WENZHOU, China, Aug. 26, 2021
/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
unaudited financial results for the six months ended March 31, 2021.
Financial Highlights for the First Half of Fiscal Year
2021
- Revenue increased 4.98% to a record $42.17 million due to increased domestic orders
that drove increased sales volume.
- Gross profit increased by 46.83% to $4.71 million. Gross margin was 11.16%, compared
to 7.98% for the same period of the prior fiscal period. The
increase of gross profit was primarily due to increased weighted
average selling prices of our water and gas piping products as the
result of domestic demand recovery of construction materials and
piping infrastructure.
- Loss from operations was $1.65
million, compared to income from operations of $0.34 million for the same period of the prior
fiscal year. Operating margin was -3.91%, compared to 0.8% for the
same period of the prior fiscal year. The decrease of operating
margin was primarily due to one-off developing and marketing
expenses incurred for the xSigma trading platform and other newly
added business operations.
- Net loss attributable to ZK International was $0.58 million, or $0.03 per share. This compared to net income
attributable to ZK International of $0.09
million, or $0.01 per share,
for the same period of the prior fiscal year.
- Net book value increased to $3.11
per share as of March 31, 2021,
compared to $2.66 as of September 30, 2020.
|
|
For the Six Months
Ended March 31,
|
($ millions,
except per share data)
|
|
2021
|
|
2020
|
|
%
Change
|
Revenue
|
|
$42.17
|
|
$40.17
|
|
4.98%
|
Gross
profit
|
|
$4.71
|
|
$3.21
|
|
46.83%
|
Gross
margin
|
|
11.16%
|
|
7.98%
|
|
3.18% pp*
|
Income (loss) from
operations
|
|
$(1.65)
|
|
$0.34
|
|
-582.45%
|
Operating
margin
|
|
-3.91%
|
|
0.85%
|
|
-4.76% pp*
|
Net income (loss)
attributable to ZK
International
|
|
$(0.58)
|
|
$0.09
|
|
-763.28%
|
Diluted earnings per
share
|
|
$(0.03)
|
|
$0.01
|
|
-367.92%
|
Net book value per
share
|
|
$3.11
|
|
$2.66
|
|
16.96%
|
* pp: percentage
point(s)
|
|
|
|
|
|
|
Mr. Jiancong Huang, Chairman and
Chief Executive Officer of ZK International, commented, "As a Company we continue to grow
as we have hit record sales of $42
million for the first half of fiscal year of 2021. With our
core business returning to profitability, in what is a competitive
landscape, we continue to be a market leader of our proprietary
stainless steel and carbon steel pipe products. Our growth is not
limited to the Chinese market as we aim to expand our line of
products into other European countries, Canada and the
United States. In addition to the existing business,
leadership at the Company decided to be innovative, and have formed
several subsidiaries to develop, market, and execute on a number of
initiatives which include raising capital to develop a DeFi
Exchange and launch our own tokens, develop a cryptocurrency
trading platform and the development of our own NFT Marketplace
which will be launched in the Fall of 2021. We expect our core
business to grow with a focus of returning to profitability while
we establish venture vehicles through operations of our
subsidiaries."
Financial Results for the First Half of Fiscal Year
2020
Revenue
Revenue increased by $1,999,238 or
4.98%, to $ 42,168,823 for the six
months ended March 31, 2021 from
$40,169,585 for the six months ended
March 31, 2020. The increase in
revenues was primarily driven by our increased sales of stainless
steel coil and strip as compared to our stainless steel piping and
fitting products. During six months ended March 31, 2021, the sales of stainless steel coil
and strip accounts for approximately 53.85% of our total revenue,
as compared to 50.84%of our total revenue during six months ended
March 31, 2020.
Gross Profit
Our gross profit increased by $1,501,481, or 46.83%, to $4,707,758 for the six months ended March 31, 2021 from $3,206,277 for the six months ended March 31, 2020. Gross profit margin was 11.16%
for the six months ended March 31,
2021, as compared to 7.98%% for the six months ended
March 31, 2020. The increase of gross
profit was primarily due to increased weighted average selling
prices of our water and gas piping products as the result of
domestic demand recovery of construction materials and piping
infrastructure. The gross profit of stainless steel coil products
is approximately 0.21% due to the decrease of average selling price
of stainless steel coil products, while our water and gas piping
products generally have gross margin of 23.75% during six months
ended March 31, 2021.
Selling and Marketing Expenses
We incurred $2,769,264 in selling
and marketing expenses for the six months ended March 31, 2021, compared to $961,513 for the six months ended March 31, 2020. Selling and marketing expenses
increased by $1,807,751, or 188.01%,
during the six months ended March 31,
2021 compared to the six months ended March 31, 2020. This increase is primarily due to
stock-based marketing expenses we paid to third party for the
marketing and promoting services provided to xSigma Corporation, a
subsidiary of the Company. On February 15,
2021, ZK entered into a Consultancy Agreement (the
"Agreement") with Dentoro Alliance LP, a company incorporated in
the Republic of Ireland (the
"Consultant"). Pursuant to the Agreement, the Consultant agreed to
provide marketing services for the business development of xSigma
Corporation, including website development, social media and
community management, content creation and public relations
management. In exchange for the Consultant's services, the Company
agreed to pay the Consultant 250,000 ordinary shares of the
Company. The shares are valued at $3.58/share.
General and Administrative expenses
We incurred $1,166,210 in general
and administrative expenses for the six months ended March 31, 2021, compared to $1,272,675 for the six months ended March 31, 2020. General and administrative
expenses decreased by $106,465, or
8.37%, for the six months ended March 31,
2021 compared to the same period in 2020. The slight
decrease is primarily due to decrease in travelling expenses and
administrative staff salary.
Research and Development Expenses
We incurred $2,419,355 in research
and development expenses for the six months ended March 31,
2021, compared to $630,692 for the
six months ended March 31, 2020. R&D expenses increase by
$1,788,663, or 283.60%, for the six
months ended March 31, 2021 compared to the same period in
2020. The significant increase was primarily due to the expenses we
paid to our various subsidiaries to to develop a DeFi exchange, a
cryptocurrency trading platform, and an NFT platform.
Income (loss) from Operations
Loss from operations was $1.65
million for the first half of fiscal year 2021, compared to
$0.34 million for the same period of
the prior fiscal year. As a result, operating margin was -3.91% for
the first half of fiscal year 2021, compared to 0.85% for the same
period of the prior fiscal year. The decreases in operating income
and operating margin were primarily related to our expanded
operations, increase of research and development expenses and
consulting share issuances.
Other Income (Expenses)
Interest expenses were $0.53
million for the first half of fiscal year 2021, compared to
$0.42 million for the same period of
the prior fiscal year. Other income was $0.33 million for the first half of fiscal year
2021, compared to $0.17 million for
the same period of the prior fiscal year. As a result, total net
other expenses were $0.19 million for
the first half of fiscal year 2020, compared to $0.25 million for the same period of the prior
fiscal year.
Net Income (loss) and earnings per share
As a result of the factors described above, net loss
was $1.92 million for the first half of fiscal year 2021,
compared to net income of $0.09
million for the same period of the prior fiscal year. Net
margin was -4.55% for the first half of fiscal year 2021, compared
to 0.2% for the same period of the prior fiscal year.
After deducting for non-controlling interests, net loss
attributable to ZK International was $0.58
million, or $0.03 per share,
for the first half of fiscal year 2021. This compared to net income
attributable to ZK International of $0.09
million, or $0.01 per share,
for the same period of the prior fiscal year.
Financial Condition
As of March 31, 2021, cash and
cash equivalents and short-term investments totaled $23.79 million, compared to $3.76 million as of September 30, 2020. Short-term bank borrowings
were $18.35 million as of
March 31, 2021, compared to
$17.37 million as of September 30, 2020.
Accounts receivable was $25.77
million as of March 31, 2021,
compared to $31.39 million as of
September 30, 2020. Inventories were
$22.04 million as of March 31, 2021, compared to $21.68 million as of September 30, 2020. Accounts payable was
$6.54 million as of March 31, 2021, compared to $10.35 million as of September 30, 2020.
Total current assets and current liabilities were $89.01 million and $37.26
million, respectively, leading to a current ratio of 2.39 as
of March 31, 2021. This compared to
total current assets and current liabilities were $64.78 million and $40.88 million, respectively, and current
ratio of 1.58 as of September 30,
2020.
Net cash used in operating activities was $4.23 million for the six months ended
March 31, 2021, compared to net cash
provided by operating activities of $1.07
million for the same period of the prior fiscal year. Net
cash provided by investing activities was $0.06 million for the six months ended
March 31, 2021, compared to net cash
used in investing activities of $0.57
million for the same period of the prior fiscal year. Net
cash provided by financing activities was $23.82 million for the six months ended
March 31, 2021, compared to net cash
used in financing activities of $2.61
million for the same period of 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. and Subsidiaries
|
Consolidated
Statements of Income and Comprehensive Income (Loss)
|
For the Six Months
Ended March 31, 2021 and 2020 (Unaudited)
|
(IN U.S. DOLLARS,
EXCEPT SHARE DATA)
|
|
|
|
For the Six Months
Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Revenues
|
|
|
42,168,823
|
|
|
$
|
40,169,585
|
|
Cost of
sales
|
|
|
37,461,065
|
|
|
|
36,963,308
|
|
Gross
profit
|
|
|
4,707,758
|
|
|
|
3,206,277
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
|
2,769,264
|
|
|
|
961,513
|
|
General and
administrative expenses
|
|
|
1,166,210
|
|
|
|
1,272,675
|
|
Research and
development costs
|
|
|
2,419,355
|
|
|
|
630,692
|
|
Total operating
expenses
|
|
|
6,354,829
|
|
|
|
2,864,880
|
|
|
|
|
|
|
|
|
|
|
Operating Income
(loss)
|
|
|
(1,647,071)
|
|
|
|
341,397
|
|
|
|
|
|
|
|
|
|
|
Other income
(expenses):
|
|
|
|
|
|
|
|
|
Interest
expenses
|
|
|
(528,598)
|
|
|
|
(424,463)
|
|
Interest
income
|
|
|
9,543
|
|
|
|
3,003
|
|
Other income
(expenses), net
|
|
|
325,539
|
|
|
|
170,391
|
|
Total other income
(expenses), net
|
|
|
(193,516)
|
|
|
|
(251,069
|
|
|
|
|
|
|
|
|
|
|
Income (Loss)
before income taxes
|
|
|
(1,840,587)
|
|
|
|
90,328
|
|
|
|
|
|
|
|
|
|
|
Income tax
provision
|
|
|
(76,306)
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
|
(1,916,893)
|
|
|
$
|
90,328
|
|
Net income (loss)
attributable to non-controlling interests
|
|
|
(1,334,346)
|
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to ZK International Group Co., Ltd.
|
|
|
(582,547)
|
|
|
$
|
87,828
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
|
(1,916,893)
|
|
|
$
|
90,328
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income:
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
1,863,153
|
|
|
|
414,042
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income (loss)
|
|
|
(53,740)
|
|
|
|
504,370
|
|
Comprehensive income
(loss) attributable to non-controlling interests
|
|
|
(1,315,874)
|
|
|
|
5,098
|
|
Comprehensive income
attributable to ZK International Group Co., Ltd.
|
|
|
1,262,134
|
|
|
|
499,272
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings per share
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(0.03)
|
|
|
|
0.01
|
|
Diluted
|
|
|
(0.03)
|
|
|
|
0.01
|
|
Weighted average
number of shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
|
19,243,252
|
|
|
|
16,558,037
|
|
Diluted
|
|
|
21,743,252
|
|
|
|
16,558,037
|
|
ZK International
Group Co., Ltd. and Subsidiaries
|
Consolidated
Balance Sheets
|
As of March 31,
2021 and September 30, 2020 (Unaudited)
|
(IN U.S.
DOLLARS)
|
|
|
|
2021
|
|
|
2020
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
23,792,863
|
|
|
$
|
3,759,535
|
|
Short-term
Investment
|
|
|
-
|
|
|
|
294,568
|
|
Accounts receivable,
net of allowance for doubtful accounts of $2,098,282 and
$2,020,373,
respectively
|
|
|
25,772,075
|
|
|
|
31,393,289
|
|
Notes
receivable
|
|
|
161,616
|
|
|
|
192,819
|
|
Other
receivables
|
|
|
1,038,179
|
|
|
|
3,337,634
|
|
Due from related
parties
|
|
|
2,927,769
|
|
|
|
47,135
|
|
Inventories
|
|
|
22,037,116
|
|
|
|
21,679,258
|
|
Advance to
suppliers
|
|
|
13,281,349
|
|
|
|
4,078,256
|
|
Total current
assets
|
|
|
89,010,967
|
|
|
|
64,782,494
|
|
Property, plant and
equipment, net
|
|
|
8,035,478
|
|
|
|
7,870,680
|
|
Intangible assets,
net
|
|
|
5,936,851
|
|
|
|
929,021
|
|
Deferred tax
assets
|
|
|
750,912
|
|
|
|
724,612
|
|
Long-term
deposit
|
|
|
12,266,483
|
|
|
|
11,836,860
|
|
Long-term
investment
|
|
|
317,974
|
|
|
|
306,837
|
|
TOTAL
ASSETS
|
|
$
|
116,318,665
|
|
|
$
|
86,450,504
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
6,543,051
|
|
|
$
|
10,351,880
|
|
Accrued expenses and
other current liabilities
|
|
|
2,239,097
|
|
|
|
4,172,781
|
|
Accrued payroll and
welfare
|
|
|
1,145,865
|
|
|
|
1,555,705
|
|
Advance from
customers
|
|
|
5,338,816
|
|
|
|
2,345,891
|
|
Due to related
parties
|
|
|
225,288
|
|
|
|
1,315,803
|
|
Short-term bank
borrowings
|
|
|
18,354,498
|
|
|
|
17,372,894
|
|
Other borrowing -
short term portion
|
|
|
-
|
|
|
|
420,741
|
|
Notes
payables
|
|
|
112,946
|
|
|
|
153,175
|
|
Income tax
payable
|
|
|
3,301,236
|
|
|
|
3,188,615
|
|
Total current
liabilities
|
|
|
37,260,797
|
|
|
|
40,877,485
|
|
Other borrowing -
long term portion
|
|
|
562,447
|
|
|
|
269,290
|
|
TOTAL
LIABILITIES
|
|
$
|
37,823,244
|
|
|
$
|
41,146,775
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Common stock, no par
value, 50,000,000 shares authorized, 25,553,748 and
16,558,037 shares
issued and outstanding, respectively
|
|
|
|
|
|
|
|
|
Additional paid-in
capital
|
|
|
51,283,674
|
|
|
|
18,049,630
|
|
Statutory surplus
reserve
|
|
|
2,904,699
|
|
|
|
2,904,699
|
|
Retained
earnings
|
|
|
22,975,762
|
|
|
|
23,546,921
|
|
Accumulated other
comprehensive income (loss)
|
|
|
2,337,366
|
|
|
|
492,685
|
|
Total equity
attributable to ZK International Group Co., Ltd.
|
|
|
79,501,501
|
|
|
|
44,993,935
|
|
Equity attributable
to non-controlling interests
|
|
|
(1,006,080)
|
|
|
|
309,794
|
|
Total
equity
|
|
|
78,495,421
|
|
|
|
45,303,729
|
|
TOTAL LIABILITIES
AND EQUITY
|
|
$
|
116,318,665
|
|
|
$
|
86,450,504
|
|
ZK International
Group Co., Ltd. and Subsidiaries
|
Consolidated
Statements of Cash Flows
|
For the Six Months
Ended March 31, 2021 and 2020 (Unaudited)
|
(IN U.S.
DOLLARS)
|
|
|
|
For the Six Months
Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
(1,916,893)
|
|
|
$
|
90,328
|
|
Adjustments to
reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
264,887
|
|
|
|
176,111
|
|
Amortization
expense
|
|
|
6,605
|
|
|
|
-
|
|
Non-cash
expenses
|
|
|
894,167
|
|
|
|
-
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
6,755,242
|
|
|
|
(136,090)
|
|
Other
receivables
|
|
|
2,420,300
|
|
|
|
(96,109)
|
|
Notes
receivable
|
|
|
38,197
|
|
|
|
167,896
|
|
Inventories
|
|
|
428,946
|
|
|
|
2,563,087
|
|
Advance to
suppliers
|
|
|
(9,053,966)
|
|
|
|
163,096
|
|
Accounts
payable
|
|
|
(4,379,215)
|
|
|
|
(2,002,061)
|
|
Notes
payable
|
|
|
(45,783)
|
|
|
|
-
|
|
Accrued expenses and
other current liabilities
|
|
|
(2,084,882)
|
|
|
|
263,591
|
|
Accrued payroll and
welfare
|
|
|
(466,248)
|
|
|
|
(183,670)
|
|
Advance from
customers
|
|
|
2,907,425
|
|
|
|
64,820
|
|
Income tax
payable
|
|
|
(3,111)
|
|
|
|
-
|
|
Net cash provided
(used in) operating activities
|
|
|
(4,234,329)
|
|
|
|
1,070,999
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
Purchases of
property, plant and equipment
|
|
|
56,013
|
|
|
|
(608,404)
|
|
Proceed from disposal
of property, plant and equipment
|
|
|
(4,871)
|
|
|
|
48,676
|
|
Net proceeds placed
into long-term deposit
|
|
|
6,715
|
|
|
|
(14,262)
|
|
Net cash used in
investing activities
|
|
|
57,857
|
|
|
|
(574,050)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing activities:
|
|
|
|
|
|
|
|
|
Net proceeds from
stock offering
|
|
|
27,340,977
|
|
|
|
-
|
|
Net proceeds released
from (placed into) bank acceptance notes
|
|
|
-
|
|
|
|
(185,764)
|
|
Net proceeds released
from short-term investment
|
|
|
305,222
|
|
|
|
277,944
|
|
Net proceeds from
(repayment to) short-term bank borrowings
|
|
|
351,006
|
|
|
|
716,659
|
|
Net repayment of
other borrowing
|
|
|
(156,929)
|
|
|
|
-
|
|
Repayments of loans
of related parties
|
|
|
(1,138,134)
|
|
|
|
(1,474,517)
|
|
Cash advance to
related parties
|
|
|
(2,878,572)
|
|
|
|
(1,948,937)
|
|
Net cash provided by
(used in) financing activities
|
|
|
23,823,569
|
|
|
|
(2,614,615)
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
|
|
386,231
|
|
|
|
58,933
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
and cash equivalents
|
|
|
20,033,328
|
|
|
|
(2,058,733)
|
|
Cash and cash
equivalents at the beginning of year
|
|
|
3,759,535
|
|
|
|
3,451,138
|
|
Cash and cash
equivalents at the end of year
|
|
$
|
23,792,863
|
|
|
$
|
1,392,405
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flows information:
|
|
|
|
|
|
|
|
|
Cash paid for income
taxes
|
|
$
|
167,862
|
|
|
$
|
-
|
|
Cash paid for
interest expenses
|
|
$
|
524,217
|
|
|
$
|
450,282
|
|
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SOURCE ZK International Group Co., Ltd.