Tantech Holdings(TANH) - 2023 Q2 - Quarterly Report

Unaudited Consolidated Financial Statements Condensed Consolidated Balance Sheets As of June 30, 2023, Tantech Holdings Ltd. reported total assets of $138.05 million, an increase from $134.13 million at December 31, 2022, with total liabilities increasing to $19.83 million and total shareholders' equity rising to $118.22 million | Metric | June 30, 2023 ($) | December 31, 2022 ($) | Change ($) | Change (%) | |:---------------------------|------------------:|----------------------:|-----------:|-----------:| | Total Current Assets | 112,048,158 | 106,756,817 | 5,291,341 | 4.96% | | Total Non-current Assets | 26,002,078 | 27,375,187 | (1,373,109)| -5.02% | | Total Assets | 138,050,236 | 134,132,004 | 3,918,232| 2.92% | | Total Current Liabilities | 15,278,986 | 13,540,791 | 1,738,195 | 12.84% | | Total Liabilities | 19,825,841 | 18,196,610 | 1,629,231 | 8.95% | | Total Shareholders' Equity | 118,224,395 | 115,935,394 | 2,289,001 | 1.97% | Unaudited Condensed Consolidated Statements of Income and Comprehensive Loss For the six months ended June 30, 2023, Tantech Holdings Ltd. reported a decrease in revenues and gross profit compared to the same period in 2022, with net income remaining stable and comprehensive loss improving, while basic EPS significantly decreased due to increased weighted average shares outstanding | Metric | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | Change ($) | Change (%) | |:------------------------------------------------|-----------------------------------:|-----------------------------------:|-----------:|-----------:| | Revenues | 19,741,709 | 26,969,417 | (7,227,708)| -26.79% | | Cost of revenues | 15,686,879 | 21,887,449 | (6,200,570)| -28.33% | | Gross Profit | 4,054,830 | 5,081,968 | (1,027,138)| -20.21% | | Income from operations | 1,893,848 | 3,171,785 | (1,277,937)| -40.29% | | Net income | 1,892,524 | 1,872,244 | 20,280 | 1.08% | | Comprehensive loss | (3,545,324) | (4,075,674) | 530,350 | 13.01% | | Net income attributable to common shareholders | 2,011,244 | 2,099,462 | (88,218) | -4.20% | | Basic Earnings per share | 1.06 | 2.72 | (1.66) | -61.03% | | Diluted Earnings per share | 1.06 | 2.66 | (1.60) | -60.15% | | Basic Weighted Average Shares Outstanding | 1,903,906 | 773,083 | 1,130,823 | 146.27% | | Diluted Weighted Average Shares Outstanding | 1,903,906 | 789,308 | 1,114,598 | 141.21% | Unaudited Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity attributable to the Company increased from $118.08 million at December 31, 2022, to $120.49 million at June 30, 2023, primarily driven by proceeds from common share issuance and net income, partially offset by foreign currency translation adjustments | Metric | December 31, 2022 ($) | June 30, 2023 ($) | Change ($) | Change (%) | |:-------------------------------------------------|----------------------:|------------------:|-----------:|-----------:| | Common Shares (Amount) | 292,299 | 829,899 | 537,600 | 183.99% | | Additional Paid-in Capital | 79,454,309 | 84,751,034 | 5,296,725 | 6.67% | | Statutory Reserves | 7,490,398 | 7,580,896 | 90,498 | 1.21% | | Retained Earnings | 39,090,079 | 41,010,825 | 1,920,746 | 4.91% | | Accumulated Other Comprehensive Loss | (8,242,727) | (13,685,840) | (5,443,113)| 66.03% | | Total Shareholders' Equity attributable to Company | 118,084,358 | 120,486,814 | 2,402,456 | 2.03% | | Non-controlling interest | (2,148,964) | (2,262,419) | (113,455) | 5.28% | | Total Shareholders' Equity | 115,935,394 | 118,224,395 | 2,289,001| 1.97% | Unaudited Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2023, Tantech Holdings Ltd. significantly improved cash flow from operating activities, reduced cash used in investing activities, and received substantial cash from financing activities, resulting in a net increase in cash and cash equivalents | Cash Flow Activity | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | Change ($) | Change (%) | |:------------------------------------|-----------------------------------:|-----------------------------------:|-----------:|-----------:|\n| Net cash used in operating activities | (901,876) | (2,354,598) | 1,452,722 | -61.70% | | Net cash used in investing activities | (1,397,446) | (45,214,318) | 43,816,872 | -96.91% | | Net cash provided by financing activities | 8,509,635 | 15,958,904 | (7,449,269)| -46.68% | | Effect of exchange rate changes | (450,252) | (1,154,256) | 704,004 | -61.00% | | Net increase (decrease) in cash | 5,760,061 | (32,764,268) | 38,524,329 | -117.59% | | Cash, beginning of period | 18,981,511 | 43,566,881 | (24,585,370)| -56.43% | | Cash, end of period | 24,741,572 | 10,802,613 | 13,938,959 | 129.03% | Notes to Unaudited Condensed Consolidated Financial Statements Note 1 – Organization and Nature of Business Tantech Holdings Ltd. is a British Virgin Islands holding company involved in bamboo products, electric and non-electric vehicles, and mining exploration, having completed its VIE structure dismantling in August 2021 and operating through diverse subsidiaries across multiple regions - Tantech Holdings Ltd. is a BVI holding company with diverse business activities including research and development, production and distribution of bamboo products, manufacturing and selling electric and non-electric vehicles, and investment in mining exploration[17] - The company completed dismantling its VIE structure on August 3, 2021[17] - Subsidiaries are located in Hong Kong, United States, Canada, and various provinces in China, with principal activities ranging from holding companies to biodegradable packaging, vehicle manufacturing/sales, bamboo/charcoal products, and factoring[18][19][20] Note 2 – Summary of Significant Accounting Policies This section outlines Tantech Holdings Ltd.'s significant accounting policies, covering principles of consolidation, use of estimates, fair value measurements, and specific policies for various financial statement line items, including cash, receivables, inventory, property, intangible assets, leases, revenue recognition, foreign currency translation, income taxes, EPS calculation, and recent accounting pronouncements Principal of Consolidation - The consolidated financial statements are prepared in accordance with US GAAP and include Tantech BVI and its subsidiaries, with all significant inter-company balances and transactions eliminated[31] Non-controlling interest - Non-controlling interest represents a 30% equity stake in Shangchi Automobile and its subsidiary Shenzhen Yimao, owned by Zhangjiagang Jinke Chuangtou Co., Ltd., which is not under the Company's control[31] Use of Estimates - Management makes estimates and assumptions affecting reported amounts, including fair value estimates for useful lives of assets, allowances for doubtful accounts, inventory valuation, impairment of long-lived assets, deferred tax assets, right-of-use assets, convertible notes, and lease liabilities[32] Fair Value of Financial Instruments - The Company applies ASC Topic 820, 'Fair Value Measurements,' which defines fair value and establishes a three-level valuation hierarchy (Level 1, 2, 3) based on input observability[34] - Most short-term financial instruments approximate their recorded values due to short maturities[35] Financial Liabilities | Financial Liabilities | June 30, 2023 ($) | |:----------------------|------------------:| | Convertible note | 2,003,000 | Cash and cash equivalents - Cash equivalents include highly liquid instruments with original maturities of three months or less and money market accounts, with all cash balances held in PRC bank accounts and not FDIC-insured[38] Restricted Cash Restricted Cash Balances | Metric | June 30, 2023 ($) | December 31, 2022 ($) | |:----------------|------------------:|----------------------:| | Restricted cash | 23,350 | 4,827 | - Restricted cash represents funds frozen in a subsidiary's bank account due to an ongoing lawsuit[39] Concentrations of credit risk - Credit risk is concentrated in cash, trade accounts receivable, and advances to suppliers, with cash held in uninsured PRC banks and sales primarily credit-based, necessitating ongoing credit evaluations[41] Accounts receivable - Accounts receivable are presented net of an allowance for doubtful accounts, estimated based on periodic reviews considering factors like age, payment history, credit-worthiness, and economic trends[42] Financing receivable - Financing receivables from the Company's factoring business are measured at amortized cost, including unpaid principal and interest, with financial interest income recognized using the effective interest rate method[43] Inventory - Inventories are valued at the lower of cost (weighted average basis) or net realizable value, with periodic reviews for obsolescence or write-downs[44] Advances to suppliers - Cash advances are made to suppliers for raw materials, with allowances established when there is doubt about a supplier's ability to refund advances or provide supplies[45] Property, Plant and Equipment, net - Property and equipment are stated at cost less accumulated depreciation, computed on a straight-line basis over estimated useful lives (e.g., Buildings: 20 years, Machinery: 5-10 years)[46][47] - Construction in progress includes direct costs, interest expense, and design fees, with capitalization ceasing upon completion and readiness for intended use[49] Intangible assets - Intangible assets are recorded at cost, amortized using a straight-line method over their estimated useful lives (e.g., Software: 5-10 years, Land use right: 50 years), and evaluated for impairment[50][51] Long term investments - Investments with significant influence are accounted for using the equity method; those without significant influence or readily determinable fair value are accounted for using the cost method[51][52] - Investments are evaluated for other-than-temporary impairment based on factors like investment nature, impairment cause/duration, fair value vs. cost, financial condition, and ability to hold the security[53] Impairment of Long-Lived Assets - Long-lived assets are evaluated for impairment when circumstances indicate carrying amount may not be recoverable, comparing carrying amount to undiscounted future cash flows, with impairment loss recognized if carrying amount exceeds fair value[54] Customer Deposits - Customer deposits represent amounts received from customers in advance of product shipments[55] Loan Payable to Third Parties - Loan payable to third parties represents amounts borrowed for working capital purposes[56] Leases - The Company adopted ASC 842 on January 1, 2019, recognizing right-of-use (ROU) assets and lease liabilities on the balance sheet for leases over 12 months, while short-term lease payments are expensed straight-line[56][57] Revenue Recognition - Revenue is recognized under ASC Topic 606 when control of promised goods or services is transferred to customers, with sales revenue recognized net of sales taxes and estimated returns upon product delivery[58] - Product warranties are assurance-type and not separate performance obligations, commission income is reported on a net basis as the Company acts as an agent, and government manufacturing rebates for electric vehicles are recognized as revenue when sales are finalized and collectability is assured[59][60] Cost of Revenues - Cost of revenues includes raw materials, inbound freight, direct labor, depreciation, other overhead, and inventory write-downs[61] Shipping and Handling - Shipping and handling costs are expensed as incurred and included in selling expenses[62] Subsidy Income - The Company periodically receives government grants, such as 'High Technology Projects Subsidy' and 'Scientific Research Grant,' with no guarantee of future receipt[62] Foreign Currency Translation - Financial information is presented in U.S. dollars, with PRC subsidiaries' functional currency being RMB, and transactions translated at prevailing exchange rates, with translation adjustments included in accumulated other comprehensive income[63] Exchange Rates (US$:RMB) | Exchange Rate (US$:RMB) | June 30, 2023 | June 30, 2022 | December 31, 2022 | |:------------------------|:-------------:|:-------------:|:-----------------:|\n| Period End | 0.1379 | 0.1493 | 0.1450 | | Average | 0.1443 | 0.1543 | 0.1486 | Research and development costs - All costs directly attributable to research and development projects, including salaries, testing, equipment, and consulting fees, are expensed as incurred[65] Comprehensive Income (loss) - Comprehensive income (loss) comprises net income (loss) and other comprehensive income (loss), with the latter primarily consisting of foreign currency translation adjustments[66] Income Taxes - The Company's PRC subsidiaries are subject to PRC income tax laws, with income taxes accounted for using the asset and liability approach (ASC 740), and deferred taxes provided for temporary differences with a valuation allowance if realization is unlikely[67] - ASC 740-10-25 requires a more-likely-than-not threshold for tax position recognition, and no material uncertain tax positions were identified as of June 30, 2023, and December 31, 2022[68] Value Added Tax ("VAT") - The Company is subject to VAT on merchandise sales in the PRC, with rates varying (currently 13% and 9% from April 1, 2019), and VAT liability calculated as output VAT less input VAT[69] - No disputes with PRC tax authorities or tax penalties were incurred during the reporting periods[71] Earnings per Share ("EPS") - EPS is computed in accordance with ASC 260, presenting basic and diluted EPS, with basic EPS as net income divided by weighted average common shares outstanding, and diluted EPS including the dilutive effect of potential common shares, excluding anti-dilutive effects[72] - For the six months ended June 30, 2023, no warrants were included in diluted EPS as their exercise prices exceeded the average market price, while in 2022, 16,225 warrants were included[72] Statement of Cash Flows - Cash flows from operations are calculated based on local currencies, meaning asset and liability changes in the cash flow statement may not directly align with balance sheet changes due to translation[73] Risks and Uncertainties - Company operations in the PRC are subject to political, economic, and legal environment risks, including changes in governmental policies, anti-inflationary measures, currency conversion, and taxation[74] - The RMB is not freely convertible, and foreign exchange transactions are regulated by the People's Bank of China, with the Company lacking business interruption, product liability, or comprehensive insurance, increasing exposure to uninsured losses[75][76] Recent accounting pronouncements - ASU No. 2021-08, 'Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,' effective after December 15, 2023, is not expected to materially impact consolidated financial statements[78] Note 3 – Accounts Receivable Net accounts receivable increased to $41.16 million as of June 30, 2023, from $40.17 million at December 31, 2022, with the allowance for doubtful accounts decreasing by $353,556 due to changes in allowance and translation adjustments Accounts Receivable Balances | Metric | June 30, 2023 ($) | December 31, 2022 ($) | Change ($) | |:------------------------------|------------------:|----------------------:|-----------:| | Accounts receivable | 44,964,778 | 44,331,093 | 633,685 | | Allowance for doubtful accounts | (3,803,205) | (4,156,761) | 353,556 | | Accounts receivable, net | 41,161,573 | 40,174,332 | 987,241| Allowance for Doubtful Accounts Movement | Allowance for Doubtful Accounts Movement | June 30, 2023 ($) | |:-----------------------------------------|------------------:| | Balance at beginning of period | 4,156,761 | | Change of allowance | (156,981) | | Translation adjustments | (196,575) | | Balance at end of period | 3,803,205 | Note 4 - Financing Receivable Financing receivables, stemming from the Company's factoring business, decreased slightly to $42.88 million as of June 30, 2023, from $43.86 million at December 31, 2022, while net financing interest income significantly increased to $1.21 million for the six months ended June 30, 2023 Financing Receivable Balances | Metric | June 30, 2023 ($) | December 31, 2022 ($) | Change ($) | |:------------------------|------------------:|----------------------:|-----------:| | Financing receivable | 42,875,260 | 43,864,192 | (988,932) | | Principal | 40,335,750 | 42,412,500 | (2,076,750)| | Interest receivable | 2,539,510 | 1,451,692 | 1,087,818 | - Financing receivables are secured by pledged accounts receivable with a carrying value of $43,899,055, exceeding the financing provided, with a term generally within 12 months and an annual interest rate of 6.5%[83] Net Financing Interest Income | Metric | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | Change ($) | |:--------------------------------|-----------------------------------:|-----------------------------------:|-----------:| | Net financing interest income | 1,206,998 | 52,248 | 1,154,750 | Note 5 – Inventory Total inventory increased to $1.28 million as of June 30, 2023, from $0.90 million at December 31, 2022, driven by increases in raw materials and work in process, with an inventory reserve of $53,275 recorded for the six months ended June 30, 2023 Inventory Components | Inventory Component | June 30, 2023 ($) | December 31, 2022 ($) | Change ($) | |:--------------------|------------------:|----------------------:|-----------:| | Raw materials | 387,984 | 158,093 | 229,891 | | Finished products | 320,005 | 351,867 | (31,862) | | Work in process | 575,566 | 388,726 | 186,840 | | Total Inventory | 1,283,555 | 898,686 | 384,869| Inventory Reserve | Metric | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | |:------------------|-----------------------------------:|-----------------------------------:|\n| Inventory reserve | 53,275 | 0 | Note 6 – Advances to Suppliers Net advances to suppliers significantly decreased to $0.50 million as of June 30, 2023, from $1.29 million at December 31, 2022, with the allowance for doubtful accounts also decreasing by $16,930 due to changes in allowance and translation adjustments Advances to Suppliers Balances | Metric | June 30, 2023 ($) | December 31, 2022 ($) | Change ($) | |:------------------------------|------------------:|----------------------:|-----------:| | Advances to suppliers | 544,996 | 1,357,625 | (812,629) | | Allowance for doubtful accounts | (48,697) | (65,627) | 16,930 | | Advances to suppliers, net| 496,299 | 1,291,998 | (795,699)| Allowance for Doubtful Accounts Movement | Allowance for Doubtful Accounts Movement | June 30, 2023 ($) | |:-----------------------------------------|------------------:|\n| Balance at beginning of period | 65,627 | | Change of allowance | (14,353) | | Translation adjustments | (2,577) | | Balance at end of period | 48,697 | Note 7 – Property, Plant and Equipment, net Net property, plant, and equipment decreased to $1.62 million as of June 30, 2023, from $1.66 million at December 31, 2022, with depreciation expense for the six months ended June 30, 2023, at $141,934, and a building with a net book value of $298,000 pledged as collateral Property, Plant and Equipment Balances | Asset Category | June 30, 2023 ($) | December 31, 2022 ($) | Change ($) | |:-----------------------------------|------------------:|----------------------:|-----------:| | Building | 4,554,216 | 4,831,806 | (277,590) | | Machinery and Production equipment | 1,468,742 | 1,214,709 | 254,033 | | Construction in progress | 1,095 | 377,300 | (376,205) | | Subtotal | 6,522,813 | 6,959,617 | (436,804) | | Less: Accumulated depreciation | (4,906,552) | (5,303,175) | 396,623 | | Property, plant and equipment, net | 1,616,261 | 1,656,442 | (40,181)| Depreciation Expense | Metric | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | |:-------------------|-----------------------------------:|-----------------------------------:|\n| Depreciation expense | 141,934 | 200,439 | - As of June 30, 2023, a building with a net book value of $298,000 was pledged as collateral for bank loans[90] Note 8 – Intangible Assets, net Net intangible assets decreased to $0.17 million as of June 30, 2023, from $0.18 million at December 31, 2022, with amortization expense for the six months ended June 30, 2023, at $4,133, and land use rights with a net book value of $167,668 pledged as collateral Intangible Asset Components | Intangible Asset Component | June 30, 2023 ($) | December 31, 2022 ($) | Change ($) | |:---------------------------|------------------:|----------------------:|-----------:| | Software | 29,602 | 31,126 | (1,524) | | Land use rights | 276,376 | 290,606 | (14,230) | | Patents | 4,137,000 | 4,350,000 | (213,000) | | Subtotal | 4,442,978 | 4,671,732 | (228,754) | | Less: Accumulated amortization | (4,271,156) | (4,486,910) | 215,754 | | Intangible assets, net | 171,822 | 184,822 | (13,000)| Amortization Expense | Metric | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | |:---------------------|-----------------------------------:|-----------------------------------:|\n| Amortization expense | 4,133 | 4,280 | - As of June 30, 2023, land use rights with a net book value of $167,668 were pledged as collateral for bank loans[92] Note 9 – Leases As of June 30, 2023, the Company reported operating lease ROU assets and total operating lease liabilities of $1.28 million each, with a weighted average remaining lease term of 8.23 years and a discount rate of 4.50%, and future minimum lease payments totaling $1.51 million Lease Metrics | Lease Metric | June 30, 2023 ($) | December 31, 2022 ($) | |:----------------------------------|------------------:|----------------------:|\n| Right-of-use assets, net | 1,278,053 | 1,417,088 | | Operating lease liabilities - current | 242,128 | 161,480 | | Operating lease liabilities - non-current | 1,040,062 | 1,259,958 | | Total operating lease liabilities | 1,282,190 | 1,421,438 | Lease Term & Rate | Lease Term & Rate | June 30, 2023 | |:----------------------------------|:------------------|\n| Weighted average remaining lease term (years) | 8.23 | | Weighted average discount rate | 4.50% | Lease Maturity Schedule (June 30, 2023) | Lease Maturity Schedule (June 30, 2023) | Amount ($) | |:----------------------------------------|-----------:|\n| 2024 | 293,475 | | 2025 | 195,650 | | 2026 | 170,828 | | 2027 | 170,828 | | 2028 | 170,828 | | Thereafter | 512,486 | | Total future minimum lease payments | 1,514,095 | | Less: imputed interest | (231,905) | | Total | 1,282,190| Note 10 – Short-term Bank Loans As of June 30, 2023, total short-term bank loans amounted to $3.04 million, including a $2.22 million loan from Bank of China and an $0.83 million outstanding balance from SPD Bank, both collateralized by company assets and guaranteed by related parties and individuals Short-term Bank Loan Sources | Bank Loan Source | June 30, 2023 ($) | |:------------------------------------------------|------------------:|\n| Loan payable to Bank of China Lishui Branch | 2,217,423 | | Loan payable to Shanghai Pudong Development Bank | 827,400 | | Total | 3,044,823 | - The Bank of China loan (approx. $2.22 million, 4.35% annual interest) is collateralized by Tantech Bamboo's building and land use right, and guaranteed by related parties and individuals[101] - The SPD Bank loan (initially $1.38 million, 3.90% annual interest, $0.83 million outstanding) is guaranteed by related parties and collateralized by Tantech Energy's building and land use right[102] Interest Expense | Metric | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | |:---------------|-----------------------------------:|-----------------------------------:|\n| Interest expense | 72,687 | 106,978 | Note 11 – Loan payable to third parties Total loan payable to third parties increased to $4.22 million as of June 30, 2023, from $3.40 million at December 31, 2022, comprising a $3.51 million long-term unsecured loan extended to December 2024 and a new $0.71 million short-term unsecured loan, both at 6% annual interest Loan Payable to Third Parties | Loan Type | June 30, 2023 ($) | December 31, 2022 ($) | |:------------------------------------|------------------:|----------------------:|\n| Loan payable to third parties | 711,266 | 0 | | Loan payable to third parties-long term | 3,506,793 | 3,395,861 | | Total | 4,218,059 | 3,395,861 | - A $3.51 million unsecured loan (6% annual interest) was extended to December 15, 2024, and a new $0.71 million unsecured loan (6% annual interest) was borrowed in February 2023 with a one-year term[104][105] - Failure to repay these debts incurs liquidated damages and compensation for legal costs[104][105] Note 12 – Convertible note On June 29, 2023, the Company issued an unsecured convertible promissory note with a principal of $2.16 million to Streeterville Capital, LLC, for $2.00 million in gross proceeds, bearing 7% annual interest and maturing in twelve months, with a fair value of $2.003 million as of June 30, 2023 - On June 29, 2023, Tantech issued an unsecured convertible promissory note with a principal of $2,160,000 to Streeterville Capital, LLC, for $2,000,000 in gross proceeds[107] - The note bears 7% annual interest, compounds daily, and matures in twelve months, including a $140,000 original issue discount and $20,000 for Streeterville's fees[107] Convertible Note Fair Value and Loss | Metric | June 30, 2023 ($) | |:----------------------------------------|------------------:|\n| Fair value of convertible note | 2,003,000 | | Loss of change in fair value of convertible note | 3,010 | - The fair value of the convertible note is calculated using the Scenario-based Discounted Cash Flows with Monte Carlo Simulation Model, with key assumptions including a 5.419% risk-free interest rate, 1-year expected life, $2.68 share price, and 142% volatility[108][109] Note 13 – Related Party Balances and Transactions As of June 30, 2023, amounts due to related parties totaled $1.14 million, primarily from Forasen Group and Mr. Wangfeng Yan, all unsecured, interest-free, and due upon demand, with the Company also having lease arrangements and receiving guarantees for its bank loans from related parties Amounts Due to Related Parties | Related Party | June 30, 2023 ($) | December 31, 2022 ($) | |:--------------------------------------------|------------------:|----------------------:|\n| Forasen Group and its affiliates | 959,485 | 857,746 | | Mr. Wangfeng Yan and his affiliates | 182,433 | 189,766 | | Total Due to Related Parties | 1,141,918 | 1,047,512 | - All balances due to related parties are unsecured, interest-free, and due upon demand[111] - The Company leases production facilities to Zhejiang Nongmi Food Co., Ltd. and Zhejiang Nongmi Biotechnology Co., Ltd., both controlled by Ms. Yefang Zhang (Company director), generating rental income of $12,183 and $29,520 respectively for the six months ended June 30, 2023[111][112] - Major shareholders and related party entities provide guarantees for the Company's bank loans, and Tantech Bamboo also provided a guarantee for Forasen Food (controlled by Ms. Yefang Zhang) by pledging land and building[113] Note 14 – Commitments and Contingencies The Company has various operating lease commitments for factory facilities and office spaces, with rental expenses totaling $154,050 for the six months ended June 30, 2023, and faces a significant contingency from a lawsuit against Shangchi Automobile and the Company for a debt dispute of approximately $1.2 million, resulting in frozen bank accounts - The Company has multiple operating lease agreements for factory facilities and office spaces, including leases for Luishui Smart, Shangchi Automobile, Tantech Charcoal, and Epakia Canada[114][115] Rental Expense | Metric | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | |:--------------|-----------------------------------:|-----------------------------------:|\n| Rental expense | 154,050 | 242,249 | - A lawsuit filed by Mr. Hengwei Chen against Shangchi Automobile and the Company for a debt dispute of approximately $1.2 million (RMB8.95 million) resulted in a final court judgment in June 2022, with the Company accruing $0.7 million for the disputed amount and interest, and $1.2 million frozen in bank accounts to enforce execution[116] Note 15 – Shareholders' Equity Tantech Holdings Ltd. underwent two reverse stock splits in 2022 to regain NASDAQ compliance, increased authorized common shares to 500 million in May 2023, and issued 1 million common shares in March 2023 for $2.80 per share and 1.24 million common shares in June 2023 for $2.50 per share, generating net proceeds of $2.78 million and $3.06 million, respectively - The Company completed a one-for-ten reverse stock split on February 25, 2022, and a one-for-twenty-four reverse stock split on November 9, 2022, to regain NASDAQ compliance[117][118] - On May 26, 2023, the authorized number of common shares was increased from 2.5 million to 500 million[119] - In March 2023, the Company sold 1,000,000 common shares at $2.80 per share, generating net proceeds of $2,779,325[120] - In June 2023, it sold 1,240,000 common shares at $2.50 per share, generating net proceeds of $3,055,000[121] - As of June 30, 2023, 26,765 registered and unregistered warrants were outstanding, with a weighted average remaining life of 2.29 years and a weighted average exercise price of $35.98[123] Note 16 – Noncontrolling Interests The non-controlling interest balance increased to $(2.26) million as of June 30, 2023, from $(2.15) million at December 31, 2022, primarily reflecting the proportionate share of net loss attributable to non-controlling interests, partially offset by foreign currency translation adjustments, representing a 30% equity stake in Shangchi Automobile and its subsidiary Shenzhen Yimao Non-controlling Interests Movement | Metric | June 30, 2023 ($) | December 31, 2022 ($) | |:--------------------------------------|------------------:|----------------------:|\n| Beginning Balance | (2,148,964) | (1,724,627) | | Proportionate shares of net loss | (118,721) | (434,873) | | Foreign currency translation adjustment | 5,266 | 10,536 | | Total | (2,262,419) | (2,148,964) | - Non-controlling interests represent a 30% equity stake in Shangchi Automobile and its subsidiary Shenzhen Yimao[126] Note 17 – Long Term Investments Tantech holds long-term investments in mining companies, including an 18% equity interest in Libo Haokun Stone Co., Ltd. (marble quarry) and an indirect 14.76% stake in Fuquan Chengwang Mining Co., Ltd. (basalt quarry), accounted for using the cost method due to lack of significant influence, with no impairment losses recognized - The Company invested approximately $16.6 million to acquire an 18% equity interest in Libo Haokun Stone Co., Ltd., which holds an exclusive permit to mine a marble quarry in Guizhou province, China[127] - Tantech indirectly holds a 14.76% stake in Fuquan Chengwang Mining Co., Ltd. (a basalt mining company) through Jingning Meizhongkuang, following a dilution from an initial 18% interest due to a third-party investment[128][130][131] - These investments are accounted for using the cost method due to the Company not having significant influence over the equity investees, and no impairment losses were recognized for the six months ended June 30, 2023 and 2022[131] Note 18 – Earnings per share For the six months ended June 30, 2023, basic and diluted EPS were $1.06, a significant decrease from $2.72 (basic) and $2.66 (diluted) in the prior year, primarily due to a substantial increase in weighted average shares outstanding from 773,083 to 1,903,906 Earnings Per Share Calculation | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:------------------------------------------------|-------------------------------:|-------------------------------:|\n| Net income attributable to common shareholders | 2,011,244 | 2,099,462 | | Weighted average shares Outstanding - Basic | 1,903,906 | 773,083 | | Dilutive securities - unexercised warrants | 0 | 16,225 | | Weighted average shares outstanding – diluted | 1,903,906 | 789,308 | | Earnings per share - Basic | 1.06 | 2.72 | | Earnings per share – Diluted | 1.06 | 2.66 | - The significant decrease in EPS is primarily due to the increase in weighted average shares outstanding from 773,083 in 2022 to 1,903,906 in 2023[134] Note 19 – Segment Information Tantech Holdings Ltd. operates in three segments: consumer products, electric vehicles (EV), and biodegradable packaging, with the consumer products segment generating the majority of revenue ($18.83 million) and gross profit ($3.92 million) for the six months ended June 30, 2023, despite year-over-year decreases, while the EV segment's revenue significantly declined and the newly introduced biodegradable packaging segment contributed $0.81 million in revenue - The Company has three operating segments: consumer products (Charcoal Doctor branded products and BBQ charcoal), electric vehicles (EV), and biodegradable packaging[135] Segment Revenue and Gross Profit | Segment | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | Change ($) | Change (%) | |:------------------------|-----------------------------------:|-----------------------------------:|-----------:|-----------:|\n| Revenue from external customers | | | | | | Consumer Products | 18,828,336 | 26,290,353 | (7,462,017)| -28.38% | | EV | 104,100 | 679,064 | (574,964) | -84.67% | | Biodegradable packaging | 809,273 | 0 | 809,273 | N/A | | Total Revenue | 19,741,709 | 26,969,417 | (7,227,708)| -26.79% | | Gross Profit | | | | | | Consumer Products | 3,921,428 | 5,068,444 | (1,147,016)| -22.63% | | EV | 63,102 | 13,524 | 49,578 | 366.60% | | Biodegradable packaging | 70,300 | 0 | 70,300 | N/A | | Total Gross Profit | 4,054,830 | 5,081,968 | (1,027,138)| -20.21% | Geographic Revenue | Geographic Revenue | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | |:-------------------|-----------------------------------:|-----------------------------------:|\n| Revenue from China | 19,216,905 | 26,969,417 | | Revenue from foreign countries | 524,804 | 0 | | Total Revenue | 19,741,709 | 26,969,417 | Note 20 – Major Customers and Suppliers For the six months ended June 30, 2023, four major customers individually accounted for 20% to 25% of total sales, and three customers represented 26% to 34% of accounts receivable, while three major suppliers individually accounted for 10% to 27% of total purchases - For the six months ended June 30, 2023, four major customers individually accounted for approximately 20% to 25% of the Company's total sales[141] - As of June 30, 2023, three customers individually accounted for approximately 26% to 34% of the Company's accounts receivable balance[141] - For the six months ended June 30, 2023, three major suppliers individually accounted for approximately 10% to 27% of the Company's total purchases[142] Note 21 – Subsequent Events Subsequent to June 30, 2023, Streeterville converted $150,000 in principal of convertible notes into 89,183 ordinary shares, and in August 2023, the Company formed a new wholly-owned subsidiary, Zhejiang Zhuguxingqi Technology Co., Ltd., focused on bamboo charcoal and wood products trading - From August to September 2023, Streeterville converted $150,000 in convertible notes principal into 89,183 ordinary shares[143] - On August 10, 2023, the Company formed a new wholly-owned subsidiary, Zhejiang Zhuguxingqi Technology Co., Ltd., in Lishui, China, to engage in bamboo charcoal and wood products trading[143]