Filed Pursuant to Rule 424(b)(5)
Registration
No. 333-230860
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 12,
2019)
ZK INTERNATIONAL GROUP CO., LTD
Up to 1,295,775 Units
Each Unit Consisting of One Ordinary
Share
And Two Warrants to Each Purchase One
Ordinary Share
We are offering in a self-underwritten
offering up to 1,295,775 units (the “Units”), with each Unit consisting of ordinary share and two warrants each
to purchase one ordinary share at an offering price of US$3.55 per Unit. Two warrants will have an exercise price per share of
US$4.00 and $4.50, respectively. The warrants will be immediately exercisable and will expire on the fifth anniversary of the original
issuance date. The warrants may be exercised only for a whole number of shares, and no fractional shares will be issued upon exercise
of the warrants. The Units will not be certificated. The ordinary shares and related warrants are immediately separable and will
be issued separately, but must be purchased together as a Unit in this offering. We will receive gross proceeds in the amount of
$4,600,001.25.
Our
ordinary shares are listed on the Nasdaq Capital Market under the symbol “ZKIN”. On February 19, 2021, the last reported
sales price of our ordinary shares on the Nasdaq Capital Market was $8.72 per share. Our stock price is volatile. During
the 12 months prior to the date of this prospectus, our ordinary shares has traded at a low of $0.65 and a high of $8.74.
From the beginning of 2021 through February 19, 2021, our ordinary shares have traded at a low of $2.55 and a high of $8.74. There
has been no change recently in our financial condition or results of operations that is consistent with the recent change in our
stock price.
Because there is no minimum offering amount
required as a condition to closing this offering, we may sell fewer than all of the Units offered hereby, which may significantly
reduce the amount of proceeds received by us, and investors in this offering will not receive a refund in the event that we do
not sell an amount of Units sufficient to pursue the business goals outlined in this prospectus. Because there is no minimum offering
amount, investors could be in a position where they have invested in our company, but we are unable to fulfill our objectives due
to a lack of interest in this offering. Also, any proceeds from the sale of Units offered by us will be available for our immediate
use, despite uncertainty about whether we would be able to use such funds to effectively implement our business plan. See “Risk
Factors” for more information. The proceeds from the sale of the Units in this offering will be deposited in a separate non-interest
bearing bank account (limited to funds received on our behalf) established by our escrow agent.
This is a self-underwritten offering. See
“Plan of Distribution” beginning on Page S-16 of this prospectus supplement for more information.
We are an “emerging growth company”
as defined in section 3(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are therefore
eligible for certain exemptions from various reporting requirements applicable to reporting companies under the Exchange Act
In reviewing this prospectus supplement, you should
carefully consider the matters described under the caption “Risk Factors” beginning on page S-1 as well as the
matters described under the caption “Risk Factors” beginning on page 6 of the accompanying prospectus and in the
documents incorporate by reference herein and therein. The securities offered by this prospectus
involve a high degree of risk including but not limited to the volatility of our stock price.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or determined if either this prospectus
supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
We will deliver the ordinary shares and
warrant certificates being issued to the investors electronically, upon closing and receipt of investor funds for the purchase
of the Units offered pursuant to this prospectus. We expect the delivery of such securities against payment in U.S. dollars will
be made, with respect to Units sold at the closing, in New York, New York on or about February 24, 2021.
The date of this prospectus supplement is February
23, 2021.
TABLE OF CONTENTS
Prospectus Supplement
Prospectus
ABOUT
THIS PROSPECTUS SUPPLEMENT
This prospectus supplement relates to a
registration statement that we filed with the United States Securities and Exchange Commission (which we refer to as the “SEC”)
utilizing a shelf registration process. Under this shelf registration process, we may, from time to time, offer, sell and issue
any of the securities or any combination of the securities described in the accompanying prospectus in one or more offerings. The
accompanying prospectus provides you with a general description of the securities we may offer. This prospectus supplement contains
specific information about the terms of this offering by us. This prospectus supplement and any free writing prospectus filed by
us (unless otherwise specifically stated therein) may add, update or change information contained in the accompanying prospectus
and the documents incorporated by reference herein and therein. You should read this prospectus supplement, the accompanying prospectus
and any free writing prospectus filed by us together with the information described under the sections entitled, “Where You
Can Get More Information” and “Incorporation of Certain Information by Reference” in this prospectus supplement
and any additional information you may need to make your investment decision.
Prospective investors should be aware that
the acquisition of the securities described herein may have tax consequences in the United States. Such consequences for investors
who are resident in, or citizens of, the United States may not be described fully in this prospectus supplement or the accompanying
prospectus. See “Item 10. Additional Information – E. Taxation”
in the annual report for the fiscal year ended September 30, 2020 incorporate by reference to this prospectus supplement.
The registration statement that contains
the accompanying prospectus (SEC File No. 333-230860) (including the exhibits filed with and the information incorporated
by reference into the registration statement) contains additional important business and financial information about us and the
securities offered hereby that is not presented or delivered with this prospectus supplement. That registration statement, including
the exhibits filed with the registration statement and the information incorporated by reference into the registration statement,
can be read at the SEC’s website, www.sec.gov, or at the SEC office mentioned under the section of this prospectus supplement
entitled “Where to Find Additional Information” below.
You should rely only on the information
contained in this prospectus supplement, the accompanying prospectus and any amendments or supplements thereto or any free writing
prospectus prepared by or on our behalf. Neither we, nor the Agents, have authorized any other person to provide you with different
or additional information. Neither we, nor the Agents, take responsibility for, nor can we provide assurance as to the reliability
of, any other information that others may provide. The Agents are not making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. The information contained in this prospectus supplement is accurate only as of the date
of this prospectus or such other date stated in this prospectus supplement, and our business, financial condition, results of operations
and/or prospects may have changed since those dates.
Except as otherwise set forth in this prospectus
supplement, we have not taken any action to permit a public offering of these securities outside the United States or to permit
the possession or distribution of this prospectus supplement and the accompanying prospectus outside the United States. Persons
outside the United States who come into possession of this prospectus supplement or the accompanying prospectus must inform themselves
about and observe any restrictions relating to the offering of these securities and the distribution of this prospectus supplement
and the accompanying prospectus outside the United States.
Unless
the context otherwise requires, in this prospectus supplement, the term(s) “we”, “us”, “our”,
“Company”, “our company”, “ZK” and “our business” refer to ZK International Group
Co., Ltd. Our foreign character name is 正康国际集团有限公司.
SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS
This prospectus supplement and accompanying
prospectus contain statements that constitute “forward-looking statements”. Any statements that are not statements
of historical facts may be deemed to be forward-looking statements. These statements appear in a number of different places and,
in some cases, can be identified by words such as “anticipates”, “estimates”, “projects”, “expects”,
“contemplates”, “intends”, “believes”, “plans”, “may”, “will”,
or their negatives or other comparable words, although not all forward-looking statements contain these identifying words. Such
forward-looking statements may include, but are not limited to, statements and/or information related to: strategy, future operations,
the size and value of the order book and the number of orders, projected costs, expected production capacity, expectations regarding
demand and acceptance of our products, estimated costs of machinery to equip a new production facility, and trends in the market
in which we operate, plans and objectives of management.
Forward-looking statements are based on
the reasonable assumptions, estimates, analysis and opinions made in light of our experience and our perception of trends, current
conditions and expected developments, as well as other factors that we believe to be relevant and reasonable in the circumstances
at the date that such statements are made, but which may prove to be incorrect. Management believes that the assumption and expectations
reflected in such forward-looking statements are reasonable. Assumptions have been made regarding, among other things: our ability
to build high-performance stainless steel products and to begin production deliveries within certain timelines; our expected production
capacity; prices for machinery to equip a new production facility, labor costs and material costs, remaining consistent with our
current expectations; equipment operating as anticipated; there being no material variations in the current regulatory environment;
and our ability to obtain financing as and when required and on reasonable terms.
Readers are cautioned that the foregoing
list is not exhaustive of all factors and assumptions which may have been used.
The forward-looking statements are subject
to known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from those
expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include but are not limited
to:
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general economic and business conditions, including changes in interest rates;
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natural phenomena (including the current COVID-19 pandemic);
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actions by government authorities, including changes in government regulation;
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uncertainties associated with legal proceedings;
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changes in the stainless steel industry market;
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future decisions by management in response to changing conditions;
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our ability to execute prospective business plans;
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misjudgments in the course of preparing forward-looking statements;
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our ability to raise sufficient funds to carry out our proposed business plan;
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consumers’ willingness to adopt high-performance stainless steel and carbon steel pipe products;
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dependency on certain key personnel and any inability to retain and attract qualified personnel;
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inability to reduce and adequately control operating costs;
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inability to succeed in establishing, maintaining and strengthening the ZK brand;
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disruption of supply or shortage of raw materials;
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the unavailability, reduction or elimination of government and economic incentives;
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failure to manage future growth effectively; and
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labor and employment risks.
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Although management has attempted to identify
important factors that could cause actual results to differ materially from those contained in forward-looking statements, there
may be other factors that cause results not to be as anticipated, estimated or intended. Forward-looking statements might not prove
to be accurate, as actual results and future events could differ materially from those anticipated in such forward-looking statements.
Accordingly, readers should not place undue reliance on forward-looking statements. We wish to advise you that these cautionary
remarks expressly qualify, in their entirety, all forward-looking statements attributable to our company or persons acting on our
company’s behalf. We do not undertake to update any forward-looking statements to reflect actual results, changes in assumptions
or changes in other factors affecting such statements, except as, and to the extent required by, applicable securities laws. You
should carefully review the cautionary statements and risk factors contained in this prospectus supplement and the accompanying
prospectus and other documents that we may file from time to time with the securities regulators.
PROSPECTUS
SUPPLEMENT SUMMARY
The following summary
highlights, and should be read in conjunction with, the more detailed information contained elsewhere in this prospectus supplement,
the accompanying prospectus and the documents incorporated therein by reference. You should read carefully the entire documents,
including our historical financial statements and related notes, to understand our business, the ordinary shares and the other
considerations that are important to your decision to invest in the ordinary shares. You should pay special attention to the “Risk
Factors” sections beginning on page S-1 of this prospectus supplement and on page 21 of
the accompanying prospectus.
All references to “$” or “dollars”,
are expressed in US dollars unless otherwise indicated.
Our Company
Overview
We primarily conduct
our business through our subsidiary Zhejiang Zhengkang Industrial Co., Ltd.(“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 workflow could also significantly improve the efficiency
and performance of our engineers.
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:
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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.
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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.
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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.
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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:
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Pipe fittings to extend or terminate pipe runs: couplings, adapters, unions, caps and plugs pipe.
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Fittings to change a pipe's direction: elbows, three-way fittings
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Pipe fittings to connect two or more pipes: tees, cross, side-inlet elbows, wyes
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Pipe fittings to change pipe size: reducers, bushings, couplings
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Pipe fitting tools: pipe fasteners
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Our connections and
fittings segment has grown significantly during 2019. 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.
Potential Impact of the COVID-19 Pandemic
In December 2019,
a strain of novel coronavirus (now commonly known as COVID-19) was reported to have surfaced in Wuhan, China. COVID-19 has since
spread rapidly throughout many countries, and, on March 12, 2020, the World Health Organization declared COVID-19 to be a
pandemic. In an effort to contain and mitigate the spread of COVID-19, many countries, including the United States and China, have
imposed unprecedented restrictions on travel, and there have been business closures and a substantial reduction in economic activity
in countries that have had significant outbreaks of COVID-19.
After
longer than usual shutdowns that spanned much of February due to Chinese New Year holidays and subsequently coronavirus-induced
government mandated lockdown order, the production at the Company’s manufacturing facilities in Wenzhou City has resumed
since early March and has been running at full capacity. We experienced increased backlog of orders during the shutdown period
and now expects gradual easing of the backlog as its production returns to full capacity. The quarantine and lockdown were
lifted in April 2020 and operations and productions have resumed since then. Despite the brief disruption in production and
product work flow, the mandatory coronavirus lockdowns have not had material adverse impact on the Company’s operations and
anticipated revenues for the current fiscal year.
It is currently not
possible to predict how long the pandemic will last or the time that it will take for economic activity to return to prior levels.
We will continue to monitor the COVID-19 situation closely and intend to follow health and safety guidelines as they evolve.
Corporate Structure and Principal Executive
Offices
We were incorporated
on May 13, 2015 under the laws of British Virgin Islands, and have a September 30 fiscal year end. As of February 18,
2021, we had 19,737,282 ordinary shares outstanding.
Our principal executive
offices are located at No. 678 Dingxiang Road, Binhai Industrial Park, Economic & Technology Development Zone, Wenzhou,
Zhejiang Province, People’s Republic of China 325025. Our telephone number is +86-577-8685-2999. Our website address is www.zkinternationalgroup.com.
Information on our website does not constitute part of this prospectus supplement. Our agent for service is Vcorp Agent Services, Inc.
and is located at 25 Robert Pitt Drive, Suite 204, Monsey, New York 10952.
We have seven subsidiaries:
XSigma Corporation, a British Virgin Islands company; ZK International Uganda Limited, a company incorporated under the laws of
the Republic of Uganda; ZK Pipe Industry Co., Ltd., a Hong Kong Limited company; Wenzhou Weijia Pipeline Development Co., Ltd.,
a PRC company; Zhejiang Zhengkang Industrial Co., Ltd., a PRC company; Wenzhou Zhengfeng Industry and Trade Co., Ltd.,
a PRC company; and Wenzhou Zhenglong Ecommerce Co. Ltd., a PRC company.
THE
OFFERING
Securities offered:
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Up to 1,295,775 Units at an offering price of US$3.55 per Unit, each Unit consisting of ordinary share and two warrants with each to purchase one ordinary share. The Units will not be certificated and the ordinary shares and the warrants are immediately separable and will be issued separately in this offering.
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Ordinary shares offered by us
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1,295,775
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Ordinary shares outstanding after this offering:
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21,283,057 ordinary shares.
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Warrants offered by us
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An aggregate of 2,591,550 warrants are included in the Units,
of which 1,295,775 warrants will entitle the holder to purchase one ordinary share at an exercise price of US$4.00 per ordinary
share and 1,295,775 warrants will entitle the holder to purchase one ordinary share at an exercise price of US$4.50 per ordinary
share. The warrants shall be exercisable for five years from the date of issuance, which is the closing date of this offering.
The ordinary shares and warrants are immediately separable and will be issued separately, but must be purchased together in this
offering as Units. This prospectus also relates to the offering of the ordinary shares issuable upon exercise of the warrants.
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Manner of offering:
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This is a self-underwritten offering. See the section entitled “Plan of Distribution” in this prospectus supplement.
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Use of Proceeds:
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We intend to use the net proceeds from this offering for improving
and expanding our existing business, working capital and other general corporate purposes. We may also use the proceeds to acquire
certain assets that the Board may deem appropriate for the growth of the Company. See “Use of Proceeds” on page S-11
of this prospectus supplement.
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Risk Factors:
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See “Risk Factors” on page S-1 and the other information in this prospectus supplement and “Risk Factors” on page 6 of the accompanying prospectus for a discussion of the factors you should consider before deciding to invest in our securities.
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Transfer Agent
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The transfer agent and registrar for the ordinary shares is Securities Transfer Corporation, with its business address at 2901 Dallas Pkwy Suite 380, Plano, TX 75093
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Listing:
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Our ordinary shares are listed on the Nasdaq Capital Market under the symbol “ZKIN.” There is no established public trading market for the warrants, and we do not expect a market to develop. We do not intend to apply for listing of the Units or the warrants on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Units or the warrants will be limited.
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Risk Factors
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See “Risk Factors” and other information included in this prospectus for a discussion of risks you should carefully consider before investing in the securities.
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RISK
FACTORS
An investment in our securities carries
a significant degree of risk. You should carefully consider the following risks, as well as the other information contained in
this prospectus supplement, the accompanying prospectus and the documents incorporated therein by reference, including our historical
and pro forma financial statements and related notes, before you decide to purchase the ordinary shares. Any one of these risks
and uncertainties has the potential to cause material adverse effects on our business, prospects, financial condition and operating
results which could cause actual results to differ materially from any forward-looking statements expressed by us and a significant
decrease in the value of our ordinary shares. Refer to “Forward-Looking Statements”.
We may not be successful in preventing
the material adverse effects that any of the following risks and uncertainties may cause. These potential risks and uncertainties
may not be a complete list of the risks and uncertainties facing us. There may be additional risks and uncertainties that we are
presently unaware of, or presently consider immaterial, that may become material in the future and have a material adverse effect
on us. You could lose all or a significant portion of your investment due to any of these risks and uncertainties.
Risks Related to our Business and Industry
Our
business could be materially harmed by the ongoing coronavirus (COVID-19) pandemic.
Since last year, there
has been an ongoing spread of a novel strain of coronavirus (COVID-19) in China, which has spread rapidly to many parts of the
world. In March 2020, the World Health Organization (“WHO”) declared the COVID-19 as a pandemic. Governments in
affected countries are imposing travel bans, quarantines and other emergency public health measures, which have caused material
disruption to businesses globally resulting in an economic slowdown. These measures, though temporary in nature, may continue and
increase depending on developments in the COVID-19’s outbreak.
Zhejiang Province,
where we conduct a substantial part of our business, was materially impacted by the COVID-19. We followed the recommendations of
local health authorities to minimize exposure risk for our employees, including the temporary closure of our offices and suspension
of marketing activities, and having employees work remotely. Our on-site work was not resumed until mid-March 2020 upon approval
from the local government. Due to the extended lock-down and self-quarantine policies in China, we experienced significant business
disruption during the lock-down period from February to mid-March. The production of the Company’s suppliers and logistics
services were suspended since early February and did not resume until February 25, 2020 and was picking up slowly after
China reopened businesses nationwide.
The extent to which
the COVID-19 outbreak impacts our financial condition and results of operations for the full year of 2020 cannot be reasonably
estimated at this time and will depend on future developments that currently cannot be predicted, including new information which
may emerge concerning the severity of the COVID-19 outbreak and the actions to contain the COVID-19 outbreak or treat its impact,
the government steps to combat the virus, the disruption to the general business activities of the PRC and the impact on the economic
growth and business of our manufacturers and distributors for the foreseeable future, among others.
We might
require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.
We intend to continue
to make investments to support our business growth and may require additional funds to respond to business challenges, including
the need to develop new features or enhance our existing solutions, improve our operating infrastructure or acquire complementary
businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we
raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders could suffer
significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of
holders of our ordinary shares. Any debt financing secured by us in the future could involve restrictive covenants relating to
our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional
capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional
financing on terms favorable to us, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory
to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be
significantly impaired.
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 an income tax liability of $3,188,615 and $4,176,537 as of September 30, 2020 and September 30, 2019,
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.
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.
Outstanding bank loans may reduce
our available funds.
We
have $17,372,894 and $16,281,461 in outstanding bank loans as of September 30, 2020 and September 30, 2019, respectively.
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.
While our operating
activities provided $8,156,488 and $460,205 in net cash during the fiscal years ended September 30, 2019 and September 30,
2020, respectively, 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:
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offer additional pipe and fitting products to attract and retain a larger customer base;
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attract additional customers and increased spending per customer;
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increase awareness of our brand and continue to develop customer loyalty;
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respond to competitive market conditions;
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respond to changes in our regulatory environment;
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manage risks associated with intellectual property rights;
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maintain effective control of our costs and expenses;
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raise sufficient capital to sustain and expand our business;
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attract, retain and motivate qualified personnel; and
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upgrade our technology to support additional research and development of new pipe and fitting products.
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If we are unsuccessful
in addressing any of these risks and uncertainties, our business may be materially and adversely affected.
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. We had no major customer during
the fiscal year ended September 30, 2020 and 2019. There was one major customer during the fiscal year ended September 30,
2018, which accounted for 21.1% of total sales. 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 had four major vendors during the
fiscal year ended September 30, 2020, who collectively accounted for 70.10% of total purchase. We had two major vendors during
the fiscal years ended September 30, 2019, who collectively accounted for 75.78% of total purchase. We had three major
vendors during the fiscal years ended September 30, 2018, who collectively accounted for 62.4% of total purchase. 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.
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.
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:
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continued enhancement of our research and development capabilities;
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information technology system enhancement;
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stringent cost controls and sufficient liquidity;
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strengthening of financial and management controls and information technology systems; and
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increased marketing, sales and support activities; and hiring and training of new personnel.
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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.
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:
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seek licenses from third parties;
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redesign our branded products; or
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be restricted by injunctions,
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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.
We are susceptible to general economic conditions, natural
catastrophic events and public health crises, market downturns and changes in supply chains and sales demand could adversely affect
our operating results.
Our operating results
will be subject to fluctuations based on general economic conditions, in particular those conditions that impact graphite products
industry. Deterioration in economic conditions could cause decreases in both retail and wholesale trade volume and reduce and/or
negatively impact our short-term ability to grow our revenues. Further, any decreased collectability of accounts receivable or
early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations.
Furthermore, our business
is subject to the impact of natural catastrophic events such as earthquakes, floods or power outages, political crises such as
terrorism or war, and public health crises, such as disease outbreaks, epidemics, or pandemics in the U.S. and global economies,
our markets and business locations. Currently, the rapid spread of coronavirus (COVID-19) globally has resulted
in increased travel restrictions and disruption and shutdown of businesses. We may experience impacts from quarantines, market
downturns and changes in customer behavior related to pandemic fears and impacts on our workforce if the virus becomes widespread
in any of our markets. If the virus were to affect a significant number of our workforce employed in our business-to-business and
business-to-customer sales operation, we may experience delays or the inability to deliver our products to customers on a timely
basis. In addition, our manufacture process relies on raw materials and components provided by our suppliers. If the ongoing quarantining
measures cause delays along our supply chain, we will likely experience manufacture slow-down for the indefinite future. Our customers
include mainly domestic customers and we generally do not enter into long-term contracts with our customers; one or more of our
customers, distribution partners, service providers or suppliers may experience financial distress, file for bankruptcy protection,
go out of business, or suffer disruptions in their business due to the coronavirus outbreak; as a result, our operation revenues
may be impacted. The extent to which the coronavirus impacts our results will depend on future developments, which are highly uncertain
and will include emerging information concerning the severity of the coronavirus and the actions taken by governments and private
businesses to attempt to contain the coronavirus, but is likely to result in a material adverse impact on our business, results
of operations and financial condition at least for the near term.
Risks Related to Our Ordinary shares and this Offering
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 have adopted 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 February 19, 2021, our officers and/or
directors beneficially own approximately 53.16% 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.
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, 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.
As a foreign
private issuer, we are permitted to 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 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. 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. We may in the future again 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.
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 report of foreign private issuer 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.
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 2004 (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.
Volatility in our ordinary share
price may subject us to securities litigation.
The market for our ordinary share may have,
when compared to seasoned issuers, significant price volatility and we expect that the price of our ordinary shares may continue
to be more volatile than that of a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities
class action litigation against a company following periods of volatility in the market price of its securities. We may, in the
future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities to the Company
and could divert our management’s attention and resources.
The market price of the Company’s
ordinary shares may continue to be volatile.
The trading price
of our ordinary shares has been volatile and could continue to be subject to wide fluctuations in response to various factors,
some of which are beyond our control. During the 12 months prior to the date of this prospectus, our ordinary shares has traded
at a low of $0.65 and a high of $8.66. From the beginning of 2021 through February 8, 2021, our ordinary shares has traded at a
low of $2.55 and a high of $8.66 irrespective of our operating performance and with no discernable announcements or developments
by the company or third parties. We may incur rapid and substantial decreases in our stock price in the foreseeable future
that are unrelated to our operating performance or prospects. In addition, the recent outbreak of COVID-19 has caused broad stock
market and industry fluctuations. The stock market in general and the market for companies such as us in particular have experienced
extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility,
investors may experience losses on their investment in our ordinary shares. A decline in the market price of our ordinary shares
also could adversely affect our ability to issue additional shares or other of our securities and our ability to obtain additional
financing in the future. Factors affecting the trading price of the Company’s ordinary shares may include:
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actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;
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changes in the market’s expectations about our operating results;
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success of competitors;
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our operating results failing to meet the expectation of securities analysts or investors in a particular period;
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changes in financial estimates and recommendations by securities analysts concerning the Company or the lending market in general;
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operating and stock price performance of other companies that investors deem comparable to the Company;
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our ability to market new and enhanced services on a timely basis;
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changes in laws and regulations affecting our business;
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commencement of, or involvement in, litigation involving the Company;
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the Company’s ability to access the capital markets as needed;
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changes in the Company’s capital structure, such as future issuances of securities or the incurrence of additional debt;
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the volume of our ordinary shares available for public sale;
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any major change in our board or management;
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sales of substantial amounts of ordinary shares by our directors, executive officers or significant shareholders or the perception that such sales could occur; and
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general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.
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There is no guarantee that our
warrants will ever be in the money, and they may expire worthless and the terms of our warrants may be amended.
The exercise prices
for our warrants are $4.00 and $4.50, respectively, subject to adjustment. Warrants may be exercised only for a whole number of
the Company’s ordinary shares. No fractional shares will be issued upon exercise of the warrants. There is no guarantee that
the warrants will ever be in the money prior to their expiration, and they may expire worthless.
A possible “short squeeze”
due to a sudden increase in demand of our ordinary shares that largely exceeds supply may lead to additional price volatility.
Historically there
has not been a large short position in our ordinary shares. However, in the future investors may purchase our ordinary shares
to hedge existing exposure or to speculate on the price of our ordinary share. Speculation on the price of our ordinary shares
may involve long and short exposures. To the extent an aggregate short exposure in our ordinary shares becomes significant, investors
with short exposure may have to pay a premium to purchase shares for delivery to share lenders at times if and when the price
of our ordinary shares increases significantly, particularly over a short period of time. Those purchases may in turn, dramatically
increase the price of our ordinary shares. This is often referred to as a “short squeeze.” A short squeeze could
lead to volatile price movements in our ordinary shares that are not directly correlated to our business prospects, financial
performance or other traditional measures of value for the Company or its ordinary shares.
USE
OF PROCEEDS
We anticipate using
the net proceeds from the sale of ordinary shares for improving and expanding our existing business, working capital and other
general corporate purposes. We may also use the proceeds to acquire certain assets that the Board may deem appropriate for the
growth of the Company.
The expected use of
the net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could
change in the future as our plans and business conditions evolve. The amounts and timing of our actual expenditures will depend
on numerous factors, including the progress of our product development efforts and market acceptance of our products. As a result,
our management will have discretion and flexibility in applying the net proceeds from this offering for this purpose.
To the extent that the net proceeds we receive
from this offering are not immediately applied for the above purposes, we plan to invest the net proceeds in short-term, interest-bearing
debt instruments or bank deposits.
As an offshore holding company, under PRC
laws and regulations, we are permitted to use the net proceeds of this offering to fund our PRC subsidiaries only through capital
contributions or intercompany loans. Provided that we make the necessary registrations with government authorities and obtain the
required governmental approvals, we may extend inter-company loans or make additional capital contributions to our PRC subsidiaries
to fund their capital expenditures or working capital requirements.
DESCRIPTION
OF SECURITIES
Units
We are offering up to 1,295,775 Units,
with each Unit consisting of one ordinary share and two warrants to each purchase one ordinary share at a offering price of $3.55 per
Unit. The ordinary share and warrants are being sold in this offering only as part of the Units. However, the Units will not be
certificated and the ordinary shares and warrants comprising such Units are immediately separable. Upon issuance, the ordinary
shares and warrants may be transferred independent of one another, subject to applicable law and transfer restrictions.
The material terms and provisions
of our ordinary shares are described under the caption “Descriptions of Share” beginning on page 9 of the accompanying
prospectus.
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.
Transfer Agent
Our transfer agent
for our ordinary shares is Securities Transfer Corporation, 2901 N Dallas Parkway, Suite 380, Plano, Texas 75093, and its
telephone number is (469) 633-0101.
Distributions
The holders of our
ordinary shares are entitled to such dividends or other distributions as may be authorized 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
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.
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.
Warrants
Warrants
The following summary of certain terms and
provisions of the warrants that are being offered hereby is not complete and is subject to, and qualified in its entirety by, the
provisions of the warrants.
Exercise Price
1,295,775 warrant being offered hereby will
have an initial exercise price per share equal to $4.00 per share. 1,295,775 warrant being offered hereby will have an initial
exercise price per share equal to $4.50 per share. The warrants will be exercisable immediately upon issuance if exercised by paying
the aggregate exercise price for the ordinary shares being exercised or exercising on a cashless basis for a net number of shares
of common stock, as provided in the formula in the warrants. The exercise price and number of ordinary shares issuable upon exercise
is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting
our common stock and the exercise price. The warrants will be issued together with our ordinary shares in this offering and may
be transferred separately immediately thereafter.
Duration and Exercisability
The warrants will be exercisable immediately
and will expire five (5) years from the date of issuance. The Warrants will be exercisable, at the option of each holder, in whole
or in part, by delivering a duly executed exercise notice accompanied by payment in full for the number of shares of our common
stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together with its
affiliates) may not exercise any portion of the warrant to the extent that the holder would own more than 4.99/9.99% of the outstanding
common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to us, the holder
may increase the amount of ownership of outstanding stock after exercising the holder’s warrants.
Cashless Exercise
If, at the time a holder exercises its warrants,
a registration statement registering the issuance of the ordinary shares underlying the warrants under the Securities Act is not
then effective or available, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise
in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part)
the net number of shares of common stock determined according to a formula set forth in the Warrants.
Fundamental Transaction
In the event of a fundamental transaction,
as described in the warrants and generally including any reorganization, recapitalization or reclassification of our common stock,
the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with
or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial
owner of 50% of the voting power represented by our outstanding common stock, the holders of the warrants will be entitled to receive
upon exercise of the warrants the kind and amount of securities, cash or other property that the holders would have received had
they exercised the warrants immediately prior to such fundamental transaction. In addition, in the event of a fundamental transaction
which is approved by our Board (but not in a fundamental transaction which is not approved by our Board), the holders of the warrants
have the right to require us or a successor entity to redeem the warrant for the consideration paid in the fundamental transaction
in the amount of the Black Scholes value of the unexercised portion of the warrant on the date of the consummation of the fundamental
transaction.
Transferability
Subject to applicable laws, a warrant may
be transferred at the option of the holder upon surrender of the warrant together with the appropriate instruments of transfer.
Exchange Listing
We do not intend to list the warrants on
any securities exchange or nationally recognized trading system.
Right as a Stockholder
Except as otherwise provided in the warrants
or by virtue of such holder’s ownership of shares of our common stock, the holders of the warrants do not have the rights
or privileges of holders of our common stock, including any voting rights, until they exercise their warrants.
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.
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 authorize 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:
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amend our memorandum of association to increase or decrease the maximum number of shares we are authorized to issue;
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subject to our memorandum of association, divide our authorized and issued shares into a larger number of shares; and
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·
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subject to our memorandum of association, combine our authorized and issued shares into a smaller number of shares.
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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. See “Where You Can
Find Additional Information.”
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.
CAPITALIZATION
The
following table sets forth our capitalization and indebtedness as of September 30, 2020 on a pro forma as adjusted basis
giving effect to the sale of up to 1,295,775 Units in an aggregate price of $4,600,001 assuming no exercise of warrants attached
to the shares offered. The historical data in the table is derived from, and should be read in conjunction with, our historical
financial statements, including accompanying notes, and the section entitled “Item 5. Operating and Financial Review and
Prospects — Management’s Discussion and Analysis of Financial Condition and Results of Operations” from our Annual
Report on Form 20-F for the year ended September 30, 2020, which is incorporated by reference herein. You should
also read this table in conjunction with our financial statements and related notes appearing elsewhere in this prospectus and
“Use of Proceeds” and “Description of Shares” contained in this prospectus supplement.
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As of September 30, 2020
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Actual
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Pro forma Adjustment
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Shareholders’ Equity:
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|
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|
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Ordinary shares
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|
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-
|
|
|
|
-
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Additional paid-in capital
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|
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18,049,630
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|
|
|
22,649,631
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Statutory surplus reserve
|
|
|
2,904,699
|
|
|
|
2,904,699
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Retained earnings
|
|
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23,546,921
|
|
|
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23,546,921
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Accumulated other comprehensive income
|
|
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492,685
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|
|
|
492,685
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Non-controlling interests
|
|
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309,794
|
|
|
|
309,794
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Total shareholders’ equity
|
|
$
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45,303,729
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|
|
|
49,903,730
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|
|
|
|
|
|
|
|
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Total Capitalization
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$
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45,303,729
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|
|
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49,903,730
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DILUTION
If you invest in our
ordinary shares, your interest in our ordinary shares will be diluted to the extent of the difference between the offering price
per ordinary share and the pro forma net tangible book value per ordinary share after the offering. Dilution results from the fact
that the per share offering price is substantially in excess of the book value per ordinary share attributable to the existing
shareholders for our presently outstanding ordinary share. Our net tangible book value attributable to shareholders on September 30,
2020 was $2.20 per ordinary share. Net tangible book value per ordinary share as of September 30, 2020 represents the
amount of total assets less intangible assets and total liabilities, divided by the total number of ordinary shares outstanding
as of the date hereof.
Our pro forma as adjusted
net tangible book value of our ordinary shares as of September 30, 2020 gives effect to the issuance of 1,295,775 ordinary
shares from this offering assuming no exercise of warrants attached to the shares offered. Our post offering pro forma net tangible
book value as of September 30, 2020, which gives effect to receipt of the net proceeds from the offering but does not take
into consideration any other changes in our net tangible book value after September 30, 2020, will be approximately $2.29
per ordinary share. Net tangible book value per ordinary share would increase by $0.09 per share attributable to the purchase of
the ordinary shares by investors in this offering.
The following table
sets forth the estimated net tangible book value per ordinary share after the offering and the dilution to persons purchasing units
based on the foregoing offering assumptions.
Assumed offering price per share
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$
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3.55
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Net tangible book value per share as of September 30, 2020
|
|
$
|
2.20
|
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Increase in net tangible book value per share attributable to existing investors
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|
$
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0.09
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|
|
|
|
|
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Net tangible book value per share after giving effect to this offering
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|
$
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2.29
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|
|
|
|
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Decrease net tangible book value per share to new investors
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$
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1.26
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The above table is
based on 19,987,282 shares outstanding as of February 18, 2021.
PLAN
OF DISTRIBUTION
This is a self-underwritten
offering. This prospectus supplement is part of a registration statement that permits our officers and directors to
sell the shares directly to the public, with no commission or other remuneration payable to any of them for any shares that are
sold by them. We have not entered into any underwriting agreement, arrangement or understanding for the sale of the
shares being offered. In the event we retain a broker who may be deemed an underwriter, we will file a prospectus supplement
with the Securities and Exchange Commission. This offering is intended to be made solely by the delivery of this prospectus supplement
and the accompanying subscription agreement to prospective investors. Our officers and directors will sell the shares and intend
to offer them to friends, family members, business acquaintances, and interested parties. In offering the securities on our behalf,
our directors and officers will rely on the safe harbor from broker dealer registration set out in Rule 3a4-1 under the Securities
Exchange Act of 1934.
Rule 3a4-1 sets
forth those conditions under which a person associated with an issuer may participate in the offering of the issuer’s securities
and not be deemed to be a broker-dealer. Those conditions are as follows:
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a.
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Our officers and directors are not subject to a statutory disqualification, as that term is defined in Section 3(a)(39) of the Act, at the time of their participation;
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b.
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Our officers and directors will not be compensated in connection with their participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities; and
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c.
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Our officers and directors are not, nor will they be at the time of their participation in the offering, an associated person of a broker-dealer; and
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d.
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Our officers and directors meet the conditions of paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that they (A) primarily perform, or intend primarily to perform at the end of the offering, substantial duties for or on behalf of our Company, other than in connection with transactions in securities; and (B) are not a broker or dealer, or been associated person of a broker or dealer, within the preceding twelve months; and (C) have not participated in selling and offering securities for any Issuer more than once every twelve months other than in reliance on Paragraphs (a)(4)(i) and (a)(4)(iii).
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Our officers, directors,
control persons and affiliates of same do not intend to purchase any shares in this offering.
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.
Listing
Our ordinary shares
are listed on the NASDAQ Capital Market under the trading symbol “ZKIN.”
LEGAL
MATTERS
Mourant Ozannes is acting as our British
Virgin Islands counsel. Ortoli Rosenstadt LLP is acting as counsel to our company regarding U.S. securities law matters. The current
address of Mourant Ozannes is 5th Floor, Waters Edge Building, Meridian Plaza, Road Town, Tortola, British Virgin
Islands. The current address of Ortoli Rosenstadt LLP is 366 Madison Avenue, 3rd Floor, New York, NY 10017.
EXPERTS
Our consolidated financial statements as
of September 30, 2019 and September 30, 2018 and for the years respectively then ended incorporated by reference in this
prospectus and have been so included in reliance on the report of ZH CPA, LLC (formerly ZH CPA LLP), an independent registered
public accounting firm, given on the authority of said firm as experts in accounting and auditing. The current address of ZH CPA,
LLC is 1600 Broadway, Suite 1600, Denver, Colorado, USA 8020.
INTERESTS
OF EXPERTS AND COUNSEL
None of the named experts or legal counsel
was employed on a contingent basis, owns an amount of shares in our company which is material to that person, or has a material,
direct or indirect economic interest in our company or that depends on the success of the offering.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate
by reference” information into this prospectus supplement and the accompanying prospectus, which means that we can disclose
important information about us by referring you to another document filed separately with the SEC. The information incorporated
by reference is considered to be a part of this prospectus supplement and the accompanying prospectus. We incorporate by reference:
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the documents and reports set out in the section entitled “Incorporation by Reference” in the Prospectus;
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the documents and reports filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of the prospectus and this prospectus supplement;
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other documents and reports furnished by us to the SEC on Form 6-K subsequent to the date of the prospectus, but only to the extent specifically set forth in such Form 6-K;
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all documents and reports filed after the date of this prospectus supplement and prior to the termination of the offering hereunder pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934; and
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any other documents and reports furnished by us to the SEC on Form 6-K after the date of this prospectus supplement and prior to the termination of the offering, but only to the extent specifically set forth in such Form 6-K;
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Any statement contained in a document that
is incorporated by reference into this prospectus will be deemed to be modified or superseded for the purposes of this prospectus
to the extent that a statement contained in this prospectus, or in any other subsequently filed document which also is or is deemed
to be incorporated by reference into this prospectus, modifies or supersedes that statement. The modifying or superseding statement
does not need to state that it has modified or superseded a prior statement or include any other information set forth in the document
that it modifies or supersedes.
Upon request, we will provide, without
charge, to each person who receives this prospectus, a copy of any or all of the documents incorporated by reference (other than
exhibits to the documents that are not specifically incorporated by reference in the documents).
WHERE
YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration
statement on Form F-3 under the Securities Act with respect to the ordinary shares offered hereby. This prospectus does not
contain all of the information set forth in the registration statement and the exhibits thereto, to which reference is hereby made.
With respect to each contract, agreement or other document filed as an exhibit to the registration statement, reference is made
to such exhibit for a more complete description of the matter involved. The registration statement and the exhibits thereto filed
by us with the SEC may be inspected at the public reference facility of the SEC listed below.
The registration statement, reports and
other information filed or to be filed with the SEC by us can be inspected and copied at the public reference facilities maintained
by the SEC at 100 F. Street NW, Washington, D.C. 20549. The SEC maintains a website at www.sec.gov that contains reports, proxy
and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR
system.
As a foreign private issuer, we are exempt
from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our executive officers,
directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16
of the Exchange Act.
ZK International Group Co., Ltd
$50,000,000
Ordinary Shares
Share Purchase Contracts
Share Purchase Units
Warrants
Debt Securities
Rights
Units
We may offer, from
time to time, in one or more offerings, ordinary shares, share purchase contracts, share purchase units, warrants, debt securities,
rights or units, which we collectively refer to as the “securities”. The aggregate initial offering price of the securities
that we may offer and sell under this prospectus will not exceed $50,000,000. We may offer and sell any combination of the securities
described in this prospectus in different series, at times, in amounts, at prices and on terms to be determined at, or prior to,
the time of each offering. This prospectus describes the general terms of these securities and the general manner in which these
securities will be offered. We will provide the specific terms of these securities in supplements to this prospectus. The prospectus
supplements will also describe the specific manner in which these securities will be offered and may also supplement, update or
amend information contained in this prospectus. This prospectus may not be used to consummate a sale of securities unless accompanied
by the applicable prospectus supplement. You should read this prospectus and any applicable prospectus supplement before you invest.
The securities covered
by this prospectus may be offered through one or more underwriters, dealers and agents or directly to purchasers. The names of
any underwriters, dealers or agents, if any, will be included in a supplement to this prospectus. For general information about
the distribution of securities offered, please see “Plan of Distribution”.
Our ordinary shares
issued pursuant to a registration statement on Form F-1 (No. 333-218198) are traded on the Nasdaq Capital Market under
the symbol “ZKIN”. On February 4, 2019, the closing price of our ordinary shares as reported by the Nasdaq Capital
Market was $1.69 per ordinary share. As of March 31, 2019, the aggregate market value of our outstanding ordinary shares held
by non-affiliates using the closing price on the Nasdaq Capital Market of $1.69 was approximately $12,409,796.75 based
on 16,558,037 outstanding ordinary shares, of which approximately 7,343,075 ordinary shares were held by non-affiliates. We
have not offered any securities pursuant to General Instruction I.B.5 of Form F-3 during the prior 12 calendar month
period that ends on, and includes, the date of this prospectus.
This prospectus may not be used to offer
or sell our securities unless accompanied by a prospectus supplement. The information contained or incorporated in this prospectus
or in any prospectus supplement is accurate only as of the date of this prospectus, or such prospectus supplement, as applicable,
regardless of the time of delivery of this prospectus or any sale of our securities.
Investing in our securities being offered
pursuant to this prospectus involves a high degree of risk. You should carefully read and consider the ‘‘Risk Factors’’
section of this prospectus and in the applicable prospectus supplement before you make your investment decision.
Neither the Securities and Exchange
Commission, British Virgin Islands, nor any state securities commission has approved or disapproved of these securities or determined
if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is _______________,
2019
You should rely only on the information
contained or incorporated by reference in this prospectus or any prospectus supplement. We have not authorized any person to provide
you with different or additional information. If anyone provides you with different or inconsistent information, you should not
rely on it. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any prospectus
supplement, as well as information we have previously filed with the SEC and incorporated by reference, is accurate as of the date
on the front of those documents only. Our business, financial condition, results of operations and prospects may have changed since
those dates.
ABOUT THIS PROSPECTUS
This prospectus is
a part of a registration statement that we have filed with the SEC utilizing a “shelf” registration process. Under
this shelf registration process, we may sell any combination of the securities described in this prospectus in one or more offerings
up to an aggregate offering price of $50,000,000.
Each time we sell securities,
we will provide a supplement to this prospectus that contains specific information about the securities being offered and the specific
terms of that offering. The supplement may also add, update or change information contained in this prospectus. If there is any
inconsistency between the information in this prospectus and any prospectus supplement, you should rely on the prospectus supplement.
We may offer and sell
securities to, or through, underwriting syndicates or dealers, through agents or directly to purchasers. The prospectus supplement
for each offering of securities will describe in detail the plan of distribution for that offering.
In connection with
any offering of securities (unless otherwise specified in a prospectus supplement), the underwriters or agents may over-allot or
effect transactions which stabilize or maintain the market price of the securities offered at a higher level than that which might
exist in the open market. Such transactions, if commenced, may be interrupted or discontinued at any time. See “Plan of Distribution.”
Please carefully read
both this prospectus and any prospectus supplement together with the documents incorporated herein by reference under “Incorporation
by Reference” and the additional information described below under “Where You Can Get More Information.”
Prospective investors
should be aware that the acquisition of the securities described herein may have tax consequences. You should read the tax discussion
contained in the applicable prospectus supplement and consult your tax advisor with respect to your own particular circumstances.
You should rely only
on the information contained or incorporated by reference in this prospectus and any prospectus supplement. We have not authorized
anyone to provide you with different information. The distribution or possession of this prospectus in or from certain jurisdictions
may be restricted by law. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted or where the person making the offer or sale is not qualified
to do so or to any person to whom it is not permitted to make such offer or sale. The information contained in this prospectus
is accurate only as of the date of this prospectus and any information incorporated by reference is accurate as of the date of
the applicable document incorporated by reference, regardless of the time of delivery of this prospectus or of any sale of the
securities. Our business, financial condition, results of operations and prospects may have changed since those dates.
Except where the context
otherwise requires and for purposes of this prospectus only, “we”, “us”, “our company”, “Company”,
“our”, “Zhengkang” and “ZKIN” refer to:
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ZK International Group Co., Ltd, a British Virgin Islands company limited by shares (“ZK International” when individually referenced);
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ZK Pipe Industry Co., Ltd., a Hong Kong limited company (“ZK Pipe” when individually referenced), which is a wholly-owned subsidiary of ZK International;
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XSigma Corporation, a British Virgin Islands company (“XSigma” when individually referenced), which is a wholly-owned subsidiary of ZK International;
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Zk International Uganda Limited, a company incorporated in the Republic of Uganda (“ZK Uganda” when individually referenced), 80% of which is owned by ZK International;
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Wenzhou Weijia Pipeline Development Co., Ltd. (“Wenzhou Weijia”) (also referred to as 温州维佳管道发展有限公司 in China), a PRC company, which is a wholly-owned subsidiary of ZK Pipe;
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Zhejiang Zhengkang Industrial Co., Ltd. (“Zhejiang Zhengkang”) (also referred to as 浙江正康实业股份有限公司 in China), a PRC company, 99% of which is owned by Wenzhou Weijia;
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Wenzhou Zhengfeng Industry and Trade Co., Ltd. (“Wenzhou Zhengfeng”) (also referred to as 温州正丰工贸有限公司 in China), a PRC company, which is a wholly-owned subsidiary of Zhejiang Zhengkang; and
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Wenzhou Zhenglong Ecommerce Co., Ltd. (“Zhenglong Ecommerce”) (also referred to as 温州正隆电子商务有限公司 in China), a PRC company, 90% of which is owned by of Zhejiang Zhengkang.
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We have relied on statistics
provided by a variety of publicly-available sources regarding China’s expectations of growth. We did not, directly or indirectly,
sponsor or participate in the publication of such materials, and these materials are not incorporated in this prospectus other
than to the extent specifically cited in this prospectus. We have sought to provide current information in this prospectus and
believe that the statistics provided in this prospectus remain up-to-date and reliable, and these materials are not incorporated
in this prospectus other than to the extent specifically cited in this prospectus.
ABOUT
THE COMPANY
Overview
We are a manufacturer
and engineer of high-performance stainless steel products for projects that require sophisticated water or gas pipeline systems.
We cater our expertise and products to infrastructure projects by urban planners, real estate developers, local governments and
municipalities to bring communities reliable and durable gas and water transmission systems. Our products including double-press
thin-walled stainless steel tubes and fittings, carbon steel tubes and fittings and single-press tubes and fittings, are sold predominately
in China, but are also exported and distributed in Europe and Southeast Asia.
Further details concerning
our business, including information with respect to our assets, operations and development history, are provided in our Annual
Report on Form 20-F and the other documents incorporated by reference into this prospectus. See “Documents Incorporated
by Reference.” You are encouraged to thoroughly review the documents incorporated by reference into this prospectus as they
contain important information concerning our business and our prospects.
Our principal executive
offices are located at c/o Zhejiang Zhengkang Industrial Co., Ltd., No. 678 Dingxiang Road, Binhai Industrial Park, Economic &
Technology Development Zone, Wenzhou, Zhejiang Province, People’s Republic of China 325025. The telephone number of our principal
executive offices is +86-0577-8685-2999. Our registered agent in the British Virgin Islands is Overseas Management Company
Trust (B.V.I.) Ltd. Our registered office and our registered agent’s office in the British Virgin Islands are both at OMC
Chambers, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands. Our registered agent in the United States is Vcorp Agent
Services, Inc., with its office located at 25 Robert Pitt Drive, Suite 204 Monsey, NY 10952.
Below is a chart illustrating our current corporate
structure:
We are an “emerging
growth company,” as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company
until the earlier of (1) the last day of the fiscal year following the fifth anniversary of the completion of our initial
public offering equity securities, (2) the last day of the fiscal year in which we have total annual gross revenue of at least
$1.07 billion, (3) the last day of the fiscal year in which we are deemed to be a large accelerated filer, which will occur
when the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the end of the second quarter of
any fiscal year, or (4) the date on which we have issued more than an aggregate of $1.0 billion in non-convertible debt during
the prior three-year period.
RISK
FACTORS
Investing in our securities
involves risks. Before investing in any securities offered pursuant to this prospectus, you should carefully consider the risk
factors and uncertainties set forth under the heading “Item 3.D. Risk Factors” in our Annual
Report, as amended, on Form 20-F for the year ended September 30, 2018, which is incorporated in this prospectus
by reference, as updated by our subsequent filings under the Exchange Act and, if applicable, in any accompanying prospectus supplement
subsequently filed relating to a specific offering or sale.
SPECIAL NOTICE REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus contains
forward-looking statements. All statements contained in this prospectus other than statements of historical fact, including statements
regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future
operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,”
“continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended
to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and
projections about future events and trends that we believe may affect our financial condition, results of operations, business
strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are
subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section.
Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible
for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements
we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this prospectus
may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking
statements.
You should not rely
upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking
statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements
are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable
law, we undertake no duty to update any of these forward-looking statements after the date of this prospectus or to conform these
statements to actual results or revised expectations.
EXCHANGE
RATE DATA
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).
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High
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Low
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Period End
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Average
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2013
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6.2438
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6.0537
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6.0537
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|
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6.1478
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2014
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|
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6.2591
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|
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|
6.0402
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|
|
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6.2046
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|
|
|
6.1620
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2015
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|
|
6.4896
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|
|
|
6.1870
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|
|
|
6.4778
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|
|
|
6.2827
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2016
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|
|
6.9580
|
|
|
|
6.4480
|
|
|
|
6.9430
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|
|
|
6.6400
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2017
|
|
|
6.9575
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|
|
|
6.4773
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|
|
|
6.5063
|
|
|
|
6.7569
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|
2018
|
|
|
6.9737
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|
|
|
6.2649
|
|
|
|
6.8755
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|
|
|
6.6090
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|
January
|
|
|
6.5263
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|
|
|
6.2841
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|
|
|
6.3990
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|
|
|
6.4727
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|
February
|
|
|
6.3471
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|
|
|
6.2649
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|
|
|
6.3280
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|
|
|
6.3183
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|
March
|
|
|
6.3565
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|
|
|
6.2685
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|
|
|
6.2726
|
|
|
|
6.3174
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|
April
|
|
|
6.3340
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|
|
|
6.2655
|
|
|
|
6.3325
|
|
|
|
6.2967
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|
May
|
|
|
6.4175
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|
|
|
6.3325
|
|
|
|
6.4096
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|
|
|
6.3701
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|
June
|
|
|
6.6235
|
|
|
|
6.3850
|
|
|
|
6.6171
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|
|
|
6.4651
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|
July
|
|
|
6.8102
|
|
|
|
6.6123
|
|
|
|
6.8038
|
|
|
|
6.7164
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|
August
|
|
|
6.9330
|
|
|
|
6.8018
|
|
|
|
6.8300
|
|
|
|
6.8453
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|
September
|
|
|
6.8880
|
|
|
|
6.8270
|
|
|
|
6.8680
|
|
|
|
6.8551
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|
October
|
|
|
6.9737
|
|
|
|
6.8680
|
|
|
|
6.9737
|
|
|
|
6.9191
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|
November
|
|
|
6.9558
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|
|
|
6.8894
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|
|
|
6.9558
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|
|
|
6.9367
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|
December
|
|
|
6.9077
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|
|
|
6.8343
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|
|
|
6.8755
|
|
|
|
6.8837
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|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
|
|
|
6.8708
|
|
|
|
6.6958
|
|
|
|
6.6958
|
|
|
|
6.7863
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|
February
|
|
|
6.7907
|
|
|
|
6.6822
|
|
|
|
6.6912
|
|
|
|
6.7367
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|
March
|
|
|
6.7381
|
|
|
|
6.6916
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|
|
|
6.7112
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|
|
|
6.7119
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CAPITALIZATION AND
INDEBTNESS
Our capitalization
and indebtedness will be set forth in a prospectus supplement or in a report on Form 6-K subsequently furnished to the SEC
and specifically incorporated herein by reference.
USE
OF PROCEEDS
Unless we otherwise
indicate in a prospectus supplement, we currently intend to use the net proceeds from the sale of our securities for horizontal
acquisition to increase market share and work capital.
More detailed information
regarding the use of proceeds from the sale of securities, including any determinable milestones at the applicable time, will be
described in any applicable prospectus supplement. We may also, from time to time, issue securities otherwise than pursuant to
a prospectus supplement to this prospectus.
DIVIDEND
POLICY
Our dividend policy
is set forth under the heading “Item 8.A. Consolidated Statements and Other Financial Information” in our Annual
Report, as amended, on Form 20-F for the year ended September 30, 2018, which is incorporated in this prospectus
by reference, as updated by our subsequent filings under the Exchange Act.
OFFER
AND LISTING DETAILS
We may offer and issue
from time to time ordinary shares, share purchase contracts, share purchase units, warrants, debt securities, rights or units,
or any combination thereof, up to an aggregate initial offering price of up to $50,000,000 in one or more transactions under this
shelf prospectus. The price of securities offered will depend on a number of factors that may be relevant at the time of offer.
See “Plan of Distribution.”
The ordinary shares
have been listed on the Nasdaq Capital Market under the symbol “ZKIN” since September 1, 2017.
The following tables
sets forth, for the periods indicated, the high and low trading prices of the ordinary shares as reported on the Nasdaq Capital
Market prior to the filing of this prospectus.
Ordinary Shares (symbol: “ZKIN”)
Nasdaq
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Market Price Per Share
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High
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Low
|
|
Quarterly:
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|
|
|
|
|
|
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September 1, 2017 to September 30, 2017
|
|
$
|
10.50
|
|
|
$
|
7.50
|
|
October 1, 2017 to December 31, 2017
|
|
$
|
16.00
|
|
|
$
|
6.70
|
|
January 1, 2018 to March 30, 2018
|
|
$
|
12.85
|
|
|
$
|
6.55
|
|
April 1, 2018 to May 31, 2018
|
|
$
|
7.51
|
|
|
$
|
3.17
|
|
June 1, 2018 to September 30, 2018
|
|
$
|
4.73
|
|
|
$
|
2.67
|
|
October 1, 2018 to December 31, 2018
|
|
$
|
3.69
|
|
|
$
|
1.25
|
|
January 1, 2019 to March 31, 2019
|
|
$
|
4.18
|
|
|
$
|
1.28
|
|
DESCRIPTION
OF SHARES
Ordinary Shares
ZK International was
incorporated on May 13, 2015 under the BVI Act as a company limited by shares. We are authorized to issue 50,000,000 ordinary
shares of a single class, with no par value. As of September 30, 2018, the date of the most recent audited balance sheet included
in our financial statements, there were 16,528,037 ordinary shares issued and outstanding. As of March 31, 2019, there were
16,558,037 ordinary shares issued and outstanding. We issued 74,784 warrants to the underwriter in our initial public offering
that was closed on September 1, 2017. The warrants are exercisable at $5.00 per share for a period of five years starting
six months after the closing of the IPO. As of March 31, 2019, there were 74,784 ordinary shares issuable upon exercise of
outstanding warrants.
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.
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.
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.
Transfer Agent
Our transfer agent
for our ordinary shares is Securities Transfer Corporation, 2901 N Dallas Parkway, Suite 380, Plano, Texas 75093, and its
telephone number is (469) 633-0101.
Distributions
The holders of our
ordinary shares are entitled to such dividends or other distributions as may be authorized 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
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.
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.
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:
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amend our memorandum of association to increase or decrease the maximum number of shares we are authorized to issue;
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subject to our memorandum of association, divide our authorized and issued shares into a larger number of shares; and
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subject to our memorandum of association, combine our authorized and issued shares into a smaller number of shares.
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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. See “Where You Can
Find Additional Information.”
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.
DESCRIPTION OF WARRANTS
The following description,
together with the additional information we may include in any applicable prospectus supplements, summarizes the material terms
and provisions of the warrants that we may offer under this prospectus and the related warrant agreements and warrant certificates.
While the terms summarized below will apply generally to any warrants that we may offer under this prospectus, we will describe
the particular terms of any series of warrants that we may offer in more detail in the applicable prospectus supplement. If we
indicate in the prospectus supplement, the terms of any warrants offered under that prospectus supplement may differ from the terms
described below. However, no prospectus supplement shall fundamentally change the terms that are set forth in this prospectus or
offer a security that is not registered and described in this prospectus at the time of its effectiveness. Specific warrant agreements
will contain additional important terms and provisions and will be incorporated by reference as an exhibit to the registration
statement that includes this prospectus or as an exhibit to a report filed under the Exchange Act.
General
We may issue warrants
that entitle the holder to purchase ordinary shares, debt securities or any combination thereof. We may issue warrants independently
or together with ordinary shares, debt securities or any combination thereof, and the warrants may be attached to or separate from
these securities.
We will describe in
the applicable prospectus supplement the terms of the series of warrants, including:
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the offering price and aggregate number of warrants offered;
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the currency for which the warrants may be purchased, if not United States dollars;
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if applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued with each such security or each principal amount of such security;
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if applicable, the date on and after which the warrants and the related securities will be separately transferable;
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in the case of warrants to purchase ordinary shares, the number of ordinary shares purchasable upon the exercise of one warrant and the price at which these shares may be purchased upon such exercise;
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in the case of warrants to purchase debt securities, the principal amount of debt securities purchasable upon exercise of one warrant and the price at, and currency, if not United States dollars, in which, this principal amount of debt securities may be purchased upon such exercise;
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the effect of any merger, consolidation, sale or other disposition of our business on the warrant agreement and the warrants;
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the terms of any rights to redeem or call the warrants;
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any provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the warrants;
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the dates on which the right to exercise the warrants will commence and expire;
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the manner in which the warrant agreement and warrants may be modified;
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federal income tax consequences of holding or exercising the warrants;
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the terms of the securities issuable upon exercise of the warrants; and
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any other specific terms, preferences, rights or limitations of or restrictions on the warrants.
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Before exercising their
warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise, including:
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in the case of warrants to purchase debt securities, the right to receive payments of principal of, or premium, if any, or interest on, the debt securities purchasable upon exercise or to enforce covenants in the applicable indenture; or
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in the case of warrants to purchase our ordinary shares, the right to receive dividends, if any, or, payments upon our liquidation, dissolution or winding up or to exercise voting rights, if any.
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Exercise of Warrants
Each warrant will entitle
the holder to purchase the securities that we specify in the applicable prospectus supplement at the exercise price that we describe
in the applicable prospectus supplement. Unless we otherwise specify in the applicable prospectus supplement, holders of the warrants
may exercise the warrants at any time up to the specified time on the expiration date that we set forth in the applicable prospectus
supplement. After the close of business on the expiration date, unexercised warrants will become void.
Holders of the warrants
may exercise the warrants by delivering the warrant certificate representing the warrants to be exercised together with specified
information, and paying the required amount to the warrant agent in immediately available funds, as provided in the applicable
prospectus supplement. We will set forth on the reverse side of the warrant certificate and in the applicable prospectus supplement
the information that the holder of the warrant will be required to deliver to the warrant agent.
Upon receipt of the
required payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant
agent or any other office indicated in the applicable prospectus supplement, we will issue and deliver the securities purchasable
upon such exercise. If fewer than all of the warrants represented by the warrant certificate are exercised, then we will issue
a new warrant certificate for the remaining amount of warrants. If we so indicate in the applicable prospectus supplement, holders
of the warrants may surrender securities as all or part of the exercise price for warrants.
Enforceability of Rights by Holders
of Warrants
Each warrant agent
will act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship of agency
or trust with any holder of any warrant. A single bank or trust company may act as warrant agent for more than one issue of warrants.
A warrant agent will have no duty or responsibility in case of any default by us under the applicable warrant agreement or warrant,
including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder
of a warrant may, without the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal
action its right to exercise, and receive the securities purchasable upon exercise of, its warrants.
Warrant Agreement Will Not Be Qualified
Under Trust Indenture Act
No warrant agreement
will be qualified as an indenture, and no warrant agent will be required to qualify as a trustee, under the Trust Indenture Act.
Therefore, holders of warrants issued under a warrant agreement will not have the protection of the Trust Indenture Act with respect
to their warrants.
Modification of the Warrant Agreement
The warrant agreements
may permit us and the warrant agent, if any, without the consent of the warrant holders, to supplement or amend the agreement in
the following circumstances:
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to cure any ambiguity;
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to correct or supplement any provision which may be defective or inconsistent with any other provisions; or
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to add new provisions regarding matters or questions that we and the warrant agent may deem necessary or desirable and which do not adversely affect the interests of the warrant holders.
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DESCRIPTION OF DEBT SECURITIES
As used in this prospectus,
debt securities mean the debentures, notes, bonds and other evidences of indebtedness that we may issue from time to time. The
debt securities may be either secured or unsecured and will either be senior debt securities or subordinated debt securities. The
debt securities will be issued under one or more separate indentures between us and a trustee to be specified in an accompanying
prospectus supplement. Senior debt securities will be issued under a new senior indenture. Subordinated debt securities will be
issued under a subordinated indenture. Together, the senior indentures and the subordinated indentures are sometimes referred to
in this prospectus as the indentures. This prospectus, together with the applicable prospectus supplement, will describe the terms
of a particular series of debt securities.
The statements and
descriptions in this prospectus or in any prospectus supplement regarding provisions of the indentures and debt securities are
summaries thereof, do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of
the provisions of the indentures (and any amendments or supplements we may enter into from time to time which are permitted under
each indenture) and the debt securities, including the definitions therein of certain terms.
General
Unless otherwise specified
in a prospectus supplement, the debt securities will be direct unsecured obligations of the Hebron Technology Co., Ltd. The
senior debt securities will rank equally with any of our other senior and unsubordinated debt. The subordinated debt securities
will be subordinate and junior in right of payment to any senior indebtedness.
Unless otherwise specified
in a prospectus supplement, the indentures do not limit the aggregate principal amount of debt securities that we may issue and
provide that we may issue debt securities from time to time at par or at a discount, and in the case of the new indentures, if
any, in one or more series, with the same or various maturities. Unless indicated in a prospectus supplement, we may issue additional
debt securities of a particular series without the consent of the holders of the debt securities of such series outstanding at
the time of the issuance. Any such additional debt securities, together with all other outstanding debt securities of that series,
will constitute a single series of debt securities under the applicable indenture.
Each prospectus supplement
will describe the terms relating to the specific series of debt securities being offered. These terms will include some or all
of the following:
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the title of the debt securities and whether they are subordinated debt securities or senior debt securities;
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any limit on the aggregate principal amount of the debt securities;
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the ability to issue additional debt securities of the same series;
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the price or prices at which we will sell the debt securities;
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the maturity date or dates of the debt securities on which principal will be payable;
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the rate or rates of interest, if any, which may be fixed or variable, at which the debt securities will bear interest, or the method of determining such rate or rates, if any;
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the date or dates from which any interest will accrue or the method by which such date or dates will be determined;
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the right, if any, to extend the interest payment periods and the duration of any such deferral period, including the maximum consecutive period during which interest payment periods may be extended;
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whether the amount of payments of principal of (and premium, if any) or interest on the debt securities may be determined with reference to any index, formula or other method, such as one or more currencies, commodities, equity indices or other indices, and the manner of determining the amount of such payments;
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the dates on which we will pay interest on the debt securities and the regular record date for determining who is entitled to the interest payable on any interest payment date;
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the place or places where the principal of (and premium, if any) and interest on the debt securities will be payable, where any securities may be surrendered for registration of transfer, exchange or conversion, as applicable, and notices and demands may be delivered to or upon us pursuant to the indenture;
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if we possess the option to do so, the periods within which and the prices at which we may redeem the debt securities, in whole or in part, pursuant to optional redemption provisions, and the other terms and conditions of any such provisions;
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our obligation, if any, to redeem, repay or purchase debt securities by making periodic payments to a sinking fund or through an analogous provision or at the option of holders of the debt securities, and the period or periods within which and the price or prices at which we will redeem, repay or purchase the debt securities, in whole or in part, pursuant to such obligation, and the other terms and conditions of such obligation;
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the denominations in which the debt securities will be issued, if other than denominations of $1,000 and integral multiples of $1,000;
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the portion, or methods of determining the portion, of the principal amount of the debt securities which we must pay upon the acceleration of the maturity of the debt securities in connection with an event of default (as described below), if other than the full principal amount;
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the currency, currencies or currency unit in which we will pay the principal of (and premium, if any) or interest, if any, on the debt securities, if not United States dollars;
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provisions, if any, granting special rights to holders of the debt securities upon the occurrence of specified events;
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any deletions from, modifications of or additions to the events of default or our covenants with respect to the applicable series of debt securities, and whether or not such events of default or covenants are consistent with those contained in the applicable indenture;
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any limitation on our ability to incur debt, redeem shares, sell our assets or other restrictions;
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the application, if any, of the terms of the indenture relating to defeasance and covenant defeasance (which terms are described below) to the debt securities;
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whether the subordination provisions summarized below or different subordination provisions will apply to the debt securities;
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the terms, if any, upon which the holders may convert or exchange the debt securities into or for our ordinary shares or other securities or property;
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whether any of the debt securities will be issued in global form and, if so, the terms and conditions upon which global debt securities may be exchanged for certificated debt securities;
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any change in the right of the trustee or the requisite holders of debt securities to declare the principal amount thereof due and payable because of an event of default;
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the depository for global or certificated debt securities;
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any special tax implications of the debt securities;
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any foreign tax consequences applicable to the debt securities, including any debt securities denominated and made payable, as described in the prospectus supplements, in foreign currencies, or units based on or related to foreign currencies;
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any trustees, authenticating or paying agents, transfer agents or registrars, or other agents with respect to the debt securities;
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any other terms of the debt securities not inconsistent with the provisions of the indentures, as amended or supplemented;
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to whom any interest on any debt security shall be payable, if other than the person in whose name the security is registered, on the record date for such interest, the extent to which, or the manner in which, any interest payable on a temporary global debt security will be paid if other than in the manner provided in the applicable indenture;
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if the principal of or any premium or interest on any debt securities of the series is to be payable in one or more currencies or currency units other than as stated, the currency, currencies or currency units in which it shall be paid and the periods within and terms and conditions upon which such election is to be made and the amounts payable (or the manner in which such amount shall be determined);
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the portion of the principal amount of any securities of the series which shall be payable upon declaration of acceleration of the maturity of the debt securities pursuant to the applicable indenture if other than the entire principal amount; and
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if the principal amount payable at the stated maturity of any debt security of the series will not be determinable as of any one or more dates prior to the stated maturity, the amount which shall be deemed to be the principal amount of such securities as of any such date for any purpose, including the principal amount thereof which shall be due and payable upon any maturity other than the stated maturity or which shall be deemed to be outstanding as of any date prior to the stated maturity (or, in any such case, the manner in which such amount deemed to be the principal amount shall be determined).
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Unless otherwise specified
in the applicable prospectus supplement, the debt securities will not be listed on any securities exchange and will be issued in
fully-registered form without coupons.
Debt securities may
be sold at a substantial discount below their stated principal amount, bearing no interest or interest at a rate which at the time
of issuance is below market rates. The applicable prospectus supplement will describe the federal income tax consequences and special
considerations applicable to any such debt securities. The debt securities may also be issued as indexed securities or securities
denominated in foreign currencies, currency units or composite currencies, as described in more detail in the prospectus supplement
relating to any of the particular debt securities. The prospectus supplement relating to specific debt securities will also describe
any special considerations and certain additional tax considerations applicable to such debt securities.
Subordination
The prospectus supplement
relating to any offering of subordinated debt securities will describe the specific subordination provisions. However, unless otherwise
noted in the prospectus supplement, subordinated debt securities will be subordinate and junior in right of payment to any existing
senior indebtedness.
Unless otherwise specified
in the applicable prospectus supplement, under the subordinated indenture, “senior indebtedness” means all amounts
due on obligations in connection with any of the following, whether outstanding at the date of execution of the subordinated indenture,
or thereafter incurred or created:
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the principal of (and premium, if any) and interest due on our indebtedness for borrowed money and indebtedness evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);
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all of our capital lease obligations or attributable debt (as defined in the indentures) in respect of sale and leaseback transactions;
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all obligations representing the balance deferred and unpaid of the purchase price of any property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto, except any such balance that constitutes an accrued expense or trade payable or any similar obligation to trade creditors;
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all of our obligations in respect of interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements; other agreements or arrangements designed to manage interest rates or interest rate risk; and other agreements or arrangements designed to protect against fluctuations in currency exchange rates or commodity prices;
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all obligations of the types referred to above of other persons for the payment of which we are responsible or liable as obligor, guarantor or otherwise; and
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all obligations of the types referred to above of other persons secured by any lien on any property or asset of ours (whether or not such obligation is assumed by us).
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However, senior indebtedness
does not include:
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any indebtedness which expressly provides that such indebtedness shall not be senior in right of payment to the subordinated debt securities, or that such indebtedness shall be subordinated to any other of our indebtedness, unless such indebtedness expressly provides that such indebtedness shall be senior in right of payment to the subordinated debt securities;
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any of our obligations to our subsidiaries or of a subsidiary guarantor to us or any other of our other subsidiaries;
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any liability for federal, state, local or other taxes owed or owing by us or any subsidiary guarantor,
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any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities);
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any obligations with respect to any capital stock;
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any indebtedness incurred in violation of the indenture, provided that indebtedness under our credit facilities will not cease to be senior indebtedness under this bullet point if the lenders of such indebtedness obtained an officer’s certificate as of the date of incurrence of such indebtedness to the effect that such indebtedness was permitted to be incurred by the indenture; and
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any of our indebtedness in respect of the subordinated debt securities.
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Senior indebtedness
shall continue to be senior indebtedness and be entitled to the benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of such senior indebtedness.
Unless otherwise noted
in an accompanying prospectus supplement, if we default in the payment of any principal of (or premium, if any) or interest on
any senior indebtedness when it becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration
or otherwise, then, unless and until such default is cured or waived or ceases to exist, we will make no direct or indirect payment
(in cash, property, securities, by set-off or otherwise) in respect of the principal of or interest on the subordinated debt securities
or in respect of any redemption, retirement, purchase or other requisition of any of the subordinated debt securities.
In the event of the
acceleration of the maturity of any subordinated debt securities, the holders of all senior debt securities outstanding at the
time of such acceleration, subject to any security interest, will first be entitled to receive payment in full of all amounts due
on the senior debt securities before the holders of the subordinated debt securities will be entitled to receive any payment of
principal (and premium, if any) or interest on the subordinated debt securities.
If any of the following
events occurs, we will pay in full all senior indebtedness before we make any payment or distribution under the subordinated debt
securities, whether in cash, securities or other property, to any holder of subordinated debt securities:
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any dissolution or winding-up or liquidation or reorganization of ZK International, whether voluntary or involuntary or in bankruptcy,
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insolvency or receivership;
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any general assignment by us for the benefit of creditors; or
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any other marshaling of our assets or liabilities.
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In such event,
any payment or distribution under the subordinated debt securities, whether in cash, securities or other property, which
would otherwise (but for the subordination provisions) be payable or deliverable in respect of the subordinated debt
securities, will be paid or delivered directly to the holders of senior indebtedness in accordance with the priorities then
existing among such holders until all senior indebtedness has been paid in full. If any payment or distribution under the
subordinated debt securities is received by the trustee of any subordinated debt securities in contravention of any of the
terms of the subordinated indenture and before all the senior indebtedness has been paid in full, such payment or
distribution will be received in trust for the benefit of, and paid over or delivered and transferred to, the holders of the
senior indebtedness at the time outstanding in accordance with the priorities then existing among such holders for
application to the payment of all senior indebtedness remaining unpaid to the extent necessary to pay all such senior
indebtedness in full.
The subordinated indenture
does not limit the issuance of additional senior indebtedness.
Events of Default, Notice and Waiver
Unless an accompanying
prospectus supplement states otherwise, the following shall constitute “events of default” under the indentures with
respect to each series of debt securities:
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we default for 30 consecutive days in the payment when due of interest on the debt securities;
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we default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on the debt securities;
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our failure to observe or perform any other of our covenants or agreements with respect to such debt securities for 60 days after we receive notice of such failure;
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certain events of bankruptcy, insolvency or reorganization of the ZK International; or
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any other event of default provided with respect to securities of that series.
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Unless an accompanying
prospectus supplement states otherwise, if an event of default with respect to any debt securities of any series outstanding under
either of the indentures shall occur and be continuing, the trustee under such indenture or the holders of at least 25% (or at
least 10%, in respect of a remedy (other than acceleration) for certain events of default relating to the payment of dividends)
in aggregate principal amount of the debt securities of that series outstanding may declare, by notice as provided in the applicable
indenture, the principal amount (or such lesser amount as may be provided for in the debt securities of that series) of all the
debt securities of that series outstanding to be due and payable immediately; provided that, in the case of an event of default
involving certain events in bankruptcy, insolvency or reorganization, acceleration is automatic; and, provided further, that after
such acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount
of the outstanding debt securities of that series may, under certain circumstances, rescind and annul such acceleration if all
events of default, other than the nonpayment of accelerated principal, have been cured or waived. Upon the acceleration of the
maturity of original issue discount securities, an amount less than the principal amount thereof will become due and payable. Reference
is made to the prospectus supplement relating to any original issue discount securities for the particular provisions relating
to acceleration of maturity thereof.
Any past default under
either indenture with respect to debt securities of any series, and any event of default arising therefrom, may be waived by the
holders of a majority in principal amount of all debt securities of such series outstanding under such indenture, except in the
case of (1) default in the payment of the principal of (or premium, if any) or interest on any debt securities of such series
or (2) certain events of default relating to the payment of dividends.
The trustee is required
within 90 days after the occurrence of a default (which is known to the trustee and is continuing), with respect to the debt securities
of any series (without regard to any grace period or notice requirements), to give to the holders of the debt securities of such
series notice of such default.
The trustee, subject
to its duties during default to act with the required standard of care, may require indemnification by the holders of the debt
securities of any series with respect to which a default has occurred before proceeding to exercise any right or power under the
indentures at the request of the holders of the debt securities of such series. Subject to such right of indemnification and to
certain other limitations, the holders of a majority in principal amount of the outstanding debt securities of any series under
either indenture may direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or
exercising any trust or power conferred on the trustee with respect to the debt securities of such series, provided that such direction
shall not be in conflict with any rule of law or with the applicable indenture and the trustee may take any other action deemed
proper by the trustee which is not inconsistent with such direction.
No holder of a debt
security of any series may institute any action against us under either of the indentures (except actions for payment of overdue
principal of (and premium, if any) or interest on such debt security or for the conversion or exchange of such debt security in
accordance with its terms) unless (1) the holder has given to the trustee written notice of an event of default and of the
continuance thereof with respect to the debt securities of such series specifying an event of default, as required under the applicable
indenture, (2) the holders of at least 25% in aggregate principal amount of the debt securities of that series then outstanding
under such indenture shall have requested the trustee to institute such action and offered to the trustee indemnity reasonably
satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request; (3) the trustee
shall not have instituted such action within 60 days of such request and (4) no direction inconsistent with such written request
has been given to the trustee during such 60-day period by the holders of a majority in principal amount of the debt securities
of that series. We are required to furnish annually to the trustee statements as to our compliance with all conditions and covenants
under each indenture.
Discharge, Defeasance and Covenant Defeasance
We may discharge or
defease our obligations under the indenture as set forth below, unless otherwise indicated in the applicable prospectus supplement.
We may discharge certain
obligations to holders of any series of debt securities issued under either the senior indenture or the subordinated indenture
which have not already been delivered to the trustee for cancellation by irrevocably depositing with the trustee money in an amount
sufficient to pay and discharge the entire indebtedness on such debt securities not previously delivered to the trustee for cancellation,
for principal and any premium and interest to the date of such deposit (in the case of debt securities which have become due and
payable) or to the stated maturity or redemption date, as the case may be, and we or, if applicable, any guarantor, have paid all
other sums payable under the applicable indenture.
If indicated in the
applicable prospectus supplement, we may elect either (1) to defease and be discharged from any and all obligations with respect
to the debt securities of or within any series (except in all cases as otherwise provided in the relevant indenture) (“legal
defeasance”) or (2) to be released from our obligations with respect to certain covenants applicable to the debt securities
of or within any series (“covenant defeasance”), upon the deposit with the relevant indenture trustee, in trust for
such purpose, of money and/or government obligations which through the payment of principal and interest in accordance with their
terms will provide money in an amount sufficient to pay the principal of (and premium, if any) or interest on such debt securities
to maturity or redemption, as the case may be, and any mandatory sinking fund or analogous payments thereon. As a condition to
legal defeasance or covenant defeasance, we must deliver to the trustee an opinion of counsel to the effect that the holders of
such debt securities will not recognize income, gain or loss for federal income tax purposes as a result of such legal defeasance
or covenant defeasance and will be subject to federal income tax on the same amounts and in the same manner and at the same times
as would have been the case if such legal defeasance or covenant defeasance had not occurred. Such opinion of counsel, in the case
of legal defeasance under clause (i) above, must refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable federal income tax law occurring after the date of the relevant indenture. In addition, in the case of either
legal defeasance or covenant defeasance, we shall have delivered to the trustee (1) if applicable, an officer’s certificate
to the effect that the relevant debt securities exchange(s) have informed us that neither such debt securities nor any other
debt securities of the same series, if then listed on any securities exchange, will be delisted as a result of such deposit and
(2) an officer’s certificate and an opinion of counsel, each stating that all conditions precedent with respect to such
legal defeasance or covenant defeasance have been complied with.
We may exercise our
defeasance option with respect to such debt securities notwithstanding our prior exercise of our covenant defeasance option.
Modification and Waiver
Under the indentures,
unless an accompanying prospectus supplement states otherwise, we and the applicable trustee may supplement the indentures for
certain purposes which would not materially adversely affect the interests or rights of the holders of debt securities of a series
without the consent of those holders. We and the applicable trustee may also modify the indentures or any supplemental indenture
in a manner that affects the interests or rights of the holders of debt securities with the consent of the holders of at least
a majority in aggregate principal amount of the outstanding debt securities of each affected series issued under the indenture.
However, the indentures require the consent of each holder of debt securities that would be affected by any modification which
would:
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reduce the principal amount of debt securities whose holders must consent to an amendment, supplement or waiver;
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reduce the principal of or change the fixed maturity of any debt security or, except as provided in any prospectus supplement, alter or waive any of the provisions with respect to the redemption of the debt securities;
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reduce the rate of or change the time for payment of interest, including default interest, on any debt security;
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waive a default or event of default in the payment of principal of or interest or premium, if any, on, the debt securities (except a rescission of acceleration of the debt securities by the holders of at least a majority in aggregate principal amount of the then outstanding debt securities and a waiver of the payment default that resulted from such acceleration);
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make any debt security payable in money other than that stated in the debt securities;
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make any change in the provisions of the applicable indenture relating to waivers of past defaults or the rights of holders of the debt securities to receive payments of principal of, or interest or premium, if any, on, the debt securities;
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waive a redemption payment with respect to any debt security (except as otherwise provided in the applicable prospectus supplement);
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except in connection with an offer by us to purchase all debt securities, (1) waive certain events of default relating to the payment of dividends or (2) amend certain covenants relating to the payment of dividends and the purchase or redemption of certain equity interests;
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make any change to the subordination or ranking provisions of the indenture or the related definitions that adversely affect the rights of any holder; or
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make any change in the preceding amendment and waiver provisions.
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The indentures permit
the holders of at least a majority in aggregate principal amount of the outstanding debt securities of any series issued under
the indenture which is affected by the modification or amendment to waive our compliance with certain covenants contained in the
indentures.
Payment and Paying Agents
Unless otherwise indicated
in the applicable prospectus supplement, payment of interest on a debt security on any interest payment date will be made to the
person in whose name a debt security is registered at the close of business on the record date for the interest.
Unless otherwise indicated
in the applicable prospectus supplement, principal, interest and premium on the debt securities of a particular series will be
payable at the office of such paying agent or paying agents as we may designate for such purpose from time to time. Notwithstanding
the foregoing, at our option, payment of any interest may be made by check mailed to the address of the person entitled thereto
as such address appears in the security register.
Unless otherwise indicated
in the applicable prospectus supplement, a paying agent designated by us will act as paying agent for payments with respect to
debt securities of each series. All paying agents initially designated by us for the debt securities of a particular series will
be named in the applicable prospectus supplement. We may at any time designate additional paying agents or rescind the designation
of any paying agent or approve a change in the office through which any paying agent acts, except that we will be required to maintain
a paying agent in each place of payment for the debt securities of a particular series.
All moneys paid by
us to a paying agent for the payment of the principal, interest or premium on any debt security which remain unclaimed at the end
of two years after such principal, interest or premium has become due and payable will be repaid to us upon request, and the holder
of such debt security thereafter may look only to us for payment thereof.
Denominations, Registrations and Transfer
Unless an accompanying
prospectus supplement states otherwise, debt securities will be represented by one or more global certificates registered in the
name of a nominee for The Depository Trust Company, or DTC. In such case, each holder’s beneficial interest in the global
securities will be shown on the records of DTC and transfers of beneficial interests will only be effected through DTC’s
records.
A holder of debt securities
may only exchange a beneficial interest in a global security for certificated securities registered in the holder’s name
if:
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we deliver to the trustee notice from DTC that it is unwilling or unable to continue to act as depository or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor depositary is not appointed by us within 120 days after the date of such notice from DTC;
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we in our sole discretion determine that the debt securities (in whole but not in part) should be exchanged for definitive debt securities and deliver a written notice to such effect to the trustee; or
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there has occurred and is continuing a default or event of default with respect to the debt securities.
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If debt securities
are issued in certificated form, they will only be issued in the minimum denomination specified in the accompanying prospectus
supplement and integral multiples of such denomination. Transfers and exchanges of such debt securities will only be permitted
in such minimum denomination. Transfers of debt securities in certificated form may be registered at the trustee’s corporate
office or at the offices of any paying agent or trustee appointed by us under the indentures. Exchanges of debt securities for
an equal aggregate principal amount of debt securities in different denominations may also be made at such locations.
Governing Law
The indentures and
debt securities will be governed by, and construed in accordance with, the laws of the State of New York, without regard to its
principles of conflicts of laws, except to the extent the Trust Indenture Act is applicable or as otherwise agreed to by the parties
thereto.
Trustee
The trustee or trustees
under the indentures will be named in any applicable prospectus supplement.
Conversion or Exchange Rights
The prospectus supplement
will describe the terms, if any, on which a series of debt securities may be convertible into or exchangeable for our ordinary
shares or other debt securities. These terms will include provisions as to whether conversion or exchange is mandatory, at the
option of the holder or at our option. These provisions may allow or require the number of shares of our ordinary shares or other
securities to be received by the holders of such series of debt securities to be adjusted. Any such conversion or exchange will
comply with applicable British Virgin Islands law and our Memorandum and Articles of Association.
DESCRIPTION OF
UNITS
We may issue units
comprising one or more of the other securities described in this prospectus in any combination. Each unit will be issued so that
the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights
and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities
included in the unit may not be held or transferred separately, at any time or at any time before a specified date or occurrence.
The applicable prospectus
supplement may describe:
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the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those securities may be held or transferred separately;
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any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units; and
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whether the units will be issued in fully registered or global form.
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The applicable prospectus
supplement will describe the terms of any units. The preceding description and any description of units in the applicable prospectus
supplement does not purport to be complete and is subject to and is qualified in its entirety by reference to the unit agreement
and, if applicable, collateral arrangements and depository arrangements relating to such units.
DESCRIPTION OF
SHARE PURCHASE CONTRACTS AND SHARE PURCHASE UNITS
We may issue share
purchase contracts, including contracts obligating holders to purchase from us, and obligating us to sell to the holders, a specified
number of ordinary shares or other securities registered hereunder at a future date or dates, which we refer to in this prospectus
as “share purchase contracts.” The price per share of the securities and the number of shares of the securities may
be fixed at the time the share purchase contracts are issued or may be determined by reference to a specific formula set forth
in the share purchase contracts.
The share purchase
contracts may be issued separately or as part of units consisting of a share purchase contract and debt securities, warrants, other
securities registered hereunder or debt obligations of third parties, including U.S. treasury securities, securing the holders’
obligations to purchase the securities under the share purchase contracts, which we refer to herein as “share purchase units.”
The share purchase contracts may require holders to secure their obligations under the share purchase contracts in a specified
manner. The share purchase contracts also may require us to make periodic payments to the holders of the share purchase units or
vice versa, and those payments may be unsecured or refunded on some basis.
The share purchase
contracts, and, if applicable, collateral or depositary arrangements, relating to the share purchase contracts or share purchase
units, will be filed with the SEC in connection with the offering of share purchase contracts or share purchase units. The prospectus
supplement relating to a particular issue of share purchase contracts or share purchase units will describe the terms of those
share purchase contracts or share purchase units, including the following:
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if applicable, a discussion of material tax considerations; and
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any other information we think is important about the share purchase contracts or the share purchase units.
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DESCRIPTION OF
RIGHTS
We may issue rights
to purchase ordinary shares that we may offer to our securityholders. The rights may or may not be transferable by the persons
purchasing or receiving the rights. In connection with any rights offering, we may enter into a standby underwriting or other arrangement
with one or more underwriters or other persons pursuant to which such underwriters or other persons would purchase any offered
securities remaining unsubscribed for after such rights offering. Each series of rights will be issued under a separate rights
agent agreement to be entered into between us and a bank or trust company, as rights agent, that we will name in the applicable
prospectus supplement. The rights agent will act solely as our agent in connection with the rights and will not assume any obligation
or relationship of agency or trust for or with any holders of rights certificates or beneficial owners of rights.
The prospectus supplement
relating to any rights that we offer will include specific terms relating to the offering, including, among other matters:
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the date of determining the securityholders entitled to the rights distribution;
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the aggregate number of rights issued and the aggregate number of ordinary shares purchasable upon exercise of the rights;
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the conditions to completion of the rights offering;
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the date on which the right to exercise the rights will commence and the date on which the rights will expire; and
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applicable tax considerations.
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Each right would entitle
the holder of the rights to purchase for cash the principal amount of debt securities or ordinary shares at the exercise price
set forth in the applicable prospectus supplement. Rights may be exercised at any time up to the close of business on the expiration
date for the rights provided in the applicable prospectus supplement. After the close of business on the expiration date, all unexercised
rights will become void.
If less than all of
the rights issued in any rights offering are exercised, we may offer any unsubscribed securities directly to persons other than
our security holders, to or through agents, underwriters or dealers or through a combination of such methods, including pursuant
to standby arrangements, as described in the applicable prospectus supplement.
TAXATION
Information regarding
taxation is set forth under the heading “Item 10.E. Taxation” in our Annual
Report, as amended, on Form 20-F for the year ended September 30, 2018, which is incorporated in this prospectus
by reference, as updated by our subsequent filings under the Exchange Act.
PLAN
OF DISTRIBUTION
We may sell the securities
described in this prospectus through underwriters or dealers, through agents, or directly to one or more purchasers or through
a combination of these methods. The applicable prospectus supplement will describe the terms of the offering of the securities,
including:
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the name or names of any underwriters, if any, and if required, any dealers or agents, and the amount of securities underwritten or purchased by each of them, if any;
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the public offering price or purchase price of the securities from us and the net proceeds to us from the sale of the securities;
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any underwriting discounts and other items constituting underwriters’ compensation;
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any discounts or concessions allowed or re-allowed or paid to dealers; and
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any securities exchange or market on which the securities may be listed.
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We may distribute the securities from time
to time in one or more transactions at:
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a fixed price or prices, which may be changed;
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market prices prevailing at the time of sale;
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varying prices determined at the time of sale related to such prevailing market prices; or
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Only underwriters named
in the prospectus supplement will be underwriters of the securities offered by the prospectus supplement.
If we use underwriters
in the sale, the underwriters will either acquire the securities for their own account and may resell the securities from time
to time in one or more transactions at a fixed public offering price or at varying prices determined at the time of sale, or sell
the Shares on a “best efforts, minimum/maximum basis” when the underwriters agree to do their best to sell the securities
to the public. We may offer the securities to the public through underwriting syndicates represented by managing underwriters or
by underwriters without a syndicate. Any public offering price and any discounts or concessions allowed or re-allowed or paid to
dealers may change from time to time.
If we use a dealer
in the sale of the securities being offered pursuant to this prospectus or any prospectus supplement, the securities will be sold
directly to the dealer, as principal. The dealer may then resell the securities to the public at varying prices to be determined
by the dealer at the time of resale.
Our ordinary shares
are listed on the NASDAQ Capital Market. Unless otherwise specified in the related prospectus supplement, all securities we offer,
other than ordinary shares, will be new issues of securities with no established trading market. Any underwriter may make a market
in these securities, but will not be obligated to do so and may discontinue any market making at any time without notice. We may
apply to list any series of warrants or other securities that we offer on an exchange, but we are not obligated to do so. Therefore,
there may not be liquidity or a trading market for any series of securities.
We may sell the securities
directly or through agents we designate from time to time. We will name any agent involved in the offering and sale of securities
and we will describe any commissions we may pay the agent in the applicable prospectus supplement.
We may authorize agents
or underwriters to solicit offers by institutional investors to purchase securities from us at the public offering price set forth
in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the
future. We will describe the conditions to these contracts and the commissions we must pay for solicitation of these contracts
in the applicable prospectus supplement.
In connection with
the sale of the securities, underwriters, dealers or agents may receive compensation from us or from purchasers of the securities
for whom they act as agents in the form of discounts, concessions or commissions. Underwriters may sell the securities to or through
dealers, and those dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters
or commissions from the purchasers for whom they may act as agents. Underwriters, dealers and agents that participate in the distribution
of the securities, and any institutional investors or others that purchase securities directly and then resell the securities,
may be deemed to be underwriters, and any discounts or commissions received by them from us and any profit on the resale of the
securities by them may be deemed to be underwriting discounts and commissions under the Securities Act.
We may provide agents
and underwriters with indemnification against particular civil liabilities, including liabilities under the Securities Act, or
contribution with respect to payments that the agents or underwriters may make with respect to such liabilities. Agents and underwriters
may engage in transactions with, or perform services for, us in the ordinary course of business.
In addition, we may
enter into derivative transactions with third parties (including the writing of options), or sell securities not covered by this
prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection
with such a transaction, the third parties may, pursuant to this prospectus and the applicable prospectus supplement, sell securities
covered by this prospectus and the applicable prospectus supplement. If so, the third party may use securities borrowed from us
or others to settle such sales and may use securities received from us to close out any related short positions. We may also loan
or pledge securities covered by this prospectus and the applicable prospectus supplement to third parties, who may sell the loaned
securities or, in an event of default in the case of a pledge, sell the pledged securities pursuant to this prospectus and the
applicable prospectus supplement. The third party in such sale transactions will be an underwriter and will be identified in the
applicable prospectus supplement or in a post-effective amendment.
To facilitate an offering
of a series of securities, persons participating in the offering may engage in transactions that stabilize, maintain, or otherwise
affect the market price of the securities. This may include over-allotments or short sales of the securities, which involves the
sale by persons participating in the offering of more securities than have been sold to them by us. In those circumstances, such
persons would cover such over-allotments or short positions by purchasing in the open market or by exercising the over-allotment
option granted to those persons. In addition, those persons may stabilize or maintain the price of the securities by bidding for
or purchasing securities in the open market or by imposing penalty bids, whereby selling concessions allowed to underwriters or
dealers participating in any such offering may be reclaimed if securities sold by them are repurchased in connection with stabilization
transactions. The effect of these transactions may be to stabilize or maintain the market price of the securities at a level above
that which might otherwise prevail in the open market. Such transactions, if commenced, may be discontinued at any time. We make
no representation or prediction as to the direction or magnitude of any effect that the transactions described above, if implemented,
may have on the price of our securities.
EXPENSES
The following table
sets forth the estimated costs and expenses, other than underwriting discounts and commissions, payable by us in connection with
the offering of the securities being registered. All the amounts shown are estimates, except for the SEC registration fee.
SEC registration fee
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$
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6,060
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FINRA fee
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$
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*
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Legal fees and expenses
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$
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*
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Accounting fees and expenses
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$
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*
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Printing fees and expenses
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$
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*
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Miscellaneous
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$
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*
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Total
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$
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*
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* Estimated expenses are not presently
known. The foregoing sets forth the general categories of expenses (other than underwriting discounts and commissions) that the
Company anticipates it will incur in connection with the offering of securities under the registration statement. An estimate of
the aggregate expenses in connection with the issuance and distribution of the securities being offered will be included in the
applicable prospectus supplement.
WHERE
YOU CAN GET MORE INFORMATION
We have filed with
the SEC a registration statement on Form F-3 under the Securities Act with respect to the securities described in this prospectus
and any accompanying prospectus supplement, as applicable. This prospectus and any accompanying prospectus supplement, which constitute
a part of that registration statement, do not contain all of the information set forth in that registration statement and its exhibits.
For further information with respect to us and our securities, you should consult the registration statement and its exhibits.
We are subject to the
informational requirements of the Exchange Act, and, in accordance with the Exchange Act, we also must file reports with, and furnish
other information to, the SEC. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing
the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting
and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required to
publish financial statements as promptly as U.S. companies. However, we file with the SEC an annual report on Form 20-F containing
financial statements audited by an independent registered public accounting firm, and we submit to the SEC, on Form 6-K, unaudited
quarterly financial information.
You may read and copy
any document we file with, or furnish to, the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC also maintains an internet
site (www.sec.gov) that makes available reports and other information that we file or furnish electronically with it.
INCORPORATION
BY REFERENCE
The SEC allows us to
“incorporate by reference” into this prospectus the documents we file with, or furnish to, it, which means that we
can disclose important information to you by referring you to these documents. The information that we incorporate by reference
into this prospectus forms a part of this prospectus, and information that we file later with the SEC automatically updates and
supersedes any information in this prospectus. We incorporate by reference into this prospectus the documents listed below:
All documents filed
by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this prospectus and prior
to the termination of the offering of the securities offered by this prospectus are incorporated by reference into this prospectus
and form part of this prospectus from the date of filing or furnishing of these documents. Any documents that we furnish to the
SEC on Form 6-K subsequent to the date of this prospectus will be incorporated by reference into this prospectus only to the
extent specifically set forth in the Form 6-K.
Any statement contained
in a document that is incorporated by reference into this prospectus will be deemed to be modified or superseded for the purposes
of this prospectus to the extent that a statement contained in this prospectus, or in any other subsequently filed document which
also is or is deemed to be incorporated by reference into this prospectus, modifies or supersedes that statement. The modifying
or superseding statement does not need to state that it has modified or superseded a prior statement or include any other information
set forth in the document that it modifies or supersedes.
Upon request, we will
provide, without charge, to each person who receives this prospectus, a copy of any or all of the documents incorporated by reference
(other than exhibits to the documents that are not specifically incorporated by reference in the documents). Please direct written
or oral requests for copies to our Corporate Secretary at No. 678 Dingxiang Road, Binhai Industrial Park, Economic &
Technology Development Zone, Wenzhou, Zhejiang Province, People’s Republic of China 325025.
ENFORCEABILITY
OF CIVIL LIABILITIES
We are incorporated
under the laws of the British Virgin Islands with limited liability. We are incorporated in the British Virgin Islands because
of certain benefits associated with being a British Virgin Islands corporation, such as political and economic stability, an effective
judicial system, a favorable tax system, the absence of exchange control or currency restrictions and the availability of professional
and support services. However, the British Virgin Islands has a less developed body of securities laws as compared to the United
States and provides protections for investors to a lesser extent. In addition, British Virgin Islands companies may not have standing
to sue before the federal courts of the United States.
Substantially all of
our assets are located outside the United States. In addition, a majority of our directors and officers are nationals and/or residents
of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the
United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or
such persons or to enforce against them or against us, judgments obtained in United States courts, including judgments predicated
upon the civil liability provisions of the securities laws of the United States or any state thereof.
We have appointed Vcorp
Agent Services, Inc. as our agent to receive service of process with respect to any action brought against us in the United
States District Court for districts in the State of New York under the federal securities laws of the United States or of any State
of the United States or any action brought against us in the Supreme Court of the State of New York under the securities laws of
the State of New York.
There is uncertainty
as to whether the courts of China would (1) recognize or enforce judgments of United States courts obtained against us or
such persons predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or
(2) be competent to hear original actions brought in each respective jurisdiction, against us or such persons predicated upon
the securities laws of the United States or any state thereof.
The recognition and
enforcement of foreign judgments are provided for under the Chinese Civil Procedure Law. Chinese courts may recognize and enforce
foreign judgments in accordance with the requirements of the Chinese Civil Procedure Law based either on treaties between China
and the country where the judgment is made or in reciprocity between jurisdictions. China does not have any treaties or other agreements
with the British Virgin Islands or the United States that provide for the reciprocal recognition and enforcement of foreign judgments.
As a result, it is uncertain whether a Chinese court would enforce a judgment rendered by a court in either of these two jurisdictions.
The United States and
the British Virgin Islands do not have a treaty providing for reciprocal recognition and enforcement of judgments of courts of
the United States in civil and commercial matters and that a final judgment for the payment of money rendered by any general or
state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws,
may not be enforceable in the British Virgin Islands. A final and conclusive judgment obtained in U.S. federal or state courts
under which a sum of money is payable as compensatory damages (i.e., not being a sum claimed by a revenue authority for taxes or
other charges of a similar nature by a governmental authority, or in respect of a fine or penalty or multiple or punitive damages)
may be the subject of an action on a debt in the court of the British Virgin Islands.
MATERIAL CHANGES
Except as otherwise
described in our Annual
Report on Form 20-F for the fiscal year ended September 30, 2018, in our Reports on Form 6-K filed or submitted
under the Exchange Act and incorporated by reference herein and as disclosed in this prospectus, no reportable material changes
have occurred since September 30, 2018.
LEGAL
MATTERS
Ortoli Rosenstadt LLP
is acting as counsel to our company regarding U.S. securities law matters. The current address of Ortoli Rosenstadt LLP is 366
Madison Avenue, 3rd Floor, New York, NY 10017. Mourant Ozannes is acting as our British Virgin Islands counsel. The current
address of Mourant Ozannes is Coastal Buildings, Wickham's Cay II, PO Box 4857, Road Town, Tortola, British Virgin Islands. Any
underwriters or placement agents will be represented by their own counsel.
EXPERTS
Our consolidated financial
statements as of September 30, 2018 and September 30, 2017 and for the years respectively then ended incorporated by
reference in this prospectus and have been so included in reliance on the report of ZH CPA, LLC (formerly ZH CPA LLP), an independent
registered public accounting firm, given on the authority of said firm as experts in accounting and auditing. The current address
of ZH CPA, LLC is 1600 Broadway, Suite 1600, Denver, Colorado, USA 8020.
INTERESTS OF EXPERTS
AND COUNSEL
No named expert of
or counselor to us was employed on a contingent basis, or owns an amount of our shares (or those of our subsidiaries) which is
material to that person, or has a material, direct or indirect economic interest in us or that depends of the success of the offering.
COMMISSION POSITION
ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
ZK INTERNATIONAL GROUP CO., LTD
PROSPECTUS SUPPLEMENT
Up to 1,295,775 Units
Each Unit Consisting of One Ordinary
Share
And Two Warrants to Each Purchase One
Ordinary Share
February 23, 2021
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