UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 20-F



(AMENDMENT NO.1)





(Mark One)



| |  ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ------------------------------------------------------------------------------------------------



OR



| | x | ANNUAL REPORT PURSUANT TO SECTION 13
        OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
        For the fiscal year ended September 30,
        2018
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



OR



| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------



OR



| |  ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | -------------------------------------------------------------------------------------------



For the transition period from                        to



Commission file number 001-38146



ZK INTERNATIONAL GROUP CO., LTD.

(Exact name of Registrant as specified in its
charter)



British Virgin Islands

(Jurisdiction of incorporation or organization)



c/o Zhejiang Zhengkang Industrial Co., Ltd.

No. 678 Dingxiang Road, Binhai Industrial
Park

Economic & Technology Development Zone

(Address of principal executive offices)



Di Chen, Corporate Secretary

+86-577-86852999

zjzk@cn-zk.cn

c/o Zhejiang Zhengkang Industrial Co., Ltd.

No. 678 Dingxiang Road, Binhai Industrial
Park

Economic & Technology Development Zone



(Name, Telephone, E-mail and/or Facsimile
number and Address of Company Contact Person)



Securities registered or to be registered pursuant to Section 12(b)
of the Act:





|Title of each class                     |  | Trading Symbol(s) |  | Name of each exchange on which registered
|--------------------------------------- |  | ----------------- |  | -----------------------------------------
|Ordinary shares, no par value per share |  | ZKIN              |  | The NASDAQ Stock Market LLC              



Securities registered or to be registered pursuant to Section 12(g)
of the Act: None



Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act: None



Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period covered by the annual report: 16,528,037 Ordinary shares as of September
30, 2018.



Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.



 ̈ Yes    x No



If this report is an annual or transition report, indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.



 ̈ Yes    x No



Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.



x Yes     ̈ No



Indicate by check mark whether the registrant has submitted electronically
 every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files).



x Yes     ̈ No



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large
accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange
Act.



|Large accelerated filer  ̈ | Accelerated filer  ̈ | Non-accelerated filer x  
|------------------------- | ------------------- | -------------------------
|                          |                     | Emerging growth company x



If an emerging growth company that prepares
its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a)
of the Exchange Act.  ̈



Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:





|U.S. GAAP x |  | International Financial Reporting Standards as issued |  | Other  ̈
|----------- |  | ----------------------------------------------------- |  | -------
|            |  | by the International Accounting Standards Board  ̈     |  |        



If "Other" has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant has elected to follow.



 ̈ Item 17     ̈ Item 18



If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).



 ̈ Yes    x No



(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PAST FIVE YEARS)



Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.



 ̈ Yes     ̈ No



















Table of Contents



|          |                                                                              | Page
|--------- | ---------------------------------------------------------------------------- | ----
|PART I    |                                                                              | 5   
|Item 1.   | Identity of Directors, Senior Management and Advisers                        | 5   
|Item 2.   | Offer Statistics and Expected Timetable                                      | 5   
|Item 3.   | Key Information                                                              | 5   
|Item 4.   | Information on the Company                                                   | 24  
|Item 4A.  | Unresolved Staff Comments                                                    | 41  
|Item 5.   | Operating and Financial Review and Prospects                                 | 41  
|Item 6.   | Directors, Senior Management and Employees                                   | 50  
|Item 7.   | Major Shareholders and Related Party Transactions                            | 57  
|Item 8.   | Financial Information                                                        | 58  
|Item 9.   | The Offer and Listing                                                        | 60  
|Item 10.  | Additional Information                                                       | 61  
|Item 11.  | Quantitative and Qualitative Disclosures About Market Risk                   | 72  
|Item 12.  | Description of Securities Other than Equity Securities                       | 73  
|          |                                                                              |     
|PART II   |                                                                              | 73  
|Item 13.  | Defaults, Dividend Arrearages and Delinquencies                              | 73  
|Item 14.  | Material Modifications to the Rights of Security Holders and Use of Proceeds | 73  
|Item 15.  | Controls and Procedures                                                      | 74  
|Item 15T. | Controls and Procedures                                                      | 74  
|Item 16.  | [Reserved]                                                                   | 75  
|Item 16A. | Audit Committee Financial Expert                                             | 75  
|Item 16B. | Code of Ethics                                                               | 75  
|Item 16C. | Principal Accountant Fees and Services                                       | 75  
|Item 16D. | Exemptions from the Listing Standards for Audit Committees                   | 75  
|Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       | 76  
|Item 16F. | Change in Registrant’s Certifying Accountant                                 | 76  
|Item 16G. | Corporate Governance                                                         | 77  
|Item 16H. | Mine Safety Disclosure                                                       | 77  
|          |                                                                              |     
|PART III  |                                                                              | 77  
|Item 17.  | Financial Statements                                                         | 77  
|Item 18.  | Financial Statements                                                         | 77  
|Item 19.  | Exhibits                                                                     | 77  



3









EXPLANATORY NOTE



This Amendment No.
1 to Form 20-F (the “Form 20-F/A”) amends the annual report on Form 20-F of ZK International Group Co., Ltd., (“ZK
International”) for the fiscal year ended September 30, 2018, originally filed with the U.S. Securities and Exchange Commission
(“SEC”) on January 31, 2019 (the “Form 20-F”). This Form 20-F/A is being filed solely for the purpose of
(i) revising Item 3 Key Information to include selected financial data for fiscal year ended September 30, 2015 and to provide
an amended disclosure regarding the adoption of ASC 606, (ii) revising Item 15 Controls and Procedures to provide an amended disclosure
of the status of ZK International’s remediation activities, and (iii) revising Item 5 Operating and Financial Review and
Prospects to include the net accounts receivable aging schedule as of September 30, 2018, 2017, 2016 and 2015. No other changes
have been made to the Form 20-F.



The Form 20-F, as amended
by this Form 20-F/A, speaks as of the original filing date of the Form 20-F, is not intended to reflect events that may have occurred
subsequent to the original filing date of the Form 20-F.



Conventions Used in this Annual Report



Except where the context
otherwise requires and for purposes of this annual report on Form 20-F only, “we,” “us,” “our
company,” “Company,” “our” and “ZK” refer to:



| | · | ZK International Group Co., Ltd., a British Virgin Islands company limited by ordinary shares (“ZK International” when individually referenced);
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



| | · | XSigma Corporation, a British Virgin Islands company limited by ordinary shares (“XSigma” when individually referenced), a wholly-owned subsidiary of ZK International;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | ZK International Uganda Limited, a company incorporated under the laws of the Republic of Uganda (“ZK Uganda” when individually referenced), 80% of which is held by ZK International;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | ZK Pipe Industry Co., Ltd., a Hong Kong limited company (“ZK Pipe” when individually referenced), which is a wholly-owned subsidiary of ZK International;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Wenzhou Weijia Pipeline Development Co., Ltd. (also referred to as 温州维佳管道发展有限公司 in China), a PRC company (“Wenzhou Weijia” when individually referenced), which is a wholly-owned subsidiary of ZK Pipe;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Zhejiang Zhengkang Industrial Co., Ltd. (also referred to as 浙江正康实业股份有限公司 in China), a PRC company (“Zhejiang Zhengkang” when individually referenced), 99% of which is held by Wenzhou Weijia;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Wenzhou Zhengfeng Industry and Trade Co., Ltd. (also referred
to as 温州正丰工贸有限公司 in
China), a PRC company (“Wenzhou Zhengfeng” when individually referenced), which is a wholly-owned subsidiary of Zhejiang
Zhengkang; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Wenzhou Zhenglong Ecommerce Co. Ltd. (also referred to as 温州正隆电子商务有限公司 in China), a PRC company (“Zhenglong Ecommerce” when individually referenced), which is a wholly-owned subsidiary of Zhejiang Zhengkang.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



This annual report contains translations of
certain RMB amounts into U.S. dollar amounts at a specified rate solely for the convenience of the reader. All reference to “U.S.
dollars”, “USD”, “US$” or “$” are to United States dollars. The exchange rates in effect
as of September 30, 2018, 2017 and 2016 were US $1.00 for RMB 6.8680, RMB 6.6545 and RMB 6.6711, respectively. The average exchange
rates for the years ended September 30, 2018, 2017 and 2016 were US $1.00 for RMB 6.5368, RMB 6.8126 and RMB 6.5333 respectively.
We use period-end exchange rates for assets and liabilities and average exchange rates for revenue and expenses. Capital accounts
are translated at their historical exchange rates when the capital transactions occurred. Any discrepancies in any table between
the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.



We obtained the industry
and market data used in this annual report or any document incorporated by reference from industry publications, research, surveys
and studies conducted by third parties and our own internal estimates based on our management’s knowledge and experience
in the markets in which we operate. We did not, directly or indirectly, sponsor or participate in the publication of such materials,
and these materials are not incorporated in this annual report other than to the extent specifically cited in this annual report.
We have sought to provide current information in this annual report and believe that the statistics provided in this annual report
remain up-to-date and reliable, and these materials are not incorporated in this annual report other than to the extent specifically
cited in this annual report.



SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING
STATEMENTS



Certain matters discussed
in this report may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended (the “Securities
Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and involve known and unknown
risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different
from the future results, performance or achievements expressed or implied by such forward-looking statements. The words “expect,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,”
and similar expressions are intended to identify such forward-looking statements. Our actual results may differ materially from
the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation, those discussed
under “Item 3—Key Information—Risk Factors,” “Item 4—Information on the Company,” “Item
5—Operating and Financial Review and Prospects,” and elsewhere in this report, as well as factors which may be identified
from time to time in our other filings with the Securities and Exchange Commission (the “SEC”) or in the documents
where such forward-looking statements appear. All written or oral forward-looking statements attributable to us are expressly qualified
in their entirety by these cautionary statements.



4







The forward-looking statements
contained in this report reflect our views and assumptions only as of the date this report is signed. Except as required by law,
we assume no responsibility for updating any forward-looking statements.



PART I



| | Item 1. | Identity of Directors, Senior Management and Advisers
| | ------- | -----------------------------------------------------



Not applicable for annual
reports on Form 20-F.



| | Item 2. | Offer Statistics and Expected Timetable
| | ------- | ---------------------------------------



Not applicable for annual
reports on Form 20-F.



| | Item 3. | Key Information
| | ------- | ---------------



A. Selected Financial Data



The following table presents
the selected consolidated financial information for our company. The selected consolidated statements of comprehensive income data
for the three years ended September 30, 2018, 2017 and 2016 and the selected consolidated balance sheets data as of September
30, 2018, 2017 and 2016 have been derived from our audited consolidated financial statements, which are included in this annual
report beginning on page F-1. Our historical results do not necessarily indicate results expected for any future periods.
The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to,
our audited consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects”
below. Our audited consolidated financial statements are prepared and presented in accordance with US GAAP.



(All amounts in thousands of U.S. dollars, except
Shares outstanding)



Statement of operations data:





|                                    |  | Year ended September 30, |            
|----------------------------------- |  | ------------------------ | -----------
|                                    |  | 2018                     |            
|Revenue                             |  | $                        | 54,884,381 
|Cost of Revenue                     |  | $                        | (36,593,792
|Gross Profit                        |  | $                        | 18,290,589 
|General and administrative expenses |  | $                        | 4,071,116  
|Research and development expenses   |  | $                        | 1,652,633  
|Selling and marketing costs         |  | $                        | 2,949,204  
|income from operations              |  | $                        | 9,617,636  
|Interest expense                    |  | $                        | (1,239,170 
|Interest income                     |  | $                        | 10,702     
|Other income, net                   |  | $                        | 112,099    
|Income before income taxes          |  | $                        | 8,501,267  
|Income taxes                        |  | $                        | (1,398,210 
|Net income                          |  | $                        | 7,103,057  
|Foreign currency translation (loss) |  | $                        | (818,468   
|Comprehensive income                |  | $                        | 6,284,589  





5







Balance sheet data:





|                           |  | As of September 30, |           
|-------------------------- |  | ------------------- | ----------
|                           |  | 2018                |           
|Current assets             |  | $                   | 64,347,173
|Total assets               |  | $                   | 76,398,563
|Current liabilities        |  | $                   | 39,130,971
|Total liabilities          |  | $                   | 39,130,971
|Total shareholders' equity |  | $                   | 37,267,592
|Shares outstanding         |  |                     | 16,528,037





Exchange Rate Information



Our financial information
is presented in U.S. dollars. Our functional currency for ZK International and XSigma is U.S. dollars, and functional currency
for ZK Pipe, Wenzhou Weijia, Zhejiang Zhengkang, Wenzhou Zhengfeng
and Zhenglong Ecommerce is Renminbi (“RMB”). Transactions which are denominated in currencies other than functional
currency are converted into functional currency at the exchange rate at the dates of the transactions. Exchange gains and losses
resulting from transactions denominated in a currency other than functional currency are included in statements of operations as
foreign currency transaction gains or losses. Our financial statements have been translated into U.S. dollars in accordance with
Statement of Financial Accounting Standard (“SFAS”) No. 52, “Foreign Currency Translation”, which was subsequently
codified within ASC 830, “Foreign Currency Matters”. For those entities which use RMB as its functional currency, the
financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange rates as to assets
and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange
rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component
of accumulated other comprehensive income (loss) in shareholders’ equity.



We make no representation
that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any
particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation
of the conversion of RMB into foreign exchange and through restrictions on foreign trade. We do not currently engage in currency
hedging transactions.



The following table sets
forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated. (www.federalreserve.gov).



|                                 |  | High |        |  | Low |  |        | Period End |  |  | Average | 
|-------------------------------- |  | ---- | ------ |  | --- |  | ------ | ---------- |  |  | ------- | 
|2013                             |  |      | 6.2438 |  |     |  | 6.0537 |            |  |  | 6.0537  | 
|2014                             |  |      | 6.2591 |  |     |  | 6.0402 |            |  |  | 6.2046  | 
|2015                             |  |      | 6.4896 |  |     |  | 6.1870 |            |  |  | 6.4778  | 
|2016                             |  |      | 6.9580 |  |     |  | 6.4480 |            |  |  | 6.9430  | 
|2017                             |  |      | 6.9575 |  |     |  | 6.4773 |            |  |  | 6.5063  | 
|2018                             |  |      | 6.9737 |  |     |  | 6.2649 |            |  |  | 6.8755  | 
|January                          |  |      | 6.5263 |  |     |  | 6.2841 |            |  |  | 6.3990  | 
|February                         |  |      | 6.3471 |  |     |  | 6.2649 |            |  |  | 6.3280  | 
|March                            |  |      | 6.3565 |  |     |  | 6.2685 |            |  |  | 6.2726  | 
|April                            |  |      | 6.3340 |  |     |  | 6.2655 |            |  |  | 6.3325  | 
|May                              |  |      | 6.4175 |  |     |  | 6.3325 |            |  |  | 6.4096  | 
|June                             |  |      | 6.6235 |  |     |  | 6.3850 |            |  |  | 6.6171  | 
|July                             |  |      | 6.8102 |  |     |  | 6.6123 |            |  |  | 6.8038  | 
|August                           |  |      | 6.9330 |  |     |  | 6.8018 |            |  |  | 6.8300  | 
|September                        |  |      | 6.8880 |  |     |  | 6.8270 |            |  |  | 6.8680  | 
|October                          |  |      | 6.9737 |  |     |  | 6.8680 |            |  |  | 6.9737  | 
|November                         |  |      | 6.9558 |  |     |  | 6.8894 |            |  |  | 6.9558  | 
|December                         |  |      | 6.9077 |  |     |  | 6.8343 |            |  |  | 6.8755  | 
|2019                             |  |      |        |  |     |  |        |            |  |  |         | 
|January (until January 25, 2019) |  |      | 6.8708 |  |     |  | 6.7448 |            |  |  | 6.7448  | 



6







As of January 25, 2019, the exchange rate was RMB 6.7448 to $1.00.



B. Capitalization and Indebtedness



Not applicable for annual reports on Form 20-F.



C. Reasons for the Offer and Use of Proceeds



Not applicable for annual reports on Form 20-F.



D. Risk Factors



Risks Related to Our Business and Industry



We may incur liability for unpaid taxes,
including interest and penalties.



In the normal course of
its business, our Company, including in particular Zhejiang Zhengkang and Wenzhou Zhengfeng, may be subject to challenges from
various PRC taxing authorities regarding the amounts of taxes due. Although Zhejiang Zhengkang is currently entitled to a preferential
income tax rate of 15% as we have been certified as a high-tech enterprise by the local agency and our management believe that
the we have paid all taxes to date, PRC taxing authorities may take the position that the we owe more taxes than we have paid based
on transactions conducted by ZK International or ZK Pipe, which may be deemed a resident enterprise, thereby resulting in taxable
liability for Zhejiang Zhengkang. (See “Risk Factors - Under the Enterprise Income Tax Law, we may be classified as a ‘Resident
Enterprise’ of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC stockholders.”).



We recorded a tax liability
of $8,231,511, $6,817,587 and $5,163,716 for the fiscal years ended September 30, 2018, 2017 and 2016 , respectively. It is possible
that the tax liability of the Company for past taxes may be higher than those amounts. We believe that we have sufficient cash
on hand to adequately meet any tax liability for the underpayment of income and business taxes. Additionally, we believe that we
may be able to negotiate with local PRC taxing authorities a reduction to any amounts that such authorities may believe are due
and a reduction to any interest or penalties thereon. We have no guarantee that we will be able to negotiate such a reduction.
To the extent we can negotiate such amounts, national-level taxing authorities may take the position that localities are without
power to reduce such liabilities, and such PRC taxing authorities may attempt to collect unpaid taxes, interest and penalties in
amounts greatly exceeding management’s estimates.



7







Our industry is very
competitive in China.



The domestic market for
pipe and fitting products is fragmented and highly competitive. We estimate that there are a few relatively large companies with
which we compete against and more than one hundred smaller companies with regional presences. We also face competition from products
imported to China or produced by manufacturers that are already globally recognized. The number of these companies varies from
time to time. Some of our pipe and fitting products compete on the basis of price and are sold in fragmented markets with low barriers
to entry, allowing less expensive domestic producers to gain market share and reduce our margins. To the extent these competitors
are able to grow and consolidate, they may be able to take advantage of economies of scale, which could put further pressure on
our margins.



A weakening of the Chinese economy (and
in particularly in real estate or hospitality sectors) could hurt demand for our products.



Through distributors and
wholesalers, most of our products are sold domestically to end users in the real estate or hospitality industries, including those
in local municipalities, hotels or residential complexes. As such, we have relied on consumer spending to drive sales in our products.
Over the last five years, there are signs that China’s GDP growth rate has slowed. If China’s economy continues to
slow, or if customer spending for decreases, demand for our products may be negatively impacted, which would adversely affect sales
of our products to infrastructural, real estate or hotel developers and results of our operations.



Our inability to raise additional capital
could have material adverse effect on our financial condition and results of operations.



Our production can be improved
with additional production units and better infrastructure within the facility. We may need additional capital from time to time
in order for us to purchase additional equipment and build necessary infrastructure within our production facility to meet the
demand of our customers. If we cannot raise additional capital and is unable to execute our business expansion plan successfully,
our customers may experience substantial delay in receiving our products, which could have a material adverse effect on our business
relationship with them and our financial performance.



Our revenue will decrease if the industries
in which our customers operate experience a protracted slowdown.



Our products mainly serve
as key components in projects and machines operated by our customers which are mostly in the construction industry. Therefore,
we are subject to the general changes in economic conditions affecting those industry segments of the economy. If the industry
segments in which our customers operate do not grow or if there is a contraction in those industries, demand for our products will
decrease. Demand for our products is typically affected by a number of overarching economic factors, including, but not limited
to, interest rates, the availability and magnitude of private and governmental investment in infrastructure projects and the health
of the overall global economy. If there is a decline in economic activity in China and the other markets in which we operate or
a protracted slowdown in industries on which we rely for our sales, demand for our products and our revenue will likewise decrease.



Any decline in the availability or increase
in the cost of raw materials could materially affect our earnings.



Our pipe and fitting manufacturing
operations depend heavily on the availability of various raw materials and energy resources. The availability of raw materials
and energy resources may decline and their prices may fluctuate greatly. If our suppliers are unable or unwilling to provide us
with raw materials on terms favorable to us, we may be unable to produce certain products. This could result in a decrease in profit
and damage to our reputation in our industry. In the event our raw material and energy costs increase, we may not be able to pass
these higher costs on to our customers in full or at all. Any increase in the prices for raw materials or energy resources could
materially increase our costs and therefore lower our earnings.



8







Outstanding bank loans may reduce our
available funds.



We have $19,270,530 in
outstanding bank loans as of September 30, 2018. While the management believes that we will have sufficient cash to repay these
loans, there can be no guarantee that we will be able to pay all amounts when due or refinance the amounts on terms that are acceptable
to us or at all. If we are unable to make our payments when due or to refinance such amounts, our property could be foreclosed
and our business could be negatively affected.



Weak liquidity may have material adverse
effect on our results of operations.





We have in the past
recorded negative cash flows from our operating activities, largely due to the increases in accounts receivable from customers,
including $2,234,995 outflow during the fiscal year ended September 30, 2018. While
our operating activities provided $1,146,282 in net cash during the fiscal year ended September 30, 2017, we cannot assure you
that we will be able to do in the future. In addition, some of our accounts receivable have carried balance for more than 3 years.
While we are actively collecting the remaining balance of these accounts receivable, we cannot assure you that we will be able
to do so. If we continue experiencing an increase in accounts receivable without substantial collection of them, the weak liquidity
could have a material adverse effect on our financial performance.”



Our limited operating history makes it
difficult to evaluate our future prospects and results of operations.



We have a limited operating
history, with our oldest subsidiary, Wenzhou Zhengfeng, having been founded in 1999. Accordingly, you should consider our future
prospects in light of the risks and uncertainties experienced by early stage companies in evolving markets such as the growing
market for pipe and fitting products in the PRC. Some of these risks and uncertainties relate to our ability to:



| | · | offer additional pipe and fitting products to attract and retain a larger customer base;
| | - | ----------------------------------------------------------------------------------------



| | · | attract additional customers and increased spending per customer;
| | - | -----------------------------------------------------------------



| | · | increase awareness of our brand and continue to develop customer loyalty;
| | - | -------------------------------------------------------------------------



| | · | respond to competitive market conditions;
| | - | -----------------------------------------



| | · | respond to changes in our regulatory environment;
| | - | -------------------------------------------------



| | · | manage risks associated with intellectual property rights;
| | - | ----------------------------------------------------------



| | · | maintain effective control of our costs and expenses;
| | - | -----------------------------------------------------



| | · | raise sufficient capital to sustain and expand our business;
| | - | ------------------------------------------------------------



| | · | attract, retain and motivate qualified personnel; and
| | - | -----------------------------------------------------



| | · | upgrade our technology to support additional research and development of new pipe and fitting products.
| | - | -------------------------------------------------------------------------------------------------------



If we are unsuccessful
in addressing any of these risks and uncertainties, our business may be materially and adversely affected.



9







The loss of any of our key customers
could reduce our revenues and our profitability.



We consider our major customers
in each period to be those customers that accounted for more than 10% of overall revenues in such period. There’s one significant
customer during the fiscal year ended September 30, 2018, which accounted for 21.1% of total sales. And we has one significant
customer during the fiscal year ended September 30, 2017, which accounted for 14.9% of total sales. We did not have such customer
during the fiscal year ended September 30, 2016. It is common practice for us rely to on individual orders from such customers
without any long-term contracts. Therefore, there can be no assurance that we will maintain or improve the relationships with these
customers, or that we will be able to continue to supply these customers at current levels or at all. As the majority of our revenues
are driven by individual orders for construction products, our major customers often change each period based on when a given order
is placed. If we cannot maintain long-term relationships with major customers or replace major customers from period to period
with equivalent customers, the loss of such sales could have an adverse effect on our business, financial condition and results
of operations.



The loss of any of our key vendors could
have a materially adverse effect on our results of operations.



We consider our major vendors
in each period to be those vendors that accounted for more than 10% of overall purchases in such period. We have three such vendors
during fiscal years ended September 30, 2018, who collectively accounted for approximately 62.4% of overall purchases respectively.
We purchase raw materials on the market at prevailing market prices. We believe that we can locate replacement vendors readily
on the market for prevailing prices and that we would not have significant difficulty replacing a given vendor, any difficulty
in replacing such a vendor could adversely affect our company’s performance to the extent it results in higher prices, slower
supply chain and ultimately less desirable results of operations.



Any disruption in the supply chain of
raw materials and our products could adversely impact our ability to produce and deliver products.



As to the products we manufacture,
we must manage our supply chain for raw materials and delivery of our products. Supply chain fragmentation and local protectionism
within China further complicates supply chain disruption risks. Local administrative bodies and physical infrastructure built to
protect local interests pose transportation challenges for raw material transportation as well as product delivery. In addition,
profitability and volume could be negatively impacted by limitations inherent within the supply chain, including competitive, governmental,
legal, natural disasters, and other events that could impact both supply and price. Any of these occurrences could cause significant
disruptions to our supply chain, manufacturing capability and distribution system that could adversely impact our ability to produce
and deliver products.



10







Our patent rights are limited in China.



We rely on many patented
products to establish our market share for stainless pipe products. Our patent rights are granted by the State Intellectual Property
Office of the PRC. While we have sold our products outside of the PRC and plan to continue expanding the export of our products
overseas, we have not been granted any patent in countries outside of the PRC. As of the date hereof, most of our products are
sold within the PRC. However, in the event that we begin to generate substantial revenue from sales abroad and if we cannot successfully
protect our intellectual properties outside of the PRC, we may not be able to execute our business plan, which could have a material
adverse effect on our financial performance.



Rapid expansion could significantly strain
our resources, management and operational infrastructure, which could impair our ability to meet increased demand for our products
and hurt our business results.



To accommodate our anticipated
growth, we will need to expend capital resources and dedicate personnel to implement and upgrade our accounting, operational and
internal management systems and enhance our record keeping and contract tracking system. Such measures will require us to dedicate
additional financial resources and personnel to optimize our operational infrastructure and to recruit more personnel to train
and manage our growing employee base. If we cannot successfully implement these measures efficiently and cost-effectively, we will
be unable to satisfy the demand for our products, which will impair our revenue growth and hurt our overall financial performance.



We must manage growth in operations to
maximize our potential growth and achieve our expected revenues and any failure to manage growth will cause a disruption of our
operations and impair our ability to generate revenue.



In order to maximize potential
growth in our current and potential markets, we believe that we must expand the scope of our pipe and fitting manufacturing and
production facilities and capabilities and continue to develop new and improved valves. This expansion will place a significant
strain on our management and our operational, accounting, and information systems. We expect that we will need to continue
to improve our financial controls, operating procedures and management information systems. We will also need to effectively train,
motivate and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from
generating the revenues we expect.



We cannot assure you that our internal
growth strategy will be successful, which may result in a negative impact on our growth, financial condition, results of operations
and cash flow.



One of our strategies is
to grow internally through increasing the development of new products and improve the quality of existing products. However, many
obstacles to this expansion exist, including, but not limited to, increased competition from similar businesses, our ability to
improve our products and product mix to realize the benefits of our research and development efforts, international trade and tariff
barriers, unexpected costs, costs associated with marketing efforts abroad and maintaining attractive foreign exchange rates. We
cannot, therefore, assure you that we will be able to successfully overcome such obstacles and establish our services in any additional
markets. Our inability to implement this internal growth strategy successfully may have a negative impact on our growth, future
financial condition, results of operations or cash flows.



We cannot assure you that our acquisition
growth strategy will be successful, resulting in our failure to meet growth and revenue expectations.



In addition to our internal
growth strategy, we plan to explore the possibility of growing through strategic acquisitions. We may pursue opportunities to acquire
businesses in the PRC that are complementary or related in products and business structure to us. We do not presently have any
commitments, agreements or understandings to acquire any businesses or assets of such businesses. We may not be able to locate
suitable acquisition candidates at prices that we consider appropriate or to finance acquisitions on terms that are satisfactory
to us. If we do identify an appropriate acquisition candidate, we may not be able to negotiate successfully the terms of an acquisition,
or, if the acquisition occurs, integrate the acquired business into our existing business. Acquisitions of businesses or other
material operations may require debt financing or additional equity financing, resulting in leverage or dilution of ownership.
Integration of acquired business operations could disrupt our business by diverting management away from day-to-day operations.
The difficulties of integration may be increased by the necessity of coordinating geographically dispersed organizations, integrating
personnel with disparate business backgrounds and combining different corporate cultures.



11







We also may not be able
to retain key employees or customers of an acquired business or realize cost efficiencies or synergies or other benefits we anticipated
when selecting our acquisition candidates. In addition, we may need to record write-downs from future impairments of intangible
assets, which could reduce our future reported earnings. At times, acquisition candidates may have liabilities or adverse operating
issues that we fail to discover through due diligence prior to the acquisition. In addition to the above, acquisitions in
the PRC, including state owned businesses, will be required to comply with the laws of the PRC, to the extent applicable. There
can be no assurance that any given proposed acquisition will be able to comply with PRC requirements, rules and/or regulations,
or that we will successfully obtain governmental approvals that are necessary to consummate such acquisitions, to the extent required.
If our acquisition strategy is unsuccessful, we will not grow our operations and revenues at the rate that we anticipate.



Failure to manage our growth could strain
our management, operational and other resources, which could materially and adversely affect our business and prospects.



Our growth strategy includes
building our brand, increasing market penetration of our existing products, developing new products, increasing our targeting of
the pharmaceutical market in China, and increasing our exports. Pursuing these strategies has resulted in and will continue to
result in substantial demands on management resources. In particular, the management of our growth will require, among other things:



| | · | continued enhancement of our research and development capabilities;
| | - | -------------------------------------------------------------------



| | · | information technology system enhancement;
| | - | ------------------------------------------



| | · | stringent cost controls and sufficient liquidity;
| | - | -------------------------------------------------



| | · | strengthening of financial and management controls and information technology systems; and
| | - | ------------------------------------------------------------------------------------------



| | · | increased marketing, sales and support activities; and hiring and training of new personnel.
| | - | --------------------------------------------------------------------------------------------



If we are not able to manage our growth successfully,
our business and prospects would be materially and adversely affected.



Our bank accounts are not insured or
protected against loss.



We maintain our cash with
various banks and trust companies located in the PRC. Our cash accounts are not insured or otherwise protected. While China is
currently considering implementation of banking insurance policies, it has not yet done so. Should any bank or trust company holding
our cash deposits become insolvent, or if we are otherwise unable to withdraw funds, we would lose the cash on deposit with that
particular bank or trust company.



We are substantially dependent upon our
senior management and key research and development personnel.



We are highly dependent
on our senior management to manage our business and operations and our key research and development personnel for the development
of new products and the enhancement of our existing products and technologies. In particular, we rely substantially on our Chief
Executive Officer and Chairman of the Board Jiancong Huang, to manage our operations.



While we provide the legally
required personal insurance for the benefit of our employees, we do not maintain key man life insurance on any of our senior management
or key personnel including our Chief Executive Officer and Chairman of the Board, Mr. Jiancong Huang. The loss of any one of them
would have a material adverse effect on our business and operations. Competition for senior management and our other key personnel
is intense and the pool of suitable candidates is limited. We may be unable to locate a suitable replacement for any senior management
or key personnel that we lose. In addition, if any member of our senior management or key personnel joins a competitor or forms
a competing company, they may compete with us for customers, business partners and other key professionals and staff members of
our company. Although each of our senior management and key personnel has signed a confidentiality and non-competition agreement
in connection with his employment with us, we cannot assure you that we will be able to successfully enforce these provisions in
the event of a dispute between us and any member of our senior management or key personnel.



12







We compete for qualified
personnel with other hardware manufacturing companies and related technology research institutions. Intense competition for these
personnel could cause our compensation costs to increase, which could have a material adverse effect on our results of operations.
Our future success and ability to grow our business will depend in part on the continued service of these individuals and our ability
to identify, hire and retain additional qualified personnel. If we are unable to attract and retain qualified employees, we may
not be able to meet our business and financial goals.



We are heavily dependent upon the services
of experienced personnel who possess skills that are valuable in our industry, and we may have to actively compete for their services.



We are heavily dependent
upon our ability to attract, retain and motivate skilled personnel to serve our customers. Many of our personnel possess skills
that would be valuable to all companies engaged in our industry. Consequently, we expect that we will have to actively compete
for these employees. Some of our competitors may be able to pay our employees more than we are able to pay to retain them. Our
ability to profitably operate is substantially dependent upon our ability to locate, hire, train and retain our personnel. There
can be no assurance that we will be able to retain our current personnel, or that we will be able to attract and assimilate other
personnel in the future. If we are unable to effectively obtain and maintain skilled personnel, the development and quality of
our services could be materially impaired.



If we fail to protect our intellectual
property rights, it could harm our business and competitive position.



We rely on a combination
of patent, copyright, trademark and trade secret laws and non-disclosure agreements and other methods to protect our intellectual
property rights. We own various patents in China covering our pipe and fitting production technology.



The process of seeking
patent protection can be lengthy and expensive, our patent applications may fail to result in patents being issued, and our existing
and future patents may be insufficient to provide us with meaningful protection or commercial advantage. Our patents and patent
applications may also be challenged, invalidated or circumvented.



We also rely on trade secret
rights to protect our business through non-disclosure provisions in employment agreements with employees. If our employees breach
their non-disclosure obligations, we may not have adequate remedies in China, and our trade secrets may become known to our competitors.



Implementation of PRC intellectual
property-related laws has historically been lacking, primarily because of ambiguities in the PRC laws and enforcement difficulties.
Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as in the United States
or other western countries. Furthermore, policing unauthorized use of proprietary technology is difficult and expensive, and we
may need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability, scope and validity
of our proprietary rights or those of others. Such litigation and an adverse determination in any such litigation, if any, could
result in substantial costs and diversion of resources and management attention, which could harm our business and competitive
position.



We may be exposed to intellectual property
infringement and other claims by third parties which, if successful, could disrupt our business and have a material adverse effect
on our financial condition and results of operations.



Our success depends, in
large part, on our ability to use and develop our technology and know-how without infringing third party intellectual property
rights. If we sell our branded products internationally, and as litigation becomes more common in China, we face a higher risk
of being the subject of claims for intellectual property infringement, invalidity or indemnification relating to other parties’
proprietary rights. Our current or potential competitors, many of which have substantial resources and have made substantial investments
in competing technologies, may have or may obtain patents that will prevent, limit or interfere with our ability to make, use or
sell our branded products in either China or other countries, including the United States and other countries in Asia. In addition,
the defense of intellectual property suits, including patent infringement suits, and related legal and administrative proceedings
can be both costly and time consuming and may significantly divert the efforts and resources of our technical and management personnel.
Furthermore, an adverse determination in any such litigation or proceedings to which we may become a party could cause us to:



13







| | · | pay damage awards;
| | - | ------------------



| | · | seek licenses from third parties;
| | - | ---------------------------------



| | · | pay ongoing royalties;
| | - | ----------------------



| | · | redesign our branded products; or
| | - | ---------------------------------



| | · | be restricted by injunctions,
| | - | -----------------------------



each of which could effectively prevent us
from pursuing some or all of our business and result in our customers or potential customers deferring or limiting their purchase
or use of our branded products, which could have a material adverse effect on our financial condition and results of operations.



Risks Related to Doing Business in China



If we become directly subject to the
recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources
to investigate and resolve the matter which could harm our business operations and our reputation and could result in a loss of
your investment in our stock, especially if such matter cannot be addressed and resolved favorably.



Recently, U.S. public companies
that have substantially all of their operations in China, have been the subject of intense scrutiny, criticism and negative publicity
by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity
has centered around financial and accounting irregularities, a lack of effective internal controls over financial accounting, inadequate
corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny,
criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value
and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement
actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide
scrutiny, criticism and negative publicity will have on our company and our business. If we become the subject of any unfavorable
allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate
such allegations and/or defend the Company. This situation may be a major distraction to our management. If such allegations are
not proven to be groundless, our company and business operations will be severely hampered and your investment in our stock could
be rendered worthless.



Our PRC subsidiaries’ books and records are prepared
in accordance with China GAAP, not U.S. GAAP.



Substantially all of the
business operations of our Company are located in the PRC. Although ZK International’s reports are prepared in accordance
with U.S. GAAP, our PRC subsidiaries’ books and records are prepared in accordance with China GAAP. Despite our efforts to
improve the Company’s controls and procedures, our accounting personnel do not have sufficient knowledge, experience and
training in maintaining our books and records in accordance with U.S. GAAP standards. If we fail to maintain an effective system
of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As
a result, current and potential shareholders could lose confidence in our financial reporting, which would harm the value of our
shares.



Adverse changes in political and economic
policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could reduce
the demand for our products and materially and adversely affect our competitive position.



Substantially all of our
business operations are conducted in China. Accordingly, our business, results of operations, financial condition and prospects
are subject to economic, political and legal developments in China. Although the Chinese economy is no longer a planned economy,
the PRC government continues to exercise significant control over China’s economic growth through direct allocation of resources,
monetary and tax policies, and a host of other government policies such as those that encourage or restrict investment in certain
industries by foreign investors, control the exchange between RMB and foreign currencies, and regulate the growth of the general
or specific market. These government involvements have been instrumental in China’s significant growth in the past 30 years.
In response to the recent global and Chinese economic downturn, the PRC government has adopted policy measures aimed at stimulating
the economic growth in China. If the PRC government’s current or future policies fail to help the Chinese economy achieve
further growth or if any aspect of the PRC government’s policies limits the growth of our industry or otherwise negatively
affects our business, our growth rate or strategy, our results of operations could be adversely affected as a result.



14







Labor laws in the PRC may adversely affect
our results of operations.



On June 29, 2007, the PRC
government promulgated a new labor law, namely, the Labor Contract Law of the PRC, which became effective on January 1, 2008, which
was further amended on December 28, 2012 (effective July 1, 2013). The Labor Contract Law imposes greater liabilities on employers
and significantly affects the cost of an employer’s decision to reduce its workforce. Further, it requires certain terminations
be based upon seniority and not merit. In the event we decide to significantly change or decrease our workforce, the Labor Contract
Law could adversely affect our ability to enact such changes in a manner that is most advantageous to our business or in a timely
and cost-effective manner, thus materially and adversely affecting our financial condition and results of operations. The Labor
Contract Law also mandates that employers provide social welfare packages to all employees, increasing our labor costs. To the
extent competitors from outside China are not affected by such requirements, we could be at a comparative disadvantage.



Imposition of trade barriers and taxes
may reduce our ability to do business internationally, and the resulting loss of revenue could harm our profitability.



We may experience barriers
to conducting business and trade in our targeted emerging markets in the form of delayed customs clearances, customs duties and
tariffs. In addition, we may be subject to repatriation taxes levied upon the exchange of income from local currency into foreign
currency, substantial taxes on profits, revenues, assets and payroll, as well as value-added tax. The markets in which we plan
to operate may impose onerous and unpredictable duties, tariffs and taxes on our business and products, and there can be no assurance
that this will not reduce the level of sales that we achieve in such markets, which would reduce our revenues and profits.



Under the Enterprise Income Tax Law,
we may be classified as a “Resident Enterprise” of China. Such classification will likely result in unfavorable tax
consequences to us and our non-PRC stockholders.



China passed an Enterprise
Income Tax Law (the “EIT Law”) and implementing rules, both of which became effective on January 1, 2008. Under the
EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a
“resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income
tax purposes. The implementing rules of the EIT Law define de facto management as “substantial and overall management and
control over the production and operations, personnel, accounting, and properties” of the enterprise.



On April 22, 2009, the
State Administration of Taxation of China issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment
Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the
Notice, further interpreting the application of the EIT Law and its implementation to offshore entities controlled by a Chinese
enterprise or group. Pursuant to the Notice, an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese
enterprise or group will be classified as a “non-domestically incorporated resident enterprise” if (i) its senior management
in charge of daily operations reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made
or approved by bodies or persons in China; (iii) its substantial assets and properties, accounting books, corporate stamps, board
and stockholder minutes are kept in China; and (iv) at least half of its directors with voting rights or senior management are
often resident in China. A resident enterprise would be subject to an enterprise income tax rate of 25% on its worldwide income
and must pay a withholding tax at a rate of 10% when paying dividends to its non-PRC stockholders. However, it remains unclear
as to whether the Notice is applicable to an offshore enterprise controlled, but not necessarily owned, by a Chinese natural person.
Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.



If the PRC tax authorities
determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax
consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income
as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as non-China source income
would be subject to PRC enterprise income tax at a rate of 25%. Currently, we do not have any non-China source income, so this
would minimal effect on us; however, if we develop non-China source income in the future, we could be adversely affected. Second,
under the EIT Law and its implementing rules, dividends paid to us from our PRC subsidiaries would qualify as “tax-exempt
income.” Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification
could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC stockholders and with
respect to gains derived by our non-PRC stockholders from transferring our shares.



15







Since our operations and assets are located
in the PRC, shareholders may find it difficult to enforce a U.S. judgment against the assets of our company, our directors and
executive officers.



Our operations and assets
are located in the PRC. In addition, most of our executive officers and directors are non-residents of the U.S., and substantially
all the assets of such persons are located outside the U.S. As a result, it could be difficult for investors to effect service
of process in the U.S., or to enforce a judgment obtained in the U.S. against us or any of these persons.



We may be exposed to liabilities under
the Foreign Corrupt Practices Act and Chinese anti-corruption law.



We are subject to the U.S.
Foreign Corrupt Practices Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments
and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or
retaining business. We are also subject to Chinese anti-corruption laws, which strictly prohibit the payment of bribes to government
officials. We have operations, agreements with third parties, and make sales in China, which may experience corruption. Our activities
in China create the risk of unauthorized payments or offers of payments by one of the employees, consultants or distributors of
our company, because these parties are not always subject to our control. We are in process of implementing an anticorruption program,
which prohibits the offering or giving of anything of value to foreign officials, directly or indirectly, for the purpose of obtaining
or retaining business. The anticorruption program also requires that clauses mandating compliance with our policy be included in
all contracts with foreign sales agents, sales consultants and distributors and that they certify their compliance with our policy
annually. It further requires that all hospitality involving promotion of sales to foreign governments and government-owned or
controlled entities be in accordance with specified guidelines. In the meantime, we believe to date we have complied in all material
respects with the provisions of the FCPA and Chinese anti-corruption law.



However, our existing safeguards
and any future improvements may prove to be less than effective, and the employees, consultants or distributors of our Company
may engage in conduct for which we might be held responsible. Violations of the FCPA or Chinese anti-corruption law may result
in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business,
operating results and financial condition. In addition, the government may seek to hold our Company liable for successor liability
FCPA violations committed by companies in which we invest or that we acquire.



Uncertainties with respect to the PRC
legal system could adversely affect us.



We conduct all of our business
through our subsidiaries in China. Our operations in China are governed by PRC laws and regulations. Our PRC subsidiaries are generally
subject to laws and regulations applicable to foreign investments in China and, in particular, laws and regulations applicable
to wholly foreign-owned enterprises. The PRC legal system is based on statutes. Prior court decisions may be cited for reference
but have limited precedential value.



Since 1979, PRC legislation
and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However,
China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all
aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the
limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations
involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which
are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation
of these policies and rules until sometime after the violation. In addition, any litigation in China may be protracted and result
in substantial costs and diversion of resources and management attention.



16







Governmental control of currency conversion
may affect the value of your investment.



The PRC government imposes
controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China.
We receive substantially all of our revenues in RMB. Under our current corporate structure, our income is primarily derived from
dividend payments from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our
PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign
currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including
profit distributions, interest payments and expenditures from trade-related transactions can be made in foreign currencies without
prior approval from SAFE by complying with certain procedural requirements. However, approval from appropriate government authorities
is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment
of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign
currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign
currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our security-holders.



17







Fluctuations in exchange rates could
adversely affect our business and the value of our securities.



Changes in the value of
the RMB against the U.S. dollar, Euro and other foreign currencies are affected by, among other things, changes in China’s
political and economic conditions. Any significant revaluation of the RMB may have a material adverse effect on our revenues and
financial condition, and the value of, and any dividends payable on our shares in U.S. dollar terms. For example, to the extent
that we need to convert U.S. dollars we received from our initial public offering into RMB for our operations, appreciation of
the RMB against the U.S. dollar would have an adverse effect on RMB amount we would receive from the conversion. Conversely, if
we decide to convert our RMB into U.S. dollars for the purpose of paying dividends on our Ordinary Shares or for other business
purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us.
In addition, fluctuations of the RMB against other currencies may increase or decrease the cost of imports and exports, and thus
affect the price-competitiveness of our products against products of foreign manufacturers or products relying on foreign inputs.



Since July 2005, the RMB
is no longer pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange
market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly
in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift
restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.



We reflect the impact of
currency translation adjustments in our financial statements under the heading “accumulated other comprehensive (loss)/income.”
For the years ended September 30, 2018, 2017 and 2016, we had adjustment loss of $818,468, adjustment gain of $272,237 and adjustment
loss of $403,865 respectively, for foreign currency translations. Very limited hedging transactions are available in China to reduce
our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may enter into
hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be
able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange
control regulations that restrict our ability to convert RMB into foreign currencies.



PRC regulations relating to offshore
investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute
profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.



SAFE promulgated the Circular
on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose
Vehicles, or SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local branch in
connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.
In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes
material events relating to any change of basic information (including change of such PRC citizens or residents, name and operation
term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. SAFE Circular 37
is issued to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing
and Roundtrip Investments via Overseas Special Purpose Vehicles, or SAFE Circular 75. SAFE promulgated the Notice on Further Simplifying
and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June
1, 2015. This notice has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than
SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of
overseas investment or financing.



If our shareholders who
are PRC residents or entities do not complete their registration as required, our PRC subsidiaries may be prohibited from distributing
their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our
ability to contribute additional capital to our PRC subsidiaries. Moreover, failure to comply with the SAFE registration described
above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.



Our shareholders who are
PRC residents have not completed their registration with the local SAFE branches. The failure of our beneficial owners who are
PRC residents to register or amend their SAFE registrations in a timely manner pursuant to SAFE Circular 37 and subsequent implementation
rules, or the failure of future beneficial owners of our company who are PRC residents to comply with the registration procedures
set forth in SAFE Circular 37 and subsequent implementation rules, may subject such beneficial owners or our PRC subsidiaries to
fines and legal sanctions, restrict our overseas or cross-border investment activities,
limit our PRC subsidiaries’ ability to make distributions or pay dividends to us or affect our ownership structure, which
could adversely affect our business and prospects.



Furthermore,
as these foreign exchange regulations are still relatively new and their interpretation and implementation has been constantly
evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will
be interpreted, amended and implemented by the relevant government authorities. For example, we may be subject to a more stringent
review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign currency
denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if we decide
to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able
to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.



18







Risks Related to Our Corporate Structure
and Operation



We will incur additional costs as a result
of becoming a public company, which could negatively impact our net income and liquidity.



As a public company, we
will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, Sarbanes-Oxley
and rules and regulations implemented by the SEC and the Nasdaq Capital Market require significantly heightened corporate governance
practices for public companies. We expect that these rules and regulations will increase our legal, accounting and financial compliance
costs and will make many corporate activities more time-consuming and costly.



We do not expect to incur
materially greater costs as a result of becoming a public company than those incurred by similarly sized U.S. public companies.
If we fail to comply with these rules and regulations, we could become the subject of a governmental enforcement action, investors
may lose confidence in us and the market price of our Ordinary Shares could decline.



The obligation to disclose information
publicly may put us at a disadvantage to competitors that are private companies.



We are a publicly listed
company in the United States. As a publicly listed company, we will be required to file periodic reports with the Securities and
Exchange Commission upon the occurrence of matters that are material to our company and shareholders. In some cases, we will need
to disclose material agreements or results of financial operations that we would not be required to disclose if we were a private
company. Our competitors may have access to this information, which would otherwise be confidential. This may give them advantages
in competing with our company. Similarly, as a U.S.-listed public company, we will be governed by U.S. laws that our competitors,
which are mostly private Chinese companies, are not required to follow. To the extent compliance with U.S. laws increases our expenses
or decreases our competitiveness against such companies, our public listing could affect our results of operations.



We are a “foreign private issuer,”
and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the
same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more
difficult for you to evaluate our performance and prospects.



We are a foreign private
issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will
be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting
companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose
detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required
to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure
and recovery regime.



As a foreign private issuer,
we will also be exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select
groups of investors are not privy to specific information about an issuer before other investors. However, we will still be subject
to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure
obligations imposed on us as a foreign private issuer differ from those imposed on U.S. domestic reporting companies, you should
not expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting
companies.



An insufficient amount of insurance could
expose us to significant costs and business disruption.



While we have purchased
insurance to cover our certain assets and property of our business, the amounts and scope of coverage could leave our business
inadequately protected from loss. If we were to incur substantial losses or liabilities due to fire, explosions, floods, other
natural disasters or accidents or business interruption, our results of operations could be materially and adversely affected.



19







Risks Related to Our Ordinary Shares



We are an “emerging growth company,”
and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our ordinary shares
less attractive to investors.



We are an “emerging
growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be
an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other
public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports
and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder
approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years,
although we could lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible
debt in a three-year period, or if the market value of our Ordinary Shares held by non-affiliates exceeds $700 million as of any
June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot
predict if investors will find our Ordinary Shares less attractive because we may rely on these exemptions. If some investors find
our Ordinary Shares less attractive as a result, there may be a less active trading market for our Ordinary Shares and our stock
price may be more volatile.



Under the JOBS Act, emerging
growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private
companies. We plan to adopt ASC 606 for the fiscal year ended September 30, 2019.



Our officers/directors have entered into
an agreement to vote in concert, which provides control over majority of our Ordinary Shares and increases our influence on shareholder
decisions.



ZK International was incorporated on May 13, 2015 under the laws BVI, with 100% of the founding shares
held by Kai Chun Cheng. On the same date, Jiancong Huang, Mingjie Wang, Guolin Wang, Jiandi Wang and Yangming Wang entered into
an agreement to vote in concert in ZK International with Mr. Huang appointed as proxy effective completion of transfer of the ordinary
shares held by Mr. Cheng. Pursuant to the agreement, which has a term of 20 years from its effective date of May 13, 2015, if the
parties are unable to reach a unanimous consent in relation to the matters requiring action in concert, a decision made by more
than 50% of the voting rights of the parties will be deemed a decision unanimously passed by all parties and will be binding on
all parties. On July 29, 2015, Mr. Cheng entered into equity interest transfer agreements with and transferred to these individuals
45%, 20%, 20%, 10% and 5%, respectively, of ZK International’s equity interest on October 12, 2015. All of these individuals
are officers or directors of ZK International and/or our operating entity Zhejiang Zhengkang. As of January 23, 2019, our officers
and/or directors beneficially own approximately 55.65% of our outstanding shares. As a result, our officers and directors will
possess substantial ability to impact our management and affairs and the outcome of matters submitted to shareholders for approval.
These shareholders, acting individually or as a group, could exert control and substantial influence over matters such as electing
directors and approving mergers or other business combination transactions. This concentration of ownership and voting power may
also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to
receive a premium for their shares as part of a sale of our company and might reduce the price of our Ordinary Shares. These actions
may be taken even if they are opposed by our other shareholders.



20







As a “controlled company”
under the rules of the Nasdaq Capital Market, we may exempt our company from certain corporate governance requirements that could
adversely affect our public shareholders.



Because of the voting in
concert agreement described elsewhere in this annual report, our principal shareholders will continue collectively owning a majority
of the voting power of our outstanding Ordinary Shares. Under Rule 5615(b)(1) of the Nasdaq Listing Requirement, a company of which
more than 50% of the voting power is held by an individual, group or another company is a "controlled company" and is
permitted to phase in its compliance with the independent committee requirements. Although we do not rely on the "controlled
company" exemption under the Nasdaq listing rules, we could elect to rely on this exemption in the future. If we elected to
rely on the “controlled company” exemption, a majority of the members of our board of directors might not be independent
directors and our nominating and corporate governance and compensation committees might not consist entirely of independent directors.
Accordingly, while we remain a controlled company relying on the exemption and during any transition period following a time when
we are no longer a controlled company, you would not have the same protections afforded to shareholders of companies that are subject
to all of the Nasdaq Capital Market corporate governance requirements.





As a foreign
private issuer, we are permitted to, and did, follow certain home country corporate governance practices instead of otherwise applicable
Nasdaq Capital Market requirements, which may result in less protection than is accorded to investors under rules applicable to
domestic U.S. issuers.



As
a foreign private issuer, we are permitted to, and did, follow certain home country corporate governance practices instead of those
otherwise required under the applicable rules of the Nasdaq Capital Market for domestic U.S. issuers, provided that we disclose
the requirements we are not following and describe the home country practices we are following. From time to time, we have followed
and may follow home country practice in British Virgin Islands in lieu of Nasdaq Capital Market rules requiring written notification
to shareholders for omission to seek shareholder approval for a specified issuance of securities. Under the British Virgin Islands
Business Companies Act (as amended), there is no general requirement for shareholders to be notified of securities issuance of
a British Virgin Islands company, which is different than the requirements of the Nasdaq Capital Market listing standards. As such,
while we may choose to notify shareholders our omission to seek the shareholder approval for specified issuance of securities,
our memorandum of association and bye-laws do not require any such approvals. See “Item 16.G – Corporate Governance.”
We may in the future elect to follow home country practices in British Virgin Islands with regard to other matters. Following our
home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the Nasdaq
Capital Market may provide less protection to you than what is accorded to investors under the applicable rules of the Nasdaq Capital
Market applicable to domestic U.S. issuers.





If we are unable to implement and maintain
effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness
of our financial reports and the market price of our Ordinary Shares may decline.



As a public company, we
are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control.
In addition, beginning with this annual report on Form 20-F, we are required to furnish a report by management on the effectiveness
of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We are in the process of designing,
implementing, and testing the internal control over financial reporting required to comply with this obligation, which process
is time consuming, costly, and complicated. In addition, our independent registered public accounting firm will be required to
attest to the effectiveness of our internal control over financial reporting beginning with our annual report on Form 20-F
following the date on which we are no longer an “emerging growth company”. If we identify material weaknesses in our
internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner
or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm
is unable to express an opinion as to the effectiveness of our internal control over financial reporting when required, investors
may lose confidence in the accuracy and completeness of our financial reports and the market price of our Ordinary Shares could
be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed,
the Securities and Exchange Commission, or the SEC, or other regulatory authorities, which could require additional financial and
management resources.



The requirements of being a public company
may strain our resources and divert management’s attention.



As a public company, we
are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley
Act, the Dodd-Frank Act, the listing requirements of the securities exchange on which we list, and other applicable securities
rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless
increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand
on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires,
among other things, that we file annual, quarterly, and current reports with respect to our business and operating results.



As a result of disclosure
of information in filings required of a public company, our business and financial condition will become more visible, which we
believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful,
our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor,
these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely
affect our business, brand and reputation and results of operations.



We also expect that being
a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability
insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors
could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve
on our audit committee and compensation committee, and qualified executive officers.



21







We have broad discretion in the use of
the net proceeds from our initial public offering and may not use them effectively.



To the extent we determine
that the proposed uses set forth in in the section titled “Use of Proceeds” in our initial public offering registration
statement are no longer in the best interests of our Company, we cannot specify with any certainty the particular uses of such
net proceeds that we received from our initial public offering. However, we advise shareholders as required in our annual reports
on Form 20-F of any changes in application of funds and will file a current report on Form 6-K to the extent we determine such
changes in application must be disclosed more quickly.



Our management will have
broad discretion in the application of such net proceeds, including working capital, and other general corporate purposes, including
paying tax due, and we may spend or invest these proceeds in a way with which our stockholders disagree. The failure by our management
to apply these funds effectively could harm our business and financial condition. Pending their use, we may invest the net proceeds
from our initial public offering in a manner that does not produce income or that loses value.



We do not intend to pay dividends for
the foreseeable future.



We currently intend to
retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends
in the foreseeable future. As a result, you may only receive a return on your investment in our Ordinary Shares if the market price
of our Ordinary Shares increases.



22







British Virgin Islands companies may
not be able to initiate shareholder derivative actions, thereby depriving shareholders of the ability to protect their interests.



British Virgin Islands
companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. The circumstances
in which any such action may be brought, and the procedures and defenses that may be available in respect to any such action, may
result in the rights of shareholders of a British Virgin Islands company being more limited than those of shareholders of a company
organized in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate
wrongdoing has occurred. The British Virgin Islands courts are also unlikely to recognize or enforce against us judgments of courts
in the United States based on certain liability provisions of U.S. securities law; and to impose liabilities against us, in original
actions brought in the British Virgin Islands, based on certain liability provisions of U.S. securities laws that are penal in
nature. There is no statutory recognition in the British Virgin Islands of judgments obtained in the United States, although the
courts of the British Virgin Islands will generally recognize and enforce the non-penal judgment of a foreign court of competent
jurisdiction without retrial on the merits. This means that even if shareholders were to sue us successfully, they may not be able
to recover anything to make up for the losses suffered.



The laws of the British Virgin Islands
provide little protection for minority shareholders, so minority shareholders will have little or no recourse if they are dissatisfied
with the conduct of our affairs.



Under the law of the British
Virgin Islands, there is little statutory law for the protection of minority shareholders other than the provisions of the BVI
Business Companies Act (the "BVI Act") dealing with shareholder remedies. The principal protection
under statutory law is that shareholders may bring an action to enforce the company's memorandum and articles of association. Shareholders
are entitled to have the affairs of the company conducted in accordance with the general law and the company's memorandum and articles
of association.



There are common law rights
for the protection of shareholders that may be invoked, largely dependent on English company law, since the common law of the British
Virgin Islands for business companies is limited. Under the general rule pursuant to English company law known as the rule in Foss
v. Harbottle, a court will generally refuse to interfere with the management of a company at the insistence of a minority of its
shareholders who express dissatisfaction with the conduct of the company’s affairs by the majority or the board of directors.
However, every shareholder is entitled to have the affairs of the company conducted properly according to law and the constituent
documents of the corporation. As such, if those who control the company have persistently disregarded the requirements of company
law or the provisions of the company’s memorandum and articles of association, then the courts will grant relief. Generally,
the areas in which the courts will intervene are the following: (1) an act complained of which is outside the scope of the authorized
business or is illegal or not capable of ratification by the majority; (2) acts that constitute fraud on the minority where the
wrongdoers control the company; (3) acts that infringe on the personal rights of the shareholders, such as the right to vote; and
(4) where the company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders,
which are more limited than the rights afforded minority shareholders under the laws of many states in the United States.



23







| | Item 4. | Information on the Company
| | ------- | --------------------------



Business Overview



We primarily conduct our business through our subsidiary Zhejiang Zhengkang. Our core business focuses
on providing systematic solutions to construction projects that require sophisticated piping systems. Leveraging our experience
in the industry, we offer urban planners and real estate developers sophisticated pipe and fitting products and engineering expertise,
enabling them to bring communities reliable and durable gas and water transmission systems. Our products are primarily sold in
China, but are also exported and distributed in Europe, Africa and Southeast Asia. We have received numerous awards and recognitions
domestically and internationally. Located within the Wenzhou Binhai Industrial Park, a national economic development zone, our
facility occupies approximately five acres, consisting of business offices, manufacturing plants, a research and development center
and storage facilities.



We specialize in designing
and producing pipes and fittings such as double-press thin-walled stainless steel tubes and fittings, carbon steel tubes and fittings
and single-press tubes and fittings. Focused on the innovation and expansion of our products to meet the specific needs of our
clients, we believe that we are a leading manufacturer and engineer of high-performance stainless steel pipes. Our products offer
a comprehensive suite of superior solutions for use in the construction and infrastructure industries. Our innovative products
are used in a broad range of applications, including water and gas transmission within urban infrastructural development, residential
housing development, food and beverage production, oil and gas exploitation, and agricultural irrigation. Since Zhejiang Zhengkang’s
founding in 2001, we have developed an array of patented pipe and fitting products that have been marketed and distributed both
domestically and internationally.



We promote our brand through
our sales staff, distributors, trade shows, trade fairs, forums, direct communications with potential customers, business networks,
and the internet. In addition, we tailor our products to the needs of our clients and provide our clients with competitive pricing
to establish long-term business relationships. We take pride in the cutting-edge technology and superb quality of our products,
which have received recognitions such as the ISO9001 Quality Management System Certification, ISO14001 Environmental Management
System Certification, and National Industrial Stainless Steel Production License, among other awards and honors. Our products have
been used in well-known facilities such as Olympic stadiums, multinational hotel chains, and mega-sized apartment complexes.



Safety, quality and productivity
are three pillars of our operations and the hallmarks of our success. In the past year, we experienced another year of outstanding
safety performance while continuing to improve safety standard for our workforce. We also plan to transform our value proposition
from strictly being a product supplier to a solution provider, aiming to deliver both high-quality products and complete engineering
solutions to our clients. We have compiled a team of engineers and pipe network designers who will work closely with the manufacturing
team to respond to clients’ special construction demands, create rapid prototypes of our solutions, and enhance the utility
of our products based on clients’ feedback. This work flow could also significantly improve the efficiency and performance
of our engineers.



Industry Overview



We believe that we are
in the early stages of four trends that are reshaping how water is accessed and managed by our community on a daily basis:



|· | As urbanization continues, cities in China will face tremendous challenges providing clean and safe water distribution in urban areas                                                                                              
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | People are realizing that access to potable water in their home should not be a privilege, but a right. Many are now asking for improved water distribution systems.                                                               
|· | Stainless steel is considered the safest and most environmental-friendly material for clean water transmission, and these features are being recognized by the market.                                                             
|· | As water distribution systems are becoming more complex, water supply companies are seeking suppliers that not only supply products, but also engage in projects and are adaptable and responsive to ever-changing project demands.



24







These trends are creating
an increasing number of new opportunities for organizations in the stainless steel pipe industry. We believe that the best opportunities
are for the organizations that can continually make quality products and work with clients to solve problems and make improvements.



The Clean Water Supply Imperative



With almost 20% of the
world’s population, but access to only 5% of the world’s renewable freshwater resources, it is easy to understand the
reason that water resource management has been a high social priority in China. The Ministry of Water Resources notes on its website
that out of 663 cities in China, more than 400 are suffering from water shortages, with 110 classified as “severe”.
China’s move to upgrade its water distribution infrastructure comes as it faces tremendous challenges from two directions.
On one side, water quality remains an issue, while on the other side, reliable water distribution networks in many cities are still
in developmental stage.



Increasing Investment Towards the Drinking
Water Distribution Industry



Like many other things,
opportunities always come with challenges. There are both political and economic incentives in this field attracting investment
from the government and private companies. As more investment has flowed into the water supply industry over the past several years,
the number of large and medium water treatment and supply companies has increased by 145 to 1491 in 2015, as compared to 1346 in
2014. As reported by Ministry of Environmental Protection (MEP), the quality of drinking water has significantly improved as well
– 76% of water sources are safe for drinking compared to 53.4% in 2004. Despite these improvements in drinking water quality,
the distribution networks across China still falls short as many cities still rely on decades-old pipe networks that are outdated
and rusted. It’s been reported, in 2013, that drinking water network coverage is only 3% throughout China (even in the biggest
three cities is only 15%), which means only 3% of Chinese citizens have access to drinking water in their homes. In other words,
distribution is the bottleneck of China’s entire drinking water supply system. The government and private capital have now
turned their focus to updating cities’ water distribution networks. According to H2O China, one of the largest research institutes
covering China’s water supply industry, fixed asset investment from both the government and private companies in the water
supply and distribution industry has grown significantly, with a compound annual growth rate of 14.32% from 2011 to 2015, as illustrated
below:







(Source: H2O China, http://www.h2o-china.com/news/242939.html)



25







Generational Shift to Stainless Steel Pipe
Network



To accommodate the enormous
increase of clean water demand in urban cities, the distribution network has to be highly safe, reliable, durable, and environmentally
friendly. Current pipe networks mainly consist of plastic (such as PPR and PVC), galvanized, and copper pipe, however, these materials
don’t meet the standards of drinking water transmission. In some developed countries, stainless steel had been widely accepted
as the best material for such application; Germany and Japan, for instance, have 80% and 90% of their water pipe networks using
stainless steel, respectively, while the percentage in China is around 3%. The popular acceptance of stainless steel is due to
the following advantages over other materials:



High Strength: Stainless
steel pipe’s strength is 1.5 times higher than galvanized pipe, 2-3 times higher than copper pipe and 8-10 times higher than
PPR pipe. Strength is an important factor and determines how shock resistant the pipe is.



Anti-corrosion: Stainless
steel pipe is highly corrosion resistant. Even under high velocity water flow of 60m/s, stainless steel’s corrosion rate
is below 0.003mm/year. This ensures stainless steel has more than 70 years of service life. As comparison, other materials can
only be used for 10-20 years.



Low water resistance: Due
to the smoothness of the inner pipe wall, stainless steel has a 40% lower water resistance than that of carbon and copper pipe.
Low water resistance reduces scale and bacterial deposits on the inner pipe wall, improving overall water quality and also reduces
the amount of electricity consumed by pump stations by half, provided that all downstream pipes are stainless steel.



Low Leakage Rate: Benefitting
from its high strength and anti-corrosion features, stainless steel pipes and fittings have extremely low leakage rates. According
to Best Practice: Water Leakage Prevention Controls published by New York City, replacing current pipe networks
with stainless steel components is a major priority to prevent water leakage, which can cause water waste, secondary disasters
such as poor water flow, road collapse, and flooding of buildings and inundation. Tokyo, an example used in the Best Practicedocument,
decreased its leakage rate from 20% in 1956 to 3% in 2010, mostly attributed to the usage of stainless steel pipes in its network.
(Source: http://www1.nyc.gov/assets/globalpartners/downloads/pdf/Tokyo_Energy_Water%20Leakage%20Controls.pdf)



Recyclable: Stainless steel
is 100% recyclable, while plastic pipe can only be landfilled or incinerated, both causing pollution to environment.



In addition to the significant
potential market within the urban development and residential real estate industries, we anticipate that the demand of our services
and products from hotels within China will also become an important target market. Currently, through local distributors, our products
are provided to global hotel brands such as Kempinski, Sheraton and Holiday Inn within China. During the past ten years, through
contractors, distributors and wholesalers, our products have been used in more than three hundred three- to five-star hotels. As
we have become one of the industry-leading stainless pipe manufacturers, we plan to work with end users such as multinational global
chains from the initial planning stage, assisting in the design of their pipe transmission systems, to the post-sale stage, providing
maintenance and repair services as part of their daily operation. China’s hotel industry has experienced tremendous growth
due to both inbound foreign travelers and domestic travelers, resulting in a $44 billion business with 2.5 million hotel rooms.
However, the hotel penetration rate is only approximately 4 rooms per 1,000 capita in China, which is relatively low compared to
that of developed nations. It is anticipated that the hospitality industry in China could reach $100 billion with 6.3 million rooms
and 8 rooms per 1,000 capita. This therefore presents a significant opportunity for our company. As developers and travelers are
becoming more sophisticated, the need for a sustainable and cost-effective solution is expected to increase. The quality of our
products and our expertise servicing global hotel chains will provide us with a competitive advantage for future hotel construction
projects.



26







Our Products and Services



Our products focus primarily
on the drinking water and gas transmission industries, while a minor portion of revenue is generated from the pharmaceutical, medical,
food and beverage industries. Produced from different stages of our production line, our steel products can be broken down and
sold as the following parts and components:



| | · | Steel Strip: We manufacture carbon steel and stainless steel strip for sale to traditional manufacturers who are not in the pipe and fitting industry and for our own internal use in the production of our pipes and fittings. Our ability to produce steel strip in-house allows us to ensure the quality and consistency of our pipe and fitting products.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Steel Pipe: Our carbon steel and stainless steel pipes are primarily used in water and gas transmission systems. Carbon steel pipes are generally stronger than stainless steel, and therefore are typically used in applications that require high-pressure resistance, such as gas transmission and fire hydrants. Stainless steel pipes, in contrast, are more corrosion resistant and are commonly applied in cases that require clean transmission, such as drinking water and pharmaceutical liquid transmission.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Light Gauge Stainless Steel Pipe (LGSSP): We have production lines specifically designed to produce LGSSP, which have 40% thinner walls than regular stainless steel pipes. The reduction in the thickness of the pipe wall leads to a reduced manufacturing cost and weight and enhances installation flexibility due to its smaller size. LGSSP is an affordable option for household plumbing systems that require easy installation.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Pipe Connections and Fittings: We manufacture high-quality pipe connections and fittings that are used to connect pipes. Pipe fittings have wide applications for any piping and plumbing systems in both industrial and commercial applications. Fittings allow pipes to be joined or installed in the appropriate place and terminated or closed where necessary. We produce fittings in various shapes and sizes, with more than 10,000 different specifications. As most leakages are caused by misalignment or improper manufacture of connections and fittings, pipe connections and fittings, being the most crucial components of any piping system, require extremely precise production procedures. Depending on the purposes served, our pipe fittings can be categorized as follows:
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



27







| | · | Pipe fittings to extend or terminate pipe runs: couplings, adapters, unions, caps and plugs pipe.
| | - | -------------------------------------------------------------------------------------------------



| | · | Fittings to change a pipe's direction: elbows, three-way fittings
| | - | -----------------------------------------------------------------



| | · | Pipe fittings to connect two or more pipes: tees, cross, side-inlet elbows, wyes
| | - | --------------------------------------------------------------------------------



| | · | Pipe fittings to change pipe size: reducers, bushings, couplings
| | - | ----------------------------------------------------------------



| | · | Pipe fitting tools: pipe fasteners
| | - | ----------------------------------



| | · | Pipe flanges
| | - | ------------



Our connections and fittings
segment has grown significantly during 2016. The increased proportion of our revenue generated by the connections and fittings
segment reflects a shift in our manufacturing and marketing priority to this segment. We have shifted our focus to connections
and fittings because we could offer more value-add to our products than pipe or strip. More importantly, providing quality products
in this segment is more likely to help us retain clients as consistency and quality of joints and fittings plays a big role in
reducing maintenance costs and leakage rates for the customers.



Pipe production is very
competitive in China. In order to distinguish ourselves from the other competitors in the industry, we have employed a team of
engineers specializing in network design, CAD drawing, and special prototyping of piping systems to help our customers create a
systematic solution based on their piping needs.







28







Sales Channels and Long Term Opportunities



Extensive Sales Network
within China. To market our products and brand to other regions within China, we have set up 48 sales representative posts
in major cities across China by assigning our sales and engineer specialists to those regions to establish long-term business relationship
with the local water and gas supply companies. In addition, we also have worked with 156 distributors across China to serve their
local customers. This extensive sales network ensures our products and services are accessible in all of the cities within in 30
of the 34 provinces and territories in China.



Strategic Partners.There’re
many water and gas transmission companies in China, and it would be very time-consuming if we negotiate with each of them one by
one on the terms of our order contract. To better market our products to these utility companies, we have invited some of them
to conduct on-site visit to check our production facility, quality control protocols, production capability, and research and development
capacity to demonstrate our value as a supplier compared to other competitors on the market. Once approved by these utility companies’
internal assessment teams, we will be pre-approved as their “qualified supplier”, which would exempt our company form
their production inspection process when they place orders. We have been pre-approved as “qualified supplier” by the
following companies:



| | · | Towngas Investment Group
| | - | ------------------------



| | · | Changsha Water Investment Group
| | - | -------------------------------



| | · | Shengzhen Water Supply Group
| | - | ----------------------------



| | · | Shanghai SMI Water Group
| | - | ------------------------



| | · | Sichuan SPT Energy Group
| | - | ------------------------



| | · | Min Sheng Energy Group
| | - | ----------------------



All of these companies
present us with potential long term opportunities for large scale project, which would require a large volume of piping products
over multiple years. In addition, we would be able to advantage of their business network. We currently do not directly supply
to some of our partners and instead we rely on local distributors and wholesalers to deal with specific projects due to the complex
of each project. However, to provide goodwill and value-add to our customers in addition to our quality products, we prioritize
the production of their orders and plan to offer them with engineering advisory and post-sales maintenance services in the future.
We also have staffed experienced engineers available to resolve any installation or maintenance issues that these end users may
encounter.



Customers and Suppliers



Customers



For carbon and stainless
steel pipe products, we principally target our marketing efforts toward those clients in the water and gas supply industries which
require high quality specialty steel pipes and fittings with precise “just-in-time” delivery as most of our clients
do not carry inventory, technical consultancy or post-sale support. Our enhanced product quality and delivery capabilities, as
well as our emphasis on customer oriented technical support and product planning, are critical factors in our ability to serve
this segment of the market. In the near future, as we begin to transform our business to both a product supplier and a solution
provider, we expect that customers will enjoy using our products and working with engineers since our integrated approach is expected
to help our customers reduce planning, installation and maintenance costs.



We find that primarily
sold through distributors, our products are mostly embraced by two categories of end users: those within the water transmission
industry and those within the gas transmission. Our clients scatter in diverse industries including, but not limited to, water
treatment, real estate development, hospitality, hospital, gas supply, and school. We consider our major customers in each period
to be those customers that accounted for more than 10% of overall revenues in such period. We have one significant customer during
the fiscal year ended September 30, 2018, which accounted for 21.1% of total sales. There was one significant customer during the
fiscal year ended September 30, 2017, which accounted for 14.9% of total sales. We did not have such customer during the fiscal
year ended September 30, 2016.



Suppliers



We consider our major vendors
in each period to be those vendors that accounted for more than 10% of overall purchases in such period. We have 3 major vendors
during the fiscal year ended September 30, 2018, 2017 and 2016, who collectively accounted for 62.4%, 63.6% and 67% respectively
during the three fiscal years. We purchase from a variety of suppliers and believe these raw materials are widely available. If
we were unable to purchase from our primary suppliers, we do not expect we would face difficulties in locating another supplier
at substantially the same price. We have secure and efficient access to all the raw materials necessary for the production of our
products. We believe our relationships with the suppliers of these raw materials are strong. While the prices of such raw materials
may vary greatly from time to time, we believe we could hedge such risk by adjusting our price or absorb the higher cost at times
if necessary.



29







Research and Development



We are committed to researching
and developing stainless steel products for use in all industries that need water and gas transmission systems. We believe scientific
and technological innovations will help our Company achieve its long-term strategic objectives. Our research and development efforts
are an integral part of our operations and the crux of our competitive advantage and differentiation strategy.



The Research and Development
team consists of dedicated researchers and analysts focusing on mechanical design, mechatronics, CAD design, mold design and welding.
Quality control is an important aspect of the team’s work and ensuring quality at every stage of the process has been a key
driver in maintaining and developing brand value for the Company.



Our Intellectual Property



We rely on our technology
patents to protect our domestic business interests and ensure our competitive position in our industry. The issued patents we hold
are as follows:





|No. |  | Patent Name                                                                      |  | Owner              |  | Category              |  | Patent Code.  |  | Authorization Date
|--- |  | -------------------------------------------------------------------------------- |  | ------------------ |  | --------------------- |  | ------------- |  | ------------------
|1.  |  | Anti vibration groove                                                            |  | Zhejiang Zhengkang |  | Design Patent         |  | 2016303899813 |  | 12/21/2016        
|2.  |  | Anti vibration groove connector for pipeline                                     |  | Zhejiang Zhengkang |  | Utility Models Patent |  | 2016208805658 |  | 01/18/2017        
|3.  |  | High strength tensile mechanical compression type pipe joint                     |  | Zhejiang Zhengkang |  | Utility Models Patent |  | 2016204183044 |  | 09/21/2016        
|4.  |  | Tensile elastic ring                                                             |  | Zhejiang Zhengkang |  | Utility Models Patent |  | 2016204163036 |  | 09/21/2016        
|5.  |  | Special joint for gas                                                            |  | Zhejiang Zhengkang |  | Utility Models Patent |  | 2016204209275 |  | 09/21/2016        
|6.  |  | Self sealing ring                                                                |  | Zhejiang Zhengkang |  | Utility Models Patent |  | 2016204162993 |  | 11/23/2016        
|7.  |  | Warm jacket (45 degree elbow)                                                    |  | Zhejiang Zhengkang |  | Design Patent         |  | 2016300576444 |  | 07/20/2016        
|8.  |  | Articulated bellows                                                              |  | Zhejiang Zhengkang |  | Utility Models Patent |  | 2016201606371 |  | 07/27/2016        
|9.  |  | Stainless steel pipe warm jacket                                                 |  | Zhejiang Zhengkang |  | Utility Models Patent |  | 2016201606102 |  | 07/27/2016        
|10. |  | A new type of metal pipe fitting                                                 |  | Zhejiang Zhengkang |  | Utility Models Patent |  | 2016201585303 |  | 07/27/2016        
|11. |  | Three way warm jacket                                                            |  | Zhejiang Zhengkang |  | Design Patent         |  | 2016300576459 |  | 07/27/2016        
|12. |  | Warm jacket (90 degree elbow)                                                    |  | Zhejiang Zhengkang |  | Design Patent         |  | 2016300576463 |  | 07/27/2016        
|13. |  | Direct thermal cover                                                             |  | Zhejiang Zhengkang |  | Design Patent         |  | 2016300576482 |  | 09/07/2016        
|14. |  | Thin wall compression type metal pipe fitting type O sealing ring                |  | Zhejiang Zhengkang |  | Utility Models Patent |  | 2015202071764 |  | 08/05/2015        
|15. |  | Internal expansion type stainless steel pipe mouth shaping device                |  | Zhejiang Zhengkang |  | Utility Models Patent |  | 2015202074989 |  | 08/05/2015        
|16. |  | Full automatic stainless steel pipe high pressure water pressure testing machine |  | Zhejiang Zhengkang |  | Utility Models Patent |  | 2015202070687 |  | 08/05/2015        
|17. |  | An elbow pipe automatic flat head machine                                        |  | Zhejiang Zhengkang |  | Utility Models Patent |  | 2015202072894 |  | 08/05/2015        
|18. |  | Full automatic steel pipe air tightness detecting machine                        |  | Zhejiang Zhengkang |  | Invention Patent      |  | 2014100189333 |  | 03/02/2016        





30







|19. |  | Full automatic steel pipe air tightness detection device                                          |  | Zhejiang Zhengkang         |  | Utility Models Patent |  | 2014200253551 |  | 06/25/2014
|--- |  | ------------------------------------------------------------------------------------------------- |  | -------------------------- |  | --------------------- |  | ------------- |  | ----------
|20. |  | Loading device of full automatic steel pipe air tightness testing machine                         |  | Zhejiang Zhengkang         |  | Utility Models Patent |  | 2014200262086 |  | 07/16/2014
|21. |  | Material distributing device of full automatic steel pipe air tightness detecting machine         |  | Zhejiang Zhengkang         |  | Utility Models Patent |  | 2014200261789 |  | 07/16/2014
|22. |  | Multi-station semiautomatic fitting former                                                        |  | Zhejiang Zhengkang         |  | Invention Patent      |  | 201310251507X |  | 2015.08.26
|23. |  | Double-cone double-clamp metal pipeline connecting piece                                          |  | Zhejiang Zhengkang         |  | Utility Models Patent |  | 2013203622036 |  | 12/18/2013
|24. |  | Semi-automatic multi-station pipe fitting forming machine                                         |  | Zhejiang Zhengkang         |  | Utility Models Patent |  | 2013203622017 |  | 12/18/2013
|26. |  | Convex-ring-free self-locking and hermetic-connecting device for thin-walled stainless steel pipe |  | Zhejiang Zhengkang         |  | Utility Models Patent |  | 2011202296878 |  | 01/11/2012
|27. |  | LGSSP connecting piece without bulge loop and adopting self-locking sealing                       |  | Zhejiang Zhengkang         |  | Utility Models Patent |  | 2011202296806 |  | 02/15/2012
|28  |  | Pipe Joint                                                                                        |  | Zhejiang
        Zhengkang |  | Invention Patent      |  | 2006100289799 |  | 05/12/2010
|29  |  | Convex pipe joint                                                                                 |  | Zhejiang
        Zhengkang |  | Invention Patent      |  | 2008101079922 |  | 08/31/2011
|30  |  | Elbow pipe fittings automatic flat head machine                                                   |  | Zhejiang
        Zhengkang |  | Invention Patent      |  | 200910097809X |  | 09/08/2010
|31  |  | Self-sealing shaped seal                                                                          |  | Zhejiang
        Zhengkang |  | Utility Models Patent |  | 2016204162993 |  | 11/23/2016
|32  |  | Buckle type pipe fitting with warning device                                                      |  | Zhejiang
        Zhengkang |  | Utility Models Patent |  | 2016214861265 |  | 08/18/2017
|33  |  | Automatic roll forming machine                                                                    |  | Zhejiang
        Zhengkang |  | Utility Models Patent |  | 2009201178720 |  | 01/13/2010



Description of Chinese Patent Categories:



Invention patents



As in Europe, this type
of patent is granted for new technical solutions or improvements to a product or a process with practical applicability.



Utility patents



Granted for new technical
solutions or improvement with a lower degree of ‘inventiveness’ than Invention patents, i.e., products with a new shape
or structural physical features. Utility Models are also sometimes called ‘Utility Patents’ or ‘Petty Patents’
in other countries.



31







Design patents



Granted for innovations
in the external features of a product, encompassing any of the following features: Shape; Pattern; Shape and Pattern; Shape and
Color; Shape, Pattern and Color. Innovations must also be “fit for industrial application” (i.e., specifically usable
by industry, producible in batches, etc.).



Trademarks



In addition, we have the
right to use the following trademark registrations issued in the PRC, all of which are held by the Zhejiang Zhengkang:



|No. |  | Registrant                     |  | Trademark |  | Category |  | Certificate
Code |  | Valid Through                  |  | Application Area                                                                                                                                                                   
|--- |  | ------------------------------ |  | --------- |  | -------- |  | ---------------- |  | ------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1   |  | Zhengkang Industrial Co., Ltd. |  |           |  | 6        |  | 4482840          |  | 2008.2.14-
        2018.2.13   |  | Metal Sheet and Plate, Metal Door Panel, Metal Binding Strap, Metal Flange, Metal Signboard, Metal Electrode                                                                       
|    |  |                                |  |           |  |          |  |                  |  |                                |  |                                                                                                                                                                                    
|2   |  | Zhengkang Industrial Co., Ltd. |  |           |  | 6        |  | 5584098          |  | 2009.6.28-
        2019.6.27   |  | Metal Sheet and Plate, Metal Pipe, Metal Partition Board, Metal Door, Metal Lock, Metal Band Hoop, Metal Screws, Metal Signboard, Metal Flange, Metal Electrode                    
|    |  |                                |  |           |  |          |  |                  |  |                                |  |                                                                                                                                                                                    
|3   |  | Zhengkang Industrial Co., Ltd. |  |           |  | 6        |  | 5584100          |  | 2009.10.21-
        2019.10.20 |  | Metal Sheet and Plate, Metal Partition Board, Metal Binding Strap, Metal Screws, Metal Signboarb, Metal Strecther, Metal Electrode                                                 
|    |  |                                |  |           |  |          |  |                  |  |                                |  |                                                                                                                                                                                    
|4   |  | Zhengkang Industrial Co., Ltd. |  |           |  | 11       |  | 5584101          |  | 2009.8.14-
        2019.8.13   |  | Faucet, Pipe Tap, Water Distribution Equipment, Pipeline of Medical Equipment, Plumbing Pipe and Fitting, Water Drainage Equipment, Mixer Tap, Running Water Coordination Equipment
|    |  |                                |  |           |  |          |  |                  |  |                                |  |                                                                                                                                                                                    
|5   |  | Zhengkang Industrial Co., Ltd. |  |           |  | 6        |  | 5646751          |  | 2009.7.14-
        2019.7.13   |  | Metal Pipe, Steel Bar, Metal Signboard, Railway Metal Material, Metal Clip (for cable or pipe), Metal Mould, Metal Electrode, Iron Ores, Bronze Artwork, Metal Mooring Bollards    
|    |  |                                |  |           |  |          |  |                  |  |                                |  |                                                                                                                                                                                    
|6   |  | Zhengkang Industrial Co., Ltd. |  |           |  | 41       |  | 7034175          |  | 2010.10.14-
        2020.10.13 |  | School (Education) , Training, Meeting Arrangement, Book Publication, Club Service (Entertainment or Education), TV Programme Production, Lottery                                  
|    |  |                                |  |           |  |          |  |                  |  |                                |  |                                                                                                                                                                                    
|7   |  | Zhengkang Industrial Co., Ltd. |  |           |  | 39       |  | 7034176          |  | 2010.10.14-
        2020.10.13 |  | Transportation,MarineTransportation, Truck Transportation, Air Transportation, Car Rental, Storage, Express Delivery, Travelling Agency, Pipe Transportation                       



32







|8  |  | Zhengkang Industrial Co., Ltd. |  |  |  | 28 |  | 7034178 |  | 2010.12.28-
        2020.12.27 |  | Christmas Tree with Synthetic Material, Fishing Tackle, Fishing Pole, Swimming Pool                                                                                         
|-- |  | ------------------------------ |  |  |  | -- |  | ------- |  | ------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                |  |  |  |    |  |         |  |                                |  |                                                                                                                                                                             
|9  |  | Zhengkang Industrial Co., Ltd. |  |  |  | 20 |  | 7034179 |  | 2010.10.28-
        2020.10.27 |  | Plastic Elbow Pipe, Glass Mirror, Non-metal Plate, Drinking Straw, Non-metal Furniture Component, Non-metal Door Component                                                  
|   |  |                                |  |  |  |    |  |         |  |                                |  |                                                                                                                                                                             
|10 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 18 |  | 7034180 |  | 2011.06.07-
        2021.06.06 |  | Leather Bag, Handbag, Travelling Coat Pocket, Umbrella, Umbrella Cover, Crutch, Leather Belt, Sausage Casing                                                                
|   |  |                                |  |  |  |    |  |         |  |                                |  |                                                                                                                                                                             
|11 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 17 |  | 7034181 |  | 2010.11.14-
        2020.11.13 |  | Synthetic Rubber, Synthetic Resin, Asbestos Sole, Electro Insulating Material, Packge Rubber Bag, Firehose, Latex, Plexiglass                                               
|   |  |                                |  |  |  |    |  |         |  |                                |  |                                                                                                                                                                             
|12 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 12 |  | 7034182 |  | 2010.6.14-
        2020.6.13   |  | Railway Carriage Couplings, Air Pump, Small-size Vehicle, Bicycl, Aerial Conveyer, Luggage Carrier, Sleigh Car, Vehicle Tire, Ferry                                         
|   |  |                                |  |  |  |    |  |         |  |                                |  |                                                                                                                                                                             
|13 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 8  |  | 7034183 |  | 2010.10.7-
        2020.10.6   |  | Abrasive Tool, Garden Tool, Fish Spear, Shaver, Drills, Threader, Sculpting Tool, Scissor, Tableware                                                                        
|   |  |                                |  |  |  |    |  |         |  |                                |  |                                                                                                                                                                             
|14 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 42 |  | 7086004 |  | 2011.2.21-
        2020.2.20   |  | Land Vehicle, Meteorological Info, Vehicle Performance Inspection, Package Design, Interior Design                                                                          
|   |  |                                |  |  |  |    |  |         |  |                                |  |                                                                                                                                                                             
|15 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 7  |  | 7086005 |  | 2010.7.14-
        2020.7.13   |  | Vehicle Engine Radiator Tube, Machine Tool, Steam Elbow Pipe, Die-casting Mould, Sewing Machine, Leather-working Machine, Agricultural Machinery                            
|   |  |                                |  |  |  |    |  |         |  |                                |  |                                                                                                                                                                             
|16 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 45 |  | 7086006 |  | 2010.8.7-
        2020.8.6     |  | Security Surveillance, Security Consulting, Dress Rental, Lock Pick, Firefighting, Intellectual Property Consulting, IP License,  Software License                          
|   |  |                                |  |  |  |    |  |         |  |                                |  |                                                                                                                                                                             
|17 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 36 |  | 7086007 |  | 2010.9.7-
        20209.6      |  | Life Insurance, Insurance Consulting, Financial Loan, Security Trade Information, Artwork Appraisal, Guarantee, Charitable Fund Raising, Pawn Brokerage, Cerdit Card Service
|   |  |                                |  |  |  |    |  |         |  |                                |  |                                                                                                                                                                             
|18 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 6  |  | 7089246 |  | 2010.7.7-
        2020.7.6     |  | Metal Sheet and Plate, Metal Water Pipe, Metal Door Panel, Metal Valve, Metal Lock, Metal Band Hoop, Metal Screws, Metal Signboard, Metal Flange, Metal Pipe                



33









|19 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 6  |  | 7154484  |  | 2010.7.21-
        2020.7.20   |  | Metal Sheet and Plate, Metal Water pipe, Metal Door Panel, Metal Valve, Metal Lock, Metal Band Hoop, Metal Screws, Metal Signboard, Metal Flange, Metal Pipe                   
|-- |  | ------------------------------ |  |  |  | -- |  | -------- |  | ------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                |  |  |  |    |  |          |  |                                |  |                                                                                                                                                                                
|20 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 6  |  | 7287954  |  | 2010.12.21-
        2020.12.20 |  | Metal Sheet and Plate, Metal Water pipe, Metal Door Panel, Metal Lock, Metal Band Hoop, Metal Screws, Metal Signboard, Metal Flange, Metal Pipe                                
|   |  |                                |  |  |  |    |  |          |  |                                |  |                                                                                                                                                                                
|21 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 1  |  | 13711670 |  | 2015.6.21-
        2025.6.20   |  | Industrial Graphite, Oxidation Shaft, Photographic Paper, Fire Extinguishing Composition, Flux, Metal Return Agent                                                             
|   |  |                                |  |  |  |    |  |          |  |                                |  |                                                                                                                                                                                
|22 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 21 |  | 13716104 |  | 2015.8.21-
        2025.8.20   |  | Toothbrush, Cosmetics, Water Tank (Indoor Aquarium), Trapping Insects                                                                                                          
|   |  |                                |  |  |  |    |  |          |  |                                |  |                                                                                                                                                                                
|23 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 26 |  | 13712073 |  | 2015.8.21-
        2025.8.20   |  | Wigs, Needles, Garment Pads, Repaired Textiles with Heat-Bonded Patches, Linen Markers with Numbers                                                                            
|   |  |                                |  |  |  |    |  |          |  |                                |  |                                                                                                                                                                                
|24 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 40 |  | 13716264 |  | 2015.4.7-
        2025.4.6     |  | Metal Plating, Wood Making, Optical Lens Grinding, Firing Pottery                                                                                                              
|   |  |                                |  |  |  |    |  |          |  |                                |  |                                                                                                                                                                                
|25 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 5  |  | 13711759 |  | 2015.7.21-
        2025.7.20   |  | Dental Abrasive Powder                                                                                                                                                         
|   |  |                                |  |  |  |    |  |          |  |                                |  |                                                                                                                                                                                
|26 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 6  |  | 14497890 |  | 2015.8.7-
        2025.8.6     |  | Metal Water pipe, Metal Door, Metal Binding Strap, Metal Screws, Metal Flange, Metal Sealing Cap, Metal Signboard, Metal Electrode                                             
|   |  |                                |  |  |  |    |  |          |  |                                |  |                                                                                                                                                                                
|27 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 9  |  | 13715937 |  | 2015.8.21-
        2025.8.20   |  | Signal Light, Movie Camera, Water Meter, Optical Product, Safety Helmet                                                                                                        
|   |  |                                |  |  |  |    |  |          |  |                                |  |                                                                                                                                                                                
|28 |  | Zhengkang Industrial Co., Ltd. |  |  |  | 16 |  | 13711975 |  | 2016.5.7-
        2026.5.6     |  | Lithographic Crafts                                                                                                                                                            
|   |  |                                |  |  |  |    |  |          |  |                                |  |                                                                                                                                                                                
|29 |  | Zhengfeng Industry and Trade   |  |  |  | 6  |  | 1581510  |  | 2001.6.7-
        2011.6.6     |  | Sheet Metal and Sheet Metal, Steel Strip, Metal Strip For Packaging Or Bundling, Ordinary Metal Wire, Iron Strip, Stainless Steel, Steel Strip, Ordinary Metal Hinge, Metal Rod



34







Chinese Laws and Regulations



Regulation on Product Liability



Manufacturers
and vendors of defective products in the PRC may incur liability for losses and injuries caused by such products. Under the General
Principles of the Civil Laws of the PRC, which became effective on January 1, 1987 and were amended on August 27, 2009, manufacturers
or retailers of defective products that cause property damage or physical injury to any person will be subject to civil liability.



In
1993, the General Principles of the PRC Civil Law were supplemented by the Product Quality Law of the PRC (as amended in 2000 and
2009) and the Law of the PRC on the Protection of the Rights and Interests of Consumers (as amended in 2009), which were enacted
to protect the legitimate rights and interests of end-users and consumers and to strengthen the supervision and control of the
quality of products. If our products are defective and cause any personal injuries or damage to assets, our customers have the
right to claim compensation from us.



The
PRC Tort Law was promulgated on December 26, 2009 and became effective from July 1, 2010. Under this law, a patient who suffers
injury from a defective medical device can claim damages from either the medical institution or the manufacturer of the defective
device. If our pipe products and installation and construction services injure a patient, and if the patient claims damages from
the medical institution, the medical institution is entitled to claim repayment from us. Pursuant to the PRC Tort Law, where a
personal injury is caused by a tort, the tortfeasor shall compensate the victim for the reasonable costs and expenses for treatment
and rehabilitation, as well as death compensation and funeral costs and expenses if it causes the death of the victim. There is
no cap on monetary damages the plaintiffs may seek under the PRC Tort Law.







Regulation on Foreign Exchange Control and Registration of Offshore Investment by PRC Residents



See
Item 10. Additional Information – D. Exchange Controls.







Regulation on Dividend Distributions



Our
PRC subsidiary, Wenzhou Weijia, is a wholly foreign-owned enterprise under the PRC law. The principal regulations governing the
distribution of dividends paid by wholly foreign-owned enterprises include:



| | · | Corporate Law (1993) as amended in 2005 and 2013;
| | - | -------------------------------------------------



| | · | The Wholly Foreign-Owned Enterprise Law (1986), as amended in 2000;
| | - | -------------------------------------------------------------------



| | · | The Wholly Foreign-Owned Enterprise Law Implementation Regulations (1990), as amended in 2001; and
| | - | --------------------------------------------------------------------------------------------------



| | · | The Enterprise Income Tax Law (2007) and its Implementation Regulations (2007).
| | - | -------------------------------------------------------------------------------



35







Under these regulations, wholly foreign-owned
enterprises in China may pay dividends only out of their accumulated profits, if any, as determined in accordance with PRC accounting
standards and regulations. In addition, an enterprise in China is required to set aside at least 10% of its after-tax profit based
on PRC accounting standards each year to its general reserves until its cumulative total reserve funds reaches 50% of its registered
capital. Our Company’s reserve fund has not yet reached this level. The board of directors of a wholly foreign-owned enterprise
has the discretion to allocate a portion of its after-tax profits to its employee welfare and bonus funds. These reserve funds,
however, may not be distributed as cash dividends.



On
March 16, 2007, the National People’s Congress enacted the Enterprise Income Tax Law, and on December 6, 2007,
the State Council issued the Implementation Regulations on the Enterprise Income Tax Law, both of which became effective on January 1,
2008. Under this law and its implementation regulations, dividends payable by a foreign-invested enterprise in the PRC to its foreign
investor who is a non-resident enterprise will be subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction
of incorporation has a tax treaty with the PRC that provides for a lower withholding tax rate.



36







Restriction on Foreign Investment



The
Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2018 Version), or the Negative List, which
was promulgated jointly by the Ministry of Commerce and the National Development and Reform Commission on June 28, 2018 and became
effective on July 28, 2018, replaced and partly abolished the Guidance Catalogue of Industries for Foreign Investment (2017 Revision)
regulating the access of foreign investors to China. Pursuant to the Negative List, foreign investors should refrain from making
investing in any of prohibited sectors specified in the Negative List, and foreign investors are required to obtain the permit
for access to other sectors that are listed in the Negative List but not classified as “prohibited”.



Our company’s primary
market is the hardware manufacturing industry. We are not engaged in any activities placing us in the encouraged, restricted or
prohibited categories and so it could be inferred that we are engaged in a permitted industry for foreign investment. Such a designation
offers businesses certain advantages. For example, businesses engaged in permitted industries:



| | · | are not subject to restrictions on foreign investment, and, as such, foreigners can own a majority interest in Sino-foreign joint ventures or establish wholly-owned foreign enterprises in the PRC;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | provided such business has total investment of less than $100 million, are subject to regional (not central) government examination and approval which are generally more efficient and less time-consuming. Our current total investment is less than $100 million.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The National Development
and Reform Commission and MOFCOM periodically jointly revise the Foreign Investment Industrial Guidance Catalogue. As such, there
is a possibility that our company’s business may fall outside the scope of the definition of a permitted industry in the
future. Should this occur, we would no longer benefit from such designation.



On January 19, 2015, China’s
Ministry of Commerce issued a draft Foreign Investment Law aiming to, upon its enactment, replace the three existing laws regulating
foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture
Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations.
At the same time, the Ministry of Commerce published an accompanying explanatory note of the draft Foreign Investment Law, which
contains important information about the draft Foreign Investment Law, including its drafting philosophy and principles, main table
of contents, plans to transition to the new legal regime and treatment of business in China controlled by foreign invested enterprises.
The draft Foreign Investment Law proposes an expected PRC regulatory trend to rationalize its foreign investment regulatory regime
in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign
and domestic investments and, when implemented, may have a significant impact on businesses in China controlled by foreign-invested
enterprises primarily through contractual arrangements, such as our business. Among other things, the draft Foreign Investment
Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether
a company is considered a foreign-invested enterprise. Under the draft Foreign Investment Law, variable interest entities would
also be deemed as foreign-invested enterprises, if they are ultimately “controlled” by foreign investors, and be subject
to restrictions on foreign investments. The Ministry of Commerce solicited comments on the draft Foreign Investment Law in 2015,
but no new draft has been published since then.



According to the current
Special Administrative Measures for Entrance of Foreign Investment, our company’s
business does not fall in any prohibited or restricted industries. If China’s Ministry of Commerce adopts a list as same
as the Catalogue along with the draft, the draft will have very limited impact on our business, if any. The probability that our
business will be classified as prohibited or restricted industry is very low. However, If China’s Ministry of Commerce adopts
a list by our business is prohibited or restricted, and it treats our business in China as foreign investment by deciding our
actual controller is Mr. Jiancong Huang who is not a Chinese citizen, we may face certain restrictions or even be prohibited to
conduct business in China.



Regulations on Offshore Parent Holding Companies’ Direct
Investment in and Loans to Their PRC Subsidiaries



Loans
made by foreign investors as shareholders in foreign invested enterprises established in China are considered to be foreign debts
and are mainly regulated by the Regulation of the People’s Republic of China on Foreign Exchange Administration, the Interim
Provisions on the Management of Foreign Debts, the Statistical Monitoring of Foreign Debts Tentative Provisions, the Detailed Rules
for the Implementation of Provisional Regulations on Statistics and Supervision of External Debt, and the Administrative Measures
for Registration of Foreign Debts. Pursuant to these regulations and rules, a shareholder loan in the form of foreign debt made
to a PRC entity does not require the prior approval of SAFE, but such foreign debt must be registered with and recorded by SAFE
or its local branches within 15 business days after entering into the foreign debt contract. Under these regulations and rules,
the balance of the foreign debts of a foreign invested enterprise shall not exceed the difference between the total investment
and the registered capital of the foreign invested enterprise, or Total Investment and Registered Capital Balance.



37







The Interim Provisions
of the State Administration for Industry and Commerce on the Ratio of the Registered Capital to the Total Investment of a Sino-Foreign
Equity Joint Venture Enterprise was promulgated by SAIC on February 17, 1987 and effective on March 1, 1987. According to these
provisions, with respect to a sino-foreign equity join venture, the registered capital shall be (i) no less than seven-tenths of
its total investment, if the total investment is US$3 million or under US$3 million; (ii) no less than one-half of its total investment,
if the total investment is ranging from US$3 million to US$10 million (including US$10 million), provided that the registered capital
shall not be less than US$2.1 million if the total investment is less than US$4.2 million; (iii) no less than two-fifths of its
total investment, if the total investment is ranging from US$10 million to US$30 million (including US$30 million), provided that
the registered capital shall not be less than US$5 million if the total investment is less than US$12.5 million; and (iv) no less
than one-third of its total investment, if the total investment exceeds US$30 million, provided that the registered capital shall
not be less than US$12 million if the total investment is less than US$36 million.





The Notice of the People’s
Bank of China on Matters concerning the Macro-Prudential Management of Full-Covered Cross-Border Financing, or PBOC Notice No.
9, issued by the PBOC on January 12, 2017, provides that within a transition period of one year from January 12, 2017, the foreign
invested enterprises may adopt the currently valid foreign debt management mechanism, or Current Foreign Debt Mechanism, or the
mechanism as provided in PBOC Notice No. 9, or Notice No. 9 Foreign Debt Mechanism, at their own discretion. PBOC Notice No. 9
provides that enterprises may conduct independent cross-border financing in RMB or foreign currencies as required. According to
the PBOC Notice No.9, the outstanding cross-border financing of an enterprise (the outstanding balance drawn, here and below) shall
be calculated using a risk-weighted approach, or Risk-Weighted Approach, and shall not exceed the specified upper limit, namely:
risk-weighted outstanding cross-border financing  ̈ the upper limit of
risk-weighted outstanding cross-border financing. Risk-weighted outstanding cross-border financing =  ̈ outstanding
amount of RMB and foreign currency denominated cross-border financing × maturity risk conversion factor × type risk
conversion factor +  ̈ outstanding foreign currency denominated cross-border
financing × exchange rate risk conversion factor. Maturity risk conversion factor shall be 1 for medium- and long-term cross-border
financing with a term of more than one year and 1.5 for short-term cross-border financing with a term of less than one year. Type
risk conversion factor shall be 1 for on-balance-sheet financing and 1 for off-balance-sheet financing (contingent liabilities)
for the time being. Exchange rate risk conversion factor shall be 0.5. The PBOC Notice No. 9 further provides that the upper limit
of risk-weighted outstanding cross-border financing for enterprises shall be 200% of its net assets, or Net Asset Limits. Enterprises
shall file with SAFE in its capital item information system after entering into a cross-border financing agreement, but no later
than three business days before making a withdrawal. As an example, the maximum amount of the loans that Yeelion Online, one of
our PRC subsidiaries, may acquire from outside China is (i) US$9.5 million, under the total investment minus registered capital
approach, which is calculated based on its total investment of US$29.5 million and registered capital of US$20 million
as of September 30, 2018; and (ii) RMB959.7 million (US$139.7 million), under the net asset approach, calculated based
on its net asset of RMB479.9 million (US$69.9 million) as of September 30, 2018 pursuant to PRC GAAP.



Based on the foregoing,
if we provide funding to our wholly foreign owned subsidiaries through shareholder loans, the balance of such loans shall not exceed
the Total Investment and Registered Capital Balance and we will need to register such loans with SAFE or its local branches in
the event that the Current Foreign Debt Mechanism applies, or the balance of such loans shall be subject to the Risk-Weighted Approach
and the Net Asset Limits and we will need to file the loans with SAFE in its information system in the event that the Notice No.
9 Mechanism applies. Under the PBOC Notice No. 9, after a transition period of one year from January 11, 2017, the PBOC and SAFE
will determine the cross-border financing administration mechanism for the foreign-invested enterprises after evaluating the overall
implementation of PBOC Notice No. 9. As of the date hereof, neither the PBOC nor SAFE has promulgated and made public any further
rules, regulations, notices or circulars in this regard. It is uncertain which mechanism will be adopted by the PBOC and SAFE in
the future and what statutory limits will be imposed on us when providing loans to our PRC subsidiaries.



Regulations on Trademarks



Trademarks are protected
by the PRC Trademark Law adopted in 1982, as subsequently amended, as well as the Implementation Regulations of the PRC Trademark
Law adopted by the State Council in 2002 and 2013. The Trademark Office under the SAIC handles trademark registrations. Trademarks
can be registered for a term of ten years and can be extended for another ten years if requested upon expiration of the first or
any renewed ten-year term. The PRC Trademark Law has adopted a "first-to-file" principle with respect to trademark registration.
Where a trademark for which a registration application has been made is identical or similar to another trademark which has already
been registered or been subject to a preliminary examination and approval for use on the same type of or similar commodities or
services, the application for such trademark registration may be rejected. Any person applying for the registration of a trademark
may not prejudice the existing right first obtained by others, nor may any person register in advance a trademark that has already
been used by another party and has already gained a "sufficient degree of reputation" through such other party's use.
Trademark license agreements must be filed with the Trademark Office or its regional offices. Meanwhile, we have successfully applied
on our own name 21 trademarks.



38







Regulations on Patents



The
PRC Patent Law provides for patentable inventions, utility models and designs, which must meet three conditions: novelty, inventiveness
and practical applicability. The State Intellectual Property Office is responsible for examining and approving patent applications.
A patent is valid for a term of twenty years in the case of an invention and a term of ten years in the case of utility models
and designs. We have obtained 25 patents, all of which we have ownership of, including a number of those that were originally
under the ownership of certain individuals affiliated with our Company through ownership transfer.



Regulations on Taxation



See
“Item 10. Additional Information – E. Taxation – PRC Taxation.”



Regulations on Employment



In
accordance with the PRC National Labor Law, which became effective in January 1995, and the PRC Labor Contract Law, which became
effective in January 2008, as amended subsequently in 2012, employers must execute written labor contracts with full-time employees
in order to establish an employment relationship. All employers must compensate their employees equal to at least the local minimum
wage standards. All employers are required to establish a system for labor safety and sanitation, strictly abide by state rules
and standards and provide employees with appropriate workplace safety training. In addition, employers in China are obliged to
pay contributions to the social insurance plan and the housing fund plan for employees. We have contributed to the basic and minimum
social insurance plan. Due to a high employee turnover rate in our industry, it is difficult for us to comply fully with the law.
While we believe we have made adequate provision of such outstanding amounts of contributions to such plans in our financial statements,
any failure to make sufficient payments to such plans would be in violation of applicable PRC laws and regulations and, if we are
found to be in violation of such laws and regulations, we could be required to make up the contributions for such plans as well
as to pay late fees and fines.



| | A. | Organizational Structure
| | -- | ------------------------



Below is a chart illustrating our current corporate
structure:







ZK Pipe Industry Co., Ltd.
(“ZK Pipe”) was incorporated on May 28, 2015 under the law of Hong Kong SAR. The registered capital is HKD 1,000,000,
with 40% of the equity interest held by ZK International and 60% held by Kai Chun Cheng initially. On August 5, 2015, Mr. Cheng
transferred all of his equity in ZK Pipe to ZK International, making ZK Pipe a wholly-owned subsidiary of ZK International. The
registered principal activities of ZK Pipe including technical research of metal pipe and fittings, metal take-up valve plumbing
and water purifying plant, as well as importing and exporting of goods.



39









Wenzhou Weijia Pipeline
Development Co., Ltd. (“Wenzhou Weijia”) was incorporated on June 17, 2015 under the laws of the People’s Republic
of China. A wholly-owned subsidiary of ZK Pipe and a wholly foreign-owned entity under the PRC laws, Wenzhou’s registered
capital is USD 20,000,000 and the registered principal activities of Wenzhou Weijia
including (i) technical research, (ii) technical service and sales of metal pipe and fittings, (iii) technical service and sales
of light industry machinery and (iv) equipment imports and exports of goods and technology.



Zhejiang Zhengkang Industrial
Co., Ltd., or formerly known as Wenzhou Yafei Valve Manufacturing Co. Ltd (“Zhejiang Zhengkang”) was incorporated on
December 4, 2001 under the laws of the People’s Republic of China. Zhejiang Zhengkang’s registered and paid in capital
is RMB 20,000,000. Through equity transfers, Wenzhou Weijia holds 99% of the equity interest of Zhejiang Zhengkang, with the remaining
1% held by our Chief Executive Officer, Jiancong Huang. The principal activities of Zhejiang Zhengkang include (i) manufacturing
and sales of stainless steel band,copper strip,welded stainless steel pipes and fittings, pipe fittings,
valve, light industry machinery and equipment and other stainless steel products and (ii) imports and exports of goods and technology.



Wenzhou Zhengfeng Industry
and Trade Co., Ltd. or formerly known as Wenzhou Zhengfeng Steel Strip Co., Ltd. (“Wenzhou Zhengfeng”) was incorporated
on December 24, 1999 under the laws of the People’s Republic of China. Wenzhou Zhengfeng’s registered and paid in capital
is RMB 2,880,000. Through equity transfers, Wenzhou Zhengfeng is a wholly-owned subsidiary of Zhejiang Zhengkang and its principal
activity is trading of steel strip that are mainly purchased from Zhejiang Zhengkang.





XSigma Corporation
(“XSigma”) was incorporated on January 18, 2018 under the laws of the British Virgin Islands. XSigma is a wholly-owned
subsidiary of ZK International. It is currently not engaging in any business but a research and investment vehicle to seek opportunities
that would complement and diversify the current business operations of the Company.



ZK International Uganda
Limited (“ZK Uganda”) was incorporated on March 23, 2018 under the laws of the Republic of Uganda. ZK Uganda is 80%
owned by ZK International, and is currently not engaging in any business but is actively bidding on governmental infrastructural
projects in Uganda to seek expansion opportunities that would complement and diversify the current business operations of the Company.



Zhenglong Ecommerce was
incorporated on March 15, 2018 under the laws of the People’s Republic of China. Zhenglong Ecommerce’ registered capital
is RMB 5,000,000, and the paid-in capital was zero as of September 30, 2018. The registered principal activities of Zhenglong Ecommerce
include sales (and online sale) of steel pipes, steel strips, pipe connections and fittings, machinery, constructive material,
chemical, solar cell, electronic appliance, toys, leather goods, consumer goods, clothing; development and sale of software; IT
consulting and service; design and maintenance of computer system; importing and exporting of goods and technology. Zhejiang Zhengkang
owns 90% of Zhenglong Ecommerce.



| | B. | Property and Plants
| | -- | -------------------



There is no private land
ownership in China. Individuals and entities are permitted to acquire land use rights for specific purposes. We were granted land
use rights for our facilities in Wenzhou, which expires on November 30, 2052. Following is a list of our properties, all of which
we own the land use rights to:



|Property                                                                                                                                                         |  | Duration ofLand Use Rights           |  | Space      |  | Ground FloorArea
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ |  | ---------- |  | ----------------
|No. 678 Dingxiang Road, Binhai Industrial Park
        Economic & Technology Development Zone
        Wenzhou, Zhejiang Province
        P.R. China 325020       |  | December 1, 2002 - November 30, 2052 |  | 19,427 m2  |  | 9,600 m2        
|Longlian Plaza Building #3, Yongzhong Boulevarad, 167 North Luodong Road, Suite 702, Longwan District, Wenzhou, Zhejiang Province, P.R. China                    |  | August 19, 2016 – November 12 2051   |  | 1012 m2    |  | -               
|23 units of Xuri Xiaoqu, B404 Binhai Industrial Park
        Economic & Technology Development Zone
        Wenzhou, Zhejiang Province
        P.R. China 325020 |  | March 31, 2003 –March 31, 2073       |  | 1377.14 m2 |  |                 





Our property in No.
678 Dingxiang Road, Binhai Industrial Park, Economic & Technology Development Zone, Wenzhou, Zhejiang Province, P.R. China
325020 is our central office and manufacturing facility. At this location, we have a variety of heavy equipment required to produce
our steel strips, pipes and fittings, product testing equipment and laboratory equipment for research and development. Our office
in Longlian Plaza, for which ownership belongs to Wenzhou Zhengfeng, is for administrative and sales purposes and contains customary
office equipment. We are not aware of any environmental concerns or limitations on the use of our properties for the purposes we
currently use them or intend to use them in the future.





40







| | Item 4A. | Unresolved Staff Comments
| | -------- | -------------------------



None.



| | Item 5. | Operating and Financial Review and Prospects
| | ------- | --------------------------------------------



The following discussion and analysis of
our financial condition and results of operations should be read in conjunction with our consolidated financial statements and
related notes that appear in this annual report. In addition to historical consolidated financial information, the following discussion
contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially
from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those
discussed below and elsewhere in this annual report, particularly in “Risk Factors.”



| | A. | Operating Results
| | -- | -----------------



Incorporated on May 13, 2015, under the laws of the British Virgin Islands (“BVI”), we primarily
conduct our business through our subsidiary Zhejiang Zhengkang. Our core business focuses on providing systematic solutions to
construction projects that require sophisticated piping systems. Leveraging our experience in the industry, we offer urban planners
and real estate developers sophisticated pipe and fitting products and engineering expertise, enabling them to bring communities
reliable and durable gas and water transmission systems. Our products are primarily sold in China, but are also exported and distributed
in Europe, Africa and Southeast Asia. We have received numerous awards and recognitions domestically and internationally. Located
within the Wenzhou Binhai Industrial Park, a national economic development zone, our facility occupies approximately five acres,
consisting of business offices, manufacturing plants, a research and development center and storage facilities.



We specialize in designing
and producing pipes and fittings such as double-press thin-walled stainless steel tubes and fittings, carbon steel tubes and fittings
and single-press tubes and fittings. Focused on the innovation and expansion of our product to meet the specific needs of our clients,
we believe that we are a leading manufacturer and engineer of high-performance stainless steel pipes. Our products offer a comprehensive
suite of superior solutions for use in the construction and infrastructure industries. Our innovative products are used in a broad
range of applications, including water and gas transmission within urban infrastructural development, residential housing development,
food and beverage production, oil and gas exploitation, and agricultural irrigation. Since Zhejiang Zhengkang’s founding
in 2001, we have developed an array of patented pipe and fitting products that have been marketed and distributed both domestically
and internationally.



We promote our brand through
our sales staff, distributors, trade shows, trade fairs, forums, direct communications with potential customers, business networks,
and the internet. In addition, we tailor our products to the needs of our clients and provide our clients with competitive pricing
to establish long-term business relationships. We take pride in the cutting-edge technology and superb quality of our products,
which have received recognitions such as the ISO9001 Quality Management System Certification, ISO14001 Environmental Management
System Certification, and National Industrial Stainless Steel Production License, among other awards and honors. Our products have
been used in well-known facilities such as Olympic stadiums, multinational hotel chains, and mega-sized apartment complexes.





Over the past few years,
we have seen significant growth of our revenue and market share. In summary, we generated a revenue and net income of $54,884,381
and $7,103,057, respectively, for the year ended September 30, 2018, an increase of 22.1% and 19.71% respectively, compared to
the fiscal year ended September 30, 2017, during which we generated $44,951,740 and $5,933,688.





41







The following table presents
an overview of our results of operations for the years ended September 30, 2018, 2017 and 2016:







|                                                            |  | For the year ended September 30, |            
|----------------------------------------------------------- |  | -------------------------------- | -----------
|                                                            |  | 2018                             |            
|Revenues                                                    |  | $                                | 54,884,381 
|Cost of sales                                               |  |                                  | (36,593,792
|Gross profit                                                |  |                                  | 18,290,589 
|Operating expenses:                                         |  |                                  |            
|Selling and marketing expenses                              |  |                                  | 2,949,204  
|General and administrative expenses                         |  |                                  | 4,071,116  
|Research and development costs                              |  |                                  | 1,652,633  
|Total operating expenses                                    |  |                                  | 8,672,953  
|                                                            |  |                                  |            
|Operating Income                                            |  |                                  | 9,617,636  
|                                                            |  |                                  |            
|Other income (expenses):                                    |  |                                  |            
|Interest expenses                                           |  |                                  | (1,239,170 
|Interest income                                             |  |                                  | 10,702     
|Other income, net                                           |  |                                  | 112,099    
|Total other expenses, net                                   |  |                                  | (1,116,369 
|                                                            |  |                                  |            
|Income before income taxes                                  |  |                                  | 8,501,267  
|                                                            |  |                                  |            
|Income tax provision                                        |  |                                  | (1,398,210 
|                                                            |  |                                  |            
|Net income                                                  |  | $                                | 7,103,057  
|Net income attributable to non-controlling interests        |  |                                  | (84,943    
|                                                            |  |                                  |            
|Net income attributable to ZK International Group Co., Ltd. |  |                                  | 7,018,114  
|                                                            |  |                                  |            
|Net income                                                  |  |                                  | 7,103,057  
|                                                            |  |                                  |            
|Other comprehensive income (loss):                          |  |                                  |            
|Foreign currency translation adjustment                     |  |                                  | (818,468   
|                                                            |  |                                  |            
|Total comprehensive income                                  |  | $                                | 6,284,589  



Revenue



We generated revenue of
$54,884,381 for the fiscal year ended September 30, 2018, as compared to $44,951,740 for the fiscal year ended September 30, 2017.
The increase in revenue is primarily due to our company getting more market share of this industry and more government projects
to replace the underground pipes and to improve local water supply systems.



We generated $44,951,740
in revenue for the fiscal year ended September 30, 2017, as compared to $36,809,094 for the fiscal year ended September 30, 2016.
The increase in revenue is primarily due to our customers getting more government projects to replace the underground pipes and
to improve local sewer systems.



Cost of Revenues



Total cost of revenue was
$36,593,792 for the fiscal year ended September 30, 2018, compared to $31,843,337 for the fiscal year ended September 30, 2017.
Total cost of revenue as a percentage of revenue decreased by 4.16% to 66.67% for the fiscal year ended September 30, 2018 compared
to 70.84% for the fiscal year ended September 30, 2017. The decrease is primarily due to the improvement of our manufacturing technique
which lowered our defect rate and thus decreased the cost of the production.



Total cost of revenue was
$31,843,337 for the fiscal year ended September 30, 2017, compared to $25,333,318 for the fiscal year ended September 30, 2016.
Total cost of revenue as a percentage of revenue increased by 2.02% to 70.84% for the fiscal year ended September 30, 2017 compared
to 68.82% for the fiscal year ended September 30, 2016. The increase is primarily due to increase of raw material costs and labor
costs.



Selling and Marketing Expenses



We incurred
$2,949,204 in selling and marketing expenses for the fiscal year ended September 30, 2018, compared to $1,915,127 for the
fiscal year ended September 30, 2017. Selling and marketing expenses increased by $1,034,077, or 54%, during the fiscal year
ended September 30, 2018 compared to the fiscal year ended September 30, 2017. This increase is primarily due to increases in
freight expenses, advertising expenses, and compensation for the additional sales personnel we hired during the year.



We incurred $1,915,127
in selling and marketing expenses for the fiscal year ended September 30, 2017, compared to $957,990 for the fiscal year ended
September 30, 2016. Selling and marketing expenses increased by $957,137, or 99.91%, during the fiscal year ended September 30,
2017 compared to the fiscal year ended September 30, 2016. This increase is primarily due to increases in advertising expenses
and compensation for the additional sales personnel we hired during the year.



General and Administrative expenses



We incurred $4,071,116
in general and administrative expenses for the fiscal year ended September 30, 2018, compared to $1,782,318 for the fiscal year
ended September 30, 2017. General and administrative expenses increased by $2,288,798, or 128.42%, for the fiscal year ended September
30, 2018 compared to the fiscal year ended September 30, 2017. The increase is primarily due to the increase in legal and other
expenses related to SEC regulation compliance and the increase in payroll, welfare and travelling expenses related to our operating
expansion.



42







We
incurred $1,782,318 in general and administrative expenses for the fiscal year ended September 30, 2017, compared to $1,599,743
for the fiscal year ended September 30, 2016. General and administrative expenses increased by $182,575, or 11.41%, for the fiscal
year ended September 30, 2017 compared to the fiscal year ended September 30, 2016. The increase is primarily due to the increase
in administrative expenses relating to our business expansion that results in increase of payroll and welfare expenses.



Research and Development Expenses



We incurred $1,652,633
in research and development expenses for the fiscal year ended September 30, 2018, compared to $1,331,111 for the fiscal year ended
September 30, 2017. R&D expenses increased by $321,522, or 24.15%, for the fiscal year ended September 30, 2018 compared to
the fiscal year ended September 30, 2017. The increase was primarily due to the increased research staff salary and expenses relating
to the materials and equipment we use to conduct our research for our new products. Management is committed to expanding our research
and development activities to enhance competitive advantage.



We incurred $1,331,111
in research and development expenses for the fiscal year ended September 30, 2017, compared to $1,302,022 for the fiscal year ended
September 30, 2016. R&D expenses increased by $29,089, or 2.23%, for the fiscal year ended September 30, 2017 compared to the
fiscal year ended September 30, 2016. The increase was primarily due to the expenses relating to the materials and equipment we
use to conduct our research for our new products.



Income from operations



As a result of the factors
described above, operating income was $9,617,636 for the fiscal year ended September 30, 2018, compared to operating income of
$8,079,847 for the fiscal year ended September 30, 2017, an increase of operating income of $1,537,789, or approximately
19.03%.





As a result of the factors
described above, operating income was $8,079,847 for the fiscal year ended September 30, 2017, compared to operating income of
$7,616,021 for the fiscal year ended September 30, 2016, an increase of operating income of $463,826, or approximately 6.09%.



Other expenses



Our interest income and
expenses were $10,702 and $1,239,170, respectively, for the fiscal year ended September 30, 2018, compared to interest income and
expenses of $24,459 and $1,245,385, respectively, for the fiscal year ended September 30, 2017. The decrease of interest expense
is primarily due to the decrease of bank loan incurred during 2018 fiscal year. We also had other income of $112,099 for the fiscal
year ended September 30, 2018 compared to other income of $69,772 for the fiscal year ended September 30, 2017.



Our interest income and
expenses were $24,459 and $1,245,385, respectively, for the fiscal year ended September 30, 2017, compared to interest income and
expenses of $51,058 and $1,417,745, respectively, for the fiscal year ended September 30, 2016. The decrease of interest expense
is primarily due to the decrease of bank loan incurred during 2017 fiscal year. We also had other income of $69,772 for the fiscal
year ended September 30, 2017 compared to other income of $158,797 for the fiscal year ended September 30, 2016.



Income Tax



We incurred income tax
expense of $1,398,210 for the fiscal year ended September 30, 2018, compared to $995,005 for the fiscal year ended September 30,
2017. The increase is primarily attributable to the increased operating profit.





We incurred income tax
expense of $995,005 for the fiscal year ended September 30, 2017, compared to $1,105,440 for the fiscal year ended September 30,
2016. The decrease is primarily attributable to the taxation adjustments related to R&D expenses made according to PRC Tax
Law, which results from approximately $0.2 million tax deduction.



Net Income



As a result of the factors
described above, our net income for the fiscal year ended September 30, 2018 was $7,103,057 compared to net profit of $5,933,688
for the fiscal year ended September 30, 2017, an increase in profit of $1,169,369. Our net income for the fiscal year ended September
30, 2017 was $5,933,688 compared to net profit of $5,302,691 for the fiscal year ended September 30, 2016, an increase in profit
of $630,997.



43







Foreign currency translation



Our consolidated financial statements are expressed in U.S. dollars but the functional currency of our
operating subsidiaries is RMB. Results of operations and cash flows are translated at average exchange rates during the period,
assets and liabilities are translated at the unified exchange rate at the end of the period and equity is translated at historical
exchange rates. Translation adjustments resulting from the process of translating the financial statements denominated in RMB into
U.S. dollars are included in determining comprehensive income. Our foreign currency translation loss for the fiscal year ended
September 30, 2018 was $818,468, compared to a foreign currency gain of $272,237 for the fiscal year ended September 30, 2017,
a decrease of $1,090,705. The decrease is primarily due to the depreciation of RMB against the U.S. dollars. Our foreign
currency translation gain for the fiscal year ended September 30, 2017 was $272,237, compared to a foreign currency loss of $403,865
for the fiscal year ended September 30, 2016, an increase of $676,102. The increase is primarily due to the appreciation
of RMB against the U.S. dollars.





| | B. | Liquidity and Capital Resources
| | -- | -------------------------------



As of September 30, 2018,
2017 and 2016 we had cash and cash equivalents of $7,682,589, $11,278,475, and $123,649 respectively. The significant increase
of cash in 2017 fiscal year is primarily contributed by our financing activities, including private placement and IPO. We believe
that our current cash, cash to be generated from our operations and access to capital market will be sufficient to meet our
working capital needs for at least the next twelve months. However, we do not have any amounts committed to be provided by our
related party. We are also not dependent upon future financing to meet our liquidity needs for the next twelve months. However,
we plan to expand our business to implement our growth strategies in the water supply market and strengthen our position in the
marketplace. To do so, we may need more capital through equity financing to increase our production and meet market demands.



Substantially all of our
operations are conducted in China and all of our revenues, expense, cash and cash equivalents are denominated in Renminbi (RMB).
RMB is subject to the exchange control regulation in China, and, as a result, we may have difficulty distributing any dividends
outside of China due to PRC exchange control regulations that restrict its ability to convert RMB into U.S. Dollars.



Under applicable PRC regulations,
foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance
with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at
least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount
of such reserves reaches 50% of its registered capital. These reserves are not distributable as cash dividends. The board of directors
of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds,
which may not be distributed to equity owners except in the event of liquidation. Under PRC law, RMB is currently convertible into
U.S. Dollars under a company’s “current account,” which includes dividends, trade and service-related foreign
exchange transactions, without prior approval of the State Administration of Foreign Exchange (SAFE), but is not from a company’s
“capital account,” which includes foreign direct investments and loans, without the prior approval of the SAFE.



With respect to retained
earnings accrued after such date, our board of directors may declare dividends after taking into account our operations, earnings,
financial condition, cash requirements and availability and other factors as it may deem relevant at such time. Any declaration
and payment, as well as the amount, of dividends will be subject to our By-Laws, charter and applicable Chinese and U.S. state
and federal laws and regulations, including the approval from the shareholders of each subsidiary which intends to declare such
dividends, if applicable.



We have limited financial
obligations dominated in US dollars, thus the foreign currency restrictions and regulations in the PRC on the dividends distribution
will not have a material impact on the liquidity, financial condition and results of operations of the Company.



Cash Flow Summary



|                                                    |  | Years ended September 30, |           
|--------------------------------------------------- |  | ------------------------- | ----------
|                                                    |  | 2018                      |           
|Net cash provided by (used in) operating activities |  | $                         | (2,234,995
|Net cash provided by (used in) investing activities |  |                           | (710,275  
|Net cash provided by (used in) financing activities |  |                           | (986,029  
|Effect of exchange rate changes on cash             |  |                           | 335,413   
|Net increase (decrease) in cash                     |  | $                         | (3,595,886
|Cash at beginning of period                         |  |                           | 11,278,475
|Cash at end of period                               |  | $                         | 7,682,589 



Operating Activities:



Net cash used in operating activities for the year ended September 30, 2018 was approximately $2.23 million,
which was primarily attributable to a net profit approximately $7.1 million, adjusted for non-cash items for approximately $0.66
million and adjustments for changes in working capital approximately $9.99 million. The adjustments for changes in working capital
mainly included:





44







| | (i) | Increase in accounts receivable of approximately $7.2 million – our accounts receivable increased significantly due to the increased credit sales in 2018 compared to in 2017 despite that we had shorter collection cycle during 2018 fiscal year. For the fiscal year ended September 30, 2018, we had an overall sales outstanding of 180 days compared with 193 days in 2017. Compared with 2017 fiscal year, we generated more revenue from construction companies that carry public utility projects, such as municipal water and gas supply pipeline and the typical payment term with those customers is 6 months. These construction projects are typically funded by the local governments. Our customers usually get small progress payments throughout the construction period and a larger payment until the inspection is done and when the projects are completed. When our customers request for payment extension, we carefully review the background of the projects and the status of each construction project. We only grant payment extension to our customers when they have healthy financial standings, have no records of delinquent payments and can demonstrate their ability to continuing making the payments. Our management team believes that the risk of writing off the accounts receivable is low because of the involvement of local municipalities.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





The following table is our net accounts receivable aging schedule
as of September 30, 2018, 2017, 2016 and 2015:



|                         |  | Total |            |  | < 1 Year |   |            | 1 – 2 Years |  |   | 2-3 Years |  |  | > 3 Years |          
|------------------------ |  | ----- | ---------- |  | -------- | - | ---------- | ----------- |  | - | --------- |  |  | --------- | ---------
|As of September 30, 2018 |  | $     | 27,134,237 |  |          | $ | 20,549,351 |             |  | $ | 4,222,769 |  |  | $         | 2,037,074
|As of September 30, 2017 |  | $     | 21,261,609 |  |          | $ | 15,048,061 |             |  | $ | 5,516,294 |  |  | $         | 532,776  
|As of September 30, 2016 |  | $     | 23,843,980 |  |          | $ | 20,003,450 |             |  | $ | 3,345,126 |  |  | $         | 383,699  
|As of September 30, 2015 |  | $     | 15,225,136 |  |          | $ | 14,218,558 |             |  | $ | 336,988   |  |  | $         | 617,243  



The following table summarizes the amount that we
subsequently collected as of May 31, 2019 based on the aging schedule above:



|                       |  | Total |            |  | < 1 Year |   |            | 1 – 2 Years |  |   | 2-3 Years |  |  | > 3 Years |          
|---------------------- |  | ----- | ---------- |  | -------- | - | ---------- | ----------- |  | - | --------- |  |  | --------- | ---------
|September 30, 2018     |  | $     | 27,134,237 |  |          | $ | 20,549,351 |             |  | $ | 4,222,769 |  |  | $         | 2,037,074
|Subsequently collected |  | $     | 17,588,664 |  |          | $ | 13,687,958 |             |  | $ | 2,606,858 |  |  | $         | 1,022,092





We expect the unreserved accounts receivable are all collectible within the next 12 months, as our customers
keep making payment and there are no indications that we will not be able to collect the remaining balance.



| | (ii) | Increase in inventories
    of approximately $9.1 million  – we have more inventories in stock because: 1) we believe the cost of the raw materials
    will increase so we purchased more to hedge price fluctuation, and 2) due to limited production capability we outsourced some
    productions to third parties for initial processing to reduce workload and speed delivery, and as of September 30, 2018 we
    have approximately $4 million inventory in outsourcing facilities;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Decrease in advances to suppliers of approximately $1.6 million for the year ended December 31, 2018 as compared to fiscal 2017;
| | ----- | --------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Increase in advance from customers of approximately $1.56 million for the year ended December 31, 2018 as compared to fiscal 2017;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------



| | (v) | Increase in income tax payable of approximately $1.35 million for the year ended December 31, 2018 as compared to fiscal 2017.
| | --- | ------------------------------------------------------------------------------------------------------------------------------



Net cash provided by operating
activities for the year ended September 30, 2017 was approximately $1.1 million, which was primarily attributable to a net profit
approximately $5.9 million, adjusted for non-cash items for approximately $0.58 million and adjustments for changes in working
capital approximately $5.4 million. The adjustments for changes in working capital mainly included:



| | (i) | Decrease in accounts receivable of approximately $2.4 million – our accounts receivable decreased significantly due to receivable collection from completed projects. For the fiscal year ended September 30, 2017, we had an overall sales outstanding of 193 days compared with 194 days in 2016. Since fiscal year ended September 30, 2015, we supplied products for construction companies that carry public utility projects, such as municipal water and gas supply pipeline and the typical payment term with those customers is 6 months. These construction projects are typically funded by the local governments. Our customers usually get small progress payments throughout the construction period and a larger payment until the inspection is done and when the projects are completed. When our customers request for payment extension, we carefully review the background of the projects and the status of each construction project. We only grant payment extension to our customers when they have healthy financial standings, have no records of delinquent payments and can demonstrate their ability to continuing making the payments. Our management team believes that the risk of writing off the accounts receivable is low because of the involvement of local municipalities.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Increase in inventories of approximately $3.5 million – we have more inventories in stock because: 1) we believe the cost of the raw materials will increase so we purchased more to stock up, and 2) we expect we will receive more orders from our customers so we stocked more materials. For the fiscal year ended September 30, 2017, we had an inventory turnover ratio of 3.86 times compared with 4.09 times in fiscal year ended September 30, 2016. The decrease in inventory turnover ratio is mainly due to our increased inventory in stock to hedge raw material price fluctuation and shorten delivery lead time. ;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Increase in advances to suppliers of approximately $6.2 million – Because of the increase of our order for materials, our suppliers required us making more deposits;
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Decrease in accounts payables of approximately $0.42 million, primarily because of the increase of our advance to suppliers which is applied against trade accounts payable;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | Increase in advance from customers of approximately $0.28 million – because of additional orders from our customers, we required more deposits from the customers;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | Increase in income tax payable of approximately $0.98 million – due to higher taxable income in fiscal year ended September 30, 2017 compared to fiscal year ended September 30, 2016.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





45







Net cash used in operating
activities for the year ended September 30, 2016 was approximately $1.2 million, which was primarily attributable to a net profit
approximately $5.3 million, adjusted for non-cash items for approximately $1.15 million and adjustments for changes in working
capital approximately $7.65 million. The adjustments for changes in working capital mainly included:



| | (i) | Increase in accounts
receivable of approximately $10.2 million – our accounts receivable increased significantly due to: 1) increase in credit
sales in 2016 compared to in 2015, and 2) it took longer for our customers to make payments. For the fiscal year ended September
30, 2016, we had an overall sales outstanding of 193 days compared with 109 days in 2015. Since fiscal year ended September 30,
2015, we supplied products for construction companies that carry public utility projects, such as municipal water and gas supply
pipeline and the typical payment term with those customers is 6 months. These construction projects are typically funded by the
local governments. Our customers usually get small progress payments throughout the construction period and a larger payment until
the inspection is done and when the projects are completed. When our customers request for payment extension, we carefully review
the background of the projects and the status of each construction project. We only grant payment extension to our customers when
they have healthy financial standings, have no records of delinquent payments and can demonstrate their ability to continuing
making the payments. Our management team believes that the risk of writing off the accounts receivable is low because of the involvement
of local municipalities.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Increase in inventories
of approximately $0.78 million – we purchased more raw materials because: 1) we believe the cost of the raw materials will
increase so we purchased more to stock up, and 2) we expect we will receive more customer orders from our customers so we stocked
more materials. For the fiscal year ended September 30, 2016, we had an inventory turnover ratio of 4.09 times compared with 3.34
times in fiscal year ended September 30, 2015. The improvement in inventory turnover ratio is mainly due to our improvement in
the production cycle and overall inventory management;
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Increase in advances
to suppliers of approximately $0.91 million – Because of the increase of our order for materials, our suppliers required
us making more deposits;
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Increase in accounts
payables of approximately $0.80 million, primarily because of the increase of our purchases of raw materials. For the fiscal year
ended September 30, 2016, we had an overall payable outstanding of 10.96 days compared with 5.07 days in 2015. The increase in
number of days payable outstanding is primarily attributable to the increase of extension time that our vendors allowed us on
the payment terms to help us mange our operating cash flows;
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | Increase in advance
from customers of approximately $1.4 million – Because of additional orders from our customers, we required more deposits
from the customers;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | Increase in income tax
payable of approximately $2 million – due to higher taxable income in fiscal year ended September 30, 2016 compared to fiscal
year ended September 30, 2015.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Investing Activities:



Net cash used in investing
activities was $710,275 for the year ended September 30, 2018. It was primarily attributable to the purchase of new equipment
and operating software for production needs during the fiscal year.



Net cash used in investing
activities was $161,856 for the year ended September 30, 2017. It was primarily attributable to the purchase of new equipment for
production needs during the fiscal year.



Net cash used in investing
activities was $123,945 for the year ended September 30, 2016. It was primarily attributable to the purchase of new equipment for
production needs during the fiscal year.



Financing Activities:



Net cash used in financing
activities was approximately $986,029 for the year ended September 30, 2018. It was primarily attributable to the proceeds from
related parties of 5,665,914, long-term deposit pledged to third parties with an amount of 4,444,170, and net repayments of the
short-term bank loans for an amount of $1,473,208.



Net cash provided by
financing activities was approximately $9,968,964 for the year ended September 30, 2017. It was primarily attributable to the proceeds
from three rounds of private placement and IPO completed in 2017 fiscal year for an amount of $5,582,099, proceeds released from
restricted cash for an amount of $2,651,704, and loans from related party for an amount of $6,051,523, offset by the repayments
to short-term back borrowings for an amount of $499,904 and the repayments on notes payable for an amount of $3,816,458.



46







Net cash provided by
financing activities was approximately $840,501 for the year ended September 30, 2016. It was primarily attributable to the proceeds
from short-term bank borrowings for an amount of $2,148,310, repayments from related party with an amount of $1,485,555, and capital
contributions from non-controlling interest for an amount of $15,306, offset by our repayments on note payable for $2,602,037 and
proceeds placed into restricted cash for an amount of $206,633.



Credit Facility



In addition to equity financing,
we mainly finance our operations through short-term revolving loans provided by a syndicate of banks, as listed in the table below. As
of September 30, 2018, we had 23 outstanding short-term loans provided by eight (8) banks, totaling RMB 132,350,000 in the aggregate,
or approximately $19.27 million. Each of these borrowings has a term of six months to one year and, as per our agreement with these
banks, all of the loans are expected to be renewed and funds can be accessed immediately when the outstanding principal and interest
are repaid in full. This ensures that each loan can be repaid on time by both our working capital and the fund released from the
other revolving loans. Most of our loans have fixed interest rate, while some loans are subject to variable interest rate, that
are indicated in the table below. The weighted average annual interest rates were 6.12% and 5.99% for the years ended September
30, 2018 and 2017, respectively.





Short-term bank borrowings consisted of
the following at September 30, 2018:





|Bank Name                          |  | Amount - RMB |             |  | Amount - USD |  |            | Issuance Date |  |  | Expiration Date |  |  | Interest |           
|---------------------------------- |  | ------------ | ----------- |  | ------------ |  | ---------- | ------------- |  |  | --------------- |  |  | -------- | ----------
|Agricultural Bank - Longwan Branch |  |              | 6,190,000   |  |              |  | 901,281    |               |  |  | 12/1/2017       |  |  |          | 11/25/2018
|Agricultural Bank - Longwan Branch |  |              | 8,000,000   |  |              |  | 1,164,822  |               |  |  | 1/18/2018       |  |  |          | 12/5/2018 
|Agricultural Bank - Longwan Branch |  |              | 7,580,000   |  |              |  | 1,103,669  |               |  |  | 1/18/2018       |  |  |          | 10/8/2018 
|Agricultural Bank - Longwan Branch |  |              | 8,700,000   |  |              |  | 1,266,744  |               |  |  | 1/29/2018       |  |  |          | 1/5/2019  
|Agricultural Bank - Longwan Branch |  |              | 4,300,000   |  |              |  | 626,092    |               |  |  | 8/16/2018       |  |  |          | 8/15/2019 
|Agricultural Bank - Longwan Branch |  |              | 5,750,000   |  |              |  | 837,216    |               |  |  | 8/21/2018       |  |  |          | 8/1/2019  
|Agricultural Bank - Longwan Branch |  |              | 6,000,000   |  |              |  | 873,617    |               |  |  | 9/27/2018       |  |  |          | 9/1/2019  
|Bank of China                      |  |              | 4,250,000   |  |              |  | 618,812    |               |  |  | 4/3/2018        |  |  |          | 4/2/2019  
|Bank of China                      |  |              | 6,800,000   |  |              |  | 990,099    |               |  |  | 4/3/2018        |  |  |          | 4/2/2019  
|China Merchants Bank               |  |              | 15,000,000  |  |              |  | 2,184,042  |               |  |  | 12/12/2017      |  |  |          | 12/6/2018 
|China Merchants Bank               |  |              | 1,500,000   |  |              |  | 218,404    |               |  |  | 2/8/2018        |  |  |          | 12/1/2018 
|Industrial Bank                    |  |              | 6,500,000   |  |              |  | 946,419    |               |  |  | 12/6/2017       |  |  |          | 12/3/2018 
|Industrial Bank                    |  |              | 3,000,000   |  |              |  | 436,809    |               |  |  | 12/7/2017       |  |  |          | 11/27/2018
|Industrial Bank                    |  |              | 5,500,000   |  |              |  | 800,815    |               |  |  | 12/8/2017       |  |  |          | 11/20/2018
|China Minsheng Bank                |  |              | 4,000,000   |  |              |  | 582,411    |               |  |  | 6/28/2018       |  |  |          | 3/31/2019 
|China Minsheng Bank                |  |              | 2,200,000   |  |              |  | 320,326    |               |  |  | 6/28/2018       |  |  |          | 3/31/2019 
|Ping An Bank                       |  |              | 6,200,000   |  |              |  | 902,737    |               |  |  | 9/25/2018       |  |  |          | 9/25/2019 
|CZBANK                             |  |              | 3,500,000   |  |              |  | 509,610    |               |  |  | 4/20/2018       |  |  |          | 10/19/2018
|CZBANK                             |  |              | 6,000,000   |  |              |  | 873,617    |               |  |  | 4/19/2018       |  |  |          | 10/18/2018
|CZBANK                             |  |              | 6,000,000   |  |              |  | 873,617    |               |  |  | 4/17/2018       |  |  |          | 10/16/2018
|CZBANK                             |  |              | 1,500,000   |  |              |  | 218,404    |               |  |  | 4/19/2018       |  |  |          | 10/18/2018
|Bank of Communications             |  |              | 9,000,000   |  |              |  | 1,310,425  |               |  |  | 9/10/2018       |  |  |          | 9/7/2019  
|CZBANK                             |  |              | 4,880,000   |  |              |  | 710,542    |               |  |  | 4/26/2018       |  |  |          | 4/26/2019 
|Total                              |  |              | 132,350,000 |  |              |  | 19,270,530 |               |  |  |                 |  |  |          |           





Short-term bank borrowings consisted of the following at September
30, 2017:





|Bank Name              |  | Amount - RMB |             |  | Amount - USD |  |            | Issuance Date |  |  | Expiration Sate |  |  | Interest |           
|---------------------- |  | ------------ | ----------- |  | ------------ |  | ---------- | ------------- |  |  | --------------- |  |  | -------- | ----------
|Agricultural Bank      |  |              | 5,580,000   |  |              |  | 838,530    |               |  |  | 1/13/2017       |  |  |          | 1/12/2018 
|Agricultural Bank      |  |              | 8,700,000   |  |              |  | 1,307,386  |               |  |  | 1/18/2017       |  |  |          | 1/17/2018 
|Agricultural Bank      |  |              | 5,750,000   |  |              |  | 864,077    |               |  |  | 8/17/2017       |  |  |          | 8/16/2018 
|Agricultural Bank      |  |              | 4,300,000   |  |              |  | 646,179    |               |  |  | 8/14/2017       |  |  |          | 8/13/2018 
|Agricultural Bank      |  |              | 6,000,000   |  |              |  | 901,645    |               |  |  | 9/22/2017       |  |  |          | 9/21/2018 
|Agricultural Bank      |  |              | 6,190,000   |  |              |  | 930,198    |               |  |  | 12/16/2016      |  |  |          | 12/11/2017
|Agricultural Bank      |  |              | 10,000,000  |  |              |  | 1,502,742  |               |  |  | 1/10/2017       |  |  |          | 1/9/2018  
|Minsheng Bank          |  |              | 4,350,000   |  |              |  | 653,693    |               |  |  | 6/30/2017       |  |  |          | 6/30/2018 
|Minsheng Bank          |  |              | 3,250,000   |  |              |  | 488,391    |               |  |  | 6/30/2017       |  |  |          | 6/30/2018 
|Industrial Bank        |  |              | 6,500,000   |  |              |  | 976,783    |               |  |  | 9/4/2017        |  |  |          | 12/4/2017 
|Zhejiang Commerce Bank |  |              | 6,000,000   |  |              |  | 901,645    |               |  |  | 7/27/2017       |  |  |          | 4/20/2018 
|Zhejiang Commerce Bank |  |              | 1,500,000   |  |              |  | 225,411    |               |  |  | 7/28/2017       |  |  |          | 4/20/2018 
|Bank of China          |  |              | 8,550,000   |  |              |  | 1,284,845  |               |  |  | 4/10/2017       |  |  |          | 3/29/2018 
|Industrial Bank        |  |              | 6,500,000   |  |              |  | 976,783    |               |  |  | 9/5/2017        |  |  |          | 12/20/2017
|Zhejiang Commerce Bank |  |              | 10,500,000  |  |              |  | 1,577,880  |               |  |  | 7/28/2017       |  |  |          | 4/20/2018 
|Pingan Bank            |  |              | 7,960,000   |  |              |  | 1,196,183  |               |  |  | 9/27/2017       |  |  |          | 9/25/2018 
|CMBC                   |  |              | 5,400,000   |  |              |  | 811,481    |               |  |  | 12/20/2016      |  |  |          | 12/11/2017
|CMBC                   |  |              | 5,990,000   |  |              |  | 900,143    |               |  |  | 12/20/2016      |  |  |          | 12/11/2017
|CMBC                   |  |              | 5,000,000   |  |              |  | 751,371    |               |  |  | 12/20/2016      |  |  |          | 12/11/2017
|CMBC                   |  |              | 410,000     |  |              |  | 61,612     |               |  |  | 12/22/2016      |  |  |          | 12/11/2017
|Bank of China          |  |              | 1,490,000   |  |              |  | 223,909    |               |  |  | 4/10/2017       |  |  |          | 3/29/2018 
|Bank of China          |  |              | 2,760,000   |  |              |  | 414,757    |               |  |  | 4/10/2017       |  |  |          | 3/29/2018 
|Industrial Bank        |  |              | 5,000,000   |  |              |  | 751,371    |               |  |  | 9/6/2017        |  |  |          | 12/14/2017
|Bank of Communications |  |              | 3,000,000   |  |              |  | 450,823    |               |  |  | 5/10/2017       |  |  |          | 11/13/2017
|Bank of Communications |  |              | 3,000,000   |  |              |  | 450,823    |               |  |  | 4/18/2017       |  |  |          | 11/13/2017
|Bank of Communications |  |              | 3,000,000   |  |              |  | 450,823    |               |  |  | 4/14/2017       |  |  |          | 11/13/2017
|Bank of Communications |  |              | 3,000,000   |  |              |  | 450,823    |               |  |  | 4/19/2017       |  |  |          | 11/13/2017
|Bank of Communications |  |              | 2,300,000   |  |              |  | 345,632    |               |  |  | 5/11/2017       |  |  |          | 11/13/2017
|Total                  |  |              | 141,980,000 |  |              |  | 21,335,938 |               |  |  |                 |  |  |          |           





47







* These short-term borrowings were subject to variable
interest rates, which are determined by the issuing banks with prime rate plus 1.79 - 2.2% on monthly or quarterly basis. The
variable interest rates quoted in the table above were effective for the period ended September 30, 2017.



Short-term bank borrowings consisted of the following at September
30, 2016:



|Bank Name                          |  | Amount - RMB |             |  | Amount - USD |  |            | Issuance Date |  |  | Expiration Sate |  |  | Interest |           
|---------------------------------- |  | ------------ | ----------- |  | ------------ |  | ---------- | ------------- |  |  | --------------- |  |  | -------- | ----------
|Agricultural Bank - Longwan Branch |  |              | 6,240,000   |  |              |  | 935,382    |               |  |  | 12/16/2015      |  |  |          | 12/11/2016
|Agricultural Bank - Longwan Branch |  |              | 2,500,000   |  |              |  | 374,752    |               |  |  | 3/17/2016       |  |  |          | 3/16/2017 
|Agricultural Bank - Longwan Branch |  |              | 7,000,000   |  |              |  | 1,049,307  |               |  |  | 4/7/2016        |  |  |          | 3/26/2017 
|Agricultural Bank - Longwan Branch |  |              | 2,210,000   |  |              |  | 331,281    |               |  |  | 4/12/2016       |  |  |          | 4/11/2017 
|Agricultural Bank - Longwan Branch |  |              | 4,000,000   |  |              |  | 599,604    |               |  |  | 6/2/2016        |  |  |          | 5/26/2017 
|Agricultural Bank - Longwan Branch |  |              | 2,040,000   |  |              |  | 305,798    |               |  |  | 6/13/2016       |  |  |          | 6/11/2017 
|Agricultural Bank - Longwan Branch |  |              | 2,700,000   |  |              |  | 404,733    |               |  |  | 6/16/2016       |  |  |          | 6/11/2017 
|Agricultural Bank - Longwan Branch |  |              | 5,750,000   |  |              |  | 861,931    |               |  |  | 8/26/2016       |  |  |          | 8/16/2017 
|Agricultural Bank - Longwan Branch |  |              | 4,300,000   |  |              |  | 644,574    |               |  |  | 9/9/2016        |  |  |          | 7/26/2017 
|Agricultural Bank - Longwan Branch |  |              | 6,000,000   |  |              |  | 899,406    |               |  |  | 9/22/2016       |  |  |          | 9/21/2017 
|Bank of China - Longwan Branch     |  |              | 13,000,000  |  |              |  | 1,948,713  |               |  |  | 8/26/2016       |  |  |          | 4/8/2017  
|CMBC-10802                         |  |              | 7,600,000   |  |              |  | 1,139,248  |               |  |  | 5/25/2016       |  |  |          | 11/22/2016
|CMBC-10802                         |  |              | 5,400,000   |  |              |  | 809,465    |               |  |  | 6/15/2016       |  |  |          | 11/22/2016
|CMBC-10802                         |  |              | 5,000,000   |  |              |  | 749,505    |               |  |  | 6/17/2016       |  |  |          | 11/22/2016
|Zhejiang Commerce Bank             |  |              | 2,000,000   |  |              |  | 299,802    |               |  |  | 2/5/2016        |  |  |          | 2/4/2017  
|Zhejiang Commerce Bank             |  |              | 1,500,000   |  |              |  | 224,851    |               |  |  | 2/5/2016        |  |  |          | 2/4/2017  
|Zhejiang Commerce Bank             |  |              | 1,500,000   |  |              |  | 224,851    |               |  |  | 2/6/2016        |  |  |          | 2/5/2017  
|Zhejiang Commerce Bank             |  |              | 5,000,000   |  |              |  | 749,505    |               |  |  | 3/2/2016        |  |  |          | 3/1/2017  
|Zhejiang Commerce Bank             |  |              | 5,000,000   |  |              |  | 749,505    |               |  |  | 3/7/2016        |  |  |          | 3/6/2017  
|Zhejiang Commerce Bank             |  |              | 5,000,000   |  |              |  | 749,505    |               |  |  | 3/9/2016        |  |  |          | 3/8/2017  
|Industrial Bank                    |  |              | 6,481,268   |  |              |  | 971,549    |               |  |  | 9/25/2015       |  |  |          | 9/23/2016 
|Industrial Bank                    |  |              | 6,500,000   |  |              |  | 974,356    |               |  |  | 9/25/2015       |  |  |          | 9/25/2016 
|Minsheng Bank                      |  |              | 5,000,000   |  |              |  | 749,505    |               |  |  | 3/8/2016        |  |  |          | 10/19/2016
|Minsheng Bank                      |  |              | 3,500,000   |  |              |  | 524,653    |               |  |  | 4/16/2016       |  |  |          | 4/11/2017 
|Minsheng Bank                      |  |              | 5,400,000   |  |              |  | 809,465    |               |  |  | 4/8/2016        |  |  |          | 4/8/2017  
|Pingan Bank                        |  |              | 8,000,000   |  |              |  | 1,199,208  |               |  |  | 3/3/2016        |  |  |          | 3/3/2017  
|Agricultural Bank                  |  |              | 1,964,381   |  |              |  | 294,463    |               |  |  | 12/31/2015      |  |  |          | 9/11/2016 
|Bank of Communications             |  |              | 5,000,000   |  |              |  | 749,505    |               |  |  | 5/20/2016       |  |  |          | 5/20/2017 
|Bank of Communications             |  |              | 5,000,000   |  |              |  | 749,505    |               |  |  | 5/23/2016       |  |  |          | 5/23/2017 
|Bank of Communications             |  |              | 4,800,000   |  |              |  | 719,525    |               |  |  | 5/24/2016       |  |  |          | 5/24/2017 
|Total                              |  |              | 145,385,649 |  |              |  | 21,793,454 |               |  |  |                 |  |  |          |           



48







These short-term bank
borrowings are secured by the pledged assets listed below, and are guaranteed by certain shareholders, shareholders’ immediate
family members and third-parties.



|                     |  | Fiscal Year Ended September 30, |          
|-------------------- |  | ------------------------------- | ---------
|Pledged Assets:      |  | 2018                            |          
|Term Deposit         |  |                                 | 728,014  
|Buildings, net       |  |                                 | 4,583,560
|Land use rights, net |  |                                 | 431,621  
|Machinery, net       |  |                                 | 154,795  
|Inventory            |  |                                 | 1,674,432
|Total                |  |                                 | 7,572,422



C. Research and development, patents and licenses



Research and Development



For the years ended September
30, 2018, 2017, and 2016 we spent $1,652,633, $1,331,111 and $1,302,022 respectively, on R&D. We anticipate that we will focus
our research and development efforts on improving existing products and developing new technology in the coming years.





The Research and Development
team has 14 dedicated researchers and analysts focusing on mechanical design, mechatronics, CAD design, mold design and welding.
Quality control is an important aspect of the team’s work and ensuring quality at every stage of the process has been a
key driver in maintaining and developing brand value for the Company.



D. Trend Information



Other than as disclosed
elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably
likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources,
or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition
or results of operations.



49







E. Off-balance Sheet Arrangements



There were no off-balance
sheet arrangements for the fiscal year ended September 30, 2018, 2017 or 2016, or that in the opinion of management are likely
to have, a current or future material effect on our financial condition or results of operations.



F. Tabular Disclosure of Contractual
Obligations



The following table
sets forth our contractual obligations as of September 30, 2018:



|                        |  | Payment Due by Period |           
|----------------------- |  | --------------------- | ----------
|Contractual Obligations |  | Total                 |           
|Short-term bank loans*  |  | $                     | 19,270,530
|Total                   |  | $                     | 19,270,530



*    The numbers in the table are
principle only and exclude interest payable.



G. Safe Harbor



See “SPECIAL CAUTIONARY NOTICE REGARDING
FORWARD-LOOKING STATEMENTS.”



| | Item 6. | Directors, Senior Management and Employees
| | ------- | ------------------------------------------



A. Directors and Senior Management



|Name           |  | Age |  |  | Position(s)                                           
|-------------- |  | --- |  |  | ------------------------------------------------------
|Jiancong Huang |  | 55  |  |  | Chief Executive Officer and Chairman of the Board     
|Shaochai Yang  |  | 38  |  |  | Chief Financial Officer                               
|Di Chen        |  | 28  |  |  | Secretary                                             
|Guolin Wang    |  | 50  |  |  | Director                                              
|Min Ni         |  | 43  |  |  | Independent Director & Chairman of the Audit Committee
|Lie Cao        |  | 41  |  |  | Independent Director                                  
|Linge Zhou     |  | 40  |  |  | Independent Director                                  



The business address
of each of the officers and directors is c/o Zhejiang Zhengkang Industrial Co., Ltd., No. 678 Dingxiang Road, Binhai Industrial
Park, Economic and Technology Development Zone, Wenzhou, Zhejiang, P.R. China 325025.



Jiancong Huang.
Mr. Huang is one of the co-founders of our Company and has served as the Chief Executive Officer and Chairman of the Board since
the beginning. Mr. Huang has extensive experience in manufacturing industry and held President position in two companies before
Zhengkang was founded. He earned his EMBA from Renmin University of China and Engineering Professional Title, and was awarded as
Top10 Wenzhou Entrepreneurship and appointed to be the Vice Director of China Construction and Building Standard and Safety Committee.
He is also members of National Pipe Standard Committee and National Building Water Supply and Waste Standard Committee. Mr. Huang
is an experienced corporate strategist and visionary with decades of experience on corporate management and innovation. He has
a systematic ideology on the future of stainless steel pipe in the water and gas supply area. We believe his influence and expertise
in the industry will greatly contribute to the growth of company and industry.



Shaochai Yang.Ms.
Yang has more than 10 years experience in accounting and financial management. Prior to joining the company, she worked as the
CFO at Kaidishi Industrial from 2009 to 2016, a company focuses on developing and manufacturing electrical lock and biometric fingerprint
scanner, where she oversaw the day-to-day operations of accounting department. She worked as CFO at Weiduli Valve from 2002 to
2009, a company manufacturing valve and piping products. Through years of career in accounting and management, she has acquired
extensive experience in manufacturing industry from her past career in various medium to large enterprises. Ms. Yang received her
Bachelor degree in business administration from China Computer Science College with the major in Accounting.



50







Di Chen. Prior
to joining the company at 2017, Mr. Chen served as the Senior Associate at Pacific Seaboard Investment, a corporate advisory firm
based in Canada that focuses on guiding clients through IPO, M&A and private placement investments, for two years. His position
focuses on leading the team to conduct industry research, due diligence, financial consulting, and preparing regulatory reporting.
From 2012 to 2014 he worked as the accounting manager in Azizmalco, a property management company in Canada, where he oversaw the
accounting department of Azizmalco’s subsidiaries. He received his Bachelor degree in Commerce from Lakehead University with
the major in Accounting. His past experience provided him with a solid understanding of IFRS accounting principles, corporate finance,
SEC regulations, company valuation and presentation and investor relationship management.



Guolin Wang.
Mr. Wang is one of the co-founders of our Company. Prior to co-founding our subsidiary Wenzhou Zhengfeng in 1999, he was the head
of research department in Wenzhou Shuangling Stainless Steel Co., Ltd. Mr. Wang has extensive experience in stainless steel industry
and business administration, and is currently in charge of Company’s technical research, production, and exporting. Mr. Wang
obtained an EMBA degree from Renmin University of China and is a member of National Building Water Supply and Drainage Committee,
as well as that of Wenzhou Building Material Industry Association. Mr. Wang was appointed as a Director for his industry expertise.



Min Ni. Mr.
Ni is currently serving as the partner of CAN Partners LLP, a public accounting firm with offices in Canada since 2013, and as
the director of Bluehill Advisory Ltd., an accounting advisory firm based in China since 2011. His focus of the two positions are
to provide auditing and financial services to both private and public companies, and assist companies going public to improve internal
control and compliances to meet regulatory requirements. Prior to his current positions, he worked as senior auditor at MNP LLP
(formerly MSCM LLP) from 2008 to 2011 and Duffy & Associates in Toronto from 2006 to 2008, where he focused on financial auditing,
internal control assessment, financial consulting and SEC filings review. Mr. Ni has extensive experience in both US GAAP and IFRS
reporting frameworks, Sarbanes-Oxley compliance, and regulatory compliances. Mr. Ni was designated with CA, CPA in Canada and CPA
in Illinois, US and he received his Master Degree in Management and Professional Accounting from Toronto University – Rotman
Business School. Because of his expertise in US GAAP accounting, the Board believes that Mr. Ni qualifies as a “financial
expert” as defined by the SEC rules.



Lie Cao. Mr.
Cao currently is the Deputy Secretary General of National Water Supply & Sewerage Standard Committee, a regulatory body setting
standard to water supply & sewerage industry, and Director of China Construction Metal Structure Association - Water Supply
& Sewerage Division, a national trade association representing the technology and products of Chinese water supply & sewerage
industry. Mr. Cao works closely with the government to oversee the water supply and sewerage industry, review and draft industrial
technical standard, promote new materials and technology, organize anti-dumping and anti-trust investigation, and organize international
communication conferences for the industry. His current and previous positions have provided him with a perspective and understanding
on Chinese piping industry, and his management experience offered him a broad leadership and executive experience. We believe Mr.
Cao qualifies to be our director because of his industry expertise.



Linge Zhou.
Ms. Zhou currently is the General Manager of Zhejiang Bestware, a marketing and consulting company based in Hong Kong since 2016,
where she focuses on guiding clients to expand business to international markets, including America and European Union. Prior to
her current position, she was the General Manager of 121 E-Commerce, a children’s fashion company, from 2013 to 2016 where
she oversees the operations, branding, and supply chain of the company. Ms. Zhou possesses outstanding experience in marketing,
business development and operations. We expect her joining to our board will improve our company’s branding and marketing
performance and introduce our products to more foreign markets. We believe Ms. Zhou qualifies to be our director because of her
experience with business operation.



51







B. Compensation



Director Compensation



All directors hold
office until the next annual meeting of shareholders at which their respective class of directors is re-elected and until their
successors have been duly elected and qualified. Officers are elected by and serve at the discretion of the Board of Directors.
Employee directors do not receive any compensation for their services. Non-employee directors are entitled to receive such compensation
set forth below for serving as directors and may receive stock grants from our company. In addition, non-employee directors are
entitled to receive compensation for their actual travel expenses for each Board of Directors meeting attended.



Director Compensation—For the
fiscal years ended September 30, 2018 and 2017



During the fiscal years
ended September 30, 2018 and 2017, no member of our board of directors, except the Non-Employee Directors as described below, received
compensation in their capacity as directors.



Director Compensation—Non-Employee
Directors



On May 10, 2017, we
entered into service agreement with our independent directors. We have agreed to pay Lie Cao and Linge Zhou cash compensation of
$12,000 per year and our audit committee chairman Min Ni cash compensation of $15,200 per year. The salaries are paid quarterly
with payroll dates on February 10, May 10, August 10 and November 10 in each year. For the fiscal year ended September 30, 2017,
we did not make payment either as the first payment was deferred to November 2017, which would be accounted during the fiscal year
ended September 30, 2018.  For the fiscal year ended September 30, 2018, we paid salaries for 5 quarters, including deferred
one quarter salary that should have been paid in 2017 fiscal year, to the three independent directors.



Executive Compensation



Effective on May 22, 2017, our compensation committee is responsible to determine the compensation to
be paid to our executive officers based on our financial and operating performance and prospects, and contributions made by
the officers to our success. Each of the named officers will be measured by a series of performance criteria by the board of directors,
or the compensation committee on a yearly basis. Such criteria will be set forth based on certain objective parameters such as
job characteristics, required professionalism, management skills, interpersonal skills, related experience, personal performance
and overall corporate performance.



Our compensation committee
has adopted a charter for determining the amount of compensation paid to our executive officers. The compensation committee will
make an independent evaluation of appropriate compensation to key employees, with input from management and has oversight of executive
compensation plans, policies and programs.



Summary Compensation Table



The following table
presents summary information regarding the total compensation awarded to, earned by, or paid to each of the named executive officers
for services rendered to us for the fiscal years ended September 30, 2018, 2017, and 2016.



52







|Name and Principal Position |  | Fiscal Year |      |  | Salary ($) |  |        | Bonus ($) |  |  | Stock Awards ($) |  |  | All Other Compensation ($) |   |  | Total ($) | 
|--------------------------- |  | ----------- | ---- |  | ---------- |  | ------ | --------- |  |  | ---------------- |  |  | -------------------------- | - |  | --------- | 
|Jiancong Huang (1)          |  |             | 2018 |  |            |  | 73,393 |           |  |  | 0                |  |  |                            | 0 |  |           | 
|Chief Executive Officer     |  |             | 2017 |  |            |  | 73,393 |           |  |  | 0                |  |  |                            | 0 |  |           | 
|                            |  |             | 2016 |  |            |  | 76,531 |           |  |  | 0                |  |  |                            | 0 |  |           | 
|Shaochai Yang (2)           |  |             | 2018 |  |            |  | 15,853 |           |  |  | 3,611            |  |  |                            | 0 |  |           | 
|Chief Financial Officer     |  |             | 2017 |  |            |  | 15,853 |           |  |  | 3,611            |  |  |                            | 0 |  |           | 
|                            |  |             | 2016 |  |            |  | 0      |           |  |  | 0                |  |  |                            | 0 |  |           | 
|Di Chen                     |  |             | 2018 |  |            |  | 7,046  |           |  |  | 3,523            |  |  |                            | 0 |  |           | 
|Secretary                   |  |             | 2017 |  |            |  | 7,046  |           |  |  | 3,523            |  |  |                            | 0 |  |           | 
|                            |  |             | 2016 |  |            |  | 0      |           |  |  | 0                |  |  |                            | 0 |  |           | 



| | (1) | We entered into an indefinite
employment agreement with Jiancong Huang on April 15, 2016. Pursuant to the agreement, Mr. Huang has accepted the position of
Chief Executive Officer and we have agreed to pay Mr. Huang an annual salary of RMB 500,000 (approximately $76,531).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | We entered into a three-year employment agreement with Shaochai Yang on February 4, 2017. Pursuant to
the agreement, Ms. Yang has accepted the position of Chief Financial Officer and we have agreed to pay Ms. Yang an annual salary
of RMB 108,000 (approximately $15,853) with additional annual bonus and/or allowance of RMB 24,600 (approximately $3,611).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | We entered into a three-year employment agreement with Di Chen on January 1, 2017. Pursuant to the agreement,
Mr. Chen has accepted the position of Secretary and we have agreed to pay Mr. Chen an annual salary of RMB 48,000 (approximately
$7,046) with additional annual bonus and/or allowance of RMB 24,000 (approximately $3,523).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Employment Agreements



Our employment agreements
with our officers generally provide for employment for a specific term (typically approximately three years at a time) and pay
annual salary, health insurance, pension insurance, and paid vacation and family leave time. The agreement may be terminated by
either party as permitted by law. In the event of any termination of the agreement by our company that results in violation of
applicable labor laws, we shall pay the employee all damages incurred from such termination. In the event of a breach or termination
causing loss to our company by the employee, the employee shall pay all economic loss we had incurred as a result.



C. Board Practices



Election of Officers



Our executive officers
are appointed by, and serve at the discretion of, our board of directors, including our Chief Executive Officer Jiancong Huang,
Chief Financial Officer Shaochai Yang and Secretary Di Chen. There is no family relationship among any of our directors or executive
officers.



Board of Directors



Our board of directors
currently consists of 5 directors, a majority of whom are independent as such term is defined by the Nasdaq Capital Market.



A director may vote
in respect of any contract or transaction in which he is interested, provided, however that the nature of the interest of any director
in any such contract or transaction shall be disclosed by him at or prior to its consideration and any vote on that matter. A general
notice or disclosure to the directors or otherwise contained in the minutes of a meeting or a written resolution of the directors
or any committee thereof of the nature of a director’s interest shall be sufficient disclosure and after such general notice
it shall not be necessary to give special notice relating to any particular transaction. A director may be counted for a quorum
upon a motion in respect of any contract or arrangement which he shall make with our company, or in which he is so interested and
may vote on such motion.



Mr. Jiancong Huang
currently holds the positions of Chief Executive Officer and Chairman of the Board. These three positions have not been consolidated
into one position; Mr. Huang simply holds both positions at this time. We do not have a lead independent director because of the
foregoing reason and also because we believe our independent directors are encouraged to freely voice their opinions on a relatively
small company board. We believe this leadership structure is appropriate because we are a relatively small company in the process
of listing on a public exchange; as such we deem it appropriate to be able to benefit from the guidance of Mr. Huang as both our
principal executive officer and Chair of the Board. Our board of directors plays a key role in our risk oversight. The board of
directors makes all relevant Company decisions. As a smaller company with a small board of directors, we believe it is appropriate
to have the involvement and input of all of our directors in risk oversight matters.



53







Corporate Governance



The business and affairs
of the company are managed under the direction of our Board. We have conducted Board meetings regularly since inception. Each of
our directors has attended all meetings either in person, via telephone conference, or through written consent for special meetings.
In addition to the contact information in this annual report, the Board has adopted procedures for communication with the officers
and directors on May 22, 2017. Stockholders will be given specific information on how he/she can direct communications to the officers
and directors of the Company at our annual stockholders’ meetings. All communications from stockholders are relayed to the
members of the Board.



Board Committees



We have established
and adopted charters for five standing committees under the board: the Audit Committee, the Compensation Committee, the Nomination
Committee, Governance Committees and Enterprise Risk Oversight Committee. Except for the Enterprise Risk Oversight Committee, each
Committee consists of only independent directors of the Company. The Board also adopted charters for i) the Enterprise and Risk
Oversight Committee, ii) Risk and Information Security Committee, iii) Social Media Committee, and iv) Regulatory, Compliance &
Government Affairs Committee. The charters will be implemented upon formation of each respective committee.



| | · | Audit Committee:  Min Ni (Chair), Linge Zhou, Lie Cao                                                 
| | - | ------------------------------------------------------------------------------------------------------
| | · | Compensation Committee:  Min Ni (Chair), Linge Zhou, Lie Cao                                          
| | · | Nomination Committee:  Lie Cao (Chair), Min Ni, Linge Zhou                                            
| | · | Governance Committee: Linge Zhou (Chair), Lie Cao, Min Ni,                                            
| | · | Enterprise Risk Oversight Committee:  Jiancong Huang (Chair), Lie Cao, Min Ni, Linge Zhou, Guolin Wang



The Board also adopted
an insider trading policy that allows insiders to sell securities of the Company pursuant to pre-arranged trading plans.



This insider trading
policy was put into place because effective October 23, 2000, the Securities and Exchange Commission (the “SEC”) adopted
rules related to insider trading. One of these rules, Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, provides
an exemption to the insider trading rules in the form of an affirmative defense. Rule 10b5-1 recognizes the creation of formal
programs under which executives and other insiders may sell the securities of publicly traded companies on a regular basis pursuant
to written plans that are entered into at a time when the plan participants are not aware of material non-public information and
that otherwise comply with the requirements of Rule 10b5-1.



The Board also adopted
a written disclosure policy, which applies to all directors, officers and employees of the Company and its wholly owned subsidiaries,
to ensure that communications to the investing public about the Company are timely, factual and accurate and are broadly disseminated
in accordance with all applicable legal and regulatory requirements.



In addition, the Board
adopted a whistleblower procedure that provides the Audit Committee the responsibility to ensure proper procedure of the receipt,
retention, and treatment of complaints about the Company’s accounting, internal accounting controls, or auditing matters.
The Audit Committee must also provide for confidential, anonymous submission by the Company’s employees of concerns about
questionable accounting or auditing matters.



Lastly, the Board adopted
a corporate governance policy for its website content, as well as procedures for shareholder’s communication with Directors.
With all of the above referenced charters and procedures in place, the Company is committed to corporate governance practices that
are compliance with applicable laws, regulations and exchange requirements.



The functions of each
committee the Company formed and adopted charters for as of January 31, 2019 are described below:



Audit Committee



The Audit Committee
shall make such examinations as are necessary to monitor the corporate financial reporting and external audits of the Company and
its subsidiaries; to provide to the Board the results of its examinations and recommendations derived therefrom; to outline to
the Board improvements made, or to be made, in internal accounting controls; to nominate an independent auditor; and to provide
to the Board such additional information and materials as it may deem necessary to make the Board aware of significant financial
matters requiring Board attention.



54







Compensation Committee



The purpose of the
Compensation Committee is to review and make recommendations to the Board regarding all forms of compensation to be provided to
the executive officers and directors of the Company, including stock compensation and loans, and all bonus and stock compensation
to all employees.



Nomination Committee



The purpose of the
Nomination Committee shall be to review and make recommendations to the Board regarding matters concerning corporate governance;
review the composition of and evaluate the performance of the Board; recommend persons for election to the Board and evaluate director
compensation; review the composition of committees of the Board and recommend persons to be members of such committees; review
and maintain compliance of committee membership with applicable regulatory requirements; and review conflicts of interest of members
of the Board and corporate officers.



Governance Committee



The Governance Committee
shall be responsible for developing Company’s approach to the Board and corporate governance issues; helping to maintain
an effective working relationship between the Board and management; exercising, within the limits imposed by the by-laws of the
Company, by applicable laws, and by the Board, the powers of the Board for the management and direction of the affairs of the Company
during the intervals between meetings of the Board; reviewing and making recommendations to the Board for the appointment of senior
executives of the Company and for considering their terms of employment; reviewing succession planning, matters of compensation;
recommending awards under the Company’s long term and short term incentive plans; assuming the role of administrator, whether
by delegation or by statute, for the corporate-sponsored registered pension plans and the Supplementary Executive Retirement Plan
of the Company and its wholly-owned subsidiaries and any future, additional or replacement plans relating to the plans; and monitoring
the investment performance of the trust funds for the plans and compliance with applicable legislation and investment policies.



The Governance Committee
shall also review any “red flags” or issues that may arise out of the Compensation Committee compensation and award
recommendations and report them to the board of directors. The Compensation Committee and Governance Committee, at times, may be
collaborative but will not coordinate as the process is intended to be a “checks and balance” approach. It is being
set up as an internal control mechanism that would safeguard against fraud and errors due to omission.



Enterprise Risk Oversight Committee



The Enterprise Risk
Oversight Committee shall oversee the effectiveness of risk management policies, procedures and practices implemented by management
of the Corporation with respect to strategic, operational, environmental, health and safety, human resources, legal and compliance
and other risks faced by the Corporation. The committee shall i) review executive management’s assessment of the company’s
material risk exposures and the company’s actions to identify, monitor and mitigate such exposures, ii) review executive
management’s implementation of systems and controls designed to promote compliance with applicable legal and regulatory requirements,
iii) report to the Board on an annual basis with respect to the committee’s review of the company’s material risks
and measures in place to mitigate them, and at least annually in respect of the committee’s other activities.



Copy
of our committee charters available on our corporate investor relations website atwww.zkinternationalgroup.com.



Duties of Directors



Under British Virgin
Islands law, our directors have a duty to act honestly, in good faith and with a view to our best interests. Our directors also
have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances.
In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association. We
have the right to seek damages if a duty owed by our directors is breached.



The functions and powers of our board of
directors include, among others:



| | · | appointing officers and determining the term of office of the officers;                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| | · | authorizing the payment of donations to religious, charitable, public or other bodies, clubs, funds or associations as deemed advisable;
| | · | exercising the borrowing powers of the company and mortgaging the property of the company;                                              
| | · | executing checks, promissory notes and other negotiable instruments on behalf of the company; and                                       
| | · | maintaining or registering a register of mortgages, charges or other encumbrances of the company.                                       



55







Interested Transactions



A director may vote,
attend a board meeting or sign a document on our behalf with respect to any contract or transaction in which he or she is interested.
A director must promptly disclose the interest to all other directors after becoming aware of the fact that he or she is interested
in a transaction we have entered into or are to enter into. A general notice or disclosure to the board or otherwise contained
in the minutes of a meeting or a written resolution of the board or any committee of the board that a director is a shareholder,
director, officer or trustee of any specified firm or company and is to be regarded as interested in any transaction with such
firm or company will be sufficient disclosure, and, after such general notice, it will not be necessary to give special notice
relating to any particular transaction.



Remuneration and Borrowing



The directors may receive
such remuneration as our board of directors may determine from time to time. Each director is entitled to be repaid or prepaid
all traveling, hotel and incidental expenses reasonably incurred or expected to be incurred in attending meetings of our board
of directors or committees of our board of directors or shareholder meetings or otherwise in connection with the discharge of his
or her duties as a director. The compensation committee will assist the directors in reviewing and approving the compensation structure
for the directors. Our board of directors may exercise all the powers of the company to borrow money and to mortgage or charge
our undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is
borrowed or as security for any debt, liability or obligation of the company or of any third party.



Qualification



There are no membership
qualifications for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a general
meeting. There are no other arrangements or understandings pursuant to which our directors are selected or nominated.



Director Compensation



Employee directors
do not receive any compensation for their services. Non-employee directors are entitled to receive an as-yet undetermined cash
fee for serving as directors and may receive option grants from our company. In addition, non-employee directors are entitled to
receive compensation for their actual travel expenses for each board of directors meeting attended.



Terms of Directors
and Officers



All
directors hold office until the next annual meeting of shareholders at which they would be recommended for re-election by the shareholders
and until their successors have been duly elected and qualified. Officers are elected by and serve at the discretion of the board
of directors. Our directors may be elected by a resolution of our board of directors, or by an ordinary resolution of our shareholders.
Each of our directors will hold office until the expiration of his or her term as provided in the written agreement with our company,
if any, and until his or her successor has been elected or appointed. A director will cease to be a director if, among other things,
the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our company
to be or becomes of unsound mind, (iii) resigns his office by notice in writing to the company, or (iv) without special leave of
absence from our board, is absent from three consecutive board meetings and our directors resolve that his office be vacated. Our
officers are elected by and serve at the discretion of the board of directors.



Limitation of Director and Officer Liability



Under British Virgin
Islands law, each of our directors and officers, in performing his or her functions, is required to act honestly and in good faith
with a view to our best interests and exercise the care, diligence and skill that a reasonably prudent person would exercise in
comparable circumstances. British Virgin Islands law does not limit the extent to which a company’s memorandum and articles
of association may provide for indemnification of officers and directors, except to the extent any indemnification provision may
be held by the British Virgin Islands courts to be contrary to public policy (for example, a provision for indemnification against
civil fraud or the consequences of committing a crime).



Under our memorandum
and articles of association, we may indemnify our directors against all expenses, including legal fees, and against all judgments,
fines and amounts paid in settlement and reasonably incurred in connection with civil, criminal, administrative or investigative
proceedings to which they are party or are threatened to be made a party by reason of their acting as our directors. To be entitled
to indemnification, these persons must have acted honestly and in good faith with a view to the best interests of the company and,
in the case of criminal proceedings, they must have had no reasonable cause to believe their conduct was unlawful. The decision
of our board of directors as to whether such a person acted honestly and in good faith with a view to the best interests of the
company and as to whether the person had no reasonable to cause to believe that his or her conduct was unlawful is, in the absence
of fraud, sufficient for the purposes of the indemnification, unless a question of law is involved. The termination of any proceedings
by any judgment, order, settlement, conviction or the entry of no plea does not, by itself, create a presumption that a director
did not act honestly and in good faith and with a view to our best interests or that the director had reasonable cause to believe
that his or her conduct was unlawful. Such limitation of liability does not affect the availability of equitable remedies such
as injunctive relief or rescission. These provisions will not limit the liability of directors under United States federal securities
laws.



56







We may indemnify anyone
serving at our request as a director of another entity against all expenses, including legal fees, and against all judgments, fines
and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings. To
be entitled to indemnification, such a person must have acted honestly and in good faith with the view to our best interests and,
in the case of criminal proceedings, must have had no reasonable cause to believe that his or her conduct was unlawful. The decision
of our board of directors as to whether the person acted honestly and in good faith with a view to our best interests and as to
whether the person had no reasonable cause to believe that his or her conduct was unlawful, is in the absence of fraud sufficient
for the purposes of indemnification, unless a question of law is involved. The termination of any proceedings by any judgment,
order, settlement, conviction or the entry of no plea does not, by itself, create a presumption that the person did not act honestly
and in good faith and with a view to our best interests or that the person had reasonable cause to believe that his or her conduct
was unlawful.



We may purchase and
maintain insurance in relation to any of our directors or officers against any liability asserted against the directors or officers
and incurred by the directors or officers in that capacity, whether or not we have or would have had the power to indemnify the
directors or officers against the liability as provided in our memorandum and articles of association.



Insofar as indemnification
for liabilities arising under the Securities Act may be permitted for our directors, officers or persons controlling our company
under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.



Involvement in Certain Legal Proceedings



To the best of our
knowledge, none of our directors or officers has been convicted in a criminal proceeding, excluding traffic violations or similar
misdemeanors, nor has any been a party to any judicial or administrative proceeding during the past five years that resulted in
a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal
or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed
without sanction or settlement. Except as set forth in our discussion below in “Related Party Transactions,” our directors
and officers have not been involved in any transactions with us or any of our affiliates or associates which are required to be
disclosed pursuant to the rules and regulations of the SEC.



D. Employees



As of September 30,
2018, we employ a total of 377 employees working in departments including 7 within management, 14 within the Research and Development
Department, 197 within the Production Department, 95 within the Sales Department and 64 within the Administrative Support Department.
 Our employees are not represented by a labor organization or covered by a collective bargaining agreement. We have not experienced
any work stoppages. We are required under PRC law to make contributions to employee benefit plans at specified percentages of our
after-tax profit. In addition, we are required by PRC law to cover employees in China with various types of social insurance. All
of our employees are covered by worker compensation insurance arising from any job-related injuries. With respect to retirement
benefits, as most of our employees are from other cities outside of Wenzhou where their retirement insurance are registered locally
at their respective hometowns. The authorities in Wenzhou has instead required companies in Wenzhou to increase their coverage
for Migrant Workers Medical Insurance in order to improve workers’ employment welfare. We have 377 employees, of which 47%
of our employees are covered by the five statutory social benefits, and 100% are covered by Occupational Injury Insurance.  Companies
are not required to make contribution to the local Housing Pension in Wenzhou for the employees and since most employees are from
other regions outside of Wenzhou, most of them have opted out. Currently, we are making contribution to the Housing Pension for
six employees.



| | Item 7. | Major Shareholders and Related Party Transactions
| | ------- | -------------------------------------------------



| | A. | Major Shareholders
| | -- | ------------------



The following table
sets forth information with respect to beneficial ownership of our Ordinary Shares as of January 23, 2019 by:



| | · | Each person who is known by us to beneficially own more than 5% of our outstanding Ordinary Shares;
| | - | ---------------------------------------------------------------------------------------------------
| | · | Each of our director, director nominees and named executive officers; and                          
| | · | All directors and named executive officers as a group.                                             



The number and percentage of Ordinary Shares beneficially owned are based on 16,558,037 Ordinary Shares
issued and outstanding as of January 23, 2019. Information with respect to beneficial ownership has been furnished by each director,
officer or beneficial owner of more than 5% of our Ordinary Shares. Beneficial ownership is determined in accordance with the rules
of the SEC and generally requires that such person have voting or investment power with respect to securities. In computing the
number of Ordinary Shares beneficially owned by a person listed below and the percentage ownership of such person, Ordinary Shares
underlying options, warrants or convertible securities held by each such person that are exercisable or convertible within 60 days
of January 23, 2019 are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other
person. Except as otherwise indicated in the footnotes to this table, or as required by applicable community property laws, all
persons listed have sole voting and investment power for all Ordinary Shares shown as beneficially owned by them. Unless otherwise
indicated in the footnotes, the address for each principal shareholder is in the care of our Company at No. 678 Dingxiang Road,
Binhai Industrial Park, Economic & Technology Development Zone, Wenzhou, P.R. China 325020. As of January 23, 2019, we have
139 shareholders of record.



57













|Named Executive Officers and Directors                       |  | Amount ofBeneficialOwnership  (1) |           |  | PercentageOwnership (2) | 
|------------------------------------------------------------ |  | --------------------------------- | --------- |  | ----------------------- | 
|Directors and Named Executive Officers:                      |  |                                   |           |  |                         | 
|Jiancong Huang, Chief Executive Officer and Chairman (3) (4) |  |                                   | 9,214,962 |  |                         | 
|Shaochai Yang, Chief Financial Officer                       |  |                                   | 0         |  |                         | 
|Di Chen, Secretary                                           |  |                                   | 0         |  |                         | 
|Guolin Wang, Director (4)                                    |  |                                   | 1,800,000 |  |                         | 
|Min Ni, Director                                             |  |                                   | 0         |  |                         | 
|Lie Cao, Director                                            |  |                                   | 0         |  |                         | 
|Linge Zhou, Director                                         |  |                                   | 0         |  |                         | 
|All directors and executive officers as a group (7 persons)  |  |                                   | 9,214,962 |  |                         | 
|                                                             |  |                                   |           |  |                         | 
|5% Beneficial Owners:                                        |  |                                   |           |  |                         | 
|Mingjie Wang (4)                                             |  |                                   | 1,800,000 |  |                         | 





(1) Beneficial ownership is determined
in accordance with the rules of the SEC and includes voting or investment power with respect to the ordinary shares. All shares
represent only ordinary shares held by shareholders as no options are issued or outstanding.

(2) Calculation based on 16,558,037 Ordinary
Shares issued and outstanding as of January 23, 2019.

(3) Mr. Huang individually holds 5,434,962
ordinary shares of the Company. He has been appointed as proxy for shares held by individuals noted in footnote (4).

(4) Individuals who entered into an agreement
to vote in concert in ZK International on May 13, 2015. There is another individual holding 180,000 ordinary shares as of January
23, 2019 who is also a party to the agreement. Pursuant to the agreement, which has a term of 20 years from its effective date
of May 13, 2015, if the parties are unable to reach a unanimous consent in relation to the matters requiring action in concert,
a decision made by more than 50% of the voting rights of the parties will be deemed a decision unanimously passed by all parties
and will be binding on all parties.



Affiliates



Pacific Seaboard Investments
Ltd. (“Pacific Seaboard”) is a consultant to the Company and/or its majority shareholders. Its president Saleem Mohamed
has control and dispositive power of 58,000 ordinary shares of our company held by Pacific Seaboard and may be deemed as an affiliate
of the company. There is no related party transaction between Pacific Seaboard and the Company.



| | B. | Related Party Transactions
| | -- | --------------------------



Net amounts due to
related parties consisted of the following as of September 30, 2018, 2017, and 2016:



|                             |  |                                 |  | As of September 30, |          
|---------------------------- |  | ------------------------------- |  | ------------------- | ---------
|Accounts                     |  | Name of related parties         |  | 2018                |          
|                             |  |                                 |  |                     |          
|Related party payables       |  | Shareholder, HUANG Jian Cong    |  | $                   | 3,584,216
|Related party payables       |  | Other Affiliates of the Company |  |                     | 110,253  
|Total due to related parties |  |                                 |  | $                   | 3,694,469



This represented
unsecured, interest free borrowings between the Company and the shareholders. As the majority shareholder of the Company, Jiancong
Huang has made his personal funds available to use for working capital needs. The borrowings are mainly for the company to purchase
raw materials for productions.



Interests of experts and counsel



Not applicable for
annual reports on Form 20-F.



|ITEM 8. | Financial Information
|------- | ---------------------



A. Consolidated Statements and Other Financial Information



Please refer to Item
18.



58







Legal and Administrative Proceedings



Except as set forth
below and disclosed elsewhere in the annual report, currently there is no legal proceeding pending or threatened against to which
we are a party of. However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in
the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters
may arise.



During 2010, we entered
into two loan agreements with Raozhou Dianli Ltd and Xianjin Cao, and advanced RMB 9 million on the first loan and RMB 1.5 million
on the second loan, totaled RMB 10.5 million (approximately USD 1.52 million). The terms of these two loans are both one year.
Both borrowers defaulted without making any repayment when the terms expired. We later sued these two parties and, pursuant to
the final judgement ruled by Jiangsu High People’s Court, are entitled to a repayment of RMB 10.5 million plus interest with
an interest rate that is four times higher than the normal interest rate in the corresponding period. The claim has been secured
by real estate assets of Raozhou Dianli Ltd, which has been seized by the Court and has an appraised value of RMB 143.1 million,
or about USD 21.5 million as of September 19, 2017, according the recent appraisal report, which is much higher than our claim.
We are listed as the first-in-line creditor and the management believes that we will receive repayment of RMB 10.5 million plus
the outstanding interest. We recorded the entire RMB 10.5 million as Other Receivable. As of September 30, 2018, 2017 and 2016,
the outstanding balance is RMB4.4 million (USD0.64 million), RMB7.4 million (USD1.1 million) and RMB 7.4 million (USD 1.1 million)
, respectively.



In the opinion of the
management, after consultation with the Company’s legal counsel, the management believes it is probable the balance will
be collected as the debtor has real properties worth much more than the debt owed to the Company. There were no legal matters that
are likely to have a material adverse effect on the Company’s financial position as of September 30, 2018 and 2017 and the
results of operations or cash flows for the years ended September 30, 2018 and 2017.



Dividend Policy



We have never
declared or paid any cash dividends on our common shares. We anticipate that we will retain any earnings to support operations
and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable
future. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors and will
depend on a number of factors, including future earnings, capital requirements, financial conditions and future prospects and other
factors the Board of Directors may deem relevant.



Under British Virgin
Islands law, we may only pay dividends from surplus (the excess, if any, at the time of the determination of the total assets of
our company over the sum of our liabilities, as shown in our books of account, plus our capital), and we must be solvent before
and after the dividend payment in the sense that we will be able to satisfy our liabilities as they become due in the ordinary
course of business; and the realizable value of assets of our company will not be less than the sum of our total liabilities, other
than deferred taxes as shown on our books of account, and our capital.



If we determine to
pay dividends on any of our common shares in the future, as a holding company, we will be dependent on receipt of funds from our
operating subsidiaries. Current PRC regulations permit our PRC subsidiaries to pay dividends to ZK Pipe only out of their accumulated
profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries
in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such
reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of
its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion
of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and
eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as
cash dividends except in the event of liquidation. Our subsidiaries in China are required to set aside statutory reserves and have
done so.



In addition, pursuant
to the EIT Law and its implementation rules, dividends generated after January 1, 2008 and distributed to us by our PRC subsidiaries
are subject to withholding tax at a rate of 10% unless otherwise exempted or reduced according to treaties or arrangements between
the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.



Under existing PRC
foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and
service-related foreign exchange transactions, can be made in foreign currencies without prior approval of the State Administration
of Foreign Exchange, or SAFE, by complying with certain procedural requirements. Specifically, under the existing exchange restrictions,
without prior approval of SAFE, cash generated from the operations in China may be used to pay dividends to our company.



59







B. Significant Changes



We have not experienced
any significant changes since the date of our audited consolidated financial statements included in this annual report.



|Item 9. | The Offer and Listing
|------- | ---------------------



A. Offer and listing details



Our ordinary shares
have been listed on the Nasdaq Capital Market since September 1, 2017 under the symbol “ZKIN.” The table below shows,
for the periods indicated, the high and low market prices for our shares.





|                                        |  | Market Price Per Share |      
|--------------------------------------- |  | ---------------------- | -----
|                                        |  | High                   |      
|Quarterly:                              |  |                        |      
|September 1, 2017 to September 30, 2017 |  | $                      | 10.50
|October 1, 2017 to December 31, 2017    |  | $                      | 16.00
|January 1, 2018 to March 30, 2018       |  | $                      | 12.85
|April 1, 2018 to May 31, 2018           |  | $                      | 7.51 
|June 1, 2018 to September 30, 2018      |  | $                      | 4.73 
|October 1, 2018 to December 31, 2018    |  | $                      | 3.69 
|January 1, 2019 to January 30, 2019     |  | $                      | 1.86 





B. Plan of distribution



Not applicable for
annual reports on Form 20-F.



C. Markets



Our ordinary shares
are listed on the Nasdaq Capital Market under the symbol “ZKIN.”



D. Selling shareholders



Not applicable for
annual reports on Form 20-F.



E. Dilution



Not applicable for
annual reports on Form 20-F.



60







F. Expenses of the issue



Not applicable for
annual reports on Form 20-F.



|Item 10. | Additional Information
|-------- | ----------------------



A. Share capital



Not applicable for
annual reports on Form 20-F.



61







B. Memorandum and articles of association



ZK International was
incorporated on May 13, 2015 under the BVI Companies Act, 2004 as a company limited by shares. We are authorized to issue 50,000,000
ordinary shares with no par value. As of January 23, 2019, there are 16,558,037 ordinary shares issued and outstanding.



Our memorandum and
articles of association do not permit a director to decide what compensation he or she will receive. All decisions about the compensation
of directors will be recommended by the compensation committee, upon its formation, and approved by the board of directors as a
whole, both acting only when a quorum of members is present.



The following are summaries
of the material provisions of our memorandum and articles of association and the BVI Act, insofar as they relate to the material
terms of our ordinary shares.



Description of Ordinary Shares



General



All of our issued ordinary
shares are fully paid and non-assessable. Each holder of ordinary shares is entitled to a certificate specifying the number of
ordinary shares held by him, her or it. Our shareholders who are non-residents of the British Virgin Islands may freely hold and
vote their ordinary shares.



Listing



Our ordinary shares
have been listed on the Nasdaq Capital Market since September 1, 2017 under the symbol “ZKIN.”



Transfer Agent and Registrar



The transfer agent
and registrar for the ordinary shares is Securities Transfer Corporation, 2901 N Dallas Parkway, Suite 380, Plano, Texas 75093.



Distributions



The holders of our
ordinary shares are entitled to such dividends or other distributions as may be authorised by our board of directors, subject to
the BVI Act and our memorandum and articles of association.



Shareholders' voting rights



Any action required
or permitted to be taken by the shareholders must be taken at a duly called meeting of the shareholders entitled to vote on such
action. At each meeting of shareholders, each shareholder who is present in person or by proxy (or, in the case of a shareholder
being a corporation, by its duly authorized representative) will have one vote for each ordinary share which such shareholder holds.
An action that may be taken by the shareholders at a meeting may also be taken by a resolution of shareholders consented to in
writing.



Election of directors



Delaware law permits
cumulative voting for the election of directors only if expressly authorized in the certificate of incorporation. The laws of the
British Virgin Islands do not specifically prohibit or restrict the creation of cumulative voting rights for the election of our
directors. Cumulative voting is not a concept that is accepted as a common practice in the British Virgin Islands, and we have
made no provisions in our memorandum and articles of association to allow cumulative voting for elections of directors.



Meetings of Shareholders



Any of our directors
may convene a meeting of shareholders at any time and in any manner and place the director considers necessary or desirable. The
director convening a meeting must not give less than seven days' notice of the meeting to those shareholders whose names appear
as shareholders in the register of shareholders on the date of the notice and are entitled to vote at the meeting, and the other
directors. Our board of directors must convene a meeting of shareholders upon the written request of shareholders entitled to exercise
30% or more of the voting rights in respect of the matter for which the meeting is requested within 28 days of receiving the written
request. A meeting of shareholders held in contravention of the requirement to give notice is valid if shareholders holding at
least 90% of the total voting rights on all the matters to be considered at the meeting have waived notice of the meeting and,
for this purpose, the presence of a shareholder at the meeting shall constitute waiver in relation to all the shares which that
shareholder holds.



62







The quorum for a meeting
of shareholders is duly constituted if, at the beginning of the meeting, there are present in person or by proxy not less than
50% of the votes of the shares (or class or series of shares) entitled to vote on the resolutions to be considered at the meeting.
A quorum may comprise a single shareholder or proxy. If within two hours from the time appointed for the meeting a quorum is not
present, the meeting, if convened upon the requisition of the shareholders, will be dissolved. In any other case, it will stand
adjourned to the next business day in the jurisdiction in which the meeting was to have been held at the same time and place or
to such other time and place as the directors may determine, and if at the adjourned meeting there are present within one hour
from the time appointed for the meeting in person or by proxy not less than one third of the votes of the shares or each class
or series of shares entitle to vote on the matter to be considered by the meeting, those present will constitute a quorum but otherwise
the meeting will be dissolved.



Meetings of directors



Our business and affairs
are managed by our board of directors who make decisions by voting on resolutions of directors. Our directors are free to meet
at such times and in such manner and places within or outside the BVI as they determine to be necessary or desirable. A director
must be given not less than 3 days’ notice of a meeting of directors. At any meeting of directors, a quorum will be present
if not less than one half of the total number of directors is present, unless there are only 2 directors in which case the quorum
is 2. An action that may be taken by the directors at a meeting may also be taken by a resolution of directors consented to in
writing by a majority of the directors.



A person other than
an individual which is a shareholder may by a resolution of its directors or other governing body authorise any individual it thinks
fit to act as its representative at any meeting of shareholders. The authorized representative shall be entitled to exercise the
same powers on behalf of the person which he represents as that person could exercise if it were an individual.



Protection of minority shareholders



We would normally expect
British Virgin Islands courts to follow English case law precedents, which would permit a minority shareholder to commence a representative
action, or derivative actions in our name, to challenge (1) an act which is ultra vires or illegal, (2) an act which
constitutes a fraud against the minority by parties in control of us, (3) an infringement of individual rights of the minority
shareholder (such as the right to vote and pre-emptive rights), and (4) an irregularity in the passing of a resolution which
requires a special or extraordinary majority of the shareholders.



Pre-emptive rights



There are no pre-emptive
rights applicable to the issue by us of new ordinary shares under either British Virgin Islands law or our memorandum and articles
of association.



Transfer of Ordinary Shares



Subject to the restrictions
in our memorandum and articles of association and applicable securities laws, any of our shareholders may transfer all or any of
his or her ordinary shares by written instrument of transfer signed by the transferor and containing the name and address of the
transferee. Our board of directors may not resolve to refuse or delay the transfer of any ordinary share unless the shareholder
has failed to pay an amount due in respect of it.



Liquidation



If we are wound up
and the assets available for distribution among our shareholders are more than sufficient to repay all amounts paid to us on account
of the issue of shares immediately prior to the winding up, the excess shall be distributable pari passu among those shareholders
in proportion to the amount paid up immediately prior to the winding up on the shares held by them, respectively. If we are wound
up and the assets available for distribution among the shareholders as such are insufficient to repay the whole of the amounts
paid to us on account of the issue of shares, those assets shall be distributed so that, to the greatest extent possible, the losses
shall be borne by the shareholders in proportion to the amounts paid up immediately prior to the winding up on the shares held
by them, respectively. If we are wound up, the liquidator appointed by us may, in accordance with the BVI Act, divide among our
shareholders in specie or kind the whole or any part of our assets (whether they shall consist of property of the same kind or
not) and may, for such purpose, set such value as the liquidator deems fair upon any property to be divided and may determine how
such division shall be carried out as between the shareholders or different classes of shareholders.



63







Calls on ordinary shares and forfeiture
of ordinary shares



Our board of directors
may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders
at least 14 days prior to the specified date of payment. Where such a notice has been issued its requirements have not been complied
with, the directors may, at any time before the tender of payment, forfeit and cancel the ordinary shares to which the notice relates.



Redemption of ordinary shares



Subject to the provisions
of the BVI Act, our board of directors may authorise the issuance of shares at such times, to such persons, for such consideration
and on such terms as they may determine by a resolution of directors, subject to the BVI Act, our memorandum and articles of association
and any applicable requirements imposed from time to time by the SEC, The Nasdaq Capital Market or any recognized stock exchange
on which our securities are listed.



Variation of rights



All or any of the rights
attached to any class of shares may subject to the provisions of the BVI Act be varied only with the consent in writing of, or
a resolution passed at a meeting by the holders of more than 50% of the issued shares of that class.



Changes in the number of shares we are
authorized to issue and those in issue



We may from time to
time by resolution of our board of directors:



| | · | amend our memorandum of association to increase or decrease the maximum number of shares we are authorized to issue; 
| | - | ---------------------------------------------------------------------------------------------------------------------
| | · | subject to our memorandum of association, divide our authorized and issued shares into a larger number of shares; and
| | · | subject to our memorandum of association, combine our authorized and issued shares into a smaller number of shares.  



Inspection of books and records



Under the BVI Act, holders of our ordinary shares are entitled, upon giving written notice to us, to inspect
(i) our memorandum and articles of association, (ii) our register of shareholders, (iii) our register of directors
and (iv) minutes of meetings and resolutions of our shareholders, and to make copies and take extracts from these documents
and records. However, our directors can refuse access if they are satisfied that to allow such access would be contrary to our
interests.



Rights of non-resident or foreign shareholders



There are no limitations
imposed by our memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise
voting rights on our shares. In addition, there are no provisions in our memorandum and articles of association governing the ownership
threshold above which shareholder ownership must be disclosed.



Issuance of additional ordinary shares



Our memorandum and articles of association
authorizes our board of directors to issue additional ordinary shares from authorized but unissued shares, to the extent available,
at such times, to such persons, for such consideration and on such terms as they may determine by a resolution of directors.



C. Material contracts



We have not entered
into any material contracts other than in the ordinary course of business and otherwise described elsewhere in this annual report.



D. Exchange controls



PRC Laws and Regulations relating to Foreign Exchange



General administration of foreign exchange



The principal regulation
governing foreign currency exchange in the PRC is the Administrative Regulations of the PRC on Foreign Exchange (the
“Foreign Exchange Regulations”), which were promulgated on January 29, 1996, became effective on April 1,
1996 and were last amended on August 5, 2008. Under these rules, Renminbi is generally freely convertible for payments of
current account items, such as trade- and service-related foreign exchange transactions and dividend payments, but not freely convertible
for capital account items, such as capital transfer, direct investment, investment in securities, derivative products or loans
unless prior approval by competent authorities for the administration of foreign exchange is obtained. Under the Foreign Exchange
Regulations, foreign-invested enterprises in the PRC may purchase foreign exchange without the approval of SAFE to pay dividends
by providing certain evidentiary documents, including board resolutions, tax certificates, or for trade- and services-related foreign
exchange transactions, by providing commercial documents evidencing such transactions.



64







Circular No. 75, Circular No. 37 and Circular No. 13



Circular 37 was released by SAFE on July 4,
2014 and abolished Circular 75 which had been in effect since November 1, 2005. Pursuant to Circular 37, a PRC resident should
apply to SAFE for foreign exchange registration of overseas investments before it makes any capital contribution to a special purpose
vehicle, or SPV, using his or her legitimate domestic or offshore assets or interests. SPVs are offshore enterprises directly established
or indirectly controlled by domestic residents for the purpose of investment and financing by utilizing domestic or offshore assets
or interests they legally hold. Following any significant change in a registered offshore SPV, such as capital increase, reduction,
equity transfer or swap, consolidation or division involving domestic resident individuals, the domestic individuals shall amend
the registration with SAFE. Where an SPV intends to repatriate funds raised after completion of offshore financing to the PRC,
it shall comply with relevant PRC regulations on foreign investment and foreign debt management. A foreign-invested enterprise
established through return investment shall complete relevant foreign exchange registration formalities in accordance with the
prevailing foreign exchange administration regulations on foreign direct investment and truthfully disclose information on the
actual controller of its shareholders.



If any shareholder who is a PRC resident
(as determined by the Circular No. 37) holds any interest in an offshore SPV and fails to fulfil the required foreign exchange
registration with the local SAFE branches, the PRC subsidiaries of that offshore SPV may be prohibited from distributing their
profits and dividends to their offshore parent company or from carrying out other subsequent cross-border foreign exchange activities.
The offshore SPV may also be restricted in its ability to contribute additional capital to its PRC subsidiaries. Where a domestic
resident fails to complete relevant foreign exchange registration as required, fails to truthfully disclose information on the
actual controller of the enterprise involved in the return investment or otherwise makes false statements, the foreign exchange
control authority may order them to take remedial actions, issue a warning, and impose a fine of less than RMB300,000 on an institution
or less than RMB50,000 on an individual.



Circular 13 was issued by SAFE on February 13,
2015, and became effective on June 1, 2015. Pursuant to Circular 13, a domestic resident who makes a capital contribution
to an SPV using his or her legitimate domestic or offshore assets or interests is no longer required to apply to SAFE for foreign
exchange registration of his or her overseas investments. Instead, he or she shall register with a bank in the place where the
assets or interests of the domestic enterprise in which he or she has interests are located if the domestic resident individually
seeks to make a capital contribution to the SPV using his or her legitimate domestic assets or interests; or he or she shall register
with a local bank at his or her permanent residence if the domestic resident individually seeks to make a capital contribution
to the SPV using his or her legitimate offshore assets or interests.



As of January 31,
2019, our Beneficial Shareholders have not completed registrations in accordance with Circular 37, they are currently working
on their registrations in the local Administration of Exchange Control. The failure of our Beneficial Shareholders to comply with
the registration procedures may subject each of our Beneficial Shareholders to fines of less than RMB50,000 (approximately US$7199).
If the registration formalities cannot be processed retrospectively, then the repatriation of the financing funds, profits or
any other interests of our shareholders obtained through special purpose vehicles, for use in China, would be prohibited. As a
result, any cross-border capital flows between our PRC subsidiary and its offshore parent company, including dividend distributions
and capital contributions, would be illegal.



Circular 19 and Circular 16



Circular 19 was promulgated by SAFE on March 30,
2015, and became effective on June 1, 2015. According to Circular 19, foreign exchange capital of foreign-invested enterprises
shall be granted the benefits of Discretional Foreign Exchange Settlement (“Discretional Foreign Exchange Settlement”).
With Discretional Foreign Exchange Settlement, foreign exchange capital in the capital account of a foreign-invested enterprise
for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau, or for which
book-entry registration of monetary contribution has been completed by the bank, can be settled at the bank based on the actual
operational needs of the foreign-invested enterprise. The allowed Discretional Foreign Exchange Settlement percentage of the
foreign exchange capital of a foreign-invested enterprise has been temporarily set to be 100%. The Renminbi converted from the
foreign exchange capital will be kept in a designated account and if a foreign-invested enterprise needs to make any further payment
from such account, it will still need to provide supporting documents and to complete the review process with its bank.



Furthermore, Circular 19 stipulates that
foreign-invested enterprises shall make bona fide use of their capital for their own needs within their business scopes. The capital
of a foreign-invested enterprise and the Renminbi if obtained from foreign exchange settlement shall not be used for the following
purposes:



• directly or indirectly used for expenses beyond its business
scope or prohibited by relevant laws or regulations;



​• directly or indirectly used for investment in
securities unless otherwise provided by relevant laws or regulations;

​

65







• directly or indirectly used for entrusted loan in Renminbi
(unless within its permitted scope of business), repayment of inter-company loans (including advances by a third party) or repayment
of bank loans in Renminbi that have been sub-lent to a third party; and



​• directly or indirectly used for expenses related
to the purchase of real estate that is not for self-use (except for foreign-invested real estate enterprises).



Circular 16 was issued by SAFE on June 9,
2016. Pursuant to Circular 16, enterprises registered in the PRC may also convert their foreign debts from foreign currency to
Renminbi on a self-discretionary basis. Circular 16 provides an integrated standard for conversion of foreign exchange capital
items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary basis applicable to all
enterprises registered in the PRC. Circular 16 reiterates the principle that an enterprise’s Renminbi converted from foreign
currency-denominated capital may not be directly or indirectly used for purposes beyond its business scope or purposes prohibited
by PRC laws or regulations, and such converted Renminbi shall not be provided as loans to non-affiliated entities.



Circulars 16 and 19 address foreign
direct investments into the PRC, and stipulate the procedures applicable to foreign exchange settlement. As we do not plan to transfer
proceeds raised in this offering to our WFOE or VIE in the PRC, the proceeds raised in this offering would not be subject to Circular 19
or Circular 16. However, if and when circumstances require funds to be transferred to our WFOE or VIE in the PRC from our
offshore entities, then any such transfer would be subject to Circulars 16 and 19.



E. Taxation



PRC Taxation



Enterprise Income Tax



On
March 16, 2007, the Standing Committee of the National People’s Congress promulgated the Enterprise Income Tax Law of
the PRC which was amended on February 24, 2017 and on December 6, 2007, the State Council enacted the Implementation
Regulations for the Enterprise Income Tax Law of the PRC, or collectively, the PRC EIT Law. Under the PRC EIT Law, both resident
enterprises and non-resident enterprises are subject to tax in the PRC. Resident enterprises are defined as enterprises
that are established in China in accordance with PRC laws, or that are established in accordance with the laws of foreign countries
but are actually or in effect controlled from within the PRC. Non-resident enterprises are defined as enterprises that
are organized under the laws of foreign countries and whose actual management is conducted outside the PRC, but have established
institutions or premises in the PRC, or have no such established institutions or premises but have income generated from inside
the PRC. Under the PRC EIT Law and relevant implementing regulations, a uniform enterprise income tax rate of 25% is applied. However,
if non-resident enterprises have not formed permanent establishments or premises in the PRC, or if they have formed permanent
establishment or premises in the PRC but there is no actual relationship between the relevant income derived in the PRC and the
established institutions or premises set up by them, enterprise income tax is set at the rate of 10% with respect to their income
sourced from inside the PRC.



Pursuant
to the PRC EIT Law, the EIT tax rate of a high and new technology enterprise or HNTE, is 15%. According to the Administrative Measures
for the Recognition of HNTEs, effective on January 1, 2008 and amended on January 29, 2016, for each entity accredited
as HNTE, its HNTE status is valid for three years if it meets the qualifications for HNTE on a continuing basis during such period.





Value-added Tax



The Provisional Regulations
of on Value-added Tax of the PRC were promulgated by the State Council on December 13, 1993 and came into effect on January 1,
1994 which were subsequently amended on November 10, 2008 and came into effect on January 1, 2009, and were further amended
on February 6, 2016 and November 19, 2017. The Detailed Rules for the Implementation of Provisional Regulations of on Value-added
Tax of the PRC were promulgated by the Ministry of Finance on December 25, 1993 and subsequently amended on December 15,
2008 and October 28, 2011, or collectively, VAT Law. On November 19, 2017, the State Council promulgated The Order on
Abolishing the Provisional Regulations of the PRC on Business Tax and Amending the Provisional Regulations of on Value-added Tax
of the PRC, or Order 691. According to the VAT Law and Order 691, all enterprises and individuals engaged in the sale of goods,
the provision of processing, repair and replacement services, sales of services, intangible assets, real property and the importation
of goods within the territory of the PRC are the taxpayers of VAT. The VAT rates generally applicable are simplified as 17%, 11%,
6% and 0%, and the VAT rate applicable to the small-scale taxpayers is 3%.



On April 4, 2018,
the Ministry of Finance and the State Administration of Taxation issued the Circular on Adjustment of VAT Rates, which became effective
as of May 1, 2018. According to the Circular on the Adjustment of VAT Rates, relevant VAT rates have been reduced from May 1,
2018, such as: (i) VAT rates of 17% and 11% applicable to the taxpayers who have VAT taxable sales activities or imported
goods are adjusted to 16% and 10%, respectively; (ii) VAT rate of 11% originally applicable to the taxpayers who purchase
agricultural products is adjusted to 10% and so on.



66







As of January 31,
2019, our PRC subsidiaries and consolidated affiliated entities are generally subject to VAT rates of 3%, 6% or 16%.



Dividend Withholding Tax



The
PRC EIT Law provides that since January 1, 2008, an enterprise income tax rate of 10% will normally be applicable to dividends
declared to non-PRC resident investors which do not have an establishment or place of business in the PRC, or which have
such establishment or place of business but the relevant income is not effectively connected with the establishment or place of
business, to the extent such dividends are derived from sources within the PRC.



Pursuant
to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation
and the Prevention of Fiscal Evasion with Respect to Taxes on Incomes, or the Double Tax Avoidance Arrangement and other applicable
PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions
and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends
the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%. However, based on the Circular
on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or the SAT Circular 81, issued on February 20,
2009 by the State Administration of Taxation, or the SAT, if the relevant PRC tax authorities determine, in their discretion, that
a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such
PRC tax authorities may adjust the preferential tax treatment. According to the Circular on Several Issues regarding the “Beneficial
Owner” in Tax Treaties, which was issued on February 3, 2018 by the SAT, effective as of April 1, 2018, when determining
the applicant’s status of the “beneficial owner” regarding tax treatments in connection with dividends, interests
or royalties in the tax treaties, several factors, including without limitation, whether the applicant is obligated to pay more
than 50% of its income in twelve months to residents in third country or region, whether the business operated by the applicant
constitutes the actual business activities, and whether the counterparty country or region to the tax treaties does not levy any
tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate, will be taken into account, and it will be
analyzed according to the actual circumstances of the specific cases. This circular further provides that applicants who intend
to prove his or her status of the “beneficial owner” shall submit the relevant documents to the relevant tax bureau
according to the Announcement on Issuing the Measures for the Administration of Non-Resident Taxpayers’ Enjoyment
of the Treatment under Tax Agreements.



Tax on Indirect Transfer



On
February 3, 2015, the SAT issued the Circular on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident
Enterprises, or SAT Circular 7. Pursuant to SAT Circular 7, an “indirect transfer” of assets, including equity interests
in a PRC resident enterprise, by non-PRC resident enterprises, may be recharacterized and treated as a direct transfer
of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of
avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise
income tax. When determining whether there is a “reasonable commercial purpose” of the transaction arrangement, features
to be taken into consideration include, inter alia, whether the main value of the equity interest of the relevant offshore enterprise
derives directly or indirectly from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consist of
direct or indirect investment in China or if its income is mainly derived from China; and whether the offshore enterprise and its
subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their actual function
and risk exposure. According to SAT Circular 7, where the payor fails to withhold any or sufficient tax, the transferor shall declare
and pay such tax to the tax authority by itself within the statutory time limit. Late payment of applicable tax will subject the
transferor to default interest. SAT Circular 7 does not apply to transactions of sale of shares by investors through a public stock
exchange where such shares were acquired on a public stock exchange. On October 17, 2017, the SAT issued the Circular on Issues
of Tax Withholding regarding Non-PRC Resident Enterprise Income Tax, or SAT Circular 37, which further elaborates the
relevant implemental rules regarding the calculation, reporting and payment obligations of the withholding tax by the non-resident enterprises.
Nonetheless, there remain uncertainties as to the interpretation and application of SAT Circular 7. SAT Circular 7 may be
determined by the tax authorities to be applicable to our offshore transactions or sale of our shares or those of our offshore
subsidiaries where non-resident enterprises, being the transferors, were involved.



British Virgin Islands Taxation



Under the BVI Act as
currently in effect, a holder of Ordinary Shares who is not a resident of the British Virgin Islands is exempt from British Virgin
Islands income tax on dividends paid with respect to the Ordinary Shares and a holder of Ordinary Shares is not required to pay
any income tax in the British Virgin Islands on gains realized during that year on sale or disposal of such shares. The laws of
the British Virgin Islands do not impose a withholding tax on dividends paid by a company incorporated or re-registered under the
BVI Act.



There are no capital
gains, gift or inheritance taxes levied by the British Virgin Islands government on companies incorporated or re-registered under
the BVI Act. In addition, shares of companies incorporated or re-registered under the BVI Act are not subject to transfer taxes,
stamp duties or similar charges.



67







There is no income
tax treaty or convention currently in effect between the United States and the British Virgin Islands or between China and the
British Virgin Islands.



United States Federal Income Taxation



The following does
not address the tax consequences to any particular investor or to persons in special tax situations such as:



| | · | banks;
| | - | ------



| | · | financial institutions;
| | - | -----------------------



| | · | insurance companies;
| | - | --------------------



| | · | regulated investment companies;
| | - | -------------------------------



| | · | real estate investment trusts;
| | - | ------------------------------



| | · | broker-dealers;
| | - | ---------------



| | · | traders that elect to mark-to-market;
| | - | -------------------------------------



| | · | U.S. expatriates;
| | - | -----------------



| | · | tax-exempt entities;
| | - | --------------------



| | · | persons liable for alternative minimum tax;
| | - | -------------------------------------------



| | · | persons holding our Ordinary Shares as part of a straddle, hedging, conversion or integrated transaction;
| | - | ---------------------------------------------------------------------------------------------------------



68







| | · | persons that actually or constructively own 10% or more of our voting shares;
| | - | -----------------------------------------------------------------------------



| | · | persons who acquired our Ordinary Shares pursuant to the exercise of any employee share option or otherwise as consideration; or
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | · | persons holding our Ordinary Shares through partnerships or other pass-through entities.
| | - | ----------------------------------------------------------------------------------------



Prospective purchasers
are urged to consult their own tax advisors about the application of the U.S. Federal tax rules to their particular circumstances
as well as the state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of our Ordinary
Shares.



Tax Treaties



As above mentioned,
according to the Sino-U.S. Tax Treaty which was effective on January 1st, 1987 and aimed to avoid double taxation disadvantage,
income that is incurred in one nation should be taxed by that nation and exempted from the other nation, but for the dividend that
is generated in China and distributed to foreigners in other nations, a rate 10% tax will be charged.



Taxation of Dividends and Other Distributions on our Ordinary
Shares



Subject to the passive
foreign investment company rules discussed below, the gross amount of distributions made by us to you with respect to the Ordinary
Shares (including the amount of any taxes withheld therefrom) will generally be includable in your gross income as dividend
income on the date of receipt by you, but only to the extent that the distribution is paid out of our current or accumulated earnings
and profits (as determined under U.S. federal income tax principles). The dividends will not be eligible for the dividends-received
deduction allowed to corporations in respect of dividends received from other U.S. corporations.



With respect to non-corporate
U.S. Holders, including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified
dividend income, provided that (1) the Ordinary Shares are readily tradable on an established securities market in the
United States, or we are eligible for the benefits of an approved qualifying income tax treaty with the United States that includes
an exchange of information program, (2) we are not a passive foreign investment company (as discussed below) for either our
taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period requirements are
met. Under U.S. Internal Revenue Service authority, Ordinary Shares are considered for purpose of clause (1) above to be
readily tradable on an established securities market in the United States if they are listed on The Nasdaq Capital Market. You
are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our Ordinary
Shares, including the effects of any change in law after January 31, 2019.



Dividends will constitute
foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed
above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited
to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends.
The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this
purpose, dividends distributed by us with respect to our Ordinary Shares will constitute “passive category income”
but could, in the case of certain U.S. Holders, constitute “general category income.”



To the extent that
the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income
tax principles), it will be treated first as a tax-free return of your tax basis in your Ordinary Shares, and to the extent the
amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our
earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will
be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital
gain under the rules described above.



69







Taxation of Dispositions of Ordinary Shares



Subject to the passive
foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable
disposition of a share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in
U.S. dollars) in the Ordinary Shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including
an individual U.S. Holder, who has held the Ordinary Shares for more than one year, you will be eligible for reduced tax rates
of 0% (for individuals in the 10% or 15% tax brackets), 20% (for individuals in the 39.6% tax brackets) or 15% for all other individuals.
The deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated
as United States source income or loss for foreign tax credit limitation purposes.



Passive Foreign Investment Company



Based on our current
and anticipated operations and the composition of our assets, we do not expect to be a passive foreign investment company,
or PFIC, for U.S. federal income tax purposes for our current taxable year ending September 30, 2018. Our actual PFIC status for
the current taxable year ending September 30, 2018 will not be determinable until the close of such taxable year and, accordingly,
there is no guarantee that we will not be a PFIC for the current taxable year. Because PFIC status is a factual determination for
each taxable year which cannot be made until the close of the taxable year. A non-U.S. corporation is considered a PFIC for any
taxable year if either:



| | · | at
least 75% of its gross income is passive income, defined as income from interest, dividends, rents, royalties, gains on property
producing foreign personal holding company income and certain other income that does not involve the active conduct of a trade
or business; or
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year)
is attributable to assets that produce or are held for the production of passive income (the “asset test”).                                             



We will be treated
as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which
we own, directly or indirectly, at least 25% (by value) of the stock.



We must make a separate
determination each year as to whether we are a PFIC. As a result, our PFIC status may change. In particular, because the value
of our assets for purposes of the asset test will generally be determined based on the market price of our Ordinary Shares,
our PFIC status will depend in large part on the market price of our Ordinary Shares. Accordingly, fluctuations in the market price
of the Ordinary Shares may cause us to become a PFIC. In addition, the application of the PFIC rules is subject to uncertainty
in several respects and the composition of our income and assets will be affected by how, and how quickly, we spend the cash we
raised in from our initial public offering. If we are a PFIC for any year during which you hold Ordinary Shares, we will continue
to be treated as a PFIC for all succeeding years during which you hold Ordinary Shares. However, if we cease to be a PFIC, you
may avoid some of the adverse effects of the PFIC regime by making a “deemed sale” election with respect to the Ordinary
Shares.



If we are a PFIC for
any taxable year during which you hold Ordinary Shares, you will be subject to special tax rules with respect to any “excess
distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of the Ordinary
Shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year
that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years
or your holding period for the Ordinary Shares will be treated as an excess distribution. Under these special tax rules:



| | · | the
excess distribution or gain will be allocated ratably over your holding period for the Ordinary Shares;                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | the amount
allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated
as ordinary income, and                                                                          
| | · | the amount allocated to each
other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments
of tax will be imposed on the resulting tax attributable to each such year.



The tax liability for
amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating
losses for such years, and gains (but not losses) realized on the sale of the Ordinary Shares cannot be treated as capital, even
if you hold the Ordinary Shares as capital assets.



70







A U.S. Holder of “marketable
stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the tax treatment discussed
above. If you make a mark-to-market election for the Ordinary Shares, you will include in income each year an amount equal to the
excess, if any, of the fair market value of the Ordinary Shares as of the close of your taxable year over your adjusted basis in
such Ordinary Shares. You are allowed a deduction for the excess, if any, of the adjusted basis of the Ordinary Shares over their
fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market
gains on the Ordinary Shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market
election, as well as gain on the actual sale or other disposition of the Ordinary Shares, are treated as ordinary income. Ordinary
loss treatment also applies to the deductible portion of any mark-to-market loss on the Ordinary Shares, as well as to any loss
realized on the actual sale or disposition of the Ordinary Shares, to the extent that the amount of such loss does not exceed the
net mark-to-market gains previously included for such Ordinary Shares. Your basis in the Ordinary Shares will be adjusted to reflect
any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations
which are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate for qualified dividend
income discussed above under “Taxation of Dividends and Other Distributions on our Ordinary Shares” generally would
not apply.



The mark-to-market
election is available only for “marketable stock”, which is stock that is traded in other than de minimis quantities
on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market (as defined
in applicable U.S. Treasury regulations), including The Nasdaq Capital Market. If the Ordinary Shares are regularly traded on The
Nasdaq Capital Market and if you are a holder of Ordinary Shares, the mark-to-market election would be available to you were we
to be or become a PFIC.



Alternatively, a U.S.
Holder of stock in a PFIC may make a “qualified electing fund” election with respect to such PFIC to elect out of the
tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally
include in gross income for a taxable year such holder’s pro rata share of the corporation’s earnings and profits for
the taxable year. However, the qualified electing fund election is available only if such PFIC provides such U.S. Holder with certain
information regarding its earnings and profits as required under applicable U.S. Treasury regulations. We do not currently intend
to prepare or provide the information that would enable you to make a qualified electing fund election. If you hold Ordinary Shares
in any year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621 regarding distributions
received on the Ordinary Shares and any gain realized on the disposition of the Ordinary Shares.



You are urged to consult
your tax advisors regarding the application of the PFIC rules to your investment in our Ordinary Shares and the elections discussed
above.



Information Reporting and Backup Withholding



Dividend payments with
respect to our Ordinary Shares and proceeds from the sale, exchange or redemption of our Ordinary Shares may be subject to information
reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding at a current rate of 28%. Backup withholding
will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification
on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to
establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders
are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.



Backup withholding
is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability,
and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for
refund with the U.S. Internal Revenue Service and furnishing any required information.



Under the Hiring Incentives
to Restore Employment Act of 2010, certain United States Holders are required to report information relating to Ordinary Shares,
subject to certain exceptions (including an exception for Ordinary Shares held in accounts maintained by certain financial institutions),
by attaching a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return
for each year in which they hold Ordinary Shares. U.S. Holders are urged to consult their tax advisors regarding the application
of the U.S. information reporting and backup withholding rules.



71







F. Dividends and paying agents



Not applicable for
annual reports on Form 20-F.



G. Statement by experts



Not applicable for
annual reports on Form 20-F.



H. Documents on display



We are subject to the
information requirements of the Exchange Act. In accordance with these requirements, the Company files reports and other information
with the SEC. You may read and copy any materials filed with the SEC at the Public Reference Room at 100 F Street, N.E., Washington,
D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC also maintains a web site at http://www.sec.gov that contains reports and other information regarding registrants
that file electronically with the SEC.



I. Subsidiary Information



Not applicable.



|Item 11. | Quantitative and Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------



We are exposed to a
variety of financial risks, including market risk (including currency risk, price risk and cash flow and fair value interest rate
risk), credit risk and liquidity risk. Our overall risk management program focuses on preservation of capital and the unpredictability
of financial markets and has sought to minimize potential adverse effects on our financial performance and position.



Foreign Exchange Risk



While our reporting currency
is the U.S. Dollar, our consolidated sales and consolidated costs and expenses occurred within the PRC are denominated in the RMB.
Except for such cash provided by our past private placements and initial public offering in the amount of approximately $5.7 million
as of September 30, 2018, all of our assets are denominated in the RMB.   As a result, we are exposed to foreign exchange
risk as our sales and results of operations may be affected by fluctuations in the exchange rate between the U.S. Dollar and the
RMB. If the RMB depreciates against the U.S. Dollar, the value of our RMB sales, earnings and assets as expressed in our U.S. Dollar
financial statements will decline. Assets and liabilities are translated at exchange rates at the balance sheet dates and revenue
and expenses are translated at the average exchange rates and stockholders' equity is translated at historical exchange rates.
Any resulting translation adjustments are not included in determining net income but are included in determining other comprehensive
income, a component of stockholders' equity. We have not entered into any hedging transactions in an effort to reduce our exposure
to foreign exchange risk.





The value
of the RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China's political and economic
conditions. Since July 2005, the RMB has not been pegged to the U.S. dollar and, although the People's Bank of China regularly
intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate
or depreciate significantly in value against the U.S. dollar or the Euro in the medium to long term. Moreover, it is possible
that in the future, PRC authorities may lift restrictions on fluctuations in RMB exchange rate and lessen intervention in the
foreign exchange market. Although the RMB strengthened against the U.S. dollar over the last five years, the RMB’s significant
weakening against the U.S. dollar since July 2015 has largely undone such prior increases.



Interest Rate Risk



Our interest rate risk
arises from short and long-term borrowings. As of September 30, 2018 and 2017, we had borrowings with variable rates and therefore
we were exposed to cash flow interest rate risk. Borrowings issued at fixed rates expose us to fair value interest rate risk.



72







As of September 30,
2018 and 2017 we had no long-term interest-bearing assets or long-term interest bearing liabilities.



Credit Risk



Our cash is invested
primarily in savings and deposit accounts with original maturities of three months or less. Savings and deposit accounts generate
a small amount of interest income.



Financial instruments that
potentially subject the Company to significant concentrations of credit risk consist primarily of cash, contracts receivable, and
accounts receivable. As of September 30, 2018 and 2017, $7,607,876 and $7,060,122, respectively, of the Company’s cash was
on deposit at financial institutions in the PRC where there currently is no rule or regulation requiring such financial institutions
to maintain insurance to cover bank deposits in the event of bank failure. While management believes that these financial institutions
are of high credit quality, it also continually monitors their creditworthiness.



Contracts receivable and
accounts receivable are typically unsecured and derived from revenue earned from customers, thereby they are exposed to credit
risk. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring
of outstanding balances.



Inflation



Inflationary factors
such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not
believe that inflation has had a material effect on our financial position or results of operations to date, a high rate of inflation
in the future may have an adverse effect on our ability to maintain current levels of gross profit and selling, general and administrative
expenses as a percentage of net sales if the selling prices of our products do not increase with these increased costs.



| | Item 12. | Description
of Securities Other than Equity Securities
| | -------- | ------------------------------------------------------



With the exception of Items 12.D.3 and 12.D.4,
this Item 12 is not applicable for annual reports on Form 20-F. As to Items 12.D.3 and 12.D.4, this Item 12 is not applicable,
as the Company does not have any American Depositary Shares.



PART II



| | Item 13. | Defaults, Dividend Arrearages and Delinquencies
| | -------- | -----------------------------------------------



We do not have any material defaults in
the payment of principal, interest, or any installments under a sinking or purchase fund.



| | Item 14. | Material Modifications to the Rights of Securities Holders and Use of Proceeds
| | -------- | ------------------------------------------------------------------------------



Material Modifications to the Rights of Security Holders



See “Item 10. Additional Information—B. Memorandum and Articles of Association—Description
of Ordinary Shares” for a description of the rights of securities holders.



Use of Proceeds



The following “Use
of Proceeds” information relates to the registration statement on Form F-1, as amended (File Number: 333-218918) in relation
to our initial public offering of 1,068,346 of our ordinary shares, at an initial offering price of $5.00 per share, and the issuance
to the underwriter in the initial public offering of warrants to purchase 74,784 ordinary shares. Our initial public offering closed
in August 2017, for which Boustead Securities LLC. acted as the underwriter.



73







We received gross proceeds
approximately $5.3 million from our initial public offering. As of January 21, 2019, in addition to our expenses relating to our
IPO, we have used all of which for the purchase raw materials and production equipment.



| | Item 15. | Controls and Procedures
| | -------- | -----------------------



| | (a) | Evaluation of Disclosure
Controls and Procedures.
| | --- | -------------------------------------------------



As of September 30,
2018, the end of the fiscal year covered by this report, our management, under the supervision and with the participation of our
Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and
procedures. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30,
2018, our disclosure controls and procedures were ineffective. Such conclusion is due to the presence of material weakness in internal
control over financial reporting as described below.



| | (b) | Management’s annual report on internal control over financial reporting.
| | --- | ------------------------------------------------------------------------



Management of the Company
is responsible for establishing and maintaining adequate internal control over financial reporting. We assessed the effectiveness
of the Company’s internal control over financial reporting as of September 30, 2018. In making its assessment, management
used the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(the “2013 COSO Framework”). The 2013 COSO Framework outlines the 17 underlying principles and the following fundamental
components of a company’s internal control: (i) control environment, (ii) risk assessment, (iii) control activities, (iv)
information and communication, and (v) monitoring. Our management has implemented and tested our internal control over financial
reporting based on these criteria and identified certain material weaknesses set forth below. Based on the assessment, management
determined that, as of September 30, 2018, we did not maintain effective internal control over financial reporting due to the existence
of the following material weaknesses:



| | 1) | The Company did not maintain adequate segregation of duties related to certain job responsibilities for initiating, authorizing, and recording of certain transactions.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                        
| | 2) | The Company does not have sufficient accounting and finance personnel with U.S.-GAAP experience                                                                        





As a result, the Company
plans to develop remedial actions to strengthen its accounting and financial reporting functions. To strengthen the Company’s
internal control over financial reporting, the Company plans to put design, implement, and test internal control over financial
reporting. In addition to the foregoing efforts, the Company expects to implement the following remedial actions:



| | · | Development and formalization of key accounting and financial reporting policies and procedures
by September 30, 2019;
| | - | ----------------------------------------------------------------------------------------------------------------------

| | · | Hire addition personnel with experience in US GAAP financial reporting and control procedures;
and
| | - | --------------------------------------------------------------------------------------------------

| | · | Formalization of periodic communication between management and the audit committee by September
30, 2019.
| | - | ---------------------------------------------------------------------------------------------------------





Despite the material
weaknesses and deficiencies reported above, our management believes that our consolidated financial statements included in this
report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented
and that this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report.



| | (c) | Attestation report of the registered public accounting firm.
| | --- | ------------------------------------------------------------



Not applicable.



| | (d) | Changes in internal control over financial reporting.
| | --- | -----------------------------------------------------



There have been no
changes in our internal controls over financial reporting occurred during the twelve months ended September 30, 2018, that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



| | Item 15T. | Controls
and Procedures
| | --------- | -----------------------



Not applicable.



74







| | Item 16. | [Reserved]
| | -------- | ----------



| | Item 16A. | Audit Committee Financial Expert
| | --------- | --------------------------------



The Company’s
board of directors has determined that Min Ni qualifies as an “audit committee financial expert” in accordance with
applicable Nasdaq Capital Market standards. The Company’s board of directors has also determined that members of the Audit
Committee are all “independent” in accordance with the applicable Nasdaq Capital Market standards.



| | Item 16B. | Code of Ethics
| | --------- | --------------



The Company has adopted
a Code of Business Conduct and Ethics that applies to the Company’s directors, officers, employees and advisors. The Code
of Ethics is attached as an exhibit to this annual report. We have also posted a copy of our code of business conduct and ethics
on our website at www.zkinternationalgroup.com. The following is a summation of the key points of the Code of Ethics we adopted:



| | ● | Honest and ethical conduct, including ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Full, fair, accurate, timely, and understandable disclosure reports and documents that a small business issuer files with, or submits to, the Commission and in other public communications made by our Company;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Full compliance with applicable government laws, rules and regulations;
| | - | -----------------------------------------------------------------------



| | ● | The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
| | - | -----------------------------------------------------------------------------------------------------------------------



| | ● | Accountability for adherence to the code.
| | - | -----------------------------------------



| | Item 16C. | Principal Accountant Fees and Services
| | --------- | --------------------------------------



ZH CPA, LLC was appointed
by the Company to serve as its independent registered public accounting firm for fiscal years ended September 30, 2018 and 2017.
Audit services provided by ZH CPA, LLC for fiscal years ended September 30, 2018 and 2017 included the examination of the consolidated
financial statements of the Company, and services related to periodic filings made with the SEC.





Fees Paid To Independent Registered Public Accounting Firm



Audit Fees



ZH CPA, LLC’s fees for the annual audit of our financial statements for the fiscal years ended September
30, 2018 was $170,000 and for the fiscal years ended September 30, 2017 and 2016 were $210,000 in total, excluding travel
and other out-of-pocket expenses.





Audit-Related Fees



ZH CPA, LLC did not provide audit related service during the fiscal years ended September 30, 2018, 2017
and 2016.





Tax Fees



ZH CPA, LLC did not provide tax services for the fiscal years ended September 30, 2018, 2017 and 2016.



All Other Fees



The Company has not
paid ZH CPA, LLC for any other services in fiscal years ended September 30, 2018, 2017 or 2016.



Audit Committee Pre-Approval Policies



Before ZH CPA, LLC was
engaged by the Company to render audit services, the engagement was approved by the Company’s audit committee. All services
rendered by ZH CPA, LLC have been so approved.



Percentage of Hours



The percentage of hours
expended on the principal accountants’ engagement to audit our consolidated financial statements for 2018 that were attributed
to work performed by persons other than ZH CPA, LLC’s full-time permanent employees was less than 5%.



| | Item 16D. | Exemptions from the Listing Standards for Audit Committees
| | --------- | ----------------------------------------------------------



Not applicable.



75







| | Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers
| | --------- | ----------------------------------------------------------------------



Neither the Company
nor any affiliated purchaser has purchased any shares or other units of any class of the Company’s equity securities registered
by the Company pursuant to Section 12 of the Securities Exchange Act during the fiscal year ended September 30, 2018.



| | Item 16F. | Change in Registrant’s Certifying Accountant
| | --------- | --------------------------------------------



On November 26, 2017,
the Company dismissed the independent registered public accounting firm, Anton & Chia, LLP. The report of Anton & Chia,
LLP on the financial statements of the Company the fiscal year ended September 30, 2016 and 2015, and the related statements of
operations, comprehensive loss, changes in stockholders’ deficiency, and cash flows for the fiscal years ended September
30, 2016 and 2015 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles



The decision to change
the independent registered public accounting firm was recommended and approved by the Audit Committee and Board of Directors. During
the fiscal year ended September 30, 2016 and through November 26, 2017, the date of dismissal, (a) there were no disagreements
with Anton & Chia, LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope
or procedure, which disagreements, if not resolved to the satisfaction of Anton & Chia, LLP, would have caused it to make reference
thereto in its reports on the financial statements for such years and (b) there were no “reportable events” as described
in Item 304(a)(1)(v) of Regulation S-K.



On November 30, 2017,
the Audit Committee and the Board of Directors of the Company appointed ZH CPA LLP as its new independent registered public accounting
firm to audit and review the Company’s financial statements. During the two most recent fiscal years ended September 30,
2016 and September 30, 2015 and any subsequent interim periods through the date hereof prior to the engagement of ZH CPA LLP ,
neither the Company, nor someone on its behalf, has consulted ZH CPA LLP regarding either: the application of accounting principles
to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s
consolidated financial statements, and either a written report was provided to the Company or oral advice was provided that the
new independent registered public accounting firm concluded was an important factor considered by the Company in reaching a decision
as to the accounting, auditing or financial reporting issue; or any matter that was either the subject of a disagreement as defined
in paragraph 304(a)(1)(iv) of Regulation S-K or a reportable event as described in paragraph 304(a)(1)(v) of Regulation S-K.



On
July 20, 2018,the Company was informed by ZH CPA LLP that it has changed its name
from “ZH CPA LLP” to “ZH CPA, LLC,” effective from July 22, 2018. The principals and staff of ZH CPA, LLC
are the same audit partner and staff who performed audit for the Company during the fiscal years ended September 30, 2017 and 2016.



The reports of ZH CPALLP on the Company’s financial statements as of and for the years ended September 30, 2017 and 2016 contained no
adverse opinion or disclaimer of opinion nor was qualified or modified as to uncertainty, audit scope, or accounting principle.
During the fiscal years ended September 30, 2017 and 2016, there have been no (i) disagreements with ZH CPALLP, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to ZH CPALLP satisfaction, would have caused
ZH CPALLP to make reference to the subject matter of the disagreement(s) in connection
with its reports; or (ii) reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.



Neither
the Company nor anyone on behalf of the Company consulted ZH CPALLP regarding either
(a) the application of accounting principles to a specified transaction, either completed or contemplated, or the type of audit
opinion that might be rendered on the financial statements of the Company, and no written or oral advice of ZH CPALLP was provided with respect to any accounting, auditing, or financial reporting issue, or (b) any matter that was either
the subject of a disagreement of the type described in Item 304(a)(iv) of Regulation S-K or any “reportable event described
in Item 304(a)(1)(v) of Regulation S-K.



76







| | Item 16G. | Corporate Governance
| | --------- | --------------------





Under
NASDAQ Stock Market Rule 5615(a)(3), foreign private issuers, such as our company, are permitted to follow certain home country
corporate governance practices instead of certain provisions of the NASDAQ Stock Market Rules. A foreign private issuer that elects
to follow a home country practice instead of any of such NASDAQ rules must submit to NASDAQ, in advance, a written statement from
an independent counsel in such issuer’s home country certifying that the issuer’s practices are not prohibited by the
home country’s laws and such foreign private issuer discloses the requirements it is not following and describes the home
country practices it is following.



As a foreign private
issuer, we are permitted to, and did, follow certain home country corporate governance practices instead of those otherwise required
under the applicable rules of the Nasdaq Capital Market for domestic U.S. issuers. In August 2018, we provided NASDAQ with notice
of noncompliance with respect to the requirement to provide written notification to shareholders for omission to seek shareholder
approval for a specified issuance of securities. NASDAQ Listing Rule 5635(f) provides that “[a] Company that receives [an
exemption applicable to a specified issuance of securities] must mail to all Shareholders not later than ten days before issuance
of the securities a letter alerting them to its omission to seek the shareholder approval that would otherwise be required...”
Under the British Virgin Islands Business Companies Act, there is no general requirement for shareholders to be notified of securities
issuance of a British Virgin Islands company, which is different than the requirements of the Nasdaq Capital Market listing standards.
Mourant Ozannes, our British Virgin Islands counsel, provided a letter dated August 13, 2018 to NASDAQ confirming that our election
to follow British Virgin Islands law practice, in lieu of the requirements contained within NASDAQ Listing Rule 5600 is not prohibited
by British Virgin Islands law, provided that the Company shall continue to comply with those rules which are required to be followed
pursuant to the provisions of NASDAQ Listing Rule 5615(a)(3). Following our home country governance practices as opposed to the
requirements that would otherwise apply to a U.S. company listed on the Nasdaq Capital Market may provide less protection to you
than what is accorded to investors under the Nasdaq Global Select Market requirements applicable to domestic U.S. issuers.



We
otherwise intend to comply with the rules generally applicable to U.S. domestic companies listed on the Nasdaq Capital Market.
We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other Nasdaq Capital
Market corporate governance rules. See “Risk Factors - Risks Related to Our Ordinary Shares - As a “controlled company”
under the rules of the Nasdaq Capital Market, we may exempt our company from certain corporate governance requirements that could
adversely affect our public shareholders”  and “- As a foreign private issuer, we are permitted to, and did, follow
certain home country corporate governance practices instead of otherwise applicable Nasdaq Capital Market requirements, which may
result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.”





| | Item 16H. | Mine Safety Disclosure
| | --------- | ----------------------



Not applicable.



PART III



| | Item 17. | Financial Statements
| | -------- | --------------------



See Item 18.



| | Item 18. | Financial Statements
| | -------- | --------------------



Our consolidated financial statements are
included at the end of this annual report, beginning with page F-1.



| | Item 19. | Exhibits
| | -------- | --------



|Exhibit No. |  | Description of Exhibit                                                                                                                   | 
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------- | 
|            |  |                                                                                                                                         
|1.1(1)      |  | Amended and Restated Memorandum and Articles of Association of ZK International Group Co., Ltd                                          
|            |  |                                                                                                                                         
|2.1(1)      |  | Registrant's form of ordinary share certificate                                                                                         
|            |  |                                                                                                                                         
|3.1(1)      |  | Controlling shareholders’ agreement to vote in concert dated May 13, 2015.                                                              
|            |  |                                                                                                                                         
|4.1(2)      |  | Form of subscription agreement between the Registrant and private placement investors                                                   
|            |  |                                                                                                                                         
|4.2(3)      |  | Form of subscription agreement between the Registrant and private placement investor                                                    
|            |  |                                                                                                                                         
|10.1(5)     |  | Form of Exclusive License Agreement among the Registrant, XSigma Corporation and TNT Blockchain Inc. dated February 8, 2018.            
|            |  |                                                                                                                                         
|10.2(6)     |  | Debt Settlement and Mutual Release Agreement between the Registrant and Jiancong Huang dated August 15, 2018                            
|            |  |                                                                                                                                         
|8.1(4)      |  | List of Subsidiaries of the Registrant                                                                                                  
|            |  |                                                                                                                                         
|11.1(1)     |  | Code of Business Conduct and Ethics                                                                                                     
|            |  |                                                                                                                                         
|12.1*       |  | Certification of Chief Executive Officer Required by Rule 13a-14(a)                                                                     
|            |  |                                                                                                                                         
|12.2*       |  | Certification of Chief Financial Officer Required by Rule 13a-14(a)                                                                     
|            |  |                                                                                                                                         
|13.1*       |  | Certification of Chief Executive Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code
|            |  |                                                                                                                                         
|13.2*       |  | Certification of Chief Financial Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code
|            |  |                                                                                                                                         
|101.INS     |  | XBRL Instance Document.                                                                                                                 
|            |  |                                                                                                                                         
|101.SCH     |  | XBRL Taxonomy Extension Schema Document.                                                                                                
|            |  |                                                                                                                                         
|101.CAL     |  | XBRL Taxonomy Extension Calculation Linkbase Document.                                                                                  
|            |  |                                                                                                                                         
|101.DEF     |  | XBRL Taxonomy Extension Definition Linkbase Document.                                                                                   
|            |  |                                                                                                                                         
|101.LAB     |  | XBRL Taxonomy Extension Labels Linkbase Document.                                                                                       
|            |  |                                                                                                                                         
|101.PRE     |  | XBRL Taxonomy Extension Presentation Linkbase Document.                                                                                 







77







| | (1) | Incorporated by reference
to Form F-1 filed on May 23, 2017
| | --- | -----------------------------------------------------------



| | (2) | Incorporated by reference
to Form 6-K filed on December 28, 2017
| | --- | ----------------------------------------------------------------



| | (3) | Incorporated by reference
to Form 6-K filed on January 12, 2018
| | --- | ---------------------------------------------------------------



| | (4) | Incorporated by reference
to Form 6-K filed on March 29, 2018
| | --- | -------------------------------------------------------------



| | (5) | Incorporated by reference
to Form 6-K filed on February 23, 2018
| | --- | ----------------------------------------------------------------



| | (6) | Incorporated by reference
to Form 6-K filed on September 7, 2018
| | --- | ----------------------------------------------------------------



| | * | Filed herewith
| | - | --------------





SIGNATURES



The registrant hereby
certifies that it meets all of the requirements for filing on Form 20-F/A and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.



| |     | ZK INTERNATIONAL GROUP CO., LTD.   
| | --- | -----------------------------------
| |     |                                    
| | By: | /s/ Jiancong Huang                 
| |     | Name:    Jiancong Huang            
| |     | Title:      Chief Executive Officer



Date: July 8, 2019



78







ZK INTERNATIONAL GROUP CO., LTD.



TABLE OF CONTENTS



|Consolidated Financial Statements                                                                                    |           
|-------------------------------------------------------------------------------------------------------------------- | ----------
|                                                                                                                     |           
|Reports of Independent Registered Public Accounting Firm                                                             | F-1       
|                                                                                                                     |           
|Consolidated Balance Sheets as of September 30, 2018 and 2017                                                        | F-2       
|                                                                                                                     |           
|Consolidated Statements of Operations and Comprehensive Income for the years ended September 30, 2018, 2017 and 2016 | F-3       
|                                                                                                                     |           
|Consolidated Statements of Changes in Equity for the years ended September 30, 2018, 2017 and 2016                   | F-4       
|                                                                                                                     |           
|Consolidated Statements of Cash Flows for the years ended September 30, 2018, 2017 and 2016                          | F-5       
|                                                                                                                     |           
|Notes to Consolidated Financial Statements                                                                           | F-6 – F-26















| | 
| | 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM







Board of Directors and Stockholders

ZK International Group Co., Ltd.





Opinion on the Financial Statements



We have audited the accompanying consolidated
balance sheets of ZK International Group Co., Ltd and subsidiaries (the “Company”) as of September 31, 2018 and 2017,
and the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows for each of the
three years period ended September 30, 2018, and the related notes and schedules (collectively referred to as the “financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of September 30, 2018 and 2017, and the results of its operations and its cash flows for each of the
three year period ended September 30, 2018, in conformity with accounting principles generally accepted in the United States of
America.



Basis for Opinion



These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.



We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required
to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.



Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.





|/s/ ZH CPA, LLC                                    
|---------------------------------------------------
|                                                   
|We have served as the Company’s auditor since 2017.
|                                                   
|Denver, Colorado                                   
|                                                   
|January 31, 2019                                   









F-1









ZK INTERNATIONAL GROUP CO., LTD

CONSOLIDATED BALANCE SHEETS

(IN
U.S. DOLLARS)





|                                                                                                                                |  | As of September 30, |           
|------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | ----------
|                                                                                                                                |  | 2018                |           
|Assets                                                                                                                          |  |                     |           
|Current assets                                                                                                                  |  |                     |           
|Cash and cash equivalents                                                                                                       |  | $                   | 7,682,589 
|Restricted cash                                                                                                                 |  |                     | -         
|Short-term Investment                                                                                                           |  |                     | 850,829   
|Accounts receivable, net of allowance for doubtful accounts of $1,997,310 and $1,817,050, respectively                          |  |                     | 27,134,237
|Notes receivable                                                                                                                |  |                     | 414,352   
|Other receivables                                                                                                               |  |                     | 2,624,022 
|Due from Related Parties                                                                                                        |  |                     | 22,278    
|Inventories                                                                                                                     |  |                     | 17,792,187
|Advance to suppliers                                                                                                            |  |                     | 7,826,679 
|Total current assets                                                                                                            |  |                     | 64,347,173
|Property, plant and equipment, net                                                                                              |  |                     | 6,280,412 
|Intangible assets, net                                                                                                          |  |                     | 938,221   
|Deferred tax assets                                                                                                             |  |                     | 299,596   
|Long-term Deposit                                                                                                               |  |                     | 4,229,827 
|Other long-term assets                                                                                                          |  |                     | 303,334   
|TOTAL ASSETS                                                                                                                    |  | $                   | 76,398,563
|LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                            |  |                     |           
|Current liabilities:                                                                                                            |  |                     |           
|Accounts payable                                                                                                                |  | $                   | 1,670,427 
|Accrued expenses and other current liabilities                                                                                  |  |                     | 5,934,733 
|Accrued payroll and welfare                                                                                                     |  |                     | 887,201   
|Advance from customers                                                                                                          |  |                     | 3,410,322 
|Related party payables                                                                                                          |  |                     | 3,694,469 
|Short-term bank borrowings                                                                                                      |  |                     | 19,270,530
|Income tax payable                                                                                                              |  |                     | 4,263,289 
|TOTAL LIABILITIES                                                                                                               |  | $                   | 39,130,971
|                                                                                                                                |  |                     |           
|Equity                                                                                                                          |  |                     |           
|Common stock, no par value, 50,000,000 shares authorized, 16,528,037 and 13,068,346 shares issued and outstanding, respectively |  |                     |           
|Additional paid-in capital                                                                                                      |  |                     | 17,998,933
|Statutory surplus reserve                                                                                                       |  |                     | 2,031,775 
|Retained earnings                                                                                                               |  |                     | 17,138,593
|Accumulated other comprehensive income (loss)                                                                                   |  |                     | (127,456  
|Total equity attributable to ZK International Group Co., Ltd.                                                                   |  |                     | 37,041,845
|Equity attributable to non-controlling interests                                                                                |  |                     | 225,747   
|Total equity                                                                                                                    |  |                     | 37,267,592
|TOTAL LIABILITIES AND EQUITY                                                                                                    |  | $                   | 76,398,563



The accompanying notes are an
integral part of these consolidated financial statements.



F-2







ZK INTERNATIONAL GROUP CO., LTD

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(IN U.S. DOLLARS)





|                                                                      |  | For the year ended September 30, |            
|--------------------------------------------------------------------- |  | -------------------------------- | -----------
|                                                                      |  | 2018                             |            
|Revenues                                                              |  | $                                | 54,884,381 
|Cost of sales                                                         |  |                                  | (36,593,792
|Gross profit                                                          |  |                                  | 18,290,589 
|                                                                      |  |                                  |            
|Operating expenses:                                                   |  |                                  |            
|Selling and marketing expenses                                        |  |                                  | 2,949,204  
|General and administrative expenses                                   |  |                                  | 4,071,116  
|Research and development costs                                        |  |                                  | 1,652,633  
|Total operating expenses                                              |  |                                  | 8,672,953  
|                                                                      |  |                                  |            
|Operating Income                                                      |  |                                  | 9,617,636  
|                                                                      |  |                                  |            
|Other income (expenses):                                              |  |                                  |            
|Interest expenses                                                     |  |                                  | (1,239,170 
|Interest income                                                       |  |                                  | 10,702     
|Other income, net                                                     |  |                                  | 112,099    
|Total other expenses, net                                             |  |                                  | (1,116,369 
|                                                                      |  |                                  |            
|Income before income taxes                                            |  |                                  | 8,501,267  
|                                                                      |  |                                  |            
|Income tax provision                                                  |  |                                  | (1,398,210 
|                                                                      |  |                                  |            
|Net income                                                            |  | $                                | 7,103,057  
|Net income attributable to non-controlling interests                  |  |                                  | (84,943    
|                                                                      |  |                                  |            
|Net income attributable to ZK International Group Co., Ltd.           |  |                                  | 7,018,114  
|                                                                      |  |                                  |            
|Net income                                                            |  |                                  | 7,103,057  
|                                                                      |  |                                  |            
|Other comprehensive income (loss):                                    |  |                                  |            
|Foreign currency translation adjustment                               |  |                                  | (818,468   
|                                                                      |  |                                  |            
|Total comprehensive income                                            |  | $                                | 6,284,589  
|Comprehensive loss (income) attributable to non-controlling interests |  |                                  | (75,719    
|                                                                      |  |                                  |            
|Comprehensive income attributable to ZK International Group Co., Ltd. |  | $                                | 6,208,870  
|                                                                      |  |                                  |            
|Basic and diluted earnings per share                                  |  |                                  |            
|Basic                                                                 |  | $                                | 0.52       
|Diluted                                                               |  |                                  | 0.51       
|Weighted average number of shares outstanding                         |  |                                  |            
|Basic                                                                 |  |                                  | 13,610,046 
|Diluted                                                               |  |                                  | 13,629,517 



The accompanying notes are an
integral part of these consolidated financial statements.



F-3







ZK INTERNATIONAL GROUP CO., LTD

CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITYFOR THE YEARS ENDED SEPTEMBER 30, 2018, 2017 AND 2016

(IN U.S. DOLLARS, EXCEPT SHARE DATA)





|                                                  |  | Shares |            |  | Additional
     paid-in  capital |  |            | Statutory
     surplus reserve |  |  | Retained

    earnings |  |  | Accumulated

    other
 comprehensive
 income (loss) |            |  | Non-

    controlling interests |  |          | Total
    equity | 
|------------------------------------------------- |  | ------ | ---------- |  | -------------------------------- |  | ---------- | ------------------------------ |  |  | ---------------------- |  |  | ---------------------------------------------------- | ---------- |  | ------------------------------- |  | -------- | ---------------- | 
|Balance at September 30, 2015                     |  |        | 9,000,000  |  |                                  |  | 2,800,777  |                                |  |  | -                      |  |  |                                                      | 1,028,441  |  |                                 |  | 811,698  |                  | 
|                                                  |  |        |            |  |                                  |  |            |                                |  |  |                        |  |  |                                                      |            |  |                                 |  |          |                  | 
|Capital contributions by non-controlling interest |  |        | -          |  |                                  |  | -          |                                |  |  | -                      |  |  |                                                      | -          |  |                                 |  | -        |                  | 
|Foreign currency translation loss                 |  |        | -          |  |                                  |  | -          |                                |  |  | -                      |  |  |                                                      | -          |  |                                 |  | (400,459 |                  | 
|Net income                                        |  |        | -          |  |                                  |  | -          |                                |  |  | 579,994                |  |  |                                                      | 4,669,543  |  |                                 |  | -        |                  | 
|                                                  |  |        |            |  |                                  |  |            |                                |  |  |                        |  |  |                                                      |            |  |                                 |  |          |                  | 
|Balance at September 30, 2016                     |  |        | 9,000,000  |  |                                  |  | 2,800,777  |                                |  |  | 579,994                |  |  |                                                      | 5,697,984  |  |                                 |  | 411,239  |                  | 
|                                                  |  |        |            |  |                                  |  |            |                                |  |  |                        |  |  |                                                      |            |  |                                 |  |          |                  | 
|Shares issued for cast, net of offering costs     |  |        | 4,068,346  |  |                                  |  | 5,582,099  |                                |  |  |                        |  |  |                                                      |            |  |                                 |  |          |                  | 
|Foreign currency translation gain                 |  |        |            |  |                                  |  |            |                                |  |  |                        |  |  |                                                      |            |  |                                 |  | 270,549  |                  | 
|Net income                                        |  |        |            |  |                                  |  |            |                                |  |  | 593,369                |  |  |                                                      | 5,280,907  |  |                                 |  |          |                  | 
|                                                  |  |        |            |  |                                  |  |            |                                |  |  |                        |  |  |                                                      |            |  |                                 |  |          |                  | 
|Balance at September 30, 2017                     |  |        | 13,068,346 |  |                                  |  | 8,382,876  |                                |  |  | 1,173,363              |  |  |                                                      | 10,978,891 |  |                                 |  | 681,788  |                  | 
|                                                  |  |        |            |  |                                  |  |            |                                |  |  |                        |  |  |                                                      |            |  |                                 |  |          |                  | 
|Shares issued for cast, net of offering costs     |  |        | 3,459,691  |  |                                  |  | 9,616,057  |                                |  |  |                        |  |  |                                                      |            |  |                                 |  |          |                  | 
|Foreign currency translation loss                 |  |        |            |  |                                  |  |            |                                |  |  |                        |  |  |                                                      |            |  |                                 |  | (809,244 | )                | 
|Net income                                        |  |        |            |  |                                  |  |            |                                |  |  | 858,412                |  |  |                                                      | 6,156,702  |  |                                 |  |          |                  | 
|Balance at September 30, 2018                     |  |        | 16,528,037 |  |                                  |  | 17,998,933 |                                |  |  | 2,031,775              |  |  |                                                      | 17,138,593 |  |                                 |  | (127,456 | )                | 



The accompanying notes are an integral part
of these consolidated financial statements.



F-4







ZK INTERNATIONAL GROUP CO., LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN U.S. DOLLARS)





|                                                                              |  | For the year ended September 30, |             
|----------------------------------------------------------------------------- |  | -------------------------------- | ------------
|                                                                              |  | 2018                             |             
|Cash Flows from Operating Activities:                                         |  |                                  |             
|Net income                                                                    |  |                                  | $ 7,103,05 7
|Adjustments to reconcile net income to net cash used in operating activities: |  |                                  |             
|Depreciation expense                                                          |  |                                  | 395,604     
|Amortization expense                                                          |  |                                  | 12,137      
|Bad debt expense                                                              |  |                                  | 286,606     
|Deferred tax benefits                                                         |  |                                  | (37,311     
|Changes in operating assets and liabilities:                                  |  |                                  |             
|Accounts receivable                                                           |  |                                  | (7,151,260  
|Other receivables                                                             |  |                                  | (1,215,167  
|Notes receivable                                                              |  |                                  | (216,478    
|Inventories                                                                   |  |                                  | (9,065,712  
|Advance to suppliers                                                          |  |                                  | 1,580,700   
|Accounts payable                                                              |  |                                  | 861,192     
|Accrued expenses and other current liabilities                                |  |                                  | 1,698,015   
|Accrued payroll and welfare                                                   |  |                                  | 600,619     
|Advance from customers                                                        |  |                                  | 1,563,693   
|Income tax payable                                                            |  |                                  | 1,349,310   
|Net cash provided (used in) operating activities                              |  |                                  | (2,234,995  
|                                                                              |  |                                  |             
|Cash Flows from Investing Activities:                                         |  |                                  |             
|Purchases of property, plant and equipment                                    |  |                                  | (467,138    
|Disposal of Intangible Asset                                                  |  |                                  | 257,863     
|Purchases of intangible assets                                                |  |                                  | (501,000    
|Net cash used in investing activities                                         |  |                                  | (710,275    
|                                                                              |  |                                  |             
|Cash Flows from Financing activities:                                         |  |                                  |             
|Net proceeds from issuance of shares deduct related costs                     |  |                                  | (380,000    
|Short-term Investment                                                         |  |                                  | (893,945    
|Net proceeds released from (placed into) long-term deposit                    |  |                                  | (4,444,170  
|Net proceeds released from (placed into) restricted cash                      |  |                                  | 539,381     
|Proceeds from short-term bank  borrowings                                     |  |                                  | 24,056,279  
|Repayments of short-term bank borrowings                                      |  |                                  | (25,529,488 
|Net proceeds  from related parties                                            |  |                                  | 5,665,914   
|Net cash provided by financing activities                                     |  |                                  | (986,029    
|                                                                              |  |                                  |             
|Effect of exchange rate changes on cash                                       |  |                                  | 335,413     
|                                                                              |  |                                  |             
|Net change in cash and cash equivalents                                       |  |                                  | (3,595,886  
|Cash and cash equivalents at the beginning of year                            |  |                                  | 11,278,475  
|Cash and cash equivalents at the end of year                                  |  | $                                | 7,682,589   
|                                                                              |  |                                  |             
|Supplemental disclosures of cash flows information:                           |  |                                  |             
|Non-cash financing activities                                                 |  | $                                | 9,842,676   
|Cash paid for income taxes                                                    |  | $                                | 38,218      
|Cash paid for interest expenses                                               |  | $                                | 1,218,757   



The accompanying notes are an
integral part of these consolidated financial statements.



F-5







NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS



ZK International Group Co., Ltd. (“ZK
International” or “the Company”)



ZK International was incorporated on May
13, 2015 in the British Virgin Islands (“BVI”). ZK International is a holding company with no operations. The Company,
through its subsidiaries, is a leading company that specializes in manufacturing and sales of stainless steel band, copper strip,
welded stainless steel pipes and fittings, pipe fittings, valve, light industry machinery and equipment and other stainless steel
products of its trademark “Zhengkang” in People’s Republic of China (“PRC”)



The Company is authorized to issue 50,000,000
ordinary shares, with no par value. 16,528,037 shares were issued and outstanding as of September 30, 2018. The ownership interests
described below are based on the shareholders’ portion of the authorized ordinary shares. Upon its founding on May 13, 2015,
ZK International was 100% held by CHENG Kai Chun, a nominee shareholder, with no voting interest, and five mainland Chinese beneficial
owners, HUANG Jian Cong, WANG Ming Jie, WANG Guo Lin, WANG Jian Di and WANG Yang Ming, (“the five mainland Chinese beneficial
owners”) who control 100% of ZK International’s voting interest. On October 12, 2015, 100% of ZK International’s
equity interest was transferred to the five mainland Chinese beneficial owners, with HUANG Jian Cong holding 45%, WANG Ming Jie
holding 20%, WANG Guo Lin holding 20%, WANG Jian Di holding 10% and WANG Yang Ming holding 5%. The five mainland Chinese beneficial
owners entered an agreement on May 13, 2015 to vote their shares in concert in ZK International, covering all the periods presented
afterwards.



As of September 30, 2018, 65.92% of ZK
International’s equity interest was hold by the five mainland Chinese beneficial owners, with HUANG Jian Cong holding 43.05%,
WANG Ming Jie holding 10.89%, WANG Guo Lin holding 10.89%, WANG Jian Di holding 1.09% and WANG Yang Ming holding nil.



ZK Pipe Industry Co., Ltd. (“ZK
Pipe”)



ZK Pipe was incorporated on May 28, 2015
in Hong Kong. The registered capital is HKD 1,000,000 which was initially 40% held by ZK International and 60% held by CHENG Kai
Chun, a nominee shareholder with no voting interest in ZK Pipe. On August 5, 2015, CHENG Kai Chun transferred all of his equity
interest in ZK Pipe to ZK International. After the transfer, ZK International controls 100% of ZK Pipe’s voting interest
and ZK Pipe became a wholly owned subsidiary of ZK International. The paid-in capital was zero as of September 30, 2018.



The registered principal activities of
ZK Pipe are technical research of metal pipe and fittings, metal take-up valve plumbing and water purifying plant, and imports
and exports of goods. ZK Pipe had not commenced operations as of September 30, 2018.



Wenzhou Weijia Pipeline Development
Co., Ltd. (“Wenzhou Weijia”)



Wenzhou Weijia was incorporated on June
17, 2015 in Wenzhou and is a wholly owned subsidiary of ZK Pipe. Wenzhou Weijia is a wholly-foreign owned enterprise organized
the laws of the People’s Republic of China. The registered capital is USD 20,000,000 and the paid-in capital was zero as
of September 30, 2018.



The registered principal activities of
Wenzhou Weijia are technical research, technical service and sales of metal pipe and fittings and light industry machinery and
equipment, and imports and exports of goods and technology. Wenzhou Weijia had not commenced operations as of September 30, 2018.



Zhejiang Zhengkang Industrial Co., Ltd.
(“Zhejiang Zhengkang”)



Zhejiang Zhengkang was incorporated on
December 4, 2001 under the laws of the People’s Republic of China. The registered and paid in capital is RMB 20,000,000.
Since May 24, 2006, Zhejiang Zhengkang was owned by the five Mainland Chinese beneficial owners, with HUANG Jian Cong holding 45%,
WANG Ming Jie holding 20%, WANG Guo Lin holding 20%, WANG Jian Di holding 10% and WANG Yang Ming holding 5%. Also, the five mainland
Chinese beneficial owners entered an agreement on January 1, 2013 to vote their shares in concert in Zhejiang Zhengkang. The agreement
has been in effect for all financial periods presented. On September 29, 2015, Wenzhou Weijia acquired 99% equity percentage of
Zhejiang Zhengkang from the five mainland Chinese beneficial owners. After that, Zhejiang Zhengkang’s equity interest is
99% held by Wenzhou Weijia and 1% held by HUANG Jian Cong.



F-6







NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS -
Continued



In July 2016, Zhejiang Zhengkang increased
its registered and paid in capital to RMB 30,000,000, with Wenzhou Weijia invested RMB 9,900,000 and HUANG Jian Cong invested RMB
100,000. On September 28, 2017, Zhejiang Zhengkang increased its registered capital to RMB 100,000,000, with no additional investment
into the paid-in capital.



The principal activities of Zhejiang Zhengkang
are manufacturing and sales of stainless steel band, copper strip, welded stainless steel pipes and fittings, pipe fittings, valve,
light industry machinery and equipment and other stainless steel products, and imports and exports of goods and technology.



Wenzhou Zhengfeng Industry and Trade
Co., Ltd. (“Wenzhou Zhengfeng”)



Wenzhou Zhengfang was incorporated on December
24, 1999 under the laws of the People’s Republic of China. The registered and paid in capital is RMB 2,880,000. Since January
1, 2013, Wenzhou Zhengfeng’s voting interest was controlled by the five Mainland Chinese beneficial owners through agreement
with two nominee shareholders. Also, the five mainland Chinese beneficial owners entered into an agreement on January 1, 2013 to
vote their shares in concert in Wenzhou Zhengfeng. The agreement has been in effect since then. On June 8, 2015, 100% of Wenzhou
Zhengfeng’s equity interest was transferred from nominee shareholders to the five mainland Chinese beneficial owners, with
WANG Ming Jie holding 38.89%, WANG Guo Lin holding 27.78%, HUANG Jian Cong holding 22.57%, WANG Yang Ming holding 5.55% and WANG
Jian Di holding 5.21%, respectively. On September 22, 2015, Zhejiang Zhengkang acquired 100% equity of Wenzhou Zhengfeng from the
five mainland Chinese beneficial owners. After that, Wenzhou Zhengfeng is a wholly owned subsidiary of Zhejiang Zhengkang.



The principal activities of Wenzhou Zhengfeng
are trading of steel strip, which are mainly purchased from Zhejiang Zhengkang.



Wenzhou Zhenglong Ecommerce Co. Ltd.
("Zhenglong Ecommerce”)



Zhenglong Ecommerce was incorporated on March
15, 2018 under the laws of the People’s Republic of China. Zhenglong Ecommerce’ registered capital is RMB 5,000,000,
and the paid-in capital was zero as of September 30, 2018. The registered principal activities of Zhenglong Ecommerce include sales
(and online sale) of steel pipes, steel strips, pipe connections and fittings, machinery, constructive material, chemical, solar
cell, electronic appliance, toys, leather goods, consumer goods, clothing; development and sale of software; IT consulting and
service; design and maintenance of computer system; importing and exporting of goods and technology. Zhejiang Zhengkang owns 90%
of Zhenglong Ecommerce and a third-party individual owns 10%.



ZK International (ZK Uganda)



ZK Uganda was incorporated on March 23, 2018
under the laws of the Republic of Uganda. Its registered capital is 20 Million Uganda Shillings, and the paid-in capital was zero
as of September 30, 2018. ZK Uganda is 80% owned by ZK International and 20% owned by a third-party individual. ZK Uganda is currently
not engaging in any business but plans to seek such opportunities that would complement and diversify the current business operations
of the Company. The paid-in capital was zero as of September 30, 2018.



XSigma Corporation (“XSigma”)



XSigma Corporation (“XSigma”) was incorporated on
January 18, 2018 under the laws of the British Virgin Islands. Its registered capital is USD 50,000, and the paid-in capital was
zero as of September 30, 2018. XSigma is a wholly-owned subsidiary of ZK International. It is currently not engaging in any business
but plans to seek such opportunities that would complement and diversify the current business operations of the Company.



F-7







NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES



Presentation and Principles of Consolidation



The accompanying consolidated financial
statements and related notes have been prepared in accordance with generally accepted accounting principles in the United Stated
of America. All inter-company transactions and balances have been eliminated upon consolidation.



|Entity Name              |  | Registered
        Location |  | Background                                                                                                                                                                                                              |  | Ownership as of the
        issuance date of the report                                                               
|------------------------ |  | --------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------
|ZK
        International |  | BVI                         |  | • Incorporated on May 13, 2015
        • Registered capital of USD 50,000, not paid
        • A holding company with no operation activities
        itself for the years then ended                                    |  | 43.05% by HUANG Jian Cong
        10.89% by WANG Ming Jie
        10.89% by WANG Guo Lin
        1.09% by WANG Jian Di
|                         |  |                             |  |                                                                                                                                                                                                                         |  |                                                                                                                       
|ZK Pipe                  |  | Hong Kong                   |  | • Incorporated on May 28, 2015
        • Registered capital of HKD 1,000,000, not paid
        • Have not commenced operations                                                                                          |  | 100% by ZK International                                                                                              
|                         |  |                             |  |                                                                                                                                                                                                                         |  |                                                                                                                       
|Wenzhou Weijia           |  | Wenzhou                     |  | • Incorporated on June 17, 2015
        • Registered capital of USD 20,000,000, not paid
        • Have not commenced operations                                                                                        |  | 100% by ZK Pipe                                                                                                       
|                         |  |                             |  |                                                                                                                                                                                                                         |  |                                                                                                                       
|Zhejiang Zhengkang       |  | Wenzhou                     |  | • Incorporated on December 4, 2001
        • Registered capital of RMB100,000,000, RMB30,000,000
        paid
        • Principally operated in manufacturing and sales
        of steel strip, steel pipe and fittings |  | 99% by Wenzhou Weijia
        1% by HUANG Jian Cong                                                                   
|                         |  |                             |  |                                                                                                                                                                                                                         |  |                                                                                                                       
|Wenzhou Zhengfeng        |  | Wenzhou                     |  | • Incorporated on December 24, 1999
        • Registered capital of RMB 2,880,000, fully
        paid
        • Principally operated in trading of steel strip,
        mainly purchased from Zhejiang Zhengkang        |  | 100% by Zhejiang Zhengkang                                                                                            
|                         |  |                             |  |                                                                                                                                                                                                                         |  |                                                                                                                       
|Zhenglong Ecommerce      |  | Wenzhou                     |  | • Incorporated on March 15, 2018
        • Registered capital of RMB5,000,000, RMB paid,
        not paid.
        • Principally operated in online sales and promoting
        of steel strip, steel pipe and fittings |  | 90% of Zhejiang Zhengkang                                                                                             
|                         |  |                             |  |                                                                                                                                                                                                                         |  |                                                                                                                       
|ZK Uganda                |  | Uganda                      |  | • Incorporated on March 23, 2018
        • Registered capital of 20 Million Uganda Shillings,
        not paid.
        • Have not commenced operations                                                                 |  | 80% by ZK International                                                                                               
|                         |  |                             |  |                                                                                                                                                                                                                         |  |                                                                                                                       
|XSigma                   |  | BVI                         |  | • Incorporated on January 18, 2018
        • Registered capital of USD 50,000, not paid
        • Have not commenced operations                                                                                         |  | 100% by ZK International                                                                                              



F-8







NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES - Continued



Use of Estimates



The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles in the United States of America (US GAAP) requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
periods. Such estimates include, but are not limited to, allowances of accounts receivable, inventory valuation, useful life of
property, plant and equipment and income taxes related to realization of deferred tax assets and uncertain tax position. Actual
results could differ from those estimates.



Foreign Currency Translation



The financial records of the Company’s
PRC subsidiaries are maintained in their local currencies which are RMB and ZK Pipe in Hong Kong also use RMB as functional currency.
Monetary assets and liabilities denominated in currencies other than their local currencies are translated into local currencies
at the rates of exchange in effect at the balance sheet dates. Transactions denominated in currencies other than their local currencies
during the year are converted into local currencies at the applicable rates of exchange prevailing when the transactions occur.
Transaction gains and losses are recorded in other income/ (expense), net in the statements of operations and comprehensive income.



ZK International maintained its financial
record using the United States dollar (“US dollar”) as the functional currency, while the subsidiaries of the Company
in Hong Kong and mainland China maintained their financial records using RMB as the functional currencies. The reporting currency
of the Company is US dollar. When translating local financial reports of the Company’s subsidiaries into US dollar, assets
and liabilities are translated at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange
rates and revenue, expenses, gains and losses are translated at the average rate for the period. Translation adjustments are reported
as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the statements of
operations and comprehensive income.



The relevant exchange rates are listed
below:



|                                      |  | For the Fiscal Years Ended September 30 |       
|------------------------------------- |  | --------------------------------------- | ------
|                                      |  | 2018                                    |       
|                                      |  |                                         |       
|Period Ended RMB: USD exchange rate   |  |                                         | 6.8680
|Period Average RMB: USD exchange rate |  |                                         | 6.5368



Cash and Cash Equivalents



Cash and cash equivalents primarily consist
of cash and deposits with financial institutions which are unrestricted as to withdrawal and use. Cash equivalents consist of highly
liquid investments that are readily convertible to cash generally with original maturities of three months or less when purchased.



Restricted Cash



Cash that is restricted as to withdrawal
or usage is reported as restricted cash in the consolidated balance sheets and is not included in the beginning or ending balance
of cash and cash equivalents in the consolidated statements of cash flows.



Restricted cash of $0 and $529,837 as of
September 30, 2018 and 2017, respectively, consisted of cash and cash equivalents used as collateral to secure note payable and
used as guarantee deposit to secure bank acceptance, and held as compensating balances against bank borrowing. A note payable is
a draft issued by a bank for payments in future, which defers the payment until the due date for redeeming the note. According
to the notes payable agreement with the bank, certain percentage of the amount is required to be deposited at the bank as security
for the notes payable. Guarantee deposit is the deposit in bank to secure the bank acceptance issued by the bank. As of September
30, 2018 and 2017, no cash is restricted to assure future credit availability.



Short-term Investment



The Company’s short-term Investment consists
of short-term held-to-maturity investments, mainly time deposits, in commercial banks with original maturities of more than 90
day but less than one year. As of September 30, 2018, the Company has short-term investment of $850,829, while it has no short-term
investment as of September 30, 2017.



F-9







Long-term Deposit



Long-term
deposit consists of cash deposit of RMB 29,050,449 Zhejiang Zhengkang pledged to two entities, which the Company is seeking to
acquire 51% of ownership of each ("Target Company”). The deposits are used as acquisition deposits required by the
two Target Companies in order to execute their respective acquisition memorandum which details the acquisition and valuation methods
but is not legally binding. As of September 30, 2018 the total deposits pledged were $4,229,827, with $3,348,930 to one Target
Company and $880,897 to the other. In the case that any acquisition is approved by both parties, the deposits will be used as
initial payments and offset the total cash considerations of the deal. If any of the acquisition failed to be approved, the Target
Companies are obligated to return the deposit to Zhejiang Zhengkang. As of September 30, 2018, no acquisitions were either approved
or disapproved as the two acquisitions are still in the process of undergoing legal and financial due diligence.



Accounts Receivable, net



Accounts receivable arise from the product
sales in the normal course of business. The Company usually determines the adequacy of reserves for doubtful accounts based on
individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when
there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s
best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. Based on
management of customers’ credit and ongoing relationship, management makes conclusions whether any balances outstanding at
the end of the period will be deemed uncollectible on an individual basis and on aging analysis basis. The provision is recorded
against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive
income. Uncollectible receivable are written-off against the allowance for doubtful accounts after management has determined that
the likelihood of collection is not probable.



The allowance for doubtful accounts recognized
as of September 30, 2018 and 2017 was $1,997,310 and $1,817,050, respectively.



Inventories



Inventories are stated at the lower of cost
or net realizable value. Cost is principally determined using the weighted-average method. The Company records adjustments to inventory
for excess quantities, obsolescence or impairment when the appropriate to reflect inventory at net realizable value. These adjustments
are based upon a combination of factors including current sales volume, market conditions, lower of cost or market analysis and
expected realizable value of the inventory.



There were no write-downs recognized of
inventories as of September 30, 2018 and 2017.



Advance to Suppliers and Advance from
Customers



Advance to suppliers refer to advances
for purchase of materials or other service agreements, which are applied against trade accounts payable when the materials or
services are received. Advance from customers refer to advances received from customers regarding product sales, which are applied
against trade accounts receivable when products are sold.



The Company reviews a supplier's credit history
and background information before advancing a payment. If the financial condition of its suppliers were to deteriorate, resulting
in an impairment of their ability to deliver goods or provide services, the Company would write off such amount in the period when
it is considered impaired . There was no such expense recognized during the years ended September 30, 2018 and 2017.



Fair Value of Financial Instruments



For the Company’s financial instruments,
including cash and cash equivalents, restricted cash, accounts receivable, accounts payable, short-term investment, notes receivable,
bank loans, and income tax payable  and other receivables, the carrying amounts approximate their fair values due to their
short maturities.



ASC Topic 820, Fair Value Measurements and
Disclosures, requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, Financial Instruments,
defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances
disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables
and current liabilities that qualify as financial instruments and are a reasonable estimate of their fair values because of the
short period of time between the origination of such instruments and their expected realization and their current market rate
of interest. The three levels of valuation hierarchy are defined as follows:



| | • | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
| | - | --------------------------------------------------------------------------------------------------------------------



F-10







| | • | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted
prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly
or indirectly, for substantially the full term of the financial instrument.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Level 3 inputs to the valuation methodology use one or more unobservable inputs which are significant to the fair value measurement.
| | - | ------------------------------------------------------------------------------------------------------------------------------------



The Company analyzes all financial instruments
with features of both liabilities and equity under ASC Topic 480, Distinguishing Liabilities from Equity, and ASC Topic 815, Derivatives
and Hedging. As of September 30, 2018 and 2017, the Company did not identify any assets and liabilities required to be presented
on the balance sheet at fair value other than cash and cash equivalents.



Property and Equipment, net



Property, plant, and equipment are recorded at cost less accumulated
depreciation. Depreciation commences upon placing the asset in usage and is recognized on a straight-line basis over the estimated
useful lives of the assets, as follows:



|                                   |  | Useful lives
|---------------------------------- |  | ------------
|Buildings                          |  | 40 years    
|Machinery                          |  | 10 years    
|Furniture, fixtures, and equipment |  | 10 years    
|Motor vehicles                     |  | 10 years    



Upon retirement or disposition, the asset cost and related accumulated
depreciation are removed with any gain or loss recognized in the consolidated statements of operations and comprehensive income.
Repair and maintenance costs that do not extend the economic life of the underlying assets are expensed as incurred.



Costs incurred in constructing new facilities, including progress
payments and other costs related to construction, are capitalized, and transferred to property, plant and equipment on completion,
at which time depreciation commences.



Intangible Assets



Intangible assets consist primarily of
land use rights and software. Under the PRC law, all land in the PRC is owned by the government and cannot be sold to an individual
or company. The government grants individuals and companies the right to use parcels of land for specified periods of time. These
land use rights are sometimes referred to informally as “ownership.” Land use rights are stated at cost less accumulated
amortization. Intangible assets are amortized using the straight-line method with the following estimated useful lives:



|                |  | Useful lives
|--------------- |  | ------------
|Land use rights |  | 46 years    
|Software        |  | 5 years     



Impairment of Long-lived Assets



The Company management review the carrying
values of long-lived assets whenever events and circumstances, such as a significant decline in the asset’s market value,
obsolescence or physical damage affecting the asset, significant adverse changes in the assets use, deterioration in the expected
level of the assets performance, cash flows for maintaining the asset are higher than forecast, indicate that the net book value
of an asset may not be recovered through expected future cash flows from its use and eventual disposition. If the estimated cash
flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed
to be impaired and written down to its fair value.



There was no impairment charge recognized for
long-lived assets as of September 30, 2018, 2017 and 2016.



Value-added Tax



Value-added taxes (“VAT”) collected
from customers relating to product sales and remitted to governmental authorities are presented on a net basis. VAT collected from
customers is excluded from revenue. The Company is subject to a VAT rate of 17% before May 01, 2018 and a new VAT rate of 16% effective
on May 01, 2018.



F-11







Revenue Recognition



The Company recognizes revenue in accordance
with ASC 605, Revenue Recognition, regarding revenue recognition which specifies that revenue is realized or realizable and earned.
Sales revenue is recognized when:



| | 1) | Persuasive evidence of an arrangement exists;
| | -- | ---------------------------------------------

| | 2) | Delivery has occurred or services have been rendered (the risks, rewards and ownership of the products are transferred to customers);
and
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------

| | 3) | The seller’s price to the buyer is fixed or determinable; and
| | -- | -------------------------------------------------------------

| | 4) | Collectability is reasonably assured.
| | -- | -------------------------------------



Government Grant



Government grants are recognized when received
and all the conditions for their receipt have been met.



Government grants as the compensation for expenses
or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related cost
are recognized in profit or loss in the period in which they become receivable. During the period ended as of September 30, 2018,
2017 and 2016, $59,238, $87,250 and $138,219, respectively, government grants were recognized as other income for financial support
to the Company under local government’s innovation incentive programs.



Research and Development Costs



Research and development costs are expensed
as incurred. Research and development reimbursements and grants received from government are recorded by the Company as a reduction
of research and development costs.



Income Taxes



The Company accounts for income taxes using
the asset and liability method whereby it calculates deferred tax assets or liabilities for temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits
by applying enacted tax rates applicable to the years in which those temporary differences are expected to be reversed or settled.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws
of the relevant taxing authorities. The components of the deferred tax assets and liabilities are individually classified as non-current
amounts.



We record uncertain tax positions in accordance
with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions
will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not
recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate
settlement with the related tax authority. There were no tax benefits recorded as of September 30, 2018 and 2017.



Advertising costs



Advertising costs are expensed as incurred in accordance with ASC
720-35 Other Expense-Advertising costs. Advertising costs were $265,538, $69,535 and $21,715 for years ended September 30, 2018,
2017 and 2016, respectively.



Earnings Per Share



Earnings (loss) per share is calculated in accordance with ASC
260 Earnings per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to shareholders
of the Company by the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed
in accordance with the treasury stock method and based on the weighted average number of common shares and dilutive common share
equivalents. Dilutive common share equivalents are excluded from the computation of diluted earnings per share if their effects
would be anti-dilutive.



F-12







Concentration of Risks



Exchange Rate Risks



The Company operates in China, which may give
rise to significant foreign currency risks mainly from fluctuations and the degree of volatility of foreign exchange rates between
the USD and the RMB. As at September 30, 2018, cash and cash equivalents of $7,557,901 (RMB 51,907,665) is denominated in RMB and
$124,688 denominated in USD (a minor portion of which is denominated in HK Dollar and Euro) are held in PRC (September 30, 2017
- $7,107,387 (RMB 47,296,107) denominated in RMB).



Currency Convertibility Risks



Substantially all of the Company’s operating activities
are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either
through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted
by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory
institutions requires submitting a payment application form together with other information such as suppliers’ invoices,
shipping documents and signed contracts.



Concentration of Credit Risks



Financial instruments that potentially subject
the Company to concentration of credit risks consist primarily of cash and cash equivalents, restricted cash, short-term investment,
notes receivable, accounts receivable and other receivables, the balances of which are stated on the consolidated balance sheets
which represent the Company’s maximum exposure. The Company places its cash and cash equivalents, restricted cash, and short-term
investment in good credit quality financial institutions in Hong Kong and China. Concentration of credit risks with respect to
accounts receivables is linked to the concentration of revenue. To manage credit risk, the Company performs ongoing credit evaluations
of customers’ financial condition.



Interest Rate Risks



The Company is subject to interest rate risk. The Company has
bank interest bearing loans charged at variable interest rates. And although some bank interest bearing loans are charged at fixed
interest rates within the reporting period, the Company is still subject to the risk of adverse changes in the interest rates charged
by the banks when these loans are refinanced.



Subsequent Events



The Company’s management reviewed all material events
through the date of the consolidated financial statements were issued for subsequent event disclosure consideration.



Recent Accounting Pronouncements



In May 2014, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which
supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue
recognition guidance throughout the Industry Topics of the Codification. The core principle of ASU 2014-09 is to recognize revenues
when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be
received for those goods or services.



In August 2015, the FASB issued ASU 2015-14. Under ASU No. 2015-14,
public entities (1) must apply ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim
reporting periods within that reporting period.(2) Earlier application is permitted only as of annual reporting periods beginning
after December 15, 2016, including interim reporting periods within that reporting period. For example, a calendar year-end company
may adopt ASU No. 2014-09 for annual and interim periods beginning on January 1, 2017 or 2018. All other entities, including EGCs
that have appropriately elected to defer compliance with new or revised financial accounting standards until a company that is
not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act of 2002) is required to apply such standards, must apply
ASU No. 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting
periods beginning after December 15, 2019.



The Company, as an EGC, has not adopted ASC 606 as of September
30, 2018. The Company has conducted high-level evaluation on the impact of this new standard and believes the Company’s current
revenue recognition policies are generally consistent with the new revenue recognition standards set forth in ASU 2014-09.



In July 2015, the FASB issued ASU 2015-11, “Simplifying
the Measurement of Inventory”, which requires entities to measure most inventories at the lower of cost and net realizable
value, thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The
update is effective for fiscal years beginning after December 15, 2016, and interim periods therein. Early application is permitted.
Management evaluates the impact of this new standard and believes there is no impact on the Company’s consolidated financial
statements.



F-13







In November 2015, the FASB issued Accounting
Standards Update 2015-17, "Balance Sheet Classification of Deferred Taxes," which is intended to simplify the balance
sheet presentation of deferred income taxes. Current accounting principles require an entity to separate deferred income tax liabilities
and assets into current and noncurrent amounts in its balance sheet. The amendments require that deferred tax liabilities and assets
be classified as noncurrent in its balance sheet. The amendments are effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2016. Companies may apply the new provisions either retrospectively or on a prospective
basis, and early adoption is permitted. We have adopted the provisions using retrospective method for transition.



In January 2016, the FASB issued ASU No.
2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial
Liabilities”. The new guidance is intended to improve the recognition and measurement of financial instruments. The new
guidance makes targeted improvements to existing U.S. GAAP by: (1) Requiring equity investments (except those accounted for under
the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes
in fair value recognized in net income. Requiring public business entities to use the exit price notion when measuring the fair
value of financial instruments for disclosure purposes; (2) Requiring separate presentation of financial assets and financial
liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet
or the accompanying notes to the financial statements; (3) Eliminating the requirement for public business entities to disclose
the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments
measured at amortized cost on the balance sheet; and. (4) Requiring a reporting organization to present separately in other comprehensive
income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit
risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in
accordance with the fair value option for financial instruments. The new guidance is effective for public companies for fiscal
years beginning after December 15, 2017, including interim periods within those fiscal years. The Company evaluates the impact
of this new standard and believes there is no material impact on its consolidated financial statements.



In February 2016, the FASB issued ASU 2016-02,"Leases"
to provide a new comprehensive model for lease accounting. Under this guidance, lessees and lessors should apply a "right-of-use"
model in accounting for all leases (including subleases) and eliminate the concept of operating leases and off-balance sheet leases.
This guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018.
Early adoption is permitted. There is no impact on the Company but there could be if the Company enters into leases in the future.





In April 2016, FASB issued ASU No. 2016-10, Revenue from Contracts
with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects
of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments
do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments
are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual
reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a
calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December
15, 2016, including interim reporting periods within that reporting period. The Company, as an EGC, has not adopted ASC 606 as
of September 30, 2018. The Company has conducted high-level evaluation on the impact of this new standard and believes the Company’s
current revenue recognition policies are generally consistent with the new revenue recognition standards set forth in this ASU.







F-14









In May 2016, FASB issued ASU No. 2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedient. The standard (1) allows an
entity to recognize revenue in the amount of consideration received when the entity has transferred control of the goods or services,
the entity has stopped transferring goods or services (if applicable) and has no obligation under the contract to transfer additional
goods or services, and the consideration received from the customer is nonrefundable; (2) Permits an entity, as an accounting policy
election, to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price. (3) Specifies
that the measurement date for noncash consideration is contract inception and clarifies that the variable consideration guidance
applies only to variability resulting from reasons other than the form of the consideration (4) clarifies that a completed contract
for the purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy U.S.
generally accepted accounting principles before the date of initial application. (5)Permits an entity to apply the modified retrospective
transition method either to all contracts or only to contracts that are not completed contracts; (6)Clarifies that an entity that
retrospectively applies the guidance in the standard to each prior reporting period is not required to disclose the effect of the
accounting change for the periods of adoption. But an entity still is required to disclose the effect of the changes on any prior
periods retrospectively adjusted. Public business entities, certain not-for-profit entities and certain employee benefit plans
should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017. All other entities should
apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018. Earlier application is permitted
only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting
period. The Company, as an EGC, has not adopted ASC 606 as of September 30, 2018. The Company has conducted high-level evaluation
on the impact of this new standard and believes the Company’s current revenue recognition policies are generally consistent
with the new revenue recognition standards set forth in this ASU.



In August 2016, the FASB issued ASU No.
2016 15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on
the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically
addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company
in fiscal year 2018, but early adoption is permitted. The Company evaluates the impact of this new standard and believes there
is no impact on its consolidated financial statements.



In October 2016, the FASB issued ASU No.
2016-17, Consolidation (Topic 810): Interest Held through Related Parties That Are under Common Control, to provide guidance on
the evaluation of whether a reporting entity is the primary beneficiary of a VIE by amending how a reporting entity, that is a
single decision maker of a VIE, treats indirect interests in that entity held through related parties that are under common control.
The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim
periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December
15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption
in an interim period. The Company evaluates the impact of this new standard and believes there is no impact on its consolidated
financial statements.



In November 2016, the FASB issued ASU No.
2016-18, "Statement of Cash Flows: Restricted Cash". The amendments address diversity in practice that exists in the
classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public
companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company
evaluates the impact of this new standard and believes there is no material impact on its consolidated financial statements.



In January 2017, the FASB issued ASU No.
2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business". The amendments in this ASU clarify
the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should
be accounted for as acquisitions (or disposals) of assets or businesses. These amendments take effect for public businesses for
fiscal years beginning after December 15, 2017 and interim periods within those periods, and all other entities should apply these
amendments for fiscal years beginning after December 15, 2018, and interim periods within annual periods beginning after December
15, 2019. The Company does not expect this update will have a material impact on the Company's consolidated financial position,
results of operations and cash flows.



In February 2017, the FASB issued ASU No.
2017-05 (“ASU 2017-05”) to provide guidance for recognizing gains and losses from the transfer of nonfinancial assets
and in-substance nonfinancial assets in contracts with non-customers, unless other specific guidance applies. The standard requires
a company to derecognize nonfinancial assets once it transfers control of a distinct nonfinancial asset or distinct in substance
nonfinancial asset. Additionally, when a company transfers its controlling interest in a nonfinancial asset, but retains a noncontrolling
ownership interest, the company is required to measure any noncontrolling interest it receives or retains at fair value. The guidance
requires companies to recognize a full gain or loss on the transaction. ASU 2017-05 is effective for annual periods beginning after
December 15, 2017, including interim periods within that reporting period. The effective date of this guidance coincides with revenue
recognition guidance. The Company does not expect this update will have a material impact on the Company's consolidated financial
position, results of operations and cash flows.



In May 2017, the Financial Accounting Standards
Board (the “FASB”) issued ASU No. 2017-09 (“ASU 2017-09”) to provide guidance to clarify when to account
for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification
accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability)
changes as a result of the changes in terms or conditions. ASU 2017-09 is effective for all entities for annual periods, and interim
periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted and application is prospective.
The Company does not expect this update will have a material impact on the Company's consolidated financial position, results of
operations and cash flows.



F-15







In September 2017, the FASB has issued
ASU No. 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840),
and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission
of Prior SEC Staff Announcements and Observer Comments.” The amendments in ASU No. 2017-13 amends the early adoption date
option for certain companies related to the adoption of ASU No. 2014-09 and ASU No. 2016-02. Entities may still adopt using the
public company adoption guidance in the related ASUs, as amended. The effective date is the same as the effective date and transition
requirements for the amendments for ASU 2014-09 and ASU 2016-02. The Company evaluates the impact of this new standard and believes
there is no impact on its consolidated financial statements.



Other accounting standards that have been
issued by the FASB or other standards-setting bodies are not expected to have a material effect on the Company's financial position,
result of operations or cash flows.



NOTE 3 – ACCOUNTS RECEIVABLE



Accounts receivable consisted of the following as of September
30, 2018 and 2017:



|                                      |  | As of September 30, |           
|------------------------------------- |  | ------------------- | ----------
|                                      |  | 2018                |           
|Accounts receivable, gross            |  | $                   | 29,131,547
|Less: allowance for doubtful accounts |  |                     | (1,997,310
|Accounts receivable, net              |  | $                   | 27,134,237



Bad debt expense recorded by the Company during
the years ended September 30, 2018 and 2017 were $286,606 and $160,944, respectively. Bad debt write-off recorded
by the Company during the years ended September 30, 2018 and 2017 were $36,037 and $0, respectively.



Changes of allowance for doubtful accounts
for the years ended September 30, 2018 and 2017 are as follow:



|                                            |  | As of September 30, |          
|------------------------------------------- |  | ------------------- | ---------
|                                            |  | 2018                |          
|Beginning balance                           |  | $                   | 1,817,050
|Additional reserve through bad debt expense |  |                     | 272,783  
|Bad debt write-off                          |  |                     | (36,037  
|Exchange difference                         |  |                     | (56,486  
|Ending balance                              |  | $                   | 1,997,310



NOTE 4 –NOTES RECEIVABLE AND OTHER RECEIVABLES



Notes receivable consisted of bank notes of $414,352 and $214,999
provided by the Company’s customers as of September 30, 2018 and 2017, respectively, these notes are guaranteed by the banks.



Other receivables consisted of mainly the legal claims of $0.64
million and $1.1 million to be collected from the Company’s debtors as of September 30, 2018 and 2017, respectively.



During 2010, the Company entered into two loan agreements with
Raozhou Dianli Ltd and Xianjin Cao, and advanced RMB 9 million on the first loan and RMB 1.5 million on the second loan, totaled
RMB 10.5 million (approximately USD 1.52 million). The terms of these two loans are both one year. Both borrowers defaulted and
didn’t make any repayment when the terms expired. The Company thus sued these two parties and pursuant to the final judgment
ruled by Jiangsu High People’s Court, the Company is entitled to a repayment of RMB 10.5 million plus interest with an interest
rate that is four times higher than the normal interest rate in the corresponding period. The claim has been covered by real estate
assets of Raozhou Dianli Ltd, which have been seized by the Court and has an appraised value of RMB 143.1 million, or about USD
21.5 million as of September 19, 2017, according the recent appraisal report, which is much higher than the Company’s claim.
The Company is listed as the first-in-line creditor and the management believes that the repayment of RMB 10.5 million and outstanding
interest is reasonably assured. The Company recorded RMB 10.5 million as Other Receivable. As of September 30, 2018 and 2017, the
outstanding balance is RMB 4.4 million (USD 0.64 million) and RMB 7.4 million (USD 1.1 million), respectively.



F-16







In the opinion of the management, after consultation with the
Company’s legal counsel, the management believes it is assured the balance will be collected as the debtor has real properties
seized by the Court worth much more than the debt owed to the Company.



NOTE 5 – INVENTORIES



Inventories as of September 30, 2018 and 2017 consisted of the
following:



|                |  | As of September 30, |           
|--------------- |  | ------------------- | ----------
|                |  | 2018                |           
|Raw materials   |  | $                   | 4,789,860 
|Work-in-process |  |                     | 6,532,826 
|Finished goods  |  |                     | 6,469,501 
|Total           |  | $                   | 17,792,187



There were no inventory write-downs recognized
for the years ended September 30, 2018 and 2017.



NOTE 6 – PROPERTY, PLANT AND EQUIPMENT



Property, plant and equipment consisted of the following as
of September 30, 2018 and 2017:



|                                            |  | As of September 30, |           
|------------------------------------------- |  | ------------------- | ----------
|                                            |  | 2018                |           
|Buildings                                   |  | $                   | 5,188,568 
|Machinery                                   |  |                     | 4,040,773 
|Furniture, fixtures and equipment           |  |                     | 639,356   
|Motor vehicles                              |  |                     | 234,229   
|Total property plant and equipment, at cost |  |                     | 10,102,926
|Less: accumulated depreciation              |  |                     | (4,533,745
|                                            |  |                     | 5,569,181 
|Construction in progress (“CIP”)            |  |                     | 711,231   
|Property, plant and equipment, net          |  | $                   | 6,280,412 



Depreciation expense was $395,604 and $425,696
for the years ended September 30, 2018 and 2017, respectively.



As of September 30, 2018 and 2017, the
Company pledged buildings and machinery to secure banking facilities granted to the Company. The carrying values of the pledged
buildings to secure bank borrowings by the Company are shown in Note 11.



NOTE 7 – INTANGIBLE ASSETS



|                               |  | As of September 30, |         
|------------------------------ |  | ------------------- | --------
|                               |  | 2018                |         
|Land use rights, cost          |  | $                   | 579,695 
|Software, cost                 |  |                     | 506,600 
|Less: accumulated amortization |  |                     | (148,074
|Intangible assets, net         |  | $                   | 938,221 



The land use right represents the Company's
land use rights in Wenzhou's plant, which had been pledged to secure the Company’s banking facilities granted to the Company
as of September 30, 2018 and 2017. The carrying values of the pledged land use rights to secure bank borrowings by the Company
are shown in Note 11. Amortization expense was $12,137 and $12,705 for the years ended September 30, 2018 and 2017, respectively.



F-17







NOTE 8 – LONG-TERM INVESTMENT



The Company made an investment in Wenzhou
Longlian Development Co., Ltd. ("Longlian") in 2011 by RMB 2,083,300 with equity percentage of 2.0833%. The principal
activities of Longlian are property and infrastructure construction. As of September 30, 2018 and 2017, the Company carried this
investment at its cost in the amount of $303,334 and $313,066, respectively. During 2018 fiscal year, the Company received a total
of RMB 290,000 as dividend income from Longlian.



NOTE 9 – RELATED PARTY TRANSACTIONS



Net amounts due to related parties consisted of the following
as of September 30, 2018 and 2017:



|                             |  |                                 |  | As of September 30, |          
|---------------------------- |  | ------------------------------- |  | ------------------- | ---------
|Accounts                     |  | Name of related parties         |  | 2018                |          
|Related party payables       |  | Shareholder, HUANG Jian Cong    |  | $                   | 3,584,216
|Related party payables       |  | Other Affiliates of the Company |  |                     | 110,253  
|Total due to related parties |  |                                 |  | $                   | 3,694,469



This represented unsecured and interest free borrowings between
the Company and Huang Jiancong and other related parties to the Company. For the years end September 30, 2018 and 2017, the Company
borrowed $3,584,216 and $6,051,523 from its shareholder, HUANG Jian Cong, which have a loan term from October 01, 2017 to September
30, 2020.



NOTE 10 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES



Accrued expenses and other current liabilities
consisted of the following as of September 30, 2018 and 2017:



|                   |  | As of September 30, |          
|------------------ |  | ------------------- | ---------
|                   |  | 2018                |          
|VAT payable        |  | $                   | 3,918,119
|Other tax payables |  |                     | 50,104   
|Other              |  |                     | 1,966,510
|Total              |  | $                   | 5,934,733







Other current liabilities contain primarily
unsecured, due on demand and interest free short-term loan to the Company from third party entities and deposits for bidding from
suppliers to the Company.



NOTE 11 – SHORT-TERM BANK BORROWINGS



Short-term bank borrowings consisted of
the following at September 30, 2018:



|Bank Name                          |  | Amount - RMB |             |  | Amount - USD |  |            | Issuance Date |  | Expiration Date |  | Interest   | 
|---------------------------------- |  | ------------ | ----------- |  | ------------ |  | ---------- | ------------- |  | --------------- |  | ---------- | 
|Agricultural Bank - Longwan Branch |  |              | 6,190,000   |  |              |  | 901,281    |               |  | 12/1/2017       |  | 11/25/2018 | 
|Agricultural Bank - Longwan Branch |  |              | 8,000,000   |  |              |  | 1,164,822  |               |  | 1/18/2018       |  | 12/5/2018  | 
|Agricultural Bank - Longwan Branch |  |              | 7,580,000   |  |              |  | 1,103,669  |               |  | 1/18/2018       |  | 10/8/2018  | 
|Agricultural Bank - Longwan Branch |  |              | 8,700,000   |  |              |  | 1,266,744  |               |  | 1/29/2018       |  | 1/5/2019   | 
|Agricultural Bank - Longwan Branch |  |              | 4,300,000   |  |              |  | 626,092    |               |  | 8/16/2018       |  | 8/15/2019  | 
|Agricultural Bank - Longwan Branch |  |              | 5,750,000   |  |              |  | 837,216    |               |  | 8/21/2018       |  | 8/1/2019   | 
|Agricultural Bank - Longwan Branch |  |              | 6,000,000   |  |              |  | 873,617    |               |  | 9/27/2018       |  | 9/1/2019   | 
|Bank of China                      |  |              | 4,250,000   |  |              |  | 618,812    |               |  | 4/3/2018        |  | 4/2/2019   | 
|Bank of China                      |  |              | 6,800,000   |  |              |  | 990,099    |               |  | 4/3/2018        |  | 4/2/2019   | 
|China Merchants Bank               |  |              | 15,000,000  |  |              |  | 2,184,042  |               |  | 12/12/2017      |  | 12/6/2018  | 
|China Merchants Bank               |  |              | 1,500,000   |  |              |  | 218,404    |               |  | 2/8/2018        |  | 12/1/2018  | 
|Industrial Bank                    |  |              | 6,500,000   |  |              |  | 946,419    |               |  | 12/6/2017       |  | 12/3/2018  | 
|Industrial Bank                    |  |              | 3,000,000   |  |              |  | 436,809    |               |  | 12/7/2017       |  | 11/27/2018 | 
|Industrial Bank                    |  |              | 5,500,000   |  |              |  | 800,815    |               |  | 12/8/2017       |  | 11/20/2018 | 
|China Minsheng Bank                |  |              | 4,000,000   |  |              |  | 582,411    |               |  | 6/28/2018       |  | 3/31/2019  | 
|China Minsheng Bank                |  |              | 2,200,000   |  |              |  | 320,326    |               |  | 6/28/2018       |  | 3/31/2019  | 
|Ping An Bank                       |  |              | 6,200,000   |  |              |  | 902,737    |               |  | 9/25/2018       |  | 9/25/2019  | 
|CZBANK                             |  |              | 3,500,000   |  |              |  | 509,610    |               |  | 4/20/2018       |  | 10/19/2018 | 
|CZBANK                             |  |              | 6,000,000   |  |              |  | 873,617    |               |  | 4/19/2018       |  | 10/18/2018 | 
|CZBANK                             |  |              | 6,000,000   |  |              |  | 873,617    |               |  | 4/17/2018       |  | 10/16/2018 | 
|CZBANK                             |  |              | 1,500,000   |  |              |  | 218,404    |               |  | 4/19/2018       |  | 10/18/2018 | 
|Bank of Communications             |  |              | 9,000,000   |  |              |  | 1,310,425  |               |  | 9/10/2018       |  | 9/7/2019   | 
|CZBANK                             |  |              | 4,880,000   |  |              |  | 710,542    |               |  | 4/26/2018       |  | 4/26/2019  | 
|Total                              |  |              | 132,350,000 |  |              |  | 19,270,530 |               |  |                 |  |            | 



F-18







The Company’s short-term bank borrowings
are pledged by its assets as listed below, and guaranteed by the Company’s major shareholders: HUANG Jian Cong, WANG Jian
Di, WANG Guo Lin, WANG Min Jie, and WANG Yang Ming, and their immediate family members.



The carrying values of the Company's pledged
assets to secure short-term borrowings by the Company are as follows:



|                           |  | As of September 30, |          
|-------------------------- |  | ------------------- | ---------
|                           |  | 2018                |          
|Term Deposit as Collateral |  | $                   | 728,014  
|Buildings, net             |  |                     | 4,583,560
|Land use rights, net       |  |                     | 431,621  
|Machinery, net             |  |                     | 154,795  
|Inventory                  |  |                     | 1,674,432
|Total                      |  | $                   | 7,572,422





Short-term bank borrowings consisted of
the following at September 30, 2017:



|Bank Name                          |  | Amount - RMB |             |  | Amount - USD |  |            | Issuance Date |  | Expiration Date |  | Interest   | 
|---------------------------------- |  | ------------ | ----------- |  | ------------ |  | ---------- | ------------- |  | --------------- |  | ---------- | 
|Agricultural Bank - Longwan Branch |  |              | 5,580,000   |  |              |  | 838,530    |               |  | 1/13/2017       |  | 1/12/2018  | 
|Agricultural Bank - Longwan Branch |  |              | 8,700,000   |  |              |  | 1,307,385  |               |  | 1/18/2017       |  | 1/17/2018  | 
|Agricultural Bank - Longwan Branch |  |              | 5,750,000   |  |              |  | 864,076    |               |  | 8/17/2017       |  | 8/16/2018  | 
|Agricultural Bank - Longwan Branch |  |              | 4,300,000   |  |              |  | 646,179    |               |  | 8/14/2017       |  | 8/13/2018  | 
|Agricultural Bank - Longwan Branch |  |              | 6,000,000   |  |              |  | 901,646    |               |  | 9/22/2017       |  | 9/21/2018  | 
|Agricultural Bank - Longwan Branch |  |              | 6,190,000   |  |              |  | 930,198    |               |  | 12/16/2016      |  | 12/11/2017 | 
|Agricultural Bank - Longwan Branch |  |              | 10,000,000  |  |              |  | 1,502,743  |               |  | 1/10/2017       |  | 1/9/2018   | 
|Minsheng Bank                      |  |              | 4,350,000   |  |              |  | 653,693    |               |  | 6/30/2017       |  | 6/30/2018  | 
|Minsheng Bank                      |  |              | 3,250,000   |  |              |  | 488,391    |               |  | 6/30/2017       |  | 6/30/2018  | 
|Xingye Bank                        |  |              | 6,500,000   |  |              |  | 976,783    |               |  | 9/4/2017        |  | 12/4/2017  | 
|Zhejiang Commerce Bank             |  |              | 6,000,000   |  |              |  | 901,646    |               |  | 7/27/2017       |  | 4/20/2018  | 
|Zhejiang Commerce Bank             |  |              | 1,500,000   |  |              |  | 225,411    |               |  | 7/28/2017       |  | 4/20/2018  | 
|Bank of China - Longwan Branch     |  |              | 8,550,000   |  |              |  | 1,284,845  |               |  | 4/10/2017       |  | 3/29/2018  | 
|Xingye Bank                        |  |              | 6,500,000   |  |              |  | 976,783    |               |  | 9/5/2017        |  | 12/20/2017 | 
|Zhejiang Commerce Bank             |  |              | 10,500,000  |  |              |  | 1,577,880  |               |  | 7/28/2017       |  | 4/20/2018  | 
|Pingan Bank                        |  |              | 7,960,000   |  |              |  | 1,196,183  |               |  | 9/27/2017       |  | 9/25/2018  | 
|China Merchants Bank               |  |              | 5,400,000   |  |              |  | 811,481    |               |  | 12/20/2016      |  | 12/11/2017 | 
|China Merchants Bank               |  |              | 5,990,000   |  |              |  | 900,143    |               |  | 12/20/2016      |  | 12/11/2017 | 
|China Merchants Bank               |  |              | 5,000,000   |  |              |  | 751,371    |               |  | 12/20/2016      |  | 12/11/2017 | 
|China Merchants Bank               |  |              | 410,000     |  |              |  | 61,612     |               |  | 12/22/2016      |  | 12/11/2017 | 
|Bank of China - Longwan Branch     |  |              | 1,490,000   |  |              |  | 223,909    |               |  | 4/10/2017       |  | 3/29/2018  | 
|Bank of China - Longwan Branch     |  |              | 2,760,000   |  |              |  | 414,757    |               |  | 4/10/2017       |  | 3/29/2018  | 
|Xingye Bank                        |  |              | 5,000,000   |  |              |  | 751,371    |               |  | 9/6/2017        |  | 12/14/2017 | 
|Bank of Communications             |  |              | 3,000,000   |  |              |  | 450,823    |               |  | 5/10/2017       |  | 11/13/2017 | 
|Bank of Communications             |  |              | 3,000,000   |  |              |  | 450,823    |               |  | 4/18/2017       |  | 11/13/2017 | 
|Bank of Communications             |  |              | 3,000,000   |  |              |  | 450,823    |               |  | 4/14/2017       |  | 11/13/2017 | 
|Bank of Communications             |  |              | 3,000,000   |  |              |  | 450,823    |               |  | 4/19/2017       |  | 11/13/2017 | 
|Bank of Communications             |  |              | 2,300,000   |  |              |  | 345,630    |               |  | 5/11/2017       |  | 11/13/2017 | 
|Total                              |  |              | 141,980,000 |  |              |  | 21,335,938 |               |  |                 |  |            | 



* These short-term
borrowings were subject to variable interest rates.



NOTE 12 – COMMITMENT AND CONTINGENCIES



The Company, from time to time, may be a party to claims and
legal proceedings generally incidental to its business. As of September 30, 2018, Company has no material purchase commitments,
significant leases and unused letter of credit.



The Company has one pending legal claim against a third party
as of September 30, 2018. See Note 4 for disclosure related to the claim with Raozhou Dianli Ltd. There were no other legal matters
that are likely to have a material adverse effect on the Company’s financial position as of September 30, 2018 and 2017 and
the results of operations or cash flows for the years ended September 30, 2018 and 2017.



F-19







NOTE 13 – UNCERTAIN TAX POSITION



In the normal course of its business, our Company, including
in particular Zhejiang Zhengkang and Wenzhou Zhengfeng, may be subject to challenges from various PRC taxing authorities regarding
the amounts of taxes due. Although the Company’s management believes the Company has paid all accrued for all taxes owed
by the Company, from time to time, in order for our Company to stay competitive in the market, we may need to accept unfavorable
contract terms from our clients, including the accrue of account receivables for the delivery of our products until the completion
of a certain construction project and without recognizing the revenue in the interim. PRC taxing authorities may also take the
position that the Company owes more taxes than it has paid based on transactions conducted by ZK Pipe, which may be deemed a resident
enterprise, thereby resulting in taxable liability for Zhejiang Zhengkang.



In addition, the Company recorded a potential
tax liability of $ $8,231,511 and $6,817,587 for the years ended September 30, 2018 and 2017, respectively, and for the possible
underpayment of income and other taxes, not include potential interests or penalties. It is possible that the tax liability of
the Company for past taxes may be higher than those amounts. The Company’s management believes it has sufficient cash on
hand to adequately meet any tax liability for the underpayment of income and VAT taxes. Additionally, the Company’s management
believes it may be able to negotiate with local PRC taxing authorities a reduction to any amounts that such authorities may believe
are due and a reduction to any interest or penalties thereon. We have no guarantee that we will be able to negotiate such a reduction.
To the extent our Company is able to negotiate such amounts, national-level taxing authorities may take the position that localities
are without power to reduce such liabilities, and such PRC taxing authorities may attempt to collect unpaid taxes, interest and
penalties in amounts greatly exceeding management’s estimates.



The Company has accrued tax
liabilities of $8,231,511 as of September 30, 2018, mostly related to its unpaid income tax and VAT tax, both of which are
governed by local tax authority. The total amount of unpaid tax liabilities was accrued based on the calculation using the
current prevailing tax rates without including potential interest and penalties because the Company’s management
believes that it is unlikely that the interest and penalties would apply in the end if the Company negotiates with the local
tax authority to pay all or part of the unpaid tax liabilities. The Company has had unofficial discussions with the local tax
authority and the management believes that it is highly possible that the Company will reach an agreement with the local tax
authority to result in a settlement of tax liability with a much less amount than the amount currently accrued. The Company
has been negotiating with the local tax authority on the settlement continuously. Once the settlement is reached, any
interest or penalties associated with those unpaid tax liabilities will most likely be waived or reduced. The management
believes that it is very difficult to determine how much interest or penalties will eventually be, or if any of those will be
assessed at all. Those potential interests or penalty liabilities are contingent upon the outcome of tax settlement and the
management estimates if using current interest and penalty rate stipulated by the tax authority.



NOTE 14 – CUSTOMER AND SUPPLIER CONCENTRATION



Significant customers and suppliers are those that account for
greater than 10% of the Company’s revenues and purchases.



The Company sold a substantial portion of products to one customer
(21.1%) in 2018 and as of September 30, 2018, the amount due from this customer included in accounts receivable was $9,507,491.
The Company sold a substantial portion of products to one customer (14.9%) in 2017 and as of September 30, 2017, the amount due
from this customer included in accounts receivable was $3,459,882. The loss of the significant customer or the failure to attract
the new customers could have a material adverse effect on our business, results of operations and financial condition for the Company.



The Company purchased a substantial portion
of materials from three third-party vendors (62.4%) in 2018. As of September 30, 2018, the net amount due to the vendors (accounts
payable - advance to vendors) was -$5,787,900, where negative number means net advance paid to the vendors. In 2017, the Company
purchased a substantial portion of materials from three third-party vendors (63.5%). As of September 30, 2017, the net amount due
to the vendors (accounts payable - advance to vendors) was $9,139,161. The Company believes there are numerous other suppliers
that could substitute the current significant vendors should they become unavailable or non-competitive.



NOTE 15 – STOCKHOLDERS’ EQUITY



On October 12, 2015, 100% of ZK International’s equity
was transferred from ZHENG Jia Jun to the five Mainland Chinese beneficial owners, with HUANG Jian Cong holding 45%, WANG Ming
Jie holding 20%, WANG Guo Lin holding 20%, WANG Jian Di holding 10% and WANG Yang Ming holding 5%.



On May 25, 2016, Zhejiang Zhengkang's Board of Directors resolved
to increase Zhejiang Zhengkang's registered capital by RMB 10,000,000, from RMB 20,000,000 to RMB 30,000,000, and contribution
by Wenzhou Weijia of RMB 9,900,000 and by HUANG Jian Cong of RMB 100,000, respectively. After this capital increase, there was
no change on Zhejiang Zhengkang's shareholders’ investment proportion. Zhejiang Zhengkang received RMB 9,900,000 capital
injection from Wenzhou Weijia on June 21, 2016 and received RMB 100,000 capital injection from HUANG Jian Cong on June 28, 2016.
HUANG Jian Cong on June 28, 2016 became a 1% non-controlling interest holder. Zhejiang Zhengkang has received its revised business
license on August 1, 2016.



F-20







Recapitalization



On December 19, 2016, the Board of Directors
of the Company approved i) decrease of par value of the ordinary shares from $1 to no par value, (the “Par Value Change”);
ii) a 180 for 1 forward stock split whereby every authorized, issued and outstanding ordinary shares was exchanged for 180 new
ordinary shares (the “Stock Split”) and iii) increase of authorized shares from 9,000,000 to 50,000,000 ordinary shares
(the “Shares Increase”, collectively with Par Value Change and Stock Split referred as the “Recapitalization”).
As of March 20, 2017, the Recapitalization was complete and effectuated.



Shares Issuances



On December 21, 2017, the Company completed a Regulation S closing
of private placement offering of ordinary shares of ZK International, no par value per share, at a purchase price of $6.00 per
share, for an aggregate purchase price of $100,000 or 5.89BTC in cryptocurrency. Upon the closing, the Company issued a total of
16,666 ordinary shares to the subscribers in the Offering, subject to customary restrictions pursuant to Rule 144 of the Securities
Act of 1933, as amended.



On December 22, 2017, the Company completed a Regulation D closing
of private placement offering of ordinary shares of ZK International, no par value per share, at a purchase price of $6.00 per
share, for an aggregate purchase price of $420,000. Upon the closing, the Company issued a total of 70,000 ordinary shares to the
subscribers in the Offering, subject to customary restrictions pursuant to Rule 144 of the Securities Act of 1933, as amended.



On January 9, 2018, the Company completed a closing of private
placement offering of ordinary shares of ZK International, no par value per share, at a purchase price of $8.00 per share, for
an aggregate purchase price of $500,000 or 34.123BTC in cryptocurrency. Upon the closing, the Company issued a total of 62,500
ordinary shares to the subscribers in the Offering, subject to customary restrictions pursuant to Rule 144 of the Securities Act
of 1933, as amended.



On March 21, 2018 the Company issued 30,000
ordinary shares of ZK International, no par value per share, to render the consulting contract with a consultant of the Company.
The shares are measured based on the fair market value of $5.88 per share and the value of this share issuance is recognized as
consulting expense.





On August 15, 2018, ZK International entered
into a debt settlement and mutual release agreement (the “Debt Settlement and Mutual Release Agreement”) with Mr. Jiancong
Huang, the Chief Executive Officer and Chairman of the Board of our Company. As of August 15, 2018, the Company was indebted to
Mr. Huang approximately RMB 69 million and both parties agreed to settle the amount of RMB 64,079,472 (approximately $9,242,676
based on the exchange rate of 0.144238 on August 15, 2018) (the “Debt”), in respect to prior advances to finance the
Company’s working capital. Mr. Huang agreed to accept 3,280,525 restricted ordinary shares, subject to Rule 144 of the Securities
Act of 1933 as amended (the “Securities Act”), at $2.82 per share, representing 75% of the average closing bid price
for the period from July 23, 2018 to August 3, 2018 (the “Shares”) to settle the Debt pursuance to the terms and conditions
set forth in the Debt Settlement and Mutual Release Agreement (the “Settlement”). The Settlement, deemed as a related
party transaction, was reviewed and approved by Company’s compensation committee, the Board of Directors and Nasdaq. As a
foreign private issuer, we are permitted to, and did in this instance, follow certain home country corporate governance practices
instead of those otherwise required under the applicable rules of the Nasdaq Capital Market for domestic U.S. issuers, provided
that we disclose the requirements we are not following and describe the home country practices we are following. See “Item
16.G – Corporate Governance.”



Public Offering Warrants



In connection with the IPO on September
1, 2017, the Company issued warrants equal to seven percent (7%) of the shares issued, totaling 74,784 units to the placement
agents (the “warrants”). The warrants carry a term of five years, and shall not be exercisable for a period of six
months from the closing of the IPO and shall be exercisable at $5 per share. Management determined that these warrants are equity
instruments because the warrants are both a) indexed to its own stock; and b) classified in stockholders' equity. The warrants
were recorded at their fair value on the date of grant as a component of stockholders’ equity. As of September 30, 2018,
the total number of warrants outstanding was 74,784 with weighted average remaining life of 4 years. The warrants were exercisable
as of September 30, 2018 but no warrants has been exercised.



The fair value of this Warrants was $438,234
as determined on September 01, 2017. The fair value has been estimated using the Binomial Options pricing model with the following
weighted-average assumptions: risk free rate of 2%; expected term of 5 years; exercise price of the warrants of $5; volatility
of 67.4%; number of tree step of 10; and expected future dividends of nil.



F-21







Statutory surplus reserves



Pursuant to Chinese Company law applicable
to foreign investment companies, the Company’s PRC subsidiaries are required to maintain statutory surplus reserves. The
statutory surplus reserves are to be appropriated from net income after taxes, and should be at least 10% of the after tax net
income determined in accordance with accounting principles and relevant financial regulations applicable to PRC enterprises (“PRC
GAAP”). The Company has an option of not appropriating the statutory surplus reserve after the statutory surplus reserve
is equal to 50% of the subsidiary’s registered capital. Statutory surplus reserves are recorded as a component of shareholders’
equity. The statutory surplus reserve as of September 30, 2018 is $2,031,414 .



ZK International, ZK Pipe, Wenzhou Weijia,
xSigma, and ZK Uganda has not commenced operation since inception. No appropriation to the statutory surplus reserves.



Zhejiang Zhengkang appropriated $858,412 to
the statutory surplus reserves for the year ended September 30, 2018. For the year ended September 30, 2017, statutory surplus
reserves appropriated was $593,369.



Wenzhou Zhengfeng recorded a net loss
for the year ended September 30, 2018 and no revenue for the year ended September 30, 2017, so no appropriation to the statutory
surplus reserves and staff welfare and bonus fund was made.



Zhenglong Ecommerce recorded a net loss for the year ended September
30, 2018, so no appropriation to the statutory surplus reserves and staff welfare and bonus fund was made.



Dividends declared by the Company’s PRC subsidiaries are
based on the distributable profits as reported in their statutory financial statements reported in accordance with PRC GAAP, which
differ from the results of operations reflected in the consolidated financial statements prepared in accordance with US GAAP. The
Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its PRC subsidiaries.
As of September 30, 2018, the Company has no dividend payable.



Under PRC laws and regulations, statutory
surplus reserves are restricted to set-off against losses, expansion of production and operation and increasing registered capital
of the respective company, and are not distributable other than upon liquidation. The reserves are not allowed to be transferred
to the Company in terms of cash dividends, loans or advances, nor are they allowed for distribution except under liquidation.
Amounts restricted include the PRC subsidiaries’ paid-in capital and statutory surplus reserves of the Company’s PRC
subsidiaries totaling $6,325,541 as of September 30, 2018 and $5,467,130 as of September 30, 2017.



Non-controlling interests



Non-controlling interests represent the interest of non-controlling
shareholders in Zhejiang Zhengkang based on their proportionate interests in the equity of that company adjusted for its proportionate
share of income or losses from operations. On September 29, 2015, Wenzhou Weijia acquired 99% equity percentage of Zhejiang Zhengkang
from 5 individual shareholders: HUANG Jian Cong, WANG Ming Jie, WANG Guo Lin, WANG Jian Di and WANG Yang Ming. After that, Zhejiang
Zhengkang’s equity interest is 99% held by Wenzhou Weijia and 1% held by HUANG Jian Cong as of the year end. The non-controlling
interest in Zhejiang Zhengkang was 1% as of September 30, 2018 and 2017. The non-controlling interest in Zhenglong Ecommerce and
ZK Uganda was 10.9%   and 20% as of September 30, 2018 respectively.





NOTE 16 – SEGMENT REPORTING



ASC 280, “Segment Reporting”, establishes standards
for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure
as well as information about geographical areas, business segments and major customers in financial statements for details on the
Company’s business segments. The Company uses the “management approach” in determining reportable operating segments.
The management approach considers the internal organization and reporting used by the Company’s chief operating decision
maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments.
Management, including the chief operating decision maker, reviews operation results by the revenue of different products. Based
on management’s assessment, the Company has determined that it has one operating segment as defined by ASC 280.



For the years ended September 30, 2018 and 2017, revenue and
assets within PRC contributed over 90% of the Company’s total revenue and assets.



F-22







NOTE 17 – INCOME TAXES



|                                                    |  | As of September 30, |         
|--------------------------------------------------- |  | ------------------- | --------
|                                                    |  | 2018                |         
|Deferred tax assets:                                |  |                     |         
|Bad debt allowance recorded for accounts receivable |  | $                   | 299,596 
|Net operating loss carry-forward                    |  |                     | 152,257 
|Less: valuation allowance                           |  |                     | (152,257
|Total                                               |  | $                   | 299,596 



Deferred income taxes reflect the net
effects of temporary difference between the carrying amounts of assets and liabilities for financial statement purposes and the
amounts used for income tax purposes. The Company’s deferred tax assets as of September 30, 2018, 2017 and 2016 were $299,596,
$272,557 and 247, 227, respectively, which were mainly derived from the temporary difference from provision of doubtful accounts
and net operating loss carry forward of Wenzhou Zhengfeng with
effective period from October 01, 2018 to September 30, 2023. The Company evaluated the likelihood of the realization of deferred
tax assets and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion
will not be realized.



Income taxes for the years ended September
30, 2018 and 2017 are attributed to the Company’s continuing operations in China and consisted of:



|         |  | For the year ended September 30, |          
|-------- |  | -------------------------------- | ---------
|         |  | 2018                             |          
|Current  |  | $                                | 1,435,521
|Deferred |  |                                  | (37,311  
|Total    |  | $                                | 1,398,210



Per the consolidated statements of operations
and comprehensive income, the income tax expenses for the Company can be reconciled to the income before income taxes for the
years ended September 30, 2018 and 2017 as follows:



|                                                                    |  | For the year ended September 30, |          
|------------------------------------------------------------------- |  | -------------------------------- | ---------
|                                                                    |  | 2018                             |          
|Income before taxes excluded the amounts of loss incurring entities |  | $                                | 9,982,326
|PRC EIT tax rates                                                   |  |                                  | 15       
|Tax at the PRC EIT tax rates                                        |  |                                  | 1,497,349
|Tax effect of 50% R&D expenses deduction                            |  |                                  | (123,948 
|Tax effect of deferred tax recognized                               |  |                                  | (37,311  
|Tax effect of non-deductible expenses                               |  |                                  | 62,120   
|Income tax expenses                                                 |  | $                                | 1,398,210



Under the Law of the People's Republic
of China on Enterprise Income Tax ("New EIT Law"), which was effective from January 1, 2008, both domestically- owned
enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%.



Zhejiang Zhengkang was entitled High and
New Technology Enterprise ("HNTE") and enjoyed preferential tax rate of 15% for a three-year validity period from April
16, 2009. And the HNTE certificate was renewed on October 29, 2012, September 17, 2015 and September 17, 2018 all with a three-year
validity period respectively. Thus, Zhejiang Zhengkang is eligible for a 15% preferential tax rate from April 16, 2009 to September
16, 2021.



ZK International and XSigma is not subject
to income taxes under the current laws of BVI. ZK Pipe was registered in Hong Kong and is subject to corporate income tax at 16.5%
if revenue is generated in Hong Kong. Wenzhou Zhengfeng, Zhenglong Ecommerce and Wenzhou Weijia were both registered in the PRC
and have applicable EIT rate of 25%. ZK Uganda was registered in the Republic of Uganda and is subject to corporate income tax
at 30% if revenue is generated in Uganda.



F-23







NOTE 18 – CONDENSED FINANCIAL INFORMATION OF THE PARENT
COMPANY



ZK International Group Co., Ltd.

Balance Sheets





|                                                                                                                                |  | As of September 30, |           
|------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | ----------
|                                                                                                                                |  | 2018                |           
|ASSETS                                                                                                                          |  |                     |           
|Cash and cash equivalent                                                                                                        |  | $                   | 53        
|Total current assets                                                                                                            |  |                     | 53        
|Due from subsidiaries                                                                                                           |  |                     | 13,879,746
|Intangible Assets                                                                                                               |  |                     | 501,000   
|Total assets                                                                                                                    |  | $                   | 14,380,799
|                                                                                                                                |  |                     |           
|STOCKHOLDERS’ EQUITY                                                                                                            |  |                     |           
|Common stock, no par value, 50,000,000 shares authorized, 16,528,037 and 13,068,346 shares issued and outstanding, respectively |  | $                   | -         
|Additional paid-in capital                                                                                                      |  |                     | 15,402,915
|Accumulated deficits                                                                                                            |  |                     | (1,022,116
|Total stockholders' equity                                                                                                      |  |                     | 14,380,799
|                                                                                                                                |  |                     |           
|Total liabilities and stockholders’ equity                                                                                      |  | $                   | 14,380,799





F-24







NOTE 18 – CONDENSED FINANCIAL INFORMATION OF THE PARENT
COMPANY – Continued



ZK International Group Co., Ltd.

Statements of Operations and Comprehensive
income



|                                                               |  | For the year ended September 30, |           
|-------------------------------------------------------------- |  | -------------------------------- | ----------
|                                                               |  | 2018                             |           
|Operating expenses:                                            |  |                                  |           
|General and administrative expenses                            |  | $                                | 1,004,070 
|Selling and marketing expense                                  |  |                                  | 18,001    
|Total operating expenses                                       |  |                                  | 1,022,071 
|                                                               |  |                                  |           
|Net loss and comprehensive loss                                |  | $                                | 1,022,071 
|                                                               |  |                                  |           
|Net loss per common share – basic and diluted                  |  | $                                | -         
|                                                               |  |                                  |           
|Weighted average number of common shares outstanding – basic   |  |                                  | 13,610,046
|Weighted average number of common shares outstanding – diluted |  |                                  | 13,629,517



ZK International Group Co., Ltd.

Statements of Cash Flows



|                                                                   |  | For the year ended September 30, |           
|------------------------------------------------------------------ |  | -------------------------------- | ----------
|                                                                   |  | 2018                             |           
|Cash flows used in operating activities                            |  |                                  |           
|Net loss                                                           |  | $                                | (1,022,071
|Non-cash Item                                                      |  |                                  | 342,137   
|Net cash used in operating activities                              |  |                                  | (679,934  
|                                                                   |  |                                  |           
|Cash flows provided by financing activities                        |  |                                  |           
|Cash received from Share Issuances, deduct related costs           |  |                                  | (380,000  
|Cash advanced from subsidiaries                                    |  |                                  | 1,980,934 
|Cash advanced to subsidiaries                                      |  |                                  | (677,863  
|Net cash provided by financing activities                          |  |                                  | 923,071   
|                                                                   |  |                                  |           
|Cash flows used in investing activities                            |  |                                  |           
|Cash invested to intangible assets                                 |  |                                  | (501,000  
|Proceeds received from sale of intangible assets                   |  |                                  | 257,863   
|Net cash used in financing activities                              |  |                                  | (243,137  
|                                                                   |  |                                  |           
|Effect of exchange rate changes on cash                            |  |                                  | -         
|                                                                   |  |                                  |           
|Decrease in cash and cash equivalents                              |  |                                  | (2        
|Cash and cash equivalents, beginning of year                       |  |                                  | 55        
|                                                                   |  |                                  |           
|Cash and cash equivalents, end of year                             |  | $                                | 53        
|                                                                   |  |                                  |           
|Supplemental Cash Flows Information:                               |  |                                  |           
|Non-cash financing activities (refer to share issuance activities) |  | $                                | 9,842,676 
|Income tax paid                                                    |  | $                                | -         
|Interest paid                                                      |  | $                                | -         
|                                                                   |  |                                  |           
|Non-cash investing and financing activities:                       |  |                                  |           
|Shares issued to founders                                          |  | $                                | -         



F-25







NOTE 18 – CONDENSED FINANCIAL INFORMATION OF THE PARENT
COMPANY – Continued



(a) Basis of presentation



The condensed financial information of ZK International Group
Co., Ltd, has been prepared using the same accounting policies as set out in the accompanying consolidated financial statements.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have
been condensed or omitted by reference to the consolidated financial statements.



Each of the Company’s PRC subsidiaries has restrictions
on its ability to pay dividends to the Company under PRC laws and regulations. The subsidiaries did not pay any dividends to the
Company for the years presented.



(b) Cash advance with subsidiaries



In 2018, ZK International advanced $677,863
to its subsidiaries for supporting their operations and received $1,980,934 from its subsidiaries. These advances have been eliminated
in consolidation.



(c) Stockholders’ Equity



On October 12, 2015, 100% of ZK International’s equity,
9,000,000 shares were transferred from ZHENG Jia Jun to five Mainland Chinese beneficial owners, with HUANG Jian Cong holding 45%,
WANG Ming Jie holding 20%, WANG Guo Lin holding 20%, WANG Jian Di holding 10% and WANG Yang Ming holding 5%. The Company recorded
related party receivables of $50,000 from these individuals in 2015.



As of September 30, 2018, 65.92% of ZK
International’s equity interest was hold by the five mainland Chinese beneficial owners, with HUANG Jian Cong holding 43.05%,
WANG Ming Jie holding 10.89%, WANG Guo Lin holding 10.89%, WANG Jian Di holding 1.09% and WANG Yang Ming holding nil.



Recapitalization



On December 19, 2016, the Board of Directors
of the Company approved i) decrease of par value of the ordinary shares from $1 to no par value,; ii) a 180 for 1 forward stock
split whereby every authorized, issued and outstanding ordinary shares was exchanged for 180 new ordinary shares and iii) increase
of authorized shares from 9,000,000 to 50,000,000 ordinary shares. As of March 20, 2017, the Recapitalization was complete and
effectuated.



Shares Issuances



On December 21, 2017, the Company completed
a Regulation S closing of private placement offering of ordinary shares of ZK International, no par value per share, at a purchase
price of $6.00 per share, for an aggregate purchase price of $100,000 or 5.89BTC in cryptocurrency. Upon the closing, the Company
issued a total of 16,666 ordinary shares to the subscribers in the Offering, subject to customary restrictions pursuant to Rule
144 of the Securities Act of 1933, as amended.



On December 22, 2017, the Company completed
a Regulation D closing of private placement offering of ordinary shares of ZK International, no par value per share, at a purchase
price of $6.00 per share, for an aggregate purchase price of $420,000. Upon the closing, the Company issued a total of 70,000 ordinary
shares to the subscribers in the Offering, subject to customary restrictions pursuant to Rule 144 of the Securities Act of 1933,
as amended.



On January 9, 2018, the Company completed
a closing of private placement offering of ordinary shares of ZK International, no par value per share, at a purchase price of
$8.00 per share, for an aggregate purchase price of $500,000 or 34.123BTC in cryptocurrency. Upon the closing, the Company issued
a total of 62,500 ordinary shares to the subscribers in the Offering, subject to customary restrictions pursuant to Rule 144 of
the Securities Act of 1933, as amended.



On March 21, 2018 the Company issued 30,000
ordinary shares of ZK International, no par value per share, to render the consulting contract with a consultant of the Company.
The shares are measured based on the fair market value of $5.88 per share and the value of this share issuance is recognized as
consulting expense.



On August 15, 2018, ZK International entered
into a debt settlement and mutual release agreement (the “Debt Settlement and Mutual Release Agreement”) with Mr. Jiancong
Huang, the Chief Executive Officer and Chairman of the Board of our Company. As of August 15, 2018, the Company was indebted to
Mr. Huang in the amount of RMB 64,079,472 (approximately $9,242,676 based on the exchange rate of 0.144238 on August 15, 2018)
(the “Debt”), in respect to prior advances to finance the Company’s working capital. Mr. Huang agreed to accept
3,280,525 restricted ordinary shares, subject to Rule 144 of the Securities Act of 1933 as amended (the “Securities Act”),
at $2.82 per share, representing 75% of the average closing bid price for the period from July 23, 2018 to August 3, 2018 (the
“Shares”) to settle the Debt pursuance to the terms and conditions set forth in the Debt Settlement and Mutual Release
Agreement (the “Settlement”). The Settlement, deemed as a related party transaction, was reviewed and approved by Company’s
compensation committee, the Board of Directors and Nasdaq.



F-26