Zst Digital Networks (PINK:ZSTN)

As previously disclosed in a current report on Form 8-K, filed with the Securities and Exchange Commission (“SEC”) on March 30, 2012, BDO China Dahua CPA Co., Ltd. (“BDO”) informed ZST Digital Networks, Inc. (the "Company") of its decision to resign as the Company's independent registered public accounting firm, effective Mach 26, 2012. In addition, BDO informed the Company that BDO can no longer support its opinion dated March 3, 2011 related to its audit of the Company’s consolidated financial statements for the year ended December 31, 2010 contained in the Form 10-K filed with the SEC on March 4, 2011. As a result, the Company does not anticipate that it will be able to file the annual report on Form 10-K for the fiscal year ended December 31, 2011 timely in accordance with the Securities Exchange Act of 1934.

On April 2, 2012, the Board of Directors of the Company determined that it is in the best interest of the Company to voluntarily delist the Company’s common stock from the NASDAQ Global Market. In connection therewith, the Company notified The NASDAQ Stock Market on April 6, 2012 of the Company’s intention to file a Form 25, Notification of Removal from Listing and/or Registration under Section 12(b) of the Securities Exchange Act of 1934, with the SEC on or about April 16, 2012.

Letter From BDO:

We hereby give you an official notice of our resignation as auditor of the Company.

During the process of auditing of the Company’s consolidated statements for the year ended December 31, 2011, our audit procedures were seriously restricted by the Company. Consequently, we were unable to continue providing our services as the Independent Registered Public Accounting Firm for the Company. In consideration of the agreed upon procedures we completed on December 20, 2011 for the cash verification requested by NASDAQ, which including visiting in person of the bank, physically observing bank employees printing bank statements, etc., we planned a more simple procedure to confirm the bank balance; but the Company refused and insisted we follow the process the Company had arranged.

On March 6, 2012, the Company informed us that the bank account with the largest balance as of December 31, 2011 was closed on February 24, 2012 and the balance on this bank account was transferred to a new account in another bank. The balance as of December 31, 2011 on the former bank account was no longer available for confirmation as we previously requested.

The restrictions placed on us by the Company had substantially limited our work scope and we determined were severe enough that caused us from being able to complete the December 31, 2011 audit. Therefore, we must resign as auditor of the Company. In addition, the restrictions on the audit procedures could indicate a probability that there were material errors in previously issued financial statements. As a result of the restriction and work scope limitation, we are unable to rely on the Company’s management’s representations as they related to previously issued financial statements. Consequently, we can no longer support our opinion dated March 3, 2011 related to our audit of the consolidated financial statements of the Company as of December 31, 2010 included in the Form 10--K filed with the SEC on March 4, 2011.

The Company and several of its directors and officers have been named as defendants in a purported securities class action lawsuit filed in the U.S. District Court for the Central District of California. The complaint was filed on April 25, 2011 and is captioned Robert Scott v. ZST Digital Networks, Inc., et al. The complaint alleges that the Company and certain of our current and former officers and directors violated Federal securities laws by making false and/or misleading statements and failing to disclose material adverse facts about the Company's business, operations, prospects, performance, and internal controls. Named in the complaint as individual defendants are Zhong Bo, our CEO and Chairman of the Board; Zhong Lin, our COO and a member of our Board; and John Chen and Zeng Yun Su, two former CFOs.

The complaint asserts claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as amended, on behalf of all persons who purchased or otherwise acquired common stock of the Company pursuant or traceable to the registration statement and prospectus filed in connection with the Company's October 20, 2009 public offering (the “Registration Statement”), and claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, on behalf of purchasers of the Company's common stock during the period October 20, 2009 to April 21, 2011. Specifically, the complaint alleges that the Registration Statement contained falsely stated revenue for fiscal 2008 and the first six months of fiscal 2009 and that the Company's Form 10-K for the fiscal year ended December 31, 2009 (“2009 Form 10-K") provided false revenue amounts for fiscal years 2008 and 2009. In support of its allegations, the complaint, inter alia, references an April 21, 2011 report published by an online financial news website entitled seekingalpha.com that reported that documents filed by the Company’s subsidiary Zhengzhou Shenyang Technology Company Limited with the SAIC (State Administration of Industry and Commerce) in the PRC reported revenue amounts for the applicable periods that were substantially lower than revenue reported in the Company's Registration Statement and 2009 Form 10-K.