ZST Digital Networks (ZSTN), scheduled to trade Oct 20

Small IPO, $25mm

Profitable on increasing sales

Low gross margin of 15%

No R&D spending

Annualized P/E ratio of 12

ZST Digital Networks	ZSTN, C+, 7					Post-IPO shares: 11.5mm
Set-top boxes
Zhengzhou, China	2006	2007	2008	'08 six mos	'09 six mos	IPO Mkt
Rev ($mm)	$6	$29	$55	$26	$41	Cap (mm)
Gross profit %	21%	19%	18%	19%	15%	$92
Net aftertax income	$1	$3	$6	$3	$4	@$8
Net income %	11%	10%	11%	12%	9%
VALUATION RATIOS	IPO Mrkt	Price /	Price /	Price /	Price /	% offered
	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	in IPO
ZST Digital Net (ZSTN)	$92	1.1	12.1	2.3	2.3	27%
SCORECARD		Mgt	Market	Market Do-	Proprie-	Total
1-5, 5 is high			Growth	mination	tary	rating
20 is perfect		2	2	2	1	7

BUSINESS

. ZSTN is principally engaged in supplying digital and optical network equipment to cable system operators in the Henan Province of China. . ZSTN has 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. The company has assisted in the installation and construction of over 400 local cable networks covering more than 90 municipal districts, counties, townships, and enterprises.

REVENUES

Revenues consist of sales of set-top and digital networking products and revenues recorded under network installation projects. . 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. . The increase in revenues is primarily a result of the increase in sales of IPTV set-top boxes. Regional TV broadcast stations are upgrading their broadcast systems to the digital network, and as a result, every household is required to upgrade their IPTV set-top boxes. . In 2008, the regional government provided incentives for TV broadcast stations to expand their broadcast coverage to suburban areas, which will result in an increase of new subscribers of digital networks for the next two years.

GROSS MARGIN

. 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.

R&D

. For the six months ended June 30, 2009 and 2008, ZSTN invested $0 in research and development . ZSTN expects that its research and development budget will substantially increase as the scope of operations expands and as ZSTN has access to additional working capital to fund these activities.

. For the years ended December 31, 2007 and 2006, ZSTN invested approximately $88,864 and $48, respectively, in research and development.

SERVICES & PRODUCT RECOGNITION

. ZSTN’s 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.

CLIENTS

. The main clients are broadcasting TV bureaus and cable network operators serving various cities and counties. The Company has over 30 main customers, including the broadcasting TV bureaus and cable network operators of the cities of Nanyang, Mengzhou, Xuchang, Pingdingshan, Kaifeng, Zhoukou and Gongyi, and the counties of Yuanyang, Luoning, Neihuang, Yinyang, Xixia, Kaifeng, Nanzhao, and Gushi.

GROWTH PLAN

. In the near future, ZSTN plans to joint venture with cable network operators to provide bundled television programming, Internet and telephone services to residential customers in cities and counties located in the Henan Province. . Currently in the process of establishing a partnership with China Unicom, a wireless network provider, in connection with the Company’s development and sale of its GPS tracking units. . In March 2009, ZSTN entered into a network access right agreement with the Henan Subsidiary of China Unicom that allows ZSTN to use the China Unicom wireless network for providing GPS location and tracking services to third parties. . Upon completion of this offering, the Company intends to negotiate a reseller agreement with the Henan Subsidiary of China Unicom whereby GPS tracking units supplied by the Company would be sold in the Henan Subsidiary of China Unicom retail stores, with ZSTN receiving a share of subscriber revenue collected by the Henan Subsidiary of China Unicom.

COMPETITION

Includes companies such as Motorola (MOT), Cisco Systems (CSCO), and Pace

HISTORY

. Incorporated in the State of Delaware on December 7, 2006. Originally organized as a "blank check" shell company to investigate and acquire a target company or business seeking the perceived advantages of being a publicly held corporation.. On January 9, 2009, closed a share exchange transaction pursuant to which 806,408 shares of common stock was issued to acquire 100% equity ownership of World Orient and ZSTN assumed the operations of World Orient and its subsidiaries, including Zhengzhou ZST, and changed its name from SRKP 18, Inc. to ZST Digital Networks, Inc.

USE OF PROCEEDS

Of $21mm

Working capital