Deeper loss at Dogness (NASDAQ: DOGZ) as H1 2025 revenue drops 36%
Dogness (International) Corporation reported a sharp downturn for the six months ended December 31, 2025. Revenue fell to $7.71 million from $12.09 million, driven mainly by weaker sales of intelligent pet products and climbing hooks amid U.S. tariff headwinds.
Gross profit dropped to $0.87 million, with a much thinner margin as cost of revenue absorbed most of the reduced sales. The company recorded a net loss of $5.18 million, substantially wider than the prior period’s $1.82 million, including a $1.12 million impairment on its Dogness Network equity investment and higher selling expenses.
Cash and cash equivalents declined to $6.63 million from $12.83 million, mainly due to operating losses and $4.39 million of capital expenditures. Total assets were $114.45 million, with total liabilities of $19.31 million and equity of $95.14 million, reflecting a balance sheet still dominated by property and long-term investments.
Positive
- None.
Negative
- Revenue contraction and widened loss: Six-month revenue declined 36.2% to $7.71 million while net loss expanded to $5.18 million from $1.82 million, indicating materially weaker operating performance.
- Cash burn and higher capex: Cash fell from $12.83 million to $6.63 million over six months due to negative operating cash flow of $1.61 million and $4.39 million in capital expenditures, reducing liquidity.
- Asset impairment and concentration risks: A $1.12 million impairment on Dogness Network and reliance on a few major customers and suppliers increase earnings volatility and business risk.
Insights
Dogness shows steep revenue contraction, heavier losses, and cash burn in H1 2025.
Dogness generated $7.71 million in revenue for the six months ended December 31, 2025, down 36.2% from $12.09 million a year earlier. The decline came mainly from intelligent pet products and climbing hooks, while traditional pet products grew modestly.
Operating performance deteriorated: gross profit fell to $0.87 million and the company posted a loss from operations of $5.46 million. A key driver was a $1.12 million impairment on the Dogness Network equity investment after it entered liquidation, alongside higher selling expenses and inventory-related charges.
Cash and cash equivalents dropped from $12.83 million to $6.63 million, reflecting negative operating cash flow of $1.61 million and $4.39 million of capital expenditures. While total liabilities remain relatively low at $19.31 million versus equity of $95.14 million, ongoing losses and customer concentration highlight execution risk if revenue does not stabilize.
Key Figures
Key Terms
ASC 606 financial
measurement alternative financial
non-controlling interests financial
share-based compensation financial
inventory allowance financial
deferred tax assets financial
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2026
Commission
File Number:
(Registrant’s name)
People’s
Republic of
(Address of principal executive offices)
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): ☐
Explanatory Note:
On April 1, 2026, 2026, the Company announced its unaudited financial results for the first six months ended December 31, 2025. Unaudited financial statements and notes for six months ended December 31, 2025 and the Operating and Financial Review and Prospects are furnished as Exhibits 99.1 and Exhibit 99.2, respectively, to this report on Form 6-K.
On April 1, 2026, 2026, the Company issued a press release announcing its unaudited financial results for the first six months ended December 31, 2025, which press release is attached as Exhibit 99.3 to this Form 6-K.
Incorporation By Reference:
This report on Form 6-K is hereby incorporated by reference into the Registrant’s registration statement on Form S-8 (File No. 333-226985), Form F-3 (File No. 333-291900), and into each prospectus outstanding under the foregoing registration statements, to the extent not superseded by documents or reports subsequently filed or furnished by the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
Item 9.01 Financial Statements and Exhibits
The following documents are filed herewith:
| Exhibit Number | Document | |
| 99.1 | Unaudited financial statements and notes for six months ended December 31, 2025. | |
| 99.2 | Operating and Financial Review and Prospects | |
| 99.3 | Press Release dated April 1, 2026, 2026 titled “Dogness Reports Financial Results for the Six Months Ended December 31, 2025” | |
| 101.INS | XBRL Instance Document. | |
| 101.SCH | XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | XBRL Taxonomy Extension Labels Linkbase Document. | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Dogness (International) Corporation | ||
| By: | /s/ Silong Chen | |
| Name: | Silong Chen | |
| Title: | Chief Executive Officer | |
(Principal Executive Officer) and Duly Authorized Officer | ||
| Dated: April 1, 2026 | ||
Exhibit 99.1
DOGNESS (INTERNATIONAL) CORPORATION
CONSOLIDATED BALANCE SHEETS
(All amounts in USD)
As of December 31, 2025 | As of June 30, 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable-third-party, net | ||||||||
| Accounts receivable-related party | - | |||||||
| Inventories, net | ||||||||
| Due from a related party | ||||||||
| Prepayments and other current assets | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Long-term investments in equity investees | ||||||||
| Operating lease right-of-use lease assets | ||||||||
| Deferred tax assets | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Short-term bank loans | $ | $ | ||||||
| Current portion of long-term bank loans | ||||||||
| Accounts payable | ||||||||
| Accounts payable - related party | ||||||||
| Accounts payable | ||||||||
| Due to a related party | ||||||||
| Contract liabilities | ||||||||
| Taxes payable | ||||||||
| Operating lease liabilities, current | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Long-term bank loans | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and Contingencies (Note 13) | - | |||||||
| EQUITY | ||||||||
| Class A Common shares, | ||||||||
| Class B Common shares, | ||||||||
| Common shares value | ||||||||
| Statutory reserve | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Equity attributable to owners of the Company | ||||||||
| Non-controlling interest | ||||||||
| Total equity | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-1 |
DOGNESS (INTERNATIONAL) CORPORATION
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(All amounts in USD)
(Unaudited)
| 2025 | 2024 | |||||||
For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross Profit | ||||||||
| Operating expenses: | ||||||||
| Selling expenses | ||||||||
| General and administrative expenses | ||||||||
| Research and development expenses | ||||||||
| Impairment of investment in equity investee | - | |||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest income, net | ||||||||
| Foreign exchange transaction (loss) gain | ( | ) | ||||||
| Other (expenses) income, net | ( | ) | ||||||
| Rental income from related parties, net | ||||||||
| Total other income, net | ||||||||
| Loss before income tax | ( | ) | ( | ) | ||||
| Income tax benefit | ( | ) | ( | ) | ||||
| Net loss | ( | ) | ( | ) | ||||
| Less: net income attributable to non-controlling interest | - | - | ||||||
| Net loss attributable to Dogness (International) Corporation | ( | ) | ( | ) | ||||
| Other comprehensive loss | ||||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Comprehensive loss | ( | ) | ( | ) | ||||
| Less: comprehensive income attributable to non-controlling interest | - | |||||||
| Comprehensive loss attributable to Dogness (International) Corporation | $ | ( | ) | $ | ( | ) | ||
| Loss per share | ||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted Average Shares Outstanding | ||||||||
| Basic and diluted | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-2 |
DOGNESS (INTERNATIONAL) CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 2025 AND 2024
(All amounts in USD)
(Unaudited)
| Class A | Amount | Class B | Amount | Reserves | Earnings | Loss | Interest | Total | ||||||||||||||||||||||||||||
| Common Stock | Statutory | Retained | Accumulated Other Comprehensive | Non- controlling | ||||||||||||||||||||||||||||||||
| Class A | Amount | Class B | Amount | Reserves | Earnings | Loss | Interest | Total | ||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Share-based compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Issuance shares for warrants exercised | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Common Stock | Statutory | Retained | Accumulated Other Comprehensive | Non- controlling | ||||||||||||||||||||||||||||||||
| Class A | Amount | Class B | Amount | Reserves | Earnings | Loss | Interest | Total | ||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Options granted for services | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-3 |
DOGNESS (INTERNATIONAL) CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in USD)
(Unaudited)
| 2025 | 2024 | |||||||
For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile loss income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Share-based compensation | ||||||||
| Change in inventory reserve | - | |||||||
| Loss from disposal of property, plant and equipment | - | |||||||
| Reversal of allowance for credit losses | ( | ) | ( | ) | ||||
| Impairment of long-term investment | - | |||||||
| Deferred tax benefit | ( | ) | ( | ) | ||||
| Amortization of right-of-use lease assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable-third parties | ( | ) | ( | ) | ||||
| Accounts receivable-related party | ||||||||
| Inventories | ( | ) | ( | ) | ||||
Due from a related party | ( | ) | ( | ) | ||||
| Prepayments and other current assets | ( | ) | ( | ) | ||||
| Advances to supplier-related party | - | |||||||
| Accounts payable | ( | ) | ||||||
| Accounts payable-related party | ||||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Contract liabilities | ( | ) | ||||||
| Operating lease liabilities | ||||||||
| Taxes payable | ( | ) | ||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Proceeds from disposition of property, plant and equipment | - | |||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from short-term bank loans | ||||||||
| Repayment of short-term bank loans | ( | ) | ( | ) | ||||
| Repayment of long-term bank loans | ( | ) | ( | ) | ||||
| Proceeds from (repayment of) related party loans | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Effect of exchange rate changes on cash and restricted cash | ( | ) | ||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Non-Cash Investing Activities | ||||||||
| Liabilities incurred for purchase of property and equipment | $ | - | $ | |||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-4 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Dogness
(International) Corporation (“Dogness” or the “Company”), is a company limited by shares established under the
laws of the
Reorganization
A
Reorganization of the legal structure was completed on January 9, 2017. The Reorganization involved the incorporation of Dogness, a BVI
holding company; and Dogness Intelligence Technology (Dongguan) Co., Ltd. (“Dongguan Dogness”), a holding company established
under the laws of the People’s Republic of China (“PRC”); and the transfer of Dogness (Hong Kong) Pet’s Products
Co., Limited (“HK Dogness”), Jiasheng Enterprise (Hong Kong) Co., Limited (“HK Jiasheng”), and Dongguan Jiasheng
Enterprise Co., Ltd. (“Dongguan Jiasheng”; collectively, the “Transferred Entities”) from the Controlling Shareholder
to Dogness and Dongguan Dogness. Prior to the reorganization, the Transferred Entities’ equity interests were
Since the Company and its wholly-owned subsidiaries are effectively controlled by the same Controlling Shareholder before and after the reorganization, they are considered under common control. The above-mentioned transactions were accounted for as a recapitalization. The consolidation of the Company and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying unaudited consolidated financial statements.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements have been prepared in accordance with the U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended December 31, 2025 and 2024 are not necessarily indicative of the results that may be expected for the full year. The information included in this interim report should be read in conjunction with the financial statements and notes thereto included in the Company’s annual financial statements in form 20-F for the fiscal year ended June 30, 2025 as filed with the SEC on October 17, 2025.
| F-5 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company’s unaudited consolidated financial statements reflect the operating results of the following entities:
SCHEDULE OF ENTITIES
| Name of Entity | Date of Incorporation | Place of Incorporation | % of Ownership | Principal Activities | ||||||
| Dogness (International) Corporation (“Dogness” or the “Company”) | Parent,
| % | ||||||||
| Dogness (Hongkong) Pet’s Products Co., Limited (“HK Dogness”) | % | |||||||||
| Jiasheng Enterprise (Hong Kong) Co., Limited (“HK Jiasheng”) | % | |||||||||
| Dogness Intelligence Technology (Dongguan) Co., Ltd. (“Dongguan Dogness”) | % | |||||||||
| Dongguan Jiasheng Enterprise Co., Ltd. (“Dongguan Jiasheng”) | % | |||||||||
| Zhangzhou Meijia Metal Product Co., Ltd (“Meijia”) | % | |||||||||
| Dogness Overseas Ltd (“Dogness Overseas”) | % | |||||||||
| Dogness Group LLC (“Dogness Group”) | % | | ||||||||
| Dogness Pet Culture (Dongguan) Co. Ltd. (“Dogness Culture”) * | % | |||||||||
| * |
| F-6 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Non-controlling interests
As
of December 31, 2025, non-controlling interests represent
Use of Estimates
In preparing the unaudited consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates are based on information as of the date of the unaudited consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivable, inventories, advances to suppliers, useful lives of property, plant, right-of-use assets (including lease liabilities) and equipment, intangible assets, the recoverability of long-lived assets, provision necessary for contingent liabilities, and realization of deferred tax assets. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. The Company maintains most of its bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs.
Inventories, net
Inventories are stated at net realizable value using the weighted average method. Costs include the cost of raw materials, freight, direct labor and related production overhead. Any excess of the cost over the net realizable value of each item of inventory is recognized as a provision for diminution in the value of inventories.
Net realizable value is the estimated selling price in the normal course of business less any costs to complete and sell products. The Company evaluates inventories on a quarterly basis for its net realizable value adjustments, and reduces the carrying value of those inventories that are obsolete or in excess of the forecasted usage to their estimated net realizable value based on various factors, including aging and future demand of each type of inventory.
Prepayments and Other Current Assets
Prepayments and other current assets primarily consist of advances to suppliers for purchasing of raw materials that have not been received, prepaid service fee, security deposits. These advances are interest free, unsecured and short-term in nature and are reviewed periodically to determine whether their carrying value has become impaired.
| F-7 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Long-term Investments in Equity Investees
On July 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 321 “Investments—Equity Securities” (“ASC 321”). In accordance with ASC 321, equity securities over which the Company has no significant influence (generally less than a 20% ownership interest) with readily determinable fair values are accounted for at fair value based on quoted market prices. Equity securities without readily determinable fair values are accounted for either at fair value or using the measurement alternative. Under the measurement alternative, the equity investments are measured at cost, less any impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the Company.
The Company records the cost method investments at historical cost and subsequently records any dividends received from the net accumulated earnings of the investee as income. Dividends received in excess of earnings are considered a return of investment and are recorded as reductions in the cost of the investments. Investment in equity investees is evaluated for impairment when facts or circumstances indicate that the fair value of the investment is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near term prospects of the investments; and (v) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.
Fair Value of Financial Instruments
ASC 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| ● | Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data. |
| ● | Level 3 - inputs to the valuation methodology are unobservable. |
Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, short-term investments, accounts receivable, inventories, prepayments and other current assets, accounts payable, advance from customers, taxes payable, accrued expenses and other current liabilities, current portion of lease liabilities, and short-term bank loans approximate their fair values because of the short-term nature of these instruments. The Company’s long-term investments are accounted for using the measurement alternative in accordance with ASC 321, which also approximate their recorded values.
| F-8 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Long-lived assets impairment
The
Company reviews long-lived assets, including definitive-lived intangible assets, for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual
disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value.
Rental income
Rental revenue are recognized as earned in accordance with the terms of the respective lease agreement on a straight-line basis. Promotional discounts are recognized as a reduction to rental income over the promotional period. Late charges, administrative fees, and other fees are recognized as income when earned. Management reviews the tenant’s payment history and financial condition periodically in determining, in its judgment, whether any accrued rental income and unbilled rent receivable balances applicable to each specific property is collectable.
Revenue Recognition
The Company follows ASC 606 Revenue from Contract with Customers (“ASC606”) in revenue recognition. ASC 606 establishes principles for reporting information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.
To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.
Revenue is recognized when obligations under the terms of a contract with the Company’s customers are satisfied. Satisfaction of contract terms occur with the transfer of title of the Company’s products to the customers. Net sale is measured as the amount of consideration the Company expects to receive in exchange for transferring the goods to the wholesaler and retailers.
The amount of consideration the Company expects to receive consists of the sales price adjusted for any incentives if applicable. Such incentives do not represent a standalone value and are accounted for as a reduction of revenue in accordance with ASC 606. For the six months ended December 31, 2025 and 2024, the Company did not provide any sales incentives to its customers.
Incidental promotional items that are immaterial in the context of the contract are recognized as expense. Fees charged to customers for shipping and handling are included in net sales and the related costs incurred by the Company are included in cost of goods sold. In applying judgment, the Company considered customer expectations of performance, materiality and the core principles of ASC Topic 606. The Company’s performance obligations are generally transferred to the customer at a point in time. The Company’s contracts with customers generally do not include any variable consideration.
| F-9 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
The Company’s revenue is primarily generated from the sales of pet products, including leashes, accessories, collars, harnesses and intelligent pet products, to wholesalers and retailers. Revenue is reported net of all value added taxes (“VAT”). The Company does not routinely permit customers to return products and historically, customer returns have been immaterial.
The Company also generates revenue by providing ribbon dyeing service and pet grooming services to customers. The Company utilizes its manufacturing capability and color dyeing technology to provide dyeing solutions to customers and apply dyes or pigments on ribbons made of textile materials such as fibers, yarns and fabrics to achieve customer desired color fastness and quality. The Company recognizes revenue at the point when dyeing solutions and related services are rendered, products after dyeing are delivered and accepted by the customers. The revenue from pet grooming services is recognized when the services are rendered.
Contract Assets and Liabilities
Payment terms are established on the Company’s pre-established credit requirements based upon an evaluation of customers’ credit quality. Contract assets are recognized as in related accounts receivable. Contract liabilities are recognized for contracts where payment has been received in advance of delivery. The contract liability balance can vary significantly depending on the timing of when an order is placed and when shipment or delivery occurs.
As of December 31, 2025 and June 30, 2025, other than accounts receivable and advances from customers, the Company had no other material contract assets, contract liabilities or deferred contract costs recorded on its consolidated balance sheet. Costs of fulfilling customers’ purchase orders, such as shipping, handling and delivery, which occur prior to the transfer of control, are recognized in selling, general and administrative expense when incurred.
Disaggregation of Revenue
The Company disaggregates its revenue from contracts by product and service types and geographic areas, as the Company believes it best depicts how the nature, amount, timing, and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenue for the six months ended December 31, 2025, and 2024 is disclosed in Note 11.
Research and Development Costs
Research and development expenses include costs directly attributable to the conduct of research and development projects, including the cost of salaries and other employee benefits, testing expenses, consumable equipment and consulting fees. All costs associated with research and development are expensed as incurred.
| F-10 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Tax
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Income taxes are accounted for using the asset and liability approach. Under this approach, income tax expense is recognized for the amount of taxes payable or refundable for the current year. Deferred income taxes assets and liabilities are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in unaudited the consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
An
uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained
in a tax examination.
Value Added Tax (“VAT”)
Since significant amount of the Company’s products are exported to the U.S. and Europe, the Company is eligible for VAT refunds when the Company completes all the required tax filing procedures. All of the VAT returns of the Company have been and remain subject to examination by the tax authorities for five years from the date of filing.
Loss Per Share
The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
| F-11 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Share-Based Compensation
The Company follows the provisions of ASC 718, “Compensation - Stock Compensation,” which establishes the accounting for employee share-based awards. For employee share-based awards, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period for the entire award.
Foreign Currency Translation
The Company’s principal country of operations is the PRC. The financial position and results of the operations of HK Dogness, HK Jiasheng, Dongguan Dogness, Dongguan Jiasheng, Meijia, and Dogness Culture are determined using RMB, the local currency, as the functional currency, while Dogness Overseas and Dogness Group use U.S Dollar as their functional currency.
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the consolidated balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included in net income (loss) for the year.
The Company’s financial statements are reported using U.S. Dollars. The results of operations and the consolidated statements of cash flows denominated in foreign currencies are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income (loss) included in consolidated statements of changes in equity. Gains and losses from foreign currency transactions are included in the consolidated statement of comprehensive income (loss).
The following table outlines the currency exchange rates that were used in the unaudited consolidated financial statements:
SCHEDULE OF CURRENCY EXCHANGE RATES
For the Six Months Ended December 31,2025 | For the Six Months Ended December 31,2024 | As of June 30, 2025 | ||||||||||
| Year-end spot rate | $1=RMB | $1=RMB | $1=RMB | |||||||||
| Average rate | $1=RMB | $1=RMB | $1=RMB |
Comprehensive Loss
Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under GAAP are recorded as an element of shareholders’ equity but are excluded from net income. Other comprehensive income (loss) consists of a foreign currency translation adjustment resulting from the Company not using the U.S. dollar as its functional currency.
| F-12 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Related Party Transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related party transactions are measured at the amounts agreed upon by the parties.
Statement of Cash Flows
In accordance with ASC 230, “Statement of Cash Flows,” cash flows from the Company’s operations are formulated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.
In December 2023, the FASB issued ASU 2023-09, which is an update to Topic 740, Income Taxes. The amendments in this update related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The amendments allow investors to better assess, in their capital allocation decisions, how an entity’s worldwide operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows. The other amendments in this Update improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit) to be consistent with U.S. Securities and Exchange Commission (SEC) Regulation S-X 210.4-08(h), Rules of General Application—General Notes to Financial Statements: Income Tax Expense, and (2) removing disclosures that no longer are considered cost beneficial or relevant. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this Update should be applied on a prospective basis. Retrospective application is permitted. The Company is in the process of evaluating the impact of the new guidance on its consolidated financial statements.
In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. ASU 2025-03 clarifies the guidance to determine the accounting acquirer in a business combination that is effected primarily by exchanging equity interests, when the legal acquiree is a variable interest entity (“VIE”) that meets the definition of a business. ASU 2025-03 requires entities to consider the same factors in ASC 805, Business Combinations, required for determining which entity is the accounting acquirer in other acquisition transactions. ASU 2025-03 is effective for the Company’s annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-03 is required to be applied on a prospective basis to any acquisition transaction that occurs after the initial application date. The Company is currently evaluating the potential impact of adopting this guidance on its financial statements.
| F-13 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements (continued)
In May 2025, the FASB issued ASU 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). ASU 2025-04 revises the definition of the term performance condition for share-based consideration payable to a customer to incorporate conditions that are based on the volume or monetary amount of a customer’s purchases or potential purchases. ASU 2025-04 also eliminates the policy election to account for forfeitures as they occur for awards with service conditions. ASU 2025-04 also clarifies that ASC 606 variable consideration guidance does not apply to share-based payments to customers; instead, vesting probability should be assessed solely under ASC 718, Compensation—Stock Compensation. ASU 2025-04 is effective for the Company’s annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-04 may be applied on either a modified retrospective basis or on a retrospective basis. The Company is currently evaluating the potential impact of adopting this guidance on its financial statements.
In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025-05 amends ASC 326, Financial Instruments—Credit Losses, and introduces a practical expedient available for all entities and an accounting policy election available for all entities, other than public business entities, that elect the practical expedient. These changes apply to the estimation of expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue Recognition. Under the practical expedient, entities may assume that current conditions as of the balance sheet date remain unchanged for the remaining life of the asset when developing reasonable and supportable forecasts. This simplifies the estimation process for short-term financial assets. ASU 2025-05 is effective for the Company’s annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-05 should be applied on a prospective basis. The Company is currently evaluating the potential impact of adopting this guidance on its financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software to modernize the accounting for internal-use software costs, primarily by simplifying the requirements to capitalize software development costs. This update is effective beginning with the Group’s 2028 fiscal year annual reporting period, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities to establish authoritative guidance on the accounting for government grants received by business entities. This update is effective beginning with the Group’s 2029 fiscal year annual reporting period, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvement. ASU 2025-11 is intended to improve the navigability of required interim disclosures and clarify when that guidance is applicable, and also to provide additional guidance on what disclosures should be provided in interim reporting periods. ASU 2025-11 is effective for public business entities for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2025-11 on its financial statements and related disclosures.
| F-14 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements (continued)
In December 2025, the FASB issued ASU 2025-12, Codification Improvements. ASU 2025-12 makes thirty-three incremental improvements to generally accepted accounting principles. ASU 2025-12 is effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The Company is currently evaluating the impact of ASU 2025-12 on its financial statements and related disclosures.
Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the consolidated financial statements
NOTE 3 – INVENTORIES, NET
Inventories consisted of the following:
SCHEDULE OF INVENTORY
As of December 31, 2025 | As of June 30, 2025 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Inventory, gross | ||||||||
| Less: inventory allowance | ( | ) | ( | ) | ||||
| Inventory, net | $ | $ | ||||||
Inventory includes raw materials, work in progress, and finished goods. Finished goods include direct material costs, direct labor costs, and manufacturing overhead. For the six months ended December 31, 2025, the Company abandoned nearly all inventories in its United States warehouse in connection with the disposal of the warehouse at the end of fiscal year 2025.
Inventory allowance movement is as follows:
SCHEDULE OF INVENTORY ALLOWANCE
For the Six Months Ended December 31, 2025 | As of June 30, 2025 | |||||||
| Beginning balance | $ | $ | ||||||
| Provision | ||||||||
| Write-off | ( | ) | - | |||||
| Foreign currency translation adjustments | ||||||||
| Ending balance | $ | $ | ||||||
| F-15 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 4 –PREPAYMENTS AND OTHER CURRENT ASSETS
Prepayments and other current assets consisted of the following:
SCHEDULE OF PREPAYMENTS AND OTHER CURRENT ASSETS
As of December 31, 2025 | As of June 30, 2025 | |||||||
| Security deposits | $ | $ | ||||||
| Others | ||||||||
| Prepayments and other assets current portion | $ | $ | ||||||
NOTE 5 – LONG TERM INVESTMENT, NET
SCHEDULE OF LONG TERM INVESTMENT, NET
| Equity investment using the measurement alternative | ||||
| Balance as of June 30, 2024 | $ | |||
| Additions | ||||
| Foreign currency translation adjustments | ||||
| Balance as of Jun 30, 2025 | ||||
| Impairment | ( | ) | ||
| Foreign currency translation adjustments | ||||
| Balance as of December 31, 2025 | $ | |||
Equity investments using the measurement alternative include the following items:
| (1) | In
November 2018, the Company entered into an equity investment agreement to invest $ |
| (2) | In
November 2018, the Company entered into an equity investment agreement to invest $ |
| (3) | On
May 17, 2025, the Company entered into an equity investment to acquire a |
As of December 31, 2025, the Company believes there was no material market environment change or any other factor that indicating the fair value of above other investments was less than carrying value, hence, the Company concluded there is no impairment of the above other investments.
| F-16 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
NOTE 6 – BANK LOANS
Bank loans consisted of the following:
SCHEDULE OF BANK LOANS
As of December 31, 2025 | As of June 30, 2025 | |||||||
| Dongguan Rural Commercial Bank (1) | $ | $ | ||||||
| Total | ||||||||
| Less: short-term loans | ( | ) | ( | ) | ||||
| Less: current portion of long-term loans | ( | ) | ( | ) | ||||
| Long-term loans | $ | $ | ||||||
| (1) |
Interest
expenses for the above-mentioned loans amounted to $
.
The repayment schedule for the Company’s bank loans is as follows:
SCHEDULE OF REPAYMENTS OF BANK LOANS
| Twelve months ending December 31, | Repayment | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| Total | $ | |||
| F-17 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 7 – TAXES
(a) Corporate Income Taxes (“CIT”)
The following table reconciles the statutory rate to the Company’s effective tax:
SCHEDULE OF RECONCILIATION EFFECTIVE TAX
| 2025 | 2024 | |||||||
| For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Loss before income tax | $ | ( | ) | $ | ( | ) | ||
| Income tax benefit computed based on PRC statutory rate | ( | ) | ( | ) | ||||
| Effect of rate differential for Hong Kong and other outside PRC entities | ||||||||
| Effect of PRC preferential tax rate | ||||||||
| Change in valuation allowance | ||||||||
| Permanent difference | ||||||||
| Effective tax | $ | ( | ) | $ | ( | ) | ||
The provision for income tax consists of the following:
SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE (BENEFIT)
| 2025 | 2024 | |||||||
| For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Current income tax expense | $ | $ | ||||||
| Deferred income tax benefit | ( | ) | ( | ) | ||||
| Total income tax benefit | $ | ( | ) | $ | ( | ) | ||
The Company’s deferred tax assets consist of the following:
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
As of December 31, 2025 | As of June 30, 2025 | |||||||
| Deferred tax assets: | ||||||||
| Net operating losses | $ | $ | ||||||
| Assets impairment reserve | ||||||||
| Others | ( | ) | ( | ) | ||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
| F-18 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 7 – TAXES (continued)
(b) Taxes Payable
The Company’s taxes payable consist of the following:
SCHEDULE OF TAXES PAYABLE
As of December 31, 2025 | As of June 30, 2025 | |||||||
| Corporate income tax payable | $ | $ | ||||||
| Other tax payable | ||||||||
| Total taxes payable | $ | $ | ||||||
The Company may be subject to challenges from various PRC taxing authorities regarding the amounts of taxes due, although the Company’s management believes the Company has paid or accrued for all taxes owed by the Company. According to PRC taxation regulation and administrative practice and procedures, the statute of limitation on tax authority’s audit or examination of previously filed tax returns expires three years from the date they were filed. The Company also obtained a written statement from the local tax authority that no additional taxes are due as of June 30, 2025. The Company continues to discuss with the local tax authority to try to settle the remaining tax liabilities as soon as practicable, mostly related to its unpaid income tax and business tax.
Due to uncertainties associated with the status of examinations, including the protocols of finalizing audits by the relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with the interest and penalties on these unpaid tax balances. The final outcome of this tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws or expiration of status of limitation.
NOTE 8 – RELATED PARTY TRANSACTIONS
The relationship of related parties is summarized as follow:
SCHEDULE OF RELATIONSHIP OF RELATED PARTIES
| Name of Related Party | Relationship with the Company | |
| Silong Chen | ||
| Junqiang Chen | ||
| Linsun Smart Technology Co., Ltd (“Linsun”) | ||
| Dogness Network Technology Co., Ltd (“Dogness Network”) |
(1) Due from a related party
Amount due from a related party consist primarily of rental receivables from the following:
SCHEDULE OF DUE FROM RELATED PARTIES
As of December 31, 2025 | As of June 30, 2025 | |||||||
| Linsun | $ | $ | ||||||
| F-19 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 8 – RELATED PARTY TRANSACTIONS (continued)
(2) Due to a related party
Amount due to a related party consists of the following:
SCHEDULE OF DUE TO RELATED PARTIES
As of December 31, 2025 | As of June 30, 2025 | |||||||
| Mr. Silong Chen | $ | $ | ||||||
Mr. Silong Chen periodically provides working capital advances to support the Company’s operations as needed. These advances are non-interest bearing and repayable on demand.
(3) Loan guarantee provided by related parties
In connection with the Company’s bank loans, Mr. Silong Chen pledged his personal assets as collateral and signed guarantee agreements to provide a guarantee for the Company’s bank loans.
(4) Accounts receivable- related party
Accounts receivable- related party consisted of the following:
SCHEDULE OF ACCOUNTS RECEIVABLE FROM RELATED PARTIES
As of December 31, 2025 | As of June 30, 2025 | |||||||
| Dogness Network | $ | - | $ | |||||
On
January 30, 2026, Dogness Network entered into liquidation procedure due to continuous losses. Therefore, the Company accounts receivable
of $
(5) Account payable- related party
Account payable- related party consisted of the following:
SCHEDULE OF ACCOUNTS PAYABLE FROM RELATED PARTY
As of December 31, 2025 | As of June 30, 2025 | |||||||
| Linsun | $ | $ | ||||||
(6) Purchase from a related party
During
the six months ended December 31, 2025 and 2024, the Company purchased certain pet product components and parts, such as smart pet water
and food feeding devices, from Linsun. Total purchases from Linsun amounted to $
(7) Lease arrangement with a related party
On
January 2, 2020, Dongguan Jiasheng signed a lease agreement with Linsun, which enabled Linsun to lease part of Dongguan Jiasheng’s
new production facilities of approximately
| F-20 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 9 – EQUITY
Common Shares
Dogness
was established under the laws of BVI on July 11, 2016. The original authorized number of common shares was
On
October 22, 2022, Shareholders of the Company held a meeting and approved a change to the maximum number of shares that the Company is
authorized to issue from
On
November 6, 2023, the Company announced (i) a share consolidation of the Company’s issued and outstanding Class A common shares
at the ratio of one-for-twenty and (ii) an amendment of the Company’s Memorandum and Articles of Association to change its authorized
shares from
As
of December 31, 2025, the Company had an aggregate of
Common Shares Issued for Service
On
June 16, 2025, the Company signed a consulting agreement with a consultant for strategic business and marketing consulting services for
a period from July 2, 2025 to December 16, 2025 (the “Service period”). Pursuant to the agreement, the Company shall pay
On
January 26, 2023, the Board adopted resolutions to grant total
The
Company recorded $
| F-21 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 9 – EQUITY (continued)
Common Shares Issued for Long-term Investments in Equity Investees
On
May 17, 2025, in connection with acquisition of
Warrants
In
July 2021, the Company issued warrants in connection with an equity financing to purchase
In
connection with acquisition of
As
of December 31, 2025,
Options
On
January 26, 2023, the Board adopted resolutions to issue incentive stock options of total
The
aggregate fair value of the options granted to Mr. Silong Chen was $
The
Company recorded $nil
and $
| F-22 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 9 – EQUITY (continued)
Options (continued)
The following table summarized the Company’s share option activity:
SCHEDULE OF SHARE OPTION ACTIVITY
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Life in Years | ||||||||||
| Outstanding June 30, 2024 | $ | |||||||||||
| Exercisable, June 30, 2024 | $ | |||||||||||
| Granted | - | $ | - | - | ||||||||
| Exercised | - | $ | - | - | ||||||||
| Outstanding June 30, 2025 | $ | |||||||||||
| Exercisable, June 30, 2025 | $ | |||||||||||
| Granted | - | $ | - | - | ||||||||
| Exercised | - | $ | - | - | ||||||||
| Outstanding December 31, 2025 | $ | |||||||||||
| Exercisable, December 31, 2025 | $ | |||||||||||
Statutory Reserve
The
Company’s subsidiaries located in mainland China
are required to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus
reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC
GAAP”).
NOTE 10 – LOSS PER SHARE
For the six months ended December 31, 2025 and 2024, potential shares of common stock from the unexercised warrants and unexercised options are excluded from diluted net loss per share as such amounts are anti-dilutive.
The following table presents a reconciliation of basic and diluted net loss per share:
SCHEDULE OF EARNINGS PER SHARE, BASIC AND DILUTED
| 2025 | 2024 | |||||||
For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Loss attributable to the Company | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding – Basic | ||||||||
| Dilutive securities -unexercised warrants and options | - | - | ||||||
| Weighted average number of common shares outstanding – diluted | ||||||||
| Loss per share – Basic | $ | ( | ) | $ | ( | ) | ||
| Loss per share – Diluted | $ | ( | ) | $ | ( | ) | ||
| F-23 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 11 – SEGMENT
The
Company uses the “management approach” in determining its operating segments. The management approach considers the internal
organization and reporting used by the Group’s Chief Operating Decision Maker (“CODM”) for making strategic decisions,
assessing performance, and allocating resources. The Company’s CODM has been identified as the Chief Executive Officer of the Group.
The Company determined it operates as one consolidated segment and therefore has
Revenue by product category
The summary of total revenue by product category consisted of the following:
SCHEDULE OF REVENUES BY PRODUCT CATEGORIES
| 2025 | 2024 | |||||||
For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Product | ||||||||
| Traditional pet products | $ | $ | ||||||
| Intelligent pet products | ||||||||
| Climbing hooks and others | ||||||||
| Total | $ | $ | ||||||
Revenue by geographic location
Geographic information about the revenue, which are classified based on customers, is set out as follows:
SCHEDULE OF REVENUES BY GEOGRAPHIC INFORMATION
| 2025 | 2024 | |||||||
| For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Geographic location | ||||||||
| Sales to international markets | $ | $ | ||||||
| Sales to China domestic market | ||||||||
| Total | $ | $ | ||||||
| F-24 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 12 – CONCENTRATIONS AND CREDIT RISK
A majority of the Company’s expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to effect the remittance.
As
of December 31, 2025 and June 30, 2025, $
As
of December 31, 2025, three third-party customers accounted for
As
of December 31, 2025, a third-party supplier accounted for
For
the six months ended December 31, 2025 and 2024, export sales accounted for
For
the six months ended December 31, 2025, a third party supplier accounted for
NOTE 13– COMMITMENTS AND CONTINGENCIES
Contingencies
The Company may be involved in various legal proceedings, claims and other disputes arising from the commercial operations, projects, employees and other matters which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on the Company’s consolidated financial position or results of operations or liquidity
| F-25 |
DOGNESS (INTERNATIONAL) CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in USD)
(Unaudited)
NOTE 13– COMMITMENTS AND CONTINGENCIES (continued)
Capital Investment Obligation
Zhangzhou Meijia Metal Product Ltd.
Meijia
was incorporated under the laws of the People’s Republic of China with a total registered capital of RMB
Subsequently
to December 31, 2025, the Company further made additional capital contribution RMB
Capital Expenditure Commitment
Our
capital expenditures are incurred primarily in connection with the Company build new manufacturing and operating facilities, which include
warehouse, workshops, office building, security gate, employee apartment building, electrical transformer station and exhibition hall
in prior years, as well as leasehold improvements for executive accommodation facilities and research and development center infrastructure
in current period. The future minimum capital expenditure commitment on these projects was $
NOTE 14– SUBSEQUENT EVENTS
The Company has evaluated the impact of events that have occurred subsequent to December 31, 2025, through the issuance date of the unaudited consolidated financial statements and concluded that no subsequent events have occurred that would require recognition in the unaudited consolidated financial statements or disclosure in the notes to the unaudited consolidated financial statements.
| F-26 |
Exhibit 99.2
Operating and Financial Review and Prospects
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear in this report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in “Risk Factors.”
Overview of Company
Dogness (International) Corporation (“Dogness” or the “Company”), is a BVI business company limited by shares incorporated under the laws of the British Virgin Islands (“BVI”) on July 11, 2016. We are not a Chinese operating company but a British Virgin Islands holding company with operations conducted by our subsidiaries established in Delaware, mainland China, Hong Kong Special Administrative Region of the People’s Republic of China and British Virgin Islands. The Company, through its subsidiaries, is primarily engaged in the design, manufacturing and sales of various types of pet leashes, pet collars, pet harnesses, intelligent pet products and retractable leashes with products being sold all over the world mainly through distributions by large retailers.
Dongguan Jiasheng Enterprise Co., Ltd. (“Dongguan Jiasheng”) was incorporated in mainland China on May 15, 2009, and was established to develop and manufacture pet leash and related lanyard products. Dongguan Jiasheng is the main operating entity and is engaged in the research and development, manufacturing and distribution of various types of gift suspenders, pet belts ribbon, lace, elastic belt, computer jacquard ribbon and high-grade textile lace. Dogness (Hongkong) Pet’s Products Co., Limited (“HK Dogness”) and Jiasheng Enterprise (Hongkong) Co., Limited (“HK Jiasheng”) were incorporated in Hong Kong on March 10, 2009 and July 12, 2007, respectively, and were established to operate principally as trading companies.
A reorganization of the legal structure was completed on January 9, 2017. On January 9, 2017, the Controlling Shareholder transferred his 100% equity interests in HK Dogness and HK Jiasheng to the Company. After the reorganization, the Company ultimately owns 100% of the equity interests of the entities mentioned above. As of the date of this Report, the Controlling Shareholder owns a 63.01% equity interest of the Company.
Dogness Intelligent Technology (Dongguan) Co., Ltd. (“Dongguan Dogness”) was incorporated in China on October 26, 2016. Dongguan Dogness was established to operate principally as a holding company.
In January 2018, the Company formed a Delaware limited liability company, Dogness Group LLC, with its operation focusing primarily on promoting the Company’s pet products sales in the United States. In February 2018, Dogness Overseas Ltd, which is wholly owned by the Company, was established in the British Virgin Islands as a holding company. Dogness Overseas Ltd owns all of the interests in Dogness Group LLC.
On March 16, 2018, the Company entered into a share purchase agreement to acquire 100% of the equity interests in Zhangzhou Meijia Metal Product Co., Ltd (“Meijia”). After the acquisition, Meijia became the Company’s wholly-owned subsidiary. Meijia owns the land use right to a land parcel of 19,144.54 square meters and a factory and office buildings of an aggregate of 18,912.38 square meters. This acquisition enables the Company to build its own facility instead of leasing manufacturing facilities and expand its production capacity sustainably to meet increased customer demand.
Dogness Pet Culture (Dongguan) Co., Ltd. (“Dogness Culture”) was incorporated on December 14, 2018. On January 15, 2020, the Company’s subsidiary, Dongguan Dogness, entered into an agreement with the original shareholder of Dogness Culture, who is related to Mr. Silong Chen, our Chief Executive Officer, to acquire 51.2% ownership interest of Dogness Culture for a nominal fee. Dogness Culture was focusing on developing and expanding pet food market in China. As of the date of this filing, Dogness Culture is in the process of being liquidated.
Revenue by product category is summarized below:
For the Six Months Ended December 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Product | Revenue | % of total Revenue | Revenue | % of total Revenue | ||||||||||||
| Traditional pet products | $ | 5,343,190 | 69.3 | % | $ | 4,660,824 | 38.6 | % | ||||||||
| Intelligent pet products | 1,701,321 | 22.1 | % | 4,546,642 | 37.6 | % | ||||||||||
| Climbing hooks and others | 666,390 | 8.6 | % | 2,878,245 | 23.8 | % | ||||||||||
| Total | $ | 7,710,901 | 100.0 | % | $ | 12,085,711 | 100.0 | % | ||||||||
During the six months ended December 31, 2025, our products sold in 31 countries. Our major customers include Anyi trading, Mid Ocean Brands B.V., Velcro Europe S.A., Philips Domestic Appliances (China) Investment Co.,Ltd., Digital ID Limited, Costco, Trendspark, PetSmart, Petco, Pet Value, Walmart, Target, IKEA, SimplyShe, Pets at Home, PETZL, and Petmate. We also sold our products on popular online shopping sites, including Amazon, Chewy, JD, Tmall and Taobao, and on those live streaming sales platforms hosted by influencers.
Export sales accounted for 72.8% and 66.1% of the total sales for the six months ended December 31, 2025 and 2024, respectively, while China domestic sales accounted for 27.2% and 33.9% for the six months ended December 31, 2025 and 2024, respectively. The breakdown of the sales by geographic location is shown below:
For the Six Months Ended December 31, | For the Six Months Ended December 31, | |||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Geographic location | Revenue | % of total Revenue | Revenue | % of total Revenue | ||||||||||||
| Sales to international markets | $ | 5,611,162 | 72.8 | % | $ | 7,987,992 | 66.1 | % | ||||||||
| Sales in China domestic market | 2,099,739 | 27.2 | % | 4,097,719 | 33.9 | % | ||||||||||
| Total | $ | 7,710,901 | 100.0 | % | $ | 12,085,711 | 100.0 | % | ||||||||
For the six months ended December 31, 2025, two customers accounted for 27.3% and 14.2% of the Company’s total revenue, respectively. For the six months ended December 31, 2024, four customers accounted for 26.4%, 13.3%, 12.8% and 11.1% of the Company’s total revenue, respectively.
Market outlook
The company’s operations will continue to be negatively affected by the ongoing trade dispute between China and the United States, which may result in uncertainties in our export sales in the coming months.
To mitigate the impact of weak sales, we are focusing on developing new customers and markets, as well as developing a new generation of intelligent pet products. We have expanded our sales channels from traditional trading to online shopping channels, which allows us to gain direct access to more potential customers from domestic and international markets. This is particularly important to attract younger generations who are more interested in our smart pet products. At the same time, we are implementing cost-saving measures to improve production efficiency and profit margins.
Our Growth Strategy
We are committed to enhancing profitability and cash flows through the following strategies:
Develop innovative products and services. We focus on developing and strengthening our brand identity and emphasizing our unique offerings for customers and promoting our strong value proposition. Through extensive and on-going customer research, we are gaining valuable insights into the wants and needs of our customers and we are developing solutions and communication strategies to address them. We continually seek opportunities to strengthen our merchandising capabilities, which allow us to provide a differentiated product assortment, including our exclusive smart pet specialty products and our proprietary brand offerings, to deliver innovative solutions and value to our customers. We believe developing innovative products will further differentiate us from our competitors, allow us to forge a strong relationship with our customers, build loyalty, enhance our market position, increase transaction size and enhance operating margins.
Mergers and Acquisitions. When capital permits, we intend to capitalize on the challenges that smaller companies are encountering in our industry by acquiring complementary companies at favorable prices. We believe that acquiring rather than building capacity is an option that may be more beneficial to us if replacement costs are higher than purchase prices. We continue to look into acquiring smaller pet product manufacturers in China as part of our expansion plans. Some of the companies we may seek to acquire are suppliers of the raw materials or components we purchase to manufacture our products to further expand and integrate the industrial chain. If we do acquire such companies, we will have greater control over our manufacturing cost. Our expansion strategy includes increasing our share in existing pet specialty products markets, penetrating new markets and achieving operating efficiencies and economies of scale in merchandising, distribution, information systems, procurement, and marketing, while providing a return on investment to our stockholders.
Supply Chain Efficiencies and Scale. We intend to streamline our supply chain process and leverage our economies of scale. We seek suppliers that will strategically partner with us to create long-term shareholder value. We also aim to scale our supply chain to accommodate growth, cut costs and improve efficiency and drive continuous improvement, mitigate supply chain risks, and develop innovative approaches to product development.
From a long-term perspective, we believe the above-mentioned strategic initiatives will still help our future sales growth. Through continuous endeavor for product innovation, better management of our capital expenditure and leveraging costs, we expect that we could further improve our sales and product margins to produce profitability and return on investment for our shareholders in the near future.
Results of Operations
Comparison of Operation Results for the six months ended December 31, 2025 and 2024
The following table summarizes the results of our operations for the six months ended December 31, 2025 and 2024, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
For the Six Months Ended December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | Changes | ||||||||||||||||||||||
| Amount | % of total Revenue | Amount | % of total Revenue | Amount | % | |||||||||||||||||||
| Revenue | 7,710,901 | 100.0 | % | $ | 12,085,711 | 100.0 | % | (4,374,810 | ) | (36.2 | )% | |||||||||||||
| Cost of revenue | (6,843,935 | ) | (88.8 | )% | (8,668,552 | ) | (71.7 | )% | 1,824,617 | (21.0 | )% | |||||||||||||
| Gross profit | 866,966 | 11.2 | % | 3,417,159 | 28.3 | % | (2,550,193 | ) | (74.6 | )% | ||||||||||||||
| Operating expenses | ||||||||||||||||||||||||
| Selling expenses | 1,234,204 | 16.0 | % | 624,410 | 5.2 | % | 609,794 | 97.7 | % | |||||||||||||||
| General and administrative expenses | 3,437,429 | 44.6 | % | 4,312,486 | 35.7 | % | (875,057 | ) | (20.3 | )% | ||||||||||||||
| R&D expense | 533,477 | 6.9 | % | 665,494 | 5.5 | % | (132,017 | ) | (19.8 | )% | ||||||||||||||
| Impairment of investment in equity investees | 1,123,200 | 14.6 | % | - | - | % | 1,123,200 | - | % | |||||||||||||||
| Total operating expenses | 6,328,310 | 82.1 | % | 5,602,390 | 46.4 | % | 725,920 | 13.0 | % | |||||||||||||||
| Loss from operations | (5,461,344 | ) | (70.8 | )% | (2,185,231 | ) | (18.1 | )% | (3,276,113 | ) | 149.9 | % | ||||||||||||
| Other income (expenses) | ||||||||||||||||||||||||
| Interest income (expense), net | 83,438 | 1.1 | % | 6,884 | 0.1 | % | 76,554 | 1,112.1 | % | |||||||||||||||
| Foreign exchange gain | (151,611 | ) | (2.0 | )% | 114,443 | 0.9 | % | (266,054 | ) | (232.5 | )% | |||||||||||||
| Other (expense) income | (13,613 | ) | (0.2 | )% | 41,357 | 0.3 | % | (54,970 | ) | (132.9 | )% | |||||||||||||
| Rental income from related parties, net | 129,856 | 1.7 | % | 107,737 | 0.9 | % | 22,119 | 20.5 | % | |||||||||||||||
| Total other income | 48,070 | 0.6 | % | 270,421 | 2.2 | % | (222,351 | ) | (82.2 | )% | ||||||||||||||
| Loss before income tax | (5,413,274 | ) | (70.2 | )% | (1,914,810 | ) | (15.8 | )% | (3,498,464 | ) | 182.7 | % | ||||||||||||
| Income tax benefit | (238,272 | ) | (3.1 | )% | (98,967 | ) | (0.8 | )% | (139,305 | ) | 140.8 | % | ||||||||||||
| Net loss | (5,175,002 | ) | (67.1 | )% | $ | (1,815,843 | ) | (15.0 | )% | (3,359,159 | ) | 185.0 | % | |||||||||||
Revenue
Revenue
decreased by $4.4 million, or 36.2%, from $12.1 million for the six months ended December 31, 2024 to $7.7 million for the six months
ended December 31, 2025. The decrease in revenue was primarily attributable to the impact of
Revenue by Product Category
The breakdown of our revenue by product category is as follows:
For the Six Months Ended December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | Changes | ||||||||||||||||||||||
| Product | Amount | % of total Revenue | Amount | % of total Revenue | Amount | % | ||||||||||||||||||
| Traditional pet products | $ | 5,343,190 | 69.3 | % | $ | 4,660,824 | 38.6 | % | $ | 682,366 | 14.6 | % | ||||||||||||
| Intelligent pet products | 1,701,321 | 22.1 | % | 4,546,642 | 37.6 | % | (2,845,321 | ) | (62.6 | )% | ||||||||||||||
| Climbing hooks and others | 666,390 | 8.6 | % | 2,878,245 | 23.8 | % | (2,211,855 | ) | (76.8 | )% | ||||||||||||||
| Total | $ | 7,710,901 | 100.0 | % | $ | 12,085,711 | 100.0 | % | $ | (4,374,810 | ) | (36.2 | )% | |||||||||||
Total revenue for six months ended December 31, | Units sold for six months ended December 31, | Average selling price | Price | |||||||||||||||||||||||||||||||||
| Product | 2025 | 2024 | 2025 | 2024 | Variance in Units sold | % of units variance | 2025 | 2024 | Difference | |||||||||||||||||||||||||||
| Traditional pet products | $ | 5,343,190 | $ | 4,660,824 | 8,709,534 | 8,432,234 | 277,300 | 3.3 | % | $ | 0.6 | $ | 0.6 | $ | - | |||||||||||||||||||||
| Intelligent pet products | 1,701,321 | 4,546,642 | 133,200 | 271,665 | (138,465 | ) | (51.0 | )% | 12.8 | 16.7 | (3.9 | ) | ||||||||||||||||||||||||
| Climbing hooks and others | 666,390 | 2,878,245 | 332,348 | 1,305,341 | (972,993 | ) | (74.5 | )% | 2.0 | 2.2 | (0.2 | ) | ||||||||||||||||||||||||
| Total | $ | 7,710,901 | $ | 12,085,711 | 9,175,082 | 10,009,240 | (834,158 | ) | (8.3 | )% | $ | 0.8 | $ | 1.2 | $ | (0.4 | ) | |||||||||||||||||||
Traditional pet products
Revenue from traditional pet products increased by $0.7 million, or 14.6%, from $4.7 million for the six months ended December 31, 2024 to $5.3 million for the six months ended December 31, 2025. The increase was mainly driven by increased sales volume for the six months ended December 31, 2025, compared to the six months ended December 31, 2024. Among the total revenue increase, $0.5 million was from sales to customers in international markets, and $0.2 million was from sales to customers in China domestic market, primarily due to increased orders from our current customers.
Intelligent pet products
Revenue from intelligent pet products decreased by $2.8 million, or 62.6%, from $4.5 million for the six months ended December 31, 2024, to $1.7 million for the six months ended December 31, 2025. The decrease was mainly driven by a decrease in sales volume and average selling price for the six months ended December 31, 2025, compared to the six months ended December 31, 2024. Among the total revenue decrease, $1.4 million decrease was from sales to customers in international markets and $1.5 million was from sales to customers in China domestic market, primarily due to decreased orders from our current customers.
Climbing hooks and others
Revenue from climbing hooks and others decreased by $2.2 million, or 76.8%, from $2.9 million for the six months ended December 31, 2024, to $0.7 million for the six months ended December 31, 2025. The decrease was mainly driven by decreased sales volume and average selling price during the six months ended December 31, 2025, compared to the six months ended December 31, 2024. Among the total revenue decrease, $1.5 million decrease was from sales to customers in international markets and $0.7 million was from sales to customers in China domestic market, primarily due to the decreased orders from our current customers.
Revenue by geographic location
The breakdown of our revenue by geographic location is as follows:
For the Six Months Ended December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | Changes | ||||||||||||||||||||||
| Geographic location | Revenue | % of total Revenue | Revenue | % of total Revenue | Amount | % | ||||||||||||||||||
| Mainland China | $ | 2,099,739 | 27.2 | % | $ | 4,097,719 | 33.9 | % | (1,997,980 | ) | (48.8 | )% | ||||||||||||
| United States | 1,105,183 | 14.3 | % | 2,504,361 | 20.7 | % | (1,399,178 | ) | (55.9 | )% | ||||||||||||||
| Europe | 1,523,501 | 19.8 | % | 2,729,078 | 22.6 | % | (1,205,577 | ) | (44.2 | )% | ||||||||||||||
| Japan and other Asian countries and regions | 2,490,634 | 32.2 | % | 2,118,320 | 17.5 | % | 372,314 | 17.6 | % | |||||||||||||||
| Australia | 141,318 | 1.8 | % | 137,171 | 1.1 | % | 4,147 | 3.0 | % | |||||||||||||||
| Canada | 350,526 | % | 202,396 | 1.7 | % | 148,130 | 73.2 | % | ||||||||||||||||
| Central and south America | - | - | % | 296,666 | 2.5 | % | (296,666 | ) | (100.0 | )% | ||||||||||||||
| Total | $ | 7,710,901 | 100 | % | $ | 12,085,711 | 100.0 | % | (4,374,810 | ) | (36.2 | )% | ||||||||||||
International sales products category
The breakdown of sales by products category in international markets is as follows:
For the Six Months Ended December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | Changes | ||||||||||||||||||||||
| Product | Revenue | % of total international revenue | Revenue | % of total international revenue | Amount | % | ||||||||||||||||||
| Traditional pet products | $ | 4,382,120 | 78.1 | % | $ | 3,925,135 | 49.2 | % | $ | 456,985 | 11.6 | % | ||||||||||||
| Intelligent pet products | 1,096,063 | 19.5 | % | 2,461,420 | 30.8 | % | (1,365,357 | ) | (55.5 | )% | ||||||||||||||
| Climbing hooks and others | 132,979 | 2.4 | % | 1,601,437 | 20.0 | % | (1,468,458 | ) | (91.7 | )% | ||||||||||||||
| Total international sales | $ | 5,611,162 | 100.0 | % | $ | 7,987,992 | 100.0 | % | $ | (2,376,830 | ) | (29.8 | )% | |||||||||||
Our
total sales in international markets decreased by $2.4 million, or 29.8%, from $8.0 million for the year ended December 31, 2024 to $5.6
million for the six months ended December 31, 2025. The decrease in international markets sales driven by significant decrease in sales
orders, due to the impact of
Our international sales of intelligent pet products and climbing hooks and others decreased by 55.5% and 91.7%, respectively, while international sales of traditional pet products increased by 11.6%.
Domestic sales by products category
The breakdown of sales by products categories in China domestic market is as follows:
For the Six Months Ended December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | Changes | ||||||||||||||||||||||
| Products | Revenue | % of total China domestic revenue | Revenue | % of total China domestic revenue | Amount | % | ||||||||||||||||||
| Traditional pet products | $ | 961,070 | 45.8 | % | $ | 735,689 | 17.9 | % | 225,381 | 30.6 | % | |||||||||||||
| Intelligent pet products | 605,258 | 28.8 | % | 2,085,222 | 50.9 | % | (1,479,964 | ) | (71.0 | )% | ||||||||||||||
| Climbing hooks and others | 533,411 | 25.4 | % | 1,276,808 | 31.2 | % | (743,397 | ) | (58.2 | )% | ||||||||||||||
| Total domestic sales | $ | 2,099,739 | 100.0 | % | $ | 4,097,719 | 100.0 | % | (1,997,980 | ) | (48.8 | )% | ||||||||||||
Our domestic sales decreased by $2.0 million, or 48.8%, from $4.1 million for the six months ended December 31, 2024 to $2.1 million for the six months ended December 31, 2025. The decrease in our domestic market sales driven by significant decreased sales orders from our main customers, who are also affected by United States’s tariff policies, resulting in reduced demand for our products.
Our domestic sales of intelligent pet products and climbing hooks and others, decreased by 71.0% and 58.2%, respectively, while domestic sales of traditional pet products increased by 30.6%.
Cost of revenue
Our cost of revenue decreased by $1.8 million, or 21.0% from $8.7 million for the six months ended December 31, 2024 to $6.8 million for the six months ended December 31, 2025, due to a significant decrease in sales volume. As a percentage of revenue, the cost of goods sold increased by 17.1 percentage points to 88.8% for the six months ended December 31, 2025, compared to 71.7% for the six months ended December 31 2024.
Gross profit
Our gross profit decreased by $2.6 million, or 74.6%, from $3.4 million for the six months ended December 31, 2024 to $0.9 million for the six months ended December 31, 2025, primarily attributable to lower sales volume and reduced average selling price for intelligent pet products and climbing hooks and others products. Gross profit margin decreased to 11.2% for the six months ended December 31, 2025 from 28.3% for the six months ended December 31, 2024.
Gross profit by product category
The breakdown of gross profit by product categories is as follows:
For the Six Months Ended December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | Changes | ||||||||||||||||||||||
| Product | Amount | Gross profit % | Amount | Gross profit % | Amount | Gross profit pct | ||||||||||||||||||
| Traditional pet products | $ | 490,544 | 9.2 | % | $ | 631,352 | 13.5 | % | $ | (140,808 | ) | (4.3 | )pct. | |||||||||||
| Intelligent pet products | 161,344 | 9.5 | % | 1,449,164 | 31.9 | % | (1,287,820 | ) | (22.4 | )pct. | ||||||||||||||
| Climbing hooks and others | 215,078 | 32.3 | % | 1,336,643 | 46.4 | % | (1,121,565 | ) | (14.1 | )pct. | ||||||||||||||
| Total | $ | 866,966 | 11.2 | % | $ | 3,417,159 | 28.3 | % | $ | (2,550,193 | ) | (17.1 | )pct. | |||||||||||
Gross profit for traditional pet products decreased by $0.1 million from $0.6 million for the six months ended December 31, 2024 to $0.5 million for the six months ended December 31, 2025. Gross profit margin decreased from 13.5% for the six months ended December 31, 2024 to 9.2% for the six months ended December 31, 2025, primarily due to an increase of unit cost.
Gross profit for intelligent pet products decreased by $1.3 million from $1.4 million for the six months ended December 31, 2024 to $0.2 million for the six months ended December 31, 2025, mainly driven by a 51.0% decrease in sales volume. Gross profit margin decreased by 22.4 percentage points from 31.9% for the six months ended December 31, 2024 to 9.5% for the six months ended December 31, 2025, mainly driven by decrease in average selling price.
Gross profit for climbing hook and others decreased by $1.1 million from $1.3 million for the six months ended December 31, 2024 to $0.2 million for the six months ended December 31, 2025, mainly driven by a 74.5% decrease in sales volume. Gross margin for climbing hooks and others decreased by 14.1 percentage points from 46.4% for the six months ended December 31, 2024 to 32.3% for the six months ended December 31, 2025, mainly due to a decrease in average selling price.
Expenses
For the Six Months Ended December 31, |
||||||||||||||||||||||||
| 2025 | 2024 | Changes | ||||||||||||||||||||||
| Amount | % of total Expenses |
Amount | % of total Expenses |
Amount | % | |||||||||||||||||||
| Selling expenses | $ | 1,234,204 | 19.5 | % | $ | 624,410 | 11.1 | % | $ | 609,794 | 97.7 | % | ||||||||||||
| General and administrative expenses | 3,437,429 | 54.3 | % | 4,312,486 | 77.0 | % | (875,057) | (20.3) | % | |||||||||||||||
| Research and development expenses | 533,477 | 8.4 | % | 665,494 | 11.9 | % | (132,017) | (19.8) | % | |||||||||||||||
| Impairment of investment in equity investees | 1,123,200 | 17.8 | % | - | - | % | 1,123,200 | - | % | |||||||||||||||
| Total operating expenses | $ | 6,328,310 | 100.0 | % | $ | 5,602,390 | 100.0 | % | $ | 725,920 | 13.0 | % | ||||||||||||
Selling expenses. Selling expenses primarily include expenses incurred for participating in various trade shows to promote product sales, salary and sales commission expenses paid to the Company’s sales personnel, and shipping and delivery expenses. Selling expenses increased by $0.6 million, or 97.7% from $0.6 million for the six months ended December 31, 2024, to $1.2 million for the six months ended December 31, 2025. The increase was primarily attributable to the increase in entertainment fees and advertising fees for the six months ended December 31, 2025. As a percentage of sales, our selling expenses were 16.0% and 5.2% of our total revenue for the six months ended December 31, 2025, and 2024, respectively.
General and administrative expenses. Our general and administrative expenses include employee salaries, welfare and insurance expenses, depreciation and credit losses expenses, as well as consulting expenses. For the six months ended December 31, 2025, general and administrative expenses decreased by $0.9 million, or 20.3% from $4.3 million for the six months ended December 31, 2024 to $3.4 million for the six months ended December 31, 2025. The decrease was primarily due to the reduction in office renovation expenses, depreciation expenses and share-based compensation expenses. As a percentage of sales, our general and administrative expenses were 44.6% and 35.7% of our total revenue for the six months ended December 31, 2025 and 2024, respectively.
Research and development expenses. Our research and development expenses decreased by $0.1 million or 19.8%, from $0.7 million for the six months ended December 31, 2024, to $0.5 million for the six months ended December 31, 2025. As a percentage of sales, our research and development expenses were 6.9% and 5.5% of our total revenue for the six months ended December 31, 2025 and 2024, respectively. We expect research and development expenses to continue to increase as we expand our research and development activities to increase the use of environmentally-friendly materials and develop more new high-tech products to meet customer demands.
Impairment of investment in equity investees. We recorded a full impairment loss of $1,123,200 for the equity investment in Dogness Network Technology Co., Ltd (“Dogness Network”). On January 30, 2026, Dogness Network entered into liquidation procedure, due to continuous losses.
Other income, net. Other income primarily included interest income or expenses, foreign exchange gain or loss, rental income from related parties and other income or expenses. Other income decreased by $0.2 million, or 82.2%, from $0.3 million for the six months ended December 31, 2024 to $0.05 million for the six months ended December 31, 2025. The decrease was mainly attributable to increased foreign exchange loss for the six months ended December 31, 2025.
Income tax benefit. Income tax benefit increased by $0.1 million or 140.8%, from $0.1 million for the six months ended December 31, 2024 to $0.2 million for the six months ended December 31, 2025. The increase was mainly due to increased taxable loss.
Net loss. As a result of the foregoing, our net loss increased by $3.4 million or 185.0%, from $1.8 million for the six months ended December 31, 2024 to $5.2 million for the six months ended December 31, 2025.
Liquidity and Capital Resources
The following table sets forth summary of our cash flows for the years indicated:
For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash (used in) provided by operating activities | $ | (1,614,750 | ) | $ | 937,089 | |||
| Net cash used in investing activities | (4,386,993 | ) | (1,049,924 | ) | ||||
| Net cash used in financing activities | (381,615 | ) | (767,498 | ) | ||||
| Effect of exchange rate change on cash and cash equivalents | 185,352 | (18,339 | ) | |||||
| Net decrease in cash and cash equivalents | (6,198,006 | ) | (898,672 | ) | ||||
| Cash and cash equivalents, beginning of year | 12,831,485 | 6,956,434 | ||||||
| Cash and cash equivalents, end of period | $ | 6,633,479 | $ | 6,057,762 | ||||
Operating Activities
Net cash used in operating activities was $1.6 million for the six months ended December 31, 2025, including net loss of $5.2 million, adjusted for non-cash items for $3.7 million (including depreciation and amortization of $1.4 million, impairment of long term investment of $1.1 million, inventory reserve of $0.7 million and amortization of right of use lease assets of $0.5 million). Changes in working capital had an immaterial net impact, primarily consisting of an increase in inventories of $0.2 million and a decrease in accrued expenses and other liabilities of $0.1 million, offset by an increase in lease liabilities of $0.2 million.
Net cash provided by operating activities was $0.9 million for the six months ended December 31, 2024, including net loss of $1.8 million, adjusted for non-cash items for $2.2 million (including depreciation and amortization of $1.4 million and amortization of right of use lease assets of $0.6 million) and adjustments for changes in working capital of $0.5 million , primarily consisting of an increase in accounts payable (including related parties)of $1.0 million , an increase in lease liability of $0.2 million, offset by an increase in accounts receivable (including related parties) of $0.6 million.
Investing Activities
Net
cash used in investing activities was $4.4 million for the six months ended December 31, 2025, primarily due to the purchase of
Net cash used in investing activities was $1.1 million for the six months ended December 31, 2024, primarily due to the purchase of $1.1 million property, plant and equipment to improve our production capacity.
Financing Activities
Net cash used in financing activities was $0.4 million for the six months ended December 31, 2025, primarily consisting of net repayments of bank loan of $0.5 million, partially offset by proceeds from related party loans of $0.1 million.
Net cash used in financing activities was $0.8 million for the six months ended December 31, 2024, primarily consisting of net repayments of bank loan of $0.3 million and repayment of related party loans of $0.5 million.
Commitments and Contractual Obligations
The following table sets forth our contractual obligations and commercial commitments as of December 31, 2025:
| Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
| Operating lease commitment (1) | $ | 16,415,394 | $ | 1,124,537 | $ | 2,229,580 | $ | 2,446,559 | $ | 10,614,718 | ||||||||||
| 3,684,117 | 3,031,411 | 652,706 | - | - | ||||||||||||||||
| Capital injection obligation (3) | 425,110 | 425,110 | - | - | - | |||||||||||||||
| Capital expenditures on Dongguan Jiasheng (4) | 149,924 | 149,924 | - | - | - | |||||||||||||||
Capital expenditures on Dongguan Dogness (5) | 1,156,628 | 1,156,628 | - | - | - | |||||||||||||||
| Total | $ | 21,831,173 | $ | 5,887,610 | $ | 2,882,286 | $ | 2,446,559 | $ | 10,614,718 | ||||||||||
| (1) | The Company had various outstanding non-cancellable operating lease agreements. |
| (2) | As of December 31, 2025, the Company had a loan balance of $3.7 million (RMB25.8 million) borrowed from Dongguan Rural Commercial Bank. The loans have terms of eight years with a maturity date on July 16, 2028 with different effective interest rate. |
| (3) | The Company is obligated to make registered capital contributions to its subsidiary Zhangzhou Meijia Metal Product Ltd. (“Meijia”) to meet the requirement of State Administration for Industry and Commerce (“SAIC”) of China. As of December 31, 2025, future registered capital contribution commitments for Meijia was $0.4 million (RMB2.9million). Subsequently to December 31, 2025, the Company further made additional capital contribution $0.2 million (RMB1.3 million) in Meijia. As of the date of this report, pursuant to the articles of incorporation of Meijia, the Company is obligated to contribute the remaining $0.2 million (RMB1.7 million) capital investment into Meijia . |
| (4) | Dongguan Jiasheng had a construction project which expanded from the original plan of building a warehouse, to build new manufacturing and operating facilities, which include warehouse, workshops, office building, security gate, employee apartment building, electrical transformer station and exhibition hall. The total budget is approximately $37.7 million (RMB263.5 million). As of June 30, 2022, the Company had completed this project and transferred all of the related CIP to fixed assets. As of December 31, 2025, the Company has made total payments of $37.6 million (RMB262.5 million) in connection to this project, which resulted in future minimum capital expenditure payments of $0.1 million (RMB1.0 million), the Company plan to pay remaining payments in twelve months after December 31, 2025. |
(5) |
Dongguan Dogness had a leasehold improvement comprise (i) executive accommodation facilities and (ii) research and development center infrastructure. The total budget is approximately $6.2 million (RMB43.4 million). As of December 31, 2025, the Company has made total payments of $5.0 million (RMB35.3 million) in connection to this project, which resulted in future minimum capital expenditure payments of $1.2 million (RMB8.1 million), the Company plan to pay remaining payments in twelve months after December 31, 2025. |
Impact of Inflation
The Company’s business operations are affected by the inflation post pandemic. Inflation can have a significant impact on a company’s financial performance. Rising prices for raw materials, labor, and other costs can increase a company’s cost of goods sold, leading to lower gross margins and profitability. Additionally, inflation can increase the prices of products, which can lead to a decrease in demand for those products, ultimately affecting sales volume. Inflation can also impact a company’s expenses, such as salaries and benefits, rent, and utilities. As prices rise, these expenses can increase, leading to higher general and administrative expenses. Finally, inflation can impact a company’s debt service, as interest rates may rise, leading to higher borrowing costs.
Impact of Foreign Currency Fluctuations
Although all our raw material and production cost and expense were denominated in RMB, almost all our revenue were generated under agreements denominated in U.S. dollars. Export sales represent 72.8% and 66.1% of our revenue for the six months ended December 31, 2025 and 2024, respectively. Moreover, for the next few years we expect that the majority of our revenue from international sales will continue to be denominated in U.S. dollars. Having the substantial portion of our revenue contracts denominated in U.S. dollars while having most of our raw material and production costs and expenses denominated in RMB exposes us to risk, associated with exchange rate fluctuations vis-à-vis the U.S. dollar.
Foreign currency translation adjustments amounted to a gain of $2.3 million and a loss of $0.3 million for the six months ended December 31, 2025 and 2024, respectively. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the unaudited condensed consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the unaudited condensed consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income (loss) included in unaudited condensed consolidated statements of changes in equity. Gains and losses from foreign currency transactions are included in the unaudited condensed consolidated statement of comprehensive loss. The following table outlines the currency exchange rates that were used in creating the unaudited condensed consolidated financial statements:
For the Six Months Ended December 31, 2025 |
For the Six Months Ended December 31, 2024 |
As of June 30, 2025 |
||||||||
| Period-end spot rate | $ | 1=RMB 6.9931 | $ | $1=RMB7.2993 | $ | 1=RMB7.1636 | ||||
| Average rate | $ | 1=RMB 7.1235 | $ | $1=RMB7.1767 | $ | 1=RMB7.2143 |
We will continue to monitor exposure to currency fluctuations. We have not engaged in any currency hedging activities in order to reduce our exposure to currency fluctuations.
Off-balance Sheet Commitments and Arrangements
There were no off-balance sheet arrangements for the six months ended December 31, 2025 and 2024 that have or that in the opinion of management are likely to have, a current or future material effect on our financial condition or results of operations.
Critical Accounting Policies
We prepare our unaudited financial statements in conformity with accounting principles generally accepted by the United States of America (“U.S. GAAP”), which requires us to make judgments, estimates and assumptions that affect our reported amount of assets, liabilities, revenue, costs and expenses, and any related disclosures. Although there were no material changes made to the accounting estimates and assumptions in the past three years, we continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.
We believe that the following accounting policies involve a higher degree of judgment and complexity in their application and require us to make significant accounting estimates. Accordingly, these are the policies we believe are the most critical to understanding and evaluating our unaudited condensed consolidated financial condition and results of operations.
Use of Estimates
In preparing the unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates are based on information as of the date of the unaudited condensed consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivable, inventories, advances to suppliers, useful lives of property, plant, right-of-use assets (including lease liabilities) and equipment, intangible assets, the recoverability of long-lived assets, provision necessary for contingent liabilities, and realization of deferred tax assets. Actual results could differ from those estimates.
Revenue recognition
The Company follows ASC 606 Revenue from Contract with Customers (“ASC606”) in revenue recognition. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.
To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.
Revenue is recognized when obligations under the terms of a contract with the Company’s customers are satisfied. Satisfaction of contract terms occur with the transfer of title of the Company’s products to the customers. Net sale is measured as the amount of consideration the Company expects to receive in exchange for transferring the goods to the wholesaler and retailers.
The amount of consideration the Company expects to receive consists of the sales price adjusted for any incentives if applicable. Such incentives do not represent a standalone value and are accounted for as a reduction of revenue in accordance with ASC 606. For the six months ended December 31, 2025 and 2024, the Company did not provide any sales incentives to its customers.
Incidental promotional items that are immaterial in the context of the contract are recognized as expense. Fees charged to customers for shipping and handling are included in net sales and the related costs incurred by the Company are included in cost of goods sold. In applying judgment, the Company considered customer expectations of performance, materiality and the core principles of ASC Topic 606. The Company’s performance obligations are generally transferred to the customer at a point in time. The Company’s contracts with customers generally do not include any variable consideration.
The Company’s revenue is primarily generated from the sales of pet products, including leashes, accessories, collars, harnesses and intelligent pet products, to wholesalers and retailers. Revenue is reported net of all value added taxes (“VAT”). The Company does not routinely permit customers to return products and historically, customer returns have been immaterial.
The Company also generates revenue by providing ribbon dyeing service and pet grooming services to customers. The Company utilizes its manufacturing capability and color dyeing technology to provide dyeing solutions to customers and apply dyes or pigments on ribbons made of textile materials such as fibers, yarns and fabrics to achieve customer desired color fastness and quality. The Company recognizes revenue at the point when dyeing solutions and related services are rendered, products after dyeing are delivered and accepted by the customers. The revenue from pet grooming services is recognized when the services are rendered.
Contract Assets and Liabilities
Payment terms are established on the Company’s pre-established credit requirements based upon an evaluation of customers’ credit quality. Contact assets are recognized for in related accounts receivable. Contract liabilities are recognized for contracts where payment has been received in advance of delivery. The contract liability balance can vary significantly depending on the timing of when an order is placed and when shipment or delivery occurs.
As of December 31, 2025 and June 30, 2025, other than accounts receivable and advances from customers, the Company had no other material contract assets, contract liabilities or deferred contract costs recorded on its unaudited condensed consolidated balance sheet. Costs of fulfilling customers’ purchase orders, such as shipping, handling and delivery, which occur prior to the transfer of control, are recognized in selling, general and administrative expense when incurred.
Disaggregation of Revenue
The Company disaggregates its revenue from contracts by product and service types and geographic areas, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenue for the six months ended December 31, 2025 and 2024 are disclosed in notes of the unaudited condensed consolidated financial statements.
Accounts Receivable, net
Accounts receivable are presented net of allowance for credit losses. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires the Company to measure and recognize expected credit losses for financial assets held and not accounted for at fair value through net income. The Company adopted this guidance effective January 1, 2023. The Company establishes a provision for doubtful receivables based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the unaudited condensed consolidated statements of income and comprehensive income.
Inventories, net
Inventories are stated at net realizable value using the weighted average method. Costs include the cost of raw materials, freight, direct labor and related production overhead. Any excess of the cost over the net realizable value of each item of inventories is recognized as a provision for diminution in the value of inventories.
Net realizable value is the estimated selling price in the normal course of business less any costs to complete and sell products. The Company evaluates inventories on a quarterly basis for its net realizable value adjustments, and reduces the carrying value of those inventories that are obsolete or in excess of the forecasted usage to their estimated net realizable value based on various factors including aging and future demand of each type of inventories.
Leases
The Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are included in the line items right-of-use asset, lease liabilities, current, and lease liabilities, long-term in the unaudited condensed consolidated balance sheet.
Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the unaudited condensed consolidated balance sheet and are expensed on a straight-line basis over the lease term in the unaudited condensed consolidated statement of operations and comprehensive loss. The Company determines the lease term by agreement with lessor. As the Company’s lease does not provide implicit interest rate, the Company uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.
Income Tax
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Income taxes are accounted for using the asset and liability approach. Under this approach, income tax expense is recognized for the amount of taxes payable or refundable for the current year. Deferred income taxes assets and liabilities are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the unaudited condensed consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. As of December 31, 2025, the years from fiscal 2023 to fiscal 2025 for the Company’s PRC subsidiaries remain open for statutory examination by PRC Tax authorities. For the Company’s Hong Kong subsidiaries, and U.S subsidiary, all tax years remain open for statutory examination by relevant tax authorities.
Recently Issued Accounting Pronouncements
A list of recent relevant accounting pronouncements is included in Note 2 “Summary of Principal Accounting Policies” of our unaudited condensed consolidated financial statements.
Exhibit 99.3
Dogness Reports Financial Results for the Six Months Ended December 31, 2025
DONGGUAN, China and PLANO, Texas, April 1, 2026 /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, 2025.
Mr. Silong Chen, Chief Executive Officer of the Company, commented: “The first half of fiscal 2026 presented challenges as U.S. tariff policies temporarily impacted our overall revenue and margins. Despite these headwinds, our core traditional pet products category demonstrated strong resilience, growing 14.6% year-over-year driven by increased global demand and loyal customer orders.”
“To mitigate external pressures, we took proactive steps to optimize operations, successfully reduced our general and administrative expenses by over 20%. At the same time, we strategically invested in targeted marketing to expand our brand footprint and capture future market share.”
“Looking ahead, our outlook remains highly optimistic. We are accelerating our R&D initiatives to introduce a new generation of intelligent, eco-friendly pet products that meet evolving consumer demands. Backed by a robust portfolio of over 200 patents and a fully integrated supply chain, Dogness is well-positioned to navigate these temporary trade fluctuations, return to sustainable growth, and deliver long-term shareholder value.”
Financial Results for the Half Year Ended December 31, 2025
Revenue decreased by approximately $4.4 million, or 36.2%, from about $12.1 million for the six months ended December 31, 2024 to approximately $7.7 million for the six months ended December 31, 2025. The decrease in revenue was primarily attributable to the impact of United State’s tariff policies.
The following table breaks down Dogness’ revenue by product and service type for the six months ended December 31, 2025 and 2024:
| For the six months ended December 31, | ||||||||||||
| 2025 | 2024 | |||||||||||
| Products and services category | Revenue | Revenue | Variance % | |||||||||
| Products | ||||||||||||
| Traditional pet products | $ | 5,343,190 | $ | 4,660,824 | 14.6 | % | ||||||
| Intelligent pet | 1,701,321 | 4,546,642 | (62.6 | )% | ||||||||
| Climbing hooks and others | 666,390 | 2,878,245 | (76.8 | )% | ||||||||
| Total revenue from products | 7,710,901 | 12,085,711 | (36.2 | )% | ||||||||
— Traditional pet products
Revenue from traditional pet products increased by approximately $0.7 million, or 14.6%, from approximately $4.7 million for the six months ended December 31, 2024 to approximately $5.3 million for the six months ended December 31, 2025. The increase was mainly driven by increased sales volume for the six months ended December 31, 2025. Among the total revenue increase, $0.5 million was from sales to customers in international markets, and $0.2 million was from sales to customers in China domestic market, primarily due to increased orders from our current customers.
— Intelligent pet products
Revenue from intelligent pet products decreased by approximately $2.8 million, or 62.6%, from around $4.5 million for the six months ended December 31, 2024, to roughly $1.7 million for the same period in 2025. The decrease was mainly driven by a decrease in sales volume and average selling price for the six months ended December 31, 2025, compared to the six months ended December 31, 2024. Among the total revenue decrease, $1.4 million decrease was from sales to customers in international markets and $1.5 million was from sales to customers in China domestic market, primarily due to decreased orders from our current customers.
— Climbing hooks and others
Revenue from climbing hooks and other products decreased by about $2.2 million, or 76.8%, from roughly $2.9 million for the six months ended December 31, 2024, to about $0.7 million for the same period in 2025. The decrease was mainly driven by decreased sales volume and average selling price during the six months ended December 31, 2025, compared to the six months ended December 31, 2024. Among the total revenue decrease, $1.5 million decrease was from sales to customers in international markets and $0.7 million was from sales to customers in China domestic market, primarily due to the decreased orders from our current customers.
— International vs. Domestic sales
Total international sales decreased by about $2.4 million, or 29.8%, from approximately $8.0 million for the six months ended December 31, 2024, to about $5.6 million during the same period in 2025, driven by significant decrease in sales orders, due to the impact of United States’s tariff policies.
Domestic sales decreased by approximately $2.0 million, or 48.8%, from about $4.1 million for the six months ended December 31, 2024 to about $2.1 million for the six months ended December 31, 2025. The decrease in our domestic market sales was driven by significant decreased sales orders from our main customers, who are also affected by United States’s tariff policies, resulting in reduced demand for our products.
Cost of revenues decreased by $1.8 million, or 21.0%, from approximately $8.7 million for the six months ended December 31, 2024, to approximately $6.8 million for the six months ended December 31, 2025, due to a significant decrease in sales volume. As a percentage of revenues, the cost of goods sold increased by 17.1 percentage points to 88.8% for the six months ended December 31, 2025, compared to 71.7% for the six months ended December 31, 2024.
Gross profit decreased by approximately $2.6 million, or 74.6%, from about $3.4 million for the six months ended December 31, 2024 to about $0.9 million for the six months ended December 31, 2025, primarily attributable to lower sales volume and reduced average selling price for intelligent pet products and climbing hooks and others products. Gross profit margin decreased to 11.2% for the six months ended December 31, 2025 from 28.3% for the six months ended December 31, 2024.
Total operating expenses increased by approximately $0.7 million or 13.0%, to about $6.3 million for the six months ended December 31, 2025, compared to around $5.6 million for the same period in 2024.
— Selling expenses
Selling expenses increased by about $0.6 million, or 97.7%, from approximately $0.6 million for the six months ended December 31, 2024, to approximately $1.2 million for the six months ended December 31, 2025. The increase was primarily attributable to the increase in entertainment fees and advertising fees for the six months ended December 31, 2025. Selling expenses were 16.0% and 5.2% of total revenue for the six months ended December 31, 2025, and 2024, respectively.
— General and Administrative Expenses
General and administrative expenses decreased by approximately $0.9 million, or 20.3%, from about $4.3 million for the six months ended December 31, 2024, to roughly $3.4 million for the same period in 2025. The decrease was primarily due to the reduction in office renovation expenses, depreciation expenses and share-based compensation expenses. As a percentage of sales, general and administrative expenses were 44.6% and 35.7% of total revenue for the six months ended December 31, 2025 and 2024, respectively.
— Research and Development Expenses
Research and development expenses decreased by $0.1 million, or 19.8%, from approximately $0.7 million for the six months ended December 31, 2024, to about $0.5 million for the same period in 2025. As a percentage of sales, research and development expenses were 6.9% and 5.5% of total revenue for the six months ended December 31, 2025 and 2024, respectively. The Company expects these expenses to continue to increase as it expands research and development activities to increase the use of environmentally-friendly materials and develop more new high-tech products to meet customer demands.
Net loss increased by approximately $3.4 million, or 185.0%, from about $1.8 million for the six months ended December 31, 2024, to approximately $5.2 million for the six months ended December 31, 2025.
About Dogness
Dogness (International) Corporation was founded in 2003 from the belief that pet dogs and cats are important, well-loved family members. Through its smart products, hygiene products, health and wellness products, and leash products, Dogness is able to simplify pet lifestyles, make them more scientific, and enhance 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 the impact of U.S. tariffs policy on our exports to the United States and related effects on our price competitiveness and overall profitability, 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 more information please contact:
WFS Investor Relations Inc
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 December 31, 2025 | As of June 30, 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 6,633,479 | $ | 12,831,485 | ||||
| Accounts receivable-third-party, net | 1,379,534 | 1,302,189 | ||||||
| Accounts receivable-related party | - | 12,135 | ||||||
| Inventories, net | 2,293,311 | 2,719,790 | ||||||
| Due from a related party | 126,300 | 108,387 | ||||||
| Prepayments and other current assets | 3,030,798 | 3,497,688 | ||||||
| Total current assets | 13,463,422 | 20,471,674 | ||||||
| NON-CURRENT ASSETS | ||||||||
| Property, plant and equipment, net | 63,373,780 | 58,259,795 | ||||||
| Intangible assets, net | 1,761,959 | 1,748,755 | ||||||
| Long-term investments in equity investees | 20,015,853 | 20,656,752 | ||||||
| Operating lease right-of-use lease assets | 12,989,658 | 13,166,788 | ||||||
| Deferred tax assets | 2,846,502 | 2,542,822 | ||||||
| Total non-current assets | 100,987,752 | 96,374,912 | ||||||
| TOTAL ASSETS | $ | 114,451,174 | $ | 116,846,586 | ||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Short-term bank loans | $ | 715,000 | $ | 698,000 | ||||
| Current portion of long-term bank loans | 2,316,411 | 1,324,854 | ||||||
| Accounts payable | 1,616,434 | 1,593,590 | ||||||
| Accounts payable - related party | 51,294 | 22,663 | ||||||
| Due to a related party | 117,202 | 32,171 | ||||||
| Contract liabilities | 264,183 | 187,846 | ||||||
| Taxes payable | 568,702 | 566,682 | ||||||
| Operating lease liabilities, current | 663,364 | 197,130 | ||||||
| Accrued expenses and other current liabilities | 1,369,078 | 1,482,981 | ||||||
| Total current liabilities | 7,681,668 | 6,105,917 | ||||||
| NON-CURRENT LIABILITIES | ||||||||
| Long-term bank loans | 652,706 | 2,035,353 | ||||||
| Operating lease liabilities, non-current | 10,975,856 | 10,952,491 | ||||||
| Total non-current liabilities | 11,628,562 | 12,987,844 | ||||||
| TOTAL LIABILITIES | 19,310,230 | 19,093,761 | ||||||
Commitments and Contingencies (Note 13) | ||||||||
| EQUITY | ||||||||
| Class A Common shares, no par value, unlimited shares authorized; 5,441,658 and 5,161,658 issued and outstanding as of December 31, 2025 and June 30, 2025, respectively | 117,636,230 | 117,349,730 | ||||||
| Class B Common shares, no par value, unlimited shares authorized; 9,069,000 issued and outstanding as of December 31, 2025 and June 30, 2025 | 18,138 | 18,138 | ||||||
| Statutory reserve | 291,443 | 291,443 | ||||||
| Accumulated deficit | (15,667,948 | ) | (10,492,946 | ) | ||||
| Accumulated other comprehensive loss | (7,136,963 | ) | (9,413,583 | ) | ||||
| Equity attributable to owners of the Company | 95,140,900 | 97,752,782 | ||||||
| Non-controlling interest | 44 | 43 | ||||||
| Total equity | 95,140,944 | 97,752,825 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 114,451,174 | $ | 116,846,586 | ||||
DOGNESS (INTERNATIONAL) CORPORATION
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(All amounts in USD)
(Unaudited)
For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | 7,710,901 | $ | 12,085,711 | ||||
| Cost of revenue | 6,843,935 | 8,668,552 | ||||||
| Gross Profit | 866,966 | 3,417,159 | ||||||
| Operating expenses: | ||||||||
| Selling expenses | 1,234,204 | 624,410 | ||||||
| General and administrative expenses | 3,437,429 | 4,312,486 | ||||||
| Research and development expenses | 533,477 | 665,494 | ||||||
| Impairment of investment in equity investee | 1,123,200 | - | ||||||
| Total operating expenses | 6,328,310 | 5,602,390 | ||||||
| Loss from operations | (5,461,344 | ) | (2,185,231 | ) | ||||
| Other income (expense): | ||||||||
| Interest income, net | 83,438 | 6,884 | ||||||
| Foreign exchange transaction (loss) gain | (151,611 | ) | 114,443 | |||||
| Other (expenses) income, net | (13,613 | ) | 41,357 | |||||
| Rental income from related parties, net | 129,856 | 107,737 | ||||||
| Total other income, net | 48,070 | 270,421 | ||||||
| Loss before income tax | (5,413,274 | ) | (1,914,810 | ) | ||||
| Income tax benefit | (238,272 | ) | (98,967 | ) | ||||
| Net loss | (5,175,002 | ) | (1,815,843 | ) | ||||
| Less: net income attributable to non-controlling interest | - | - | ||||||
| Net loss attributable to Dogness (International) Corporation | (5,175,002 | ) | (1,815,843 | ) | ||||
| Other comprehensive loss | ||||||||
| Foreign currency translation adjustments | 2,276,621 | (300,478 | ) | |||||
| Comprehensive loss | (2,898,381 | ) | (2,116,321 | ) | ||||
| Less: comprehensive income attributable to non-controlling interest | 1 | - | ||||||
| Comprehensive loss attributable to Dogness (International) Corporation | $ | (2,898,382 | ) | $ | (2,116,321 | ) | ||
| Loss per share | ||||||||
| Basic and diluted | $ | (0.29 | ) | $ | (0.14 | ) | ||
| Weighted Average Shares Outstanding | ||||||||
| Basic and diluted | 17,807,886 | 12,755,658 | ||||||
DOGNESS (INTERNATIONAL) CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in USD)
(Unaudited)
For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (5,175,002 | ) | $ | (1,815,843 | ) | ||
| Adjustments to reconcile loss income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation and amortization | 1,360,710 | 1,395,756 | ||||||
| Share-based compensation | 286,500 | 399,470 | ||||||
| Change in inventory reserve | 688,689 | - | ||||||
| Loss from disposal of property, plant and equipment | - | 176,347 | ||||||
| Reversal of allowance for credit losses | (31,553 | ) | (232,600 | ) | ||||
| Impairment of long-term investment | 1,123,200 | - | ||||||
| Deferred tax benefit | (238,652 | ) | (108,490 | ) | ||||
| Amortization of right-of-use lease assets | 488,760 | 585,466 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable-third parties | (3,983 | ) | (824,001 | ) | ||||
| Accounts receivable-related party | 2,910 | 272,429 | ||||||
| Inventories | (208,212 | ) | (121,257 | ) | ||||
| Due from a related party | (14,995 | ) | (4,959 | ) | ||||
| Prepayments and other current assets | (30,691 | ) | (61,720 | ) | ||||
| Advances to supplier-related party | - | 51,537 | ||||||
| Accounts payable | (15,678 | ) | 999,703 | |||||
| Accounts payable-related party | 27,568 | 13,130 | ||||||
| Accrued expenses and other current liabilities | (147,295 | ) | 24,691 | |||||
| Contract liabilities | 70,460 | (39,639 | ) | |||||
| Operating lease liabilities | 214,082 | 200,827 | ||||||
| Taxes payable | (11,568 | ) | 26,242 | |||||
| Net cash (used in) provided by operating activities | (1,614,750 | ) | 937,089 | |||||
| Cash flows from investing activities: | ||||||||
| Purchase of property, plant and equipment | (4,386,993 | ) | (1,050,711 | ) | ||||
| Proceeds from disposition of property, plant and equipment | - | 787 | ||||||
| Net cash used in investing activities | (4,386,993 | ) | (1,049,924 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from short-term bank loans | 702,000 | 696,500 | ||||||
| Repayment of short-term bank loans | (702,000 | ) | (696,500 | ) | ||||
| Repayment of long-term bank loans | (464,331 | ) | (316,297 | ) | ||||
| Proceeds from (repayment of) related party loans | 82,716 | (451,201 | ) | |||||
| Net cash used in financing activities | (381,615 | ) | (767,498 | ) | ||||
| Effect of exchange rate changes on cash and restricted cash | 185,352 | (18,339 | ) | |||||
| Net decrease in cash and cash equivalents | (6,198,006 | ) | (898,672 | ) | ||||
| Cash and cash equivalents, beginning of period | 12,831,485 | 6,956,434 | ||||||
| Cash and cash equivalents, end of period | $ | 6,633,479 | $ | 6,057,762 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | 71,272 | $ | 115,430 | ||||
| Non-Cash Investing Activities | ||||||||
| Liabilities incurred for purchase of property and equipment | $ | - | $ | 34,909 | ||||