ZK International Group Co., Ltd 6-K, filed Sep 28, 2022
ZK International Group Co., Ltd. (ZKIN)
About this 6-K
ZK International Group Co., Ltd filed this 6-K on September 28, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
For the month of September 2022.
Commission File Number: 001-38146
ZK INTERNATIONAL GROUP CO., LTD.
(Translation of registrant’s name into English)
c/o Zhejiang Zhengkang Industrial Co., Ltd.
No. 678 Dingxiang Road, Binhai Industrial Park
Economic & Technology Development Zone
Wenzhou, Zhejiang Province
People’s Republic of China 325025
Tel: +86-577-86852999
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
| Form 20-F x | Form 40-F ¨ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
INCORPORATION BY REFERENCE
This report on Form 6-K shall be deemed to be incorporated by reference into the Registration Statement of ZK International Group Co., Ltd. on Form F-3 filed on April 15, 2019 (File No. 333-230860) and the Registration Statement of ZK International Group Co., Ltd. on Form F-3 filed on Juen 30, 2022 (File No. 333-265933) and to be a part thereof from the date on which this report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.
EXHIBIT INDEX
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: September 28, 2022 | ZK INTERNATIONAL GROUP CO., LTD. | |
| By: | /s/ Jiancong Huang | |
| Name: | Jiancong Huang | |
| Title: | Chief Executive Officer and Chairman of the Board | |
Exhibit 99.1
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
IN CONNECTION WITH THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2022 AND 2021
In this report, as used herein, and unless the context suggests otherwise, the terms “ZK” “Company” “we” “us” or “ours” refer to the combined business of ZK International Group Co., Ltd., its subsidiaries. References to “dollar” and “$” are to U.S. dollars, the lawful currency of the United States, and references to “Renminbi” and “RMB” are to the legal currency of China. References to “SEC” are to the Securities and Exchange Commission.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited consolidated financial statements and the related notes included elsewhere in this report on Form 6-K and with the discussion and analysis of our financial condition and results of operations contained in our Annual Report on Form 20-F for the fiscal year ended September 30, 2021 filed with the Securities and Exchange Commission on January 28, 2022 (the “2021 Annual Report”). This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those identified elsewhere in this report on Form 6-K, and those listed in the 2021 Annual Report under “Item 1A. Risk Factors” or in other parts of the 2021 Annual Report.
Results of Operations
The tables in the following discussion summarize our consolidated statements of operations for the periods indicated. This information should be read together with our consolidated financial statements included elsewhere in this press release. The operating results in any period are not necessarily of the results that may be expected for any future period.
| For the Six Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenues | $ | 42,890,657 | $ | 42,168,823 | ||||
| Cost of sales | (38,923,548 | ) | (37,461,065 | ) | ||||
| Gross profit | 3,967,109 | 4,707,758 | ||||||
| Operating expenses: | ||||||||
| Selling and marketing expenses | 930,052 | 2,769,264 | ||||||
| General and administrative expenses | 2,232,863 | 1,166,210 | ||||||
| Research and development costs | 560,216 | 2,419,355 | ||||||
| Total operating expenses | 3,723,132 | 6,354,829 | ||||||
| Operating Income (loss) | 243,977 | (1,647,071 | ) | |||||
| Other income (expenses): | ||||||||
| Interest expenses | (465,466 | ) | (528,598 | ) | ||||
| Interest income | 4,493 | 9,543 | ||||||
| Other income (expenses), net | 218,277 | 325,539 | ||||||
| Total other income (expenses), net | (242,696 | ) | (193,516 | ) | ||||
| Income (Loss) before income taxes | 1,281 | (1,840,587 | ) | |||||
| Income tax provision | - | (76,306 | ) | |||||
| Net income (loss) | $ | 1,281 | $ | (1,916,893 | ) | |||
| Net income (loss) attributable to non-controlling interests | (9,635 | ) | (1,334,346 | ) | ||||
| Net income (loss) attributable to ZK International Group Co., Ltd. | $ | (8,354 | ) | $ | (582,547 | ) | ||
| Net income (loss) | $ | 1,281 | $ | (1,916,893 | ) | |||
| Other comprehensive income: | ||||||||
| Foreign currency translation adjustment | 871,641 | 1,863,153 | ||||||
| Total comprehensive income (loss) | 872,922 | (53,740 | ) | |||||
| Comprehensive income (loss) attributable to non-controlling interests | (15,437 | ) | (1,315,874 | ) | ||||
| Comprehensive income attributable to ZK International Group Co., Ltd. | 857,485 | 1,262,134 | ||||||
| Basic and diluted earnings per share | ||||||||
| Basic | - | (0.03 | ) | |||||
| Diluted | - | (0.03 | ) | |||||
| Weighted average number of shares outstanding | ||||||||
| Basic | 28,918,177 | 19,243,252 | ||||||
| Diluted | 33,692,819 | 21,743,252 | ||||||
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 nickel material 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 sales percentage of low margin products such as stainless steel coil products and decreased sales percentage of high-margin products such as water and gas piping products. 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 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 and 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
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.
Foreign currency translation
Our consolidated financial statements are expressed in U.S. dollars but the functional currency of our operating subsidiaries is RMB. Results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the financial statements denominated in RMB into U.S. dollars are included in determining comprehensive income. Our foreign currency translation gain for the six months ended March 31, 2022 was $871,641, compared to a currency translation gain of $1,863,153 for the six months ended March 31, 2021, an decrease of $991,512. The decreased gain is primarily due to the depreciation of RMB against the U.S. dollars.
Liquidity and Capital Resources
As of March 31, 2022 and September 30, 2021, we had cash and cash equivalents of $5,244,796 and $13,525,298 respectively. We believe that our current cash, cash to be generated from our operations and access to capital market will be sufficient to meet our working capital needs for at least the next twelve months. However, we do not have any amounts committed to be provided by our related party. We are also not dependent upon future financing to meet our liquidity needs for the next twelve months. However, we plan to expand our business to implement our growth strategies in the water supply market and strengthen our position in the marketplace. To do so, we may need more capital through equity financing to increase our production and meet market demands.
Substantially all of our operations are conducted in China and all of our revenues, expense, cash and cash equivalents are denominated in Renminbi (RMB). RMB is subject to the exchange control regulation in China, and, as a result, we may have difficulty distributing any dividends outside of China due to PRC exchange control regulations that restrict its ability to convert RMB into U.S. Dollars.
Under applicable PRC regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reaches 50% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation. Under PRC law, RMB is currently convertible into U.S. Dollars under a company’s “current account,” which includes dividends, trade and service-related foreign exchange transactions, without prior approval of the State Administration of Foreign Exchange (SAFE), but is not from a company’s “capital account,” which includes foreign direct investments and loans, without the prior approval of the SAFE.
With respect to retained earnings accrued after such date, our board of directors may declare dividends after taking into account our operations, earnings, financial condition, cash requirements and availability and other factors as it may deem relevant at such time. Any declaration and payment, as well as the amount, of dividends will be subject to our By-Laws, charter and applicable Chinese and U.S. state and federal laws and regulations, including the approval from the shareholders of each subsidiary which intends to declare such dividends, if applicable.
We have limited financial obligations dominated in US dollars, thus the foreign currency restrictions and regulations in the PRC on the dividends distribution will not have a material impact on the liquidity, financial condition and results of operations of the Company.
Cash Flow Summary
| For the Six Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net cash used in (provided by) operating activities | $ | (5,862,144 | ) | $ | (4,234,329 | ) | ||
| Net cash provided by (used in) investing activities | (165,772 | ) | 57,857 | |||||
| Net cash provided by (used in) financing activities | (1,650,350 | ) | 23,823,569 | |||||
| Effect of exchange rate changes on cash | 87,415 | 386,231 | ||||||
| Net increase (decrease) in cash | $ | (7,590,851 | ) | $ | 20,033,328 | |||
Operating activities
Net cash used in operating activities was approximately $5.86 million for the six months ended March 31, 2022, as compared to net cash used in was approximately $4.23 million for the six months ended March 31, 2021.
Net cash used in operating activities for the six months ended March 31, 2022 was mainly due to the increase of accounts receivable of approximately $1.97 million, increase of inventory of approximately $5.73 million, increase of other receivables of approximately $3.02 million, decrease of accrued expenses and other current liabilities of approximately $1.19 million, and decrease of advance from customers of approximately $3.25 million, partially offset by the decrease of advance to suppliers of approximately $8.13 million, and increase of accounts payable of approximately $1.12 million.
Net cash used in operating activities for the six months ended March 31, 2021 was mainly due to the increase of advance to suppliers of approximately $9.05 million as a result of our advance payment to certain suppliers to order raw materials, decrease of accounts payable of approximately $4.38 million, decrease of accrued expenses and other current liabilities of approximately $2.08 million, partially offset by the decrease of accounts receivable of approximately $6.76 million, increase of advance from customers of approximately $2.91 million and decrease of other receivables of approximately $2.42 million.
Investing activities
Net cash used in investing activities was approximately $0.17 million for the six months ended March 31, 2022, as compared to net cash provided by approximately $0.06 million for the six months ended March 31, 2021.
Net cash used in investing activities for the six months ended March 31, 2022 was mainly due to purchases of equipment of approximately $0.12 million.
Net cash provided by investing activities for the six months ended March 31, 2021 was mainly due to disposal of equipment of approximately $0.06 million.
Financing activities
Net cash used in financing activities was approximately $1.65 million for the six months ended March 31, 2022, as compared to net cash provided by financing activities of approximately $23.82 million for the six months ended March 31, 2021.
Net cash used in financing activities for the six months ended March 31, 2022 was mainly due to net short-term bank loan repayment of approximately $2.82 million, and net loan repayment to related parties of approximately $0.65 million. The net cash used in financing activities was mainly offset by net proceeds from short-term investment of approximately $2.36 million.
Net cash provided by financing activities for the six months ended March 31, 2021 was mainly due to financing through stock offering and warrants exercise of approximately $27.34 million, and net proceeds from short-term bank loans of approximately $0.35 million. The net cash provided by financing activities was mainly offset by cash advance to related parties of approximately $2.88 million which was subsequently repaid by the related parties, and repayment of related party payables of approximately $1.14 million.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is subject to adjustments that may be identified when audit work is performed on the Company’s year-end financial statements, which could result in significant differences from this unaudited financial information.
Safe Harbor Statement
This report contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. When the Company uses words such as “may, “will, “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company’s expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following: the Company’s goals and strategies; the Company’s future business development; product and service demand and acceptance; changes in technology; economic conditions; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the Securities and Exchange Commission. For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company’s filings with the U.S. Securities and Exchange Commission, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.
Exhibit 99.2
ZK International Group Co., Ltd. and Subsidiaries
Consolidated Balance Sheets
As of March 31, 2022 and September 30, 2021
(IN U.S. DOLLARS, EXCEPT SHARE DATA)
2022 (Unaudited) | 2021 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 5,244,796 | $ | 13,525,298 | ||||
| Restricted cash | 79,170 | 77,906 | ||||||
| Short-term Investment | 236,619 | 2,560,760 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $2,258,356 and $2,221,870, respectively | 29,545,643 | 27,124,959 | ||||||
| Notes receivable | 368,214 | — | ||||||
| Other receivables | 5,229,288 | 2,158,120 | ||||||
| Inventories | 26,784,418 | 20,689,252 | ||||||
| Advance to suppliers | 4,602,336 | 12,567,368 | ||||||
| Total current assets | 72,090,484 | 78,703,663 | ||||||
| Property, plant and equipment, net | 7,896,620 | 8,004,855 | ||||||
| Right-of use asset | 123,042 | 54,166 | ||||||
| Intangible assets, net | 9,563,588 | 8,749,987 | ||||||
| Deferred tax assets | 359,265 | 353,460 | ||||||
| Long-term deposit | 12,677,668 | 12,472,847 | ||||||
| Long-term investment | 25,328,632 | 25,323,323 | ||||||
| TOTAL ASSETS | $ | 128,039,299 | $ | 133,662,301 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 3,323,532 | $ | 2,159,731 | ||||
| Accrued expenses and other current liabilities | 5,629,919 | 6,875,769 | ||||||
| Lease liability - current portion | - | 26,332 | ||||||
| Accrued payroll and welfare | 1,776,071 | 1,853,019 | ||||||
| Advance from customers | 2,492,270 | 5,666,214 | ||||||
| Due to related parties | 441,359 | 1,072,335 | ||||||
| Convertible debentures | 2,823,364 | 2,823,364 | ||||||
| Short-term bank borrowings | 18,912,183 | 21,394,761 | ||||||
| Other borrowing - short term portion | 288,418 | 283,758 | ||||||
| Income tax payable | 2,354,910 | 2,354,832 | ||||||
| Total current liabilities | 38,042,025 | 44,510,115 | ||||||
| Lease liability - long term portion | - | 27,834 | ||||||
| TOTAL LIABILITIES | $ | 38,042,025 | $ | 44,537,949 | ||||
| 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 | 63,374,085 | ||||||
| Statutory surplus reserve | 2,916,539 | 2,914,602 | ||||||
| Subscription receivable | (125,000 | ) | (125,000 | ) | ||||
| Retained earnings | 19,727,213 | 19,737,504 | ||||||
| Accumulated other comprehensive income (loss) | 3,764,433 | 2,898,594 | ||||||
| Total equity attributable to ZK International Group Co., Ltd. | 89,657,270 | 88,799,785 | ||||||
| Equity attributable to non-controlling interests | 340,004 | 324,567 | ||||||
| Total equity | 89,997,274 | 89,124,352 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 128,039,299 | $ | 133,662,301 | ||||
ZK International Group Co., Ltd. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income (Loss)
For the Six Months Ended March 31, 2022 and 2021 (Unaudited)
(IN U.S. DOLLARS, EXCEPT SHARE DATA)
| For the Six Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenues | 42,890,657 | $ | 42,168,823 | |||||
| Cost of sales | 38,923,548 | 37,461,065 | ||||||
| Gross profit | 3,967,109 | 4,707,758 | ||||||
| Operating expenses: | ||||||||
| Selling and marketing expenses | 930,052 | 2,769,264 | ||||||
| General and administrative expenses | 2,232,863 | 1,166,210 | ||||||
| Research and development costs | 560,216 | 2,419,355 | ||||||
| Total operating expenses | 3,723,132 | 6,354,829 | ||||||
| Operating Income (loss) | 243,977 | (1,647,071 | ) | |||||
| Other income (expenses): | ||||||||
| Interest expenses | (465,466 | ) | (528,598 | ) | ||||
| Interest income | 4,493 | 9,543 | ||||||
| Other income (expenses), net | 218,277 | 325,539 | ||||||
| Total other income (expenses), net | (242,696 | ) | (193,516 | ) | ||||
| Income (Loss) before income taxes | 1,281 | (1,840,587 | ) | |||||
| Income tax provision | - | (76,306 | ) | |||||
| Net income (loss) | 1,281 | $ | (1,916,893 | ) | ||||
| Net income (loss) attributable to non-controlling interests | (9,635 | ) | (1,334,346 | ) | ||||
| Net income (loss) attributable to ZK International Group Co., Ltd. | (8,354 | ) | $ | (582,547 | ) | |||
| Net income (loss) | 1,281 | $ | (1,916,893 | ) | ||||
| Other comprehensive income: | ||||||||
| Foreign currency translation adjustment | 871,641 | 1,863,153 | ||||||
| Total comprehensive income (loss) | 872,922 | (53,740 | ) | |||||
| Comprehensive income (loss) attributable to non-controlling interests | (15,437 | ) | (1,315,874 | ) | ||||
| Comprehensive income attributable to ZK International Group Co., Ltd. | 857,485 | 1,262,134 | ||||||
| Basic and diluted earnings per share | ||||||||
| Basic | - | (0.03 | ) | |||||
| Diluted | - | (0.03 | ) | |||||
| Weighted average number of shares outstanding | ||||||||
| Basic | 19,243,252 | |||||||
| Diluted | 21,743,252 | |||||||
ZK International Group Co., Ltd. and Subsidiaries
Consolidated Statements of Changes in Equity
For Six Months Ended March 31, 2022
(UNAUDITED, IN U.S. DOLLARS, EXCEPT SHARE DATA)
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | other | Non- | ||||||||||||||||||||||||||||||
| paid-in | Subscription | Statutory | Retained | comprehensive | controlling | Total | ||||||||||||||||||||||||||
| Shares | capital | Receivable | surplus reserve | earnings | income (loss) | interests | 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 income | 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 | |||||||||||||||||||||||
| Foreign currency translations | 865,839 | 5,802 | 871,641 | |||||||||||||||||||||||||||||
| Net income | 1,937 | (10,291 | ) | 9,635 | 1,281 | |||||||||||||||||||||||||||
| Balance at March 31, 2022 | 28,918,177 | 63,374,085 | (125,000 | ) | 2,916,539 | 19,727,213 | 3,764,433 | 340,004 | 89,997,274 | |||||||||||||||||||||||
ZK International Group Co., Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended March 31, 2022 and 2021 (Unaudited)
(IN U.S. DOLLARS)
| For the Six Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 1,281 | $ | (1,916,893 | ) | |||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation expense | 340,666 | 264,887 | ||||||
| Amortization expense | (938 | ) | 6,605 | |||||
| Non-cash expenses | 166,907 | 894,167 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (1,965,921 | ) | 6,755,242 | |||||
| Other receivables | (3,021,383 | ) | 2,420,300 | |||||
| Notes receivable | (366,474 | ) | 38,197 | |||||
| Inventories | (5,728,222 | ) | 428,946 | |||||
| Advance to suppliers | 8,132,790 | (9,053,966 | ) | |||||
| Accounts payable | 1,123,002 | (4,379,215 | ) | |||||
| Notes payable | - | (45,783 | ) | |||||
| Accrued expenses and other current liabilities | (1,185,431 | ) | (2,084,882 | ) | ||||
| Accrued payroll and welfare | (106,869 | ) | (466,248 | ) | ||||
| Advance from customers | (3,251,552 | ) | 2,907,425 | |||||
| Income tax payable | - | (3,111 | ) | |||||
| Net cash provided (used in) operating activities | (5,862,144 | ) | (4,234,329 | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Proceed from disposal of property, plant and equipment | - | 62,728 | ||||||
| Purchases of property, plant and equipment | (165,772 | ) | (4,871 | ) | ||||
| Net cash used in investing activities | (165,772 | ) | 57,857 | |||||
| Cash Flows from Financing activities: | ||||||||
| Net proceeds from stock offering | - | 27,340,977 | ||||||
| Net proceeds released from (placed into) bank acceptance notes | 15 | - | ||||||
| Net proceeds released from short-term investment | 2,355,010 | 305,222 | ||||||
| Net proceeds from (repayment to) short-term bank borrowings | (2,820,517 | ) | 351,006 | |||||
| Net repayment of other borrowing | (539,337 | ) | (156,929 | ) | ||||
| Repayments of loans of related parties | (645,521 | ) | (1,138,134 | ) | ||||
| Cash advance to related parties | - | (2,878,572 | ) | |||||
| Net cash provided by (used in) financing activities | (1,650,350 | ) | 23,823,569 | |||||
| Effect of exchange rate changes on cash | 87,415 | 386,231 | ||||||
| Net change in cash and cash equivalents | (7,590,851 | ) | 20,033,328 | |||||
| Cash and cash equivalents at the beginning of year | 12,835,647 | 3,759,535 | ||||||
| Cash and cash equivalents at the end of year | $ | 5,244,796 | $ | 23,792,863 | ||||
| Supplemental disclosures of cash flows information: | ||||||||
| Cash paid for income taxes | $ | - | $ | 167,862 | ||||
| Cash paid for interest expenses | $ | 465,465 | $ | 524,217 | ||||
Selected Notes to Consolidated Financial Statements
We prepare our consolidated financial statements in conformity with accounting principles generally accepted by the U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect our reported amount of assets, liabilities, revenue, costs and expenses, and any related disclosures. Although there were no material changes made to the accounting estimates and assumptions in the past three years, we continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.
We believe that the following accounting policies and notes involve a higher degree of judgment and complexity in their application and require us to make significant accounting estimates. Accordingly, these are the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Such estimates include, but are not limited to, allowances for doubtful accounts, inventory valuation, useful lives of property, plant and equipment, intangible assets, and income taxes related to realization of deferred tax assets and uncertain tax position. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents primarily consist of cash and deposits with financial institutions which are unrestricted as to withdrawal and use. Cash equivalents consist of highly liquid investments that are readily convertible to cash generally with original maturities of three months or less when purchased.
Value-added Tax (“VAT”)
Value-added taxes (“VAT”) collected from customers relating to product sales and remitted to governmental authorities are presented on a net basis. VAT collected from customers is excluded from revenue. The Company is subject to a VAT rate of 17% before May 1, 2018, a VAT rate of 16% effective on May 1, 2018, and the most current VAT rate of 13% effective on April 1, 2019. The VAT payable may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing or acquiring its finished products.
Intangible Assets
| March 31, | September 30, | |||||||
| 2022 | 2021 | |||||||
| Land use rights, cost | $ | 628,042 | $ | 617,895 | ||||
| Software, cost | 9,598,743 | 8,803,367 | ||||||
| Other intangible assets, cost | 19,919 | 1,732 | ||||||
| Less: accumulated amortization | (683,116 | ) | (673,007 | ) | ||||
| Intangible assets, net | $ | 9,563,588 | $ | 8,749,987 | ||||
Intangible assets consist primarily of land use rights and software. Under the PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company. The government grants individuals and companies the right to use parcels of land for specified periods of time. These land use rights are sometimes referred to informally as “ownership.” Land use rights are stated at cost less accumulated amortization. The land use right represents the Company's land use rights in Wenzhou's plant, which had been pledged to secure the Company’s banking facilities granted to the Company as of March 31, 2022 and September 30, 2021.
During the fiscal year ended September 30, 2021, the Company entered into a series of consulting agreements with third-party entity and individuals to develop and implement the following software platforms:
| ● | The DeFi (decentralized finance) Protocol, a stablecoin DEX (decentralized exchange) and liquidity mining platform, available at https://xsigma.fi. |
| ● | Two flagship trading platforms, “xSigma Trading” for CFD trading and “xSigma Trader” for Crypto, Crypto Options and Crypto derivatives. |
| ● |
MaximNFT platform (“MaximNFT”), available at www.maximnft.com, the exclusive NFT (Non-Fungible Token) marketplace partners with Maxim, the iconic men’s lifestyle brand. It will allow customers to create and sell NFTs on various blockchains, including, but not limited to, Ethereum, Binance Smart Chain, and Polkadot. |
The software platforms are intended for internal use which is to provide services to customers and the Company does not have any plan to market the software for sales externally. In exchange of the development services provided, the Company paid consideration in the form of cash, stock and stock warrants, and all the costs incurred during the Application development Stage were capitalized pursuant to ASC 350-40-25.
Stockholders’ Equity
Registered Direct Offerings
On September 25, 2020 and October 16, 2020, the Company closed a registered direct offering pursuant to certain convertible debenture agreements with certain unaffiliated investors identified therein. The convertible debentures, with aggregate principal amount of $1.4 million and 5% annual interest rate, are exercisable for a period of one year at an exercise price of 70% of the average closing price during the seven (7) consecutive Trading Days immediately preceding the Conversion Date, but not lower than the Floor Price of $0.62 per share. The transaction was closed on October 20, 2020 and full proceeds were received. As of February 5, 2021, all of the outstanding principal and interest underlying the Convertible Debentures have been converted into a total of 1,394,253.
On January 8, 2021, the Company closed a registered direct offering pursuant to certain securities purchase agreement with certain unaffiliated investors identified therein, to offer an aggregate of 1,785,000 Company’s ordinary shares, for a total purchase price of $2,499,000.
On February 24, 2021, the Company closed a registered direct offering pursuant to certain securities purchase agreements with several accredited investors providing for an aggregate investment of $4,599,983.50 by the investors for the issuance by the Company to them of (i) 1,295,770 ordinary shares of the Company (the “Shares”); (ii) first registered investor warrants, with a term of five (5) years exercisable immediately upon issuance, to purchase an aggregate of up to 1,295,770 ordinary shares (the “First Registered Warrant Shares”) at an exercise price of $4.00 per share, subject to customary adjustments thereunder (the “First Registered Warrants”); and (iii) second registered investor warrants, with a term of five (5) years exercisable immediately upon issuance, to purchase an aggregate of up to 1,295,770 ordinary shares (the “Second Registered Warrant Shares” and collectively with the First Registered Warrant Shares, the “Warrant Shares”) at an exercise price of $4.50 per share, subject to customary adjustments thereunder (the “Second Registered Warrants” and collectively with the First Registered Warrants, the “Warrants”). Holders of the Warrants may exercise them by paying the applicable cash exercise price or, if there is not an effective registration statement for the sale of the Warrant Shares at the time of exercise, by exercising on a cashless basis pursuant to the formula provided in the Warrants. As of March 31, 2021, 270,696 warrants have been exercised on cash exercise basis, and $964,779 were received.
On March 22, 2021, ZK entered into certain securities purchase agreements (the “Purchase Agreements”) with several accredited investors (the “Investors”) providing for an aggregate investment of $18,000,000 by the Investors for the issuance by the Company to them of 4,000,000 ordinary shares of the Company (the “Shares”) at an offering price of $4.50 per share.
Exhibit 99.3
ZK International Group Co., Ltd. Announces Record Revenue of $42.89 Million, an Increase of 1.71% for the First Half of Fiscal Year 2022
WENZHOU, China, September 28, 2022 -- ZK International Group Co., Ltd. (ZKIN) ("ZK International" or the "Company"), a designer, engineer, manufacturer, and supplier of patented high-performance stainless steel and carbon steel pipe products primarily used for water and gas supplies, today announced its unaudited financial results for the six months ended March 31, 2022.
Financial Highlights for the First Half of Fiscal Year 2022
| For the Six Months Ended March 31, | ||||||||||||
| ($ millions, except per share data) | 2022 | 2021 | % Change | |||||||||
| Revenue | $ | 42.89 | $ | 42.17 | 1.71 | % | ||||||
| Gross profit | $ | 3.97 | $ | 4.71 | -15.73 | % | ||||||
| Gross margin | 9.25 | % | 11.16 | % | -1.91% pp* | |||||||
| Income (loss) from operations | $ | 0.24 | $ | (1.65 | ) | 114.81 | % | |||||
| Operating margin | 0.57 | % | -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 | $ | 3.11 | 0.32 | % | ||||||
* pp: percentage point(s)
| · | Revenue increased 1.71% to a record $42.89 million due to increased market demand over our stainless steel coil and nickel material. During six months ended March 31, 2022, the sales of stainless steel coil and nickel material 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 decreased by 15.73% to $3.97 million. Gross margin was 9.25%, compared to 11.16% for the same period of the prior fiscal period. The decrease of gross profit was primarily due to increased sales percentage of low margin products such as stainless steel coil products and decreased sales percentage of high-margin products such as water and gas piping products. |
| · | Income from operations was $0.24 million, compared to loss from operations of $1.65 million for the same period of the prior fiscal year. Operating margin was 0.57%, compared to -3.91% for the same period of the prior fiscal year. The decrease of operating margin was primarily due to decreased selling and marketing expenses and research and development expenses. |
| · | Net income was $0.001 million. This compared to net loss of $1.92 million for the same period of the prior fiscal year. |
| · | Net book value per share was $3.10 as of March 31, 2022, compared to $3.08 as of September 30, 2021. |
Mr. Jiancong Huang, Chairman and Chief Executive Officer of ZK International, commented, "Bucking the trend of a declining economy during the second quarter of 2020 as China battled the COVID-19 pandemic, we are pleased to report record revenue increase for the first half of fiscal year 2020. With revenue increasing by 27.4% and across the $40 million mark for the first time in the Company’s history, our first half of fiscal year 2020 results underscore continuing order strength for our proprietary stainless steel and carbon steel pipe products. The decreases in gross and profit margins were one-off in nature and stem from management decision to provide discount on certain products in order to reduce inventory that certain customers were unable to fulfill due to COVID-19 effecting their respective businesses. Therefore, certain products were sold at deep discounts to some of our key customers in order to increase cash flow by reducing inventory level. Looking forward, we expect revenue to continue to grow and rebound of profit margins for the second half of the fiscal year 2020.”
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 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, 2022 and 2021 (Unaudited)
(IN U.S. DOLLARS, EXCEPT SHARE DATA)
| For the Six Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenues | 42,890,657 | $ | 42,168,823 | |||||
| Cost of sales | 38,923,548 | 37,461,065 | ||||||
| Gross profit | 3,967,109 | 4,707,758 | ||||||
| Operating expenses: | ||||||||
| Selling and marketing expenses | 930,052 | 2,769,264 | ||||||
| General and administrative expenses | 2,232,863 | 1,166,210 | ||||||
| Research and development costs | 560,216 | 2,419,355 | ||||||
| Total operating expenses | 3,723,132 | 6,354,829 | ||||||
| Operating Income (loss) | 243,977 | (1,647,071 | ) | |||||
| Other income (expenses): | ||||||||
| Interest expenses | (465,466 | ) | (528,598 | ) | ||||
| Interest income | 4,493 | 9,543 | ||||||
| Other income (expenses), net | 218,277 | 325,539 | ||||||
| Total other income (expenses), net | (242,696 | ) | (193,516 | ) | ||||
| Income (Loss) before income taxes | 1,281 | (1,840,587 | ) | |||||
| Income tax provision | - | (76,306 | ) | |||||
| Net income (loss) | 1,281 | $ | (1,916,893 | ) | ||||
| Net income (loss) attributable to non-controlling interests | (9,635 | ) | (1,334,346 | ) | ||||
| Net income (loss) attributable to ZK International Group Co., Ltd. | (8,354 | ) | $ | (582,547 | ) | |||
| Net income (loss) | 1,281 | $ | (1,916,893 | ) | ||||
| Other comprehensive income: | ||||||||
| Foreign currency translation adjustment | 871,641 | 1,863,153 | ||||||
| Total comprehensive income (loss) | 872,922 | (53,740 | ) | |||||
| Comprehensive income (loss) attributable to non-controlling interests | (15,437 | ) | (1,315,874 | ) | ||||
| Comprehensive income attributable to ZK International Group Co., Ltd. | 857,485 | 1,262,134 | ||||||
| Basic and diluted earnings per share | ||||||||
| Basic | - | (0.03 | ) | |||||
| Diluted | - | (0.03 | ) | |||||
| Weighted average number of shares outstanding | ||||||||
| Basic | 19,243,252 | |||||||
| Diluted | 21,743,252 | |||||||
ZK International Group Co., Ltd. and Subsidiaries
Consolidated Balance Sheets
As of March 31, 2022 and September 30, 2021 (Unaudited)
(IN U.S. DOLLARS)
2022 (Unaudited) | 2021 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 5,244,796 | $ | 13,525,298 | ||||
| Restricted cash | 79,170 | 77,906 | ||||||
| Short-term Investment | 236,619 | 2,560,760 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $2,258,356 and $2,221,870, respectively | 29,545,643 | 27,124,959 | ||||||
| Notes receivable | — | — | ||||||
| Other receivables | 5,229,288 | 2,158,120 | ||||||
| Due from related parties | 368,214 | — | ||||||
| Inventories | 26,784,418 | 20,689,252 | ||||||
| Advance to suppliers | 4,602,336 | 12,567,368 | ||||||
| Total current assets | 72,090,484 | 78,703,663 | ||||||
| Property, plant and equipment, net | 7,896,620 | 8,004,855 | ||||||
| Right-of use asset | 123,042 | 54,166 | ||||||
| Intangible assets, net | 9,563,588 | 8,749,987 | ||||||
| Deferred tax assets | 359,265 | 353,460 | ||||||
| Long-term deposit | 12,677,668 | 12,472,847 | ||||||
| Long-term investment | 25,328,632 | 25,323,323 | ||||||
| TOTAL ASSETS | $ | 128,039,299 | $ | 133,662,301 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 3,323,532 | $ | 2,159,731 | ||||
| Accrued expenses and other current liabilities | 5,629,919 | 6,875,769 | ||||||
| Lease liability - current portion | - | 26,332 | ||||||
| Accrued payroll and welfare | 1,776,071 | 1,853,019 | ||||||
| Advance from customers | 2,492,270 | 5,666,214 | ||||||
| Due to related parties | 441,359 | 1,072,335 | ||||||
| Convertible debentures | 2,823,364 | 2,823,364 | ||||||
| Short-term bank borrowings | 18,912,183 | 21,394,761 | ||||||
| Other borrowing - short term portion | 288,418 | 283,758 | ||||||
| Income tax payable | 2,354,910 | 2,354,832 | ||||||
| Total current liabilities | 38,042,025 | 44,510,115 | ||||||
| Lease liability - long term portion | - | 27,834 | ||||||
| TOTAL LIABILITIES | $ | 38,042,025 | $ | 44,537,949 | ||||
| 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 | 63,374,085 | ||||||
| Statutory surplus reserve | 2,916,539 | 2,914,602 | ||||||
| Subscription receivable | (125,000 | ) | (125,000 | ) | ||||
| Retained earnings | 19,727,213 | 19,737,504 | ||||||
| Accumulated other comprehensive income (loss) | 3,764,433 | 2,898,594 | ||||||
| Total equity attributable to ZK International Group Co., Ltd. | 89,657,270 | 88,799,785 | ||||||
| Equity attributable to non-controlling interests | 340,004 | 324,567 | ||||||
| Total equity | 89,997,274 | 89,124,352 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 128,039,299 | $ | 133,662,301 | ||||
ZK International Group Co., Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended March 31, 2022 and 2021 (Unaudited)
(IN U.S. DOLLARS)
| For the Six Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 1,281 | $ | (1,916,893 | ) | |||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation expense | 340,666 | 264,887 | ||||||
| Amortization expense | (938 | ) | 6,605 | |||||
| Non-cash expenses | 166,907 | 894,167 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (1,965,921 | ) | 6,755,242 | |||||
| Other receivables | (3,021,383 | ) | 2,420,300 | |||||
| Notes receivable | (366,474 | ) | 38,197 | |||||
| Inventories | (5,728,222 | ) | 428,946 | |||||
| Advance to suppliers | 8,132,790 | (9,053,966 | ) | |||||
| Accounts payable | 1,123,002 | (4,379,215 | ) | |||||
| Notes payable | - | (45,783 | ) | |||||
| Accrued expenses and other current liabilities | (1,185,431 | ) | (2,084,882 | ) | ||||
| Accrued payroll and welfare | (106,869 | ) | (466,248 | ) | ||||
| Advance from customers | (3,251,552 | ) | 2,907,425 | |||||
| Income tax payable | - | (3,111 | ) | |||||
| Net cash provided (used in) operating activities | (5,862,144 | ) | (4,234,329 | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Proceed from disposal of property, plant and equipment | - | 62,728 | ||||||
| Purchases of property, plant and equipment | (165,772 | ) | (4,871 | ) | ||||
| Net cash used in investing activities | (165,772 | ) | 57,857 | |||||
| Cash Flows from Financing activities: | ||||||||
| Net proceeds from stock offering | - | 27,340,977 | ||||||
| Net proceeds released from (placed into) bank acceptance notes | 15 | - | ||||||
| Net proceeds released from short-term investment | 2,355,010 | 305,222 | ||||||
| Net proceeds from (repayment to) short-term bank borrowings | (2,820,517 | ) | 351,006 | |||||
| Net repayment of other borrowing | (539,337 | ) | (156,929 | ) | ||||
| Repayments of loans of related parties | (645,521 | ) | (1,138,134 | ) | ||||
| Cash advance to related parties | - | (2,878,572 | ) | |||||
| Net cash provided by (used in) financing activities | (1,650,350 | ) | 23,823,569 | |||||
| Effect of exchange rate changes on cash | 87,415 | 386,231 | ||||||
| Net change in cash and cash equivalents | (7,590,851 | ) | 20,033,328 | |||||
| Cash and cash equivalents at the beginning of year | 12,835,647 | 3,759,535 | ||||||
| Cash and cash equivalents at the end of year | $ | 5,244,796 | $ | 23,792,863 | ||||
| Supplemental disclosures of cash flows information: | ||||||||
| Cash paid for income taxes | $ | - | $ | 167,862 | ||||
| Cash paid for interest expenses | $ | 465,465 | $ | 524,217 | ||||