NASDAQ:ZKIN

WENZHOU, China, Jan. 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 audited financial results for the fiscal year ended September 30, 2021.

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

Financial Highlights for the Fiscal Year 2021

For the Fiscal Year Ended September 30,
($ millions, except per share data)20212020% Change
Revenue$99.41$86.8514.46%
Gross profit$6.47$3.9464.13%
Gross margin6.51%4.54%1.97 percentage points
Income (loss) from operations($3.65)($1.88)94.40%
Operating income (loss) margin(3.68%)(2.16%)-1.51 percentage points
Net income (loss) attributable to ZK
International
($3.80)($0.83)-360.20%
Diluted earnings (loss) per share($0.17)($0.05)236.70%
Net book value per share$3.08$2.7213.24%

Mr. Jiancong Huang, Chairman of ZK International, commented, “We are pleased with our record revenue growth to almost $100 million and increased gross margin. Our financial results in 2021 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 into the the next fiscal year.”

Mr. Huang continued, “Building on the foundation of our core steel pipe business, we are excited to provide additional value to our shareholders with our various investments in our xSigma subsidiary assets. With our investments into xSigma DeFi, xSigma Trading, MaximBet, and MaximNFT, we are excited in diversifying our revenue stream and creating  shareholder value for our shareholder. We are thinking out of the box and by doing so, we are confident that ZK is going to provide its existing and future shareholders with a value propisition for a long time to come”.

Financial Results for the Fiscal Year 2021

Revenues

Revenues increased by $12,560,426 or 14.46%, to $99,407,217 for the year ended September 30, 2021 from $86,846,791 for the year ended September 30, 2020. The increase in revenues was primarily driven by the following factors:

1)Due to increased market demand of construction materials and the shortages of supply in the current market. In particular, the piping systems in the real estate sector, we observed an increase of the weighted average selling price (“ASP”) during the fiscal year 2021.

2)As a result of global shortage of construction materials, and our ability to lock in supply of material, our international sales increased by 144.04% compared to the last fiscal year. Our international sales revenue during fiscal year 2021 amounted to $2,707,441, an increase of $1,676,951 compared to last fiscal year.

Gross Profit

Our gross profit increased by $2,528,386, or 64.13%, to $6,471,188 for the year ended September 30, 2021 from $3,942,802 for the year ended September 30, 2020. Gross profit margin was 6.51% for the year ended September 30, 2021, as compared to 4.54% for the year ended September 30, 2020. The increase of gross profit was primarily due to increased weighted average selling prices which is attributable to the market demand recovery over the construction materials and supply shortages on the current market.

In the prior years, our gross profit decreased by $11,701,240, or 74.80%, to $3,942,802 for the year ended September 30, 2020 from $15,644,042 for the year ended September 30, 2019. Gross profit margin was 4.54% for the year ended September 30, 2020, as compared to 24.49% for the year ended September 30, 2019. The decrease of gross profit was primarily due to decreased weighted average selling prices we offered to customers as a temporary sales strategy during the pandemic by providing one-off discount on certain products to some key customers as a result of other customers not being able to fulfill their orders as they suffered from the negative impact of the COVID-19 pandemic earlier this year. The decrease of gross profit was also attributable to the increased sales percentage of low gross margin products such as stainless steel coil and strip and decreased sales percentage of high gross margin products such as stainless steel piping and fitting products. The gross profit of stainless steel coil products is approximately 0.15% 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 7.58% during the year ended September 30, 2020.

Operating Expenses

Selling and marketing expenses increased by $0.90 million, or 40.71%, to $3.12 million for the fiscal year 2021 from $2.22 million for the prior fiscal year. As a percentage of sales, selling and marketing expenses was 3.1% for the fiscal year 2021, compared to 2.6% for the prior fiscal year. This increase is primarily due to increase in payroll expenses, freight expenses, and compensation for the sales personnel during the year. The increase in our selling and marketing expenses is related to our international sales and can be attributed to the increased marketing of our subsidiaries.

General and administrative expenses increase by $3.30 million, or 132.49%, to $5.77 million for the fiscal year 2021 from $2.48 million for the prior fiscal year. As a percentage of sales, general and administrative expenses was 5.8% for the fiscal year 2021, compared to 2.9% for the prior fiscal year. The increase is primarily due to the stock-based compensation incurred during the fiscal year 2021 for the expenses related to our new business operations and subsidiaries. During fiscal year 2021, we hired third-part individuals and consulting firms to facilitate our operations in xSigma Corporation, which is  principally engaged in decentralized finance (“DeFi”) and cryptocurrency market, and xSigma Collectibles which is principally engaged in operating an NFT (Non-Fungible Token) marketplace.

Research and development expenses increased by $0.11 million, or 9.84%, to $1.23 million for the fiscal year 2021 from $1.12 million for the prior fiscal year. As a percentage of sales, research and development expenses was 1.2% for the fiscal year 2021, compared to 1.3% for the prior fiscal year. The increase was primarily due to the increased research and development activities during fiscal year 2021. Management is committed to expanding our research and development activities to enhance competitive advantage.

Total operating expenses increase by $4.30 million, or 73.9%, to $10.12 million for the fiscal year 2020 from $5.82 million for the prior fiscal year. As a percentage of sales, total operating expenses was 10.2% for the fiscal year 2021, compared to 6.7% for the prior fiscal year.

Income(loss) from Operations

Loss from operations was $3.65 million for the fiscal year 2021, compared to loss from operations of $1.88 million for the prior fiscal year. As a result, operating loss margin was 3.68% for the fiscal year 2021, compared to operating loss margin of 2.16% for the prior fiscal year. The increase in operating loss and operating loss margin were primarily related to increased General and Administrative expenses as explained above and partially offset by increased gross profit.  

Other Income (Expenses)

Interest expenses were $1.19 million for the fiscal year 2021, compared to $1.00 million for the prior fiscal year. Other income was $0.43 million for the fiscal year 2021, compared to $0.33 million for the prior fiscal year. As a result, total net other expenses were $0.70 million for the fiscal year 2021, compared to $0.39 million for the prior fiscal year. 

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

As a result of the factors described above, net loss was $3.80 million for the fiscal year 2021, compared to net loss of $0.84 million for the prior fiscal year. Net loss margin was 3.82% for the fiscal year 2021, compared to net loss margin of 0.96%  for the prior fiscal year.

After deducting for non-controlling interests, net loss attributable to ZK International was $3.80 million, or net loss of $0.17 per share, for the fiscal year 2021. This compared to net loss attributable to ZK International of $0.83 million, or $0.05 per share, for the prior fiscal year.

Financial Condition

As of September 30, 2021, cash and cash equivalents and short-term investments totaled $13.53 million, compared to $3.76 million as of September 30, 2020. Short-term bank borrowings were $21.39 million as of September 30, 2021, compared to $17.37 million as of September 30, 2020.

Accounts receivable was $27.12 million as of September 30, 2021, compared to $31.39 million as of September 30, 2020. Inventories were $20.68 million as of September 30, 2021, compared to $21.68 million as of September 30, 2020. Accounts payable was $2.16 million as of September 30, 2021, compared to $10.35 million as of September 30, 2020.

Total current assets and current liabilities were $78.70 million and $44.51 million, respectively, leading to a current ratio of 1.77 as of September 30, 2021. This compared to the total current assets and current liabilities of $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 $3.48 million for the fiscal year 2021, compared to net cash provided by operating activities was $0.46 million for the prior fiscal year. Net cash used in investing activities was $27.15 million for the fiscal year 2021, compared to $1.16 million for the prior fiscal year. Net cash provided by financing activities was $40.24 million for the fiscal year 2021, compared to net cash provided by financing activities of $0.76 million 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 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.

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, 
202120202019
Revenues$99,407,217$86,846,791$63,883,520
Cost of sales(92,936,029)(82,903,989)(48,239,478)
Gross profit6,471,1883,942,80215,644,042
Operating expenses:
Selling and marketing expenses3,117,9062,215,6512,647,429
General and administrative expenses5,772,7102,482,9722,897,995
Research and development costs1,234,1611,123,5551,452,061
Total operating expenses10,124,7775,822,1786,997,485
Operating Income (loss)(3,653,589)(1,879,376)8,646,557
Other income (expenses):
Interest expenses(1,196,648)(1,000,554)(1,151,045)
Interest income13,7337,19224,437
Gain on disposal of subsidiary, net536,612
Income (loss) on investment50,649(256,937)
Other income, net431,438327,845921,973
Total other expenses, net(700,828)(385,842)(204,635)
Income (loss) before income taxes(4,354,417)(2,265,218)8,441,922
Income tax recovery (expense)552,1461,428,202(248,228)
Net (loss) income$(3,802,271)$(837,016)$8,193,694
Net (loss) income attributable to non-controlling interests2,75711,402(86,828)
Net (loss) income attributable to ZK International Group Co., Ltd.(3,799,514)(825,614)$8,106,866
Net (loss) income(3,802,271)$(837,016)$8,193,694
Other comprehensive income (loss):
Foreign currency translation adjustment2,423,4392,319,048(1,694,278)
Total comprehensive income$(1,378,832)$1,482,032$6,499,416
Comprehensive loss (income) attributable to non-controlling interests(14,773)(6,136)(73,919)
Comprehensive income attributable to ZK International Group Co., Ltd.$(1,393,605)$1,475,896$6,425,497
Basic and diluted earnings (loss) per share
Basic$(0.17)$(0.05)$0.49
Diluted(0.17)(0.05)0.49
Weighted average number of shares outstanding
Basic21,873,59416,558,03716,551,708
Diluted22,633,81916,558,03716,551,708
ZK INTERNATIONAL GROUP CO., LTD
CONSOLIDATED BALANCE SHEETS
(IN U.S. DOLLARS)
As of September 30, 
20212020
Assets
Current assets
Cash and cash equivalents$13,525,298$3,759,535
Restricted cash77,906
Short-term Investment2,560,760294,568
Accounts receivable, net of allowance for doubtful accounts of $2,221,870 and $2,020,373, respectively27,124,95931,393,289
Notes receivable192,819
Other receivables2,158,1203,337,634
Due from related parties47,135
Inventories20,689,25221,679,258
Advance to suppliers12,567,3684,078,256
Total current assets78,703,66364,782,494
Property, plant and equipment, net8,004,8557,870,680
Right-of use asset54,166
Intangible assets, net8,749,987929,021
Deferred tax assets353,460724,612
Long-term deposit12,472,84711,836,860
Long-term investment25,323,323306,837
TOTAL ASSETS$133,662,301$86,450,504
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$2,159,731$10,351,880
Accrued expenses and other current liabilities6,875,7694,172,781
Lease liability – current portion26,332
Accrued payroll and welfare1,853,0191,555,705
Advance from customers5,666,2142,345,891
Due to related parties1,072,3351,315,803
Convertible debentures2,823,364
Short-term bank borrowings21,394,76117,372,894
Other borrowing – short term portion283,758420,741
Notes payables153,175
Income tax payable2,354,8323,188,615
Total current liabilities44,510,11540,877,485
Lease liability – long term portion27,834
Other borrowing – long term portion269,290
TOTAL LIABILITIES$44,537,949$41,146,775
Equity
Common stock, no par value, 50,000,000 shares authorized, 28,918,177 and 16,558,037 shares issued and 
    outstanding, respectively
Additional paid-in capital63,374,08518,049,630
Statutory surplus reserve2,914,6022,904,699
Subscription receivable(125,000)
Retained earnings19,737,50423,546,921
Accumulated other comprehensive income (loss)2,898,594492,685
Total equity attributable to ZK International Group Co., Ltd.88,799,78544,993,935
Equity attributable to non-controlling interests324,567309,794
Total equity89,124,35245,303,729
TOTAL LIABILITIES AND EQUITY$133,662,301$86,450,504
ZK INTERNATIONAL GROUP CO., LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN U.S. DOLLARS)
 For the year ended September 30, 
202120202019
Cash Flows from Operating Activities:
Net income$(3,802,271)$(837,016)$8,193,694
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation expense568,038438,467375,286
Amortization expense481,76311,36613,638
Loss on disposal of fixed assets7,6082,244
Bad debt expense92,032
Inventory provision103,942
Write-off of advance to suppliers108,395100,684102,523
Deferred tax benefits406,064(406,637)(1,958)
Non-cash service expense50,679
Gain on disposal of subsidiary(536,612)
Loss on investment214,114
Change in unrecognized tax benefits(918,038)(1,021,565)
Stock compensation expense1,351,082
Interest expense of convertible notes210,173
Interest expense of financing lease44,458
Changes in operating assets and liabilities:
Accounts receivable5,804,654(4,800,889)995,327
Other receivables1,345,520(793,936)680,970
Notes receivable201,187206,46513,119
Inventories2,021,789103,123(3,846,722)
Advance to suppliers(8,297,301)2,933,852596,380
Right of use assets(53,634)
Accounts payable(8,662,576)5,582,7872,593,103
Notes payable(159,823)(153,824)308,005
Accrued expenses and other current liabilities2,428,410(484,477)(1,314,005)
Accrued payroll and welfare211,632140,497506,894
Advance from customers3,162,961(198,358)(887,934)
Income tax payable(77,214)(149,386)83,250
Lease liability53,635
Net cash provided (used in) operating activities(3,479,064)460,2058,464,493
Cash Flows from Investing Activities:
Purchases of property, plant and equipment(114,319)(1,168,322)(880,289)
Proceed from disposal of property, plant and equipment6,2815,963
Purchase of  CIP(47,942)
Disposal of intangible asset
Purchases of intangible assets(1,983,812)(11,149)
Investment into CG Malta(25,000,000)
Net cash used in investing activities(27,146,073)(1,162,041)(885,475)
Cash Flows from Financing activities:
Net proceeds released from (placed into) short-term investment(2,228,301)559,030
Net proceeds received from (placed into) long-term deposit(7,682,151)
Proceeds from short-term bank  borrowings31,203,12918,061,97925,875,962
Repayments of short-term bank borrowings(28,144,978)(17,836,445)(28,199,497)
Net proceeds received from (repaid to) related parties(280,313)(133,007)(2,279,911)
Proceed from other borrowing775,951
Repayment of other borrowing(483,458)(107,195)
Proceeds from stock issuances24,758,458
Proceeds from convertible notes issuances14,071,908
Proceeds from stock warrants exercise1,345,056
Net cash provided by (used in) financing activities40,241,501761,283(11,726,567)
Effect of exchange rate changes on cash227,305248,950(83,902)
Net change in cash, cash equivalents and restricted cash9,843,669308,397(4,231,451)
Cash and cash equivalents and restricted cash at the beginning of period3,759,5353,451,1387,682,589
Cash, cash equivalents and restricted cash at the end of period$13,603,204$3,759,535$3,451,138
Supplemental disclosures of cash flows information:
Non-cash financing activities$$$
Cash paid for income taxes$37,041$149,291$170,331
Cash paid for interest expenses$338,575$991,319$1,197,504

For Enquiries:

Contact Person: Di Chen
Cell Number: +86 15057357883
Email: super.di@live.cn

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SOURCE ZK International Group Co., Ltd.

Released January 28, 2022

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