20-F/A: Tantech Holdings Amends Annual Report, Details New Note & Risks

Tantech Holdings Ltd. filed an amended annual report, disclosing a new $2.16 million promissory note, updated financial statements, and expanded risk factors related to its China-based operations.

Summary

• The company filed an amended annual report (Form 20-F/A) for the fiscal year ended December 31, 2024, in response to an SEC comment letter.
• The amendment includes revised disclosures regarding risks related to the company's corporate structure and its majority operations in China.
• Revised financial statements and notes, along with new exhibits including a promissory note and related purchase agreement, CEO/CFO certifications, and auditor's consent letter, are part of this filing.
• Tantech Holdings Ltd. is a British Virgin Islands holding company, conducting a substantial portion of its operations through subsidiaries in mainland China.
• The company reported a net loss of $(3,565,285) for 2024, a significant decline from a net income of $5,017,546 in 2023.
• Revenues decreased to $42,940,136 in 2024 from $44,631,115 in 2023.
• Gross profit decreased to $8,942,883 in 2024 from $9,716,798 in 2023.
• Operating expenses decreased to $4,958,565 in 2024 from $6,057,971 in 2023.
• Income from operations increased to $3,984,318 in 2024 from $3,658,827 in 2023.
• Net loss attributable to common stockholders was $(3,241,770) in 2024, compared to net income of $5,582,847 in 2023.
• Basic and diluted earnings per share were $(7.66) in 2024, down from $80.69 in 2023.
• Working capital increased to $106,047,000 in 2024 from $98,063,000 in 2023.
• Total assets increased to $142,951,806 in 2024 from $141,686,597 in 2023.
• Total liabilities decreased to $14,675,749 in 2024 from $18,681,365 in 2023.
• Total equity increased to $128,276,057 in 2024 from $123,005,232 in 2023.
• The Electric Vehicle (EV) business, comprising Jiyi, Wangbo, Shangchi Automobile, and Shenzhen Yimao, was sold on May 15, 2025, and is now classified as a discontinued operation.
• The company disposed of Zhejiang Tantech Bamboo Charcoal Co., Ltd. on March 16, 2024, for $246,599, resulting in a gain of $1,008,290.
• The company disposed of USCNHK Group Limited and its wholly-owned subsidiaries on December 25, 2024, for $1,269, resulting in a loss of $2,023,033.
• A new unsecured promissory note for $2,160,000 (net proceeds of $2,000,000) was issued to Streeterville Capital, LLC on August 1, 2024, with a 7% annual interest rate and a 12-month term.
• The company acquired an 85% equity interest in Xintong International Trading Limited on April 18, 2025, for approximately $66.9 million, expanding into Chinese herbal medicine and flower cultivation.

Sentiment

Score: 3

Explanation: The company reported a net loss and declining revenues and gross profit for 2024, a significant deterioration from the previous year's net income. While operating expenses decreased and total assets/equity increased, the financial performance is poor. The filing also highlights numerous and substantial risks related to its China-based operations, regulatory uncertainties, and dependence on a few customers/suppliers. The new promissory note and warrant exercises provide some capital, and the Xintong acquisition represents a new strategic direction, but the overall financial results and risk profile are negative.

Positives

• Operating expenses decreased by 18.15% from $6,057,971 in 2023 to $4,958,565 in 2024.
• Income from operations increased by 8.89% from $3,658,827 in 2023 to $3,984,318 in 2024.
• Working capital increased by 8.14% to $106,047,000 in 2024 from $98,063,000 in 2023.
• Total assets increased by 0.89% to $142,951,806 in 2024 from $141,686,597 in 2023.
• Total liabilities decreased by 21.44% to $14,675,749 in 2024 from $18,681,365 in 2023.
• Total equity increased by 4.29% to $128,276,057 in 2024 from $123,005,232 in 2023.
• The disposition of Zhejiang Tantech Bamboo Charcoal Co., Ltd. resulted in a gain of $1,008,290.
• Secured a new $2,160,000 promissory note from Streeterville Capital, LLC, providing $2,000,000 in gross proceeds.
• Acquired an 85% equity interest in Xintong International Trading Limited, signaling expansion into Chinese herbal medicine and flower cultivation.
• The company's current auditor, YCM CPA INC., is registered with the PCAOB and has been subjected to PCAOB inspections, mitigating HFCAA risks.

Negatives

• The company reported a net loss of $(3,565,285) in 2024, a significant deterioration from the net income of $5,017,546 in 2023.
• Revenues decreased by 3.79% to $42,940,136 in 2024 from $44,631,115 in 2023.
• Gross profit decreased by 7.97% to $8,942,883 in 2024 from $9,716,798 in 2023.
• Net loss attributable to common stockholders was $(3,241,770) in 2024, compared to net income of $5,582,847 in 2023.
• Basic and diluted earnings per share dropped significantly to $(7.66) in 2024 from $80.69 in 2023.
• A loss of $2,023,033 was recorded from the disposition of USCNHK Group Limited and its subsidiaries.
• The new promissory note includes a $140,000 original issue discount and $20,000 for transaction expenses, reducing the net proceeds to $2,000,000.
• The company recognized a loss of $504,006 from the change in fair value of the convertible note in 2024.
• A change in fair value of warrant liabilities resulted in a loss of $3,767,626 in 2024.
• Compensation of $610,227 was paid to Streeterville Capital in 2024 due to a significant drop in the company's share price related to a previous convertible note.
• High concentration of sales to a few customers: two customers accounted for 80% of vehicle sales in 2024, and three major charcoal product customers accounted for 27%, 25%, and 18% of total charcoal sales in 2024.
• Reliance on a limited number of suppliers: two major suppliers accounted for approximately 56% of total purchases in 2024.
• Approximately $34.9 million of cash held in PRC bank accounts as of December 31, 2024, is not covered by deposit insurance.
• A contingent liability of $0.8 million (RMB6.0 million) exists for a debt dispute with a former general manager of Shangchi Automobile.
• The company does not intend to pay dividends for the foreseeable future.
• The market price of common shares has been volatile, ranging from $1.45 to $63.60 per share in 2024, and was $2.05 on May 14, 2025.
• The company previously fell below Nasdaq's minimum bid price requirement, indicating potential delisting risk.

Risks

• Business and results of operations may be affected by changes in China's economic, political, or social conditions or government policies.
• Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit legal protections available to the company and its investors, potentially causing share value to decline or become worthless.
• The PRC government could disallow the company's holding company structure, resulting in a material change in operations and a significant decline in security value.
• The PRC government exerts substantial influence over business conduct and may intervene in operations or exert more control over overseas offerings and foreign investment in China-based issuers, potentially causing security value to decline or become worthless.
• The company is required to file with the CSRC and may be subject to approvals or other procedures with other Chinese regulatory authorities for securities offerings, with unpredictable timelines and outcomes.
• Recent regulatory developments in China, including greater oversight and discretion over privacy and data security, may subject the company to additional regulatory review, potentially hindering its ability to offer securities.
• Trading in the company's securities may be prohibited under the Holding Foreign Companies Accountable Act (HFCAA) if the PCAOB cannot inspect its auditors for two consecutive years, potentially leading to Nasdaq delisting.
• As a holding company, the company relies on dividend payments from its subsidiaries for funding, which are subject to restrictions under PRC laws.
• PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent the use of proceeds from securities offerings for PRC operating subsidiaries.
• PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject PRC resident shareholders to penalties and limit the company's ability to inject capital or receive profits from its PRC subsidiary.
• A Chinese economic downturn or growth slowdown may harm the company's business.
• U.S. regulatory bodies may be limited in their ability to conduct investigations or inspections of the company's operations in China.
• The company may be classified as a 'Resident Enterprise' of China under the Enterprise Income Tax Law, potentially resulting in unfavorable tax consequences for the company and its non-PRC shareholders.
• The company may be subject to a significant withholding tax if equity transfers by its non-resident enterprises are determined to have been done without a reasonable business purpose.
• Exposure to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption law.
• Governmental control of currency conversion may affect the value of investor's investment.
• Fluctuations in exchange rates could adversely affect the business and the value of securities.
• If the company becomes directly subject to scrutiny, criticism, and negative publicity involving U.S.-listed Chinese companies, it may expend significant resources, harming business and reputation.
• The business may be materially and adversely affected if any PRC subsidiaries declare bankruptcy or become subject to dissolution or liquidation proceedings.
• Labor laws in the PRC may adversely affect results of operations.
• Imposition of trade barriers and taxes may reduce the ability to do business internationally, harming profitability.
• A weakening of the Chinese economy could hurt demand for Charcoal Doctor products.
• Inability to develop products that meet customer demands could decrease sales.
• Competition from significantly larger competitors (e.g., Guangzhou Blue Moon Industry Co., Ltd, Shanghai SC Johnson Wax Co., Ltd) with greater customer recognition.
• Supply risks for bamboo or wood charcoal due to local government initiatives or natural events (fire, flooding, disease, pests).
• Increases in bamboo charcoal costs may negatively affect operating results.
• Competition from smaller competitors for charcoal briquette products at lower prices due to minimal barriers to entry.
• Risks related to health epidemics that could impact sales and operating results.
• High concentration of sales to relatively few customers may result in significant impact on liquidity, business, results of operations, and financial condition.
• Compliance with environmental regulations can be expensive, and noncompliance may result in adverse publicity and significant monetary damages and fines.
• Inability to keep up with advances in industry technology may lead to a decline in competitive position.
• As a minority investor in Shandong Liansen, Libo Haokun, and Fuquan Chengwang, the company is unable to control or significantly influence their management and operations.
• If expansions into new lines of business (biodegradable packaging, commercial factoring) are not successful, future results of operations and growth prospects may be materially and adversely affected.
• Risks and uncertainties associated with mining and processing operations, including operating hazards, unexpected maintenance, natural disasters, and the need for substantial capital investment.
• The company may require additional financing in the future, and operations could be curtailed if not obtained on favorable terms.
• Reliance on third-party distributors for a substantial portion of sales could affect efficient distribution and market expansion.
• Reliance on a relatively limited number of suppliers could lead to increased production costs and adverse impacts.
• PRC bank accounts are not insured or protected against loss, exposing the company to risk if a bank becomes insolvent.
• Risks relating to banking facilities used to overcome cash flow issues, particularly with 90-day payment terms from wholesale customers.
• Substantial dependence on senior management and key research and development personnel; loss of any key individual could have a material adverse effect.
• Failure to manage growth could strain management, operational, and other resources.
• Lack of implementation of advanced logistical management techniques may hamper efficiency and growth.
• Business may be negatively affected by adverse publicity, such as short seller reports.
• Business may be negatively affected by low share prices in the stock market.
• Disruptions to production facilities due to equipment failure, natural disasters, labor disputes, or maintenance.
• Failure to protect intellectual property rights could harm business and competitive position.
• Exposure to intellectual property infringement and other claims by third parties.
• Dependence on the 'Charcoal Doctor' brand and trademarks; adverse publicity could harm sales and financial performance.
• Incurrence of additional costs as a public company, negatively impacting net income and liquidity.
• Inability to comply with Nasdaq continued listing requirements, potentially leading to delisting.
• Inability to implement and maintain effective internal control over financial reporting could lead to loss of investor confidence.
• Requirements of being a public company may strain resources and divert management's attention.
• The market price of common shares may be volatile or decline regardless of operating performance.
• The company does not intend to pay dividends for the foreseeable future.
• U.S. tax authorities could treat the company as a passive foreign investment company (PFIC), which could have adverse U.S. federal income tax consequences to U.S. shareholders.
• Loss of foreign private issuer status in the future could result in significant additional costs and expenses.
• Liability risks stemming from foreign status could make it more difficult for investors to sue or enforce judgments against the company.
• Directors and executive officers' other business activities may pose conflicts of interest.
• Insufficient insurance could expose the company to significant costs and business disruption.

Future Outlook

The company intends to strictly comply with new PRC confidentiality and archives administration requirements and will continue to monitor regulatory developments in China. Management plans to upgrade or adapt existing products and introduce new ones to keep pace with technology. The growth strategy includes building the brand, increasing market penetration of existing products, developing new products, targeting the home respiratory market in China, and increasing exports. The company does not intend to pay dividends for the foreseeable future, planning to retain most, if not all, available funds and future earnings to operate and expand its business.

Management Comments

• We believe that we and our PRC subsidiaries have received all requisite permits, approvals and certificates from the PRC government authorities to conduct our business operations in China.
• We intend to strictly comply with the Confidentiality Provisions and other relevant PRC laws and regulations in our offering and listing on Nasdaq in future.
• We have been closely monitoring the regulatory development in China, particularly regarding the requirements of approvals, annual data security review or other procedures that may be imposed on us.
• We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
• As of the date of this report, we do not anticipate any difficulties on our ability to transfer cash between subsidiaries. We have not installed any cash management policies that dictate the amount of such funds and how such funds are transferred.
• We believe to date we have complied in all material respects with the provisions of the FCPA and Chinese anti-corruption law.

Industry Context

The company operates in the bamboo charcoal products market, facing intense competition from significantly larger players like Guangzhou Blue Moon Industry Co., Ltd and Shanghai SC Johnson Wax Co., Ltd, which possess greater brand recognition. Its expansion into biodegradable packaging and commercial factoring services places it in rapidly growing markets, but also against established leaders. The Chinese economy's slowdown, with GDP growth decreasing from over 10% to 5% in 2024, directly impacts consumer spending, a critical driver for the company's charcoal products. Furthermore, the evolving and increasingly stringent PRC regulatory environment, particularly concerning overseas listings, cybersecurity, and data security, represents a significant industry-wide challenge for China-based issuers like Tantech.

Comparison to Industry Standards

• Our two largest competitors, Guangzhou Blue Moon Industry Co., Ltd (Blue Moon) and Shanghai SC Johnson Wax Co., Ltd (Mr. Muscle), are substantially larger and have much greater customer recognition than Charcoal Doctor.
• Charcoal Doctor has not historically spent substantial resources on television or print advertising, unlike its larger competitors, which are expected to continue efforts to improve brand recognition.
• As a charcoal-based provider, the company faces supply risks (e.g., bamboo/wood charcoal availability) that competitors relying on chemical solutions for household products do not.
• The company's charcoal briquette products have relatively low technical requirements, leading to minimal barriers to entry and intense competition from smaller producers offering similar products at lower prices.

Management Changes

Corporate Governance

Legal Proceedings

• A lawsuit filed by Mr. Hengwei Chen against Shangchi Automobile and the Group for a debt dispute of approximately $1.6 million (RMB11.35 million) resulted in a court order on December 15, 2021, for Shangchi Automobile to pay Mr. Chen approximately $1.2 million (RMB8.95 million).
• The Group's appeal was denied, and the original ruling was maintained on June 29, 2022.
• On September 7, 2022, the Court ordered to freeze $1.2 million (RMB8.7 million) in the Group's bank accounts to enforce the judgment.
• As of the filing date, the Group has paid $22,449 (RMB163,862) towards the debt.
• An accrued interest of $0.8 million (RMB6.0 million) related to this dispute is included in accrued liabilities as of December 31, 2024.

Related Party Transactions

• As of December 31, 2024, $118,025 was due from Mr. Zhengyu Wang for business expansion funds, which has since been collected.
• As of December 31, 2024, $11,576 was due to Mr. Wangfeng Yan and his affiliates, down from $142,065 as of December 31, 2023. All balances due to related parties are unsecured, interest-free, and due upon demand.
• Tantech Bamboo leased production facilities to Zhejiang Nongmi Food Co., Ltd. (controlled by Yefang Zhang) for ten years at approximately $2,100 (RMB15,338) per month.
• Tantech Bamboo leased production facilities to Zhejiang Nongmi Biotechnology Co., Ltd. (controlled by Yefang Zhang) for ten years at approximately $5,300 (RMB38,280) per month.
• Tantech Bamboo leased production facilities to Zhejiang Nongmi Ecological Technology Co., Ltd (controlled by Yefang Zhang) for five years at approximately $1,700 (RMB11,975) per month.
• Mr. Zhengyu Wang, Ms. Yefang Zhang, Ms. Aihong Wang, Forasen Group (controlled by Zhengyu Wang), and Lishui Jiuanju Commercial Trade Co., Ltd. (controlled by Wangfeng Yan) provided guarantees for the Group's bank loans.

Stakeholder Impact

• Shareholders face potential for significant decline or worthlessness of securities due to substantial PRC regulatory and operational risks, including potential delisting under the HFCAA.
• Shareholders will experience dilution from future equity financing and will not receive dividends in the foreseeable future as the company intends to retain earnings for business expansion.
• The market price of common shares is subject to high volatility, and the company has previously faced non-compliance with Nasdaq's minimum bid price requirement, indicating ongoing delisting risk.
• Employees may be affected by the impact of PRC labor laws on workforce reduction decisions and the company's ability to attract and retain skilled personnel in a competitive market.
• Customers, particularly the few major ones, could significantly impact the company's operational results if relationships deteriorate or demand for charcoal products decreases due to economic slowdowns.
• Suppliers face risks due to the company's reliance on a limited number of major suppliers and potential disruptions in the supply of raw materials like bamboo or wood charcoal.
• Creditors, including Streeterville Capital, LLC, are exposed to the unsecured nature of the new promissory note and the company's ability to manage cash flow shortfalls and collect payments from customers in a timely fashion.
• The company's ongoing legal proceedings, such as the debt dispute with Mr. Hengwei Chen, could result in further financial liabilities and impact the company's resources.

Next Steps

• Strictly comply with new PRC confidentiality and archives administration requirements.
• Undertake filing procedures with the CSRC for subsequent events, including any further follow-up offerings on Nasdaq, dual/secondary offerings, and material events like change of control or investigations.
• Monitor regulatory developments in China, particularly regarding cybersecurity and data security, to ensure compliance with evolving requirements.
• Upgrade or adapt existing products and introduce new products to keep up with advances in industry technology.
• Continue to pursue the growth strategy, including building the brand, increasing market penetration of existing products, developing new products, increasing targeting of the home respiratory market in China, and increasing exports.
• Pay the remaining balance for the Xintong International Trading Limited acquisition in cash before September 30, 2025.

Key Dates

Recommendation

The company reported a substantial net loss and declining revenues in 2024, a significant reversal from the previous year's profitability. This poor financial performance, coupled with numerous and substantial risks explicitly detailed in the filing—particularly those related to its China-based operations, evolving PRC regulatory environment (including potential delisting under HFCAA, cybersecurity, and overseas listing rules), high customer/supplier concentration, and ongoing legal disputes—presents a highly unfavorable investment profile. While the company secured new financing and made an acquisition, these are overshadowed by the operational uncertainties and the overall negative financial trajectory. The lack of intent to pay dividends further reduces investor appeal. A seasoned investor would likely view the combination of deteriorating financials and heightened regulatory/operational risks as a strong reason to exit the position.

Keywords

Tantech Holdings, SEC filing, Form 20-F/A, Promissory Note, Streeterville Capital, China operations, risk factors, financial statements, corporate governance, capital raise, equity acquisition, Xintong International, Electric Vehicle business, charcoal products, biodegradable packaging, commercial factoring, mining investments, Nasdaq, PCAOB, HFCAA, PRC regulations, cybersecurity, data security, related party transactions