ZST Digital Networks, Inc. (ZSTN)

[Neuronal]

ZSTN Good article and discussions on the Yahoo finance page on ZSTN, most of which are very positive about the company. You can check them out for more detailed discussion. I have borrowed a couple exerpts there from author MarkSharky which are insightful for what it's worth:

"There are several legitimate reasons for SAIC reported financial statements not to match those numbers filed with the SEC. First of all, the SAIC is the business registrar and not the Chinese equivalent of the SEC. The SAIC does neither review nor audit financial statements submitted with the annual inspection report. Most companies see the sole purpose of an SAIC filing in getting their business license renewed, and some even hire a third party to do the filing for them."

"Another reason is the difference in accounting principles. Chinese documents are audited under PRC GAAP, while SEC filings are based on U.S. GAAP standards for financial reporting. There are many differences between those standard, starting with how revenue is recognized. I can't get into detail here but the bottom line is that certain key numbers don't have to be the same in order to still both be correct.

Roth Capital points out several other possible reasons for divergent filings:
Business Consolidation: In China every legal entity has to file its own annual inspection report with the SAIC. This includes every individual division or subsidiary of the U.S.-listed company and a separate report from the parent company. Sometimes the parent report is consolidated while other times it is not. According to Roth, inter-company transactions might be treated differently than in the U.S.: "For U.S. GAAP purposes, inter-company transactions are treated carefully to avoid double counting. However, for PRC tax purposes, PRC tax professionals may seek to use inter-company transactions in ways to minimize tax. This includes using different consolidation approaches and/or using inter-company transactions to allocated profits to entities that are subject to lower tax rates (including Hong Kong companies or PRC entities that have special tax benefits)."

I also borrowed this link from the Yahoo discussion board which describes the difference between SAIC and SEC filing, explains why there is a difference between SAIC and SEC filing of ZSTN, and gives more evidence that ZSTN is not a fraud.

http://china.fixyou.co.uk/2010/07/on-saic-and-sec-filings.html

I personally only have a few shares of ZSTN so don't care too much either way, but am thinking about loading up at these prices since I'm sure this will be rebounding back up soon...