RETO ReTo Eco Solutions Inc

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 6-K/A

(Amendment No. 1)

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of May 2024

 

Commission file number: 001-38307

 

RETO ECO-SOLUTIONS, INC.
(Registrant’s name)

 

c/o Beijing REIT Technology Development Co., Ltd.
X-702, 60 Anli Road, Chaoyang District, Beijing
People’s Republic of China 100101
(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒            Form 40-F ☐

 

 

 

Explanatory Note:

 

This Amendment No. 1 (the “Amendment”) to Report of Foreign Private Issuer on Form 6-K/A of ReTo Eco-Solutions, Inc., a British Virgin Islands company (the “Company”), is being filed to amend the Company’s previously filed Report of Foreign Private Issuer on Form 6-K (the “Form 6-K”) with the Securities and Exchange Commission (the “SEC”) on December 27, 2023, in order to restate the unaudited financial results for the six months ended June 30, 2023 of the Company and related disclosures.

 

The management of the Company, in consultation with its advisors, identified an error made in its previously issued unaudited condensed consolidated financial statements for the six months ended June 30, 2023 in relation to the recognition and measurement of its share-based compensation expenses. The Company failed to identify the proper share prices in calculation of the share-based compensation. Such failure has resulted in errors relating to the overstatement of share-based compensation for the six months ended June 30, 2023. The Company does not expect any tax and cash flow impact related to the correction.

 

On May 12, 2024, the Company’s audit committee concluded, after discussion with the Company’s management and its advisors, that the Company’s unaudited condensed consolidated financial statements included in the Form 6-K should no longer be relied upon due to the overstatement described above and should be restated.

 

Attached as Exhibit 99.1 to this Amendment No. 1 to the Form 6-K is a copy of the restated unaudited financial results for the six months ended June 30, 2023 of the Company and related discussions of the Company’s results of operations.

 

This Amendment speaks as of the original filing date of the Form 6-K and, except as described above, does not modify or update the Form 6-K as heretofore amended.

 

INCORPORATION BY REFERENCE

 

This Amendment, including Exhibit 99.1 hereto, shall be deemed to be incorporated by reference into each of (i) the registration statement on Form F-3, as amended (No. 333-267101) of the Company, (ii) the registration statement on Form S-8, as amended (File No. 333-270355) of the Company and (iii) the registration statement on Form S-8, as amended (File No. 333-264499) of the Company, and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.

  

EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Restated Unaudited Financial Results for the Six Months Ended June 30, 2023

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: May 15, 2024	RETO ECO-SOLUTIONS, INC.
	By:	/s/ Hengfang Li
	Name:	Hengfang Li
	Title:	Chief Executive Officer

 

 

2

Exhibit 99.1

 

First Half 2023 Financial Review

 

●	Revenues decreased by approximately $1.7 million, or 57%, to $1.2 million for the six months ended June 30, 2023 from approximately $2.9 million for the six months ended June 30, 2022.

 

●	Cost of revenues decreased by approximately $1.4 million, or 55%, to approximately $1.1 million for the six months ended June 30, 2023 from $2.5 million for the six months ended June 30, 2022.

 

●	Operating expenses increased by approximately $1.1 million, or 18%, to approximately $7.1 million for the six months ended June 30, 2023 from $6.0 million for the six months ended June 30, 2022.

 

●	Net loss increased by approximately $5.9 million, or 102%, to approximately $11.6 million for the six months ended June 30, 2023 from $5.8 million for the six months ended June 30, 2022.

 

Financial Results for the First Half 2023

 

Revenues 

 

Revenues decreased by approximately $1.7 million, or 57%, to $1.2 million for the six months ended June 30, 2023 from approximately $2.9 million for the six months ended June 30, 2022. Revenue from machinery and equipment sales decreased by approximately $1.0 million, or 49%, to $1.0 million for the six months ended June 30, 2023 from approximately $2.0 million for the six months ended June 30, 2022. The decrease is mainly due to slowdown of the construction industry and less demand for the Company’s products. Sales of the Company’s environmental-friendly construction materials decreased by approximately $0.2 million, or 72%, to approximately $0.09 million for six months ended June 30, 2023 from approximately $0.3 million for the six months ended June 30, 2022 due to the decrease in demand resulting from the downturn of the national real estate market. Revenue from other services decreased by approximately $0.3 million, or 79%, to approximately $0.09 million for six months ended June 30, 2023 from approximately $0.4 million for the six months ended June 30, 2022 due to less demand for the Company’s technological consulting service and roadside assistance service.

 

Cost of revenues 

 

Cost of revenues decreased by approximately $1.4 million, or 55%, to approximately $1.1 million for the six months ended June 30, 2023 from $2.5 million for the six months ended June 30, 2022.  The decrease in cost of revenues was in line with the decrease in revenues.

 

Gross profit

 

Gross profit decreased by approximately $0.3 million, or 75%, to approximately $0.1 million for the six months ended June 30, 2023 from $0.4 million for the six months ended June 30, 2022. Gross margin was 8% for the six months ended June 30, 2023 as compared to 13% for the six months ended June 30, 2022. The decrease in gross profit was primarily attributable to (i) a decrease of approximately $147,000 in gross profit in machinery and equipment business due to the significant decrease in domestic and overseas market demand of machinery and equipment; and (ii) a decrease of approximately $155,000 in gross profit in other services due to decreased customer orders. Because other services with higher gross profit margin accounted for 7% of total revenue in the six months ended June 30, 2023 as compared to 15% of total revenue for the six months ended June 30, 2022, the Company’s gross profit margin decreased to 8% for the six months ended June 30, 2023 as compared to 13% of total revenue for the six months ended June 30, 2022.

 

 

Operating expenses

 

For the six months ended June 30, 2023 and 2022, the Company’s selling expenses were approximately $0.3 million for both periods.

 

General and administrative expenses decreased by $0.3 million, or 6%, to $5.5 million for the six months ended June 30, 2023 from $5.9 million for the six months ended June 30, 2022. The decrease was due to $0.3 million decrease in share-based compensation and payroll expenses.

 

Bad debt expenses amounted to approximately $0.5 million for the six months ended June 30, 2023, as compared to a bad debt recovery of approximately $0.7 million for the six months ended June 30, 2022.

 

Research and development expenses increased by $0.3 million, or 60%, to $0.8 million for the six months ended June 30, 2023 from $0.5 million for the six months ended June 30, 2022. The increase was due to an increase of approximately $0.3 million in expert fees.

 

Interest expense

 

The Company’s interest expenses were approximately $0.2 million for both six-month periods ended June 30, 2023 and 2022.

 

Change in fair value in convertible debt

 

Due to change in fair value of convertible loans, the Company recorded an unrealized loss of $57,985 and $204,331 in other expense for the six months ended June 30, 2023 and 2022, respectively.

 

Other income (expense), net

 

Other expense was $4.4 million for the six months ended June 30, 2023 as compared to $0.3 million for the six months ended June 30, 2022. The increase was due to a one-time charge of $4.7 million from a terminated project.

 

Loss before income taxes

 

The Company’s loss before income taxes was approximately $11.6 million for the six months ended June 30, 2023, an increase of approximately $5.9 million as compared to loss before income taxes of approximately $5.7 million for the six months ended June 30, 2022. The increase was primarily attributable to decrease in revenue and increase in operating expenses and other expense.

 

Provision for income taxes  

 

The Company’s subsidiaries in the People’s Republic of China (“PRC”) are subject to PRC income tax, which is computed according to the relevant laws and regulations in the PRC. Under the Enterprise Income Tax Law, the corporate income tax rate applicable to all companies, including both domestic and foreign-invested companies, is 25%. However, two subsidiaries of the Company, Beijing REIT Technology Development Co., Ltd. and Hainan Yile IoT Technology Co., Ltd., are recognized as High and New Technology Enterprises by the PRC government and thus subject to a favorable income tax rate of 15%. As the Company had losses before income tax, its income tax expenses amounted to $52 and $28,767 for the six months ended June 30, 2023 and 2022, respectively. 

 

Net loss

 

As a result of the foregoing, net loss amounted to approximately $11.6 million and $5.8 million for the six months ended June 30, 2023 and 2022, respectively.

 

Cash

 

Cash was approximately $0.2 million as of June 30, 2023, reflecting an increase of approximately $0.1 million from approximately $0.1 million as of December 31, 2022.

 

 

RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

		June 30,				December 31,
		2023				2022
ASSETS		(Unaudited)
		(Restated)
Current Assets:
Cash and cash equivalents		$	233,839			$	113,895
Accounts receivable, net			475,303				2,150,450
Accounts receivable, net - related party			79,639				83,736
Advances to suppliers, net			707,775				453,894
Advances to suppliers, net - related party			1,598,977				3,787,036
Inventories, net			820,590				337,798
Prepayments and other current assets			114,287				402,151
Due from related parties			483,369				208,225
Due from third parties			678,223				-
Total Current Assets			5,192,002				7,537,185
Property, plant and equipment, net			8,028,957				8,722,435
Intangible assets, net			4,548,402				4,869,654
Long-term investment in equity investee			2,301,850				2,503,944
Right-of-use assets			271,972				424,999
Total Assets		$	20,343,183			$	24,058,217
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term loans		$	5,274,916				1,319,490
Convertible debt			3,004,000				3,922,686
Advances from customers			2,072,983				2,551,216
Advances from customers-related party			166,275				-
Due to a minority shareholder			413,719				725,000
Deferred grants - current			264				18,563
Accounts payable			2,934,058				2,624,701
Accrued and other liabilities			2,433,692				2,717,432
Loans from third parties			1,356,113				1,106,233
Taxes payable			1,922,345				2,077,088
Operating lease liabilities, current			150,420				277,036
Deferred tax liability			309,664				325,593
Total Current Liabilities			20,038,449				17,665,038
Loans from third parties-noncurrent			1,048,088				1,160,000
Operating lease liabilities - noncurrent			83,407				158,650
Total Liabilities			21,169,944				18,983,688
Commitments and Contingencies
Shareholders’ Equity:
Common Share, $0.1 par value, 2,000,000 shares authorized, 772,585 shares and 433,989 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively*			77,259				43,400
Additional paid-in capital			64,669,295				53,331,093
Subscription receivable			(5,887,546	)			-
Statutory reserve			1,069,882				1,066,554
Accumulated deficit			(59,036,277	)			(47,813,206	)
Accumulated other comprehensive loss			(2,220,029	)			(2,388,890	)
Total Shareholders’ Equity Attributable to ReTo Eco-Solutions Inc.			(1,327,416	)			4,238,951
Noncontrolling interest			500,655				835,578
Total Shareholders’ Equity			(826,761	)			5,074,529
Total Liabilities and Shareholders’ Equity		$	20,343,183				24,058,217

 

*

The share number and share-related data in the financial statements have been adjusted to reflect the two share combinations on May 12, 2023 and March 1, 2024.

 

 

RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

 

		For the Six Months Ended June 30,
		2023				2022
		(Restated)
Revenues – third party customers		$	1,022,919			$	2,882,792
Revenues – related parties			210,864				6,987
Total revenues			1,233,783				2,889,779
Cost of revenues – third party customers			780,794				1,957,829
Cost of revenues – related parties			359,398				557,145
Total Cost			1,140,192				2,514,974
Gross Profit			93,591				374,805
Operating Expenses:
Selling expenses			289,730				288,552
General and administrative expenses			5,539,187				5,888,849
Bad debt expenses (recovery)			460,116				(650,776	)
Research and development expenses			809,979				505,847
Total Operating Expenses			7,099,012				6,032,472
Loss from Operations			(7,005,421	)			(5,657,667	)
Other Income (expenses):
Interest expenses			(180,772	)			(189,755	)
Interest income			1,509				2,293
Other income (expenses), net			(4,356,224	)			348,266
Change in fair value of convertible debt			(57,985	)			(204,331	)
Gain from disposal of subsidiaries			38,394				-
Share of losses in equity method investments			(83,307	)			(38,885	)
Total Other Expenses, Net			(4,638,385	)			(82,412	)
Loss Before Income Taxes			(11,643,806	)			(5,740,079	)
Provision for Income Taxes			52				28,767
Net Loss			(11,643,858	)			(5,768,846	)
Less: net loss attributable to noncontrolling interest			(424,115	)			(92,866	)
Net Loss Attributable to ReTo Eco-Solutions, Inc.		$	(11,219,743	)		$	(5,675,980	)
Net Loss		$	(11,643,858	)		$	(5,768,846	)
Other comprehensive gain (loss):
Foreign currency translation adjustment			258,053				(723,421	)
Comprehensive Loss			(11,385,805	)			(6,492,267	)
Less: comprehensive loss attributable to noncontrolling interest			(334,923	)			(22,981	)
Comprehensive Loss Attributable to ReTo Eco-Solutions, Inc		$	(11,050,882	)		$	(6,469,286	)
Loss Per Share
Basic and diluted		$	(20.63	)		$	(16.48	)
Weighted Average Number of Shares*
Basic and diluted			543,785				344,334

 

*

The share number and share-related data in the financial statements have been adjusted to reflect the two share combinations on May 12, 2023 and March 1, 2024.

 

 

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