20-F: Tantech Holdings Ltd. Files 20-F, Details Financial Performance and Corporate Structure

Tantech Holdings Ltd. files its annual report on Form 20-F, outlining its financial results for the fiscal year ended December 31, 2023, and providing insights into its corporate structure and operations.

Summary

• Tantech Holdings Ltd., a British Virgin Islands holding company, conducts a substantial portion of its operations through subsidiaries in mainland China.
• The company's corporate structure currently contains no VIEs, and its industries are not subject to foreign ownership limitations in mainland China.
• The company's common shares are listed on Nasdaq, and the listing and trading are deemed an indirect overseas offering and listing by domestic companies established in mainland China, making it subject to filing procedures with the CSRC.
• The company's revenue decreased by 11.5% to $47.3 million in 2023, primarily due to a decrease in consumer product revenue.
• Net income attributable to common stockholders increased to $5.6 million in 2023 from $3.0 million in 2022.
• The company has identified material weaknesses in its internal control over financial reporting.
• The company is subject to the Holding Foreign Companies Accountable Act (HFCAA), which could prohibit its shares from trading on U.S. exchanges if the PCAOB cannot inspect its auditors for two consecutive years.
• The company has outstanding bank loans of approximately $2.3 million as of December 31, 2023.
• The company is dependent on key management and research and development personnel.
• The company faces competition from smaller competitors that may be able to provide similar charcoal briquette products at lower prices.
• The company's electric vehicle (EV) business has not met expectations, and its future growth depends on customer adoption of alternative fuel vehicles.
• The company is subject to risks associated with its mining investments in Libo Haokun and Fuquan Chengwang.
• The company relies on third-party distributors for a substantial portion of its sales.
• The company buys its supplies from a relatively limited number of suppliers, and disruption in supply may increase its production cost.
• The company's bank accounts are not insured or protected against loss.
• The company is subject to risks relating to the banking facilities it uses to overcome cash flow issues.
• The company is substantially dependent upon its senior management and key research and development personnel.
• The company is heavily dependent upon the services of experienced personnel who possess skills that are valuable in our industry, and we may have to actively compete for their services.
• The company is heavily dependent upon its ability to attract, retain and motivate skilled personnel to serve its customers.
• The company's strategy of developing driverless street sweepers may fail and as a result, its future results of operations and growth prospects may be materially and adversely affected.
• The company may be affected by disruptions to its production facilities.
• The company may be exposed to intellectual property infringement and other claims by third parties which, if successful, could disrupt its business and have a material adverse effect on our financial condition and results of operations.
• The company is dependent on its brand and trademarks.
• The company's charcoal briquette products have relatively low technical requirements; therefore, barriers to entry are minimal.
• The PRC government may intervene in or influence the company's operations at any time, which could result in a material change in its operations and significantly and adversely impact the value of its common shares.
• The approval of, filing or other procedures with the CSRC or other Chinese regulatory authorities may be required in connection with issuing securities to foreign investors under PRC law, and, if required, the company cannot predict whether it will be able, or how long it will take it, to obtain such approval or complete such filing or other procedures.
• Trading in the company's securities may be prohibited under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect or investigate completed its auditors for three consecutive years beginning in 2021, or for two consecutive years if the Accelerating Holding Foreign Companies Accountable Act or the America COMPETES Act becomes law.
• 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.
• Adverse changes in political and economic policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could reduce the demand for the company's products and materially and adversely affect its competitive position.
• Labor laws in the PRC may adversely affect the company's results of operations.
• Imposition of trade barriers and taxes may reduce the company's ability to do business internationally, and the resulting loss of revenue could harm its profitability.
• Under the Enterprise Income Tax Law, the company may be classified as a Resident Enterprise of China.
• The company may be subject to a significant withholding tax should equity transfers by its non-resident enterprises be determined to have been done without a reasonable business purpose.
• The company may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption law.
• Uncertainties with respect to the PRC legal system could adversely affect the company.
• PRC government has legalized the VIE structure for the first time, but VIE structure still faces many uncertainties.
• Governmental control of currency conversion may affect the value of your investment.
• The company is a holding company and it relies for funding on dividend payments from its subsidiaries, which are subject to restrictions under PRC laws.
• The company's business may be materially and adversely affected if any of its PRC subsidiaries declare bankruptcy or become subject to a dissolution or liquidation proceeding.
• According to the SAFEs Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, effective on December 17, 2012, and the Provisions for Administration of Foreign Exchange Relating to Inbound Direct Investment by Foreign Investors, effective May 13, 2013, if any of our PRC subsidiaries undergoes a voluntary or involuntary liquidation proceeding, prior approval from the SAFE for remittance of foreign exchange to our shareholders abroad is no longer required, but we still need to conduct a registration process with the SAFE local branch.
• Fluctuations in exchange rates could adversely affect the company's business and the value of its securities.
• The company is a foreign private issuer, and its disclosure obligations differ from those of U.S. domestic reporting companies.
• The company may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses.
• The market price of the company's common shares may be volatile or may decline regardless of its operating performance, and you may not be able to resell your shares at or above the price you paid.
• The company does not intend to pay dividends for the foreseeable future.
• The company incurs significant costs as a result of being a public company.
• U.S. tax authorities could treat the company as a passive foreign investment company, which could have adverse U.S. federal income tax consequences to U.S. shareholders.
• The company is subject to liability risks stemming from its foreign status, which could make it more difficult for investors to sue or enforce judgments against the company.

Positives

• Net income attributable to common stockholders increased to $5.6 million in 2023 from $3.0 million in 2022.
• The company's corporate structure contains no VIEs, and its industries are not subject to foreign ownership limitations in mainland China.

Negatives

• The company's revenue decreased by 11.5% to $47.3 million in 2023, primarily due to a decrease in consumer product revenue.
• The company has identified material weaknesses in its internal control over financial reporting.
• The company is subject to the Holding Foreign Companies Accountable Act (HFCAA), which could prohibit its shares from trading on U.S. exchanges if the PCAOB cannot inspect its auditors for two consecutive years.
• The company has outstanding bank loans of approximately $2.3 million as of December 31, 2023.
• The company is dependent on key management and research and development personnel.
• The company faces competition from smaller competitors that may be able to provide similar charcoal briquette products at lower prices.
• The company's electric vehicle (EV) business has not met expectations, and its future growth depends on customer adoption of alternative fuel vehicles.
• The company is subject to risks associated with its mining investments in Libo Haokun and Fuquan Chengwang.
• The company relies on third-party distributors for a substantial portion of its sales.
• The company buys its supplies from a relatively limited number of suppliers, and disruption in supply may increase its production cost.
• The company's bank accounts are not insured or protected against loss.
• The company is subject to risks relating to the banking facilities it uses to overcome cash flow issues.
• The company is heavily dependent upon the services of experienced personnel who possess skills that are valuable in our industry, and we may have to actively compete for their services.
• The company is heavily dependent upon its ability to attract, retain and motivate skilled personnel to serve its customers.
• The company's strategy of developing driverless street sweepers may fail and as a result, its future results of operations and growth prospects may be materially and adversely affected.
• The company may be affected by disruptions to its production facilities.
• The company may be exposed to intellectual property infringement and other claims by third parties which, if successful, could disrupt its business and have a material adverse effect on its financial condition and results of operations.
• The company is dependent on its brand and trademarks.
• The company's charcoal briquette products have relatively low technical requirements; therefore, barriers to entry are minimal.
• The PRC government may intervene in or influence the company's operations at any time, which could result in a material change in its operations and significantly and adversely impact the value of its common shares.
• The approval of, filing or other procedures with the CSRC or other Chinese regulatory authorities may be required in connection with issuing securities to foreign investors under PRC law, and, if required, the company cannot predict whether it will be able, or how long it will take it, to obtain such approval or complete such filing or other procedures.
• Trading in the company's securities may be prohibited under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect or investigate completed its auditors for three consecutive years beginning in 2021, or for two consecutive years if the Accelerating Holding Foreign Companies Accountable Act or the America COMPETES Act becomes law.
• 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.
• Adverse changes in political and economic policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could reduce the demand for the company's products and materially and adversely affect its competitive position.
• Labor laws in the PRC may adversely affect the company's results of operations.
• Imposition of trade barriers and taxes may reduce the company's ability to do business internationally, and the resulting loss of revenue could harm its profitability.
• Under the Enterprise Income Tax Law, the company may be classified as a Resident Enterprise of China.
• The company may be subject to a significant withholding tax should equity transfers by its non-resident enterprises be determined to have been done without a reasonable business purpose.
• The company may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption law.
• Uncertainties with respect to the PRC legal system could adversely affect the company.
• PRC government has legalized the VIE structure for the first time, but VIE structure still faces many uncertainties.
• Governmental control of currency conversion may affect the value of your investment.
• The company is a holding company and it relies for funding on dividend payments from its subsidiaries, which are subject to restrictions under PRC laws.
• The company's business may be materially and adversely affected if any of its PRC subsidiaries declare bankruptcy or become subject to a dissolution or liquidation proceeding.
• According to the SAFEs Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, effective on December 17, 2012, and the Provisions for Administration of Foreign Exchange Relating to Inbound Direct Investment by Foreign Investors, effective May 13, 2013, if any of our PRC subsidiaries undergoes a voluntary or involuntary liquidation proceeding, prior approval from the SAFE for remittance of foreign exchange to our shareholders abroad is no longer required, but we still need to conduct a registration process with the SAFE local branch.
• Fluctuations in exchange rates could adversely affect the company's business and the value of its securities.
• The company is a foreign private issuer, and its disclosure obligations differ from those of U.S. domestic reporting companies.
• The company may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses.
• The market price of the company's common shares may be volatile or may decline regardless of its operating performance, and you may not be able to resell your shares at or above the price you paid.
• The company does not intend to pay dividends for the foreseeable future.
• The company incurs significant costs as a result of being a public company.
• U.S. tax authorities could treat the company as a passive foreign investment company, which could have adverse U.S. federal income tax consequences to U.S. shareholders.
• The company is subject to liability risks stemming from its foreign status, which could make it more difficult for investors to sue or enforce judgments against the company.

Risks

• Health epidemics could impact sales and operating results.
• A weakening of the Chinese economy could hurt demand for products.
• Inability to develop products that meet customer demands.
• Competition from larger competitors.
• Supply risks related to charcoal.
• Risks related to fire, flooding, disease, and pests affecting bamboo supplies.
• Increases in bamboo charcoal costs.
• Competition from smaller competitors offering lower-priced charcoal briquettes.
• The electric vehicle (EV) business not meeting expectations.
• High concentration of vehicle sales to few customers.
• Dependence on approvals from the Ministry of Industry and Information Technology of the Peoples Republic China (the MIIT).
• Potential for lithium-ion batteries to catch fire or vent smoke and flame.
• Expensive compliance with environmental regulations.
• Limitations on ability to develop, use, or sell products due to certain laws, ordinances and regulations.
• Developments in alternative technologies or improvements in the internal combustion engine may materially adversely affect the demand for our EV products.
• Strategy of developing driverless street sweepers may fail.
• Inability to keep up with advances in EV technology.
• Changes to the Chinese governments subsidy/rebate support policies and further delays in subsidy/rebate payments may have further negative impacts on our EV segment.
• The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, financial condition, operating results and prospects.
• Not owning 100% of electric vehicle subsidiary, and being a minority investor in mining investments.
• Outstanding bank loans may reduce available funds.
• Failure to manage growth could strain management, operational and other resources.
• Not yet implementing advanced logistical management techniques.
• Business may be negatively affected by adverse publicity.
• Business may be negatively affected by low share prices in the stock market.
• Disruptions to production facilities.
• Failure to protect intellectual property rights.
• Exposure to intellectual property infringement and other claims by third parties.
• Dependence on brand and trademarks.
• Charcoal briquette products have relatively low technical requirements; therefore, barriers to entry are minimal.
• The PRC government may intervene in or influence our operations at any time, which could result in a material change in our operations and significantly and adversely impact the value of our common shares.
• The approval of, filing or other procedures with the CSRC or other Chinese regulatory authorities may be required in connection with issuing securities to foreign investors under PRC law, and, if required, we cannot predict whether we will be able, or how long it will take us, to obtain such approval or complete such filing or other procedures.
• Trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect or investigate completed our auditors for three consecutive years beginning in 2021, or for two consecutive years if the Accelerating Holding Foreign Companies Accountable Act or the America COMPETES Act becomes law.
• Chinese economic downturn or growth slowdown may harm our business.
• U.S. regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in China.
• Adverse changes in political and economic policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could reduce the demand for our products and materially and adversely affect our competitive position.
• Labor laws in the PRC may adversely affect our results of operations.
• Imposition of trade barriers and taxes may reduce our ability to do business internationally, and the resulting loss of revenue could harm our profitability.
• Under the Enterprise Income Tax Law, we may be classified as a Resident Enterprise of China.
• We may be subject to a significant withholding tax should equity transfers by our non-resident enterprises be determined to have been done without a reasonable business purpose.
• We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption law.
• Uncertainties with respect to the PRC legal system could adversely affect us.
• PRC government has legalized the VIE structure for the first time, but VIE structure still faces many uncertainties.
• Governmental control of currency conversion may affect the value of your investment.
• We are a holding company and we rely for funding on dividend payments from our subsidiaries, which are subject to restrictions under PRC laws.
• Our business may be materially and adversely affected if any of our PRC subsidiaries declare bankruptcy or become subject to a dissolution or liquidation proceeding.
• According to the SAFEs Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, effective on December 17, 2012, and the Provisions for Administration of Foreign Exchange Relating to Inbound Direct Investment by Foreign Investors, effective May 13, 2013, if any of our PRC subsidiaries undergoes a voluntary or involuntary liquidation proceeding, prior approval from the SAFE for remittance of foreign exchange to our shareholders abroad is no longer required, but we still need to conduct a registration process with the SAFE local branch.
• Fluctuations in exchange rates could adversely affect our business and the value of our securities.
• We are a foreign private issuer, and our disclosure obligations differ from those of U.S. domestic reporting companies.
• We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
• The market price of our common shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the price you paid.
• We do not intend to pay dividends for the foreseeable future.
• We incur significant costs as a result of being a public company.
• U.S. tax authorities could treat us as a passive foreign investment company, which could have adverse U.S. federal income tax consequences to U.S. shareholders.
• We are subject to liability risks stemming from our foreign status, which could make it more difficult for investors to sue or enforce judgments against our company.

Key Dates

Keywords

Tantech Holdings, financial results, corporate structure, bamboo charcoal, electric vehicles, risk factors, China, PCAOB, HFCAA, CSRC, VIE, subsidiaries, revenue, net income, internal control, auditors, dividends, shareholders, regulations