Analysis: a facility priced off the lowest close in a rolling window

The economics here run in one direction. The investor funds cash at a 6% discount to the balance created, earns 7% on that balance, and settles at half of the lowest closing price over the previous 180 trading days. A settlement price referenced to the lowest close in a rolling nine-month window, rather than to the price on the settlement date, means that any single bad session sets the conversion reference for months afterwards. Combined with the 50% haircut, the arrangement pays the investor more shares the worse the stock does, which is the standard structure of these facilities and the reason the floor price exists.

The floor is the only hard limit on share count, and it is set at $0.10 against a stock the supplement reports at US$2.96 in June. Between that price and the floor there is a wide range in which the company can keep settling in stock. The 9.99% ownership cap does not restrain the total issued; it restrains how much the investor may hold at any one moment, which in practice paces the settlements rather than limiting them. An investor selling into the market between notices resets its own headroom.

The alternative to issuing shares is worse for cash. Prepayment costs 120% of the balance repaid, so a company that wants to avoid dilution must find a fifth more cash than the balance it retires, and this is a company that lost approximately $12.6 million in its last reported year against approximately $3.4 million of revenue and carries a going concern qualification. The whole facility is $36,000,000 of cash against a float of approximately $97,322,911, so the commitment amount is a substantial fraction of the company’s non-affiliate market value.

Two gaps in the record are worth noting. The filings do not disclose the closing price of the Class A shares on August 7, 2026, which sets one half of the settlement price formula, so the current ceiling on the settlement price cannot be calculated from these documents. And the 6-K refers to the counterparty once as “Maple” in the settlement notice provision while the prospectus supplement and the agreement itself name Mapie Wind Limited, a discrepancy the company has not corrected.

The prospectus supplement also flags a legal characterisation that matters to anyone reading the share count. Although the investor represents that it is purchasing for its own account for investment purposes, ReTo states that the Commission may take the position that the investor is an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and that its profits and any discounts may be deemed underwriting compensation. What to watch next is straightforward: each settlement notice and the share price it uses, the outstanding balance disclosed in subsequent reports, and whether the Class A share count moves materially above 35,848,309.

What the documents say

ReTo Eco-Solutions, Inc. (NASDAQ: RETO) has signed a two-year funding line under which a single investor advances cash and takes repayment in shares priced at half the market, subject only to a ten cent floor. The company disclosed the arrangement in a Form 6-K filed on August 7, 2026, the same day it filed a prospectus supplement covering the shares.

The Securities Purchase Agreement lets the Beijing company request pre-paid purchases with an aggregate cash amount of up to $36,000,000 over a two-year commitment period. Each pre-paid purchase increases the outstanding balance by 106% of the cash funded, a 6% original issue discount, so the maximum aggregate outstanding balance is $38,160,000. An initial pre-paid purchase of $3,498,000, consisting of $3,300,000 in cash and a $198,000 original issue discount, was funded on the effective date and remained outstanding when the prospectus supplement was filed. The statutory term the supplement invokes is defined at 15 U.S.C. 77b, which provides that an underwriter is any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security.

How the balance gets repaid

Interest accrues on the outstanding balance at 7% a year, rising to 18% on an event of default. On or before maturity, two years after the effective date, ReTo must settle the entire outstanding balance by issuing Class A shares, by paying cash at 120% of the balance being repaid, or by a combination.

The share settlement mechanism is where the terms bite. Whenever a balance is outstanding, the company may serve a settlement notice electing to issue Class A shares of no par value to the investor, offset against the amount owed. The price per share is the lower of 50% of the closing price on the Nasdaq Capital Market on the date of the agreement and 50% of the lowest closing price during the 180 trading days immediately preceding the settlement notice, rounded down to the nearest two decimal places. It cannot go below a floor price of $0.10 per share. ReTo chooses the number of shares in each notice at its sole discretion, capped by the outstanding balance and other limits in the agreement. Amounts offset are applied first to accrued and unpaid interest, then to principal.

One brake exists. The pre-paid purchase document contains an ownership limitation preventing any issuance that would take the investor and its affiliates above 9.99% of ordinary shares outstanding, measured under Section 13(d) of the Exchange Act. The agreement states that the maximum percentage is enforceable, unconditional and non-waivable and applies to all affiliates and assigns.

The shares are being sold off an existing shelf registration statement on Form F-3. The prospectus supplement, filed the same day, offers up to $38,160,000 of Class A shares directly to Mapie Wind Limited, a British Virgin Islands company. ReTo engaged Univest Securities, LLC as exclusive placement agent on a reasonable best efforts basis, for a cash fee of 5.0% of aggregate gross proceeds plus non-accountable expense reimbursement and out-of-pocket costs capped at $50,000 in total. A legal opinion from Appleby on the legality of the shares was filed as an exhibit.

The company doing the borrowing

ReTo’s annual report for the year ended December 31, 2025 records a net loss of approximately $12.6 million, following approximately $8.4 million in 2024 and approximately $16.1 million in 2023. Total revenues rose approximately $1.5 million, or 84%, to approximately $3.4 million, while cost of revenues rose approximately $1.2 million, or 117%, to approximately $2.2 million. The auditor, YCM CPA INC., stated that there is substantial doubt about the company’s ability to continue as a going concern for the 12 months from issuance of the consolidated financial statements, citing significant losses from operations and a significant decrease in working capital.

The equity base is small relative to the facility. The prospectus supplement is based on 35,848,309 Class A shares outstanding as of August 7, 2026, and states that as of June 24, 2026 there were 32,879,362 Class A shares held by non-affiliates, giving a public float of approximately $97,322,911 using the last reported sale price of US$2.96 on June 10, 2026.