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Dogness Reports Financial Results for the Six Months Ended December 31, 2023

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PLANO, Texas, April 19, 2024 /PRNewswire/ — Dogness (International) Corporation ("Dogness" or the "Company") (NASDAQ: DOGZ), a developer and manufacturer of a comprehensive line of Dogness-branded, OEM and private label pet products, today announced its financial results for the six months ended December 31, 2023.

Silong Chen, Chairman and Chief Executive Officer of Dogness, commented, "We continue to face challenges due to intense competition in the domestic market and the ongoing trade dispute between China and the United States, which are impacting and will likely continue impacting our domestic and export sales in the near future."

"The decrease in the Company’s revenue during the half year ended December 31, 2023 was also partially caused by a significant drop in the average selling price of our intelligent pet products and further affected by decreases in sales volume. To counter the effects of weak sales, we are actively focused on expanding our customer base and exploring new markets by developing more new high-tech products to differentiate us from competitors and meet customer demands. In particular, we are targeting younger consumers who show a strong interest in our smart pet products. We are also implementing cost-saving measures to streamline supply chain processes, enhance production efficiency and improve profit margins."

"We also target to actively seek merger and acquisition opportunities to capitalize on industry challenges and expand our market presence. By acquiring complementary companies, we can strengthen our industrial chain and exercise greater control over manufacturing costs. Through effective cost control we aim to improve sales performance and margins, so to deliver strong return on investment for our valued shareholders in the near future."

Financial Results for the Half Year Ended December 31, 2023

Revenues decreased by approximately $3.7 million, or 35.8%, to approximately $6.7 million for the six months ended December 31, 2023 from approximately $10.4 million for the same period in 2022. The decrease in revenue was primarily attributable to the significant decrease in sales for both domestic and international markets.

The following table breaks down Dogness’ revenue by product and service type for the six months ended December 31, 2023 and 2022:

For the six months ended December 31,

2023

2022

Products and services category

Revenue

Revenue

Variance %

Products

Traditional pet products

$

3,601,676

$

4,720,547

(23.7)

%

Intelligent pet

2,234,220

4,909,115

(54.5)

%

Climbing hooks and others

761,742

722,312

5.5

%

Total revenue from products

6,597,638

10,351,974

(36.3)

%

Services

Dyeing services

77,049

%

Other services

46,633

(100.0)

%

Total revenue from services

77,049

46,633

65.2

%

Total

$

6,674,687

$

10,398,607

(35.8)

%

 

─ Traditional pet products

Revenue from traditional pet products decreased by $1.1 million or 23.7%, from $4.7 million in the six months ended December 31, 2022, to $3.6 million in the six months ended December 31, 2023. The decline was due to a $0.40 decrease in average selling price per unit.

Intelligent pet products

Revenue from intelligent pet products decreased by $2.7 million or 54.5%, from $4.9 million in the six months ended December 31, 2022, to $2.2 million in the six months ended December 31, 2023. The decrease was driven by a $28.40 decrease in average selling price per unit, and more low-value intelligent pet products were sold during the six months ended December 31, 2023, compared to the same period in 2022.

Climbing hooks and others

Revenue from climbing hooks and other products increased by $39 thousand from $0.7 million in the six months ended December 31, 2022, to $0.8 million in the six months ended December 31, 2023. The increase was due to a $0.10 increase in average selling price per unit.

Dyeing service

For the six months ended December 31, 2023 and 2022, the Company earned approximately $0.1 million and $Nil, respectively, in dyeing service fees.

International vs. Domestic sales

International sales decreased by approximately $2.3 million or 33.7%, to $4.5 million for the six months ending December 31, 2023, compared to $6.8 million in the same period in 2022. The decline was primarily driven by a significant drop in the average selling price of intelligent pet products during this period.

Domestic sales decreased by approximately $1.4 million or 39.9%, from approximately $3.5 million for the six months ended December 31, 2022, to approximately $2.1 million for the six months ended December 31, 2023. The decrease was mainly due to a decrease in customer orders caused by intense competition in the domestic market.

Cost of revenues was approximately $5.4 million during the six months ending December 31, 2023, compared to around $7.7 million for the same period in 2022. This decrease was due to a significant drop in the average unit cost of intelligent pet products. The cost of goods sold as a percentage of revenues increased by about 6.5 percentage points, reaching 80.4% for the six months ending December 31, 2023, compared to 73.9% in 2022.

Gross profit decreased by approximately $1.4 million or 51.7%, to about $1.3 million for the six months ending December 31, 2023, compared to around $2.7 million in 2022. This decline was primarily due to the lower average selling price of our intelligent pet products. The overall gross profit margin was 19.6%, a decrease of 6.5 percentage points from the 26.1% margin achieved in 2022.

Total operating expenses decreased by approximately $1.4 million or 21.8%, to about $4.9 million for the six months ending December 31, 2023, compared to around $6.2 million for the same period in 2022.

Selling expenses

Selling expenses decreased by approximately $1.0 million or 64.8%, from around $1.5 million to about $0.5 million. The decrease was due to reduced marketing research activities. As a percentage of sales, selling expenses were 7.9% in 2023 and 14.4% in 2022.

General and administrative expenses

General and administrative expenses decreased by about $0.3 million or 7.6%, from around $4.2 million to approximately $3.9 million. The decrease was mainly due to lower consultant fees and expenses associated with furnishing the new facility. As a percentage of sales, general and administrative expenses were 58.0% in 2023 and 40.3% in 2022.

Research and development expenses

Research and development expenses decreased by $0.1 million or 12.4%, from $0.6 million to approximately $0.5 million. As a percentage of sales, research and development expenses were 7.3% in 2023 and 5.3% in 2022.

Net loss was approximately $3.2 million for the six months ended December 31, 2023, as compared to approximately $3.0 million for the six months ended December 31, 2022. The increased net loss was the result of decreased sales and gross profit, offset by decreased operating expenses as discussed above.

About Dogness

Dogness (International) Corporation was founded in 2003 from the belief that dogs and cats are important, well-loved family members. Through its smart products, hygiene products, health and wellness products, and leash products, Dogness’ technology simplifies pet lifestyles and enhances the relationship between pets and pet caregivers. The Company ensures industry-leading quality through its fully integrated vertical supply chain and world-class research and development capabilities, which has resulted in over 200 patents and patents pending. Dogness products reach families worldwide through global chain stores and distributors. For more information, please visit: ir.dogness.com.

Forward Looking Statements

No statement made in this press release should be interpreted as an offer to purchase or sell any security. Such an offer can only be made in accordance with the Securities Act of 1933, as amended, and applicable state securities laws. Certain statements in this press release concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for the "safe harbor" under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding lingering effects of the Covid-19 pandemic on our customers’ businesses and end purchasers’ disposable income, our ability to raise capital on any particular terms, fulfillment of customer orders, fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, our ability to realize revenue from expanded operation and acquired assets in China and the U.S., our ability to attract and retain highly skilled professionals, client concentration, industry segment concentration, reduced demand for technology in our key focus areas, our ability to successfully complete and integrate potential acquisitions, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings. These filings are available at www.sec.gov. Dogness may, from time to time, make additional written and oral forward-looking statements, including statements contained in the Company’s filings with the Securities and Exchange Commission and our reports to shareholders. In addition, please note that any forward-looking statements contained herein are based on assumptions that we believe to be reasonable as of the date of this press release. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company unless it is required by law.

For investor and media inquiries, please contact:

Wealth Financial Services LLC
Connie Kang, Partner
Email: [email protected]
Tel: +86 1381 185 7742 (CN)

 

DOGNESS (INTERNATIONAL) CORPORATION

CONSOLIDATED BALANCE SHEETS

(All amounts in USD)

(Unaudited)

As of December 31,

As of June 30,

2023

2023

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

2,479,010

$

4,483,308

Accounts receivable from third-party customers, net

2,101,516

1,492,762

Accounts receivable from related parties

1,118,431

1,272,384

Inventories, net

3,087,595

2,679,275

Due from related parties

94,281

87,430

Prepayments and other current assets

4,925,636

3,748,955

Advances to supplier- related party

115,863

239,729

Total current assets

13,922,332

14,003,843

NON-CURRENT ASSETS

Property, plant and equipment, net

61,743,326

61,686,849

Operating lease right-of-use lease assets

17,303,060

17,537,096

Intangible assets, net

1,853,039

1,845,006

Long-term investments in equity investees

1,548,800

1,516,900

Deferred tax assets

1,586,428

1,281,634

Total non-current assets

84,034,653

83,867,485

TOTAL ASSETS

$

97,956,985

$

97,871,328

LIABILITIES

CURRENT LIABILITIES

Short-term bank loans

$

705,200

$

887,000

Current portion of long-term bank loans

625,274

2,959,918

Accounts payable

1,347,606

895,694

Accounts payable – related parties

Due to related parties

99,281

85,843

Advances from customers

231,029

121,687

Taxes payable

1,198,575

1,015,444

Accrued expenses and other current liabilities

1,024,780

1,026,218

Operating lease liabilities, current

2,364,014

2,326,162

Total current liabilities

7,595,759

9,317,966

NON-CURRENT LIABILITIES

Long term bank loans

3,855,168

1,595,549

Operating lease liabilities, non-current

11,038,675

10,612,508

Total non-current liabilities

14,893,843

12,208,057

TOTAL LIABILITIES

22,489,602

21,526,023

Commitments and Contingencies (Note 6)

EQUITY

Class A Common shares, no par value, unlimited shares
authorized; 1,557,566 and 1,552,762 issued and
outstanding as of December 31, 2023 and June 30,
2023, respectively

86,369,647

85,716,578

Class B Common shares, no par value, unlimited shares
authorized; 9,069,000 issued and outstanding as of both
December 31, 2023 and June 30, 2023

18,138

18,138

Statutory reserve

291,443

291,443

Retained earnings

(2,532,613)

664,004

Accumulated other comprehensive loss

(8,679,275)

(10,345,832)

Equity attributable to owners of the Company

75,467,340

76,344,331

Non-controlling interest

43

974

Total equity

75,467,383

76,345,305

TOTAL LIABILITIES AND EQUITY

$

97,956,985

$

97,871,328

 

 

DOGNESS (INTERNATIONAL) CORPORATION

STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(All amounts in USD)

(Unaudited)

For The Six Months Ended December 31,

2023

2022

Revenues–third party customers

$

6,573,379

$

9,388,291

Revenues – related parties

101,308

1,010,316

Total Revenues

6,674,687

10,398,607

Cost of revenues – third party customers

(5,280,923)

(7,012,038)

Cost of revenues – related parties

(82,835)

(671,876)

Total Cost of revenues

(5,363,758)

(7,683,914)

Gross Profit

1,310,929

2,714,693

Operating expenses:

Selling expenses

529,021

1,501,469

General and administrative expenses

3,873,442

4,192,810

Research and development expenses

485,849

554,393

Total operating expenses

4,888,312

6,248,672

Loss from operations

(3,577,383)

(3,533,979)

Other income (expense):

Interest expense, net

(113,690)

(100,255)

Foreign exchange transaction gain

32,469

76,962

Other income, net

80,891

64,719

Rental income from related parties, net

148,406

165,656

Total other income, net

148,076

207,082

Loss before income taxes

(3,429,307)

(3,326,897)

Income taxes benefit

(231,756)

(315,036)

Net loss

(3,197,551)

(3,011,861)

Less: net loss attributable to non-controlling interest

(934)

(57,103)

Net loss attributable to Dogness (International)
Corporation

(3,196,617)

(2,954,758)

Other comprehensive loss

Foreign currency translation

1,666,560

(2,326,099)

Comprehensive loss

(1,530,991)

(5,337,960)

Less: comprehensive loss attributable to non-controlling
interest

(931)

(66,346)

Comprehensive loss attributable to Dogness
(International) Corporation

$

(1,530,060)

$

(5,271,614)

Loss Per share

Basic

$

(0.30)

$

(0.28)

Diluted

$

(0.30)

$

(0.28)

Weighted Average Shares Outstanding

Basic

10,622,663

10,580,323

Diluted

10,622,663

10,580,323

 

 

DOGNESS (INTERNATIONAL) CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts in USD)

(Unaudited)

For The Six Months Ended

December 31,

2023

2022

Cash flows from operating activities:

Net loss

$

(3,197,551)

$

(3,011,861)

Adjustments to reconcile loss income to net cash    
provided by operating activities:

Depreciation and amortization

1,414,937

1,553,520

Share-based compensation for services

399,470

18,583

Gain from disposal of property, plant and
equipment

(9,845)

Change in bad debt allowance

111,105

Deferred tax benefit

(275,121)

(336,131)

Accrued interest income

(97,622)

Amortization of right-of-use lease assets

591,705

408,602

Warrants modification

239,308

Changes in operating assets and liabilities:

Accounts receivable

(682,445)

(37,436)

Accounts receivable-related parties

177,374

(445,099)

Inventories

(359,976)

(630,430)

Prepayments and other current assets

(1,080,158)

(589,816)

Advances to supplier-related party

126,527

(102,305)

Accounts payables

425,101

291,728

Accounts payables-related party

(370,662)

Accrued expenses and other current liabilities

16,516

(156,628)

Advance from customers

104,887

182,887

Operating lease liabilities

188,379

(1,320,452)

Taxes payable

159,612

220,999

Net cash used in operating activities

(1,650,175)

(4,422,123)

Cash flows from investing activities:

Purchase of property, plant and equipment

(294,828)

(1,084,008)

Proceeds from disposition of property, plant and
equipment

56,000

Proceeds upon maturity of short-term investments             

(10,374,920)

Net cash used in investing activities

(238,828)

(11,458,928)

Cash flows from financing activities:

Net proceeds from exercise of warrants

15,101

Reverse split shares

(810)

Proceeds from short-term bank loans

691,000

400,000

Repayment of short-term bank loans

(885,800)

(50,000)

Proceeds from long-term bank loans

2,625,800

Repayment of long-term bank loans

(2,793,472)

(447,438)

Proceeds from related-party loans

6,498

585,157

Net cash (used in) provided by financing activities

(341,683)

487,719

Effect of exchange rate changes on cash and restricted
cash

226,388

(489,499)

Net decrease in cash and cash equivalents

(2,004,298)

(15,882,831)

Cash and cash equivalents, beginning of period

4,483,308

16,605,872

Cash and cash equivalents, end of period

$

2,479,010

$

723,041

SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:

Cash paid for interest

$

154,884

$

208,134

Non-Cash Investing Activities

Right-of-assets obtained in exchange for operating
lease obligations

$

$

14,939,726

Reduction of construction-in-progress through
accounts payable and other payable

$

(40,251)

$

Prepaid share-based compensation for services

$

(223,000)

$

315,917

 

Source : Dogness Reports Financial Results for the Six Months Ended December 31, 2023

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