Dogness Reports Financial Results for Fiscal Year Ended June 30, 2024

2024-10-17 Dogness (International) Corporation HaiPress

PLANO,Texas,Oct. 17,2024 -- 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 fiscal year ended June 30,2024.

Silong Chen,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. In fiscal 2024,Dogness experienced intensified competition and a complex macro environment,which posed challenges to the Company resulting in a 15.6% revenue decline. Our gross profit for fiscal 2024 decreased to approximately $3.1 million,reflecting a 14.7% decline,primarily due to lower sales volumes in intelligent pet products. However,we effectively reduced our selling expenses by approximately $1.3 million and general and administrative expenses by $2.0 million,enhancing our operational efficiency. As a result,our overall gross profit margin improved slightly to 21.0%,up from 20.8% in fiscal 2023."

"Looking ahead,we are committed to leveraging our strengths in traditional pet products to capture additional market share,particularly in international markets where we see significant growth potential. We are also exploring new product lines and enhancements to our intelligent pet products,aiming to align them with consumer trends and preferences. Our commitment to sustainability will drive our research and development efforts,focusing on eco-friendly materials and advanced technologies that resonate with our customer base."

"Thanks to these strategic initiatives,our net loss improved by approximately $1.4 million,or 18.8%,decreasing from $7.5 million in fiscal 2023 to $6.1 million in fiscal 2024. We appreciate the continued support of our stakeholders as we strive for sustainable growth and profitability in the coming years,which we believe will positionDogness as a leader in the pet products industry."

Financial Results for The Fiscal Year Ended June 30,2024

Revenues

Revenues decreased by approximately $2.7 million,or 15.6%,to approximately $14.8 million in fiscal 2024 from approximately $17.6 million in fiscal 2023. The decrease in revenue was primarily attributable to an approximately $3.0 million decrease in the sales of intelligent pet products and an approximately $0.5 million decrease in the sales of climbing hooks and others,offset by an approximately $0.7 million increase in the sales of traditional pet products.

The breakdown of our revenue by products and services categories is as follows:


2024

2023

Changes

Products and services


category


Amount

(USD Million)


Amount

(USD Million)

%


Products


Traditional pet products


$

9.0


$

8.3


8.7

%

Intelligent pet products


4.4


7.4


(40.8)

%

Climbing hooks and others


1.4


1.8


(25.0)

%

Total revenue from products


14.8


17.5


(15.7)

%


Services


Dyeing services


0.09


-


-

%

Other services


-


0.07


(100.0)

%

Total revenue from services


0.09


0.07


22.5

%

Total


$

14.8


$

17.6


(15.6)

%

Traditional Pet Products

Revenue from traditional pet products rose by approximately $0.7 million or 8.7%,from $8.3 million in fiscal 2023 to $9.0 million in fiscal 2024. This increase was primarily due to higher sales volume,with $1.2 million coming from overseas markets,offset by a $0.5 million decline in the Chinese domestic market.

Intelligent Pet Products

Revenue from intelligent pet products fell by approximately $3.0 million,or 40.8%,from $7.4 million in fiscal 2023 to $4.4 million in fiscal 2024. This decline was driven by a 33.1% drop in sales volume and a $2.3 decrease in average selling price per unit. The Chinese market accounted for a $0.8 million decrease,while overseas markets contributed to a $2.2 million decline,as the pet product industry is facing reduced consumer spending on non-essential intelligent pet products items.

Climbing Hooks and Others

Revenue from climbing hooks and other products decreased by approximately $0.5 million,or 25.0%,from $1.8 million in fiscal 2023 to $1.4 million in fiscal 2024,mainly due to lower sales volume.

Dyeing Services

The Company provides dyeing solutions using our manufacturing capabilities,applying dyes to textiles for desired quality and color. Revenue from dyeing services was $0.1 million in fiscal 2024,up from no revenue in 2023.

Sales to Related Parties

During fiscal 2024,Dogness Network Technology Co.,Ltd. ("Dogness Network") and Dogness Technology Co.,Ltd ("Dogness Technology") were related parties of the Company. Dogness Technology ceased being a related party after December 31,2023. Sales to Dogness Network and Dogness Technology Co.,Ltd totaled $0.1 million and $1.7 million in fiscal 2024 and 2023,respectively,representing 0.7% and 9.7% of total revenue. Costs associated with these sales were $0.1 million in 2024 and $1.2 million in 2023.

International vs. Domestic sales

Total international sales dropped by approximately $1.2 million,or 10.6% to approximately $10.1 million in fiscal 2024,primarily due to 48.7% decline in intelligent pet product sales. Traditional pet product sales,however,rose by 21.6%.

Domestic sales decreased by approximately $1.5 million,or 24.4% to around $4.8 million,driven by reduced customer orders caused by intense competition in the domestic market. Domestic sales of traditional and intelligent pet products declined by 19.8% and 27.7% respectively in the domestic market.

Cost of revenues

Cost of revenues decreased by approximately $2.2 million or 15.8%,from approximately $13.9 million in fiscal 2023 to approximately $11.7 million in fiscal 2024. The decreased cost of revenues was the result of the decrease in average unit cost due to a shift toward lower cost traditional pet products.

Gross profit

Gross profit decreased by approximately $0.5 million or 14.7%,from approximately $3.7 million in fiscal 2023 to approximately $3.1 million in fiscal 2024,primarily attributable to the decreased sales volume of our intelligent pet products. Overall gross profit margin was 21.0% in fiscal 2024,an increase of 0.2 percentage points,as compared to 20.8% in fiscal 2023.

The breakdown of gross profit by products and services categories is as follows:


For the Year ended June 30,


2024


2023


Changes


Products and services category


Amount

($Million)


Gross


profit %


Amount

($Million)


Gross


profit %


Gross profit Pct.


Pt.


Traditional pet products


$

1.4


16.0

%


$

1.2


14.3

%


1.7

pct.

Intelligent pet products


1.2


28.3

%


1.8


24.4

%


3.9

pct.

Climbing hooks and others


0.5


34.9

%


0.6


34.2

%


0.7

pct.


3.1


21.4

%


3.6


20.6

%


0.8

pct.

Services


Dyeing services


(0.03)


(35.8)

%


-


-

%


(35.8)

pct.

Other services


-


-

%


0.06


86.5


(86.5)

pct.

Total


$

3.1


21.0%

%


$

3.7


20.8

%


0.2

pct.

Traditional pet products

Gross profit for traditional pet products rose by approximately $0.3 million in fiscal 2024,with the gross profit margin increasing by 1.7 percentage points from 14.3% to 16.0%,mainly due to a $0.15 reduction in average unit cost.

Intelligent pet products

For intelligent pet products,gross profit fell by approximately $0.6 million from $1.8 million to $1.2 million,largely due to a 33.1% drop in sales volume. However,gross profit margin improved by 3.9 percentage points from 24.4% to 28.3%,driven by a $2.42 decrease in average unit cost.

Climbing hooks and others

Gross profit for climbing hooks and others decreased by approximately $0.1 million from $0.6 million to $0.5 million,primarily due to a 25.2% decline in sales volume. The overall gross margin for this category increased by 0.7 percentage points from 34.2% to 34.9%. The increase was due a $0.02 reduction in average unit cost.

Expenses

Selling Expenses

Selling expenses decreased by approximately $1.3 million,or 54.4%,from $2.5 million in fiscal 2023 to $1.1 million in fiscal 2024,mainly due to reduced marketing research activities. As a percentage of sales,these expenses were 7.6% in fiscal 2024,down from 14.1% in 2023.

General and Administrative Expenses

General and administrative expenses decreased by approximately $2.0 million,or 20.0%,from $9.8 million in fiscal 2023 to $7.8 million in fiscal 2024,due to lower professional consulting and decoration costs. As a percentage of sales,these expenses were 52.8% in 2024,compared to 55.7% in 2023.

Research and Development Expenses

Research and development expenses decreased by approximately $0.3 million,or 34.4%,from $0.9 million in fiscal 2023 to $0.6 million in fiscal 2024. As a percentage of sales,these expenses were 4.1% in 2024,down from 5.3% in 2023. The company anticipates an increase in R&D spending to focus on environmentally-friendly materials and new high-tech products.

Net loss

As a result of the foregoing,our net loss decreased by approximately $1.4 million or 18.8%,from approximately $7.5 million in fiscal 2023 to approximately $6.1 million in fiscal 2024.

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 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: ckang@wealthfsllc.com


Tel: +86 1381 185 7742 (CN)

DOGNESS(INTERNATIONAL) CORPORATION

CONSOLIDATED BALANCE SHEETS

(All amounts in USD)


As of June 30,


As of June 30,


2024


2023


ASSETS


CURRENT ASSETS


Cash and cash equivalents


$

6,956,434


$

4,483,308


Accounts receivable from third-party customers,net


2,269,341


1,492,762


Accounts receivable from related parties


582,182


1,272,384


Inventories,net


3,119,827


2,679,275


Due from related parties


97,037


87,430


Prepayments and other current assets


3,328,189


3,748,955


Advances to supplier- related party


50,908


239,729


Total current assets


16,403,918


14,003,843


NON-CURRENT ASSETS


Property,plant and equipment,net


61,303,327


61,686,849


Operating lease right-of-use lease assets


16,325,988


17,537,096


Intangible assets,net


1,780,856


1,845,006


Long-term investments in equity investees


1,513,600


1,516,900


Deferred tax assets


1,873,140


1,281,634


Total non-current assets


82,796,911


83,867,485


TOTAL ASSETS


$

99,200,829


$

97,871,328


LIABILITIES AND EQUITY


CURRENT LIABILITIES


Short-term bank loans


$

894,400


$

887,000


Current portion of long-term bank loans


759,339


2,959,918


Accounts payable


1,286,981


895,694


Due to related parties


518,003


85,843


Advances from customers


264,832


121,687


Taxes payable


1,007,482


1,015,444


Accrued expenses and other current liabilities


1,452,225


1,026,218


Operating lease liabilities,current


2,352,482


2,326,162


Total current liabilities


8,535,744


9,317,966


NON-CURRENT LIABILITIES


Long-term bank loans


3,315,715


1,595,549


Operating lease liabilities,non-current


10,938,477


10,612,508


Total non-current liabilities


14,254,192


12,208,057


TOTAL LIABILITIES


22,789,936


21,526,023


Commitments and Contingencies (Note 10)


EQUITY


Class A Common shares,no par value,unlimited shares authorized;


3,661,658 and 1,552,762 issued and outstanding as of June 30,2024 and


2023,respectively*


92,004,296


85,716,578


Class B Common shares,unlimited shares authorized;


9,069,000 issued and outstanding as of June 30,2024 and 2023


18,138


18,138


Statutory reserve


291,443


291,443


(Accumulated deficit) retained earnings


(5,391,709)


664,004


Accumulated other comprehensive loss


(10,511,317)


(10,345,832)


Equity attributable to owners of the Company


76,410,851


76,344,331


Non-controlling interest


42


974


Total equity


76,893


76,305


TOTAL LIABILITIES AND EQUITY


$

99,328


DOGNESS(INTERNATIONAL) CORPORATION

STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME

(All amounts in USD)


For the Years Ended June 30,


2024


2023


2022


Revenues – third party customers


$

14,746,447


$

15,884,281


$

24,882,618


Revenues – related parties


101,455


1,700,173


2,212,579


Total Revenues


14,847,902


17,584,454


27,095,197


Cost of revenues – third party customers


(11,642,233)


(12,760,852)


(15,654,952)


Cost of revenues – related parties


(82,955)


(1,162,314)


(1,301,180)


Total cost of revenues


(11,725,188)


(13,923,166)


(16,132)


Gross Profit


3,122,714


3,288


10,139,065


Operating expenses:


Selling expenses


1,129,671


2,478,163


2,077,174


General and administrative expenses


7,838,024


9,800,714


6,742,687


Research and development expenses


610,439


931,078


917,227


Loss from disposal of property,plant and


equipment


1,075,490


15,306


327,921


Total operating expenses


10,653,624


13,225,261


10,065,009


(Loss) income from operations


(7,530,910)


(9,563,973)


74,056


Other income:


Interest expense,net


(207,410)


(330,824)


(370,108)


Foreign exchange transaction gain


310,860


800,403


246,211


Other income,net


541,468


112,109


115,016


Rental income from related parties,net


337,743


295,362


173,089


Total other income


982,661


877,050


164,208


(Loss) income before income taxes


(6,548,249)


(8,923)


238,264


Income taxes benefit


(491,600)


(1,227,449)


(2,777,868)


Net (loss) income


(6,056,649)


(7,459,474)


3,016,132


Less: net loss attributable to non-controlling


interest


(936)


(259,211)


(219,427)


Net (loss) income attributable to Dogness


(International) Corporation


(6,055,713)


(7,263)


3,235,559


Other comprehensive loss:


Foreign currency translation loss


(165,481)


(6,204,254)


(3,203,448)


Comprehensive loss


(6,222,130)


(13,663,728)


(187,316)


Less: comprehensive loss attributable to non-


controlling interest


(932)


(270,210)


(230,583)


Comprehensive(loss) income attributable


to Dogness (International) Corporation


$

(6,221,198)


$

(13,393,518)


$

43,267


(Loss) earnings per share


Basic


$

(0.55)


$

(0.68)


$

0.31


Diluted


$

(0.55)


$

(0.68)


$

0.31


Weighted Average Shares Outstanding*


Basic


10,919,386


10,598,989


10,133


Diluted


10,316,232


DOGNESS(INTERNATIONAL) CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts in USD)


For the Years Ended June 30,


2024


2023


2022


Cash flows from operating activities:


Net (loss) income


$

(6,649)


$

(7,474)


$

3,132


Adjustments to reconcile net (loss)income to


net cash provided by (used in) operating


activities:


Amortization of operating lease right-of-use


lease assets


1,179,776


1,023,500


408,566


Depreciation and amortization


2,771,727


3,172


3,458,347


Loss from disposition of property,921


Share-based compensation for services


1,114,857


1,243,385


11,831


Change in inventory reserve


-


246,281


-


Change in credit losses


275,923


160,254


(16,776)


Deferred tax benefit


(597,241)


(658,595)


(118,424)


Warrants modification


239,308


-


-


Accrued interest income


-


-


(1,320)


Changes in operating assets and liabilities:


Accounts receivables


(1,060,171)


(109,090)


683,119


Accounts receivables-related parties


691,431


(272,301)


(620,728)


Inventories


(447,631)


268,593


740,265


Prepayments and other current assets


97,647


(3,113,841)


1,173,662


Advances to supplier- related party


189,395


(249,986)


-


Accounts payables


395,559


(62,237)


224,676


Accounts payables-related parties


-


(379,124)


58,190


Advance from customers


144,236


(18,989)


(52,365)


Taxes payable


(5,936)


(441,390)


(2,827,106)


Accrued expenses and other liabilities


423,456


34,381


(137,457)


Operating lease liabilities


382,649


(2,444,110)


(168,075)


Net cash provided by (used in) operating


activities


813,826


(8,902,265)


6,160,458


Cash flows from investing activities:


Purchase of property,plant and equipment


(3,524,713)


(1,520,556)


(15,259,272)


Proceeds from disposition of property,plant


and equipment


79,850


14,872


22,213


Proceeds upon maturity of short-term


investments


-


50,330


495,680


Net cash used in investing activities


(3,863)


(1,455,354)


(14,741,379)


Cash flows from financing activities:


Net proceeds from private placement


4,920,800


-


19,124,920


Adjustment relating to non-controlling


interest


-


(26,245)


-


Net proceeds from exercise of warrants


329,480


-


4,136


Reverse split shares


(810)


-


-


Net proceeds from exercise of options


-


-


180,000


Proceeds from short-term bank loans


899,600


483,000


804,000


Repayment of short-term bank loans


(887,000)


(160,000)


(944,446)


Proceeds from long-term bank loan


2,629,600


-


-


Repayment of long-term bank loans


(3,102,838)


(1,337,323)


(796,416)


Proceeds from (repayment of) related party


loans


425,007


(25,796)


(1,943,408)


Net cash provided by (used in) financing


activities


5,213,839


(1,066,364)


20,868,786


Effect of exchange rate changes on cash and


cash equivalents


(109,676)


(698,581)


(617,747)


Net increase (decrease) in cash and cash


equivalents


2,473,126


(12,564)


11,670,118


Cash and cash equivalents,beginning of year


4,308


16,605,872


4,935,754


Cash and cash equivalents,end of year


$

6,308


$

16,872


SUPPLEMENTAL DISCLOSURES OF


CASH FLOW INFORMATION:


Cash (refunded) paid for income tax


$

-


$

(2,593)


$

3,195


Cash paid for interest


$

294,628


$

396,517


$

471,443


Non-Cash Investing Activities


Transfer from construction-in-progress to


fixed assets


$

-


$

-


$

597,594


Additions (reductions) to property,plant and


equipment through other payable


$

7,301


$

(8,167)


$

-


Prepaid share-based compensation for


services


$

-


$

315,917


$

-


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