Business Context and Reporting Period
Company: ReTo Eco-Solutions, Inc. (RETO)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal Year Ended December 31, 2025
Jurisdiction: British Virgin Islands (BVI) holding company with operations primarily in the People's Republic of China (PRC).
Business Overview: Following a December 2024 divestiture of its legacy construction materials business (reported as discontinued operations), the Company has pivoted to three primary segments: ecological environment protection equipment, intelligent mining equipment, and smart craft beer machines. In April 2025, the Company acquired a 51% interest in MeinMalzeBier (MMB) to expand its craft beer operations. In February 2026 (subsequent event), the Company acquired a 51% interest in Seven Arrows Supply Chain Limited.
Key Financial Metrics (Fiscal Year 2025)
| Metric | 2025 (USD) | 2024 (USD) |
|---|---|---|
| Total Revenue | $3,370,789 | $1,828,976 |
| Gross Profit | $1,189,605 | $825,204 |
| Gross Margin | 35.3% | 45.1% |
| Net Loss (Continuing Ops) | $(12,613,401) | $(8,312,576) |
| Net Loss (Total) | $(12,613,401) | $(8,386,923) |
| Cash and Cash Equivalents | $250,008 | $671,355 |
| Working Capital Deficit | $(5,109,033) | $(2,579,986) |
| Total Assets | $31,839,482 | $34,256,918 |
| Total Liabilities | $7,100,216 | $4,332,232 |
Note: The 2025 Net Loss includes a non-cash goodwill impairment charge of approximately $8.0 million related to the MMB acquisition.
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 84% year-over-year, driven by a 165% increase in equipment and accessories sales ($3.12M in 2025 vs. $1.18M in 2024) and the addition of craft beer revenue ($0.1M) following the MMB acquisition.
- Impairment Charges: The Company recorded a full goodwill impairment of $7,982,271 and an impairment of long-lived assets of $725,940 in 2025. These charges were absent in 2024.
- Discontinued Operations: The Company divested REIT Holdings (China) Limited in December 2024. Consequently, 2024 included a $3.6 million loss from disposal of subsidiaries and $74,347 in net loss from discontinued operations, whereas 2025 had no discontinued operations.
- Interest Expense: Net interest expense surged to $981,761 in 2025 from $2,015 in 2024, primarily due to accrued interest on a new convertible note issued to Streeterville Capital, LLC.
- Customer Concentration: In 2025, one customer accounted for 59% of total revenue, compared to two customers accounting for 36% and 13% respectively in 2024.
Guidance, Outlook, Risks, and Unusual Items
Going Concern Uncertainty
The independent auditor has issued a report expressing substantial doubt about the Company's ability to continue as a going concern for the next 12 months. This is due to significant accumulated losses, a working capital deficit of approximately $5.1 million, and limited cash reserves ($0.25 million). Management plans to address this through operational cash flow, bank borrowings, and potential equity financing, though no commitments are currently secured.
Material Risks
- Regulatory Risks (PRC): Significant exposure to PRC regulations regarding foreign investment, data security (Cybersecurity Review Measures), and overseas listings (CSRC filing requirements). The Company faces potential delisting risks under the Holding Foreign Companies Accountable Act (HFCAA) if the PCAOB cannot inspect its auditor.
- Geopolitical Risks: Operations are heavily concentrated in China, with significant revenue exposure to the Middle East (UAE). Geopolitical instability in the Middle East and trade tensions between the U.S. and China pose material risks to supply chains and demand.
- Internal Controls: The Company identified material weaknesses in internal control over financial reporting, including a lack of full-time accounting personnel with U.S. GAAP expertise and inadequate review procedures for share-based compensation.
- Acquisition Integration: The Company faces risks related to the integration of MMB and the subsequent Seven Arrows acquisition, including the potential for further goodwill impairments if performance targets are not met.
Unusual Items
- Convertible Note Financing: In June 2025, the Company entered into a securities purchase agreement with Streeterville Capital, LLC, issuing pre-paid purchases (convertible notes) and pre-delivery shares. This financing structure includes significant original issue discounts and accrued interest.
- Share Combinations: The Company executed multiple share combinations in 2025 (10-for-1 and 5-for-1), significantly altering the share count and par value structure.
Investor Verification Checklist
- Liquidity Runway: Verify the Company's ability to fund operations beyond the next 12 months given the $5.1M working capital deficit and $0.25M cash balance.
- Goodwill Impairment Validity: Review the third-party valuation report supporting the $8.0M goodwill impairment on the MMB acquisition to assess the reasonableness of the discounted cash flow assumptions.
- Regulatory Compliance: Confirm the status of CSRC filing requirements for the Company's overseas listing and the Seven Arrows acquisition to ensure no delisting triggers are imminent.
- Customer Concentration: Assess the stability of the single customer representing 59% of 2025 revenue and the risks associated with potential order cancellations.
- Internal Control Remediation: Evaluate the progress of remediation plans for the identified material weaknesses in internal controls over financial reporting.
- Convertible Note Terms: Analyze the dilution impact and repayment obligations of the Streeterville Capital convertible note, including the floor price and conversion mechanics.