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ZK International Group Co., Ltd. Announces Record Revenues of $99.41 Million, an Increase of 14.5% for the Fiscal Year 2021

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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.)
(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)

2021


2020


% Change

Revenue


$99.41


$86.85


14.46%

Gross profit


$6.47


$3.94


64.13%

Gross margin


6.51%


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


$2.72


13.24%

  • Revenue increased by 14.46% to a record $99.41 million primarily driven by the 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. As a result of global shortage of construction materials, with our ability to lock in the supply of material, our international sales increased by 144.04% compared to the last fiscal year.

  • Gross profit increased by 64.13% to $6.47 million. Gross margin was 6.51%, compared to 4.54% for the prior fiscal year. 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.

  • Loss from operations was $3.65 million, compared to loss from operations of $1.88 million for the prior fiscal year. The increase of operational loss was mainly due to the one-time stock-based compensations 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.

  • Net loss attributable to ZK International was $3.80 million, or net loss of $0.17 per share. This compared to net loss attributable to ZK International of $0.83 million, or $0.05 per share, for the prior fiscal year.

  • Net book value per share was $3.08 as of September 30, 2021, compared to $2.72 as of September 30, 2020.

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 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 STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

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




For the year ended September 30,



2021


2020


2019

Revenues


$

99,407,217


$

86,846,791


$

63,883,520

Cost of sales



(92,936,029)



(82,903,989)



(48,239,478)

Gross profit



6,471,188



3,942,802



15,644,042











Operating expenses:










Selling and marketing expenses



3,117,906



2,215,651



2,647,429

General and administrative expenses



5,772,710



2,482,972



2,897,995

Research and development costs



1,234,161



1,123,555



1,452,061

Total operating expenses



10,124,777



5,822,178



6,997,485











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 income



13,733



7,192



24,437

Gain on disposal of subsidiary, net





536,612



Income (loss) on investment



50,649



(256,937)



Other income, net



431,438



327,845



921,973

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)



552,146



1,428,202



(248,228)











Net (loss) income


$

(3,802,271)


$

(837,016)


$

8,193,694

Net (loss) income attributable to non-controlling interests



2,757



11,402



(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 adjustment



2,423,439



2,319,048



(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










Basic



21,873,594



16,558,037



16,551,708

Diluted



22,633,819



16,558,037



16,551,708

ZK INTERNATIONAL GROUP CO., LTD

CONSOLIDATED BALANCE SHEETS

(IN U.S. DOLLARS)




As of September 30,



2021


2020

Assets







Current assets







Cash and cash equivalents


$

13,525,298


$

3,759,535

Restricted cash



77,906



Short-term Investment



2,560,760



294,568

Accounts receivable, net of allowance for doubtful accounts of $2,221,870 and $2,020,373, respectively



27,124,959



31,393,289

Notes receivable





192,819

Other receivables



2,158,120



3,337,634

Due from related parties





47,135

Inventories



20,689,252



21,679,258

Advance to suppliers



12,567,368



4,078,256

Total current assets



78,703,663



64,782,494

Property, plant and equipment, net



8,004,855



7,870,680

Right-of use asset



54,166



Intangible assets, net



8,749,987



929,021

Deferred tax assets



353,460



724,612

Long-term deposit



12,472,847



11,836,860

Long-term investment



25,323,323



306,837

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 liabilities



6,875,769



4,172,781

Lease liability - current portion



26,332



Accrued payroll and welfare



1,853,019



1,555,705

Advance from customers



5,666,214



2,345,891

Due to related parties



1,072,335



1,315,803

Convertible debentures



2,823,364



Short-term bank borrowings



21,394,761



17,372,894

Other borrowing - short term portion



283,758



420,741

Notes payables





153,175

Income tax payable



2,354,832



3,188,615

Total current liabilities



44,510,115



40,877,485

Lease liability - long term portion



27,834



Other borrowing - long term portion





269,290

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 capital



63,374,085



18,049,630

Statutory surplus reserve



2,914,602



2,904,699

Subscription receivable



(125,000)



Retained earnings



19,737,504



23,546,921

Accumulated other comprehensive income (loss)



2,898,594



492,685

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



88,799,785



44,993,935

Equity attributable to non-controlling interests



324,567



309,794

Total equity



89,124,352



45,303,729

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,



2021


2020


2019

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 expense



568,038



438,467



375,286

Amortization expense



481,763



11,366



13,638

Loss on disposal of fixed assets





7,608



2,244

Bad debt expense



92,032





Inventory provision





103,942



Write-off of advance to suppliers



108,395



100,684



102,523

Deferred tax benefits



406,064



(406,637)



(1,958)

Non-cash service expense







50,679

Gain on disposal of subsidiary





(536,612)



Loss on investment





214,114



Change in unrecognized tax benefits



(918,038)



(1,021,565)



Stock compensation expense



1,351,082





Interest expense of convertible notes



210,173





Interest expense of financing lease



44,458





Changes in operating assets and liabilities:










Accounts receivable



5,804,654



(4,800,889)



995,327

Other receivables



1,345,520



(793,936)



680,970

Notes receivable



201,187



206,465



13,119

Inventories



2,021,789



103,123



(3,846,722)

Advance to suppliers



(8,297,301)



2,933,852



596,380

Right of use assets



(53,634)






Accounts payable



(8,662,576)



5,582,787



2,593,103

Notes payable



(159,823)



(153,824)



308,005

Accrued expenses and other current liabilities



2,428,410



(484,477)



(1,314,005)

Accrued payroll and welfare



211,632



140,497



506,894

Advance from customers



3,162,961



(198,358)



(887,934)

Income tax payable



(77,214)



(149,386)



83,250

Lease liability



53,635





Net cash provided (used in) operating activities



(3,479,064)



460,205



8,464,493











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 equipment





6,281



5,963

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 borrowings



31,203,129



18,061,979



25,875,962

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 borrowing





775,951



Repayment of other borrowing



(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



40,241,501



761,283



(11,726,567)











Effect of exchange rate changes on cash



227,305



248,950



(83,902)











Net change in cash, cash equivalents and restricted cash



9,843,669



308,397



(4,231,451)

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



3,759,535



3,451,138



7,682,589

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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