UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of November 2020

 

Commission File Number: 001-38206

 

TDH HOLDINGS, INC.

(Translation of registrant’s name into English)

 

c/o Qingdao Tiandihui Foodstuffs Co. Ltd.,

2521 Tiejueshan Road, Huangdao District, Qingdao, Shandong Province

People’s Republic of China

Tel: +86-532-8615-7918

(Address of Principal Executive Office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒      Form 40-F ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes ☐ No ☒

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): -. 

 

 

 

 

   

EXPLANATORY NOTE

 

This Report of Foreign Private Issuer on Form 6-K filed by TDH Holdings, Inc. (together with our subsidiaries, unless the context indicates otherwise, “we,” “us,” “our,” or the “Company”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or the Company’s future financial performance. The Company has attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. 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. The information in this Report on Form 6-K is not intended to project future performance of the Company. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company does not guarantee future results, levels of activity, performance or achievements. The Company expectations are as of the date this Form 6-K is filed, and the Company does not intend to update any of the forward-looking statements after the date this Report on Form 6-K is filed to confirm these statements to actual results, unless required by law.

 

 

 

   

Index to Unaudited Condensed Consolidated Interim Financial Statements

 

    Page
     
Consolidated Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019   2
     
Consolidated Statements of Operations and Comprehensive Loss For The Six Months Ended June 30, 2020 and 2019 (Unaudited)   3
     
Consolidated Statements of Cash Flows For The Six Months Ended June 30, 2020 and 2019 (Unaudited)   4

  

1

 

   

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  

  

2

 

   

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  

  

3

 

   

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  

 

4

 

 

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.

  

5

 

   

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.

  

6

 

   

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.

  

7

 

   

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.

 

Exhibits

 

Exhibit No.   Description
99.1   Press release.

    

8

 

    

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: November 25, 2020    
     
  TDH Holdings, Inc.
     
  By: /s/ Dandan Liu
  Name:  Dandan Liu
  Title: Chief Executive Officer

 

 

9

 

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