Tantech Holdings Ltd 6-K, filed Dec 28, 2022
Tantech Holdings Ltd (TANH)
About this 6-K
Tantech Holdings Ltd filed this 6-K on December 28, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of
Commission File Number: 001-36885
(Translation of registrant’s name into English)
c/o Zhejiang Forest Bamboo Technology Co., Ltd.
+86-578-226-2305
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ⌧ |
| Form 40-F ¨ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Explanatory Note:
The Registrant is furnishing this Report on Form 6-K to provide its unaudited interim financial statements for the six months ended June 30, 2022 and incorporate such financial statements into the Registrant’s registration statements referenced below.
This Form 6-K is hereby incorporated by reference into the registration statements of the Registrant on Form S-8 (File Number 333-203387), Form S-8 (File Number 333-205821), Form F-3 (File Number 333-213240), as amended, Form F-3 (File Number 333-248197) and Form F-3 (File Number 333-251509) and into each prospectus outstanding under the foregoing registration statements, to the extent not superseded by documents or reports subsequently filed or furnished by the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
1
Financial Statements and Exhibits.
The following exhibit is attached.
Exhibit |
| Description |
99.1 | | |
99.2 | | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
99.3 | | |
101.INS | | XBRL Instance Document |
101.SCH | | XBRL Taxonomy Extension Schema Document |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TANTECH HOLDINGS LTD | ||
| |||
Date: December 28, 2022 | By: | /s/ Wangfeng Yan | |
|
| Name: | Wangfeng Yan |
|
| Title: | Chief Executive Officer |
3
Exhibit 99.1
TANTECH HOLDINGS LTD AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
|
| Page |
Consolidated Financial Statements | |
|
Condensed Consolidated Balance Sheets as of June 30, 2022 (Unaudited) and December 31, 2021 | | F-2 |
| F-3 | |
| F-4 | |
| F-5 | |
Notes to Unaudited Condensed Consolidated Financial Statements | | F-6 - F-28 |
F-1
Tantech Holdings Ltd and Subsidiaries
Condensed Consolidated Balance Sheets
|
| June 30, |
| December 31, | ||
|
| 2022 |
| 2021 | ||
| | (Unaudited) | | | ||
Assets | | |
| | | |
Current Assets | | | | | |
|
Cash and cash equivalents | | $ | | | $ | |
Restricted cash | |
| — | |
| |
Accounts receivable, net | |
| | |
| |
Factoring receivable | | | | | | — |
Inventories, net | |
| | |
| |
Due a from related party | | | — | | | |
Advances to suppliers, net | |
| | |
| |
Prepaid taxes | |
| | |
| |
Prepaid expenses and other receivables, net | |
| | |
| |
Total Current Assets | |
| | |
| |
| |
|
| | |
|
Other Assets | | | | |
| |
Property, plant and equipment, net | |
| | |
| |
Intangible assets, net | |
| | |
| |
Right of use assets | | | | | | |
Long-term investment | |
| | |
| |
Total Non-current Assets | | | | | | |
Total Assets | | $ | | | $ | |
| | | | | | |
Liabilities and Stockholders’ Equity | |
|
| |
|
|
Current Liabilities | |
|
| |
|
|
Short-term bank loans | | $ | | | $ | |
Accounts payable | |
| | |
| |
Due to related parties | |
| | |
| |
Customer deposits | |
| | |
| |
Taxes payable | |
| | |
| |
Loan payable to third parties | |
| | |
| |
Lease liabilities-current | | | | | | |
Accrued liabilities and other payables | |
| | |
| |
Total Current Liabilities | |
| | |
| |
Lease liabilities non-current | |
| | |
| |
Total Liabilities | |
| | |
| |
| | | | | | |
Stockholders’ Equity | |
|
| |
|
|
Common stock, $ | |
| | |
| |
Additional paid-in capital | |
| | |
| |
Statutory reserves | |
| | |
| |
Retained earnings | |
| | |
| |
Accumulated other comprehensive (loss) income | |
| ( | |
| |
Total Stockholders’ Equity attributable to the Company | |
| | |
| |
Noncontrolling interest | |
| ( | |
| ( |
Total Stockholders’ Equity | |
| | |
| |
Total Liabilities and Stockholders’ Equity | | $ | | | $ | |
*Retroactively restated for -for-twenty-four reverse split with effective date of November 9, 2022.
The accompanying notes are an integral part of these consolidated unaudited condensed financial statements.
F-2
Tantech Holdings Ltd and Subsidiaries
Unaudited Condensed Consolidated Statements of Income (Loss) and Comprehensive Loss
|
| For the Six Months Ended June 30, | ||||
|
| 2022 |
| 2021 | ||
| | | | | | |
Revenues | | $ | | | $ | |
Cost of revenues | |
| | |
| |
Gross Profit | |
| | |
| |
| | | | | | |
Operating expenses | |
| | |
| |
Selling expenses | |
| | |
| |
General and administrative expenses | |
| | |
| |
Share-based compensation | | | — | | | |
Research and development expenses | |
| | |
| |
Total operating expenses | |
| | |
| |
| | | | | | |
Income (loss) from operations | |
| | |
| ( |
| | | | | | |
Other income (expenses) | |
| | |
| |
Interest income | |
| | |
| |
Interest expense | |
| ( | |
| ( |
Government subsidy income | |
| | |
| |
Rental income from related parties | | | | | | |
Other income, net | |
| | |
| |
Total other income | |
| | |
| |
| | | | | | |
Income (loss) before provision for income taxes | |
| | |
| ( |
Provision for income taxes | |
| | |
| |
Net income (loss) | |
| | |
| ( |
Less: net loss attributable to noncontrolling interest | |
| ( | |
| ( |
Net income (loss) attributable to common stockholders of Tantech Holdings Ltd. | | $ | | | $ | ( |
| | | | | | |
Net income (loss) | |
| | |
| ( |
Other comprehensive income (loss): | |
| | |
| |
Foreign currency translation adjustment | |
| ( | |
| |
Comprehensive loss | |
| ( | |
| ( |
Less: Comprehensive loss attributable to noncontrolling interest | |
| ( | |
| ( |
Comprehensive loss attributable to common stockholders of Tantech Holdings Ltd. | | $ | ( | | $ | ( |
| | | | | | |
Earnings (loss) per share | | | | | | |
Basic | | $ | | | $ | ( |
Diluted | | $ | | | $ | ( |
Weighted Average Shares Outstanding | | | | | | |
Basic | |
| | |
| |
Diluted | |
| | |
| |
*Retroactively restated for -for-twenty-four reverse split with effective date of November 9, 2022.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
Tantech Holdings Ltd and Subsidiaries
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
|
| |
| | |
| | |
| Accumulated |
| | |
| | |
| | |
| | | |
| | | | | | | Additional | | Other | | | | | | | | Non | | Total | ||||
| | Common Stock | | Paid in | | Comprehensive | | Statutory | | Retained | | Controlling | | Stockholders’ | |||||||||
|
| Shares |
| Amount |
| Capital |
| Income (loss) |
| Reserves |
| Earnings |
| Interest |
| Equity | |||||||
Balance at December 31, 2020 |
| | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | | | | | | | | | |
Issuance of common stock for private placement | | | | | | | | | | | — | | | — | | | — | | | — | | | |
Issuance of common stock for services | | | | | | | | | | | — | | | — | | | — | | | — | | | |
Foreign currency translation adjustment | | — | | | — | | | — | | | | | | — | | | — | | | ( | | | |
Net loss | | — | | | — | | | — | | | — | | | — | | | ( | | | ( | | | ( |
Balance at June 30, 2021 |
| | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2021 | | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | ( | | $ | |
| | | | | | | | | | | | | | | | | | | | | | | |
Proceeds received from issuance of common stock |
| | |
| | |
| | | | — | |
| — | |
| — | |
| — | |
| |
Cancellation of common stock due to reverse split | | ( | | | ( | | | | |
| — | |
| — | |
| — | |
| — | |
| — |
Appropriation of retained earnings to statutory reserve fund | | — | | | — | | | — | |
| — | |
| | |
| ( | |
| — | |
| — |
Foreign currency translation adjustment | | — | | | — | | | — | | | ( | | | — | | | — | | | | | | ( |
Net income | | — | | | — | | | — | | | — | | | — | | | | | | ( | | | |
Balance at June 30, 2022 |
| | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | ( | | $ | |
*Retroactively restated for -for-twenty-four reverse split with effective date of November 9, 2022.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
Tantech Holdings Ltd and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
|
| | For the Six Months Ended June 30, | |||
|
| 2022 |
| 2021 | ||
Cash flows from operating activities | | |
|
| |
|
Net income (loss) | | $ | | | $ | ( |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |
| | |
| |
Depreciation expense | |
| | |
| |
Amortization of intangible asset | |
| | |
| |
Allowance for doubtful accounts | |
| ( | |
| |
Loss from disposal of property, plant and equipment | |
| — | |
| |
Issuance of common stock for services | | | — | | | |
Change in inventory reserve | | | — | | | |
Amortization of right of use assets | | | | | | — |
Changes in operating assets and liabilities: | |
| | |
| |
Accounts receivable | |
| ( | |
| ( |
Factoring receivable | |
| ( | | | — |
Advances to suppliers | |
| | |
| ( |
Advances to suppliers - related party | | | — | | | |
Inventory | |
| | |
| ( |
Prepaid expenses and other receivables | |
| | |
| ( |
Accounts payable | |
| | |
| |
Accrued liabilities and other payables | |
| | |
| ( |
Customer deposits | |
| ( | |
| |
Taxes payable, net of prepaid taxes | |
| | |
| |
Lease liabilities | |
| | | | — |
Net cash used in operating activities | |
| ( | |
| ( |
| | | | | | |
Cash flows from investing activities | |
| | |
| |
Acquisition of property, plant and equipment | |
| ( | |
| ( |
Net cash used in investing activities | |
| ( | |
| ( |
| | | | | | |
Cash flows from financing activities | |
|
| |
| |
Net proceeds from equity financing | |
| | |
| |
Repayment of loans from third party | |
| ( | |
| ( |
Bank acceptance notes payable, net of repayment | |
| — | |
| ( |
Proceeds from bank loans | |
| — | |
| |
Repayment of bank loans | | | ( | | | ( |
Proceeds from (repayment of) loans from related parties, net | |
| | |
| |
Net cash provided by financing activities | |
| | |
| |
| | | | | | |
Effect of exchange rate changes on cash, restricted cash and cash equivalents | |
| ( | |
| |
| | | | | | |
Net (decrease) increase in cash, restricted cash and cash equivalents | |
| ( | |
| |
| | | | | | |
Cash, restricted cash and cash equivalents, beginning of period | |
| | |
| |
| | | | | | |
Cash, restricted cash and cash equivalents, end of period | | $ | | | $ | |
| | | | | | |
Supplemental disclosure information: | |
| | |
| |
Income taxes paid | | $ | | | $ | |
Interest paid | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Organization and Nature of Business
Tantech Holdings Ltd (“Tantech” or “Tantech BVI”) is a holding company established under the laws of the British Virgin Islands on November 9, 2010. Tantech engages in the research and development, production and distribution of various products made from bamboo, manufacture and selling electric vehicles and non-electric vehicles, as well as investment in mining exploration. On August 3, 2021, Tantech completed dismantling its VIE structure. As of June 30, 2022, details of the subsidiaries of the Company and their principal business activities are set out below:
Name of Entity |
| Date of |
| Place of |
| % of |
| Principal Activities |
Tantech Holdings Ltd (“Tantech” or “Tantech BVI”) |
| November 9, 2010 |
| BVI |
| Parent |
| Holding Company |
|
|
|
|
|
|
|
|
|
USCNHK Group Limited (“USCNHK”) |
| October 17, 2008 |
| Hong Kong |
|
| Holding Company | |
|
|
|
|
|
|
|
|
|
EAG International Vantage Capitals Limited (“Euroasia”) |
| April 27, 2015 |
| Hong Kong |
|
| Holding Company | |
|
|
|
|
|
|
|
|
|
EPakia Inc. (“EPakia”) | | On May 19, 2022 | | United States | | | Biodegradable packaging business | |
| | | | | | | | |
Tantech Holdings (Lishui) Co. Ltd. (“Lishui Tantech”) |
| April 7, 2016 |
| Lishui, Zhejiang Province, China |
|
| Holding Company | |
|
|
|
|
|
|
|
|
|
Euroasia New Energy Automotive (Jiangsu) Co. Ltd. (“Euroasia New Energy”) |
| October 24, 2017 |
| Zhangjia Gang, Jiangsu Province, China |
|
| Holding Company | |
|
|
|
|
|
|
|
|
|
Shanghai Jiamu Investment Management Co., Ltd (“Jiamu”) |
| July 14, 2015 |
| Shanghai, China |
|
| Holding Company | |
|
|
|
|
|
|
|
|
|
Hangzhou Wangbo Investment Management Co., Ltd (“Wangbo”) |
| February 2, 2016 |
| Hangzhou, Zhejiang Province, China |
|
| Holding Company | |
|
|
|
|
|
|
|
|
|
Hangzhou Jiyi Investment Management Co., Ltd (“Jiyi”) |
| February 2, 2016 |
| Hangzhou, Zhejiang Province, China |
|
| Holding Company | |
|
|
|
|
|
|
|
|
|
Shangchi Automobile Co., Ltd. (“Shangchi Automobile”) |
| Acquired on July 12, 2017 |
| Zhangjia Gang, Jiangsu Province, China |
|
| Manufacturing and sale of specialty electric and non-electric vehicles and power batteries | |
|
|
|
|
|
|
|
|
|
Shenzhen Yimao New Energy Sales Co., Ltd. (“Shenzhen Yimao”) |
| November 13, 2018 |
| Shenzhen, Guangdong Province, China |
|
| Electric vehicles sales | |
|
|
|
|
|
|
|
|
|
Lishui Xincai Industrial Co., Ltd. (“Lishui Xincai”) |
| December 14, 2017 |
| Lishui, Zhejiang Province, China |
|
| Holding Company | |
|
|
|
|
|
|
|
|
|
Zhejiang Tantech Bamboo Charcoal Co., Ltd. (“Tantech Charcoal”) |
| September 5, 2002 |
| Lishui, Zhejiang Province, China |
|
| Manufacturing, selling and trading various products made from bamboo and charcoal | |
|
|
|
|
|
|
|
|
|
Lishui Jikang Energy Technology Co., Ltd. (“Jikang Energy”) |
| January 2, 2020 |
| Lishui, Zhejiang Province, China |
|
| Holding Company | |
|
|
|
|
|
|
|
|
|
Hangzhou Tanbo Tech Co., Ltd. (“Tanbo Tech”) |
| December 8, 2015 |
| Hangzhou, Zhejiang Province, China |
|
| Exploring business opportunities outside Lishui area | |
|
|
|
|
|
|
|
|
|
Zhejiang Tantech Bamboo Technology Co., Ltd. (“Tantech Bamboo”) |
| December 31, 2005 |
| Lishui, Zhejiang Province, China |
|
| Manufacturing and sale of various products made from bamboo | |
|
|
|
|
|
|
|
|
|
Zhejiang Shangchi New Energy Automobile Co., Ltd. (“Zhejiang Shangchi”) |
| November 12, 2020 |
| Lishui, Zhejiang Province, China |
|
| Sales of automobiles | |
|
|
|
|
|
|
|
|
|
Lishui Smart New Energy Automobile Co., Ltd. (“Lishui Smart”) |
| November 16, 2020 |
| Lishui, Zhejiang Province, China |
|
| Research, development and manufacturing new energy automobiles | |
| | | | | | | | |
Gangyu Trading (Jiangsu) Co., Ltd. (“Gangyu Trading”) | | August 10, 2021 | | Zhangjiagang Jiangsu Province, China | | | Marketing and selling electric vehicles | |
| | | | | | | | |
Shangchi (Zhejiang) Intelligent Equipment Co., Ltd. (“Shangchi Intelligent Equipment”) | | August 26, 2021 | | Pinghu Zhejiang Province, China | | | Manufacturing and sales company focusing on new energy vehicles | |
| | | | | | | | |
Shanghai Wangju Industrial Group Co., Ltd. (“Shanghai Wangju”) | | September 23, 2021 | | Shanghai, China | | | Investing in the factoring industry | |
| | | | | | | | |
Eurasia Holdings (Zhejiang) Co., Ltd. (“Eurasia Holdings”) | | July 15, 2021 | | Hangzhou Zhejiang province, China | | | Marketing and selling electric vehicles | |
| | | | | | | | |
Hangzhou Eurasia Supply Chain Co., Ltd. (“Eurasia Supply”) | | August 4 2021 | | Hangzhou Zhejiang province, China | | | Supply chain business | |
| | | | | | | | |
Zhejiang Shangchi Medical Equipment Co., Ltd. (“Shangchi Medical”) | | November 13, 2021 | | Pinghu Zhejiang Province, China | | | Manufacturing and sales company focusing on new energy vehicles | |
| | | | | | | | |
Shenzhen Shangdong Trading Co., Ltd. (“Shenzhen Shangdong”) | | July 13, 2016 | | Shenzhen Guangdong Province, China | | | Investing in the factoring industry | |
| | | | | | | | |
China East Trade Co., Ltd. (“China East”) | | February 15, 2018 | | Hong Kong | | | Investing in the factoring industry | |
| | | | | | | | |
First International Commercial Factoring (Shenzhen) Co., Ltd. (“First International”) | | July 27, 2017 | | Shenzhen Guangdong Province, China | | | Investing in the factoring industry |
F-6
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies
Principal of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The consolidated financial statements include the financial statements of Tantech BVI and its subsidiaries (collectively, the “Company”). All significant inter-company balances and transactions are eliminated upon consolidation.
Non-controlling interest
Non-controlling interest represents
Use of Estimates
In preparing the unaudited condensed consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates unaudited condensed of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include the fair value estimates used in the useful lives of property and equipment and intangible assets, allowances pertaining to the allowance for doubtful accounts of accounts receivable, advance to suppliers and other receivables, the valuation of inventories, the impairment of long-lived assets, and the realizability of deferred tax assets.
Fair Value of Financial Instruments
The Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurements”, defines fair value, establishes a three-level valuation hierarchy for fair value measurements and enhances disclosure requirements.
The three levels are defined as follows:
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3 - inputs to the valuation methodology are unobservable.
Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, restricted cash, accounts receivable, advances to suppliers, other receivables, accounts payable, customer deposits, accrued expenses, short term bank loans and bank acceptance notes payable approximates their recorded values due to their short-term maturities.
Cash and cash equivalents
For purposes of the statements of cash flows, the Company considers all highly liquid instruments purchased with an original maturity of three months or less and money market accounts to be cash equivalents. All cash balances are in bank accounts in PRC and are not insured by the Federal Deposit Insurance Corporation or other programs.
F-7
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
Restricted Cash
As of December 31, 2021, the Company’s restricted cash represents the cash of $
Concentrations of credit risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, trade accounts receivable and advances to suppliers. All of the Company’s cash is maintained with banks within the People’s Republic of China of which no deposits are covered by insurance. The Company has not experienced any losses in such accounts. A significant portion of the Company’s sales are credit sales which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas. The Company also makes cash advances to certain suppliers to ensure the stable supply of key raw materials. The Company performs ongoing credit evaluations of its customers and key suppliers to help further reduce credit risk.
Accounts receivable
Accounts receivable are presented at invoiced amount net of an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer’s payment history, its current credit-worthiness and current economic trends. Accounts are written off after efforts at collection prove unsuccessful.
Inventory
The Company values its inventories at the lower of cost, determined on a weighted average basis, or net realizable value. The Company reviews its inventories periodically to determine if any markdown is necessary for potential obsolescence or if a write-down is necessary if the carrying value exceeds net realizable value.
Advances to suppliers
In order to ensure a steady supply of raw materials, the Company is required from time to time to make cash advances when placing its purchase orders. The Company reviews its advances to suppliers on a periodic basis and makes general and specific allowances when there is doubt as to the ability of a supplier to refund an advance or provide supplies to the Company.
Property and Equipment and Construction in Progress
Property and equipment are stated at cost less accumulated depreciation. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use.
F-8
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets. The estimated useful lives for significant property and equipment are as follows:
Buildings |
| |
Machinery and equipment |
| |
Transportation equipment |
| |
Office equipment |
| |
Electronic equipment |
|
Repairs and maintenance costs are normally charged to earnings in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.
Construction in progress includes direct costs of construction or acquisition of equipment, interest expense associated with the loans used for the construction and design fees incurred. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed.
Intangible assets
Intangible assets are acquired individually or as part of a group of assets, and are initially recorded at cost. The cost of a group of assets acquired in a transaction is allocated to the individual assets based on their relative fair values. Intangible assets are carried at cost less accumulated amortization and any recorded impairment. Intangible assets with finite useful lives are amortized using a straight-line method over the period of estimated useful life. The estimated useful lives of the Company’s intangible assets are as follows:
|
| Estimated Useful Life |
Licenses and permits |
| Indefinite |
Software |
| |
Land use right |
| |
Patents |
|
The Company evaluates intangible assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired.
Long term investments
The Company accounts for investment in equity investees over which it has significant influence but does not own a majority of the equity interest or lack of control using the equity method. For investment in equity investees over which the Company does not have significant influence or the underlying shares the Company invested in are not considered in-substance common stock and have no readily determinable fair value, the cost method accounting is applied.
F-9
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
The Company records the equity method investments at historical cost and subsequently adjusts the carrying amount each period for share of the earnings or losses of the investee and other adjustments required by the equity method of accounting. Dividends received from the equity method investments are recorded as reductions in the cost of such investments. The Company records the cost method investments at historical cost and subsequently record any dividends received from the net accumulated earnings of the investee as income. Dividends received in excess of earnings are considered a return of investment and are recorded as reductions in the cost of the investments.
Investment in equity investees are evaluated for impairment when facts or circumstances indicate that the fair value of the investment is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near term prospects of the investments; and (v) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, the Company evaluates the recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available.
Customer Deposits
Customer deposits represent amounts received from customers in advance of shipments relating to the sales of the Company’s products.
Loan Payable to Third Parties
Loan payable to third parties represent amounts the Company borrowed from third parties for working capital purpose. On December 17,2021, the Company borrowed $
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than
The Company adopted ASC 842 on January 1, 2019 on a modified retrospective basis and elected the practical expedients permitted under the transition guidance, which allows the Company to carryforward the historical lease classification, the assessment on whether a contract is or contains a lease, and the initial direct costs for any leases that exist prior to adoption of the new standard. Leases with an initial term of
F-10
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
Revenue Recognition
The Company adopted ASC Topic 606 Revenue from Contracts with Customers (“ASC 606”) on January 1, 2018 using the modified retrospective approach. There is no adjustment to the opening balance of retained earnings at January 1, 2018 since there was no change to the timing and pattern of revenue recognition upon adoption of ASC 606. Under ASC 606, revenue is recognized when control of promised goods or services is transferred to the Company’s customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services. The Company’s revenues are primarily derived from the following sources:
Sales of products: The Company recognizes sales revenue, net of sales taxes and estimated sales returns, at the time the product is delivered to the customer and control is transferred (point of sale).
For the Company’s electric vehicles sales contracts, the Company provides a warranty for
Commission income: The Company acts as an agent without assuming the risks and rewards of ownership of the goods and reports the revenue on a net basis. Revenue is recognized based on the completion of the contracted service.
Government manufacturing rebate income: The Company sells electric vehicles in China and is eligible for a government manufacturing rebate on each qualifying electric vehicle sold. The government manufacturing rebates are recognized as part of revenue when sales are finalized, amount of rebate can be reasonably estimated and collection is assured. The collectability of rebates can be assured as long as the sales are deemed qualifying based on the criteria set by the government.
Factoring income: The Company provides commercial factoring service to customers who seek financing from their receivables. The Company identifies the distinct performance obligation is to serve the customer with ongoing factoring service over the contractual period. The Company’s customer simultaneously receives and consumes the benefit provided by the company performance over the loan term. As the result, the Company recognizes the interest income from factoring service over the contract time.
Revenue is reported net of all value added taxes. The Company does not routinely permit customers to return products and historically, customer returns have been immaterial.
Cost of Revenues
Cost of revenues includes cost of raw materials purchased, inbound freight cost, cost of direct labor, depreciation expense and other overhead. Write-down of inventory for lower of cost or net realizable value adjustments is also recorded in cost of revenues.
Shipping and Handling
Shipping and handling costs are expensed as incurred and included in selling expenses.
Subsidy Income
The Company periodically receives various government grants such as “High Technology Projects Subsidy” and “Scientific Research Grant”. There is no guarantee the Company will continue to receive such grants in the future.
F-11
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
Foreign Currency Translation
The Company’s financial information is presented in U.S. dollars. The functional currency of the Company’s subsidiaries in the PRC is the RMB, the currency of the PRC. Any subsidiary transactions, which are denominated in currencies other than RMB, are translated into RMB at the exchange rate quoted by the People’s Bank of China prevailing at the dates of the transactions, and exchange gains and losses are included in the statements of comprehensive income (loss) as foreign currency transaction gain or loss. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830, “Foreign Currency Matters”. The financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange rates for assets and liabilities and average exchange rates for revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in stockholders’ equity. Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:
|
| Six months ended June 30, 2022 |
| Six months ended June 30, 2021 |
| December 31, 2021 | |||||||||
US$:RMB exchange rate |
| Period End |
| $ | |
| Period End |
| $ | |
| Period End |
| $ | |
| | Average | | $ | | | Average | | $ | | | Average | | $ | |
Research and development costs
Research and development expenses include costs directly attributable to the conduct of research and development projects, including the cost of salaries and other employee benefits, testing expenses, consumable equipment and consulting fees prior to the establishment of technological feasibility. All costs associated with research and development are expensed as incurred.
Comprehensive Income (loss)
Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under GAAP are recorded as an element of stockholders’ equity but are excluded from net income (loss). Other comprehensive income (loss) consists of foreign currency translation adjustment from those subsidiaries not using the U.S. dollar as their functional currency.
Income Taxes
The Company’s subsidiaries in China are subject to the income tax laws of the PRC. No taxable income was generated outside the PRC as of June 30, 2022. The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or future deductibility is uncertain.
F-12
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
ASC 740-10-25 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. The statute of limitation on the PRC tax authority’s audit or examination of previously filed tax returns expires three years from the date they were filed. There were no material uncertain tax positions as of June 30, 2022 and December 31, 2021.
Value Added Tax (“VAT”)
Earnings (loss) per Share (“EPS”)
The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”), and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. As of June 30, 2022 and December 31, 2021, the total number of registered and unregistered warrants outstanding both were
Statement of Cash Flows
In accordance with ASC 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
Risks and Uncertainties
The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, in addition to the general state of the PRC economy. The Company’s operating results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
F-13
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
The Company’s sales, purchases and expense transactions are denominated in RMB, and primarily all of the Company’s assets and liabilities are also denominated in RMB. The RMB is not freely convertible into foreign currencies under the current law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China, the central bank of China. Remittances in currencies other than RMB may require certain supporting documentation in order to affect the remittance.
The Company does not carry any business interruption insurance, products liability insurance or any other insurance policy except for a limited property insurance policy. As a result, the Company may incur uninsured losses, increasing the possibility that investors would lose their entire investment in the Company.
COVID-19
The Company’s operations were affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020, was declared a pandemic by the World Health Organization. The COVID-19 outbreak is causing lockdowns, travel restrictions, and closures of businesses. The Company’s business has been negatively impacted by the COVID-19 coronavirus outbreak to certain extent in fiscal 2020.
From late January 2020 to the middle of February 2020, the Company had to temporarily suspend our manufacturing activities due to government restrictions. During the temporary business closure period, our employees had very limited access to our manufacturing facilities and the shipping companies were not available and as a result, the Company experienced difficulty delivering our products to the customers on a timely basis. In addition, due to the COVID-19 outbreak, some of the customers or suppliers may experience financial distress, delay or default on their payments, reduce the scale of their business, or suffer disruptions in their business due to the outbreak. Any increased difficulty in collecting accounts receivable, delayed raw materials supply, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations.
As of the date of this filing, the COVID-19 coronavirus outbreak in China appears to be controlled and most provinces and cities have resumed business activities under the guidance and support of the government. In light of the current situation, the Company believes that the impact of the COVID-19 outbreak on the business is both temporary and limited, and that the revenues have started growing again in fiscal 2021 and fiscal 2022. However, there is still significant uncertainty regarding the possibility of another wave of infections, and the breadth and duration of business disruptions related to COVID-19, which could continue to have material impact to the Company’s operations.
Recent accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes” (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company adopted this guidance and this guidance did not have a material impact on the consolidated financial statements.
F-14
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”), which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 is effective for the Company beginning January 1, 2021. The Company adopted this guidance and this guidance did not have a material impact on the consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The Company adopted this guidance and this guidance did not have a material impact on the consolidated financial statements.
Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the unaudited condensed consolidated financial statements.
Note 3 – Liquidity
During six months ended June 30, 2022, the Company had a significantly growth in bamboo related products which generated revenue of $
F-15
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 – Liquidity (continued)
During six months ended June 30, 2022, the Company successfully completed one equity financing which resulted in net proceeds of $
The Company currently plans to fund its operations mainly through renewal of bank borrowings, additional equity financing and the continuing financial support by its shareholders and its affiliates controlled by its principal shareholder, if necessary, in the near future to ensure sufficient working capital. The Company has implemented a stricter policy on sales to supermarkets and less credible customers and continues to improve its collection efforts on accounts with outstanding balances. The Company is actively working with its customers and suppliers and expects to fully collect outstanding accounts receivables or utilize the rest of prepayment balance in next twelve months.
The Company plans to fund the EV segment through additional private placement and continued support from the parent company. The principal shareholder of the Company, along with the affiliated entity, Forasen Group, has agreed to provide financial support to the Company whenever necessary.
Based on its current operating plan, management believes that the above-mentioned measures collectively will provide sufficient liquidity for the Company to meet its future liquidity and capital requirements for at least next twelve months from the date of this report.
Note 4 – Accounts Receivable
Accounts receivable consisted of the following:
|
| June 30, |
| December 31, | ||
| | 2022 | | 2021 | ||
Accounts receivable | | $ | | | $ | |
Allowance for doubtful accounts | |
| ( | |
| ( |
Accounts receivable, net | | $ | | | $ | |
The movement of allowance for doubtful accounts are as follows:
| | June 30, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Balance at beginning of period | | $ | | | $ | |
Change of allowance for doubtful accounts | |
| ( | |
| ( |
Write off | | | — | | | ( |
Translation adjustments | |
| ( | |
| |
Balance at end of period | | $ | | | $ | |
F-16
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 – Inventory
Inventory consisted of the following:
|
| June 30, |
| December 31, | ||
| | 2022 | | 2021 | ||
Raw materials | | $ | | | $ | |
Finished products | |
| | |
| |
Work in process | |
| | |
| |
Total Inventory | | $ | | | $ | |
For the six months ended June 30, 2022 and 2021, the Company recorded inventory reserve of $
Note 6 – Advances to Suppliers
Advances to Suppliers consisted of the following:
| | | | | | |
|
| June 30, |
| December 31, | ||
| | 2022 | | 2021 | ||
Advances to suppliers | | $ | | | $ | |
Allowance for doubtful accounts | |
| ( | |
| ( |
Advances to suppliers, net | | $ | | | $ | |
The movement of allowance for doubtful accounts are as follows:
| | | | | | |
| | June 30, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Balance at beginning of period | | $ | | | $ | |
Change of allowance for doubtful accounts | |
| | |
| ( |
Write off | | | ( | | | ( |
Translation adjustments | |
| ( | |
| |
Balance at end of period | | $ | | | $ | |
Note 7 – Manufacturing Rebate Receivable
On September 13, 2013, the Chinese Ministry of Finance, the Chinese Ministry of Science and Technology, the Chinese Ministry of Industry and Information Technology, and the Chinese National Development and Reform Commission issued a joint announcement that in order to promote the development, sale and use of alternative energy vehicles, Chinese government will continue to provide a manufacturing rebate for qualifying alternative energy vehicles sold. The government manufacturing rebates are typically provided to eligible alternative energy automobile manufacturers after sales are finalized and paperwork regarding the eligible mileages is submitted. Based on the criteria, Shangchi Automobile (formerly known as Suzhou E-Motors) was eligible for government manufacturing rebates and had $
In 2021, the Chinese Ministry of Finance, the Chinese Ministry of Science and Technology, the Chinese Ministry of Industry and Information Technology, and the Chinese National Development and Reform Commission implemented a new policy which requires the minimum number of alternative energy vehicles for manufacturing rebate application shall be
The Company determined that there is remote possibility to successfully claim the manufacturing rebate under the newly implemented policy. As a result, the Company recorded
F-17
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 8 – Property, Plant and Equipment, net
Property, plant and equipment stated at cost less accumulated depreciation consisted of the following:
|
| June 30, |
| December 31, | ||
| | 2022 | | 2021 | ||
Building | | $ | | | $ | |
Machinery and Production equipment | |
| | |
| |
Electronic equipment | |
| | |
| |
Office equipment | |
| | |
| |
Automobiles | |
| | |
| |
Construction in progress | |
| | |
| |
Subtotal | |
| | |
| |
Less: Accumulated depreciation | |
| ( | |
| ( |
Property, plant and equipment, net | | $ | | | $ | |
Depreciation expense was $
Note 9 – Intangible Assets, net
Intangible assets stated at cost less accumulated depreciation amortization consisted of the following:
|
| June 30, |
| December 31, | ||
| | 2022 | | 2021 | ||
Software | | $ | | | $ | |
Land use rights* | |
| | |
| |
Patents | |
| | |
| |
Subtotal | |
| | |
| |
Less: Accumulated amortization | |
| ( | |
| ( |
Intangible assets, net | | $ | | | $ | |
*There is no private ownership of land in China. Land is usually owned by the local government and the government grants land use rights for specified terms. The Company acquired land use rights from the local government in December 2002 for period of
Amortization expense for intangible assets totaled $
Note 10 – Leases
Effective January 1, 2019, the Company adopted ASC 842, the new lease accounting standard using a modified retrospective transition method which allowed the Company not to recast comparative periods presented in its consolidated financial statements. In addition, the Company elected the package of practical expedients, which allowed the Company to not reassess whether any existing contracts contain a lease, to not reassess historical lease classification as operating or finance leases, and to not reassess initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The Company combines the lease and non-lease components in determining the ROU assets and related lease obligation. Adoption of this standard resulted in the recording of operating lease ROU assets and corresponding operating lease liabilities as disclosed below and had no impact on retained earnings as of June 30, 2022. ROU assets and related lease obligations are recognized at commencement date based on the present value of remaining lease payments over the lease term.
F-18
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10 – Leases (continued)
Supplemental balance sheet information related to operating leases was as follows:
|
| June 30, |
| December 31, | ||
| | 2022 | | 2021 | ||
| $ | | | $ | | |
| | | | | | |
| | |
| | | |
| | |
| | | |
| $ | | | $ | | |
The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of June 30, 2022:
Remaining lease term and discount rate: |
|
|
|
Weighted average remaining lease term (years) | |
| |
Weighted average discount rate | | | % |
The following is a schedule of maturities of lease liabilities as of June 30, 2022:
Twelve months ending June 30, |
| | |
2023 | | $ | |
2024 | | | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
Thereafter |
| | |
Total future minimum lease payments |
| | |
Less: imputed interest |
| | |
Total | | $ | |
Note 11 – Short-term Bank Loans
The Company’s short-term bank loans consist of the following:
|
| June 30, |
| December 31, | ||
| | 2022 | | 2021 | ||
Loan payable to Bank of China Lishui Branch | | $ | | | $ | |
Loan payable to Shanghai Pudong Development (“SPD”) Bank Lishui Branch | |
| | |
| |
Total | | $ | | | $ | |
On December 22, 2021, Tantech Charcoal entered into a short-term loan agreement with Bank of China (Lishui Branch) to borrow approximately $
F-19
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11 – Short-term Bank Loans (continued)
On April 1, 2022, the Company entered into a short-term-loan agreement with SPD Bank (Lishui Branch) to extend the remaining loan $
As of June 30, 2022, total bank loans payable amounted to $
On July 2, 2021, Tantech Charcoal entered into a short-term loan agreement with Bank of China (Lishui Branch) to borrow approximately $
On April 7, 2021, Tantech Bamboo entered into a short-term loan agreement with SPD Bank (Lishui Branch) to borrow $
As of December 31, 2021, total bank loans payable amounted to $
For the six months ended June 30, 2022 and 2021, the interest expense related to bank loans was $
F-20
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 12 – Related Party Balances and Transactions
Due from a related party
In October 2021, an aggregated of $
Due to related parties
The balances due to related parties were as follows:
| | | | | | |
|
| June 30, |
| December 31, | ||
| | 2022 | | 2021 | ||
Mr. Hengwei Chen and his affiliates * | | $ | — | | $ | |
Forasen Group and its affiliates, controlled by Mr. Zhengyu Wang, Chairman and previous CEO of the Company until December 6, 2019 | |
| | |
| |
Mr. Wangfeng Yan, the CEO of the Company since December 7, 2019 and his affiliates | | | | | | |
Total | | $ | | | $ | |
*Mr. Hengwei Chen was the former general manager of Shangchi Automobile (formerly known as Suzhou E-Motors). The Company acquired
As of June 30, 2022 and December 31, 2021, the Company borrowed $
Mr. Wangfeng Yan, the CEO of the Company, and his affiliates, also made advances to the Company. The balance due to Mr. Wangfeng Yan and his affiliates was $
The Company’s major shareholder Mr. Zhengyu Wang, his wife Ms. Yefang Zhang and his relative Ms. Aihong Wang, as well as related party entities controlled by Mr. Wang, and LJC the company controlled by the CEO, Mr. Wangfeng Yan provided guarantees to the Company’s bank loans (See Note 11).
Lease arrangement with related party
On July 6, 2020, Tantech Bamboo signed a lease agreement with Zhejiang Forasen Food Co., Ltd. (“Forasen Food”) to lease part of its production facilities of approximately
On July 13, 2021, Tantech Bamboo signed a lease agreement with Zhejiang Nongmi Food Co., Ltd. (“Nongmi Food”) to lease part of its production facilities of approximately
F-21
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 12 – Related Party Balances and Transactions (continued)
On July 13, 2021, Tantech Bamboo signed a lease agreement with Zhejiang Nongmi Biotechnology Co., Ltd. (“Nongmi Biotechnology”) to lease part of its production facilities of approximately
Note 13 – Commitments and Contingencies
Guaranty provided for related party
In July 2020, Tantech Bamboo provided a guarantee with Bank of China Lishui Branch for Forasen Food for maximum amount of approximately $
Operating leases
Shangchi Automobile leased certain factory facilities under operating leases through August 9, 2022. The annual rent under operating lease agreement was approximately $
On November 20, 2020, Shenzhen Yimao signed a new operating lease agreement for office space for
Tantech Charcoal leased factory facilities and office space from Tantech Energy under operating leases for
On April 18, 2022, Tanatech signed a new operating lease agreement for office space for
The rental expense for the six months ended June 30, 2022 and 2021 were $
Contingencies
On March 23, 2021, Mr. Hengwei Chen filed a lawsuit against Shangchi Automobile and the Company for a debt dispute of approximately $
F-22
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14 – Stockholders’ Equity
Share Consolidation
On February 24, 2022, the Company’s Board approved a share consolidation of the Company’s common shares at the ratio of -for-ten reverse split with the effective date of February 25, 2022. The objective of the share consolidation is to enable the company to regain compliance with NASDAQ Marketplace Rule 5550(a)(2) and maintain its listing on Nasdaq.
As a result of the share consolidation, each
On October 28, 2022, the Company’s Board approved a share consolidation of the Company’s common shares at the ratio of -for-twenty-four reverse split with the effective date of November 9, 2022. The objective of the share consolidation is to enable the company to regain compliance with NASDAQ Marketplace Rule 5550(a)(2) and maintain its listing on Nasdaq.
As a result of the share consolidation, each
All share information included in the consolidated financial statements and notes thereto have been retroactively adjusted for the -for-ten reverse split and one-for-twenty-four reverse split occurred on the first day of the first period presented.
Issuance of common shares
On March 23, 2020, the Company issued
On November 24, 2020, the Company completed an offering of
On May 18, 2021, the Company issued
On June 7, 2021, the Company completed an offering of
On July 15, 2021, the Company increased its authorized shares from
On December 6, 2021, the Company completed an offering of
On March 14, 2022, the Company paid cash to certain minor shareholders and cancelled
F-23
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14 – Stockholders’ Equity (continued)
On March 18, 2022, the Company completed an offering of
September 2017 Offering Warrants
In connection with the offering closed in September 2017, the Company registered and issued warrants to purchase an aggregate of
During the year ended December 31, 2020,
November 2020 Offering Warrants
In connection with and upon closing of the offering on November 24, 2020, the Company issued registered warrants to purchase up to
Management determined that these warrants meet the requirements for equity classification under ASC 815-40 because they are indexed to its own stock. The warrants were recorded at their fair value on the date of issuance as a component of shareholders’ equity. As of June 30, 2022, the total number of common shares underlying registered and unregistered warrants outstanding was
F-24
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 15 – Noncontrolling Interests
A reconciliation of non-controlling interest as of June 30, 2022 and December 31, 2021 is as follows:
|
| June 30, |
| December 31, | ||
| | 2022 | | 2021 | ||
Beginning Balance | | $ | ( | | $ | |
Proportionate shares of net loss | |
| ( | |
| ( |
Foreign currency translation adjustment | |
| | |
| ( |
Total | | $ | ( | | $ | ( |
As of June 30, 2022 and December 31, 2021, the noncontrolling interests balances represented the noncontrolling shareholder’s
Note 16 – Long Term Investments
On January 10, 2018, the Company invested approximately $
On November 29, 2019, the Company entered into an investment agreement (the “Investment Agreement”) with Jingning Zhonggang Mining Co., Ltd. (“Jingning Zhonggang”) through Lishui Tantech to acquire
Pursuant to the Investment Agreement, Tantech is obligated to pay the consideration within
After a series of transactions and reorganization, as of December 31, 2019, the Company and Jingning Zhonggang owns
On April 3, 2020, Lishui Ansheng Energy Technology Co., a third party, signed an investment agreement with Jingning Meizhongkuang to invest in Fuquan Chengwang by paying $
Fuquan Chengwang received the renewed mining permit in March 2021, and expiration date is March 2024. The mining permit provides it the right to mine a
Due to the fact that the Company did not have significant influence over the equity investees, the investments were accounted for using the cost method. For the six months ended June 30, 2022 and 2021, the Company did
F-25
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 17 – Segment Information
The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Due to business strategic changes, the Company merged consumer products segment and trading segment, and we start to provided commercial factoring business during six months ended June 30, 2022As a result, the Company has determined that it has three operating segments as defined by ASC 280, “Segment Reporting”: consumer products, electric vehicles (“EV”) and commercial factoring. Consumer products segment manufactures, sell and trade Charcoal Doctor branded products and BBQ charcoal in China. The EV segment manufactures and sell electric vehicles. Commercial factoring segment provided factoring business. Management, including the chief operating decision maker, reviews operation results of consumer products, electric vehicles and commercial factoring separately.
Adjustments and eliminations of inter-company transactions were not included in determining segment (loss) profit, as they are not used by the chief operating decision maker. The following table presents summary information by segment for the six months ended June 30, 2022 and 2021, respectively.
|
| Consumer Products |
| EV |
| Commercial Factoring | | Total | ||||||||||||||||
| | Six months | | Six months | | Six months | | Six months | | Six months | | Six months | | Six months | | Six months | ||||||||
| | ended | | ended | | ended | | ended | | ended | | ended | | ended | | ended | ||||||||
|
| June 30, 2022 |
| June 30, 2021 |
| June 30, 2022 |
| June 30, 2021 |
| June 30, 2022 |
| June 30, 2021 |
| June 30, 2022 |
| June 30, 2021 | ||||||||
Revenue from external customers | | $ | | | $ | | | $ | | | $ | | | $ | |
| $ | | $ | | | $ | | |
Revenue from inter segment | |
| ( | |
| ( | |
| — | |
| — | |
| — |
| | | | ( | |
| ( | |
Cost of revenue | |
| | |
| | |
| | |
| | |
| |
| | | | | |
| | |
Gross profit | |
| | |
| | |
| | |
| | |
| |
| | | | | |
| | |
Interest Expenses | |
| | |
| | |
| — | |
| — | |
| — |
| | | | | |
| | |
Depreciation & amortization | |
| | |
| | |
| | |
| | |
|
| | | | | |
| | ||
Capital expenditure | |
| | |
| |
| | |
| | |
|
| | | | | |
| | |||
Segment assets | |
| | |
| | |
| | |
| | |
| |
| | | | | |
| | |
Segment profit | | $ | | | $ | | | $ | ( | | $ | ( | | | |
| | | $ | | | $ | ( | |
F-26
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 17 – Segment Information (continued)
All of the Company’s long-lived assets are located in the PRC. Geographic information about the revenues, which are classified based on customers, is set out as follows:
|
| For the six months ended June 30, | ||||
|
| 2022 |
| 2021 | ||
Revenue from China | | $ | | | $ | |
Revenue directly from foreign countries | |
| | |
| |
Total Revenue | | $ | | | $ | |
Note 18 – Major Customers and Suppliers
The Company had certain customers whose revenue individually represented
For the six months ended June 30, 2022, four major customers accounted for approximately
As of June 30, 2022, three customers accounted for approximately
The Company also had certain major suppliers whose purchases individually represented
F-27
TANTECH HOLDINGS LTD AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 19 – Subsequent Events
Share Consolidation
On October 28, 2022, the Company’s Board approved a share consolidation of the Company’s common shares at the ratio of reverse split with the effective date of November 09, 2022. The objective of the share consolidation is to enable the company to regain compliance with NASDAQ Marketplace Rule 5550(a)(2) and maintain its listing on Nasdaq.
As a result of the share consolidation, each
NASDAQ Notice
On April 28, 2022 and May 18, 2022, the Company received notification letters (the “Notice”) from NASDAQ advising the Company that for
On October 28, 2022, The Nasdaq Stock Market LLC (“NASDAQ”) granted Tantech Holdings Ltd (the “Company”) an additional 180 calendar days, or until April 24, 2023, to regain compliance with the $
Incorporation of New Entity
On July 12, 2022, the Company formed a wholly-owned subsidiary EPakia Canada Inc. (“EPakia Canada”) in Canada. EPakia Canada will be engaged in developing the biodegradable packaging trading business in Canada and other international markets.
Bank Loan
On September 30, 2022, Tantech Bamboo entered into a short-term loan agreement with SPD (Luishui Branch) to borrow $
F-28
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report.
A. Operating Results
Overview of Company
Historically, we have been a specialized manufacturer of bamboo charcoal-based products with primary business focus in consumer products and low emission BBQ charcoal. After completing a series of re-organizations, dismantling prior VIE structure and business strategic changes, through our operating subsidiaries, we are now engaging in research, development, production and distribution of various charcoal products and vehicles, as well as trading bamboo charcoal products. We also have investments in mining exploration. For more detailed information about our recent developments, please refer to Notes 1 of the footnotes accompanying the financial statements included in this report.
As the result of the business strategic changes, during the year ended December 31, 2021 the Company merged its trading segment into its consumer products segment. We start to provide commercial factoring business during the six months ended June 30, 2022. Now the Company had three reporting segments: consumer product segment, electric vehicle segment and commercial factoring segment.
Our consumer products include purification and deodorization products, household cleaning products and barbecue charcoals designed for domestic market. Purification and deodorization products and household cleaning products are sold under the brand name “Charcoal Doctor.” Purification and deodorization products include air purification products, deodorant products and bamboo vinegar. Household cleaning products include toilet cleaning products, kitchen cleaning products, personal care products and clothing detergent products.
The largest category of our consumer products is purification and deodorization products. Made from dry distilled carbonized bamboo, our purification and deodorization products have the ability to absorb harmful substances and air-borne odors, including benzene, formaldehyde, ammonia and carbon tetrachloride. These products also come in many shapes and varieties for a multitude of purposes including pillows, cushion insoles, wrist pads, clothes hangers and other products. Bamboo vinegar is an additive that can be used in food processing, medical and hygiene products and fertilizer. Although it currently only accounts for a small portion of our revenue, bamboo vinegar products are crucial for us to maintain close ties with the agricultural industry which we believe will be a key area for growth in the coming years. Cleaning products, including disinfectants, detergents, lotions, specialized soaps and toilet cleaners are relatively new in our consumer products but provide us another opportunity for growth. Purchased from third parties and sold through our distribution channel, barbecue charcoals designed for China’s domestic market have also been a key source of revenue for us in recent years.
We are in the process to transform our business to focus more on the specialty electric vehicles (EVs) market. Our acquisition of Shangchi Automobile completed in the second quarter of 2017, and we recently established two subsidiaries in Zhejiang to shift our business strategy and focus on researching, developing and selling specialty EVs, such as electric driverless street sweepers. We are building our presence methodically, in order to maximize the impact of our R&D investments and technology advancements in specialty-use EVs rather than the more competitive, domestic general consumer EV market. We are confident in our position and remain fully committed to the EV segment, which we expect will be a key long-term growth driver for us. We expect our specialty EV business, especially driverless street sweepers, will grow with the growing sensitivity to cleaner environments and the demand for zero-emission vehicles, as well as favorable government policies and support in terms of subsidies, grants and/or tax rebates.
During six months ended June 30, 2022, we have started to provide commercial factoring service to customers who seek financing from their receivables. We estimate that we will generate approximately $1.2 million revenue from factoring service in fiscal 2022.
1
If our expansions into these new businesses are not successful, our future results of operations and growth prospects may be materially and adversely affected. There could be trends, uncertainties or events that may have a material effect on our sales or revenue of consumer products. If we cannot increase our consumer products and electric vehicle revenues or find new business opportunities to continue the growth, our total revenue may be decreasing.
Factors Affecting Our Results of Operations
Government Policy May Impact Our Business and Operating Results
We have seen negative impact of unfavorable government policy regarding rebates upon our EV business in recent years. In addition, our business and operating results will be affected by China’s overall economic growth and government policy. Unfavorable changes in government policies could affect the demand for our products and could materially and adversely affect our results of operations. Our bamboo charcoal-based consumer products are currently not subject to such government restrictions; however, any future changes in the government’s policy on the bamboo charcoal industry may have a negative effect on the supply of our raw materials.
Price Inelasticity of Raw Materials May Reduce Our Profit
As a specialized manufacturer of bamboo charcoal-based products, we rely on the continuous and stable supply of bamboo charcoal to ensure our operation and expansion. Although bamboo (and as a result bamboo charcoal) is a renewable supply, price inelasticity at any given time may increase the likelihood of bidding wars, resulting in an increase in raw material prices and thus reduce our profit. In addition, as we are competing based upon low price, we will risk losing customers by increasing our selling prices.
Competition in Consumer Product
Our products face competition from other producers. In our consumer product segment, we face competition from a number of companies that have similar product portfolios. Many of such competitors’ products are not bamboo-based; instead, we compete based on our products’ functional use. Many such competitors are able to provide functionally similar products without relying on bamboo or bamboo charcoal components.
Although our Charcoal Doctor brand is one of the largest and most famous in the charcoal bag and bamboo charcoal market, the bamboo charcoal-based consumer product industry is relatively fragmented and subject to relatively low barriers of entry.
Our Charcoal Doctor air purification products compete with products from charcoal-based competitors such as Zhejiang Maitanweng Ecological Development Co., Ltd., Zhejiang Jiejiegao Charcoal Industry Co., Ltd., and Quzhou Modern Charcoal Industry, Co., Ltd.
Our Charcoal Doctor toilet cleaner competitors include non-charcoal-based competitors such as SC Johnson & Son (Shanghai) Inc. (which makes the Mr. Muscle brand in China), Blue Moon Chinese Co., Ltd., Shanghai White Cat Group Ltd., Beijing Green Umbrella Chemical Co., Ltd. and Weilai (Guangzhou) Consumer products Co., Ltd.
COVID-19
Our operations were affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020, was declared a pandemic by the World Health Organization. The COVID-19 outbreak is causing lockdowns, travel restrictions, and closures of businesses. The Company’s business has been negatively impacted by the COVID-19 coronavirus outbreak to certain extent in fiscal 2020.
From late January 2020 to the middle of February 2020, the Company had to temporarily suspend our manufacturing activities due to government restrictions. During the temporary business closure period, our employees had very limited access to our manufacturing facilities and the shipping companies were not available and as a result, the Company experienced difficulty delivering our products to the customers on a timely basis. In addition, due to the COVID-19 outbreak, some of the customers or suppliers may experience financial distress, delay or default on their payments, reduce the scale of their business, or suffer disruptions in their business due to the outbreak. Any increased difficulty in collecting accounts receivable, delayed raw materials supply, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations.
2
As of the date of this filing, the COVID-19 coronavirus outbreak in China appears to be controlled and most provinces and cities have resumed business activities under the guidance and support of the government. In light of the current situation, the Company believes that the impact of the COVID-19 outbreak on the business is both temporary and limited, and that the revenues have started growing again in fiscal 2021 and fiscal 2022. However, there is still significant uncertainty regarding the possibility of another wave of infections, and the breadth and duration of business disruptions related to COVID-19, which could continue to have material impact to the Company’s operations.
Results of Operation
The following table summarizes the selected results of our operation during the six months ended June 30, 2022 and 2021, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
(All amounts, other than percentages, in thousands of U.S. dollars)
| | Six months ended June 30, |
| Six months ended June 30, |
|
| |
|
|
| ||||||
| | 2022 | | 2021 | | | | | | | ||||||
| | | | | As a | | | | | As a | | | | | |
|
| | | | | percentage | | | | | percentage | | Dollar ($) | | Percentage | | |
| | Dollars in | | of sales | | Dollars in | | of sales | | Increase | | Increase | | |||
Statement of Operations Data: |
| thousands |
| revenue |
| thousands |
| revenue |
| (Decrease) |
| (Decrease) |
| |||
Revenues | | $ | 27,026 |
| 100.0 | % | $ | 20,633 |
| 100 | % | $ | 6,393 |
| 31.0 | % |
Cost of revenues | |
| 21,892 |
| 81.0 | % |
| 16,660 |
| 80.7 | % |
| 5,232 |
| 31.4 | % |
Gross profit | |
| 5,134 |
| 19.0 | % |
| 3,973 |
| 19.3 | % |
| 1,161 |
| 29.2 | % |
| | | | | | | | | | | | | | | | |
Operating expenses | |
| |
| | |
| |
| | |
| |
| | |
Selling expenses | |
| 145 |
| 0.5 | % |
| 122 |
| 0.6 | % |
| 23 |
| 18.9 | % |
General and administrative expenses | |
| 1,528 |
| 5.7 | % |
| 1,399 |
| 6.8 | % |
| 129 |
| 9.2 | % |
Share based compensation | |
| — |
| — | % |
| 1,840 |
| 8.9 | % |
| (1,840) |
| (100.0) | % |
Research and development expenses | |
| 237 |
| 0.9 | % |
| 6,352 |
| 30.8 | % |
| (6,115) |
| (96.3) | % |
Total operating expenses | |
| 1,910 |
| 7.1 | % |
| 9,713 |
| 47.1 | % |
| (7,803) |
| (80.3) | % |
| | | | | | | | | | | | | | | | |
Income (loss) from operations | |
| 3,224 |
| 11.9 | % |
| (5,740) |
| (27.8) | % |
| 8,964 |
| (156.2) | % |
| | | | | | | | | | | | | | | | |
Other income (expenses) | |
| |
| | |
| |
| | |
| |
| | |
Interest income | |
| 192 |
| 0.7 | % |
| 58 |
| 0.3 | % |
| 134 |
| 231.0 | % |
Interest expense | |
| (107) |
| (0.4) | % |
| (138) |
| (0.7) | % |
| 31 |
| (22.5) | % |
Rental income from related parties | |
| 70 |
| 0.3 | % |
| 67 |
| 0.3 | % |
| 3 |
| 4.5 | % |
Other income (expense) | |
| 30 |
| 0.1 | % |
| 49 |
| 0.2 | % |
| (19) |
| (38.8) | % |
Total other income | |
| 185 |
| 0.7 | % |
| 36 |
| 0.2 | % |
| 149 |
| 413.9 | % |
| | | | | | | | | | | | | | | | |
Income (loss) before income tax expense | |
| 3,409 |
| 12.6 | % |
| (5,704) |
| (27.6) | % |
| 9,113 |
| (159.8) | % |
Income tax expense | |
| 1,537 |
| 5.7 | % |
| 1,048 |
| 5.1 | % |
| 489 |
| 46.7 | % |
| | | | | | | | | | | | | | | | |
Net income (loss) | |
| 1,872 |
| 6.9 | % |
| (6,752) |
| (32.7) | % |
| 8,624 |
| (127.7) | % |
Net income (loss) attributable to common stockholders of Tantech Holdings Ltd | | $ | 2,099 |
| 7.8 | % | $ | (6,570) |
| (31.8) | % | $ | 8,669 |
| (131.9) | % |
Revenues
Revenues increased by approximately $6.4 million, or 31.0%, to approximately $27.0 million in the six months ended June 30, 2022 from approximately $20.6 million in the same period of 2021. The increase was mainly attributable to the significant increase of our revenues from consumer products due to higher sales volume from existing and new customers.
3
Consumer product segment
Revenues from consumer product segment increased by $5.8 million, or 28.6%, to $26.3 million in the six months ended June 30, 2022 from $20.4 million in the same period of 2021. The increase was primarily attributable to the demand surge for our bamboo charcoal used for active charcoal masks, air purification and sanitation products due to continued fight against the COVID-19.
Electric Vehicle (“EV”) segment
The revenue for our EV segment was approximately $0.7 million in the six months ended June 30, 2022, as compared to sales of approximately $0.2 million in the same period of 2021. In the six months ended June 30, 2022, the revenue was mainly from the commission income in connection with fuel minibuses and electric specialty vehicles sold on behalf of other manufacturers.
Commercial factoring segment
During the six months ended June 30, 2022, the Company started to provides commercial factoring service to customers who seek financing from their receivables. The Company generated revenue of $56,311 from commercial factoring for the six months ended June 30, 2022. We expect the revenue from commercial factoring will continue to increase in the future.
Cost of revenues:
Our cost of revenues increased by approximately $5.2 million or 31.4% to approximately $21.9 million in the six months ended June 30, 2022 from approximately $16.7 million in the same period of 2021. As a percentage of revenues, the cost of revenue slightly increased to 81.0% in the six months ended June 30, 2022 from 80.7% in the same period of 2021.
The slightly increase in cost of revenues as a percentage of revenues in the six months ended June 30, 2022 was mainly attributable to the increase of cost of revenue from EV segment due to high fixed costs.
Gross profit
Our gross profit increased by approximately $1.1 million, or 29.2% to approximately $5.1 million in the six months ended June 30, 2022 from approximately $4.0 million in the same period of 2021. The gross profit margin was 19.0% in the six months ended June 30, 2022, as compared to 19.3% in the same period of 2021. On segment basis, gross margins for consumer product, EV segment and commercial factoring segment were 19.3%, 2.0% and 92.8%, respectively, for the six months ended June 30, 2022, compared to 19.1%, 38.5% and nil, respectively, for the same period of 2021. The decrease in overall gross margin was primarily attributable to the high cost from EV segment.
Selling expenses
Selling expenses were approximately $0.15 million in the six months ended June 30, 2022 and approximately $0.12 million in the same period of 2021. As a percentage of sales, our selling expenses were 0.5% of revenues in the six months ended June 30, 2022, as compared to 0.6% of revenues in the same period of 2021. The increase was mainly due to more promotion expenses in the six months ended June 30, 2022.
General and administrative expenses
Our general and administrative expenses increased by approximately $0.1 million or 9.2%, to approximately $1.5 million in the six months ended June 30, 2022 from approximately $1.4 million in the same period of 2021. As a percentage of revenues, general and administrative expenses increased to 5.7% in the six months ended June 30, 2022, compared to 6.8% in the same period of 2021. The increase was primarily attributable to increase of approximately $0.3 million in professional consulting expenses and approximately $0.3 million in staff compensations, offset by decrease of approximately $0.4 million in allowance of account receivables and decrease of approximately $0.2 million in amortization of intangible assets.
4
Research and development expenses
Research and development expenses decreased by $6.1 million, or 96.3%, to $0.2 million in the six months ended June 30, 2022 from $6.4 million in the same period of 2021. The decrease was primarily due to the less R&D activities in connection with our EV segment. During six months ended June 30, 2021, we increased our investment significantly for smart electric sanitation vehicles designed to be used in closed industrial parks and residential communities. We have successfully manufactured sanitation vehicles in fiscal 2021.
Share based compensation
In the six months ended June 30, 2021, the Company recorded share-based compensation of approximately $1.8 million. The Company issued 1,600,000 common shares to its employees under the Company’s 2014 Share Incentive Plan in May 2021. No such expense incurred in the six months ended June 30, 2022.
Total operating expenses
Total operating expenses decreased by $7.8 million, or 80.3%, to $1.9 million in the six months ended June 30, 2022 from $9.7 million in the same period of 2021, which was mainly due to a decrease of approximately $6.1 million in research and development and a decrease in share-based compensation expenses of $1.8 million compared to the same period of 2021.
Interest expenses
Our interest expenses were $0.1 million in the six months ended June 30, 2022 and 2021 reflecting no changes.
Rental income from related parties
Since fiscal 2021, the company has signed certain lease agreements with related parties to lease part of production facilities to related parties. the Company recorded rent income of approximately $0.07 million and $0.07 million for the six months ended June 30, 2022 and 2021, respectively.
Other income
Other income was approximately $0.03 million in the six months ended June 30, 2022 compared to approximately $0.49 million in the same period of 2021. Other income was primarily related to the government subsidy income.
Income (loss) before income taxes
Our income before income taxes was approximately $3.3 million in the six months ended June 30, 2022, compared to loss before income taxes of approximately $5.7 million in the same period of 2021. The increase of income before income taxes was primarily attributable to a decrease of approximately $7.7 million in operation expenses and an increase of approximately $1.2 million in gross profit compared to the same period of 2021.
Income taxes expense
Our income taxes expense was approximately $1.5 million in the six months ended June 30, 2022, an increase of approximately $0.5 million or 46.7% from approximately $1.0 million in the same period of 2021. The increased income tax provision was in line with increased taxable income in the six months ended June 30, 2022 compared to the same period of 2021.
Net income (loss) attributable to common stockholders
Our net income attributable to common stockholders was approximately $2.0 million in the six months ended June 30, 2022, an increase of approximately $8.5 million from a net loss of approximately 6.6 million in the same period of 2021. The increase of net income was attributable to the factors described above.
5
B. Liquidity and Capital Resources
We are a holding company incorporated in the British Virgin Islands. We may need dividends and other distributions on equity from our PRC subsidiaries to satisfy our liquidity requirements. Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiaries are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. Our PRC subsidiaries may also allocate a portion of their after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends.
We have relied on direct payments of expenses by our subsidiaries (which generate revenues), to meet our obligations to date.
During six months ended June 30, 2022, the Company had a significantly growth in bamboo related products which generated revenue of $26.3 million from its consumer product segment. And two subsidiaries focused on developing and manufacturing of smart electric sanitation vehicles generated revenue of $0.7 million from Electric Vehicle (the “EV”) segment. In additional, the Company commenced its commercial factoring business during the six months ended June 30, 2022. The Company estimates that its commercial factoring business will generate approximately $1.2 million in revenue in fiscal 2022.
During the six months ended June 30, 2022, we successfully completed an equity financing which resulted in net proceeds of $10.1 million. In addition, the Company obtained net proceeds of $19.4 million form two equity financings during fiscal 2021. As a result, the Company had approximately $10.8 million cash on hand as of June 30, 2022. Although the Company maintained a positive working capital as of June 30, 2022, the future operations of the Company depend on whether or not the Company can successfully collect its accounts receivable and utilize its advances, as well as if and how any changes in government policies may affect its EV business.
We currently plan to fund our operations mainly through renewal of bank borrowings, additional equity financing and the continuing financial support by its shareholders and its affiliates controlled by its principal shareholder, if necessary, in the near future to ensure sufficient working capital. The Company has implemented a stricter policy on sales to supermarkets and less credible customers and continues to improve its collection efforts on accounts with outstanding balances. The Company is actively working with its customers and suppliers and expects to fully collect outstanding accounts receivables or utilize the rest of prepayment balance in next twelve months.
We plan to fund the EV segment through additional private placement and continued support from the parent company. The principal shareholder of the Company, along with the affiliated entity, Forasen Group, has agreed to provide financial support to the Company whenever necessary.
Based on its current operating plan, management believes that the above-mentioned measures collectively will provide sufficient liquidity for the Company to meet its future liquidity and capital requirements for at least next twelve months from the date of this report.
As of June 30, 2022, we had cash and restricted cash of approximately $10.8 million. Our current assets were approximately $107.7 million and our current liabilities were approximately $16.3 million, which resulted in a current ratio of 6.6:1. Total stockholders’ equity as of June 30, 2022 was approximately $118.6 million.
Our accounts receivable turnover in days were 306 days and 262 days for the year ended June 30, 2022 and the year ended December 31, 2021, respectively. Although we typically do not grant special payment terms to our customers, some of our customers, who are large retailers and wholesale chains, tend to require longer payment terms but are unlikely to default. The instances of slow payments and long-aging receivables may have negative impact on our short-term operating cash flow and future liquidity. We periodically review our accounts receivable and allowance level in order to ensure our methodology used to determine allowances is reasonable and accrued additional allowances if necessary. We have recently put a lot of efforts into accounts receivable collection through tightening our customer credit policy and strengthening monitoring of uncollected receivables. If the Company has difficulty collecting, the following steps will be taken, including but not limited to: cease any additional shipments to the customers, visit the customers to request payments on past due invoices, and if necessary, take legal recourse. If all of these steps are unsuccessful, management will determine whether or not the receivable will be reserved or written off.
For the accounts receivable, the Company provided bad debt allowance of $3.1 million against the aged accounts receivable balances. Subsequent to June 30, 2022 and through November 30, 2022, the Company collected $25.6 million or 51% of the accounts receivable balance as of June 30, 2022.
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As of June 30, 2022, we also had factoring receivable of approximately $43.7 million. We monitor our customers financial performance and payment records very closely. Due to the short-term nature of the factoring receivable and sufficient collaterals based on our internal risk reviews, we determined there was no collecting issues for our factoring receivable.
As of June 30, 2022 and December 31, 2021, the Company had significant advances to suppliers of approximately $3.2 million and $3.4 million, respectively. In order to ensure a steady supply of raw materials, the Company is required from time to time to make cash advances when placing its purchase orders. Due to recent tightened environmental protection policies in China, many smaller suppliers have gone out of business. The Company monitors the advances to suppliers account and the allowance level periodically in order to ensure the related allowance is reasonable. We have since enhanced our collections or realization on advance to suppliers through tightening vendor prepayment policy and strengthening monitoring of unrealized prepayment. If the Company has difficulty collecting, the following steps will be taken: cease additional purchases from these suppliers, visit the suppliers to request return of the prepayments promptly, and if necessary, take legal recourse. If all of these steps are unsuccessful, management will determine whether or not the prepayment will be reserved or written off.
The following table sets forth summary of our cash flows for the periods indicated:
(All amounts in thousands of U.S. dollars)
|
| Six months |
| Six months | ||
| | ended June 30, | | ended June 30, | ||
| | 2022 | | 2021 | ||
Net cash used in operating activities | | $ | (47,547) | | $ | (1,656) |
Net cash used in investing activities |
| | (22) |
| | (5) |
Net cash provided by financing activities |
| | 15,959 |
| | 4,714 |
Effect of exchange rate changes on cash, restricted cash and cash equivalents |
| | (1,154) |
| | 319 |
Net (decrease) increase in cash, restricted cash and cash equivalents |
| | (32,764) |
| | 3,372 |
Cash, restricted cash and cash equivalents, beginning of period |
| | 43,567 |
| | 37,339 |
Cash, restricted cash and cash equivalents, end of period | | $ | 10,803 | | $ | 40,711 |
Operating Activities
Net cash used in operating activities was approximately $47.5 million in the six months ended June 30, 2022, compared to approximately $1.7 million in the same period of 2021. The change in net cash used in operating activities was primarily attributable to the following factors:
An increase of $45.2 million in factoring receivable due to the commencement of our new commercial factoring business;
An increase of $4.0 million in accounts receivable due to the increased product sales; and
A decrease of 2.4 million in customers deposits because we provided inventories to customers;
Offset by the impacts from the following factors:
A net income of 1.9 million in the six months ended June 30, 2022.
An increase of $0.9 million in accounts payable
Investing Activities
Net cash used in investing activities was $21,879 in the six months ended June 30, 2022, compared to net cash used in investing activities of $5,086 in the same period of 2021. The net cash used in investing activities in the six months ended June 30, 2022 was primarily attributable to $21,879 paid for purchase of property, plant and equipment.
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Financing Activities
Net cash provided by financing activities was $16.0 million in the six months ended June 30, 2022, compared to $4.7 million in the same period of 2021. Net cash provided by financing activities in the six months ended June 30, 2022 was primarily from the offering of 953,333 common shares (retroactively adjusted for reverse stock split effected on November 9, 2022), which resulted in net proceeds of approximately $10.1 million in the six months ended June 30, 2022. In addition, we also had net proceeds of approximately $9.3 million from related party, offset by net repayment of $3.2 million to third party loan.
Our primary source of cash is currently generated from the sales of our products and bank borrowings equity financings. In the future, we may raise additional capital by issuing common shares to meet our cash needs. While facing uncertainties in regards to the size and timing of capital raise, we expect to be able to meet our working capital and capital expenditure requirements by using our cash on hand, cash flows from operations and bank borrowings in the next twelve months.
Loan Facilities
As of June 30, 2022, the balance of our bank loans was approximately $4.2 million. The details of all our short-term bank loans are as follows:
No. |
| Type |
| Contracting Party |
| Valid Date |
| Duration |
| Amount | |
1 |
| Short-term bank loan |
| Bank of China | | December 22, 2021 |
| 12 months | | $ | 2,550,044 |
2 |
| Short-term bank loan |
| Shanghai Pudong Development Bank | | April 1, 2022 |
| 12 months | | $ | 1,642,300 |
On December 22, 2021, Tantech Charcoal entered into a short-term loan agreement with Bank of China (Lishui Branch) to borrow approximately $2,550,044 (RMB 17,080,000) for six months with fixed annual interest rate of 4.5%. The purpose of the loan was for purchasing bamboo charcoal materials. The loan was collateralized by building and land use right of Tantech Bamboo with a maximum guaranteed amount of up to approximately $3.9 million (RMB25,960,000). The loan was also guaranteed by two related parties, Lishui Jiuanju Commercial Trade Co., Ltd. (“LJC”), and Forasen Group Co., Ltd., an unrelated third party, Zhejiang Meifeng Tea Industry Co., Ltd., and three other related individuals, Zhengyu Wang, Chairman of the Board and previous CEO of the Company, his wife, Yefang Zhang, and his relative, Aihong Wang.
On April 1, 2022, the Company entered into a short-term-loan agreement with SPD Bank (Lishui Branch) to extend the remaining loan of $1,791,600 (RMB12 million) to March 30, 2023 with fixed interest rate of 3.9%. The purpose of the loan was to fund working capital needs. The loan was guaranteed by three related parties, Zhengyu Wang and his wife, Yefang Zhang, and Forasen Group Co., Ltd., a company owned by Zhengyu Wang and Yefang Zhang, and an unrelated third party, Lishui Zhongyun Mitai Industrial Co., Ltd. The loan was also collateralized by building and land use right of Tantech Energy with a maximum guaranteed amount of up to approximately $4.4 million (RMB29,250,000).
Although we currently do not have any material unused sources of liquidity, giving effect to the foregoing bank loans and other financing activities, we believe that our currently available working capital should be adequate to sustain our operations at our current levels through at least for the next twelve months. We will consider additional borrowing or other sources based on our working capital needs and capital expenditure requirements. There is no seasonality of our borrowing activities.
Statutory Reserves
Under PRC regulations, all our subsidiaries in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC GAAP. In addition, these companies are required to set aside at least 10% of their after-tax net profits each year, if any, to fund the statutory reserves until the balance of the reserves reaches 50% of their registered capital. The statutory reserves are not distributable in the form of cash dividends to the Company and can be used to make up cumulative prior year losses.
Restrictions on net assets also include the conversion of local currency into foreign currencies, tax withholding obligations on dividend distributions, the need to obtain State Administration of Foreign Exchange approval for loans to a non-PRC consolidated entity. We did not have these restrictions on our net assets as of June 30, 2022 and December 31, 2021. We are also a party to certain debt agreements that are secured with pledges on our real property in Tianning located in Lishui, China. But such debt agreements do not restrict our net assets and instead only impose restrictions on the pledged property.
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The following table provides the amount of our statutory reserves, the amount of restricted net assets, consolidated net assets, and the amount of restricted net assets as a percentage of consolidated net assets, as of June 30, 2022 and December 31, 2021.
| | As of | | As of |
| ||
| | June 30, | | December 31, | | ||
|
| 2022 |
| 2021 | | ||
Statutory Reserves | | $ | 7,196,867 | | $ | 6,874,614 |
|
Total Restricted Net Assets | | $ | 7,196,867 | | $ | 6,874,614 | |
Consolidated Net Assets | | $ | 118,581,437 | | $ | 112,536,711 | |
Restricted Net Assets as Percentage of Consolidated Net Assets | |
| 6.1 | % |
| 6.1 | % |
Total restricted net assets accounted for approximately 6.1% and 6.1% of our consolidated net assets as of June 30, 2022 and December 31, 2021 respectively. As our subsidiaries usually set aside only 10% of after-tax net profits each year to fund the statutory reserves and are not required to fund the statutory reserves when they incur losses, we believe the potential impact of such restricted net assets on our liquidity is limited.
Capital Expenditures
We had capital expenditures of $21,879 and $5,086 for the six months ended June 30, 2022, and 2021, respectively for the addition and renovation of our workshops and office buildings, purchasing of equipment in connection with our business activities and purchasing of long-term investment.
We expect that our capital expenditures will increase in the future as our business continues to develop and expand. We have used cash generated from our subsidiaries’ operations to fund our capital commitments in the past and anticipate using such funds and proceeds received from our offerings through issuance of common stocks and other sources to fund capital expenditure commitments in the future.
C. Research and development, patents and licenses, etc.
We are committed to researching and developing applications of bamboo charcoal, activated bamboo charcoal and EVs such as street sweepers. We believe scientific and technological innovations will help the Company achieve its long-term strategic objectives. R&D is an integral part of our operations and the crux of its competitive advantage and differentiation strategy.
Our R&D team is well educated and has far-reaching research capabilities. The R&D team has 3 dedicated researchers and analysts, with one focusing on Charcoal Doctor product development and applications, and two focusing on developing vehicle products such as street sweepers. Quality control is an important aspect of the team’s work and ensuring quality at every stage of the process has been a key driver in maintaining and developing brand value for the Company.
We are also collaborating with technology companies and consultants on developing specialty EVs, such as smart electric sanitation vehicles, and we will continue to invest in this area in 2022. Since the end of the year ended December 31, 2020, we have significantly increased our research and development spending.
Our Intellectual Property
We rely on trademarks and service marks to protect our branding. As of the date of this report, we hold over 38 registered trademarks about or related to “Charcoal Doctor” and “Shangchi” in different applicable trademark categories in China. We also own a domain name of tantech.cn, the registration of which will expire on March 11, 2023. This website is not part of this report and is not incorporated by reference herein.
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We rely on our technology patents to protect our domestic business interests and ensure our position as a bamboo carbon technology pioneer in our industry. However, we do not believe that our business, as a whole, is dependent on, or that its profitability would be materially affected by the revocation, termination, expiration or infringement upon any particular patent. We currently hold three patents on charcoal products and five patents on vehicles. Since the filing of our annual report for the year ended December 31, 2020 in July 2022, we have obtained the following patents, which are effective as of the date of application.
Recent Renewed Patents on Vehicles
| | | | Patent | | | | | | |
Patent Description |
| Holder |
| Type |
| Application |
| Expiration |
| Patent Number |
Energy-absorbing and anti-collision equipment on side of fuel tank |
| Shangchi Automobile |
| Utility Mode | | November 26,2020 | | November 25,2030 |
| ZL202022776533.2 |
Variable light front windshield |
| Shangchi Automobile |
| Utility Mode | | November 26,2020 | | November 25,2030 |
| ZL202022779980.3 |
Sound insulation and noise prevention hood with reinforcing ribs for front engine |
| Shangchi Automobile |
| Utility Mode | | November 12,2020 | | November 15,2030 |
| ZL202022605348.7 |
Multifunctional expanding bucket for sweeping vehicle |
| Shangchi Automobile |
| Utility Mode | | November 12,2020 | | November 15,2030 |
| ZL202022601008.7 |
D. Trend information
Market Trends
Other than as disclosed elsewhere in this financial report, we are not aware of any trends, uncertainties, demands, commitments or events for the six months ended June 30, 2022 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition.
E. Off-balance Sheet Arrangements
Except for the above-mentioned guaranty, we have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements.
Critical Accounting Policies
We prepare our financial statements in conformity with accounting principles generally accepted by the United States of America (“U.S. GAAP”), which requires us to make judgments, estimates and assumptions that affect our reported amount of assets, liabilities, revenue, costs and expenses, and any related disclosures. Although there were no material changes made to the accounting estimates and assumptions in the past three years, we continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.
We believe that the following accounting policies involve a higher degree of judgment and complexity in their application and require us to make significant accounting estimates. Accordingly, these are the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations.
Use of Estimates
In preparing the consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include the fair value estimates used in the useful lives of property and equipment and intangible assets,
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allowances pertaining to the allowance for doubtful accounts of accounts receivable, advance to suppliers and other receivables, the valuation of inventories, the impairment of long-lived assets, and the realizability of deferred tax assets.
Research and development costs
Research and development expenses include costs directly attributable to the conduct of research and development projects, including the cost of salaries and other employee benefits, testing expenses, consumable equipment and consulting fees. All costs associated with research and development are expensed as incurred.
Revenue Recognition
The Company adopted ASC Topic 606 Revenue from Contracts with Customers (“ASC 606”) on January 1, 2018 using the modified retrospective approach. There is no adjustment to the opening balance of retained earnings at January 1, 2018 since there was no change to the timing and pattern of revenue recognition upon adoption of ASC 606. Under ASC 606, revenue is recognized when control of promised goods or services is transferred to the Company’s customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services. The Company’s revenues are primarily derived from the following sources:
Sales of products: The Company recognizes sales revenue, net of sales taxes and estimated sales returns, at the time the product is delivered to the customer and control is transferred (point of sale).
For the Company’s electric vehicles sales contracts, the Company provides a warranty for 12 months from the products are delivered. The Company determines such product warranty is an assurance-type warranty and is not a separated performance obligation in revenue recognition, because the nature of warranty is to provide assurance that a product will function as expected and in accordance with customer’s specification. The Company estimates the warranty costs when the promised good is delivered to the customer and accrues as warranty liabilities.
Commission income: The Company acts as an agent without assuming the risks and rewards of ownership of the goods and reports the revenue on a net basis. Revenue is recognized based on the completion of the contracted service.
Government manufacturing rebate income: The Company sells electric vehicles in China and is eligible for a government manufacturing rebate on each qualifying electric vehicle sold. The government manufacturing rebates are recognized as part of revenue when sales are finalized, amount of rebates can be reasonably estimated and collection is assured. The collectability of rebates can be assured as long as the sales are deemed qualifying based on the criteria set by the government.
Factoring income: The Company provides commercial factoring service to customers who seek financing from their receivables. The Company identifies the distinct performance obligation is to serve the customer with ongoing factoring service over the contractual period. The Company’s customer simultaneously receives and consumes the benefit provided by the company performance over the loan term. As the result, the Company recognizes the interest income from factoring service over the contract time.
Revenue is reported net of all value added taxes. The Company does not routinely permit customers to return products and historically, customer returns have been immaterial.
Long-term investments
The Company accounts for investment in equity investees over which it has significant influence but does not own a majority of the equity interest or lack of control using the equity method. For investment in equity investees over which the Company does not have significant influence or the underlying shares the Company invested in are not considered in-substance common stock and have no readily determinable fair value, the cost method accounting is applied.
The Company records the equity method investments at historical cost and subsequently adjusts the carrying amount each period for share of the earnings or losses of the investee and other adjustments required by the equity method of accounting. Dividends received from the equity method investments are recorded as reductions in the cost of such investments. The Company records the cost method investments at historical cost and subsequently record any dividends received from the net accumulated earnings of the investee as income. Dividends received in excess of earnings are considered a return of investment and are recorded as reductions in the cost of the investments.
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Investment in equity investees is evaluated for impairment when facts or circumstances indicate that the fair value of the investment is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near term prospects of the investments; and (v) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, the Company evaluates the recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available.
Recent accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes” (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company adopted this guidance and this guidance did not have a material impact on the consolidated financial statements.
In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”), which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 is effective for the Company beginning January 1, 2021. The Company adopted this guidance and this guidance did not have a material impact on the consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The Company adopted this guidance and this guidance did not have a material impact on the consolidated financial statements.
Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the consolidated financial statements.
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F. Tabular Disclosure of Contractual Obligations
Below is a table setting forth all of our contractual obligations as of June 30, 2022, which consists of our short-term loan agreements and due to related parties:
|
| Payment Due by Period | |||||||||||||
| | | | | Less than | | 1 – 3 | | 3 – 5 | | More than | ||||
Contractual Obligations |
| Total |
| 1 year |
| years |
| years |
| 5 years | |||||
Short-Term Debt Obligations | | $ | 4,192,344 | | $ | 4,192,344 | | $ | — | | $ | — | | $ | — |
Due to related parties | |
| 971,919 | |
| 971,919 | |
| — | |
| — | |
| — |
Loan payable to third parties | | | 3,579,893 | | | 3,579,893 | | | — | | | — | | | — |
Operating lease commitment | | | 1,853,533 | | | 463,433 | | | 427,321 | | | 293,124 | | | 669,655 |
Total | | $ | 10,597,689 | | $ | 9,207,589 | | $ | 427,321 | | $ | 293,124 | | $ | 669,655 |
G. Safe Harbor
See “Special Note Regarding Forward-Looking Statements.”
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Exhibit 99.3
Tantech Reports Unaudited Financial Results for the First Six Months of Fiscal Year 2022
LISHUI, China, December 28, 2022/PRNewswire/ -- Tantech Holdings Ltd (NASDAQ: TANH) ("Tantech" or the "Company") today reported its unaudited financial results for the six months ended June 30, 2022.
As compared with the same period of 2021, Tantech had increased its total revenues by approximately $6.4 million, or 31.0%, to approximately $27.0 million in the first six months of 2022 while reduced its total operating expenses by approximately $7.8 million, or 80.3%, to approximately $1.9 million, attaining a decent gross profit margin of 19.0% and leaving its total cash on hand stocked at approximately $10.8 million. Tantech’s net income attributable to common stockholders was approximately $2.1 million in the six months ended June 30, 2022, a remarkable increase of approximately $8.7 million from a net loss of approximately 6.6 million in the same period of 2021. In addition, The Company had a robust balance sheet as of June 30, 2022, holding total assets of approximately $136.2 million with a healthy debt-equity ratio of 13:87. Its current assets and current liabilities were approximately $107.7 million and approximately $136.2 million, respectively, resulting in a current ratio of 6.6:1.
Mr. Wangfeng Yan, Chief Executive Officer of Tantech, commented, "We are pleased to share our positive outcomes achieved during the first half of 2022, when challenges of COVID-19, macroeconomic uncertainties and interruptions of global supply chains have remained entwined. With strong support from shareholders, our company has made great efforts to focus on overcoming such hefty difficulties through strategic transformation and competitiveness enhancement. We have steadily diversified our business operationsinto three segments (i.e., consumer products for purification and deodorization, electric and specialty vehicles and commercial factoring) and expanded our sales endeavors from the China domestic into the international markets. Our bamboo charcoal products, customized midibuses and biodegradable packaging materials have been well accepted not only in Asia, but also in North America, South America and Africa. Meanwhile, we have continued to invest in R&D to optimize the design, production processes and overall quality of our products in order to gain better satisfaction from our customers. Based on what we have accomplished so far, we are confident of our competitiveness in both domestic and international markets and our ability to deliver improved financial performance in the near future.”
About Tantech Holdings Ltd
For the last two decades, Tantech has been a leading high-tech enterprise pioneering and specializing in producing, researching and developing products based on bamboo charcoals with a well-established domestic and international sales and distribution network. Tantech expanded into the clean vehicle industry in 2017 through acquiring 70% shares of Shangchi Automobile. In November 2020, Tantech established two additional subsidiaries, Lishui Smart New Energy Automobile Co., Ltd. and Zhejiang Shangchi New Energy Automobile Co., Ltd., to produce and market electric vehicles, including automatic high-speed street sweepers and others. The Company's subsidiary, First International Commercial Factoring (Shenzhen) Co., LTD, is engaged in commercial factoring for businesses in and related to its supply chain. Tantech has recently expanded its operation into international markets. In May and July 2022, the Company established wholly-owned subsidiaries, EPakia Inc. and EPakia Canada Inc., in the United States and Canada to develop biodegradable packaging business in the North American and other international markets. The Company is fully ISO 90000 and ISO 14000 certified and has received numerous national, provincial and local honors, awards and certifications for its products and scientific research efforts. For more information, please visit: http://ir.tantech.cn.
Forward-Looking Statements
This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning the sales, plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulations, and other risks contained in reports filed by the Company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the Company, are expressly qualified by this cautionary statement and any other cautionary statements which may accompany the forward-looking statements. In addition, the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof, except as expressly required by applicable laws.
For more information, please contact:
Tantech Holdings Ltd
Investor Relations
Tel: +86 (578) 226-2305
ir@tantech.cn