Business Context and Reporting Period
ZJK Industrial Co., Ltd. (ZJK) is a Cayman Islands exempted company incorporated in May 2022, operating primarily through subsidiaries in mainland China and Vietnam. The company specializes in manufacturing precision fasteners, structural parts, and metal components for new energy vehicles and intelligent electronic equipment. This Form 20-F covers the fiscal year ended December 31, 2024. ZJK completed its Initial Public Offering (IPO) in October 2024, listing on the Nasdaq Capital Market under the symbol "ZJK."
Key Financial Metrics (Year Ended December 31, 2024)
| Metric | 2024 (USD) | 2023 (USD) |
|---|---|---|
| Total Revenues | $37,809,465 | $29,055,306 |
| Gross Profit | $13,565,238 | $11,020,888 |
| Gross Margin | 35.88% | 37.93% |
| Net Income | $3,662,829 | $7,689,839 |
| Net Income Attributable to Shareholders | $3,682,723 | $7,691,085 |
| Operating Cash Flow | $5,342,539 | $4,116,374 |
| Cash and Cash Equivalents (End of Period) | $12,255,213 | $2,826,725 |
| Total Assets | $55,771,256 | $38,280,433 |
| Total Liabilities | $25,704,381 | $16,578,005 |
| Short-term Bank Borrowings | $1,223,405 | $37,184 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased by 30.13% to $37.81 million, driven by a 27.58% increase in sales volume and the addition of AI-related projects. Third-party sales grew significantly to $21.25 million.
- Profitability Decline: Despite revenue growth, Net Income attributable to shareholders dropped 52.12% to $3.68 million. Operating income fell 73.98% to $1.63 million.
- Expense Surge: General and Administrative (G&A) expenses rose 164.88% to $6.71 million, primarily due to a $3.92 million increase in professional service fees related to the IPO. Selling and marketing expenses increased 169.08% to $4.71 million due to market expansion into North America, Singapore, and Taiwan.
- Liquidity Improvement: Cash and cash equivalents increased to $12.26 million, bolstered by $6.91 million in gross proceeds from the October 2024 IPO.
- Margin Compression: Gross margin decreased from 37.93% to 35.88%, attributed to higher sales of lower-margin screws and price reductions to maintain customer share.
Guidance, Outlook, Risks, and Contingencies
Outlook and Strategy: Management plans to use IPO proceeds for working capital, expanding manufacturing facilities, and growing sales networks in North America and Southeast Asia. The company intends to retain earnings for business expansion rather than paying dividends in the foreseeable future.
Material Weaknesses in Internal Controls: Management identified material weaknesses in internal control over financial reporting as of December 31, 2024, specifically citing a lack of in-house accounting personnel with sufficient U.S. GAAP and SEC reporting experience. Remediation plans include hiring qualified personnel and establishing an internal audit function.
Key Risks:
- Customer Concentration: The top two customers (PSM-ZJK and BULTEN Wuxi) accounted for 56% of total revenue in 2024. PSM-ZJK is a related party (49% owned by the company).
- Regulatory Risks (China): Risks include potential non-compliance with environmental laws (subsidiaries lack certain discharge permits), labor law compliance, and evolving regulations regarding overseas listings and data security.
- HFCAA and Delisting: While the current auditor (HTL International, LLC) is subject to PCAOB inspection, the company faces risks related to the Holding Foreign Companies Accountable Act (HFCAA) if future inspections are obstructed.
- Environmental Compliance: Subsidiaries Zhongjinke Shenzhen and Zhongke Components have not completed all required environmental protection self-inspections for new construction projects, exposing the company to potential fines or operational restrictions.
Investor Verification Checklist
- Related Party Transactions: Verify the commercial terms and pricing of sales to PSM-ZJK, which accounted for 44% of total revenue in 2024.
- Environmental Compliance Status: Confirm the timeline for obtaining pollutant discharge permits and completing environmental self-inspections for Zhongjinke Shenzhen and Zhongke Components to assess risk of fines or shutdowns.
- Internal Control Remediation: Monitor progress on hiring U.S. GAAP-compliant accounting staff and establishing internal audit functions to address the disclosed material weaknesses.
- Customer Diversification: Assess the company's progress in reducing reliance on its top two customers, which collectively represent over half of its revenue.
- Capital Expenditure Execution: Verify the deployment of IPO proceeds toward the planned expansion of manufacturing facilities and the $2.0 million equipment purchase commitment.