November 30, 2023

Business International

Business International For Your Health

2023-02-02 | NDAQ:ZKIN | Press Release

WENZHOU, China, Feb. 1, 2023 /PRNewswire/ — ZK International Group Co., Ltd. (ZKIN) (“ZK International” or the “Company”), a designer, engineer, manufacturer, and supplier of patented high-performance stainless steel and carbon steel pipe products primarily used for water and gas supplies, today announced its audited financial results for the fiscal year ended September 30, 2022.

(PRNewsfoto/ZK International Group Co., Ltd.)

Financial Highlights for the Fiscal Year 2022

For the Fiscal Year Ended

September 30,

($ millions, except per share data)

2022

2021

% Change

Revenue

$

102.39

$

99.41

3.00

%

Gross profit

$

7.60

$

6.47

17.38

%

Gross margin

7.42

%

6.51

%

0.91

percentage

points

Loss from operations

$

(3.96)

$

(3.65)

8.51

%

Operating loss margin

(3.87)

%

(3.68)

%

-0.19

percentage

points

Net loss attributable to ZK

International

$

(6.08)

$

(3.80)

60.06

%

Diluted loss per share

$

(0.21)

$

(0.17)

23.53

%

Net book value per share

$

2.80

$

3.08

-9.09

%

  • Revenues increased by $2,984,419 or 3.00%, to $102,391,636 for the year ended September 30, 2022 from $99,407,217 for the year ended September 30, 2021. The growth was primarily driven by the increased weighted average selling price (“ASP”) during the fiscal year 2022. We observed the rise of raw material prices, recovery of market demand for construction materials and the shortages of supply in the current market. Overall, we had 34.26% increase of ASP in steel strip, 29.00% increase in steel pipe, and 33.71% increase in pipe fittings during 2022 fiscal year.
  • Gross profit increased by 17.38% to $7.60 million. Gross margin was 7.42%, compared to 6.5% for the prior fiscal year. The increase of gross profit was primarily due to increased weighted average selling prices.
  • During the fiscal year 2022, our Chinese subsidiaries returned to profitability with net income after tax of $2.71 million.
  • Loss from operations was $3.96 million, compared to loss from operations of $3.65 million for the prior fiscal year. The decrease of operational loss was mainly due to the one-off asset impairment cost of intangible asset and stock-based compensation incurred during 2022 fiscal year for the expenses related to our new business operations and subsidiaries.
  • Net loss attributable to ZK International was $6.08 million, or net loss of $0.21 per share. This compared to net loss attributable to ZK International of $3.80 million, or $0.17 per share, for the prior fiscal year.
  • Net book value per share was $2.80 as of September 30, 2022, compared to $3.08 as of September 30, 2021.

Mr. Jiancong Huang, Chairman of ZK International, commented, “We are pleased with our record revenue growth to break the $100 million mark while having an increased gross margin. Our financial results in 2022 were largely driven by the market recovery from the pandemic and worldwide construction material supply shortage. The Chinese government also continues to focus on improving water and gas infrastructure. Our ability to work closely with the local government and provide sophisticated piping solutions for major projects is key to our growth trajectory. We anticipate that our business will continue to grow and expand both domestically and internationally into the next fiscal year.”

Mr. Huang continued, “Building on the foundation of our core steel pipe business domestically, we are excited to provide additional value to our shareholders with plans to grow our core steel pipe business internationally. Being one of the leaders in our industry has brought many other international opportunities for gas and water infrastructure needs, so it will be our goal in 2023 to seek out these international opportunities while building our sales and profitability domestically. We are confident that ZK is going to continue to provide its existing and future shareholders with a value propisition for a long time to come.”

Financial Results for the Fiscal Year 2022

Revenues

Revenues increased by $2,984,419 or 3.00%, to $102,391,636 for the year ended September 30, 2022 from $99,407,217 for the year ended September 30, 2021. The increase in revenues was primarily driven by the following factors:

1) During the fiscal year 2022, we observed an increase of raw materials, especially the price of nikel which is an important component of stainless steel. To minimize the impact the rise of raw material price, we increased our weighted average selling price (“ASP”) during the fiscal year 2022.

2) During 2022 fiscal year, the average selling price of electrolytic nickel decreased by 0.33% from RMB 114,092 per ton in fiscal year 2021 to RMB 113,716 in fiscal year 2022; the average selling price of steel strip increased by 34.26% from RMB 15.12 per kilogram in fiscal year 2021 to RMB 20.3 in fiscal year 2022; the average selling price of steel pipe increased by 29.00% from RMB 108.73 per piece in fiscal year 2021 to RMB 140.26 in fiscal year 2022; the average selling price of pipe fittings increased by 33.71% from RMB 16.94 each in fiscal year 2021 to RMB 22.65 in fiscal year 2022.

3) Due to the rise of product prices, we had an overall decrease in sales volume. The sales volume of steel strip decreased by 62.98% from 2227.19 tons in fiscal year 2021 to 753.91 tons in fiscal year 2022; Sales of pipes decreased by 25.28% from 793,480 in fiscal year 2021 to 592,919 in fiscal year 2022; The sales volume of pipe fittings decreased by 22.16% from 9,126,002 pieces in fiscal year 2021 to 7,103,894 pieces in fiscal year 2022.

Gross Profit

Our gross profit increased by $1,124,411 or 17.38% to $7,595,599 for the year ended September 30, 2022 from $6,471,188 for the year ended September 30, 2021. Gross profit margin was 7.42% for the year ended September 30, 2022, as compared to 6.51% for the year ended September 30, 2021. The increase of gross profit was primarily due to increased weighted average selling prices which is attributable to the rise of raw material prices and market demand recovery over the construction materials and supply shortages on the current market compared to the fiscal year 2021.

Operating Expenses

We incurred $2,380,429 in selling and marketing expenses for the fiscal year ended September 30, 2022, compared to $3,117,906 for the fiscal year ended September 30, 2021. Selling and marketing expenses decreased by $737,477, or 23.65%, during the fiscal year ended September 30, 2022 compared to the fiscal year ended September 30, 2021. This decrease is primarily due to decreases in sales payroll expenses, compensation for the sales personnel, freight expenses, and technical service fee during the year.

We incurred $5,421,575 in general and administrative expenses for the fiscal year ended September 30, 2022, compared to $5,772,710 for the fiscal year ended September 30, 2021. General and administrative expenses decreased by $351,136, or 6.08%, for the fiscal year ended September 30, 2022 compared to the fiscal year ended September 30, 2021. The slight decrease is mainly attributable to the decreased stock-based compensation incurred during the fiscal year 2022.

During the fiscal year ended September 30, 2021, the Company entered into a series of consulting agreements with third-party entity and individuals to develop and implement a defi exchange platform, which is a stablecoin DEX (decentralized exchange) and liquidity mining platform, available at https://xsigma.fi. During 2022 fiscal year, the Company evalutated the recoverability of the Defi platform pursuant to ASC 360-10-35-21 and concluded that the carrying value of the Defi Exchange may not be recoverable as it projects that the platform is likely to have continuing losses and it’s more likely than not this platform will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company wrote off the carrying value of the platform and recorded a loss of $2,771,019. There was no asset impairment cost during the fiscal year ended September 30, 2021

We incurred $987,186 in research and development expenses for the fiscal year ended September 30, 2022, compared to $1,234,161 for the fiscal year ended September 30, 2021. R&D expenses decreased by $246,975, or 20.01%, for the fiscal year ended September 30, 2022 compared to the fiscal year ended September 30, 2021. The decrease was primarily due to the decreased research and development activities during fiscal year 2022.

Income(loss) from Operations

As a result of the factors described above, operating loss was $3,964,610 for the fiscal year ended September 30, 2022, compared to operating loss of $3,653,589 for the fiscal year ended September 30, 2021, an increase of operating loss of $311,021 or approximately 8.51%.

Other Income (Expenses)

Our interest income and expenses were $109,290 and $3,451,665, respectively, for the fiscal year ended September 30, 2022, compared to interest income and expenses of $13,733 and $1,196,648, respectively, for the fiscal year ended September 30, 2021. We also had government grant of $ 496,740 for financial support to the Company under local government’s innovation incentive programs which was recorded as other income in our Statement of Operations.

Net Income (loss) and earnings (loss) per share

As a result of the factors described above, our net loss for the fiscal year ended September 30, 2022 was $6,054,266 compared to net loss of $3,802,271 for the fiscal year ended September 30, 2021, an increase in loss of $2,251,995 or approximately 59.23%.

After deducting for non-controlling interests, net loss attributable to ZK International was $6.08 million, or net loss of $0.21 per share, for the fiscal year 2022. This compared to net loss attributable to ZK International of $3.80 million, or $0.17 per share, for the prior fiscal year.

About ZK International Group Co., Ltd.

ZK International Group Co., Ltd. is a China-based designer, engineer, manufacturer, and supplier of patented high-performance stainless steel and carbon steel pipe products that require sophisticated water or gas pipeline systems. The Company owns 33 patents, 21 trademarks, 2 Technical Achievement Awards, and 10 National and Industry Standard Awards. ZK International is Quality Management System Certified (ISO9001), Environmental Management System Certified (ISO1401), and a National Industrial Stainless Steel Production Licensee that is focused on supplying steel piping for the multi-billion dollar industries of Gas and Water sectors. ZK has supplied stainless steel pipelines for over 2,000 projects, including the Beijing National Airport, the “Water Cube”, and “Bird’s Nest”, which were venues for the 2008 Beijing Olympics.

Emphasizing superior properties and durability of its steel piping, ZK International is providing a solution for the delivery of high quality, highly sustainable, environmentally sound drinkable water not only to the China market but also to international markets such as Europe, East Asia, and Southeast Asia.

For more information please visit www.ZKInternationalGroup.com. Additionally, please follow the Company on Twitter, Facebook, YouTube, and Weibo. For further information on the Company’s SEC filings please visit www.sec.gov.

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are not guarantee of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict and many of which are beyond the control of ZK International. Actual results may differ from those projected in the forward-looking statements due to risks and uncertainties, as well as other risk factors that are included in the Company’s filings with the U.S. Securities and Exchange Commission. Although ZK International believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking statements will be realized. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by ZK International or any other person that their objectives or plans will be achieved. ZK International does not undertake any obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

ZK INTERNATIONAL GROUP CO., LTD

CONSOLIDATED BALANCE SHEETS

(IN U.S. DOLLARS)

As of September 30,

2022

2021

Assets

Current assets

Cash and cash equivalents

$

7,515,147

$

13,525,298

Restricted cash

101,992

77,906

Short-term Investment

915,616

2,560,760

Accounts receivable, net of allowance for doubtful accounts of $255,322 and $2,221,870,

respectively

28,362,933

27,124,959

Notes receivable

49,611

Other receivables and prepayments

2,360,539

2,158,120

Inventories

21,141,501

20,689,252

Advance to suppliers

6,322,592

12,567,368

Total current assets

66,769,931

78,703,663

Property, plant and equipment, net

7,124,587

8,004,855

Right-of use asset

30,998

54,166

Intangible assets, net

11,415,451

8,749,987

Deferred tax assets

320,164

353,460

Long-term deposit

12,472,847

Long-term prepayment

10,447,395

Long-term accounts receivable

7,522,188

Long-term investment

25,292,866

25,323,323

TOTAL ASSETS

$

128,923,580

$

133,662,301

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

10,066,758

$

2,159,731

Accrued expenses and other current liabilities

6,949,772

6,875,769

Lease liability – current portion

10,754

26,332

Accrued payroll and welfare

1,880,377

1,853,019

Advance from customers

1,758,800

5,666,214

Due to related parties

2,052,403

1,072,335

Convertible debentures

3,352,311

2,823,364

Short-term bank borrowings

16,257,820

21,394,761

Other borrowing – short term portion

283,758

Notes payables

702,889

Income tax payable

817,059

2,354,832

Total current liabilities

43,848,943

44,510,115

Lease liability – long term portion

10,256

27,834

TOTAL LIABILITIES

$

43,859,199

$

44,537,949

Equity

Common stock, no par value, 50,000,000 shares authorized, 30,392,940 and 28,918,177 shares

issued and outstanding, respectively

Additional paid-in capital

70,872,765

63,374,085

Statutory surplus reserve

3,176,556

2,914,602

Subscription receivable

(125,000)

(125,000)

Retained earnings

13,394,137

19,737,504

Accumulated other comprehensive income (loss)

(2,640,753)

2,898,594

Total equity attributable to ZK International Group Co., Ltd.

84,677,705

88,799,785

Equity attributable to non-controlling interests

386,676

324,567

Total equity

85,064,381

89,124,352

TOTAL LIABILITIES AND EQUITY

$

128,923,580

$

133,662,301

The accompanying notes are an integral part of these consolidated financial statements.

ZK INTERNATIONAL GROUP CO., LTD

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(IN U.S. DOLLARS, EXCEPT SHARE DATA)

For the year ended September 30,

2022

2021

2020

Revenues

$

102,391,636

$

99,407,217

$

86,846,791

Cost of sales

(94,796,037)

(92,936,029)

(82,903,989)

Gross profit

7,595,599

6,471,188

3,942,802

Operating expenses:

Selling and marketing expenses

2,380,429

3,117,906

2,215,651

General and administrative expenses

5,421,575

5,772,710

2,482,972

Asset impairment costs

2,771,019

Research and development costs

987,186

1,234,161

1,123,555

Total operating expenses

11,560,209

10,124,777

5,822,178

Operating loss

(3,964,610)

(3,653,589)

(1,879,376)

Other income (expenses):

Interest expenses

(3,451,665)

(1,196,648)

(1,000,554)

Interest income

109,290

13,733

7,192

Gain on disposal of subsidiary, net

536,612

Income (loss) on investment

50,649

(256,937)

Other income (expense), net

(88,125)

431,438

327,845

Total other expenses, net

(3,430,500)

(700,828)

(385,842)

Loss before income taxes

(7,395,110)

(4,354,417)

(2,265,218)

Income tax recovery

1,340,844

552,146

1,428,202

Net loss

$

(6,054,266)

$

(3,802,271)

$

(837,016)

Net (loss) income attributable to non-

controlling interests

(27,147)

2,757

11,402

Net (loss) income attributable to ZK

International Group Co., Ltd.

(6,081,413)

(3,799,514)

$

(825,614)

Net (loss) income

(6,054,266)

$

(3,802,271)

$

(837,016)

Other comprehensive income (loss):

Foreign currency translation adjustment

(5,504,385)

2,423,439

2,319,048

Total comprehensive loss

$

(11,558,651)

$

(1,378,832)

$

1,482,032

Comprehensive loss (income) attributable to non-

controlling interests

(62,109)

(14,773)

(6,136)

Comprehensive income attributable to ZK

International Group Co., Ltd.

$

(11,620,760)

$

(1,393,605)

$

1,475,896

Basic and diluted earnings (loss) per share

Basic

$

(0.21)

$

(0.17)

$

(0.05)

Diluted

(0.21)

(0.17)

(0.05)

Weighted average number of shares

outstanding

Basic

29,305,828

21,873,594

16,558,037

Diluted

29,431,781

22,633,819

16,558,037

The accompanying notes are an integral part of these consolidated financial statements.

ZK INTERNATIONAL GROUP CO., LTD

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED SEPTEMBER 30, 2022, 2021 AND 2020

(IN U.S. DOLLARS, EXCEPT SHARE DATA)

Accumulated

Additional

other

Non-

paid-in

Subscription

Statutory

Retained

comprehensive

controlling

Total

Shares

capital

Receivable

surplus reserve

earnings

income (loss)

interests

equity

Balance at

September 30,

2019

16,558,037

18,049,630

2,904,699

24,372,535

(1,808,825)

299,666

43,817,705

Disposal of

subsidiary

3,992

3,992

Foreign currency

translation loss

2,301,510

17,538

2,319,048

Net income

(825,614)

(11,402)

(837,016)

Balance at

September 30,

2020

16,558,037

18,049,630

2,904,699

23,546,921

492,685

309,794

45,303,729

Issuance of

common

stock, net of

offering costs

7,080,762

24,884,560

(125,000)

24,759,560

Common stock

issued in

connection

with

conversion of

convertible

notes

4,374,176

11,443,067

11,443,067

Issuance of

common stock

related to

exercise of

warrants

355,202

1,345,056

1,345,056

Stock-based

compensation

550,000

9,542,783

9,542,783

Unearned

Compensation

(1,891,011)

(1,891,011)

Foreign currency

translations

2,405,909

17,530

2,423,439

Net income

9,903

(3,809,417)

(2,757)

(3,802,271)

Balance at

September 30,

2021

28,918,177

63,374,085

(125,000)

2,914,602

19,737,504

2,898,594

324,567

89,124,352

Stock incentive

issuance

1,407,200

1,688,640

1,688,640

Stock issued in

connection

with

conversion of

convertible

notes

67,563

116,781

116,781

Fair value

change due to

convertible

notes

extension

678,782

678,782

Stock-based

compensation

5,603,615

5,603,615

Unearned

Compensation

(589,138)

(589,138)

Foreign currency translations

(5,539,347)

34,962

(5,504,385)

Net income

261,954

(6,343,367)

27,147

(6,054,266)

Balance at

September 30,

2022

30,392,940

70,872,765

(125,000)

3,176,556

13,394,137

(2,640,753)

386,676

85,064,381

The accompanying notes are an integral part of these consolidated financial statements.

ZK INTERNATIONAL GROUP CO., LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN U.S. DOLLARS)

For the year ended September 30,

2022

2021

2020

Cash Flows from Operating Activities:

Net loss

$

(6,054,266)

$

(3,802,271)

$

(837,016)

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation expense

672,368

568,038

438,467

Amortization expense

830,481

481,763

11,366

Right of use assets

(53,634)

Loss on disposal of fixed assets

7,608

Bad debt expense

227,837

92,032

Inventory provision

103,942

Write-off of advance to suppliers

108,395

100,684

Deferred tax benefits

406,064

(406,637)

Gain on accounts receivable factoring, net of discount

(451,047)

Gain on disposal of subsidiary

(536,612)

Loss on investment

214,114

Impairment on intangible assets

2,771,019

Change in unrecognized tax benefits

(1,428,458)

(918,038)

(1,021,565)

Stock compensation expense

2,674,807

1,351,082

Interest expense of convertible notes

1,324,510

210,173

Interest expense of financing lease

44,458

Changes in operating assets and liabilities:

Accounts receivable

(12,059,620)

5,804,654

(4,800,889)

Other receivables and prepayments

(260,755)

1,345,520

(793,936)

Notes receivable

(53,853)

201,187

206,465

Inventories

(2,606,504)

2,021,789

103,123

Advance to suppliers

5,493,624

(8,297,301)

2,933,852

Accounts payable

8,803,924

(8,662,576)

5,582,787

Notes payable

762,986

(159,823)

(153,824)

Accrued expenses and other current liabilities

752,241

2,428,410

(484,477)

Accrued payroll and welfare

219,178

211,632

140,497

Advance from customers

(3,662,097)

3,162,961

(198,358)

Income tax payable

(77,214)

(149,386)

Lease liability

(28,595)

53,635

Net cash provided (used in) operating activities

(2,072,220)

(3,479,064)

460,205

Cash Flows from Investing Activities:

Purchases of property, plant and equipment

(507,663)

(114,319)

(1,168,322)

Proceed from disposal of property, plant and equipment

6,281

Purchase of CIP

(12,666)

(47,942)

Disposal of intangible asset

Purchases of intangible assets

(1,588,107)

(1,983,812)

Investment into CG Malta

(25,000,000)

Net cash used in investing activities

(2,108,436)

(27,146,073)

(1,162,041)

Cash Flows from Financing activities:

Net proceeds released from (placed into) short-term investment

1,523,953

(2,228,301)

Proceeds from short-term bank borrowings

31,113,044

31,203,129

18,061,979

Repayments of short-term bank borrowings

(34,501,465)

(28,144,978)

(17,836,445)

Net proceeds received from (repaid to) related parties

1,173,516

(280,313)

(133,007)

Proceed from other borrowing

775,951

Repayment of other borrowing

(279,004)

(483,458)

(107,195)

Proceeds from stock issuances

24,758,458

Proceeds from convertible notes issuances

14,071,908

Proceeds from stock warrants exercise

1,345,056

Net cash provided by (used in) financing activities

(969,956)

40,241,501

761,283

Effect of exchange rate changes on cash

(835,453)

227,305

248,950

Net change in cash, cash equivalents and restricted cash

(5,986,065)

9,843,669

308,397

Cash and cash equivalents and restricted cash at the beginning of period

13,603,204

3,759,535

3,451,138

Cash, cash equivalents and restricted cash at the end of period

$

7,617,139

$

13,603,204

$

3,759,535

Supplemental disclosures of cash flows information:

Non-cash financing activities

$

$

$

Cash paid for income taxes

$

87,473

$

37,041

$

149,291

Cash paid for interest expenses

$

976,091

$

338,575

$

991,319

The accompanying notes are an integral part of these consolidated financial statements.

For Media Enquiries:

Di Chen

Email: [email protected]

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/zk-international-group-co-ltd-announces-record-revenues-of-102-39-million-and-saw-gross-profit-increase-by-17-38-to-7-60-million-for-the-fiscal-year-2022–301737348.html

SOURCE ZK International Group Co., Ltd.

link