Date of Report (Date of earliest event reported):
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March 4, 2011
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Delaware
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001-34488
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20-8057756
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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Registrant’s telephone number, including area code
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(86) 371-6771-6850
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Item 2.02
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Results of Operations and Financial Condition.
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Item 7.01
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Regulation FD Disclosure.
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Item 9.01
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Financial Statements and Exhibits.
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Exhibit
Number
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Description
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99.1
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Press Release dated March 4, 2011.
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ZST DIGITAL NETWORKS, INC. | |||
Date: March 4, 2011
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By:
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/s/ John Chen | |
Name: | John Chen | ||
Title: | Chief Financial Officer | ||
Exhibit
Number
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Description
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99.1
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Press Release dated March 4, 2011.
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·
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Total revenue was US$46.0 million, an increase of 51% compared to the fourth quarter of 2009.
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·
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Gross profit for the fourth quarter 2010 was US$12.4 million, an increase of 113% compared to the fourth quarter 2009.
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·
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Gross profit margin for the fourth quarter 2010 was 27%, compared to 19% for the fourth quarter of 2009.
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·
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Operating income for the fourth quarter 2010 was US$11.0 million, an increase of 161% compared to the fourth quarter of 2009.
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·
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Net income for the fourth quarter 2010 was US$8.5 million, an increase of 176% compared to the fourth quarter of 2009.
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·
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Net income margin for the fourth quarter of 2010 was 18.5%, compared to 10.1% for the fourth quarter of 2009.
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·
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Total revenue for the fiscal year 2010 was US$134.6 million, an increase of 34% compared to the fiscal year 2009.
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·
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Gross profit for the fiscal year 2010 was US$34.8 million, an increase of 104% compared to the fiscal year 2009. Gross profit margin for the fiscal year 2010 was 26%, compared to 17% for the fiscal year 2009.
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·
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Net income for the fiscal year 2010 was US$22.1 million, an increase of 117% compared to the fiscal year 2009.
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·
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Net income margin for the fiscal year 2010 was 16.4%, compared to 10.1% for the fiscal year 2009.
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·
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Basic and diluted earnings per share were both US$1.90 for the fiscal year 2010, an increase of US$0.74 compared to US$1.16 for basic and diluted earnings per share for the fiscal year 2009.
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·
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On December 16, 2010, ZST Digital Networks’ commercial GPS tracking products were awarded official certification by the China Communications Product Certification Center (“CCPC”) of the Ministry of Transport of the PRC. While the GPS vehicle tracking product market has been in development in China for over a decade, various government ministries have only recently begun to issue official quality standards and guidelines. In August 2010, the Ministry of Transport, through the CCPC, initiated a certification program for GPS tracking products, and a number of manufacturers have applied for certification. To the best of the Company’s knowledge, ZST
Digital is the first company to date to have received official certification for its commercial GPS tracking products following a successful product inspection, testing, and review process by the CCPC.
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·
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On January 28, 2011, the Company announced that as a part of its ongoing expansion strategy, the Company entered into a purchase agreement for two floors of an office building located near its existing offices in Zhengzhou City, China. The purchased area is approximately 2,880 square meters, for a total purchase price of approximately US$7.8 million. Previously, in March 2010, the Company agreed to purchase an additional office space of approximately 2,100 square meters in the same building for approximately $1.7 million. In addition to providing additional workspace and growth capacity, the new office space purchase puts a significant tangible asset on ZST’s balance sheet.
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·
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On February 24, 2011, the Company announced that it had entered into an agreement with the Road Transportation Department of Shangqiu City, a city with over eight million residents in eastern Henan Province, to develop a city-wide GPS tracking platform for commercial vehicles. The platform will utilize ZST Digital’s commercial GPS tracking technology and will link registered vehicles to the national and provincial transportation departments. In addition, ZST Digital will provide ongoing maintenance and support of the platform. Management estimates the total investment in the project will amount to RMB2.0 million (approximately US$0.3 million)(1). The Company believes that the agreement could generate approximately RMB40-50 million
(approximately US$6.1-7.6 million) in revenue per year upon successful completion of the platform, and it expects to begin generating revenue from this project in the second quarter of fiscal 2011.
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(1)
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The amount in RMB was translated into U.S. Dollars using the spot rate of US$1 = RMB6.566 for February 24, 2011.
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Company Contact:
ZST Digital Networks, Inc
John Chen, Chief Financial Officer
Email: jchen@shenyangkeji.com
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Investor Relations (US):
Taylor Rafferty, LLC
Bryan Degnan
Tel: +1-212-889-4350
Email: zstdigital@taylor-rafferty.com
www.taylor-rafferty.com
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Investor Relations (US):
BPC Financial Marketing
John Baldissera
Tel: 800-368-1217
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Investor Relations (HK):
Taylor Rafferty, LLC
Mahmoud Siddig
Tel: +852-3196-3712
Email: zstdigital@taylor-rafferty.com
www.taylor-rafferty.com
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December 31,
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December 31,
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|||||||
2009
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2010
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|||||||
(Unaudited)
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(Unaudited)
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|||||||
ASSETS
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||||||||
Current assets:
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||||||||
Cash and cash equivalents
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$ | 13,627,992 | $ | 23,702,457 | ||||
Accounts receivable
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24,885,497 | 33,490,510 | ||||||
Inventories
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1,245,803 | 221,093 | ||||||
Advance to suppliers
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7,399,141 | 7,270,379 | ||||||
Prepaid expenses and other receivable
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1,064,499 | 1,019,629 | ||||||
Deferred tax assets
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- | 685,491 | ||||||
Total current assets
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48,222,932 | 66,389,559 | ||||||
Property, machinery, equipment and software, net
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875,806 | 10,544,051 | ||||||
Intangible asset
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171,122 | 166,288 | ||||||
Prepaid expenses – long term
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858,609 | - | ||||||
Total assets
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$ | 50,128,469 | $ | 77,099,898 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
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||||||||
Current liabilities:
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||||||||
Accounts payable
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$ | 700,940 | $ | - | ||||
Deferred revenue
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376,586 | 2,741,964 | ||||||
Accruals and other payables
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295,410 | 263,073 | ||||||
Accrued payroll and related expense
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66,370 | 129,281 | ||||||
VAT payable
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198,828 | 669,682 | ||||||
Franchise tax payable
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162,100 | 170,000 | ||||||
Income tax payable
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547,917 | 1,289,974 | ||||||
Total current liabilities
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2,348,151 | 5,263,974 | ||||||
Equity:
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||||||||
Common stock $0.0001 par value, 100,000,000 shares authorized, 11,650,442 and 11,650,442 shares issued and outstanding
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1,165 | 1,165 | ||||||
Additional paid-in capital
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30,677,932 | 30,729,182 | ||||||
Treasury stock
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- | (198,335 | ) | |||||
Appropriated earnings
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3,328,345 | 5,817,035 | ||||||
Retained earnings
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13,752,791 | 33,358,364 | ||||||
Translation adjustment
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20,085 | 2,128,513 | ||||||
Total equity
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47,780,318 | 71,835,924 | ||||||
Total liabilities and equity
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$ | 50,128,469 | $ | 77,099,898 |
Three Months Ended
December 31,
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||||||||
2009
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2010
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|||||||
(Unaudited)
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(Unaudited)
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|||||||
Revenues:
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||||||||
Sales of products
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$ | 29,727,739 | $ | 43,430,075 | ||||
Sales of services
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619,192 | 2,525,442 | ||||||
Total revenue
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30,346,931 | 45,955,517 | ||||||
Cost of sales:
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||||||||
Cost of products sold
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24,416,152 | 33,513,943 | ||||||
Cost of services
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142,910 | 87,160 | ||||||
Total cost of sales
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24,559,062 | 33,601,103 | ||||||
Gross profit
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5,787,869 | 12,354,414 | ||||||
Selling expense
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373,283 | 180,514 | ||||||
Research and development expenses
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112,399 | 30,080 | ||||||
General and administrative expenses
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1,104,013 | 1,175,565 | ||||||
Merger cost
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- | - | ||||||
Income from operations
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4,198,174 | 10,968,255 | ||||||
Interest income (expense), net
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315 | 26,265 | ||||||
Other income
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371,548 | (290 | ) | |||||
Income before income taxes
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4,570,037 | 10,994,230 | ||||||
Income tax provision
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1,491,584 | 2,483,271 | ||||||
Net income
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$ | 3,078,453 | $ | 8,510,959 | ||||
Weighted average common shares outstanding – basic
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8,776,491 | 11,650,442 | ||||||
Earnings per share – basic
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$ | 0.28 | $ | 0.73 | ||||
Weighted average common shares outstanding – diluted
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8,776,491 | 11,650,442 | ||||||
Earnings per shares – diluted
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$ | 0.28 | $ | 0.73 | ||||
Comprehensive income:
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||||||||
Net income
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3,078,453 | 8,510,959 | ||||||
Translation adjustment
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(19,518 | ) | 1,023,503 | |||||
Comprehensive income
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$ | 3,058,935 | $ | 9,534,462 |
Years Ended
December 31, |
||||||||
2009
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2010
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|||||||
(Unaudited)
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(Unaudited)
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|||||||
Revenues:
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||||||||
Sales of products
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$ | 99,794,923 | $ | 127,848,170 | ||||
Sales of services
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619,192 | 6,720,751 | ||||||
Total revenue
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100,414,115 | 134,568,921 | ||||||
Cost of sales:
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||||||||
Cost of products sold
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83,189,772 | 99,564,280 | ||||||
Cost of services
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142,910 | 205,956 | ||||||
Total cost of sales
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83,332,682 | 99,770,236 | ||||||
Gross profit
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17,081,433 | 34,798,685 | ||||||
Selling expense
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459,145 | 743,988 | ||||||
Research and development expenses
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221,467 | 399,438 | ||||||
General and administrative expenses
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1,806,180 | 3,691,162 | ||||||
Merger cost
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566,654 | - | ||||||
Income from operations
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14,027,987 | 29,964,097 | ||||||
Interest income (expense), net
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(127,976 | ) | 78,560 | |||||
Other income
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363,866 | 34,568 | ||||||
Income before income taxes
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14,263,877 | 30,077,225 | ||||||
Income tax provision
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4,085,308 | 7,982,962 | ||||||
Net income
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$ | 10,178,569 | $ | 22,094,263 | ||||
Weighted average common shares outstanding – basic
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8,776,491 | 11,650,442 | ||||||
Earnings per share – basic
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$ | 1.16 | $ | 1.90 | ||||
Weighted average common shares outstanding – diluted
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8,776,491 | 11,650,442 | ||||||
Earnings per shares – diluted
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$ | 1.16 | $ | 1.90 | ||||
Comprehensive income:
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||||||||
Net income
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10,178,569 | 22,094,263 | ||||||
Translation adjustment
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(570,574 | ) | 2,108,428 | |||||
Comprehensive income
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$ | 9,607,995 | $ | 24,202,691 |
Years Ended
December 31, |
||||||||
2009
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2010
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|||||||
(Unaudited)
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(Unaudited)
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|||||||
Cash flows from operating activities:
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||||||||
Net income
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$ | 10,178,569 | $ | 22,094,263 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
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||||||||
Depreciation and amortization
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109,865 | 258,169 | ||||||
Stock option issued as compensation
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34,193 | 148,639 | ||||||
Imputed interest
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31,417 | - | ||||||
Deferred tax assets
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- | (685,491 | ) | |||||
Changes in operating assets and liabilities:
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||||||||
Accounts receivable
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(12,563,398 | ) | (8,349,833 | ) | ||||
Inventories
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(470,618 | ) | 989,316 | |||||
Advance to suppliers
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(4,374,473 | ) | 115,700 | |||||
Prepayment and other assets
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(1,909,833 | ) | 790,629 | |||||
VAT payable
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108,184 | 486,200 | ||||||
Accounts payable
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(569,156 | ) | (700,940 | ) | ||||
Accruals and other payable
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(145,070 | ) | 41,223 | |||||
Deferred revenue
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376,586 | 2,443,211 | ||||||
Taxes payable
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547,917 | 765,963 | ||||||
Net cash provided by(used in) operating activities
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(8,645,817 | ) | 18,397,049 | |||||
Cash flows from investing activities:
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||||||||
Additions to property, machinery, equipment and software
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(887,327 | ) | (9,631,680 | ) | ||||
Additions to intangible assets
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(235,476 | ) | 28,965 | |||||
Net cash used in investing activities
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(1,122,803 | ) | (9,602,715 | ) | ||||
Cash flows from financing activities:
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||||||||
Repayments for short term bank loans
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(3,930,964 | ) | - | |||||
Net proceeds from sale of common stock and preferred stock
|
25,768,879 | - | ||||||
Repurchase of common stock
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- | (198,335 | ) | |||||
Net cash received from financing activities
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21,837,915 | (198,335 | ) | |||||
Effect of changes in foreign exchange rates
|
423,743 | 1,478,466 | ||||||
Net increase in cash and cash equivalents
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12,493,038 | 10,074,465 | ||||||
Cash and cash equivalents, beginning of the year
|
1,134,954 | 13,627,992 | ||||||
Cash and cash equivalents, end of the year
|
$ | 13,627,992 | $ | 23,702,457 | ||||
Supplemental disclosures of cash flow information:
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||||||||
Cash paid for interest
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$ | 200,483 | $ | - | ||||
Cash paid for income taxes
|
$ | 3,634,146 | $ | 7,946,879 |