TDH Holdings, Inc. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023; filed April 29, 2024. This is an annual report, not a standalone Q4 filing. Financial statements are prepared under U.S. GAAP. TDH Holdings is a British Virgin Islands holding company; its continuing revenue is now principally from U.S. restaurant operations.
Business context and material changes
The company discontinued petfood manufacturing in the first quarter of 2023. Tiandihui’s bankruptcy proceedings were completed on December 27, 2023, and the subsidiary was disposed of by year-end. The restaurant business, including Bo Lings in the Kansas City area, is now the principal continuing business. Restaurant revenue represented virtually all reported continuing revenue in 2023.
Financial results and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue from continuing operations | $3.176 million | $3.099 million |
| Gross profit / margin | $1.030 million / 32.42% | $1.053 million / 33.97% |
| Operating loss | $6.370 million | $3.048 million |
| Loss from continuing operations | $8.536 million | Income of $1.194 million |
| Loss from discontinued operations | $15.096 million | $0.339 million |
| Consolidated net income (loss) | $(23.632) million | $0.855 million |
| Net cash used in operating activities | $2.493 million | $2.073 million |
| Cash and cash equivalents at year-end | $13.661 million | $21.857 million |
| Short-term investments at year-end | $13.318 million | $9.922 million |
| Total liabilities at year-end | $3.852 million | $15.359 million |
Revenue rose 2.5%, while restaurant revenue increased approximately $101,000 to $3.175 million. Petfood revenue was negligible. Gross margin declined 1.55 percentage points. Operating expenses increased to $7.400 million, including $3.040 million of stock-based compensation recorded after extending warrant exercise periods. The company reported a $2.645 million net investment loss in 2023, compared with $4.161 million of investment income in 2022; its short-term investments are publicly listed equity securities measured at fair value.
Cash used in investing activities was $6.067 million, primarily reflecting net purchases of short-term investments. Financing provided $1.922 million, mainly from related parties. The company had no outstanding bank loans at year-end; lease liabilities totaled $683,113. Current liabilities were $3.389 million, including $1.983 million due to related parties and $277,408 in short-term related-party loans. Amounts due to related parties are generally unsecured, non-interest-bearing and payable on demand. Management reported $13.661 million in cash and $13.318 million in short-term investments, but noted that cash held in China is subject to currency and remittance restrictions; cash in Chinese banks is uninsured.
Outlook, risks and unusual items
The auditor’s report includes a going-concern explanatory paragraph, citing recurring losses and negative operating cash flows; it states that substantial doubt exists about the company’s ability to continue as a going concern. Management plans to improve restaurant profitability and operating cash flow, seek support from its principal shareholder, and explore debt or equity financing and strategic opportunities. No committed third-party financing or quantified earnings or revenue guidance is disclosed.
The $15.096 million discontinued-operations loss principally reflects the Tiandihui disposition and bankruptcy process. Completion of the bankruptcy addressed substantially all material pre-bankruptcy claims, but the company warns that any claims not discharged could adversely affect results and financial condition. The filing also highlights restaurant execution and acquisition risks, geographic concentration in Missouri, food-cost and labor pressures, competition, PRC regulatory and cash-transfer uncertainty, and potential listing and foreign-investor risks.
Management concluded that disclosure controls and internal control over financial reporting were ineffective at December 31, 2023. Identified material weaknesses include insufficient accounting staff with U.S. GAAP and SEC reporting expertise and an ineffective financial-statement review process. Management plans remediation by the end of fiscal 2024. The filing reports no material cybersecurity incident known to the company.
Investor verification priorities
- Review the audited notes on the $15.096 million bankruptcy/disposal loss, the final treatment of claims and the possibility of any remaining liabilities.
- Assess the going-concern outlook against operating cash burn, the restaurant’s profitability, and whether planned financing or shareholder support is actually available.
- Verify the composition, liquidity, valuation exposure and custody of the $13.318 million portfolio of listed securities, including the reported 2023 investment loss.
- Review the related-party balances and terms, particularly the increase in amounts due to related parties and loans payable on demand.
- Track remediation of the disclosed control weaknesses and the company’s ability to produce reliable financial reporting.
- Confirm the period and accounting classifications when comparing results: 2023 results include the completed petfood bankruptcy disposal, while continuing operations are overwhelmingly restaurant revenue.