TDH Holdings, Inc. Reports First Half 2022 Financial Results
QINGDAO, China, Nov. 1, 2022 /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, and an operator of a restaurant in the U.S., announced today its financial results for the six months ended June 30, 2022.
First Half 2022 Unaudited Financial Highlights:
For the Six Months Ended June 30 | ||||||||||||
($ millions, except per share data) | 2022 | 2021 | % | |||||||||
Revenues | $ | 1.45 | $ | 0.13 | 980.81 | % | ||||||
Gross profit (loss) | $ | 0.4 | $ | (0.18) | -328.05 | % | ||||||
Gross profit (loss) margin | 27.54 | % | -138.46 | % | 165.00 pp | * | ||||||
Operating loss | $ | (2.29) | $ | (1.17) | 96.65 | % | ||||||
Operating loss margin | -157.88 | % | -867.74 | % | 709.86 pp | * | ||||||
Net loss attributable to common stockholders | $ | (0.9) | $ | (0.94) | -4.96 | % | ||||||
Loss per share - basic and diluted | $ | (0.14) | $ | (0.37) | -62.16 | % | ||||||
* | pp: percentage points |
- Revenues increased by 980.81% to $1.45 million for the first half of 2022. For the six months ended June 30, 2022, revenue from our restaurant business in the United States increased, however, pet food revenue continued to decrease in 2022 due to the following facts: (1) The purchasing cost of raw materials required for production has risen to a certain extent; (2) we accepted less orders trying to avoid unprofitable orders; and (3) we received decreased sales orders for pet food.
- Gross profit was $ 0.4 million for the first half of 2022, compared to gross loss of $0.18 million for the same period of the prior year.
- Operating loss was $2.29 million for the first half of 2022, compared to operating loss of $1.17 million for the same period of the prior year. The increase in operating loss was primarily due to the company's payment of certain legal costs, an increase in consulting service fees and increased depreciation and amortization expenses related to our restaurant business in the U.S. during the six months ended June 30, 2022.
- Net loss was $0.9 million, or loss per share of $0.14, for the first half of 2022, compared to net loss of $0.94 million, or loss per share of $0.37, for the same period of the prior year.
First Half 2022 Financial Results
Revenues
For the first half of 2022, total revenues increased by $1.32 million, or 980.81%, to $1.45 million from $0.13 million as compared with the same period of the prior year. For the six months ended June 30, 2022, revenue from food and beverage sales in our restaurant business in the United States increased, however, we only generated limited amount of revenue from pet food sales in 2022, which was mainly due to the following facts: (1) The purchasing cost of raw materials required for production has risen to a certain extent; (2) we accepted less orders trying to avoid unprofitable orders; and (3) we received decreased sales orders for pet food. Therefore, our sales increase for the six months ended June 30, 2022 compared to the same period in 2021 was primarily due to an increase in restaurant revenue, as discussed in detail below:
For the Six Months Ended June 30, | ||||||||||||||||||||||||
2022 | 2021 | Y/Y Change | ||||||||||||||||||||||
Revenues | % of | Revenues | % of | Amount | % | |||||||||||||||||||
Domestic | $ | 14 | 0.96 | % | $ | 115 | 85.82 | % | $ | (101) | -87.83 | % | ||||||||||||
E-commerce | 1 | 0.07 | % | 19 | 14.18 | % | 18 | -94.74 | % | |||||||||||||||
Restaurant revenue | 1,438 | 99.04 | % | - | - | % | 1,438 | 100.00 | % | |||||||||||||||
less: sales tax and additional surcharge | 1 | 0.07 | % | - | - | % | 1 | 100.00 | % | |||||||||||||||
Total | $ | 1,452 | 100.00 | % | $ | 134 | 100.00 | % | $ | (1,318) | 980.81 | % | ||||||||||||
Domestic sales for pet foot decreased by $0.1 million, or 87.83%, to $0.01 million for the first half of 2022 from $0.12 million for the same period of the prior year. E-commerce sales for pet food decreased by $0.02 million, or 100%, to $0 million for the first half of 2022 from $0.02 million for the same period of the prior year. Sales from the restaurant revenue increased by $1.44 million, or 100%, to $1.44 million for the first half of 2022 from $0 million for the same period of the prior year.
Cost of revenues
Our cost of revenue mainly includes the cost of our raw materials, labor costs, factory overheads and the cost of food and beverages sold to customers in our restaurants. Our cost of revenues, increased by $0.74 million or 239.77%, to $1.05 million for the six months ended June 30, 2022 as compared to $0.31 million for the six months ended June 30, 2021. This increase in cost of revenues was in line with the 980.81% increase in our total net revenue for the six months ended June 30, 2022, driven by higher restaurant revenue. As a percentage of revenues, cost of revenues was 72.46% for the first half of 2022, compared to 230.51% for the same period of the prior year.
Gross profit (loss) and gross profit (loss) margin
Gross profit was $0.40 million for the first half of 2022, compared to gross loss of $0.18 million for the same period of the prior year. The increase in gross profit was due to higher profit from our restaurant business.
Operating expense
Operating expense consists of selling expense and general and administrative expense.
Selling expense increased by $0.01 million, or 16.81%, to $0.05 million for the first half of 2022 from $0.04 million for the same period of the prior year. The increase in our selling expense was in line with our increased revenue for the six months ended June 30, 2022. The increase in selling expense was mainly due to higher advertising fees we incurred during six months ended June 30, 2022.
General and administrative expense increased by $1.69 million, or 178.11%, to $2.64 million for the first half of 2022 from $0.95 million for the same period of the prior year. The main reason for the increase was mainly due to the company's payment of certain legal costs, an increase in consulting service fees and increased depreciation and amortization expenses related to our restaurant business.
As a result, total operating expenses increased by $1.70 million, or 171.83%, to $2.69 million for the first half of 2022 from $0.99 million for the same period of the prior year.
Operating loss
Loss from operations was $2.29 million for the first half of 2022, compared to $1.17 million for the same period of the prior year. The continuous loss from operation was mainly due to increased operating expenses in 2022.
Other income, net
Total net other income increased by approximately $0.76 million or 341.62%, from $0.22 million in the six months ended June 30, 2021 to $0.98 million in the six months ended June 30, 2022, which is primarily attributable to an increase in investment income and a gain from a modification to an operating lease agreement. We invested our available cash on hand in equity securities of certain publicly listed companies through various open market transactions. Our investments in marketable securities are accounted for pursuant to ASC 321 and reported at their readily determinable fair value as quoted by market exchanges in the consolidated balance sheets with change in fair value recognized in earnings. During the first half of 2022, the investments generated a total of $1.08 million net returns as compared to $1.62 million for the same period of 2021. On the other hand, our additional expense of approximately $0.5 million was primarily interest expense on unpaid bank borrowings.
Net loss and loss per share
Net loss was $0.9 million, or loss per share of $0.14, for the first half of 2022, compared to net loss of $0.94 million, or loss per share of $0.37, for the same period of the prior year.
Financial Conditions
As of June 30, 2022, the Company had cash, cash equivalents and restricted cash of $13.63 million, compared to $19.51 million at December 31, 2021. Accounts receivable and inventories were $0.04 million and $0.01 million, respectively, as of June 30, 2022, compared to $0.04 million and $0.05 million, respectively, at December 31, 2021.
Net cash used in operating activities was $0.87 million for the first half of 2022, compared to $4.84 million for the same period of the prior year. Net cash used in investing activities was $6.06 million for the first half of 2022, compared to net cash provided by investing activities of $5.81 million for the same period of the prior year. Net cash used in financing activities was $0 million for the first half of 2022, as compared to net cash used in financing activities of $0.36 million for the same period of the prior year.
Recent development
On February 23, 2022, the Company received a notification letter from Nasdaq Listing Qualifications advising the Company that based upon the closing bid price for the Company's common shares for the past 30 consecutive business days, the Company no longer met the minimum $1.00 per share Nasdaq continued listing requirement set forth in Nasdaq Listing Rule 5550(a)(2). The notification also stated that the Company would be provided 180 calendar days, or until August 22, 2022, to regain compliance with the foregoing listing requirement. To do so, the bid price of the Company's common shares had to close at or above $1.00 per share for a minimum of 10 consecutive business days prior to that date.
On June 14, 2022, our Board approved to effect a reverse stock split of our common shares at the ratio of one-for-twenty with the market effective date of June 14, 2022. The objective of the reverse stock split was to enable our Company to regain compliance with NASDAQ Marketplace Rule 5550(a)(2) and maintain its listing on Nasdaq. As a result of the reverse stock split, each twenty common shares outstanding automatically combined and converted to one issued and outstanding common share without any action on the part of the shareholder. Subsequent to the reverse stock split, Nasdaq determined that for 10 consecutive business days, the closing bid price of the Company's common shares was at $1.00 per share or greater. On June 29, 2022, Nasdaq notified the Company that it has regained compliance with Listing Rule 5550(a)(2) and closed the matter.
On July 26, 2022, we completed a private placement of securities, and entered into a securities purchase agreement with eight accredited investors pursuant to which we sold to the investors an aggregate 4,000,000 of our common shares, at a price of $1.50 per share and warrants at a price of $0.01 per warrant to purchase up to an aggregate 4,000,000 of our common shares, for gross proceeds of $6,040,000. The warrants have an exercise price of $2.44 per share, and a term of two years. The warrants are immediately exercisable upon issuance and have a cashless exercise feature.
On July 26, 2022, we established a 100% controlled subsidiary Beijing Wenxin Co., Ltd. ("Beijing Wenxin"), a PRC limited liability company with registered capital of $2 million. A third-party, Kargo Services, Inc.("Kargo"), a British Virgin Islands Company, helped us to complete the registration and incorporation of Beijing Wenxin, in exchange for certain consulting service fees. We plan to utilize Beijing Wenxin to seek for potential strategic business acquisition target in order to expand our business lines in the near future.
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 China, Asia and Europe. The Company also runs restaurant business in the United States. More information about the Company can be found at www.tiandihui.com.
Safe Harbor Statement
This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. When the Company uses words such as "may", "will", "intend", "should", "believe", "expect", "anticipate", "project", "estimate" or similar expressions that do not relate solely to historical matters, it is making 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, and 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. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company's expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following: the Company's goals and strategies; the Company's future business development; product and service demand and acceptance; changes in technology; economic conditions; the growth of the pet food industry in China; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the Securities and Exchange Commission. For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company's filings with the U.S. Securities and Exchange Commission, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.
For more information, please contact:
Feng Zhang, CFO
Email: zhangfeng@tdhpet.com
Phone: +86 183-1102-1983
TDH HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 12,248,397 | $ | 18,027,322 | ||||
Restricted cash | 1,386,184 | 1,483,653 | ||||||
Short-term investments | 11,562,777 | 4,428,446 | ||||||
Accounts receivable, net | 36,504 | 39,512 | ||||||
Advances to suppliers, net | - | 10,986 | ||||||
Inventories, net | 16,650 | 51,423 | ||||||
Prepayments and other current assets, net | 199,406 | 1,205,695 | ||||||
Total current assets | 25,449,918 | 25,247,037 | ||||||
NON-CURRENT ASSETS: | ||||||||
Property, plant and equipment, net | 1,402,025 | 1,543,430 | ||||||
Land use rights, net | 641,834 | 653,125 | ||||||
Operating lease right-of-use assets | 887,177 | 4,604,365 | ||||||
Total non-current assets | 2,931,036 | 6,800,920 | ||||||
Total assets | $ | 28,380,954 | $ | 32,047,957 | ||||
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 2,885,191 | $ | 3,065,387 | ||||
Accounts payable - related parties | 118,158 | 127,688 | ||||||
Advances from customers | 89,375 | 109,959 | ||||||
Bank overdrafts | 79,851 | 79,851 | ||||||
Short-term loans | 5,168,227 | 5,440,350 | ||||||
Short-term loans - related parties | 541,630 | 555,096 | ||||||
Taxes payable | 25,690 | 82,614 | ||||||
Due to related parties | 334,289 | 307,509 | ||||||
Operating lease liabilities, current | 208,857 | 268,403 | ||||||
Other current liabilities | 4,067,838 | 3,793,141 | ||||||
Total current liabilities | 13,519,106 | 13,829,998 | ||||||
NON-CURRENT LIABILITIES: | ||||||||
Deferred tax liabilities | 1,076 | 1,132 | ||||||
Operating lease liabilities, non-current | 790,266 | 4,846,760 | ||||||
Total liabilities | 14,310,448 | 18,677,890 | ||||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
Common stock ($0.02 par value; 50,000,000 shares authorized; 6,323,268 and | 126,465 | 104,374 | ||||||
Additional paid-in capital | 42,129,567 | 42,151,658 | ||||||
Statutory reserves | 160,014 | 160,014 | ||||||
Accumulated deficit | (29,865,627) | (28,969,627) | ||||||
Accumulated other comprehensive loss | 952,477 | (460,702) | ||||||
Noncontrolling interest | 567,610 | 384,350 | ||||||
Total stockholders' equity (deficit) | 14,070,506 | 13,370,067 | ||||||
Total liabilities and stockholders' equity (deficit) | $ | 28,380,954 | $ | 32,047,957 | ||||
* Retrospectively restated to reflect the one-for-twenty reverse split dated on June 14,2022
TDH HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | ||||||||
(Unaudited) | ||||||||
For The | For The | |||||||
Net revenues | $ | 1,451,655 | $ | 134,312 | ||||
Cost of revenues | 1,051,919 | 309,597 | ||||||
Gross loss | 399,736 | (175,285) | ||||||
Operating expenses: | ||||||||
Selling expense | 45,064 | 38,580 | ||||||
General and administrative expense | 2,646,573 | 951,615 | ||||||
Total operating expenses | 2,691,637 | 990,195 | ||||||
Loss from operations | (2,291,901) | (1,165,480) | ||||||
Interest expense | (497,739) | (568,918) | ||||||
Other income | 13,067 | 40,648 | ||||||
Investment income | 1,075,565 | 1,617,467 | ||||||
Other expenses | (15,580) | (24,053) | ||||||
Loss from judicial auction of property, plant and equipment and land use rights in | - | (964,266) | ||||||
Gain from forgiveness of interest payable | - | 121,829 | ||||||
Gain from operating lease contract modification | 408,198 | - | ||||||
Total other income | 983,511 | 222,707 | ||||||
Loss before income tax expense | (1,308,390) | (942,773) | ||||||
Income tax expense | - | - | ||||||
Net loss | (1,308,390) | (942,773) | ||||||
Less: Net loss attributable to noncontrolling interest | (412,390) | - | ||||||
Net Loss attributable to TDH Holdings, Inc. | (896,000) | (942,773) | ||||||
Comprehensive loss | ||||||||
Net loss | $ | (896,000) | $ | (942,773) | ||||
Other comprehensive income (loss) | ||||||||
Foreign currency translation adjustment | 1,413,179 | (70,452) | ||||||
Total comprehensive loss | $ | 517,179 | $ | (1,013,225) | ||||
Less: Comprehensive loss attributable to noncontrolling interest | - | - | ||||||
Comprehensive loss attributable to TDH Holdings, Inc. | $ | 517,179 | $ | (1,013,225) | ||||
Loss per common share attributable to TDH Holdings, Inc. | 517,179 | (1,013,225) | ||||||
Basic | $ | (0.14) | $ | (0.37) | ||||
Diluted | $ | (0.14) | $ | (0.37) | ||||
Weighted average common shares outstanding* | ||||||||
Basic | 6,252,212 | 2,529,114 | ||||||
Diluted | 6,252,212 | 2,529,114 | ||||||
* Retrospectively restated to reflect the one-for-twenty reverse split dated on June 14,2022
TDH HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
For The | For The | |||||||
June 30, | June 30, | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (896,000) | $ | (942,773) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization expense | 87,755 | 201,104 | ||||||
Fair value change of short-term investments | (1,075,565) | (1,617,467) | ||||||
Loss on sale of property, plant and equipment | 64,941 | 16,837 | ||||||
Loss on judicial auction of property, plant and equipment in relation to litigations | - | 834,817 | ||||||
Loss on judicial auction of land use rights in relation to litigations | - | 129,449 | ||||||
Gain on disposal of subsidiaries | - | (39,330) | ||||||
Non-cash lease expense | - | 21,625 | ||||||
Gain from forgiveness of interest payable | - | (121,829) | ||||||
Gain from operating lease contract modification | (408,198) | - | ||||||
Changes in operating assets and liabilities: | 101,765 | - | ||||||
Accounts receivable, net | 3,008 | 151,852 | ||||||
Inventories, net | 34,774 | 100,962 | ||||||
Operating lease liabilities | (92,419) | 271 | ||||||
Operating lease liabilities – related parties | - | 8,015 | ||||||
Advances to suppliers, net | 10,986 | (14,232) | ||||||
Prepayments and other current assets, net | 1,006,289 | 155,102 | ||||||
Accounts payable | (201,315) | (20,606) | ||||||
Interest payable | - | 356,820 | ||||||
Interest payable – related parties | - | 24,543 | ||||||
Taxes payable | (56,924) | 1,293 | ||||||
Advances from customers | - | 21,957 | ||||||
Advances from customer - related party | (20,584) | - | ||||||
Deferred income tax liability - current | (56) | - | ||||||
Other current liabilities | 572,968 | (4,105,300) | ||||||
NET CASH USED IN OPERATING ACTIVITIES | $ | (868,576) | $ | (4,836,890) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Payments to acquire property, plant and equipment | - | (10,999) | ||||||
Proceeds from sale of property, plant and equipment | - | 16,495 | ||||||
Proceeds from auction of property, plant and equipment | - | 4,434,580 | ||||||
Proceeds from auction of land use rights | - | 687,760 | ||||||
Purchase of short-term investments | (22,078,834) | (2,281,766) | ||||||
Proceeds from sale of short-term investments | 16,020,068 | 2,967,756 | ||||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | $ | (6,058,766) | $ | 5,813,826 | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of common shares | - | 2,730,000 | ||||||
Repayments of short-term loans | - | (3,086,132) | ||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | $ | - | $ | (356,132) | ||||
Effects on changes in foreign exchange rate | 1,050,948 | 22,904 | ||||||
Net change in cash, cash equivalents, and restricted cash | (5,876,394) | 643,708 | ||||||
Cash, cash equivalents, and restricted cash - beginning of the period | 19,510,975 | 6,749,064 | ||||||
Cash, cash equivalents, and restricted cash - end of the period | $ | 13,634,581 | $ | 7,392,772 | ||||
Supplemental cash flow information | ||||||||
Interest paid | $ | - | $ | 203,550 | ||||
Non-cash investing and financing activities | ||||||||
Liabilities assumed in connection with purchase of property, plant and equipment | $ | - | $ | - | ||||
Liabilities assumed in connection with purchase of short – term investments | $ | - | $ | - | ||||
Notes payable reclassified to short-term loans | $ | - | $ | - | ||||
Liabilities settled with sale of property, plant and equipment | $ | - | $ | 53,193 | ||||
Cashless exercise of warrants | 21,887 | - | ||||||
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance | ||||||||
Cash and cash equivalents | $ | 12,248,397 | $ | 5,975,713 | ||||
Restricted cash | $ | 1,386,184 | $ | 1,417,059 | ||||
Total cash, cash equivalents, and restricted cash | $ | 13,634,581 | $ | 7,392,772 | ||||
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SOURCE TDH Holdings, Inc.