ZST Digital Networks (OTC:ZSTN), a supplier of digital and optical network equipment to cable system operators in China, is expected to go public this week.
Business Overview (from prospectus)
We are principally engaged in supplying digital and optical network equipment to cable system operators in the Henan Province of China. We have developed a line of internet protocol television (“IPTV”) set-top boxes that are used to provide bundled cable television, Internet and telephone services to residential and commercial customers. We have assisted in the installation and construction of over 400 local cable networks covering more than 90 municipal districts, counties, townships, and enterprises. Our services and products have been recognized with various certifications, including “integrated computer information system qualification class III” issued by the Ministry of Industry Information, “communication user cable construction enterprise qualification” issued by the Henan Province Administration of Communication, “Henan Province Security Technology Prevention Engineering Qualification Class III”, a certificate of “ISO9001: 2000 Quality System Authentication”, and “Double High” certification, high-tech product and high-tech enterprise issued by the Henan Province government.
Offering: 3.1 million shares at $8-$9 per share. Net proceeds of approximately $20,950,000 will be used for general corporate purposes and to fund GPS tracking unit inventories and related accounts receivable.
Lead Underwriters: Rodman & Renshaw, Westpark Capital
Revenues from product sales were $41,439,540 for the six months ended June 30, 2009, an increase of $15,661,237, or 61%, compared to $25,778,303 for the same period in 2008... Cost of goods sold, which include raw material, labor and amounts due to contract manufacturers, was $34,950,607 for the six months ended June 30, 2009, an increase of $13,953,698, or 66%, compared to $20,996,909 for the same period in 2008... Gross profit for six months ended June 30, 2009 was $6,488,933, or 16% of revenues, compared to $4,781,394, or 19% of revenues, for the comparable period in 2008... Selling expenses, which mainly include marketing, shipping, insurance, wage and other expenses, were $35,302 for the six months ended June 30, 2009, a decrease of $70,768, or 67%, compared to $106,070 for the same period in 2008.
Currently, there are many significant competitors in the set-top box business including several established companies who have sold set-top boxes to major cable operators for many years. These competitors include companies such as Motorola (MOT), Cisco Systems (CSCO), and Pace. In addition, a number of rapidly growing companies have recently entered the market, many of them with set-top box offerings similar to our existing set-top box products. We also expect additional competition in the future from new and existing companies who do not currently compete in the market for set-top boxes. As the set-top box business evolves, our current and potential competitors may establish cooperative relationships among themselves or with third parties, including software and hardware companies that could acquire significant market share, which could adversely affect our business. We also face competition from set-top boxes that have been internally developed by digital video providers.