ZK International (NASDAQ: ZKIN) holds $66M assets, just $83K cash
ZK International Group Co., Ltd. (ZKIN) reported interim results for the six months ended March 31, 2026, showing a major strategic shift and significant losses. The company sold all equity interests in its legacy pipe and related subsidiaries for $21.0 million, treating them as discontinued operations, and is refocusing on pipeline monitoring components, gaming and digital-asset-related businesses.
From continuing operations, revenue was only $1.0 million with a gross profit of about $10 thousand, while general and administrative expenses reached $8.0 million, driving a loss from continuing operations of $17.0 million. Key non-recurring items included an $8.1 million loss on disposal of subsidiaries and $7.1 million of stock-based compensation. Total net loss attributable to ZKIN was $17.0 million versus $0.8 million a year earlier.
At March 31, 2026, ZKIN had $66.4 million in total assets but only $82.7 thousand of cash in continuing operations. Assets were concentrated in a $21.6 million prepayment for AI equipment, a $20.0 million digital assets consideration receivable tied to AWA tokens, and a $21.0 million receivable from the sale of subsidiaries. Management disclosed that these conditions and cumulative deficits of $68.3 million raise substantial doubt about the company’s ability to continue as a going concern, despite raising approximately $20.9 million in equity financing during the period.
Positive
- $20.9 million raised via equity issuance in November 2025, materially strengthening reported shareholders’ equity to $59.3 million.
- Sale of legacy subsidiaries for $21.0 million allows ZKIN to exit lower-margin steel piping operations and focus on new businesses, with related receivable recorded in current assets.
Negative
- Net loss attributable to ZKIN expanded to $17.0 million from $0.8 million year-over-year, driven by disposal loss and stock-based compensation.
- Auditors and management disclosed substantial doubt about ZKIN’s ability to continue as a going concern given low cash, large losses and asset illiquidity.
- A $20.0 million digital assets consideration receivable (about 30.1% of assets) is concentrated in illiquid AWA tokens with uncertain realizability.
- Prepayments for AI equipment total $21.6 million with delivery expected over about two years, tying up a large share of assets in non-productive advances.
- Convertible notes with a carrying value of $5.3 million remain outstanding past maturity, and holders have initiated legal proceedings, creating additional financial and legal uncertainty.
Filing Explained
By July 30, the February equity issuance had delivered 205,512.5 AWA coins instead of cash, leaving consideration concentrated in an illiquid digital asset.
ZK International uses this Form 6-K to furnish interim financial information for the six months ended
The balance sheet shows
Issuing additional shares increases the total share count and, absent offsetting changes, reduces an existing holder’s percentage ownership. The February securities purchase agreement covered up to
The filing states that AWA is not listed on major exchanges and that deposits and withdrawals are frequently suspended; it therefore identifies limits on the company’s ability to transfer or monetize the tokens, while the recorded consideration was
Note 12 reports
Key Figures
Key Terms
discontinued operations financial
digital assets consideration receivable financial
going concern financial
ASC 820 fair value hierarchy financial
stock-based compensation financial
convertible debentures financial
FAQ
How much did ZKIN (ZKIN) lose in the six months ended March 31, 2026?
What was ZKIN (ZKIN)’s revenue from continuing operations in this period?
Why is there a going concern warning for ZKIN (ZKIN)?
What is the $20.0 million digital assets consideration receivable on ZKIN (ZKIN)’s balance sheet?
How did the sale of subsidiaries affect ZKIN (ZKIN)’s results?
What is ZKIN (ZKIN)’s exposure to convertible notes as of March 31, 2026?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2026
Commission File Number:
(Exact name of registrant as specified in its charter)
People’s Republic of
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
Financial Statements and Exhibits
| Exhibit No | Description | |
| 99.1 | ZK International Group Co., Ltd. and Subsidiaries As of March 31, 2026 and September 30, 2025. | |
| 99.2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: August 21, 2026 | ZK International Group Co., Ltd. | |
| By: | /s/ Ruihong Ma | |
| Ruihong Ma | ||
| Chief Executive Officer | ||
2
Exhibit 99.1
ZK International Group Co., Ltd. and Subsidiaries
Consolidated Balance Sheets
As of March 31, 2026 and September 30, 2025
(IN U.S. DOLLARS)
| As of | ||||||||||
| March 31, | September 30, | |||||||||
| NOTE | 2026 | 2025 | ||||||||
| $ | $ | |||||||||
| ASSETS | ||||||||||
| Current Assets | ||||||||||
| Cash and cash equivalents | ||||||||||
| Account receivables, net | 3 | |||||||||
| Prepayment, deposit and other receivable | 4 | |||||||||
| Receivable of disposal subsidiaries | ||||||||||
| Advance to suppliers | 5 | |||||||||
| Digital assets consideration receivable | 6 | |||||||||
| Assets related to discontinued operation | ||||||||||
| Total Current Assets | ||||||||||
| Non-Current Assets | ||||||||||
| Property and equipment, net | 7 | |||||||||
| Prepayment for property and equipment | 5 | |||||||||
| Intangible assets, net | 8 | |||||||||
| Long-term investment | 9 | |||||||||
| Non-current assets of discontinued operations | ||||||||||
| Total Non-Current Assets | ||||||||||
| Total Assets | ||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| Current Liabilities | ||||||||||
| Accounts payable | ||||||||||
| Accrued expenses and other current liabilities | 11 | |||||||||
| Accrued payroll and welfare | ||||||||||
| Advance from customers | 5 | |||||||||
| Due to related parties | 10 | |||||||||
| Convertible debentures | 12 | |||||||||
| Income tax payable | ||||||||||
| Current liabilities of discontinued operations | ||||||||||
| Total Current Liabilities | ||||||||||
| Non-Current Liabilities | ||||||||||
| Non-current liabilities of discontinued operations | ||||||||||
| Total Non-Current Liabilities | ||||||||||
| Total Liabilities | ||||||||||
| Shareholders’ Equity | ||||||||||
Common stock, | ||||||||||
| Additional paid in capital | ||||||||||
| Statutory surplus reserve | ||||||||||
| Subscription receivable | ( | ) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||||
| Total equity attributable to ZK International Group Co., Ltd. | ||||||||||
| Equity attributable to non-controlling interests | ||||||||||
| Total Equity | ||||||||||
| Total Liabilities and Shareholders’ Equity | ||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-1
ZK International Group Co., Ltd. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income
(Amount in $, except for number of shares)
| For the Six months Ended | ||||||||||
| March 31, | March 31, | |||||||||
| NOTE | 2026 | 2025 | ||||||||
| $ | $ | |||||||||
| Continuing operations: | ||||||||||
| Revenues | ||||||||||
| Cost of sales | ||||||||||
| Gross profit | ||||||||||
| Operating expenses: | ||||||||||
| General and administrative expenses | ||||||||||
| Total operating expenses | ||||||||||
| Loss from continuing operations | ( | ) | ( | ) | ||||||
| Other income/(expenses): | ||||||||||
| Interest expenses | ( | ) | ||||||||
| Interest income | ||||||||||
| Loss on investment | ( | ) | ||||||||
| Loss on disposal of subsidiaries | ( | ) | ||||||||
| Total other income/(expenses), net | ( | ) | ||||||||
| Loss from continuing operations before income taxes | ( | ) | ( | ) | ||||||
| Income tax expense | 16 | |||||||||
| Net loss from continuing operation | ( | ) | ( | ) | ||||||
| Discontinued operations: | ||||||||||
| Loss from discontinued operations before income taxes | ( | ) | ( | ) | ||||||
| Income tax expense | ||||||||||
| Loss from discontinued operations, net of tax | ( | ) | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ||||||
| Net income/(loss) attributable to non-controlling interests | ( | ) | ||||||||
| Net loss attributable to ZK International Group Co., Ltd. | ( | ) | ( | ) | ||||||
| Other comprehensive income (loss): | ||||||||||
| Foreign currency translation adjustment | ( | ) | ||||||||
| Total comprehensive loss | ( | ) | ( | ) | ||||||
| Comprehensive income attributable to non-controlling interests | ||||||||||
| Comprehensive loss attributable to ZK International Group Co., Ltd. | ( | ) | ( | ) | ||||||
| Basic and diluted loss per share | ||||||||||
| Basic from continuing operation | ( | ) | ( | ) | ||||||
| Basic from discontinuing operation | ( | ) | ( | ) | ||||||
| Diluted from continuing operation | ( | ) | ( | ) | ||||||
| Diluted from discontinuing operation | ( | ) | ( | ) | ||||||
| Weighted average number of shares outstanding | ||||||||||
| Basic from continuing operation | ||||||||||
| Basic from discontinuing operation | ||||||||||
| Diluted from continuing operation | ||||||||||
| Diluted from discontinuing operation | ||||||||||
The accompanying notes are an integral part of the consolidated financial statement
F-2
ZK International Group Co., Ltd. and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
For the six months ended March 31, 2026 and 2025
(Amount in $, except for number of shares)
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Statutory | other | Non- | |||||||||||||||||||||||||||||
| Paid-in | Subscription | surplus | Accumulated | comprehensive | controlling | Total | ||||||||||||||||||||||||||
| Shares | Capital | Receivable | reserve | deficits | income (loss) | interests | equity | |||||||||||||||||||||||||
| Balance at September 30, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net income from continuing operation | - | - | - | - | ( | ) | - | - | ( | ) | ||||||||||||||||||||||
| Net income from discontinued operation | - | - | - | - | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at March 31, 2025 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
F-3
ZK International Group Co., Ltd. and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
For the six months ended March 31, 2026 and 2025
(Amount in $, except for number of shares)
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Statutory | other | Non- | |||||||||||||||||||||||||||||
| Paid-in | Subscription | surplus | Accumulated | comprehensive | controlling | Total | ||||||||||||||||||||||||||
| Shares | Capital | Receivable | reserve | (deficits) | income (loss) | interests | equity | |||||||||||||||||||||||||
| Balance at September 30, 2025 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | |||||||||||||||||||||||||||
| Shares Issued for cash or subscription receivables | - | - | - | - | - | |||||||||||||||||||||||||||
| Disposal of subsidiaries | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | |||||||||||||||||||||||||||
| Net loss from continuing operation | - | - | - | - | ( | ) | - | - | ( | ) | ||||||||||||||||||||||
| Net income from discontinued operation | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Balance at March 31, 2026 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| * | The financial statements give retroactive effect to the January 31, 2025 one-for-seven reverse share split. |
The accompanying notes are an integral part of the consolidated financial statements.
F-4
ZK International Group Co., Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
(Amount in $, except for number of shares)
| For the Six Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Net loss on long-term investment | ||||||||
| Loss from disposal of subsidiary | ||||||||
| Bad debt expense and credit loss | ||||||||
| Stock compensation expense | ||||||||
| Interest expense of convertible notes | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Net (increase) in accounts receivable | ( | ) | ||||||
| Net (increase) in other receivables and prepayments | ( | ) | ||||||
| Net (increase) in advance to supplier | ( | ) | ||||||
| Net increase in accounts payable | ||||||||
| Net increase in accrued expenses and other current liabilities | ||||||||
| Net increase in accrued payroll and welfare | ||||||||
| Net increase in advance from customers | ||||||||
| Net increase in Income tax payable | ||||||||
| Net cash used in operating activities- continuing operations | ( | ) | ( | ) | ||||
| Net cash provided by/(used in) operating activities- discontinued operations | ( | ) | ||||||
| Net cash provided by/(used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment and intangible assets | ( | ) | ||||||
| Net cash used in investing activities-continuing operations | ( | ) | ||||||
| Net cash (used in)/provided by investing activities-discontinued operations | ( | ) | ||||||
| Net cash (used in)/provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from share issuance, net of issuance costs | ||||||||
| Net repayment for due to related parties | ( | ) | ||||||
| Net cash provided by financing activities-continuing operations | ||||||||
| Net cash used in financing activities-discontinued operations | ( | ) | ( | ) | ||||
| Net cash provided by/(used in) financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| Net increase/(decrease) in cash and restricted cash | ( | ) | ||||||
| Cash and cash equivalents and restricted cash at beginning of the period | ||||||||
| Cash and cash equivalents at end of the period | ||||||||
| Less: Cash, cash equivalents of discontinued operations at end of the period | ( | ) | ( | ) | ||||
| Cash and cash equivalent of continuing operations at end of the period | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-5
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
ZK International Group Co., Ltd. (the “Company”) was incorporated in the British Virgin Islands (“BVI”) on May 13, 2015. The Company is a holding company with no operations of its own and conducts its business primarily through its subsidiaries in the People’s Republic of China (“PRC”).
Prior to the disposal described below, the Group, through its PRC subsidiary Zhejiang Zhengkang Industrial Co., Ltd. (“Zhejiang Zhengkang”), was principally engaged in the manufacturing and sales of stainless steel band, copper strip, welded stainless steel pipes and fittings, pipe fittings, valves, light industry machinery and equipment, and other stainless steel products under its trademark “Zhengkang.”
On March 30, 2026, the Company entered into a
Stock Purchase Agreement (the “Agreement”) with PIONEER INVESTMENT MANAGEMENT LTD. (the “Purchaser”), a U.S. company,
pursuant to which the Company transferred all of its equity interests in certain subsidiaries, including ZK Pipe Industry Co. Ltd., Wenzhou
Weijia Pipeline Development Co., Ltd., Zhejiang Zhengkang Industrial Co. Ltd., Wenzhou Zhengfeng Industry and Trade Co. Ltd., Wenzhou
Suona Piping Limited, XSigma Corporation, xSigma Trading, LLC, and ZK International Uganda Limited (collectively, the “Disposed Entities”),
to the Purchaser, for a cash consideration of $
Following the disposal, the Group expanded its business through its newly established PRC subsidiary, Shijiazhuang Zhongkang Technology Co., Ltd. (“Shijiazhuang Zhongkang”), which is principally engaged in the resale of pipeline monitoring components and related peripheral products.
xSigma Collectibles Limited (“xSigma Collectibles”)
xSigma Collectibles Limited (“xSigma Collectibles”)
was incorporated on July 6, 2021 under the laws of the British Virgin Islands. Its registered capital is USD
xSigma Entertainment Limited (“xSigma Entertainment”)
xSigma Entertainment Limited (“xSigma Entertainment”)
was incorporated on March 17, 2021 under the laws of the British Virgin Islands. Its registered capital is USD
Waterside Inc. Colorado, United States of America (“Waterside Colorado”)
Waterside Inc. (“Waterside”) was incorporated on September 22, 2022 under the laws of the State of Colorado, United States. Waterside is wholly owned by ZK International Group Co., Ltd. (“ZK International”). Waterside is engaged in the gaming business under the “GAME WATERSIDE” brand and provides game-related services, including game operations, game content development and user interface and user experience design. Waterside’s public-facing website lists its principal address as 6855 S Havana St Ste 610, Centennial, Colorado 80112, United States.
F-6
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
Zhengkang International Hong Kong Limited (“ZK Hong Kong”)
Zhengkang International Hong Kong Limited (“ZK Hong Kong”) was incorporated on October 31, 2025 under the laws of Hong Kong. ZK Hong Kong is a private company limited by shares and remains registered as of the date of this description. Its business registration number is 79058202.
Shijiazhuang Zhongkang Technology Co.,Ltd (“Zhongkang Technology”)
Shijiazhuang
Zhongkang Technology Co., Ltd (“Shijiazhuang Zhongkang”) was incorporated on November 19, 2025 under the laws of the People’s
Republic of China. Its registered capital is RMB
Shenzhen Likang Xinye Equipment Sales Co., Ltd (“Shenzhen Likang Xinye”)
Shenzhen
Likang Xinye Equipment Sales Co., Ltd (“Shenzhen Likang Xinye”) was incorporated on February 26, 2026 under the laws of the
People’s Republic of China. Its registered capital is RMB
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Presentation and Principles of Consolidation
The accompanying consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the United Stated of America. All inter-company transactions and balances have been eliminated upon consolidation.
| Register | Ownership as of | |||||
| Entity name | Location | Background | March 31, 2026 | |||
(“ZK International”) | - Incorporated on - Registered capital of USD - A holding company with no operation activities itself for the years then ended | |||||
- Incorporated on - Registered capital of USD - Principally operated in NFT (Non-Fungible Token) marketplace | ||||||
- Incorporated on - Registered capital of USD - A holding company that holds ownership in CG Malta, a sports betting and casino operator | ||||||
Waterside Inc. Colorado, United States of America (“Waterside Colorado”) | - Incorporated on - Principally operated | |||||
- Incorporated on | ||||||
- Incorporated on - Registered capital of RMB -Principally operated in technology services, new energy business, etc. | ||||||
- Incorporated on - Registered capital of RMB -Principally operated in sales of electronic components, photovoltaic equipment and components, etc. |
Going Concern Consideration
The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.
As reflected in the consolidated financial statements,
F-7
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
In response to the conditions described above, management has taken and plans to take the following actions to improve the Company’s financial position and operations:
a. The Company will fund its development and future
operations through (i) continued growth of its pipeline monitoring components resale business, which generated revenues of $
b. Should the Group fail to achieve the above objectives, it may require additional financing to execute its business plans. Such financing may be in the form of equity or debt, the timing, terms, and availability of which cannot be assured. If the Group is unable to secure necessary capital on acceptable terms or at all, or if it fails to improve gross margins and reduce operating expenses, it may be unable to implement its current expansion strategy.
However, there can be no assurance that these plans and arrangements will be sufficient to fund the Company’s ongoing capital expenditure, working capital, and other requirements. Management has concluded that, notwithstanding the implementation of the plans described above, substantial doubt about the Company’s ability to continue as a going concern exists as of the date of issuance of these consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of assets or the amounts or classification of liabilities that may result from the outcome of this uncertainty.
Measurement of credit losses on financial instruments
On October 1, 2021, the Company adopted ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326) — Measurement of Credit Losses on Financial Instruments,” for financial assets stated at amortized cost including accounts receivable, refundable deposits, prepayments and other receivables. This guidance replaced the “incurred loss” impairment methodology with an approach based on “expected losses” to estimate credit losses on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance requires financial assets to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the cost of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset.
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (US GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, expected credit loss of accounts receivable, inventory valuation, useful life of property, plant and equipment, intangible asset impairment, allowances of long-term prepayment, long-term investment impairment, and income taxes related to realization of deferred tax assets, right-of-use assets, stock-based compensation, and uncertain tax position. Actual results could differ from those estimates.
F-8
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
Foreign Currency Translation
The financial records of the Company’s PRC subsidiaries are maintained in their local currencies which are RMB as functional currency. Monetary assets and liabilities denominated in currencies other than their local currencies are translated into local currencies at the rates of exchange in effect at the balance sheet dates. Transactions denominated in currencies other than their local currencies during the year are converted into local currencies at the applicable rates of exchange prevailing when the transactions occur. Transaction gains and losses are recorded in other income/ (expense), net in the statements of operations and comprehensive income.
ZK International maintained its financial record using the United States dollar (“US dollar”) as the functional currency, while the subsidiaries of the Company in mainland China maintained their financial records using RMB as the functional currencies. The reporting currency of the Company is US dollar. When translating local financial reports of the Company’s subsidiaries into US dollar, assets and liabilities are translated at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenue, expenses, gains and losses are translated at the average rate for the period. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the statements of operations and comprehensive income.
The relevant exchange rates are listed below:
US$ to RMB
| Period End | Average | |||||||
| March 31, 2026 | ||||||||
| September 30, 2025 | ||||||||
| March 31, 2025 | ||||||||
Cash and Cash Equivalents
Cash and cash equivalents primarily consist of cash and deposits with financial institutions which are unrestricted as to withdrawal and use. Cash equivalents consist of highly liquid investments that are readily convertible to cash generally with original maturities of three months or less when purchased.
Long-term investments
Effective October 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-01 and related ASU 2018-03 concerning recognition and measurement of financial assets and financial liabilities. In adopting this new guidance, the Company has made an accounting policy election to adopt an adjusted cost method measurement alternative for investments in equity securities without readily determinable fair values.
For equity investments that are accounted for using the measurement alternative, the Company initially records equity investments at cost but is required to adjust the carrying value of such equity investments through earnings when there is an observable transaction involving the same or a similar investment with the same issuer or upon an impairment.
F-9
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
Accounts Receivable, net
Accounts receivable arise from the product sales in the normal course of business. The Company usually determines the adequacy of reserves for allowance of credit loss based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures. Based on management of customers’ credit and ongoing relationship, management makes conclusions whether any balances outstanding at the end of the period will be deemed uncollectible on an individual basis and on aging analysis basis. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Uncollectible receivable are written-off against the allowance for credit loss after management has determined that the likelihood of collection is not probable.
The Company use a loss rate method to estimate the allowance for credit losses. For those past due balances over one year and other higher risk receivables identified by the Company are reviewed individually for collectability. The Company evaluates the expected credit loss of accounts receivable based on historical collection experience, the financial condition of its customers and assumptions for the future movement of different economic drivers and how these drivers will affect each other. The Company writes off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected or if a settlement with respect to a disputed receivable is reached for an amount that is less than the carrying value.
The allowance for credit loss recognized as of
March 31, 2026 and September 30, 2025 was $
Inventories
Inventories are stated at the lower of cost or net realizable value. The Company records adjustments to inventory for excess quantities, obsolescence or impairment when appropriate to reflect inventory at net realizable value. These adjustments are based upon a combination of factors including current sales volume, market conditions, lower of cost or market analysis and expected realizable value of the inventory.
Advance to Suppliers and Advance from Customers
Advance to suppliers refer to advances for purchase of materials or other service agreements, which are applied against trade accounts payable when the materials or services are received. Advance from customers refer to advances received from customers regarding product sales, which are applied against accounts receivable when products are sold.
The Company reviews a supplier’s credit history and background information before advancing a payment. If the financial condition of its suppliers were to deteriorate, resulting in an impairment of their ability to deliver goods or provide services, the Company would write off such amount in the period when it is considered impaired.
F-10
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities that qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
| ● | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| ● | Level 3 inputs to the valuation methodology use one or more unobservable inputs which are significant to the fair value measurement. |
For the Company’s financial instruments, including cash and cash equivalents, restricted cash, short-term investment, accounts receivable, accounts payable, short-term investment, other current assets, due to related parties, convertible notes, lease liabilities, other liabilities, notes receivable, notes payable, bank borrowings, long-term prepayment, long-term accounts receivable, other receivables and other borrowings, the carrying amounts approximate their fair values due to their short maturities as of March 31, 2026 and September 30, 2025. For lease liabilities, fair value approximates their carrying value at the year end as the interest rates used to discount the host contracts approximate market rates. The carrying amount of the non-current bank borrowings approximates its fair value due to the fact that the related interest rate approximates the interest rates currently offered by financial institutions for similar debt instruments of comparable maturities.
In
addition, the Company holds an equity investment in NIXXY, Inc. (NASDAQ: NIXX), a publicly traded company. The investment is measured
at fair value, which is determined based on quoted market prices in an active market, and is classified within Level 1 of the fair value
hierarchy. In accordance with ASC 321, Investments — Equity Securities, changes in the fair value of this investment are recognized
in earnings. During the six months ended March 31, 2026, the Company recognized an unrealized loss of $
The Company noted no transfers between levels
during any of the periods presented. The Company did not identify any instruments that were measured at fair value on a recurring or non-recurring
basis for the six months ended March 31, 2026 and 2025, other than the equity investment in NIXXY, Inc. as described above. The digital
assets consideration receivable of $
Digital Assets
Upon receipt, the Company accounts for digital assets in accordance with Accounting Standards Update (“ASU”) 2023-08, Accounting for and Disclosure of Crypto Assets (ASC 350-60, Intangibles—Goodwill and Other—Crypto Assets). ASU 2023-08 is effective for fiscal years beginning after December 15, 2024 and is applicable to the Company for its fiscal year beginning October 1, 2025. Under ASC 350-60, crypto assets that meet the applicable criteria are measured at fair value, with changes in fair value recognized in net income.
Management evaluates whether each digital asset meets the definition of a crypto asset under ASC 350-60, including whether it is an intangible asset, fungible, not created or issued by the Company or its related parties, not a financial instrument or security, and created or resides on a distributed ledger. The evaluation also considers the other criteria in ASC 350-60, including whether the asset provides rights to or claims on underlying goods, services, or other assets and whether it is secured through cryptography.
Digital assets that do not meet all of the criteria in ASC 350-60 are accounted for as indefinite-lived intangible assets under ASC 350 and are measured at cost less any impairment.
Related parties
The Company adopted ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.
F-11
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
Property and Equipment, net
Property,
and equipment are recorded at cost less accumulated depreciation.
| Category | Estimated useful lives | |
| Computer |
Upon retirement or disposition, the asset cost and related accumulated depreciation are removed with any gain or loss recognized in the consolidated statements of operations and comprehensive income. Repair and maintenance costs that do not extend the economic life of the underlying assets are expensed as incurred.
Costs incurred in constructing new facilities, including progress payments and other costs related to construction, are capitalized, and transferred to property, plant and equipment on completion, at which time depreciation commences.
Intangible Assets
Intangible assets are amortized using the straight-line method with the following estimated useful lives:
| Category | Estimated useful lives | |
| Software |
Impairment of Long-lived Assets
The Company management review the carrying values of long-lived assets whenever events and circumstances, such as a significant decline in the asset’s market value, obsolescence or physical damage affecting the asset, significant adverse changes in the assets use, deterioration in the expected level of the assets performance, cash flows for maintaining the asset are higher than forecast, indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value.
There
was
Value-added Tax
Value-added
taxes (“VAT”) collected from customers relating to product sales and remitted to governmental authorities are presented on
a net basis. VAT collected from customers is excluded from revenue. The Company is subject to a VAT rate of
Convertible note, net
The Company evaluated the convertible notes issued pursuant to the ASC 470-20-25-4 Beneficial Conversion Feature (“BCF”) guidance for the year ended September 30, 2022 and 2021. The BCF was measured the intrinsic values for convertible notes on the commitment dates, which are the dates that the agreements were signed with the investors. The Company’s convertible notes both have stated redemption dates (maturity dates), which are 12 months from the issuance dates, the BCF values will be accreted from issuance date to the conversion date or the stated maturity date, whichever is earlier. The accretion calculation is based on effective interest rate method consistent with the ordinary debt instruments.
ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, provides simplification of the convertible debt accounting framework by eliminating the cash conversion and the beneficial conversion feature accounting models for convertible debt and convertible preferred stock. The new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. ASU 2020-06 requires adoption using either modified retrospective method or full retrospective method. The Company adopted ASU 2020-06 since October 1, 2022.
F-12
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
Under the new framework, the reporting entity will decide the accounting for its convertible notes in the following steps: (1) a reporting entity will first decide whether to elect the fair value option under ASC 825-10 (convertible debt issued with a substantial premium may be ineligible for the fair value option); (2) if the fair value option is not elected, the reporting entity must assess whether the conversion feature requires bifurcation pursuant to ASC 815; (3) if bifurcation is not required, the reporting entity must evaluate whether the convertible debt was issued with a substantial premium; (4) if the fair value option is not elected, the conversion option is not required to be bifurcated, and the convertible debt was not issued with a substantial premium, the convertible debt will be accounted for as a single unit of account under the “traditional convertible security” model. Debt discount is amortized over the period during which the convertible note is expected to be outstanding (through the maturity date) as additional non-cash interest expense.
Stock-based compensation
The Company accounts for share-based payment exchanged for services at the estimated grant date fair value. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the Company estimates the stock warrants by performing Monte Carlo simulation analysis to calculate the fair value of the committed warrants. The Company’s share price was simulated under a risk-neutral framework using Geometric Brownian Motion (“GBM”). The daily share price was simulated from the valuation date through to the latest expiry date. The assumptions used in calculating the fair value of stock-based compensation represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.
Expected Term - The expected term of options represents the period that the Company’s stock option are expected to be outstanding based on the simplified method, which is the half-life from vesting to the end of its contractual term.
Expected Volatility - The Company computes stock price volatility over expected terms based on its historical common stock trading prices.
Risk-Free Interest Rate - The Company bases the risk-free interest rate on the implied yield available on U. S. Treasury zero coupon issues with an equivalent remaining term.
Expected
Dividend - The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends
in the foreseeable future, and, therefore, uses an expected dividend yield of
F-13
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
Revenue Recognition (Continued)
The Company adopted ASC Topic 606 using the modified retrospective adoption method. Based on the requirements of ASC Topic 606, revenue is recognized when control of the promised goods or services is transferred to the customers in an amount that reflects the consideration the Group expects to be entitled to receive in exchange for those goods or services. Revenue is recognized when the following 5-step revenue recognition criteria are met:
| 1) | Identify the contract with a customer |
| 2) | Identify the performance obligations in the contract |
| 3) | Determine the transaction price |
| 4) | Allocate the transaction price |
| 5) | Recognize revenue when or as the entity satisfies a performance obligation |
Revenue from product sales is recognized at the point in time control of the products is transferred, generally upon customer receipt based upon the contract terms. Shipping and handling activities are considered to be fulfillment activities rather than promised services and are not, therefore, considered to be separate performance obligations. The Group’s sales terms provide no right of return outside of a standard quality policy and has not experienced any sales returns.
Cost of revenue (Continued)
Costs of revenues primarily consist of the purchase costs of pipeline monitoring components and peripheral products, as well as other direct costs.
Revenue Recognition (Discontinued)
The Company generates its revenues mainly from sales of steel piping products and sales of steel materials such as stainless steel coil and strip. The Company follows Financial Accounting Standards Board (FASB) ASC 606 and accounting standards updates (“ASU”) 2014-09 for revenue recognition. On October 1, 2018, the Company has early adopted ASC 606, which is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) Identify the Contract with a Customer, (2) Identify the Performance Obligations in the Contract, (3) Determine the Transaction Price, (4) Allocate the Transaction Price to the Performance Obligations in the Contract, and (5) Recognize Revenue When (or As) the Entity Satisfies a Performance Obligation. Results for reporting periods beginning after October 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the previous accounting standards ASC 605. The Company has assessed the impact of the guidance by reviewing its existing customer contracts and current accounting policies and practices to identify differences that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control and principal versus agent considerations. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606 and there was no material unfinished contracts with customers upon adoption of ASC 606, therefore there was no material changes to the Company’s consolidated financial statements upon adoption of ASC 606, and there have not been any significant changes to company’s business processes, systems, or internal controls as a result of implementing the standard.
F-14
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. As part of its consideration of the contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which are distinct, to be the identified performance obligations.
In determining the transaction price the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. The Company has assessed the financing component on contract basis, and conclude there is no significant financing component exist either implicitly or explicitly. The Company allocates the transaction price to each distinct product based on their relative standalone selling price.
Revenues are reported net of all value added taxes. The Company does not routinely permit customers to return products, while in certain conditions product changes are allowed, and historically customer returns have been immaterial and due to the nature of company’s products no warranty is offered. Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied at a point in time), which typically occurs at delivery.
Cost of revenue (Discontinued)
Cost of revenue consists primarily of cost of materials, direct labors, overhead, and other related incidental expenses that are directly attributable to the Company’s principal operations.
Comprehensive income (loss)
Comprehensive
income (loss) consists of net income (loss) and other comprehensive income (loss), including foreign currency translation adjustments.
Comprehensive income (loss) is reported in the consolidated statements of comprehensive income. Accumulated other comprehensive income
(loss), as presented on the consolidated balance sheets, represents the cumulative foreign currency translation adjustments. For the
six months ended March 31, 2026 and 2025, the Company recorded other comprehensive income of $
Earnings Per Share
Earnings (loss) per share is calculated in accordance with ASC 260 Earnings per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed in accordance with the treasury stock method and based on the weighted average number of common shares and dilutive common share equivalents. Dilutive common share equivalents are excluded from the computation of diluted earnings per share if their effects would be anti-dilutive.
F-15
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
Segment reporting
The Group uses the management approach in determining
reportable operating segments. The management approach considers the internal organization and reporting used by the Group’s chief
operating decision maker identified as the Chief Executive Officer for making operating decisions, allocating resources and assessing
performance as the source for determining the Group’s reportable segments. The Group’s CODM reviews consolidated results including
revenue and operating income at a consolidated level. This resulted in only
Commitments and contingencies
In the normal course of business, the Company is subject to commitments and contingencies, including operating lease and finance lease commitments, legal proceedings and claims arising out of its business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss will occur, and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments on liability for contingencies, including historical and the specific facts and circumstances of each matter.
Risks and Uncertainties
Exchange Rate Risks
The Company operates in China, which may give rise to significant foreign currency risks mainly from fluctuations and the degree of volatility of foreign exchange rates between the USD and the RMB.
Currency Convertibility Risks
Substantially all of the Company’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with other information such as suppliers’ invoices, shipping documents and signed contracts.
Concentration Risks
The Company has a concentration risk related to suppliers and customers. Failure to maintain existing relationships with the suppliers or customers to establish new relationships in the future could negatively affect the Group’s ability to obtain goods sold to customers in a price advantage and timely manner. If the Group is unable to obtain ample supply of goods from existing suppliers or alternative sources of supply, the Company may be unable to satisfy the orders from its customers, which could materially and adversely affect revenues.
F-16
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
For
the six months ended March 31, 2026, all of the Company’s revenue was generated from
Disclosure of details regarding the Company’s four customers in respect of the concentration of sales revenues generated from third-party customers:
| For the six months ended | ||||||||
| March 31, 2026 | ||||||||
| Customer A | % | |||||||
| Customer B | % | |||||||
| Customer C | % | |||||||
| Customer D | % | |||||||
| Total | % | |||||||
For
the six months ended March 31, 2026, cost of revenue derived from the Company’s top
Disclosure of details regarding the Company’s top four suppliers in respect of the concentration of sales costs generated from third-party suppliers:
| For the six months ended | ||||||||
| March 31, 2026 | ||||||||
| Supplier A | % | |||||||
| Supplier B | % | |||||||
| Supplier C | % | |||||||
| Supplier D | % | |||||||
| Total | % | |||||||
Recent Accounting Pronouncements
New Accounting Pronouncements Recently Adopted
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). The amendments in this ASU modify the disclosure requirements on fair value measurements. ASU 2018-13 is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted for any removed or modified disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis.
F-17
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. This update permits the use of either the modified retrospective or fully retrospective method of transition.
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (“Topic 326”). This ASU provides a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset in developing reasonable and supportable forecasts as part of estimating expected credit losses. For public business entities, ASU 2025-05 will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The guidance will be applied on a prospective basis. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance.
New Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures” which primarily requires disaggregated disclosure of certain expense categories in the notes to the financial statements on an annual and interim basis. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted, and the Company is currently assessing the impact of adoption.
F-18
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
Discontinued operation
On
March 26, 2026, ZK International Group Co., Ltd.(“the Company”) held its 2026 Extraordinary General Meeting of Shareholders.
At the Meeting, the shareholders voted to approve the proposed sale of the Company’s subsidiaries, ZK Pipe Industry Co. Ltd., a
company incorporated under the laws of Hong Kong, Wenzhou Weijia Pipeline Development Co., Ltd., a company incorporated under the laws
of the People’s Republic of China (the “PRC”), Zhejiang Zhengkang Industrial Co. Ltd., a company incorporated under
the laws of the PRC, Wenzhou Zhengfeng Industry and Trade Co. Ltd., a company incorporated under the laws of the PRC, Wenzhou Suona Piping
Limited, a company incorporated under the laws of the PRC, XSigma Corporation, a company incorporated under the laws of the British Virgin
Islands, xSigma Trading, LLC, a Delaware limited liability company, and ZK International Uganda Limited (collectively, the “Disposed
Entities”), a company incorporated under the laws of the Republic of Uganda, to PIONEER INVESTMENT MANAGEMENT LTD. (the “Purchaser”)
a U.S. company, in exchange for a cash consideration of $
On March 30, 2026, the Company entered into a Stock Purchase Agreement (the “Agreement”) with the Purchaser, pursuant to which the parent Company will transfer all of its equity interests in the disposed entities to the Purchaser. Upon the closing of the disposal (the “Closing Date”), the disposed entities will cease to be consolidated subsidiaries of the Parent Company and will operate as a standalone combined group under the ownership of the Purchaser.
A discontinued operation may include a component of an entity or a group of components of an entity, or a business or nonprofit activity. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when any of the following occurs: (1) the component of an entity or group of components of an entity meets the criteria to be classified as held-for-sale; (2) the component of an entity or group of components of an entity is disposed of by sale; and (3) the component of an entity or group of components of an entity is disposed of other than by sale.
For any component classified as held for sale or disposed of by sale or other than by sale that qualifies for presentation as a discontinued operation during the six months ended March 31, 2026, the Company has reclassified certain comparative amounts in the consolidated statements of operations for the six months ended March 31, 2025 to conform to the presentation adopted for the six months ended March 31, 2026. The results of discontinued operations for the six months ended March 31, 2026 have been presented separately as a single line item in the consolidated statements of operations for all periods presented in accordance with U.S. GAAP. Cash flows from discontinued operations for the six months ended March 31, 2026 have been separately presented by operating, investing, and financing activities in the consolidated statements of cash flows for all periods presented in accordance with U.S. GAAP.
F-19
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
Gain (Loss) on disposal
| As of March, 31 | ||||
| 2026 | ||||
| $ | ||||
| Disposal proceeds | ||||
| AOCI reclassified to earnings | ( | ) | ||
| Carrying amount of NCI at disposal date | ||||
| Sub total- amounts increasing the gain | ||||
| Less: carrying amount of identifiable net assets disposed | ( | ) | ||
| Gain / (loss) on disposal | ( | ) | ||
Result of discontinued operations:
| For the Six months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Revenues | ||||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling and marketing expenses | ||||||||
| General and administrative expenses | ||||||||
| Research and development costs | ||||||||
| Total operating expenses | ||||||||
| Loss from discontinued operations | ( | ) | ( | ) | ||||
| Other income/(expenses): | ||||||||
| Interest expenses | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Other income | ||||||||
| Total other income (expenses), net | ( | ) | ||||||
| Loss from discontinued operations before income taxes | ( | ) | ( | ) | ||||
| Income tax expense | ||||||||
| Net loss discontinued operations | ( | ) | ( | ) | ||||
F-20
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
| As of | ||||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | ||||||||
| Restrict cash | ||||||||
| Account receivables, net: | ||||||||
| Notes receivable | ||||||||
| Prepayment, deposit and other receivable - current | ||||||||
| Due from related parties | ||||||||
| Inventories | ||||||||
| Advance to suppliers | ||||||||
| Total Current Assets | ||||||||
| Non-Current Assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Long-term prepaid expenses | ||||||||
| Intangible assets, net | ||||||||
| Long-term accounts receivable | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | ||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Operating lease liability - current | ||||||||
| Accrued payroll and welfare | ||||||||
| Advance from customers | ||||||||
| Due to related parties | ||||||||
| Bank borrowings - current | ||||||||
| Long-term Bank borrowings - current | ||||||||
| Notes payables | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Lease liabilities | ||||||||
| Other long-term borrowing loans | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
F-21
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
Cash flows of the discontinued operations:
| For the Six Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Net cash provided by/(used in) discontinued operations | ( | ) | ||||||
| Net cash provided by/(used in) from operating activities | ( | ) | ||||||
| Net cash (used in)/provided by investing activities | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
NOTE 3 - ACCOUNT RECEIVABLE
Accounts receivable consisted of the following:
| As of | ||||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Accounts receivable, gross | ||||||||
| Less: allowance for credit loss | ( | ) | ||||||
| Total, net | ||||||||
Changes of allowance for credit loss as follow:
| As of | ||||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Beginning balance | ||||||||
| Additional allowance of credit loss | ||||||||
| Ending balance | ||||||||
NOTE 4 - PREPAYMENT, DEPOSIT AND OTHER RECEIVABLE
Prepayment, deposit and other receivable consisted of the following:
| As of | ||||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Advance to third parties | ||||||||
| Advance to investment escrow account | ||||||||
| Others | ||||||||
| Ending balance | ||||||||
F-22
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
NOTE 5 - ADVANCE TO SUPPLIERS AND ADVANCE FROM CUSTOMERS
Advance to suppliers consisted of the following:
| As of | ||||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Current: | ||||||||
| Prepayments for materials purchased | ||||||||
| Non-current: | ||||||||
| Prepayments for AI equipment | ||||||||
| Total | ||||||||
On January 5, 2026, the Group entered into a procurement agreement with Beijing Jingze Trading Co., Ltd. (“Jingze”), an unrelated third-party supplier, for the acquisition of AI equipment and related products to support the Group’s strategic initiatives in the artificial intelligence sector. The procurement of the related computing hardware constitutes the initial phase of this planned build-out. Delivery is expected within approximately two years from the date of the supplemental agreement.
As
of March 31, 2026, the Company had prepaid approximately RMB
No impairment loss was recognized on the prepayment for AI equipment as of March 31, 2026, as management believes the prepayment is fully recoverable based on the supplier’s performance to date and the terms of the procurement agreement.
Advance from customers consisted of the following:
| As of | ||||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Prepayments for materials customers | ||||||||
| Total | ||||||||
F-23
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
NOTE 6 - DIGITAL ASSETS CONSIDERATION RECEIVABLE
On
February 27, 2026, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain Non-U.S.
investors (collectively, the “Purchasers”) pursuant to which the Company agreed to sell to the Purchasers an aggregate of
up to
As of March 31, 2026, the Company had not received
the digital assets. The $
On
March 20, 2026, upon the legal issuance of the shares, the Group recognized a digital assets consideration receivable of $
The AWA token is a non-mainstream digital asset that is not listed on major exchanges. In addition, deposit and withdrawal functions are frequently suspended. Combined, these factors may prevent the Company from accessing or transferring its holdings of AWA tokens for an uncertain period of time. Such operational risks could significantly hinder the Company’s ability to monetize these assets or realize their carrying value.
The digital assets consideration receivable of
$
Because the AWA token is not listed on any major cryptocurrency exchange, there are no Level 1 observable market prices. Any future fair value measurement of the AWA tokens upon receipt would likely require the use of significant unobservable inputs (Level 3 within the ASC 820 fair value hierarchy), which involves substantial estimation uncertainty.
Digital assets are subject to an evolving and uncertain regulatory environment. Changes in laws or regulations, or the interpretation thereof, could adversely affect the value, transferability, or legal status of the AWA tokens.
The Company’s ability to realize the carrying value of the digital assets consideration receivable is dependent on the fair value of the AWA tokens at the time of receipt and the Company’s subsequent ability to liquidate or otherwise monetize the tokens, which may be constrained by the illiquidity and operational limitations described above.
No allowance for credit losses has been recognized against the digital assets consideration receivable as of March 31, 2026. The receivable represents the right to receive non-cash consideration pursuant to a completed equity transaction, and management has assessed that the counterparties’ contractual obligations remain enforceable. Management will continue to evaluate the need for any allowance as facts and circumstances develop.
The following tables summarize the carrying amount of the AWA tokens consideration receivable for the periods ended March 31, 2026 and September 30, 2025:
| March 31, 2026 | September 30, 2025 | |||||||||||||||
| Units | Carrying Amount (US$) | Units | Carrying Amount (US$) | |||||||||||||
| Digital assets-AWA tokens to be received | N/A -variable number | |||||||||||||||
| Total | ||||||||||||||||
NOTE 7 - PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following :
| As of | ||||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Furniture, fixtures and equipment | ||||||||
| Less: accumulated depreciation | ||||||||
| Property, plant and equipment, net | ||||||||
F-24
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
NOTE 8 - INTANGIBLE ASSETS
| As of | ||||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Software, cost | ||||||||
| Less: impairment | ( | ) | ( | ) | ||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | ||||||||
During the fiscal year ended September 30, 2021, the Company entered into a series of consulting agreements with third party entity and individuals to develop and implement the following software platforms:
| ● | The DeFi (decentralized finance) Protocol, a stablecoin DEX (decentralized exchange) and liquidity mining platform, available at https://xsigma.fi. |
| ● | Two flagship trading platforms, “xSigma Trading” for CFD trading and “xSigma Trader” for Crypto, Crypto Options and Crypto derivatives. |
| ● | MaximNFT platform (“MaximNFT”), available at www.maximnft.com, the exclusive NFT (Non-Fungible Token) marketplace partners with Maxim, the iconic men’s lifestyle brand. It will allow customers to create and sell NFTs on various blockchains, including, but not limited to, Ethereum, Binance Smart Chain, and Polkadot. |
The software platforms are intended for internal use which is to provide services to customers and the Company does not have any plan to market the software for sales externally. In exchange of the development services provided, the Company paid consideration in the form of cash, stock and stock warrants, and all the costs incurred during the Application development Stage were capitalized pursuant to ASC 350-40-25.
During
2023 fiscal year, the Company evaluated the recoverability of the three platforms, including Defi Exchange, xSigma Trading, and MaximNFT
pursuant to ASC 360-10-35-21 and concluded that the carrying value of the three platforms may not be recoverable as it projects that
the platform is likely to have continuing losses and it’s more likely than not this platform will be sold or otherwise disposed
of significantly before the end of its previously estimated useful life. The Company wrote off the carrying value of the platform and
recorded a loss of $
NOTE 9 - LONG-TERM INVESTMENT
Wenzhou Longlian Development Co., Ltd. (“Longlian”)
The
Company made an investment in Longlian, a private company incorporated in PRC, in 2011 by RMB
F-25
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
During
the 2025 fiscal year, Longlian has suspended its operations due to the real estate market decline in China, and may resume operations
when market recovers. For the year ended September 30, 2025, the Company has written off the investment in Longlian and recorded impairment
loss of $
CG Malta Holding Limited (“CG Malta”)
On
April 8, 2021, ZK International Group Co., Ltd., a British Virgin Islands company (the “Company”), through its wholly owned
subsidiary xSigma Entertainment Limited (“xSigma Entertainment”) entered into a Subscription of Shares Agreement (the “Subscription
Agreement”) with CG Malta on April 4, 2021, pursuant to which xSigma Entertainment acquired
The Company’s equity investment in CG Malta is accounted for under ASC 321 Investment: Equity Securities. The Company has elected the measurement alternative under ASC 321 to use cost minus impairment method for the subsequent measurement of its equity investment.
For
the 2021 and 2022 fiscal years, CG Malta achieved high growth with its online gaming services launched in more than 10 states in US with
high growth rate of Real Money Handle and First-Time Depositor. More detailed operation performance is included in Item 5. Operating
And Financial Review And Prospects. As of September 30, 2022, the Company carried this investment at its cost in the amount of $
During
the 2023 fiscal year, the competition of gaming market has been increasingly intense. Market bullishness and valuations peaked in early-2023
and declined rapidly from there, preventing CG Malta from raising further capital to execute its business plan. For the best interest
of the Company’s shareholder, the Company decided to stop funding CG Malta and instead demanded the management team of CG Malta
took active measures to achieve organic growth and healthy cash flow. However, the business was unable to raise the capital required
to fund the business plan, and therefore the shareholders of CG Malta passed shareholder resolution on November 27, 2023 to cease operations
of CG Malta and wind up the entity. For the year ended September 30, 2023, the Company has written off the investment in CG Malta and
recorded impairment loss of $
F-26
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
Recruiter.Com Group, Inc. (“RCRT”)
On July 12, 2024, the Company entered into a securities
purchase agreement (the “Securities Purchase Agreement”) with Recruiter.Com Group, Inc. (NASDAQ: RCRT) which subsequently
changed its name to NIXXY, Inc. (NASDAQ: NIXX). Pursuant to the Securities Purchase Agreement, the Company agreed to purchase
NOTE 10 - RELATED PARTY TRANSACTIONS
Net amounts due to related parties consisted of the following:
| As of | ||||||||||
| Account | Name of Related party | March 31, 2026 | September 30, 2025 | |||||||
| $ | $ | |||||||||
| Related party payables | Chairman and shareholder, HUANG Jian Cong | |||||||||
| Total | ||||||||||
Related party payables represented unsecured
and interest free borrowings between the Company and Huang Jian Cong to the Company. As of March 31, 2026 and September 30, 2025, the
Company had outstanding loans with total amount of $
NOTE 11 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:
| As of | ||||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Other tax payables | ||||||||
| Other | ||||||||
| Total | ||||||||
Other current liabilities contain primarily unsecured, due on demand and interest free short-term loan to the Company from third party entities and deposits for bidding from suppliers to the Company.
F-27
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
NOTE 12 - CONVERTIBLE NOTES
On
August 26, 2021, ZK entered into Convertible Debenture agreements with certain unaffiliated investors identified therein (each an “Holder”
and collectively “Holders”). The convertible debentures, with aggregate principal amount of $
The embedded conversion feature of the above convertible notes was determined to be beneficial conversion feature that requires recognition within equity on the commitment date. The BCF was measured the intrinsic values for convertible notes on the commitment dates, which are the dates that the agreements were signed with the investors. The Company’s convertible notes both have stated redemption dates (maturity dates), which are 12 months from the issuance dates, the BCF values will be accreted from issuance date to the conversion date or the stated maturity date, whichever is earlier. The accretion calculation is based on effective interest rate method consistent with the ordinary debt instruments.
On
December 7, 2022, the Company entered into amendment agreements with outstanding Holders to amend the maturity date to August 26, 2023,
and the amendment was treated as extinguishment of the original convertible notes and issuance of new convertible notes with principle
amount of $
On December 21, 2023, the Company entered into amendment agreements with outstanding Holders to amend the maturity date to June 30, 2024, and the amendment was treated as extinguishment of the original convertible notes and issuance of new convertible notes (“Convertible Note 2023”).
In
accounting for the issuance of the Convertible Note 2023 under ASU 2020 - 06, the Company recorded the convertible note as a single liability
in its entirety according to the new framework. The effective interest rate for the Convertible Note 2023 is
On January 4, 2025, the Company entered into amendment agreements with outstanding Holders to amend the maturity date to August 26, 2025, and the amendment was treated as extinguishment of the original convertible notes and issuance of new convertible notes (“Convertible Note 2024”).
F-28
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
In
accounting for the issuance of the Convertible Note 2024 under ASU 2020-06, the Company recorded the convertible note as a single liability
in its entirety according to the new framework. The effective interest rate for the Convertible Note 2024 is
Pursuant to the Convertible Debenture agreements,
the convertible notes have a floor price of $
As of March 31, 2026, no extension agreement has been executed between the Company and the Holders, and the relevant convertible debentures remain outstanding. Subsequently, certain Holders initiated legal proceedings against the Company in connection with the convertible debentures.
This litigation is currently at an early procedural stage and has not yet progressed to substantive discovery or summary judgment proceedings. Accordingly, the ultimate outcome of the litigation remains uncertain, and the Company is currently unable to reasonably predict the outcome of the proceedings or estimate the potential loss, if any. The Company intends to continue to vigorously defend against the claims and protect its legal rights and interests.
For the six months ended March 31, 2026, there were no Holders converted their convertible debentures. Net carrying amount of the liability component Convertible Notes dated as of March 31, 2026 was as follows:
| Principal | Interest on Convertible | Net carrying | ||||||||||
| Outstanding | notes | Value | ||||||||||
| $ | $ | $ | ||||||||||
| Convertible Notes - 2026 | ||||||||||||
NOTE 13 - STOCKHOLDERS’ EQUITY
On
January 31, 2025. we completed a
From the legal perspective, the Reverse Split applied to the issued shares of the Company on the date of the Reverse Split and does not have any retroactive effect on the Company’s shares prior that date. However, for accounting purposes only, references to our ordinary shares in this annual report are stated as having been retroactively adjusted and restated to give effect to the Reverse Split, as if the Reverse Split had occurred by the relevant earlier date.
Share Issuances
2023 Fiscal Year
On
March 15, 2023, the Company issued a total of
F-29
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
On
July 26, 2023, the Company issued a total of
During the fiscal year ended September 30, 2023, no convertible holder exercised convertible notes.
2024 Fiscal Year
The
Company entered into a Securities Purchase Agreement, dated November 27, 2023, with one institutional investor. Pursuant to the Securities
Purchase Agreement, the investor purchased, and the Company issued and sold
2025 Fiscal Year
On
April 15, 2025, the Company issued
2026 Fiscal Interim
On
October 20, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain Non-U.S.
investors (collectively, the “Purchasers”) pursuant to which the Company agreed to sell to the Purchasers an aggregate of
ZK
International Group Co., Ltd. (the “Company”) announced that, on October 21, 2025, it issued an aggregate of
F-30
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
This
registration statement on Form S-8 (the “Registration Statement”) is being filed by ZK International Group Co., Ltd. (the
“Registrant”) in accordance with the requirements of Form S-8 under the Securities Act of 1933, as amended (the “Securities
Act”), in order to register
On
February 27, 2026, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain Non-U.S.
investors (collectively, the “Purchasers”) pursuant to which the Company agreed to sell to the Purchasers an aggregate of
up to
NOTE 14 - STOCK OPTIONS AND WARRANTS
Stock Option
On April 5, 2021, the Company entered into a Consulting
Agreement with a third-party consultant for her marketing and promoting services provided to xSigma Corporation. Pursuant to the Consulting
Agreement, the Company issued
A summary of stock option activity for the six months ended March 31, 2026, is presented below:
| Shares | Weighted Average | Remaining Contractual | Grant- Date | |||||||||||||
| underlying Options | Exercise Price | Term (Years) | Fair Value | |||||||||||||
| $ | ||||||||||||||||
| Outstanding at October 1, 2025 | - | |||||||||||||||
| Granted | - | |||||||||||||||
| Exercised | - | |||||||||||||||
| Forfeited | - | |||||||||||||||
| Outstanding at March 31, 2026 | - | |||||||||||||||
| Exercisable at March 31, 2026 | - | |||||||||||||||
F-31
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
Stock Warrants
As
of March 31, 2026, the Company had outstanding
| Shares Underlying Options/ | Weighted Average Exercise | Weighted Average Remaining Contractual Term | ||||||||||
| Warrants | Price | (Years) | ||||||||||
| $ | ||||||||||||
| Outstanding at October 1, 2025 | ||||||||||||
| Granted | - | |||||||||||
| Exercised | - | |||||||||||
| Forfeited | - | |||||||||||
| Outstanding at March 31, 2026 | - | |||||||||||
| Exercisable at March 31, 2026 | - | |||||||||||
NOTE 15 - SEGMENT REPORTING
ASC
280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent
with the Company’s internal organizational structure as well as information about geographical areas, business segments and major
customers in financial statements for details on the Company’s business segments. The Company uses the “management approach”
in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s
chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s
reportable segments. Management, including the chief operating decision maker, reviews operation results by the revenue of different
products. Based on management’s assessment, the Company has determined that it has
For
the six months ended March 31, 2026 and for the year ended September 30, 2025, revenue within PRC contributed over
NOTE 16 - INCOME TAX
The
Group is subject to profits tax rate at
The net taxable losses before income taxes and its provision for income taxes comprised of the following:
| For six months ended | ||||||||
| March 31 | March 31 | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Current income tax expenses | ||||||||
| Deferred income tax expenses | ||||||||
| Total income tax expense | ||||||||
F-32
ZK International Group Co., Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In $, except for share data or otherwise noted)
| As of | ||||||||
| March 31 | September 30 | |||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Deferred tax assets: | ||||||||
| Allowance of credit loss | ||||||||
| Net operating loss carry-forward | ||||||||
| Less: valuation allowance | ( | ) | ||||||
| Total | ||||||||
Reconciliation between tax expense/(benefit) and profit before income tax at applicable tax rates:
| For six months ended | ||||||||
| March 31 | March 31 | |||||||
| 2026 | 2025 | |||||||
| Income before taxes excluded loss entities | ( | ) | ||||||
| PRC statutory tax rate | % | % | ||||||
| Expected income tax (benefit) | ( | ) | ||||||
| Tax effect of non-deductible expenses/ other permanent differences | ||||||||
| Income tax expense | ||||||||
NOTE 17 - COMMITMENT AND CONTINGENCIES
Convertible Debenture Litigation
As discussed in Note 12 – Convertible Notes, the relevant convertible debentures remained outstanding as of March 31, 2026, and certain Holders subsequently initiated legal proceedings against the Company in connection with the convertible debentures. The litigation remains at an early procedural stage and has not progressed to substantive discovery or summary judgment proceedings. The Company is unable to reasonably predict the outcome of the proceedings or estimate the potential loss, if any. Accordingly, no provision for loss has been recognized in the consolidated financial statements as of March 31, 2026. The Company intends to vigorously defend against the claims, will continue to monitor the litigation, and will disclose material developments, as appropriate, in subsequent periodic reports.
NOTE 18 - SUBSEQUENT EVENTS
On May 13, 2026, the Company engaged Li CPA LLC as its independent registered public accounting firm, replacing Fortune CPA, Inc.
On June 1, 2026, the Company filed a Registration
Statement on Form S-8 with the Securities and Exchange Commission to register
On July 30, 2026, the Company received
Except for the matters disclosed above and the reorganization disclosed in Note 1, there were no other subsequent events that occurred subsequent to March 31, 2026 through August 21, 2026 that would require recognition or disclosure in the Company’s consolidated financial statements.
F-33
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following description of our results of operations and financial condition in conjunction with the consolidated unaudited financial statements for the six months ended March 31, 2026 and 2025. This discussion contains forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) that involve significant risks and uncertainties. These forward-looking statements include information about our possible or assumed future results of operations or our performance. Words such as “will,” “expects,” “intends,” “plans,” “believes,” “anticipates,” “estimates,” and variations of such words and similar expressions are intended to identify the forward-looking statements. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements contained herein. Readers are encouraged to read the risk factors identified in the section entitled “Item 3.D. — Risk Factors” of our annual report on Form 20-F for the fiscal year ended September 30, 2025, as filed with the SEC on February 4, 2026.
Business Overview
ZK International Group Co., Ltd. (Nasdaq: ZKIN) is a China-based engineering company that historically designed, engineered, and supplied patented high-performance stainless steel and carbon steel pipe products for water and gas pipeline systems. Following the recent strategic restructuring, we have pivoted from its traditional infrastructure focus to the resale of pipeline monitoring components and related peripheral products.
Key Factors that Affect Operating Results
Our results of operations are affected principally by the volume and mix of products sold through our resale business, our ability to source products from third-party suppliers on commercially acceptable terms, and the extent to which revenue growth produces sustainable gross profit. For the six months ended March 31, 2026, the revenue generated from the newly established resale business of pipeline monitoring components amounted to $1.0 million. This business has limited operating history, and our historical experience in the traditional piping industry may not be indicative of future performance in the pipeline monitoring component sector.
Our operating results for the six months ended March 31, 2026 were materially affected by non-cash expenses and fair-value changes that may not recur at the same level in future periods but may continue to create volatility in reported results. We recorded stock-based compensation expense of $7.1 million for the six months ended March 31, 2026, compared with nil for the six months ended March 31, 2025. We also recorded a loss on disposal of $8.1 million. As a result of these and other factors, we recorded a net loss of $17.0 million for the six months ended March 31, 2026, compared with a net loss of $0.8 million for the six months ended March 31, 2025.
Our results are also affected by customer and supplier concentration. As our newly established resale business is in its early stage of operation, we currently have a limited customer base of only four customers. For the six months ended March 31, 2026, revenue from our top four customers accounted for 100% of total revenue, as we have not yet diversified our customer base. For the six months ended March 31, 2026, cost of revenue attributable to our top four suppliers accounted for 87.1% of total cost of revenue. The loss of any of our four existing customers, or a significant reduction in their purchase orders, could materially and adversely affect our revenue, gross margin, and cash flows. In addition, our limited operating history with these customers provides no assurance that they will continue to place orders on a consistent basis or at all.
Known Trends and Uncertainties
Following the disposition of our legacy operations in the 2026 Dispositions, our continuing operations comprise a pipeline monitoring components resale business launched in the third quarter of 2025.
We are subject to continuing liquidity constraints and going-concern uncertainty. As of March 31, 2026, we had cash and cash equivalents of $82,696, and we used $250,384 of cash in operating activities of continued operations during the six months ended March 31, 2026. Our current revenue base is limited, and we incurred a loss from operations of $8.0 million for the six months ended March 31, 2026 against gross profit of $0.01 million, with loss from continuing operations of $17.0 million driven primarily by non-recurring items, including an $8.1 million loss on disposal of subsidiaries and $7.1 million in stock-based compensation. In addition, we made significant prepayments of $21.6 million during 2026 to support our planned AI computing power services business, which remained outstanding as of the date of issuance of this report.
Market Risks
We are exposed to a variety of financial risks, including market risk (including currency risk, price risk and cash flow and fair value interest rate risk), credit risk and liquidity risk. Our overall risk management program focuses on preservation of capital and the unpredictability of financial markets and has sought to minimize potential adverse effects on our financial performance and position.
Foreign Exchange Risk
While our reporting currency is the U.S. Dollar, our consolidated sales and consolidated costs and expenses occurred within the PRC are denominated in the RMB. As a result, we are exposed to foreign exchange risk as our sales and results of operations may be affected by fluctuations in the exchange rate between the U.S. Dollar and the RMB. If the RMB depreciates against the U.S. Dollar, the value of our RMB sales, earnings and assets as expressed in our U.S. Dollar financial statements will decline. Assets and liabilities are translated at exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholders equity is translated at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are included in determining other comprehensive income, a component of stockholders equity. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.
The value of the RMB against the U.S. dollar and other currencies is affected by, among other things, changes in Chinas political and economic conditions. Since July 2005, the RMB has not been pegged to the U.S. dollar and, although the Peoples Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the U.S. dollar or the Euro in the medium to long term. Moreover, it is possible that in the future, PRC authorities may lift restrictions on fluctuations in RMB exchange rate and lessen intervention in the foreign exchange market. Although the RMB strengthened against the U.S. dollar over the last five years, the RMBs significant weakening against the U.S. dollar since July 2015 has largely undone such prior increases.
2
Interest Rate Risk
Our interest rate risk arises from short and long-term borrowings. As of March 31, 2026 and September 30, 2025, we had borrowings with fixed interest rates and therefore we were exposed to fair value interest rate risk. As of March 31, 2026 and September 30, 2025, we had no long-term interest-bearing assets.
Credit Risk
Our cash is invested primarily in savings and deposit accounts with original maturities of three months or less. Savings and deposit accounts generate a small amount of interest income.
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, and accounts receivable. As of March 31, 2026 and September 30, 2025, $82,696 and $2,305,332, respectively, of the Company’s cash was on deposit at financial institutions in the PRC. The decrease reflects the disposal of the Company’s PRC operating subsidiaries on March 30, 2026. While management believes that these financial institutions are of high credit quality, it also continually monitors their creditworthiness.
Contracts receivable and accounts receivable are typically unsecured and derived from revenue earned from customers, thereby they are exposed to credit risk. The risk is mitigated by the Company’s assessment of its customers creditworthiness and its ongoing monitoring of outstanding balances.
Inflation
Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material effect on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross profit and selling, general and administrative expenses as a percentage of net sales if the selling prices of our products do not increase with these increased costs.
Results of Operations
For the six months ended March 31, 2026 and 2025
The following table sets forth a summary of the Company’s consolidated results of operations for the six months ended March 31, 2026 and 2025. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
| For six months ended March 31, | Change | |||||||||||||||
| 2026 | 2025 | Amount | % | |||||||||||||
| Net revenue | $ | 1,001,426 | - | $ | 1,001,426 | 100.00 | % | |||||||||
| Cost of revenue | 991,286 | - | 991,286 | 100.00 | % | |||||||||||
| Gross profit | 10,140 | - | 10,140 | 100.00 | % | |||||||||||
| General and administrative expenses, including stock-based compensation and asset impairment and credit losses | 7,991,319 | 273,875 | 7,717,444 | 2,817.87 | % | |||||||||||
| Loss from operations | (7,981,179 | ) | (273,875 | ) | (7,707,304 | ) | 2,814.17 | % | ||||||||
| Interest expense, net | (288,396 | ) | - | (288,396 | ) | 100.00 | % | |||||||||
| Loss on investment | (612,527 | ) | - | (612,527 | ) | 100.00 | % | |||||||||
| Loss from disposal of subsidiaries | (8,068,807 | ) | - | (8,068,807 | ) | 100.00 | % | |||||||||
| Loss from continuing operations before income taxes | (16,950,909 | ) | (273,875 | ) | (16,677,034 | ) | 6,089.29 | % | ||||||||
| Income tax expense | 748 | - | 748 | 100.00 | % | |||||||||||
| Net loss from continuing operation | (16,951,657 | ) | (273,875 | ) | (16,677,782 | ) | 6,089.56 | % | ||||||||
| Loss from discontinued operations | (71,552 | ) | (528,153 | ) | 456,601 | (86.45 | )% | |||||||||
| Net loss | (17,023,209 | ) | (802,028 | ) | (16,221,181 | ) | 2,022.52 | % | ||||||||
3
Net Revenue
Our revenue from continuing operations for the six months ended March 31, 2026 was $1,001,426. As a result of the disposal of our legacy business during the current period, which has been classified as discontinued operations, the comparative revenue from continuing operations for the six months ended March 31, 2025 was restated to nil. The current period revenue was entirely generated from our newly launched business, which commenced commercial operations during the current period. Consequently, the period-over-period comparison is significantly affected by the change in reporting basis and does not reflect an organic growth trend from an existing business.
Cost of revenues
Our cost of revenues from continuing operations for the six months ended March 31, 2026 was $991,286, compared to a restated nil for the same period in the prior year. This cost entirely relates to the aforementioned new business.
General and administrative expenses, including stock-based compensation and asset impairment and credit losses
General and administrative expenses increased by 2,817.87%, or $7,717,444, from $273,875 for the six months ended March 31, 2025 to $7,991,319 for the six months ended March 31, 2026. The increase was mainly due to $7.1 million stock-based compensation expenses.
Net Loss
As a result of the foregoing, we recorded a net loss of $17,023,209 for the six months ended March 31, 2026, increase of $16,221,181 or 2,022.52%, from the net loss of $802,028 in the same period last year.
Liquidity and Capital Resources
For the six months ended March 31, 2026 and 2025
As of March 31, 2026, we had cash and cash equivalents of $82,696, had accumulated deficits of $68,281,114 and used $250,384 of cash in operating activities of continued operations during the six months then ended.
In addition, although the Company reported total assets of $66.4 million as of March 31, 2026, these assets were driven primarily by prepayments, digital assets consideration receivable and receivable from disposal of subsidiaries, which collectively amounted to $62.6 million (including $21.6 million of procurement advances, $20.0 million of digital assets consideration receivable, and $21.0 million of receivable from disposal of subsidiaries), rather than by cash or other immediately available liquid resources.
These conditions, together with our accumulated deficit and net loss, raise substantial doubt about our ability to continue as a going concern. Management’s liquidity plan depends on the collection or monetization of current assets, including digital assets, continued access to financing, and working-capital management, and there can be no assurance that these plans will be successful. The Company’s working capital and other capital requirements have been primarily funded by the sale of equity and from operating cash flow.
Although the Company’s management believes that cash generated from operations will be sufficient to meet the Company’s normal working capital requirements, its ability to service its current debt will depend on its future realization of its current assets during the next 12 months. Management took into account historical experience, the economy, the collectability of accounts receivable as of March 31, 2026, and the realization of inventory. Based on these considerations, the Company’s management believes that the Company has sufficient funds to meet its working capital requirements and debt obligations as they come due for the next 12 months from the date of this report. However, there is no guarantee that management’s plans will succeed. There are a number of factors that can arise and cause the Company’s plans to fall short, such as economic conditions, competitive pricing in the industry, and the continued support of banks and suppliers. Accordingly, management has concluded that substantial doubt about the Company’s ability to continue as a going concern exists as of the date of this report. If future cash flow from operations and other capital resources are insufficient to meet the Company’s liquidity needs, the Company may be forced to reduce or delay its anticipated expansion plans, sell assets, acquire additional debt or equity capital, or refinance all or part of its debt.
The following table summarizes the Company’s cash flow for the six months ended March 31, 2026 and 2025:
| For the six months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Net cash used in operating activities of continued operations | $ | (250,384 | ) | $ | (171,075 | ) | ||
| Net cash provided by/(used in) operating activities of discontinued operations | 3,370,083 | (661,746 | ) | |||||
| Cash Provided by/(Used in) Operating Activities | 3,119,699 | (832,821 | ) | |||||
| Net cash used in investing activities of continued operations | (21,234,623 | ) | - | |||||
| Net cash (used in)/provided by investing activities of discontinued operations | (89,815 | ) | 119,431 | |||||
| Cash (Used in)/Provided by in Investing Activities | (21,324,438 | ) | 119,431 | |||||
| Net cash provided by financing activities of continued operations | 20,920,400 | - | ||||||
| Net cash used in financing activities of discontinued operations | (2,282,812 | ) | (934,284 | ) | ||||
| Cash Provided by/(Used in) Financing Activities | 18,637,588 | (934,284 | ) | |||||
| Effect of exchange rate on cash | 777,486 | (859,482 | ) | |||||
| Net increase/(decrease) in cash, cash equivalents and restricted cash | 1,210,335 | (2,507,156 | ) | |||||
| Cash and cash equivalents, and restricted cash at beginning of the period | 3,819,210 | 4,113,304 | ||||||
| Cash, cash equivalents, and restricted cash – end of period | $ | 5,029,545 | $ | 1,606,148 | ||||
| Less: Cash, cash equivalents and restricted cash of discontinued operations at end of the period | (4,946,849 | ) | (1,591,421 | ) | ||||
| Cash and cash equivalent of continuing operations at end of the period | 82,696 | 14,727 | ||||||
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Operating Activities
Net cash provided by operations for the six months ended March 31, 2026 was $3,119,699, compared to net cash used in operating activities of $832,821 for the six months ended March 31, 2025. The increase in cash provided by operating activities is due to the changes in working capital. The difference between net loss and net cash provided by operating activities was primarily due to non-cash stock-based compensation of $7.1 million and loss on disposal of subsidiaries of $8.1 million.
Investing Activities
Net cash used in investing activities was $21,324,438 for the six months ended March 31, 2026, compared with net cash provided by investing activities of $119,431 for the six months ended March 31, 2025. This increased in net cash used was primarily attributable to a net increase of $21,234,623 in purchases of property, plant and equipment, primarily related to entered into an AI equipment procurement agreement with Beijing Jingze Trading Co., Ltd., an unrelated third-party supplier, s to support the our strategic initiatives in the artificial intelligence sector.
Financing Activities
Net cash provided by financing activities amounted to approximately $18,637,588 for the six months ended March 31, 2026, compared with net cash used in financing activities of $934,284 for the same period in 2025. The increase in cash provided by financing activities was due to an increase in cash proceeds from share issuance.
Cash flows from continuing operations:
Operating Activities
Net cash used in operating activities consists primarily of net loss adjusted for non-cash items, loss from disposal of subsidiaries, and is adjusted for the impact of changes in working capital. Net cash used in operations for the six months ended March 31, 2026 was $250,384, compared to net cash used in operating activities of $171,075 for the six months ended March 31, 2025.
Investing Activities
Net cash used in investing activities was $21,234,623 and nil for the six months ended March 31, 2026 and 2025, respectively. This increased in net cash used was primarily attributable to a net increase of $21,234,623 in purchases of property, plant and equipment, primarily related to entered into an AI equipment procurement agreement with Beijing Jingze Trading Co., Ltd., an unrelated third-party supplier, to support the our strategic initiatives in the artificial intelligence sector.
Financing Activities
Net cash provided by financing activities was $20,920,400 for the six months ended March 31, 2026, an increase of $20,920,400, as compared to nil net cash provided by financing activities for the six months ended March 31, 2025. The increase in cash provided by financing activities was primarily attributable to net proceeds of $20,920,900 from stock issuance during the current period.
Cash flows from discontinued operations:
Operating Activities
Net cash provided by operating activities consists primarily of net loss adjusted for non-cash items, is adjusted for the impact of changes in working capital. Net cash provided by operations for the six months ended March 31, 2026 was $3,370,083, representing an increase of $4,031,829 compared to net cash used in operating activities of $661,746 for the six months ended March 31, 2025. The increase in cash provided by operating activities is due to the changes in working capital.
Investing Activities
Net cash used in investing activities was $89,815 for the six months ended March 31, 2026, compared with net cash provided by investing activities of $119,431 for the six months ended March 31, 2025.
Financing Activities
Net cash used in financing activities was $2,282,812 for six months ended March 31, 2026, an increase of $1,348,528, as compared to $934,284 net cash used in financing activities for the six months ended March 31, 2025. This increase in cash outflows was primarily driven by the net repayment of bank borrowings and related-party loans by the disposed subsidiaries.
As of March 31, 2026, the Company did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
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