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TDH Holdings, Inc. Reports First Half 2020 Financial Results

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QINGDAO, China, Nov. 25, 2020 /PRNewswire/ -- TDH Holdings, Inc. (NASDAQ: PETZ) ("TDH" or the "Company"), a PRC-based company that specializes in the development, manufacturing and sales of pet food products in China and beyond, announced today its financial results for the six months ended June 30, 2020.

First Half 2020 Unaudited Financial Highlights:



For the Six Months Ended June 30

($ millions, except per share data)


2020


2019


% Change

Revenues


$0.28


$8.04


-96.5%

Gross profit (loss)


($0.07)


$0.69


-110.1%

Gross profit (loss) margin


-25.0%


8.6%


-33.6 pp*

Operating loss


($0.97)


($1.24)


-21.8%

Operating loss margin


-343.1%


-15.4%


-327.7pp*

Net loss attributable to common stockholders


($0.6)


($1.67)


-64.1%

Loss per share - basic and diluted


($0.01)


($0.14)


-92.9%

* pp: percentage points

  • Revenues decreased by 96.5% to $0.28 million for the first half of 2020. The decrease in total revenues was mainly due to reduced sales orders when we temporarily closed our facilities in response to the outbreak and spread of the COVID-19 pandemic.

  • Gross loss was $ 0.07 million for the first half of 2020, compared to gross profit of $0.69 million for the same period of the prior year.

  • Operating loss was $0.97 million for the first half of 2020, compared to operating loss of $1.24 million for the same period of the prior year. The operating loss was mainly due to the gross loss combined with the declined business scale.

  • Net loss was $0.6 million, or loss per share of $0.01, for the first half of 2020, compared to net loss of $1.67 million, or loss per share of $0.14, for the same period of the prior year.

First Half 2020 Financial Results

Revenues

Historically, the Company generated its revenues from product sales, mainly including sales for pet chews, dried pet snacks and wet canned pet foods in overseas markets, domestic markets and through its e-commerce platform. Revenue consists of the invoiced value for the sales, net of value-added tax ("VAT"), business tax, and applicable local government levies. For the first half of 2020, total revenues decreased by $7.76 million, or 96.5%, to $0.28 million from $8.04 million as compared with the same period of the prior year. The decrease in total revenues was mainly due to reduced sales orders when we temporarily closed our facilities in response to the outbreak and spread of the COVID-19 pandemic, as discussed in details below:

Beginning in late 2019, there were reports of the COVID-19 (coronavirus) outbreak originating in China, prompting government-imposed quarantines, cessation of certain travel and business closures. On March 11, 2020, the World Health Organization categorized it as a pandemic. To contain the spread of the COVID-19, the government took stringent measures, including restricting access to provinces and cities, reducing gathering events, and postponing non-essential business activities. Following this outbreak and other operational difficulties, the Company temporarily shut down its main office and its remaining production facilities until May 2020. Following the temporary cessation of its production capabilities and the negative impact of the COVID-19 pandemic, the Company continued to incur significant delays, reductions in revenue. In addition, due to the COVID-19 outbreak, some of our customers or suppliers experience financial distress, delay or default on their payments, reduce the scale of their business, or suffer disruptions in their business due to the outbreak. Any increased difficulty in collecting accounts receivable, delayed raw materials supply, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations. We resumed our work under the guidance and support of the government in May 2020.



For the Six Months Ended June 30,


2020


2019


Y/Y Change



Revenues ($'000)


% of Total



Revenues ($'000)


% of Total



Amount ($'000)


%

Overseas

$

61


21.60%


$

6,278


78.10%


$

(6,217)


-99%

Domestic


222


78.40%



1,644


20.40%



(1,423)


-86.60%

E-commerce


-


-%



153


1.90%



(153)


-100%

less: sales tax and additional surcharge


-


-%



(34)


-0.40%



34


100%

Total

$

283


100.00%


$

8,041


100.00%


$

(7,759)


-96.50%

Overseas sales decreased by $6.22 million, or 99%, to $0.06 million for the first half of 2020 from $6.28 million for the same period of the prior year. Domestic sales decreased by $1.42 million, or 86.6%, to $0.22 million for the first half of 2020 from $1.64 million for the same period of the prior year. Sales from the e-commerce channel decreased by $0.15 million, or 100%, to $0 million for the first half of 2020 from $0.15 million for the same period of the prior year.

Cost of revenues

Cost of revenues consists primarily of raw materials, labor and factory overhead expenses necessary to manufacture finished goods. Cost of revenues decreased by $7 million, or 95.2%, to $0.35 million for the first half of 2020 from $7.35 million for the same period of the prior year. The decrease in cost of revenues was in line with the decrease in revenue. However, even when we temporarily closed our facilities until May 2020, we still carried certain fixed overhead costs, which led to higher than our total revenue cost of revenues. Cost of revenues was 125.0% for the first half of 2020, compared to 91.4% for the same period of the prior year.

Gross profit (loss) and gross profit (loss) margin

Gross loss was $0.07 million for the first half of 2020, compared to gross profit of $0.69 million for the same period of the prior year. Gross loss margin was negative 25% for the first half of 2020, compared to gross profit margin of 8.6% for the same period of the prior year. The decrease of gross margin is mainly due to the substantial decrease of production orders and the increase of fixed cost allocation thereafter.

Operating expense

Operating expense consists of selling expense, general and administrative expense and research and development expense.

Selling expense decreased by $0.6 million, or 90.4%, to $0.06 million for the first half of 2020 from $0.66 million for the same period of the prior year. The decrease in selling expense was mainly due to decrease in revenue. Accordingly, distribution costs, sales promotion and marketing campaign related costs, and sales commissions decreased in the first half of 2020 as compared to the same period of last year.

General and administrative expense decreased by $0.43 million, or 33.9%, to $0.84 million for the first half of 2020 from $1.26 million for the same period of the prior year. The decrease in general and administrative expense was mainly attributable to the decrease in payroll expense due to the reduction of administrative employees and cost control strategy during COVID-19 pandemic.

As a result, total operating expenses decreased by $1.03 million, or 53.5%, to $0.90 million for the first half of 2020 from $1.93 million for the same period of the prior year.

Operating loss

Loss from operations was $0.97 million for the first half of 2020, compared to $1.24 million for the same period of the prior year. The decrease in loss from operations was the combined result of declined business scale during COVID-19 and decrease in operating expenses.

Investment income

Affected by COVID-19, the Company was unable to operate normally. In order to improve capital utilization, the Company invested idle funds in the stock markets. During the first half of 2020, the investments generated a total of $0.88 million net returns.

Net loss and loss per share

Net loss was $0.60 million, or loss per share of $0.01, for the first half of 2020, compared to net loss of $1.67 million, or loss per share of $0.14, for the same period of the prior year.

Financial Conditions

As of June 30, 2020, the Company had cash, cash equivalents and restricted cash of $1.37 million, compared to $6.50 million at December 31, 2019. Accounts receivable and inventories were $0.05 million and $0.23 million, respectively, as of June 30, 2020, compared to $0.02 million and $0.47 million, respectively, at the end of 2019. Total working capital deficit was $7.44 million as of June 30, 2020, compared to $7.27 million at the end of 2019.

Net cash used in operating activities was $0.81 million for the first half of 2020, compared to $4.72 million for the same period of the prior year. Net cash used in investing activities was $4.48 million for the first half of 2020, compared to $0.03 million for the same period of the prior year. Net cash provided by financing activities was $0.15 million for the first half of 2020, compared to $5.30 million for the same period of the prior year.

Going Concern

Impact of COVID-19 Pandemic on the Company's operations

In light of the current circumstances and available information, we estimate that for the year of 2020, our revenues could be significant lower as compared to the same period of last year. At the same time, our employee salaries and benefits have decreased due to company restructuring started November 2019. We expect that our net loss could be lower as compared to the same period of last year. Our assets primarily include cash, restricted cash, short-term investments, accounts receivable, inventory, prepaid expense and other current assets, property, plant and equipment, intangible assets and operating lease right-pf-use assets. Although we resumed our business activities since May 2020, the extent of the impact of COVID-19 on the Company's results of operations and financial condition for the remaining months in our fiscal year 2020 will depend on future developments, including the duration and spread of the outbreak and the impact on the Company's overseas customers and COVID-19 control in all the countries including China, which are still uncertain and cannot be reasonably estimated at this point of time. The Company's revenues remain negligible following the gradual resumption of its operations in May 2020. Moreover, the Company expects that the impact of the COVID-19 outbreak on the domestic and global economic environment will have a material adverse effect on the demand for its products and its ability to generate revenue going forward. Any and all of the foregoing could have a material adverse impact on its business, operating results and financial condition. Due to the effects of the outbreak of COVID-19 discussed above, to the extent we experience a further adverse operating environment or incur unanticipated capital expenditure requirements, or if we decide to accelerate our growth, then additional financing may be required. Such financing may include the use of additional debt or the sale of additional equity securities. We cannot guarantee, however, that additional financing, if required, would be available at all or on favorable terms.

Notice

Rounding amounts and percentages: Certain amounts and percentages included in this press release have been rounded for ease of presentation. Percentage figures included in this press release have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, certain percentage amounts in this press release may vary from those obtained by performing the same calculations using the figures in the financial statements. In addition, certain other amounts that appear in this press release may not sum due to rounding.

About TDH Holdings, Inc.

Founded in April 2002, TDH Holdings, Inc. (the "Company") (NASDAQ: PETZ), is a developer, manufacturer and distributer of a variety of pet food products under multiple brands that are sold in the China, Asia and Europe. More information about the Company can be found at www.tiandihui.com.

Safe Harbor Statement

This news release contains forward-looking statements. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate" or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements are only predictions, uncertainties and other factors may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Specifically, the Company's statements regarding, among others, its growth and business outlook, the Company's ability to execute on its business plan, secure necessary capital to sustain and maintain its operations, its ability to resume its operations at the previous levels, its ability to successfully resolve various legal proceedings in which it is involved, are forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict and many of which are beyond the control of the Company. Actual results may differ from those projected in the forward-looking statements due to risks and uncertainties that are described more fully in the Company's public reports filed with the U.S. Securities and Exchange Commission. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking statements will be realized. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by TDH or any other person that their objectives or plans will be achieved. The Company does not undertake any obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

TDH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS



June 30,



December 31,




2020



2019




(Unaudited)





ASSETS







CURRENT ASSETS:







Cash and cash equivalents


$

499,276



$

5,114,175


Restricted cash



871,119




1,390,403


Short-term investments



8,227,559




-


Accounts receivable, net



54,085




21,657


Advances to suppliers



82,902




39,806


Inventories, net



234,172




473,216


Prepayments and other current assets



206,001




153,633


Total current assets



10,175,114




7,192,890


NON-CURRENT ASSETS:









Property, plant and equipment, net



6,251,640




6,562,669


Land use rights, net



945,637




973,224


Long-term investments



71,757




71,757


Operating lease right-of-use assets - related parties



265,118




286,670


Total non-current assets



7,534,152




7,894,320


Total assets


$

17,709,266



$

15,087,210











LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)









CURRENT LIABILITIES:









Accounts payable


$

3,051,935



$

3,436,939


Accounts payable - related parties



115,178




116,834


Notes payable



-




908,008


Advances from customers



146,100




116,155


Bank overdrafts



78,320




78,320


Short term loans



8,511,776




7,624,061


Short term loans - related parties



931,935




892,510


Taxes payable



56,989




57,521


Due to related parties



38,834




39,387


Operating lease liabilities - related parties, current



157,581




137,347


Other current liabilities



4,523,101




1,054,818


Total current liabilities



17,611,749




14,461,900


NON-CURRENT LIABILITIES:









Deferred tax liabilities



1,021




1,036


Operating lease liabilities - related party, non-current



268,765




286,875


Total liabilities



17,881,535




14,749,811











STOCKHOLDERS' EQUITY (DEFICIT)









Common stock ($0.001 par value; 200,000,000 shares authorized; 45,849,995 shares issued and outstanding at June 30, 2020 and December 31, 2019)



45,850




45,850


Additional paid-in capital



21,963,678




21,963,678


Statutory reserves



160,014




160,014


Accumulated deficit



(22,578,659)




(21,974,651)


Accumulated other comprehensive income



236,856




142,516


Total TDH Holdings, Inc. stockholders' equity (deficit)



(172,261)




337,407


Noncontrolling interest



(8)




(8)


Total stockholders' equity (deficit)



(172,269)




337,399


Total liabilities and stockholders' equity (deficit)


$

17,709,266



$

15,087,210


TDH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)



For The
Six Months
Ended
June 30,
2020



For The
Six Months
Ended
June 30,
2019









Net revenues


$

282,532




7,758,756


Net revenues - related parties



-




282,510


Total revenues



282,532




8,041,266


Cost of revenues



353,135




7,074,142


Cost of revenues - related parties



-




276,540


Total cost of revenues



353,135




7,350,682


Gross profit (loss)



(70,603)




690,584


Operating expenses:









Selling expense



63,577




658,494


General and administrative expense



835,177




1,263,312


Research and development expense



-




9,981


Total operating expenses



898,754




1,931,787


Loss from operations



(969,357)




(1,241,203)


Interest expense



(569,831)




(507,355)


Government subsidies



-




121,906


Other income



62,547




10,034


Investment income



879,520




-


Other expenses



(6,744)




(53,129)


Loss from equity method investment



-




(583)


Total other income (expenses)



365,492




(429,127)


Loss before income tax expense



(603,865)




(1,670,330)


Income tax expense



143




-


Net loss



(604,008)




(1,670,330)


Less: Net loss attributable to noncontrolling interest



-




-


Net loss attributable to TDH Holdings, Inc.


$

(604,008)



$

(1,670,330)











Comprehensive loss









Net loss


$

(604,008)



$

(1,670,330)


Other comprehensive income (loss)









Foreign currency translation adjustment



94,340




(134,060)


Total comprehensive loss



(509,668)




(1,804,390)


Less: Comprehensive income attributable to noncontrolling interest



-




5


Comprehensive loss attributable to TDH Holdings, Inc.


$

(509,668)



$

(1,804,395)











Loss per common share attributable to TDH Holdings, Inc.









Basic


$

(0.01)



$

(0.14)


Diluted


$

(0.01)



$

(0.14)


Weighted average common shares outstanding









Basic



45,849,995




12,174,121


Diluted



45,849,995




12,174,121


TDH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)



For The
Six Months
Ended



For The
Six Months
Ended




June 30,
2020



June 30,
2019









CASH FLOWS FROM OPERATING ACTIVITIES:







Net loss


$

(604,008)



$

(1,670,330)


Adjustments to reconcile net loss to net cash used in operating activities:









Depreciation and amortization expense



183,812




258,896


Fair value change of short-term investments



(879,520)




-


Loss from equity method investment



-




583


Deferred income taxes



-




576


Loss on disposal of property, plant and equipment



-




32,969


Non-cash lease expense



17,577




37,903


Changes in operating assets and liabilities:









Accounts receivable, net



(32,902)




(673,817)


Accounts receivable - related parties, net



-




112,465


Inventories, net



233,518




42,696


Operating lease liability



8,179




-


Due to related parties



-




10,282


Advances to suppliers



(43,882)




(237,027)


Prepayments and other current assets



(54,763)




285,609


Accounts payable



(280,293)




(2,569,050)


Accounts payable - related parties



-




(6,827)


Interest payable



518,559




96,855


Notes payable



-




(1,095,977)


Taxes payable



143




5,584


Advances from customers



31,752




535,476


Advances from customers - related party



-




150,832


Other current liabilities



90,675




(34,104)











NET CASH USED IN OPERATING ACTIVITIES


$

(811,153)



$

(4,716,406)











CASH FLOWS FROM INVESTING ACTIVITIES:









Purchases of short-term investments



(4,500,000)




-


Proceeds from sales of short-term investments



26,826




-


Payments to acquire property, plant and equipment



(9,244)




(28,751)


Proceeds from disposal of property, plant and equipment



-




1,327


Loans to related parties



-




(7,370)


Repayment from related parties



-




1,282











NET CASH USED IN INVESTING ACTIVITIES


$

(4,482,418)



$

(33,512)











CASH FLOWS FROM FINANCING ACTIVITIES:









Proceeds from issuance of common shares



-




1,000,000


Proceeds from short term loans



104,798




1,046,275


Repayments of short term loans



(4,149)




(1,350,304)


Proceeds from short term loans - related parties



49,350




4,791,403


Repayments of short term loans - related parties



-




(190,070)











NET CASH PROVIDED BY FINANCING ACTIVITIES


$

149,999



$

5,297,304











Effects on changes in foreign exchange rate



9,389




(98,364)


Net change in cash, cash equivalents, and restricted cash



(5,134,183)




449,022


Cash, cash equivalents, and restricted cash - beginning of the period



6,504,578




2,700,505


Cash, cash equivalents, and restricted cash - end of the period


$

1,370,395



$

3,149,527











Supplemental cash flow information









Interest paid


$

37,640



$

419,809


Income taxes paid


$

-



$

-











Non-cash Investing and Financing Activities









Accrued interest added to short term loans - related parties


$

-



$

126,697


Operating expenses paid by related parties


$

-



$

5,990


Liabilities assumed in connection with purchase of property, plant and equipment


$

7,023



$

87,421


Receivables from related parties settled with payables to related parties


$

-



$

26,976


Liabilities settled with sale of property, plant and equipment


$

65,422



$

-


Notes payable reclassified to short term loans


$

899,693



$

-


Liabilities assumed in connection with purchase of short-term investments


$

347,107



$

-











Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets









Cash and cash equivalents


$

499,276



$

1,957,952


Restricted cash


$

871,119



$

1,191,575


Total cash, cash equivalents, and restricted cash


$

1,370,395



$

3,149,527


Cision
Cision

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SOURCE TDH Holdings, Inc.