from approximately $2.0 million for the six months ended June 30, 2022. The decrease is mainly due to slowdown of the construction industry and less demand for the Company’s products. Sales of the Company’s environmental-friendly construction materials decreased by approximately $0.2 million, or 72%, to approximately $0.09 million for six months ended June 30, 2023 from approximately $0.3 million for the six months ended June 30, 2022 due to the decrease in demand resulting from the downturn of the national real estate market. Revenue from other services decreased by approximately $0.3 million, or 79%, to approximately $0.09 million for six months ended June 30, 2023 from approximately $0.4 million for the six months ended June 30, 2022 due to less demand for the Company’s technological consulting service and roadside assistance service.
Cost of revenues
Cost of revenues decreased by approximately $1.4 million, or 55%, to approximately $1.1 million for the six months ended June 30, 2023 from $2.5 million for the six months ended June 30, 2022. The decrease in cost of revenues was in line with the decrease in revenues.
Gross profit
Gross profit decreased by approximately $0.3 million, or 75%, to approximately $0.1 million for the six months ended June 30, 2023 from $0.4 million for the six months ended June 30, 2022. Gross margin was 8% for the six months ended June 30, 2023 as compared to 13% for the six months ended June 30, 2022. The decrease in gross profit was primarily attributable to (i) a decrease of approximately $147,000 in gross profit in machinery and equipment business due to the significant decrease in domestic and overseas market demand of machinery and equipment; and (ii) a decrease of approximately $155,000 in gross profit in other services due to decreased customer orders. Because other services with higher gross profit margin accounted for 7% of total revenue in the six months ended June 30, 2023 as compared to 15% of total revenue for the six months ended June 30, 2022, the Company’s gross profit margin decreased to 8% for the six months ended June 30, 2023 as compared to 13% of total revenue for the six months ended June 30, 2022.
Operating expenses
For the six months ended June 30, 2023 and 2022, the Company’s selling expenses were approximately $0.3 million for both periods.
General and administrative expenses decreased by $0.3 million, or 6%, to $5.5 million for the six months ended June 30, 2023 from $5.9 million for the six months ended June 30, 2022. The decrease was due to $0.3 million decrease in share-based compensation and payroll expenses.
Bad debt expenses amounted to approximately $0.5 million for the six months ended June 30, 2023, as compared to a bad debt recovery of approximately $0.7 million for the six months ended June 30, 2022.
Research and development expenses increased by $0.3 million, or 60%, to $0.8 million for the six months ended June 30, 2023 from $0.5 million for the six months ended June 30, 2022. The increase was due to an increase of approximately $0.3 million in expert fees.
Interest expense
The Company’s interest expenses were approximately $0.2 million for both six-month periods ended June 30, 2023 and 2022.
Change in fair value in convertible debt
Due to change in fair value of convertible loans, the Company recorded an unrealized loss of $57,985 and $204,331 in other expense for the six months ended June 30, 2023 and 2022, respectively.
Other income (expense), net
Other expense was $4.4 million for the six months ended June 30, 2023 as compared to $0.3 million for the six months ended June 30, 2022. The increase was due to a one-time charge of $4.7 million from a terminated project.
Loss before income taxes
The Company’s loss before income taxes was approximately $11.6 million for the six months ended June 30, 2023, an increase of approximately $5.9 million as compared to loss before income taxes of approximately $5.7 million for the six months ended June 30, 2022. The increase was primarily attributable to decrease in revenue and increase in operating expenses and other expense.
Provision for income taxes
The Company’s subsidiaries in the People’s Republic of China (“PRC”) are subject to PRC income tax, which is computed according to the relevant laws and regulations in the PRC. Under the Enterprise Income Tax Law, the corporate income tax rate applicable to all companies, including both domestic and foreign-invested companies, is 25%. However, two subsidiaries of the Company, Beijing REIT Technology Development Co., Ltd. and Hainan Yile IoT Technology Co., Ltd., are recognized as High and New Technology Enterprises by the PRC government and thus subject to a favorable income tax rate of 15%. As the Company had losses before income tax, its income tax expenses amounted to $52 and $28,767 for the six months ended June 30, 2023 and 2022, respectively.
Net loss
As a result of the foregoing, net loss amounted to approximately $11.6 million and $5.8 million for the six months ended June 30, 2023 and 2022, respectively.
Cash
Cash was approximately $0.2 million as of June 30, 2023, reflecting an increase of approximately $0.1 million from approximately $0.1 million as of December 31, 2022.
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RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | (Unaudited) | |||||||
| (Restated) | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 233,839 | $ | 113,895 | ||||
| Accounts receivable, net | 475,303 | 2,150,450 | ||||||
| Accounts receivable, net - related party | 79,639 | 83,736 | ||||||
| Advances to suppliers, net | 707,775 | 453,894 | ||||||
| Advances to suppliers, net - related party | 1,598,977 | 3,787,036 | ||||||
| Inventories, net | 820,590 | 337,798 | ||||||
| Prepayments and other current assets | 114,287 | 402,151 | ||||||
| Due from related parties | 483,369 | 208,225 | ||||||
| Due from third parties | 678,223 | - | ||||||
| Total Current Assets | 5,192,002 | 7,537,185 | ||||||
| Property, plant and equipment, net | 8,028,957 | 8,722,435 | ||||||
| Intangible assets, net | 4,548,402 | 4,869,654 | ||||||
| Long-term investment in equity investee | 2,301,850 | 2,503,944 | ||||||
| Right-of-use assets | 271,972 | 424,999 | ||||||
| Total Assets | $ | 20,343,183 | $ | 24,058,217 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Short-term loans | $ | 5,274,916 | 1,319,490 | |||||
| Convertible debt | 3,004,000 | 3,922,686 | ||||||
| Advances from customers | 2,072,983 | 2,551,216 | ||||||
| Advances from customers-related party | 166,275 | - | ||||||
| Due to a minority shareholder | 413,719 | 725,000 | ||||||
| Deferred grants - current | 264 | 18,563 | ||||||
| Accounts payable | 2,934,058 | 2,624,701 | ||||||
| Accrued and other liabilities | 2,433,692 | 2,717,432 | ||||||
| Loans from third parties | 1,356,113 | 1,106,233 | ||||||
| Taxes payable | 1,922,345 | 2,077,088 | ||||||
| Operating lease liabilities, current | 150,420 | 277,036 | ||||||
| Deferred tax liability | 309,664 | 325,593 | ||||||
| Total Current Liabilities | 20,038,449 | 17,665,038 | ||||||
| Loans from third parties-noncurrent | 1,048,088 | 1,160,000 | ||||||
| Operating lease liabilities - noncurrent | 83,407 | 158,650 | ||||||
| Total Liabilities | 21,169,944 | 18,983,688 | ||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ Equity: | ||||||||
| Common Share, $0.1 par value, 2,000,000 shares authorized, 772,585 shares and 433,989 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively* | 77,259 | 43,400 | ||||||
| Additional paid-in capital | 64,669,295 | 53,331,093 | ||||||
| Subscription receivable | (5,887,546 | ) | - | |||||
| Statutory reserve | 1,069,882 | 1,066,554 | ||||||
| Accumulated deficit | (59,036,277 | ) | (47,813,206 | ) | ||||
| Accumulated other comprehensive loss | (2,220,029 | ) | (2,388,890 | ) | ||||
| Total Shareholders’ Equity Attributable to ReTo Eco-Solutions Inc. | (1,327,416 | ) | 4,238,951 | |||||
| Noncontrolling interest | 500,655 | 835,578 | ||||||
| Total Shareholders’ Equity | (826,761 | ) | 5,074,529 | |||||
| Total Liabilities and Shareholders’ Equity | $ | 20,343,183 | 24,058,217 | |||||
| * | The share number and share-related data in the financial statements have been adjusted to reflect the two share combinations on May 12, 2023 and March 1, 2024. |
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RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| (Restated) | ||||||||
| Revenues – third party customers | $ | 1,022,919 | $ | 2,882,792 | ||||
| Revenues – related parties | 210,864 | 6,987 | ||||||
| Total revenues | 1,233,783 | 2,889,779 | ||||||
| Cost of revenues – third party customers | 780,794 | 1,957,829 | ||||||
| Cost of revenues – related parties | 359,398 | 557,145 | ||||||
| Total Cost | 1,140,192 | 2,514,974 | ||||||
| Gross Profit | 93,591 | 374,805 | ||||||
| Operating Expenses: | ||||||||
| Selling expenses | 289,730 | 288,552 | ||||||
| General and administrative expenses | 5,539,187 | 5,888,849 | ||||||
| Bad debt expenses (recovery) | 460,116 | (650,776 | ) | |||||
| Research and development expenses | 809,979 | 505,847 | ||||||
| Total Operating Expenses | 7,099,012 | 6,032,472 | ||||||
| Loss from Operations | (7,005,421 | ) | (5,657,667 | ) | ||||
| Other Income (expenses): | ||||||||
| Interest expenses | (180,772 | ) | (189,755 | ) | ||||
| Interest income | 1,509 | 2,293 | ||||||
| Other income (expenses), net | (4,356,224 | ) | 348,266 | |||||
| Change in fair value of convertible debt | (57,985 | ) | (204,331 | ) | ||||
| Gain from disposal of subsidiaries | 38,394 | - | ||||||
| Share of losses in equity method investments | (83,307 | ) | (38,885 | ) | ||||
| Total Other Expenses, Net | (4,638,385 | ) | (82,412 | ) | ||||
| Loss Before Income Taxes | (11,643,806 | ) | (5,740,079 | ) | ||||
| Provision for Income Taxes | 52 | 28,767 | ||||||
| Net Loss | (11,643,858 | ) | (5,768,846 | ) | ||||
| Less: net loss attributable to noncontrolling interest | (424,115 | ) | (92,866 | ) | ||||
| Net Loss Attributable to ReTo Eco-Solutions, Inc. | $ | (11,219,743 | ) | $ | (5,675,980 | ) | ||
| Net Loss | $ | (11,643,858 | ) | $ | (5,768,846 | ) | ||
| Other comprehensive gain (loss): | ||||||||
| Foreign currency translation adjustment | 258,053 | (723,421 | ) | |||||
| Comprehensive Loss | (11,385,805 | ) | (6,492,267 | ) | ||||
| Less: comprehensive loss attributable to noncontrolling interest | (334,923 | ) | (22,981 | ) | ||||
| Comprehensive Loss Attributable to ReTo Eco-Solutions, Inc | $ | (11,050,882 | ) | $ | (6,469,286 | ) | ||
| Loss Per Share | ||||||||
| Basic and diluted | $ | (20.63 | ) | $ | (16.48 | ) | ||
| Weighted Average Number of Shares* | ||||||||
| Basic and diluted | 543,785 | 344,334 | ||||||
| * | The share number and share-related data in the financial statements have been adjusted to reflect the two share combinations on May 12, 2023 and March 1, 2024. |
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