ZK International Group Co., Ltd. Announces Record Revenues of $111.60 Million for the Fiscal Year 2023

About this update from Zk International Group Co., Ltd

WENZHOU, China , Aug. 13, 2024 /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, 2023 . Financial Highlights for the Fiscal Year 2023 For the Fiscal Year Ended September 30 , ($ millions, except per share data) 2023 2022 % Change Revenue $ 111.60 $ 102.39 8.99 % Gross profit $ 1.30 $ 7.60 -82.93 % Gross margin 1.16 % 7.42 % -6.26percentage points Loss from operations $ (60.44) $ (3.96) -1424.58 % Operating loss margin (54.16 %) (3.87 %) -50.29percentagepoints Net loss attributable to ZK International $ (61.06) $ (6.08) -904.06 % Diluted loss per share $ (1.94) $ (0.21) -835.72 % Net book value per share $ 0.80 $ 2.80 -71.43 % Revenue Revenues increased by $9.21 million or 8.99%, to $ 111.60 million for the year ended September 30, 2023 from $102.39 million for the year ended September 30, 2022 . The increase in revenues was primarily driven by the following factors: 1) During the fiscal year 2023, the decline of real estate market in China , especially the collapse of Evergrande, has set pressure on the steel pipe market. To strengthen the cash flow and expand our market share, we lowered our weighted average selling price ("ASP") to boost our sales volume. However, we have observed the recovery of real estate market and increase of market demand for the 2024 fiscal year, we have increased ASP for the 2024 fiscal year. 2) During 2023 fiscal year, the average selling price of electrolytic nickel increased by 33.33% from RMB 113,716 per ton in fiscal year 2022 to RMB 151,619 in fiscal year 2023; the average selling price of steel strip decreased by 1.82% from RMB 20.3 per kilogram in fiscal year 2022 to RMB 19.93 in fiscal year 2023; the average selling price of steel pipe decreased by 20.25% from RMB 140.26 per piece in fiscal year 2022 to RMB 111.86 in fiscal year 2023; the average selling price of pipe fittings decreased by 4.86% from RMB 22.65 each in fiscal year 2022 to RMB 21.55 in fiscal year 2023. 3) Due to the decrease of product prices, we had an overall increase in sales volume. The sales volume of steel strip increased by 87.73% from 753.91 tons in fiscal year 2022 to 1,415.29 tons in fiscal year 2023; Sales volume of pipes increased by 0.42% from 592,919 in fiscal year 2022 to 595,395 in fiscal year 2023; The sales volume of pipe fittings increased by 29.28% from 7,103,894 pieces in fiscal year 2022 to 9,183,690 pieces in fiscal year 2023. Gross Profit Our gross profit decreased by $6.30 million or 82.93% to $1.30 million for the year ended September 30, 2023 from $7.60 million for the year ended September 30, 2022 . Gross profit margin was 1.16% for the year ended September 30, 2023 , as compared to 7.42% for the year ended September 30, 2022 . The decrease of gross profit was primarily due to decreased weighted average selling prices while our cost of raw material remained stable. However, we have observed the recovery of real estate market and increase of market demand for the 2024 fiscal year, we have increased ASP for the 2024 fiscal year which will improve our gross margin. Loss from Operations Loss from operations was $60.44 million , compared to loss from operations of $3.96 million for the prior fiscal year. The increase of operational loss was mainly due to the one-off asset impairment cost of intangible asset and long-term investment, and stock-based compensation incurred during 2023 fiscal year for the expenses related to our new business operations and subsidiaries. During 2023 fiscal year, the Company recorded asset impairment cost of $53.20 million , primarily for the write off of its long-term investment in CG Malta and the software platforms, including xSigma Trading, MaximNFT, and the Defi Exchange. For the 2021 and 2022 fiscal years, CG Malta achieved high growth with its online gaming services launched in more than 10 states in US with high growth rate of Real Money Handle and First-Time Depositor. However, during the 2023 fiscal year, the competition of gaming market has been increasingly intense. Market bullishness and valuations peaked in early-2023 and declined rapidly from there, preventing CG Malta from raising further capital to execute its business plan. For the best interest of the Company's shareholder, the Company decided to stop funding CG Malta and instead demanded the management team of CG Malta took active measures to achieve organic growth and healthy cash flow. However, the business was unable to raise the capital required to fund the business plan, and therefore the shareholders of CG Malta passed shareholder resolution on November 27, 2023 to cease operations of CG Malta and wind up the entity. For the year ended September 30, 2023 , the Company has written off the investment in CG Malta. During 2023 fiscal year, the Company evaluated the recoverability of the three platforms, including Defi Exchange, xSigma Trading, and MaximNFT and concluded that the carrying value of the three platforms 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. For the year ended September 30, 2023 , the Company wrote off the carrying value of the three platforms. Net Loss Attributable to ZK International Net loss attributable to ZK International was $61.06 million , or net loss of $1.94 per share. This compared to net loss attributable to ZK International of $6.08 million , or $0.21 per share, for the prior fiscal year. Net book value Net book value per share was $0.80 as of September 30, 2023 , compared to $2.80 as of September 30, 2022 . Mr. Jiancong Huang, Chairman of ZK International , commented, "while ZK International declared a net loss of $61 million for the year, this was largely due to a series of one-time write-offs related to various non-core investments. These write-offs are part of the company's broader strategy to streamline operations and focus on high-growth opportunities, ensuring a more robust financial foundation for the future." Mr. Huang continued, "While this year's financial results reflect certain challenges, I am proud of the progress we have made in growing our revenue and strengthening our core business in China . The strategic decisions we've taken to write off certain investments position us for a more focused and profitable future. We remain committed to enhancing shareholder value and driving long-term growth for ZK International . As ZK International moves forward, the company remains confident in its ability to navigate the evolving market landscape and deliver sustainable value to its shareholders." 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 , 2023 2022 Assets Current assets Cash and cash equivalents $ 4,994,411 $ 7,515,147 Restricted cash 50,995 101,992 Short-term Investment 48,145 915,616 Accounts receivable, net of allowance for doubtful accounts and provision for expected credit loss of $6,617,485 and $255,322 , respectively 14,967,186 28,362,933 Notes receivable 54,825 49,611 Prepayment, deposit and other receivable - current 383,413 2,360,539 Inventories 17,937,425 21,141,501 Advance to suppliers 4,810,044 6,322,592 Total current assets 43,246,444 66,769,931 Property, plant and equipment, net 7,836,017 7,124,587 Right-of-use asset – Operating lease 43,840 30,998 Intangible assets, net 1,437,384 11,415,451 Deferred tax assets — 320,164 Prepayment, deposit and other receivable - Non-current 292,070 — Long-term prepayment — 10,447,395 Long-term accounts receivable 5,527,682 7,522,188 Long-term investment 285,540 25,292,866 TOTAL ASSETS $ 58,668,977 $ 128,923,580 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,611,220 $ 10,066,758 Accrued expenses and other current liabilities 4,964,893 6,949,772 Operating lease liability - current 21,749 10,754 Accrued payroll and welfare 1,918,415 1,880,377 Advance from customers 821,694 1,758,800 Due to related parties 1,111,001 2,052,403 Convertible debentures 4,011,224 3,352,311 Bank borrowings - current 9,388,706 16,257,820 Notes payables 41,118 702,889 Income tax payable 669 817,059 Total current liabilities 24,890,689 43,848,943 Operating lease liability – non-current 11,811 10,256 Bank borrowings – non-current 8,527,686 — TOTAL LIABILITIES $ 33,430,186 $ 43,859,199 COMMITMENTS AND CONTINGENCIES — — Equity Common stock, no par value, 50,000,000 shares authorized, 32,992,740 and 30,392,940 shares issued and outstanding, respectively Additional paid-in capital 72,886,898 70,872,765 Statutory surplus reserve 3,176,556 3,176,556 Subscription receivable (125,000) (125,000) Retained earnings (Deficits) (47,666,657) 13,394,137 Accumulated other comprehensive loss (3,190,985) (2,640,753) Total equity attributable to ZK International Group Co., Ltd. 25,080,812 84,677,705 Equity attributable to non-controlling interests 157,980 386,676 Total equity 25,238,792 85,064,381 TOTAL LIABILITIES AND EQUITY $ 58,668,977 $ 128,923,580 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 , 2023 2022 2021 Revenues $ 111,599,686 $ 102,391,636 $ 99,407,217 Cost of sales (110,303,270) (94,796,037) (92,936,029) Gross profit 1,296,416 7,595,599 6,471,188 Operating expenses: Selling and marketing expenses 2,117,810 2,380,429 3,117,906 General and administrative expenses 5,144,340 5,421,575 5,772,710 Asset impairment loss 53,203,517 2,771,019 — Research and development costs 1,274,337 987,186 1,234,161 Total operating expenses 61,740,004 11,560,209 10,124,777 Operating loss (60,443,588) (3,964,610) (3,653,589) Other income (expenses): Interest expenses (1,583,734) (3,451,665) (1,196,648) Interest income 36,699 109,290 13,733 Income on investment — — 50,649 Other income (expense), net 240,378 (88,125) 431,438 Total other expenses, net (1,306,657) (3,430,500) (700,828) Loss before income taxes (61,750,245) (7,395,110) (4,354,417) Income tax recovery 459,855 1,340,844 552,146 Net loss $ (61,290,390) $ (6,054,266) $ (3,802,271) Net (loss) income attributable to non-controlling interests 229,596 (27,147) 2,757 Net loss attributable to ZK International Group Co. , Ltd. (61,060,794) (6,081,413) $ (3,799,514) Net loss (61,290,390) $ (6,054,266) $ (3,802,271) Other comprehensive income (loss): Foreign currency translation adjustment (549,332) (5,504,385) 2,423,439 Total comprehensive loss $ (61,839,722) $ (11,558,651) $ (1,378,832) Comprehensive loss (income) attributable to non-controlling interests 228,696 (62,109) (14,773) Comprehensive loss attributable to ZK International Group Co. , Ltd. $ (61,611,026) $ (11,620,760) $ (1,393,605) Basic and diluted loss per share Basic $ (1.94) $ (0.21) $ (0.17) Diluted (1.94) (0.21) (0.17) Weighted average number of shares outstanding Basic 31,445,962 29,305,828 21,873,594 Diluted 31,445,962 29,431,781 22,633,819 ZK INTERNATIONAL GROUP CO., LTD CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED SEPTEMBER 30, 2023 , 2022 AND 2021 (IN U.S. DOLLARS, EXCEPT SHARE DATA) Shares Additional paid-in capital Subscription Receivable Statutory surplus reserve Retained earnings(deficits) Accumulated other comprehensive income (loss) Non- controlling interests Total equity 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 loss 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 loss 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 Stock-based compensation 2,599,800 1,839,733 1,839,733 Unearned Compensation 174,400 174,400 Foreign currency translations (550,232) 900 (549,332) Net loss (61,060,794) (229,596) (61,290,390) Balance at September 30, 2023 32,992,740 72,886,898 (125,000) 3,176,556 (47,666,657) (3,190,985) 157,980 25,238,792 ZK INTERNATIONAL GROUP CO., LTD CONSOLIDATED STATEMENTS OF CASH FLOWS (IN U.S. DOLLARS) For the year ended September 30 , 2023 2022 2021 Cash Flows from Operating Activities: Net loss $ (61,290,390) $ (6,054,266) $ (3,802,271) Adjustments to reconcile net income to net cash used in operating activities: Depreciation expense 677,275 672,368 568,038 Amortization expense 298,431 830,481 481,763 Right of use assets — — (53,634) Bad debt expense and credit loss 17,897,334 227,837 92,032 Write-off of advance to suppliers — — 108,395 Deferred tax expenses 322,897 — 406,064 Gain on accounts receivable factoring, net of discount — (1,602,500) — Impairment on intangible assets and long-term investment 35,346,769 2,771,019 — Change in unrecognized tax benefits (823,340) (1,428,458) (918,038) Stock compensation expense 2,014,133 2,674,807 1,351,082 Interest expense of convertible notes 658,913 1,324,510 210,173 Interest expense of financing lease — — 44,458 Interest expense of accounts receivable factoring 359,051 1,151,453 — Changes in operating assets and liabilities: Accounts receivable 8,165,567 (12,059,620) 5,804,654 Other receivables and prepayments 349,612 (260,755) 1,345,520 Notes receivable (6,676) (53,853) 201,187 Inventories 2,870,541 (2,606,504) 2,021,789 Advance to suppliers 1,401,001 5,493,624 (8,297,301) Accounts payable (7,451,608) 8,803,924 (8,662,576) Notes payable (666,355) 762,986 (159,823) Accrued expenses and other current liabilities (1,918,915) 752,241 2,428,410 Accrued payroll and welfare 130,063 219,178 211,632 Advance from customers (923,844) (3,662,097) 3,162,961 Income tax payable — — (77,214) Long-term prepaid expenses 707,470 — — Lease liability - Operating lease (23,841) (28,595) 53,635 Net cash used in operating activities (1,905,912) (2,072,220) (3,479,064) Cash Flows from Investing Activities: Purchases of property, plant and equipment (656,178) (507,663) (114,319) Purchase of CIP (930,814) (12,666) (47,942) Purchases of intangible assets (707,470) (1,588,107) (1,983,812) Investment into CG Malta — — (25,000,000) Net cash used in investing activities (2,294,462) (2,108,436) (27,146,073) Cash Flows from Financing activities: Net proceeds released from (placed into) short-term investment 852,542 1,523,953 (2,228,301) Proceeds from short-term bank borrowings 21,486,396 31,113,044 31,203,129 Repayments of short-term bank borrowings (19,350,091) (34,501,465) (28,144,978) Net (repayment) receiving for due to related parties (920,690) 1,173,516 (280,313) Repayment of other borrowing — (279,004) (483,458) 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 2,068,157 (969,956) 40,241,501 Effect of exchange rate changes on cash (439,515) (835,453) 227,305 Net (decrease) increase in cash, cash equivalents and restricted cash (2,571,733) (5,986,065) 9,843,669 Cash and cash equivalents and restricted cash at the beginning of period 7,617,139 13,603,204 3,759,535 Cash, cash equivalents and restricted cash at the end of period $ 5,045,406 $ 7,617,139 $ 13,603,204 Supplemental disclosures of cash flows information: Cash paid for income taxes $ 38,695 $ 87,473 $ 37,041 Cash paid for interest expenses $ 774,929 $ 976,091 $ 338,575 Non-cash transactions Offset between due from related parties and due to related parties balances $ 545,844 623,363 604,719 Intangible assets obtained in exchange for settlement of long-term deposit $ 707,470 749,252 — View original content to download multimedia: https://www.prnewswire.com/news-releases/zk-international-group-co-ltd-announces-record-revenues-of-111-60-million-for-the-fiscal-year-2023--302221113.html SOURCE ZK International Group Co., Ltd.

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