NASDAQ:ZKIN

WENZHOU, China, Sept. 28, 2022 /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, 2022.

Financial Highlights for the First Half of Fiscal Year 2022

For the Six Months Ended March 31,
($ millions, except per share data)20222021% Change
Revenue$42.89$42.171.71 %
Gross profit$3.97$4.71-15.73 %
Gross margin9.25 %11.16 % -1.91% pp*
Income (loss) from operations$0.24$(1.65)114.81 %
Operating margin0.57 %-3.91 %   4.48% pp*
Net income (loss)$0.001$(1.92)100.07 %
Diluted earnings per share$0.00$(0.03)100 %
Net book value per share$3.10$3.110.32 %
* pp: percentage point(s)

Mr. Jiancong Huang, Chairman and Chief Executive Officer of ZK International, commented, “Bucking the trend of a declining economy during the first quarter of 2022 as countries including China battled the inflation and the rise of material prices, we are pleased to report record revenue increase for the first half of fiscal year 2022. During first half of fiscal year 2022, we successfully executed our spent-cut program which aims to reduce operating expenses without impacting sales performance. With operating expenses declined 41.41%, revenue increased by 1.71% and our first half of fiscal year 2022 results underscore continuing order strength for our proprietary stainless steel and carbon steel pipe products. We are proud of what the Company and the staff has achieved for the first half of fiscal year 2022. Looking forward, we expect revenue to continue to grow for the second half of the fiscal year 2022.

Financial Results for the First Half of Fiscal Year 2022

Revenue

Revenue increased by $721,834 or 1.71%, to $ 42,890,657 for the six months ended March 31, 2022 from $42,168,823 for the six months ended March 31, 2021. The increase in revenues was primarily driven by our increased sales of stainless steel coil and nickel material as compared to our stainless steel piping and fitting products. During six months ended March 31, 2022, the sales of stainless steel coil and strip accounts for approximately 65.36% of our total revenue, as compared to 53.85% of our total revenue during six months ended March 31, 2021.

Gross Profit

Our gross profit decreased by $740,649, or 15.73%, to $3,967,109 for the six months ended March 31, 2022 from $4,707,758 for the six months ended March 31, 2021. Gross profit margin was 9.25% for the six months ended March 31, 2022, as compared to 11.16% for the six months ended March 31, 2021. The decrease 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 0.57% 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 22.67% during six months ended March 31, 2022.

Selling and Marketing Expenses

We incurred $930,052 in selling and marketing expenses for the six months ended March 31, 2022, compared to $2,769,264 for the six months ended March 31, 2021. Selling and marketing expenses decreased by $1,839,212, or 66.42%, during the six months ended March 31, 2022 compared to the six months ended March 31, 2022. This decrease is primarily due to decreased marketing expenses paid for the marketing and promoting services provided to xSigma Corporation, a subsidiary of the Company. During the six months ended March 31, 2021, the Company 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 $2,232,863 in general and administrative expenses for the six months ended March 31, 2022, compared to $1,166,210 for the six months ended March 31, 2021. General and administrative expenses increased by $1,066,653, or 91.46%, for the six months ended March 31, 2022 compared to the same period in 2021. The increase is primarily due to decrease in travelling expenses and administrative staff salary.

Research and Development Expenses

We incurred $560,216 in research and development expenses for the six months ended March 31, 2022, compared to $2,419,355 for the six months ended March 31, 2021. R&D expenses decreased by $1,859,139, or 76.84%, for the six months ended March 31, 2022 compared to the same period in 2021. During the six months ended March 31, 2021, our various subsidiaries developed a DeFi exchange, a cryptocurrency trading platform, and an NFT platform, while those platforms were in late-stage development during the six months ended March 31, 2022 and therefore the related expenses decreased significantly.

Income (loss) from Operations

As a result of the factors described above, we incurred operating income of $243,977 for the six months ended March 31, 2022, compared to operating loss of $1,647,071 for the six months ended March 31, 2021, an increase of operating income of $1,891,048.

Other Income (Expenses)

Our interest income and expenses were $4,493 and $465,466, respectively, for the six months ended March 31, 2022, compared to interest income and expenses of $9,543 and $528,598, respectively, for the six months ended March 31, 2021. The decrease of interest expense is primarily due to the decrease of bank loan incurred during fiscal half year of 2022. Other income mainly consists of government grant for financial support to the Company under local government’s innovation incentive programs.

Net Income (loss)

As a result of the factors described above, we incurred net loss of $1,281 for the six months ended March 31, 2022, compared to net loss of $1,916,893 for the six months ended March 31, 2021, a increase in profit of $1,918,174.

Financial Condition

As of March 31, 2022, cash and cash equivalents, restricted cash and short-term investments totaled $5.56 million, compared to $16.16 million as of September 30, 2021. Short-term bank borrowings were $18.91 million as of March 31, 2022, compared to $21.39 million as of September 30, 2021.

Accounts receivable was $29.55 million as of March 31, 2022, compared to $27.12 million as of September 30, 2021. Inventories were $23.78 million as of March 31, 2022, compared to $20.69 million as of September 30, 2021. Accounts payable was $3.32 million as of March 31, 2022, compared to $2.16 million as of September 30, 2021.

Total current assets and current liabilities were $72.09 million and $38.04 million, respectively, leading to a current ratio of 1.90 as of March 31, 2022. This compared to total current assets and current liabilities were $78.70 million and $44.51 million, respectively, and current ratio of 1.77 as of September 30, 2021.

Net cash used in operating activities was $5.86 million for the six months ended March 31, 2022, compared to net cash used in operating activities of $4.23 million for the same period of the prior fiscal year. Net cash used in investing activities was $0.17 million for the six months ended March 31, 2022, compared to net cash provided by investing activities of $0.06 million for the same period of the prior fiscal year. Net cash used in financing activities was $1.65 million for the six months ended March 31, 2022, compared to net cash provided in financing activities of $23.82 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 TwitterFacebookYouTube, 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.

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