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ZK International Group Co., Ltd. Announces Record Revenues of $102.39 Million, and saw Gross Profit Increase by 17.38% to $7.60 Million for the Fiscal Year 2022
ZK International Group Co., Ltd. Announces Record Revenues of $102.39 Million, and saw Gross Profit Increase by 17.38% to $7.60 Million for the Fiscal Year 2022
PR Newswire
WENZHOU, China, Feb. 1, 2023
WENZHOU, China, Feb. 1, 2023 /PRNewswire/ — Z…
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ZK International Group Co., Ltd. Announces Record Revenues of $102.39 Million, and saw Gross Profit Increase by 17.38% to $7.60 Million for the Fiscal Year 2022
PR Newswire
WENZHOU, China, Feb. 1, 2023
WENZHOU, China, Feb. 1, 2023 /PRNewswire/ -- ZK International Group Co., Ltd. (ZKIN) ("ZK International" or the "Company"), a designer, engineer, manufacturer, and supplier of patented high-performance stainless steel and carbon steel pipe products primarily used for water and gas supplies, today announced its audited financial results for the fiscal year ended September 30, 2022.
Financial Highlights for the Fiscal Year 2022
For the Fiscal Year Ended | ||||||||||||
($ millions, except per share data) | 2022 | 2021 | % Change | |||||||||
Revenue | $ | 102.39 | $ | 99.41 | 3.00 | % | ||||||
Gross profit | $ | 7.60 | $ | 6.47 | 17.38 | % | ||||||
Gross margin | 7.42 | % | 6.51 | % | 0.91 | |||||||
Loss from operations | $ | (3.96) | $ | (3.65) | 8.51 | % | ||||||
Operating loss margin | (3.87) | % | (3.68) | % | -0.19 | |||||||
Net loss attributable to ZK | ||||||||||||
International | $ | (6.08) | $ | (3.80) | 60.06 | % | ||||||
Diluted loss per share | $ | (0.21) | $ | (0.17) | 23.53 | % | ||||||
Net book value per share | $ | 2.80 | $ | 3.08 | -9.09 | % | ||||||
- Revenues increased by $2,984,419 or 3.00%, to $102,391,636 for the year ended September 30, 2022 from $99,407,217 for the year ended September 30, 2021. The growth was primarily driven by the increased weighted average selling price ("ASP") during the fiscal year 2022. We observed the rise of raw material prices, recovery of market demand for construction materials and the shortages of supply in the current market. Overall, we had 34.26% increase of ASP in steel strip, 29.00% increase in steel pipe, and 33.71% increase in pipe fittings during 2022 fiscal year.
- Gross profit increased by 17.38% to $7.60 million. Gross margin was 7.42%, compared to 6.5% for the prior fiscal year. The increase of gross profit was primarily due to increased weighted average selling prices.
- During the fiscal year 2022, our Chinese subsidiaries returned to profitability with net income after tax of $2.71 million.
- Loss from operations was $3.96 million, compared to loss from operations of $3.65 million for the prior fiscal year. The decrease of operational loss was mainly due to the one-off asset impairment cost of intangible asset and stock-based compensation incurred during 2022 fiscal year for the expenses related to our new business operations and subsidiaries.
- Net loss attributable to ZK International was $6.08 million, or net loss of $0.21 per share. This compared to net loss attributable to ZK International of $3.80 million, or $0.17 per share, for the prior fiscal year.
- Net book value per share was $2.80 as of September 30, 2022, compared to $3.08 as of September 30, 2021.
Mr. Jiancong Huang, Chairman of ZK International, commented, "We are pleased with our record revenue growth to break the $100 million mark while having an increased gross margin. Our financial results in 2022 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 both domestically and internationally into the next fiscal year."
Mr. Huang continued, "Building on the foundation of our core steel pipe business domestically, we are excited to provide additional value to our shareholders with plans to grow our core steel pipe business internationally. Being one of the leaders in our industry has brought many other international opportunities for gas and water infrastructure needs, so it will be our goal in 2023 to seek out these international opportunities while building our sales and profitability domestically. We are confident that ZK is going to continue to provide its existing and future shareholders with a value propisition for a long time to come."
Financial Results for the Fiscal Year 2022
Revenues
Revenues increased by $2,984,419 or 3.00%, to $102,391,636 for the year ended September 30, 2022 from $99,407,217 for the year ended September 30, 2021. The increase in revenues was primarily driven by the following factors:
1) During the fiscal year 2022, we observed an increase of raw materials, especially the price of nikel which is an important component of stainless steel. To minimize the impact the rise of raw material price, we increased our weighted average selling price ("ASP") during the fiscal year 2022.
2) During 2022 fiscal year, the average selling price of electrolytic nickel decreased by 0.33% from RMB 114,092 per ton in fiscal year 2021 to RMB 113,716 in fiscal year 2022; the average selling price of steel strip increased by 34.26% from RMB 15.12 per kilogram in fiscal year 2021 to RMB 20.3 in fiscal year 2022; the average selling price of steel pipe increased by 29.00% from RMB 108.73 per piece in fiscal year 2021 to RMB 140.26 in fiscal year 2022; the average selling price of pipe fittings increased by 33.71% from RMB 16.94 each in fiscal year 2021 to RMB 22.65 in fiscal year 2022.
3) Due to the rise of product prices, we had an overall decrease in sales volume. The sales volume of steel strip decreased by 62.98% from 2227.19 tons in fiscal year 2021 to 753.91 tons in fiscal year 2022; Sales of pipes decreased by 25.28% from 793,480 in fiscal year 2021 to 592,919 in fiscal year 2022; The sales volume of pipe fittings decreased by 22.16% from 9,126,002 pieces in fiscal year 2021 to 7,103,894 pieces in fiscal year 2022.
Gross Profit
Our gross profit increased by $1,124,411 or 17.38% to $7,595,599 for the year ended September 30, 2022 from $6,471,188 for the year ended September 30, 2021. Gross profit margin was 7.42% for the year ended September 30, 2022, as compared to 6.51% for the year ended September 30, 2021. The increase of gross profit was primarily due to increased weighted average selling prices which is attributable to the rise of raw material prices and market demand recovery over the construction materials and supply shortages on the current market compared to the fiscal year 2021.
Operating Expenses
We incurred $2,380,429 in selling and marketing expenses for the fiscal year ended September 30, 2022, compared to $3,117,906 for the fiscal year ended September 30, 2021. Selling and marketing expenses decreased by $737,477, or 23.65%, during the fiscal year ended September 30, 2022 compared to the fiscal year ended September 30, 2021. This decrease is primarily due to decreases in sales payroll expenses, compensation for the sales personnel, freight expenses, and technical service fee during the year.
We incurred $5,421,575 in general and administrative expenses for the fiscal year ended September 30, 2022, compared to $5,772,710 for the fiscal year ended September 30, 2021. General and administrative expenses decreased by $351,136, or 6.08%, for the fiscal year ended September 30, 2022 compared to the fiscal year ended September 30, 2021. The slight decrease is mainly attributable to the decreased stock-based compensation incurred during the fiscal year 2022.
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 a defi exchange platform, which is a stablecoin DEX (decentralized exchange) and liquidity mining platform, available at https://xsigma.fi. During 2022 fiscal year, the Company evalutated the recoverability of the Defi platform pursuant to ASC 360-10-35-21 and concluded that the carrying value of the Defi Exchange 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. The Company wrote off the carrying value of the platform and recorded a loss of $2,771,019. There was no asset impairment cost during the fiscal year ended September 30, 2021
We incurred $987,186 in research and development expenses for the fiscal year ended September 30, 2022, compared to $1,234,161 for the fiscal year ended September 30, 2021. R&D expenses decreased by $246,975, or 20.01%, for the fiscal year ended September 30, 2022 compared to the fiscal year ended September 30, 2021. The decrease was primarily due to the decreased research and development activities during fiscal year 2022.
Income(loss) from Operations
As a result of the factors described above, operating loss was $3,964,610 for the fiscal year ended September 30, 2022, compared to operating loss of $3,653,589 for the fiscal year ended September 30, 2021, an increase of operating loss of $311,021 or approximately 8.51%.
Other Income (Expenses)
Our interest income and expenses were $109,290 and $3,451,665, respectively, for the fiscal year ended September 30, 2022, compared to interest income and expenses of $13,733 and $1,196,648, respectively, for the fiscal year ended September 30, 2021. We also had government grant of $ 496,740 for financial support to the Company under local government's innovation incentive programs which was recorded as other income in our Statement of Operations.
Net Income (loss) and earnings (loss) per share
As a result of the factors described above, our net loss for the fiscal year ended September 30, 2022 was $6,054,266 compared to net loss of $3,802,271 for the fiscal year ended September 30, 2021, an increase in loss of $2,251,995 or approximately 59.23%.
After deducting for non-controlling interests, net loss attributable to ZK International was $6.08 million, or net loss of $0.21 per share, for the fiscal year 2022. This compared to net loss attributable to ZK International of $3.80 million, or $0.17 per share, 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 BALANCE SHEETS | ||||||
(IN U.S. DOLLARS) | ||||||
As of September 30, | ||||||
2022 | 2021 | |||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 7,515,147 | $ | 13,525,298 | ||
Restricted cash | 101,992 | 77,906 | ||||
Short-term Investment | 915,616 | 2,560,760 | ||||
Accounts receivable, net of allowance for doubtful accounts of $255,322 and $2,221,870, | 28,362,933 | 27,124,959 | ||||
Notes receivable | 49,611 | — | ||||
Other receivables and prepayments | 2,360,539 | 2,158,120 | ||||
Inventories | 21,141,501 | 20,689,252 | ||||
Advance to suppliers | 6,322,592 | 12,567,368 | ||||
Total current assets | 66,769,931 | 78,703,663 | ||||
Property, plant and equipment, net | 7,124,587 | 8,004,855 | ||||
Right-of use asset | 30,998 | 54,166 | ||||
Intangible assets, net | 11,415,451 | 8,749,987 | ||||
Deferred tax assets | 320,164 | 353,460 | ||||
Long-term deposit | — | 12,472,847 | ||||
Long-term prepayment | 10,447,395 | — | ||||
Long-term accounts receivable | 7,522,188 | — | ||||
Long-term investment | 25,292,866 | 25,323,323 | ||||
TOTAL ASSETS | $ | 128,923,580 | $ | 133,662,301 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 10,066,758 | $ | 2,159,731 | ||
Accrued expenses and other current liabilities | 6,949,772 | 6,875,769 | ||||
Lease liability - current portion | 10,754 | 26,332 | ||||
Accrued payroll and welfare | 1,880,377 | 1,853,019 | ||||
Advance from customers | 1,758,800 | 5,666,214 | ||||
Due to related parties | 2,052,403 | 1,072,335 | ||||
Convertible debentures | 3,352,311 | 2,823,364 | ||||
Short-term bank borrowings | 16,257,820 | 21,394,761 | ||||
Other borrowing - short term portion | - | 283,758 | ||||
Notes payables | 702,889 | — | ||||
Income tax payable | 817,059 | 2,354,832 | ||||
Total current liabilities | 43,848,943 | 44,510,115 | ||||
Lease liability - long term portion | 10,256 | 27,834 | ||||
TOTAL LIABILITIES | $ | 43,859,199 | $ | 44,537,949 | ||
Equity | ||||||
Common stock, no par value, 50,000,000 shares authorized, 30,392,940 and 28,918,177 shares | ||||||
Additional paid-in capital | 70,872,765 | 63,374,085 | ||||
Statutory surplus reserve | 3,176,556 | 2,914,602 | ||||
Subscription receivable | (125,000) | (125,000) | ||||
Retained earnings | 13,394,137 | 19,737,504 | ||||
Accumulated other comprehensive income (loss) | (2,640,753) | 2,898,594 | ||||
Total equity attributable to ZK International Group Co., Ltd. | 84,677,705 | 88,799,785 | ||||
Equity attributable to non-controlling interests | 386,676 | 324,567 | ||||
Total equity | 85,064,381 | 89,124,352 | ||||
TOTAL LIABILITIES AND EQUITY | $ | 128,923,580 | $ | 133,662,301 | ||
The accompanying notes are an integral part of these consolidated financial statements. | ||||||
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, | |||||||||
2022 | 2021 | 2020 | |||||||
Revenues | $ | 102,391,636 | $ | 99,407,217 | $ | 86,846,791 | |||
Cost of sales | (94,796,037) | (92,936,029) | (82,903,989) | ||||||
Gross profit | 7,595,599 | 6,471,188 | 3,942,802 | ||||||
Operating expenses: | |||||||||
Selling and marketing expenses | 2,380,429 | 3,117,906 | 2,215,651 | ||||||
General and administrative expenses | 5,421,575 | 5,772,710 | 2,482,972 | ||||||
Asset impairment costs | 2,771,019 | — | — | ||||||
Research and development costs | 987,186 | 1,234,161 | 1,123,555 | ||||||
Total operating expenses | 11,560,209 | 10,124,777 | 5,822,178 | ||||||
Operating loss | (3,964,610) | (3,653,589) | (1,879,376) | ||||||
Other income (expenses): | |||||||||
Interest expenses | (3,451,665) | (1,196,648) | (1,000,554) | ||||||
Interest income | 109,290 | 13,733 | 7,192 | ||||||
Gain on disposal of subsidiary, net | - | — | 536,612 | ||||||
Income (loss) on investment | - | 50,649 | (256,937) | ||||||
Other income (expense), net | (88,125) | 431,438 | 327,845 | ||||||
Total other expenses, net | (3,430,500) | (700,828) | (385,842) | ||||||
Loss before income taxes | (7,395,110) | (4,354,417) | (2,265,218) | ||||||
Income tax recovery | 1,340,844 | 552,146 | 1,428,202 | ||||||
Net loss | $ | (6,054,266) | $ | (3,802,271) | $ | (837,016) | |||
Net (loss) income attributable to non- | (27,147) | 2,757 | 11,402 | ||||||
Net (loss) income attributable to ZK | (6,081,413) | (3,799,514) | $ | (825,614) | |||||
Net (loss) income | (6,054,266) | $ | (3,802,271) | $ | (837,016) | ||||
Other comprehensive income (loss): | |||||||||
Foreign currency translation adjustment | (5,504,385) | 2,423,439 | 2,319,048 | ||||||
Total comprehensive loss | $ | (11,558,651) | $ | (1,378,832) | $ | 1,482,032 | |||
Comprehensive loss (income) attributable to non- | (62,109) | (14,773) | (6,136) | ||||||
Comprehensive income attributable to ZK | $ | (11,620,760) | $ | (1,393,605) | $ | 1,475,896 | |||
Basic and diluted earnings (loss) per share | |||||||||
Basic | $ | (0.21) | $ | (0.17) | $ | (0.05) | |||
Diluted | (0.21) | (0.17) | (0.05) | ||||||
Weighted average number of shares | |||||||||
Basic | 29,305,828 | 21,873,594 | 16,558,037 | ||||||
Diluted | 29,431,781 | 22,633,819 | 16,558,037 | ||||||
The accompanying notes are an integral part of these consolidated financial statements. | |||||||||
ZK INTERNATIONAL GROUP CO., LTD | ||||||||||||||||
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | ||||||||||||||||
FOR THE YEARS ENDED SEPTEMBER 30, 2022, 2021 AND 2020 | ||||||||||||||||
(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 | 16,558,037 | 18,049,630 | — | 2,904,699 | 24,372,535 | (1,808,825) | 299,666 | 43,817,705 | ||||||||
Disposal of | 3,992 | 3,992 | ||||||||||||||
Foreign currency | 2,301,510 | 17,538 | 2,319,048 | |||||||||||||
Net income | (825,614) | (11,402) | (837,016) | |||||||||||||
Balance at | 16,558,037 | 18,049,630 | — | 2,904,699 | 23,546,921 | 492,685 | 309,794 | 45,303,729 | ||||||||
Issuance of | 7,080,762 | 24,884,560 | (125,000) | 24,759,560 | ||||||||||||
Common stock | 4,374,176 | 11,443,067 | 11,443,067 | |||||||||||||
Issuance of | 355,202 | 1,345,056 | 1,345,056 | |||||||||||||
Stock-based | 550,000 | 9,542,783 | 9,542,783 | |||||||||||||
Unearned | (1,891,011) | (1,891,011) | ||||||||||||||
Foreign currency | 2,405,909 | 17,530 | 2,423,439 | |||||||||||||
Net income | 9,903 | (3,809,417) | (2,757) | (3,802,271) | ||||||||||||
Balance at | 28,918,177 | 63,374,085 | (125,000) | 2,914,602 | 19,737,504 | 2,898,594 | 324,567 | 89,124,352 | ||||||||
Stock incentive | 1,407,200 | 1,688,640 | 1,688,640 | |||||||||||||
Stock issued in | 67,563 | 116,781 | 116,781 | |||||||||||||
Fair value | 678,782 | 678,782 | ||||||||||||||
Stock-based | 5,603,615 | 5,603,615 | ||||||||||||||
Unearned | (589,138) | (589,138) | ||||||||||||||
Foreign currency translations | (5,539,347) | 34,962 | (5,504,385) | |||||||||||||
Net income | 261,954 | (6,343,367) | 27,147 | (6,054,266) | ||||||||||||
Balance at | 30,392,940 | 70,872,765 | (125,000) | 3,176,556 | 13,394,137 | (2,640,753) | 386,676 | 85,064,381 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||||
ZK INTERNATIONAL GROUP CO., LTD | |||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
(IN U.S. DOLLARS) | |||||||||
For the year ended September 30, | |||||||||
2022 | 2021 | 2020 | |||||||
Cash Flows from Operating Activities: | |||||||||
Net loss | $ | (6,054,266) | $ | (3,802,271) | $ | (837,016) | |||
Adjustments to reconcile net income to net cash used in operating activities: | |||||||||
Depreciation expense | 672,368 | 568,038 | 438,467 | ||||||
Amortization expense | 830,481 | 481,763 | 11,366 | ||||||
Right of use assets | — | (53,634) | — | ||||||
Loss on disposal of fixed assets | — | — | 7,608 | ||||||
Bad debt expense | 227,837 | 92,032 | — | ||||||
Inventory provision | — | — | 103,942 | ||||||
Write-off of advance to suppliers | — | 108,395 | 100,684 | ||||||
Deferred tax benefits | — | 406,064 | (406,637) | ||||||
Gain on accounts receivable factoring, net of discount | (451,047) | — | — | ||||||
Gain on disposal of subsidiary | — | — | (536,612) | ||||||
Loss on investment | — | — | 214,114 | ||||||
Impairment on intangible assets | 2,771,019 | — | — | ||||||
Change in unrecognized tax benefits | (1,428,458) | (918,038) | (1,021,565) | ||||||
Stock compensation expense | 2,674,807 | 1,351,082 | — | ||||||
Interest expense of convertible notes | 1,324,510 | 210,173 | — | ||||||
Interest expense of financing lease | — | 44,458 | — | ||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | (12,059,620) | 5,804,654 | (4,800,889) | ||||||
Other receivables and prepayments | (260,755) | 1,345,520 | (793,936) | ||||||
Notes receivable | (53,853) | 201,187 | 206,465 | ||||||
Inventories | (2,606,504) | 2,021,789 | 103,123 | ||||||
Advance to suppliers | 5,493,624 | (8,297,301) | 2,933,852 | ||||||
Accounts payable | 8,803,924 | (8,662,576) | 5,582,787 | ||||||
Notes payable | 762,986 | (159,823) | (153,824) | ||||||
Accrued expenses and other current liabilities | 752,241 | 2,428,410 | (484,477) | ||||||
Accrued payroll and welfare | 219,178 | 211,632 | 140,497 | ||||||
Advance from customers | (3,662,097) | 3,162,961 | (198,358) | ||||||
Income tax payable | - | (77,214) | (149,386) | ||||||
Lease liability | (28,595) | 53,635 | — | ||||||
Net cash provided (used in) operating activities | (2,072,220) | (3,479,064) | 460,205 | ||||||
Cash Flows from Investing Activities: | |||||||||
Purchases of property, plant and equipment | (507,663) | (114,319) | (1,168,322) | ||||||
Proceed from disposal of property, plant and equipment | — | 6,281 | |||||||
Purchase of CIP | (12,666) | (47,942) | — | ||||||
Disposal of intangible asset | — | — | |||||||
Purchases of intangible assets | (1,588,107) | (1,983,812) | — | ||||||
Investment into CG Malta | — | (25,000,000) | — | ||||||
Net cash used in investing activities | (2,108,436) | (27,146,073) | (1,162,041) | ||||||
Cash Flows from Financing activities: | |||||||||
Net proceeds released from (placed into) short-term investment | 1,523,953 | (2,228,301) | — | ||||||
Proceeds from short-term bank borrowings | 31,113,044 | 31,203,129 | 18,061,979 | ||||||
Repayments of short-term bank borrowings | (34,501,465) | (28,144,978) | (17,836,445) | ||||||
Net proceeds received from (repaid to) related parties | 1,173,516 | (280,313) | (133,007) | ||||||
Proceed from other borrowing | — | — | 775,951 | ||||||
Repayment of other borrowing | (279,004) | (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 | (969,956) | 40,241,501 | 761,283 | ||||||
Effect of exchange rate changes on cash | (835,453) | 227,305 | 248,950 | ||||||
Net change in cash, cash equivalents and restricted cash | (5,986,065) | 9,843,669 | 308,397 | ||||||
Cash and cash equivalents and restricted cash at the beginning of period | 13,603,204 | 3,759,535 | 3,451,138 | ||||||
Cash, cash equivalents and restricted cash at the end of period | $ | 7,617,139 | $ | 13,603,204 | $ | 3,759,535 | |||
Supplemental disclosures of cash flows information: | |||||||||
Non-cash financing activities | $ | — | $ | — | $ | — | |||
Cash paid for income taxes | $ | 87,473 | $ | 37,041 | $ | 149,291 | |||
Cash paid for interest expenses | $ | 976,091 | $ | 338,575 | $ | 991,319 | |||
The accompanying notes are an integral part of these consolidated financial statements. | |||||||||
For Media Enquiries:
Di Chen
Email: super.di@live.cn
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SOURCE ZK International Group Co., Ltd.
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Lower mortgage rates fueling existing home sales
To understand why we had such a beat in sales, you only need to go back to Nov. 9, when mortgage rates started to fall from 7.37% to 5.99%.
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Existing home sales had a huge beat of estimates on Tuesday. This wasn’t shocking for people who follow how I track housing data. To understand why we had such a beat in sales, you only need to go back to Nov. 9, when mortgage rates started to fall from 7.37% to 5.99%.
During November, December and January, purchase application data trended positive, meaning we had many weeks of better-looking data. The weekly growth in purchase application data during those months stabilized housing sales to a historically low level.
For many years I have talked about how rare it is that existing home sales trend below 4 million. That is why the historic collapse in demand in 2022 was one for the record books. We understood why sales collapsed during COVID-19. However, that was primarily due to behavior changes, which meant sales were poised to return higher once behavior returned to normal.
In 2022, it was all about affordability as mortgage rates had a historical rise. Many people just didn’t want to sell their homes and move with a much higher total cost for housing, while first-time homebuyers had to deal with affordability issues.
Even though mortgage rates were falling in November and December, positive purchase application data takes 30-90 days to hit the sales data. So, as sales collapsed from 6.5 million to 4 million in the monthly sales data, it set a low bar for sales to grow. This is something I talked about yesterday on CNBC, to take this home sale in context to what happened before it.
Because housing data and all economics are so violent lately, we created the weekly Housing Market Tracker, which is designed to look forward, not backward.
From NAR: Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – vaulted 14.5% from January to a seasonally adjusted annual rate of 4.58 million in February. Year-over-year, sales fell 22.6% (down from 5.92 million in February 2022).
As we can see in the chart above, the bounce is very noticeable, but this is different than the COVID-19 lows and massive rebound in sales. Mortgage rates spiked from 5.99% to 7.10% this year, and that produced one month of negative forward-looking purchase application data, which takes about 30-90 days to hit the sales data.
So this report is too old and slow, but if you follow the tracker, you’re not slow. This is the wild housing action I have talked about for some time and why the Housing Market Tracker becomes helpful in understanding this data.
The last two weeks have had positive purchase application data as mortgage rates fell from 7.10% down to 6.55%; tomorrow, we will see if we can make a third positive week. One thing to remember about purchase application data since Nov. 9, 2022 is that it’s had a lot more positive data than harmful data.
However, the one-month decline in purchase application data did bring us back to levels last seen in 1995 recently. So, the bar is so low we can trip over.
One of the reasons I took off the savagely unhealthy housing market label was that the days on the market are now above 30 days. I am not endorsing, nor will I ever, a housing market that has days on the market at teenager levels. A teenager level means one of two bad things are happening:
1. We have a massive credit boom in housing which will blow up in time because demand is booming, similar to the run-up in the housing bubble years.
2. We simply don’t have enough products for homebuyers, creating forced bidding in a low-inventory environment.
Guess which one we had post 2020? Look at the purchase application data above — we never had a credit boom. Look at the Inventory data below. Even with the collapse in home sales and the first real rebound, total active listings are still below 1 million.
From NAR: Total housing inventory registered at the end of February was 980,000 units, identical to January & up 15.3% from one year ago (850,000). Unsold inventory sits at a 2.6-month supply at the current sales pace, down 10.3% from January but up from 1.7 months in February ’22. #NAREHS
However, with that said, the one data line that I love, love, love, the days on the market, is over 30 days again, and no longer a teenager like last year, when the housing market was savagely unhealthy.
From NAR: First-time buyers were responsible for 27% of sales in January; Individual investors purchased 18% of homes; All-cash sales accounted for 28% of transactions; Distressed sales represented 2% of sales; Properties typically remained on the market for 34 days.
Today’s existing home sales report was good: we saw a bounce in sales, as to be expected, and the days on the market are still over 30 days. When the Federal Reserve talks about a housing reset, they’re saying they did not like the bidding wars they saw last year, so the fact that price growth looks nothing like it was a year ago is a good thing.
Also, the days on market are on a level they might feel more comfortable in. And, in this report, we saw no signs of forced selling. I’ve always believed we would never see the forced selling we saw from 2005-2008, which was the worst part of the housing bubble crash years. The Federal Reserve also believes this to be the case because of the better credit standards we have in place since 2010.
Case in point, the MBA‘s recent forbearance data shows that instead of forbearance skyrocketing higher, it’s collapsed. Remember, if you see a forbearance crash bro, hug them, they need it.
Today’s existing home sales report is backward looking as purchase application data did take a hit this year when mortgage rates spiked up to 7.10%. We all can agree now that even with a massive collapse in sales, the inventory data didn’t explode higher like many have predicted for over a decade now.
I have stressed that to understand the housing market, you need to understand how credit channels work post-2010. The 2005 bankruptcy reform laws and 2010 QM laws changed the landscape for housing economics in a way that even today I don’t believe people understand.
However, the housing market took its biggest shot ever in terms of affordability in 2022 and so far in 2023, and the American homeowner didn’t panic once. Even though this data is old, it shows the solid footing homeowners in America have, and how badly wrong the extremely bearish people in this country were about the state of the financial condition of the American homeowner.
bankruptcy covid-19 federal reserve home sales mortgage rates housing marketUncategorized
SVB contagion: Australia purportedly asks banks to report on crypto
Australia’s prudential regulator has purportedly told banks to improve reporting on crypto assets and provide daily updates.
Australia’s…
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Australia’s prudential regulator has purportedly told banks to improve reporting on crypto assets and provide daily updates.
Australia’s prudential regulator has purportedly asked local banks to report on cryptocurrency transactions amid the ongoing contagion of Silicon Valley Bank’s (SVB) collapse.
The Australian Prudential Regulation Authority (APRA) has started requesting banks to declare their exposures to startups and crypto-related companies, the Australian Financial Review reported on March 21.
The regulator has ordered banks to improve their reporting on crypto assets and provide daily updates to the APRA, the Financial Review notes, citing three people familiar with the matter. The agency is aiming to obtain more information and insight into banking exposures into crypto as well as associated risks, the sources said.
The new measures are apparently part of the APRA’s increased supervision of the banking sector in the aftermath of recent massive collapses in the global banking system. On March 19, UBS Group agreed to buy its ailing competitor Credit Suisse for $3.2 billion after the latter collapsed over the weekend. The takeover became one of the latest failures in the banking industry following the collapses of SVB and Silvergate.
Barrenjoey analyst Jonathan Mott reportedly told clients in a note that the situation “remains stable” for Australian banks but warned confidence could be quickly disrupted, putting pressure on bank margins.
Related: Silvergate, SBV collapse ‘definitely good’ for Bitcoin, Trezor exec says
“Our channel checks indicate deposits are not being withdrawn from smaller institutions in any size, and capital and liquidity buffers are strong,” Mott said, adding:
“But this is a crisis of confidence and credit spreads and cost of capital will continue to rise. At a minimum, this will add to the margin pressure the banks are facing, while credit quality will continue to deteriorate.”
The news comes soon after the Australian Banking Association launched a cost of living inquiry to study the impact of the COVID-19 pandemic and geopolitical tensions on Australians. The inquiry followed an analysis of the rising inflation suggesting that more than 186 banks in the United States are at risk of a similar shutdown if depositors decide to withdraw all funds.
cryptocurrency bitcoin crypto pandemic covid-19 cryptoUncategorized
Delta Move Is Bad News For Southwest, United Airlines Passengers
Passengers won’t be happy about this, but there’s nothing they can do about it.
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Passengers won't be happy about this, but there's nothing they can do about it.
Airfare prices move up and down based on two major things -- passenger demand and the cost of actually flying the plane. In recent months, with covid rules and mask mandates a thing of the past, demand has been very heavy.
Domestic air travel traffic for 2022 rose 10.9% compared to the prior year. The nation's air traffic in 2022 was at 79.6% of the full-year 2019 level. December 2022 domestic traffic was up 2.6% over the year-earlier period and was at 79.9% of December 2019 traffic, according to The International Air Transport Association (IATA).
“The industry left 2022 in far stronger shape than it entered, as most governments lifted COVID-19 travel restrictions during the year and people took advantage of the restoration of their freedom to travel. This momentum is expected to continue in the New Year,” said IATA Director General Willie Walsh.
And, while that's not a full recovery to 2019 levels, overall capacity has also not recovered. Total airline seats available actually sits "around 18% below the 2019 level," according to a report from industry analyst OAG.
So, basically, the drop in passengers equals the drop in capacity meaning that planes are flying full. That's one half of the equation that keeps airfare prices high and the second one looks bad for anyone planning to fly in the coming years.
Image source: Getty Images.
Airlines Face One Key Rising Cost
While airlines face some variable costs like fuel, they also must account for fixed costs when setting airfares. Personnel are a major piece of that and the pandemic has accelerated a pilot shortage. That has given the unions that represent pilots the upper hand when it comes to making deals with the airlines.
The first domino in that process fell when Delta Airlines (DAL) - Get Free Report pilots agreed to a contract in early March that gave them an immediate 18% increase with a total of a 34% raise over the four-year term of the deal.
"The Delta contract is now the industry standard, and we expect United to also offer their pilots a similar contract," investment analyst Helane Becker of Cowen wrote in a March 10 commentary, Travel Weekly reported.
US airfare prices have been climbing. They were 8.3% above pre-pandemic levels in February, according to Consumer Price Index, but they're actually below historical highs.
Southwest and United Airlines Pilots Are Next
Airlines have very little negotiating power when it comes to pilots. You can't fly a plane without pilots and the overall shortage of qualified people to fill those roles means that, within reason, United (UAL) - Get Free Report and Southwest Airlines (LUV) - Get Free Report, both of which are negotiating new deals with their pilot unions, more or less have to equal (or improve on) the Delta deal.
The actual specifics don't matter much to consumers, but the takeaway is that the cost of hiring pilots is about to go up in a very meaningful way at both United and Southwest. That will create a situation where all major U.S. airlines have a higher cost basis going forward.
Lower fuel prices could offset that somewhat, but raises are not going to be unique to pilots. Southwest also has to make a deal with its flight attendants and, although they don't have the same leverage as the pilots, they have taken a hard line.
The union, which represents Southwest’s 18,000 flight attendants, has been working without a contract for four years. It shared a statement on its Facebook page detailing its position Feb. 20.
"TWU Local 556 believes strongly in making this airline successful and is working to ensure this company we love isn’t run into the ground by leadership more concerned about shareholders than about workers and customers. Management’s methodology of choosing profits at the expense of the operation and its workforce has to change, because the flying public is also tired of the empty apologies that flight attendants have endured for years."
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