Document And Entity Information
Document And Entity Information | 12 Months Ended |
Sep. 30, 2019shares | |
Document And Entity Information [Abstract] | |
Document Type | 20-F |
Document Annual Report | true |
Document Transition Report | false |
Document Shell Company Report | false |
Amendment Flag | false |
Document Period End Date | Sep. 30, 2019 |
Document Fiscal Year Focus | 2019 |
Document Fiscal Period Focus | FY |
Entity Registrant Name | ZK International Group Co., Ltd. |
Entity Central Index Key | 0001687451 |
Current Fiscal Year End Date | --09-30 |
Entity Well-known Seasoned Issuer | No |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Non-accelerated Filer |
Trading Symbol | ZKIN |
Entity Common Stock, Shares Outstanding | 16,558,037 |
Entity Shell Company | false |
Entity Emerging Growth Company | true |
Entity Ex Transition Period | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) |
Current assets | ||
Cash and cash equivalents | $ 3,451,138 | $ 7,682,589 |
Short-term Investment | 279,810 | 850,829 |
Accounts receivable, net of allowance for doubtful accounts of $1,919,152 and $1,997,310, respectively | 25,115,040 | 27,134,237 |
Notes receivable | 385,519 | 414,352 |
Other receivables | 1,866,321 | 2,624,022 |
Due from related parties | 110,990 | 22,278 |
Inventories | 20,796,075 | 17,792,187 |
Advance to suppliers | 6,848,143 | 7,826,679 |
Total current assets | 58,853,036 | 64,347,173 |
Property, plant and equipment, net | 6,595,704 | 6,280,412 |
Intangible assets, net | 918,717 | 938,221 |
Deferred tax assets | 289,756 | 299,596 |
Long-term deposit | 11,453,690 | 4,229,827 |
Long-term investment | 291,464 | 303,334 |
TOTAL ASSETS | 78,402,367 | 76,398,563 |
Current liabilities: | ||
Accounts payable | 4,182,530 | 1,670,427 |
Accrued expenses and other current liabilities | 4,438,570 | 5,934,733 |
Accrued payroll and welfare | 1,340,060 | 887,201 |
Advance from customers | 2,422,776 | 3,410,322 |
Due to related parties | 1,446,461 | 3,694,469 |
Short-term bank borrowings | 16,281,461 | 19,270,530 |
Notes payables | 296,267 | 0 |
Income tax payable | 4,176,537 | 4,263,289 |
TOTAL LIABILITIES | 34,584,662 | 39,130,971 |
Equity | ||
Common stock, no par value, 50,000,000 shares authorized, 16,558,037 and 16,528,037 shares issued and outstanding, respectively | 0 | 0 |
Additional paid-in capital | 18,049,630 | 17,998,933 |
Statutory surplus reserve | 2,904,699 | 2,031,775 |
Retained earnings | 24,372,535 | 17,138,593 |
Accumulated other comprehensive income (loss) | (1,808,825) | (127,456) |
Total equity attributable to ZK International Group Co., Ltd. | 43,518,039 | 37,041,845 |
Equity attributable to non-controlling interests | 299,666 | 225,747 |
Total equity | 43,817,705 | 37,267,592 |
TOTAL LIABILITIES AND EQUITY | $ 78,402,367 | $ 76,398,563 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 | Mar. 21, 2018 | Sep. 30, 2017 | Dec. 19, 2016 |
CONSOLIDATED BALANCE SHEETS | |||||
Allowance for doubtful accounts | $ 1,919,152 | $ 1,997,310 | $ 1,817,050 | ||
Common Stock, No Par Value | $ 0 | $ 0 | $ 0 | ||
Common Stock, Shares Authorized | 50,000,000 | 50,000,000 | 9,000,000 | ||
Common Stock, Shares, Issued | 16,558,037 | 16,528,037 | |||
Common Stock, Shares, Outstanding | 16,558,037 | 16,528,037 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 | |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | |||
Revenues | $ 63,883,520 | $ 54,884,381 | $ 44,951,740 |
Cost of sales | (48,239,478) | (36,593,792) | (31,843,337) |
Gross profit | 15,644,042 | 18,290,589 | 13,108,403 |
Operating expenses: | |||
Selling and marketing expenses | 2,647,429 | 2,949,204 | 1,915,127 |
General and administrative expenses | 2,897,995 | 4,071,116 | 1,782,318 |
Research and development costs | 1,452,061 | 1,652,633 | 1,331,111 |
Total operating expenses | 6,997,485 | 8,672,953 | 5,028,556 |
Operating Income | 8,646,557 | 9,617,636 | 8,079,847 |
Other income (expenses): | |||
Interest expenses | (1,151,045) | (1,239,170) | (1,245,385) |
Interest income | 24,437 | 10,702 | 24,459 |
Other income, net | 921,973 | 112,099 | 69,772 |
Total other expenses, net | (204,635) | (1,116,369) | (1,151,154) |
Income before income taxes | 8,441,922 | 8,501,267 | 6,928,693 |
Income tax provision | (248,228) | (1,398,210) | (995,005) |
Net income | 8,193,694 | 7,103,057 | 5,933,688 |
Net income attributable to non-controlling interests | (86,828) | (84,943) | (59,412) |
Net income attributable to ZK International Group Co., Ltd. | 8,106,866 | 7,018,114 | 5,874,276 |
Net income | 8,193,694 | 7,103,057 | 5,933,688 |
Other comprehensive income (loss): | |||
Foreign currency translation adjustment | (1,694,278) | (818,468) | 272,237 |
Total comprehensive income | 6,499,416 | 6,284,589 | 6,205,925 |
Comprehensive loss (income) attributable to non-controlling interests | (73,919) | (75,719) | (61,100) |
Comprehensive income attributable to ZK International Group Co., Ltd. | $ 6,425,497 | $ 6,208,870 | $ 6,144,825 |
Basic and diluted earnings per share | |||
Basic | $ 0.49 | $ 0.52 | $ 0.56 |
Diluted | $ 0.49 | $ 0.51 | $ 0.56 |
Weighted average number of shares outstanding | |||
Basic | 16,551,708 | 13,610,046 | 10,970,000 |
Diluted | 16,551,708 | 13,629,517 | 10,973,674 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) | Common Stock | Additional paid-in capital | Statutory surplus reserve | Retained earnings | Accumulated other comprehensive income (loss) | Non- controlling interests | Total |
Balance at Sep. 30, 2016 | $ 2,800,777 | $ 579,994 | $ 5,697,984 | $ 411,239 | $ 88,928 | $ 9,578,922 | |
Balance (Shares) at Sep. 30, 2016 | 9,000,000 | ||||||
Shares issued for cast, net of offering costs | 5,582,099 | 0 | 0 | 0 | 0 | 5,582,099 | |
Shares issued for cast, net of offering costs (Shares) | 4,068,346 | ||||||
Foreign currency translation gain (loss) | 270,549 | 1,688 | 272,237 | ||||
Net income | 593,369 | 5,280,907 | 59,412 | 5,933,688 | |||
Balance at Sep. 30, 2017 | 8,382,876 | 1,173,363 | 10,978,891 | 681,788 | 150,028 | 21,366,946 | |
Balance (shares) at Sep. 30, 2017 | 13,068,346 | ||||||
Shares issued for cast, net of offering costs | 9,616,057 | 9,616,057 | |||||
Shares issued for cast, net of offering costs (Shares) | 3,459,691 | ||||||
Foreign currency translation gain (loss) | (809,244) | (9,224) | (818,468) | ||||
Net income | 858,412 | 6,159,702 | 84,943 | 7,103,057 | |||
Balance at Sep. 30, 2018 | 17,998,933 | 2,031,775 | 17,138,593 | (127,456) | 225,747 | 37,267,592 | |
Balance (shares) at Sep. 30, 2018 | 16,528,037 | ||||||
Shares issued for cast, net of offering costs | 50,697 | 0 | 0 | 0 | 0 | 50,697 | |
Shares issued for cast, net of offering costs (Shares) | 30,000 | ||||||
Foreign currency translation gain (loss) | $ 0 | 0 | 0 | 0 | (1,681,369) | (12,909) | (1,694,278) |
Net income | $ 0 | 0 | 872,924 | 7,233,942 | 0 | 86,828 | 8,193,694 |
Balance at Sep. 30, 2019 | $ 18,049,630 | $ 2,904,699 | $ 24,372,535 | $ (1,808,825) | $ 299,666 | $ 43,817,705 | |
Balance (shares) at Sep. 30, 2019 | 16,558,037 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 | |
Cash Flows from Operating Activities: | |||
Net income | $ 8,193,694 | $ 7,103,057 | $ 5,933,688 |
Adjustments to reconcile net income to net cash used in operating activities: | |||
Depreciation expense | 375,286 | 395,604 | 425,696 |
Amortization expense | 13,638 | 12,137 | 12,705 |
Loss on disposal of fixed assets | 2,244 | ||
Bad debt expense | 0 | 286,606 | 160,944 |
Deferred tax benefits | (1,958) | (37,311) | (24,142) |
Non-cash service expense | 50,679 | ||
Changes in operating assets and liabilities: | |||
Accounts receivable | 995,327 | (7,151,260) | 2,419,491 |
Other receivables | 680,970 | (1,215,167) | 411,554 |
Notes receivable | 13,119 | (216,478) | (121,937) |
Inventories | (3,846,722) | (9,065,712) | (3,505,158) |
Advance to suppliers | 698,903 | 1,580,700 | (6,153,011) |
Accounts payable | 2,593,103 | 861,192 | (417,453) |
Accrued expenses and other current liabilities | (1,314,005) | 1,698,015 | 791,312 |
Accrued payroll and welfare | 506,894 | 600,619 | (49,512) |
Advance from customers | (887,934) | 1,563,693 | 282,817 |
Income tax payable | 83,250 | 1,349,310 | 979,288 |
Net cash provided (used in) operating activities | 8,156,488 | (2,234,995) | 1,146,282 |
Cash Flows from Investing Activities: | |||
Purchases of property, plant and equipment | (880,289) | (467,138) | (155,152) |
Proceed from disposal of property, plant and equipment | 5,963 | ||
Disposal of intangible asset | 257,863 | ||
Purchases of intangible assets | (11,149) | (501,000) | (6,704) |
Net proceeds placed into long-term deposit | (7,682,151) | (4,444,170) | |
Net cash used in investing activities | (8,567,626) | (5,154,445) | (161,856) |
Cash Flows from Financing activities: | |||
Net proceeds released from (placed into) bank acceptance notes | 308,005 | (380,000) | 5,582,099 |
Net proceeds released from (placed into) short-term investment | 559,030 | (893,945) | |
Net proceeds released from restricted cash | 539,381 | 2,651,704 | |
Proceeds from short-term bank borrowings | 25,875,962 | 24,056,279 | (499,904) |
Repayments of short-term bank borrowings | (28,199,497) | (25,529,488) | (3,816,458) |
Net proceeds received from (repaid to) related parties | (2,279,911) | 5,665,914 | 6,051,523 |
Net cash provided by (used in) financing activities | (3,736,411) | 3,458,141 | 9,968,964 |
Effect of exchange rate changes on cash | (83,902) | 335,413 | 201,436 |
Net change in cash and cash equivalents | (4,231,451) | (3,595,886) | 11,154,826 |
Cash and cash equivalents at the beginning of year | 7,682,589 | 11,278,475 | 123,649 |
Cash and cash equivalents at the end of year | 3,451,138 | 7,682,589 | 11,278,475 |
Supplemental disclosures of cash flows information: | |||
Non-cash financing activities | 9,842,676 | ||
Cash paid for income taxes | 170,331 | 38,218 | 54,215 |
Cash paid for interest expenses | $ 1,197,504 | $ 1,218,757 | $ 1,233,066 |
ORGANIZATION AND NATURE OF OPER
ORGANIZATION AND NATURE OF OPERATIONS | 12 Months Ended |
Sep. 30, 2019 | |
ORGANIZATION AND NATURE OF OPERATIONS | |
ORGANIZATION AND NATURE OF OPERATIONS | NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS ZK International Group Co., Ltd. (“ZK International” or “the Company”) ZK International was incorporated on May 13, 2015 in the British Virgin Islands (“BVI”). ZK International is a holding company with no operations. The Company, through its subsidiaries, is a leading company that specializes in manufacturing and sales of stainless steel band, copper strip, welded stainless steel pipes and fittings, pipe fittings, valve, light industry machinery and equipment and other stainless steel products of its trademark “Zhengkang” in People’s Republic of China (“PRC”). The Company is authorized to issue 50,000,000 ordinary shares, with no par value. 16,558,037 shares were issued and outstanding as of September 30, 2019. The ownership interests described below are based on the shareholders’ portion of the authorized ordinary shares. ZK International is a holding company and is currently not actively engaging in any business. As of September 30, 2019, 52.21% of ZK International's equity interest was hold by four mainland Chinese beneficial owners, who entered an agreement on May 13, 2015 to vote their shares in concert in ZK International, covering all the periods presented afterwards, with HUANG Jian Cong holding 29.38%, WANG Ming Jie holding 10.87%, WANG Guo Lin holding 10.87%, WANG Jian Di holding 1.09%. ZK Pipe Industry Co., Ltd. (“ZK Pipe”) ZK Pipe was incorporated on May 28, 2015 in Hong Kong. The registered capital is HKD 1,000,000 which was initially 40% held by ZK International and 60% held by CHENG Kai Chun, a nominee shareholder with no voting interest in ZK Pipe. On August 5, 2015, CHENG Kai Chun transferred all of his equity interest in ZK Pipe to ZK International. After the transfer, ZK International controls 100% of ZK Pipe’s voting interest and ZK Pipe became a wholly owned subsidiary of ZK International. The paid-in capital was zero as of September 30, 2019. The registered principal activities of ZK Pipe are technical research of metal pipe and fittings, metal take-up valve plumbing and water purifying plant, and imports and exports of goods. ZK Pipe had not commenced operations as of September 30, 2019. Wenzhou Weijia Pipeline Development Co., Ltd. (“Wenzhou Weijia”) Wenzhou Weijia was incorporated on June 17, 2015 in Wenzhou and is a wholly owned subsidiary of ZK Pipe. Wenzhou Weijia is a wholly-foreign owned enterprise organized the laws of the People’s Republic of China. The registered capital is USD 20,000,000 and the paid-in capital was zero as of September 30, 2019. The registered principal activities of Wenzhou Weijia are technical research, technical service and sales of metal pipe and fittings and light industry machinery and equipment, and imports and exports of goods and technology. Wenzhou Weijia had not commenced operations as of September 30, 2019. Zhejiang Zhengkang Industrial Co., Ltd. (“Zhejiang Zhengkang”) Zhejiang Zhengkang was incorporated on December 4, 2001 under the laws of the People’s Republic of China. The registered and paid in capital is RMB 20,000,000. Since May 24, 2006, Zhejiang Zhengkang was owned by the five Mainland Chinese beneficial owners, with HUANG Jian Cong holding 45%, WANG Ming Jie holding 20%, WANG Guo Lin holding 20%, WANG Jian Di holding 10% and WANG Yang Ming holding 5%. Also, the five mainland Chinese beneficial owners entered an agreement on January 1, 2013 to vote their shares in concert in Zhejiang Zhengkang. The agreement has been in effect for all financial periods presented. On September 29, 2015, Wenzhou Weijia acquired 99% equity percentage of Zhejiang Zhengkang from the five mainland Chinese beneficial owners. After that, Zhejiang Zhengkang’s equity interest is 99% held by Wenzhou Weijia and 1% held by HUANG Jian Cong. In July 2016, Zhejiang Zhengkang increased its registered and paid in capital to RMB 30,000,000, with Wenzhou Weijia invested RMB 9,900,000 and HUANG Jian Cong invested RMB 100,000. On September 28, 2017, Zhejiang Zhengkang increased its registered capital to RMB 100,000,000, with no additional investment into the paid-in capital. The principal activities of Zhejiang Zhengkang are manufacturing and sales of stainless steel band, copper strip, welded stainless steel pipes and fittings, pipe fittings, valve, light industry machinery and equipment and other stainless steel products, and imports and exports of goods and technology. Wenzhou Zhengfeng Industry and Trade Co., Ltd. (“Wenzhou Zhengfeng”) Wenzhou Zhengfang was incorporated on December 24, 1999 under the laws of the People’s Republic of China. The registered and paid in capital is RMB 2,880,000. Since January 1, 2013, Wenzhou Zhengfeng’s voting interest was controlled by the five Mainland Chinese beneficial owners through agreement with two nominee shareholders. Also, the five mainland Chinese beneficial owners entered into an agreement on January 1, 2013 to vote their shares in concert in Wenzhou Zhengfeng. The agreement has been in effect since then. On June 8, 2015, 100% of Wenzhou Zhengfeng’s equity interest was transferred from nominee shareholders to the five mainland Chinese beneficial owners, with WANG Ming Jie holding 38.89%, WANG Guo Lin holding 27.78%, HUANG Jian Cong holding 22.57%, WANG Yang Ming holding 5.55% and WANG Jian Di holding 5.21%, respectively. On September 22, 2015, Zhejiang Zhengkang acquired 100% equity of Wenzhou Zhengfeng from the five mainland Chinese beneficial owners. After that, Wenzhou Zhengfeng is a wholly owned subsidiary of Zhejiang Zhengkang. The principal activities of Wenzhou Zhengfeng are trading of steel coil and strip. Wenzhou Zhenglong Ecommerce Co. Ltd. ("Zhenglong Ecommerce”) Zhenglong Ecommerce was incorporated on March 15, 2018 under the laws of the People’s Republic of China. Zhenglong Ecommerce’ registered capital is RMB 5,000,000, and the paid-in capital was RMB 1,020,000 as of September 30, 2019. The registered principal activities of Zhenglong Ecommerce include sales (and online sale) of steel pipes, steel strips, pipe connections and fittings, machinery, constructive material, chemical, solar cell, electronic appliance, toys, leather goods, consumer goods, clothing; development and sale of software; IT consulting and service; design and maintenance of computer system; importing and exporting of goods and technology. Zhejiang Zhengkang owns 90% of Zhenglong Ecommerce and a third-party individual owns 10%. ZK International (ZK Uganda) ZK Uganda was incorporated on March 23, 2018 under the laws of the Republic of Uganda. Its registered capital is 20 Million Uganda Shillings, and the paid-in capital was zero as of September 30, 2018. ZK Uganda is 80% owned by ZK International and 20% owned by a third-party individual. ZK Uganda is currently not engaging in any business but plans to seek such opportunities that would complement and diversify the current business operations of the Company. The paid-in capital was zero as of September 30, 2019. XSigma Corporation (“XSigma”) XSigma Corporation (“XSigma”) was incorporated on January 18, 2018 under the laws of the British Virgin Islands. Its registered capital is USD 50,000, and the paid-in capital was zero as of September 30, 2019. XSigma is a wholly-owned subsidiary of ZK International. It is currently not engaging in any business but plans to seek such opportunities that would complement and diversify the current business operations of the Company. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Sep. 30, 2019 | |
SIGNIFICANT ACCOUNTING POLICIES | |
SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES Presentation and Principles of Consolidation The accompanying consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the United Stated of America. All inter-company transactions and balances have been eliminated upon consolidation. Registered Ownership as of the Entity Name Location Background issuance date of the report ZK BVI 29.38% by HUANG Jian Cong International • Incorporated on May 13, 2015 10.87% by WANG Ming Jie • Registered capital of USD 50,000, not paid 10.87% by WANG Guo Lin • A holding company with no operation activities itself for the years then ended 1.09% by WANG Jian Di ZK Pipe Hong Kong • Incorporated on May 28, 2015 100% by ZK International • Registered capital of HKD 1,000,000, not paid • Have not commenced operations Wenzhou Weijia Wenzhou • Incorporated on June 17, 2015 100% by ZK Pipe • Registered capital of USD 20,000,000, not paid • Have not commenced operations Zhejiang Zhengkang Wenzhou • Incorporated on December 4, 2001 99% by Wenzhou Weijia • Registered capital of RMB 100,000,000, RMB 30,000,000 paid 1% by HUANG Jian Cong • Principally operated in manufacturing and sales of steel strip, steel pipe and fittings Wenzhou Zhengfeng Wenzhou • Incorporated on December 24, 1999 100% by Zhejiang Zhengkang • Registered capital of RMB 2,880,000, fully paid • Principally operated in trading of steel strip, mainly purchased from Zhejiang Zhengkang Zhenglong Ecommerce Wenzhou • Incorporated on March 15, 2018 • Registered capital of RMB 5,000,000, RMB 1,020,000 paid 90% by Zhejiang Zhengkang • Principally operated in online sales and promoting of steel strip, steel pipe and fittings ZK Uganda Uganda • Incorporated on March 23, 2018 • Registered capital of 20 Million Uganda Shillings, not paid. 80% by ZK International • Have not commenced operations XSigma BVI • Incorporated on January 18, 2018 • Registered capital of USD 50,000, not paid 100% by ZK International • Have not commenced operations Use of Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (US GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, allowances of accounts receivable, inventory valuation, useful life of property, plant and equipment and income taxes related to realization of deferred tax assets and uncertain tax position. Actual results could differ from those estimates. Foreign Currency Translation The financial records of the Company’s PRC subsidiaries are maintained in their local currencies which are RMB and ZK Pipe in Hong Kong also use RMB as functional currency. Monetary assets and liabilities denominated in currencies other than their local currencies are translated into local currencies at the rates of exchange in effect at the balance sheet dates. Transactions denominated in currencies other than their local currencies during the year are converted into local currencies at the applicable rates of exchange prevailing when the transactions occur. Transaction gains and losses are recorded in other income/ (expense), net in the statements of operations and comprehensive income. ZK International maintained its financial record using the United States dollar (“US dollar”) as the functional currency, while the subsidiaries of the Company in Hong Kong and mainland China maintained their financial records using RMB as the functional currencies. The reporting currency of the Company is US dollar. When translating local financial reports of the Company’s subsidiaries into US dollar, assets and liabilities are translated at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenue, expenses, gains and losses are translated at the average rate for the period. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the statements of operations and comprehensive income. The relevant exchange rates are listed below: For the Fiscal Years Ended September 30 2019 2018 2017 Period Ended RMB: USD exchange rate 7.1477 6.8680 6.6545 Period Average RMB: USD exchange rate 6.8753 6.5368 6.8126 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. Short-term Investment The Company’s short-term Investment consists of short-term held-to-maturity investments, mainly term deposits, in commercial banks with original maturities of more than 90 day but less than one year. As of September 30, 2019, the Company has short-term investment of $279,810, while it had $850,829 short-term investment as of September 30, 2018. Long-term Deposit Long-term deposit consists of cash deposit of RMB 81,867,541 Zhejiang Zhengkang pledged to three entities, which the Company is seeking to acquire certain percentage of ownership of each ("Target Company” or collectively "Target Companies"). The deposits are used as acquisition deposits required by the three Target Companies in order to execute their respective acquisition memorandum which details the acquisition and valuation methods but is not legally binding. As of September 30, 2019 the total deposits pledged were $11,453,690, with $10,397,406 to one Target Company and $1,056,284 to the other two. The fund pledged to the Target Companies have no definite term, however the Company anticipates the detailed acquisition proposals will be presented to the Board of Directors and shareholders of the Company for voting within one year. In the case that any acquisition is approved by both parties, the deposits will be used as initial payments and offset the total cash considerations of the deal. If any of the acquisition failed to be approved, the Target Companies are obligated to return the deposit to Zhejiang Zhengkang. As of September 30, 2019, no acquisitions were either approved or disapproved as the two acquisitions are still in the process of undergoing legal and financial due diligence. Accounts Receivable, net Accounts receivable arise from the product sales in the normal course of business. The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. Based on management of customers’ credit and ongoing relationship, management makes conclusions whether any balances outstanding at the end of the period will be deemed uncollectible on an individual basis and on aging analysis basis. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Uncollectible receivable are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. The allowance for doubtful accounts recognized as of September 30, 2019 and 2018 was $1,919,152 and $1,997,310, respectively. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is principally determined using the weighted-average method. The Company records adjustments to inventory for excess quantities, obsolescence or impairment when the appropriate to reflect inventory at net realizable value. These adjustments are based upon a combination of factors including current sales volume, market conditions, lower of cost or market analysis and expected realizable value of the inventory. There were no write-downs recognized of inventories as of September 30, 2019 and 2018. 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. During fiscal year ended September 30, 2019, the Company wrote off advance to suppliers of $102,523. There was no such expense recognized during the years ended September 30, 2018. 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, accounts receivable, accounts payable, short-term investment, notes receivable, bank loans, and income tax payable and other receivables, the carrying amounts approximate their fair values due to their short maturities as of September 30, 2019 and 2018. The company did not identify any instruments that were measured at fair value on a recurring nor non-recurring basis as of September 30, 2019 and 2018. Property and Equipment, net Property, plant, and equipment are recorded at cost less accumulated depreciation. Depreciation commences upon placing the asset in usage and is recognized on a straight-line basis over the estimated useful lives of the assets, as follows: Useful lives Buildings 40 years Machinery 10 years Furniture, fixtures, and equipment 10 years Motor vehicles 10 years Upon retirement or disposition, the asset cost and related accumulated depreciation are removed with any gain or loss recognized in the consolidated statements of operations and comprehensive income. Repair and maintenance costs that do not extend the economic life of the underlying assets are expensed as incurred. Costs incurred in constructing new facilities, including progress payments and other costs related to construction, are capitalized, and transferred to property, plant and equipment on completion, at which time depreciation commences. Intangible Assets Intangible assets consist primarily of land use rights and software. Under the PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company. The government grants individuals and companies the right to use parcels of land for specified periods of time. These land use rights are sometimes referred to informally as “ownership.” Land use rights are stated at cost less accumulated amortization. Intangible assets are amortized using the straight-line method with the following estimated useful lives: Useful lives Land use rights 46 years Software 5 years Impairment of Long-lived Assets The Company management review the carrying values of long-lived assets whenever events and circumstances, such as a significant decline in the asset’s market value, obsolescence or physical damage affecting the asset, significant adverse changes in the assets use, deterioration in the expected level of the assets performance, cash flows for maintaining the asset are higher than forecast, indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value. There was no impairment charge recognized for long-lived assets as of September 30, 2019, 2018 and 2017. Value-added Tax Value-added taxes (“VAT”) collected from customers relating to product sales and remitted to governmental authorities are presented on a net basis. VAT collected from customers is excluded from revenue. The Company is subject to a VAT rate of 17% before May 1, 2018, a VAT rate of 16% effective on May 1, 2018, and the most current VAT rate of 13% effective on April 1, 2019. The VAT payable may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing or acquiring its finished products. Revenue Recognition The Company generates its revenues mainly from sales of steel piping products. 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. 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. As the Company's standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. 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. Government Grant Government grants are recognized when received and all the conditions for their receipt have been met. Government grants as the compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related cost are recognized in profit or loss in the period in which they become receivable. During the period ended as of September 30, 2019, 2018 and 2017, $912,844, $59,238 and $87,250, respectively, government grants were recognized as other income for financial support to the Company under local government’s innovation incentive programs. Research and Development Costs Research and development costs are expensed as incurred. Research and development reimbursements and grants received from government are recorded by the Company as a reduction of research and development costs. Income Taxes The Company accounts for income taxes using the asset and liability method whereby it calculates deferred tax assets or liabilities for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits by applying enacted tax rates applicable to the years in which those temporary differences are expected to be reversed or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. The components of the deferred tax assets and liabilities are individually classified as non-current amounts. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. There were no tax benefits recorded as of September 30, 2019 and 2018. Advertising costs Advertising costs are expensed as incurred in accordance with ASC 720‑35 Other Expense-Advertising costs. Advertising costs were $306,288, $265,538 and $69,535 for years ended September 30, 2019, 2018 and 2017, respectively. Earnings Per Share Earnings (loss) per share is calculated in accordance with ASC 260 Earnings per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed in accordance with the treasury stock method and based on the weighted average number of common shares and dilutive common share equivalents. Dilutive common share equivalents are excluded from the computation of diluted earnings per share if their effects would be anti-dilutive. Concentration of Risks Exchange Rate Risks The Company operates in China, which may give rise to significant foreign currency risks mainly from fluctuations and the degree of volatility of foreign exchange rates between the USD and the RMB. Currency Convertibility Risks Substantially all of the Company’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with other information such as suppliers’ invoices, shipping documents and signed contracts. Concentration of Credit Risks Financial instruments that potentially subject the Company to concentration of credit risks consist primarily of cash and cash equivalents, short-term investment, notes receivable, accounts receivable and other receivables, the balances of which are stated on the consolidated balance sheets which represent the Company’s maximum exposure. The Company places its cash and cash equivalents, and short-term investment in good credit quality financial institutions in Hong Kong and China. Concentration of credit risks with respect to accounts receivables is linked to the concentration of revenue. To manage credit risk, the Company performs ongoing credit evaluations of customers’ financial condition. The concentration analysis of our revenue and accounts receivable is shown in Note 14. Interest Rate Risks The Company is subject to interest rate risk. The Company has bank interest bearing loans charged at variable interest rates. And although some bank interest bearing loans are charged at fixed interest rates within the reporting period, the Company is still subject to the risk of adverse changes in the interest rates charged by the banks when these loans are refinanced. Subsequent Events The Company’s management reviewed all material events through the date of the consolidated financial statements were issued for subsequent event disclosure consideration. Recent Accounting Pronouncements The Company considers the applicability and impact of all accounting standards updates. Management periodically reviews new accounting standards that are issued. In May 2014, FASB issued ASU 2014‑09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of ASU 2014‑09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. We have elected to early adopt ASU 2014-09 and its related amendments or collectively Topic 606, effective October 1, 2018, as permitted by the standard, using the modified retrospective implementation method. Accordingly, we have applied the five-step method outlined in Topic 606 for determining when and how revenue is recognized to all contracts that were not completed as of the date of adoption. Revenues for reporting periods beginning after October 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported under the previous revenue recognition guidance. For contracts that were modified before the effective date, we have considered the modification guidance within the new standard and determined that the revenue recognized and contract balances recorded prior to adoption for such contracts were not impacted. While Topic 606 requires additional disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, its adoption has not had a material impact on the measurement or recognition of our revenues. Our modified retrospective adoption, for which we were not required to make any material changes to the prior year presentation, did not have a material effect on our consolidated financial statements. In January 2016, the FASB issued ASU No. 2016‑01, “Financial Instruments – Overall (Subtopic 825‑10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to existing U.S. GAAP by: (1) Requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (2) Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; (3) Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and. (4) Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company evaluates the impact of this new standard and believes there is no material impact on its consolidated financial statements. In August 2016, the FASB issued ASU No. 2016 15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company evaluates the impact of this new standard and believes there is no impact on its consolidated financial statements. In October 2016, the FASB issued ASU No. 2016‑17, Consolidation (Topic 810): Interest Held through Related Parties That Are under Common Control, to provide guidance on the evaluation of whether a reporting entity is the primary beneficiary of a VIE by amending how a reporting entity, that is a single decision maker of a VIE, treats indirect interests in that entity held through related parties that are under common control. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The Company evaluates the impact of this new standard and believes there is no impact on its consolidated financial statements. In November 2016, the FASB issued ASU No. 2016‑18, "Statement of Cash Flows: Restricted Cash". The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company evaluates the impact of this new standard and believes there is no material impact on its consolidated financial statements. In January 2017, the FASB issued ASU No. 2017‑01, "Business Combinations (Topic 805): Clarifying the Definition of a Business". The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. These amendments take effect for public businesses for fiscal years beginning after December 15, 2017 and interim periods within those periods, and all other entities should apply these amendments for fiscal years beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The Company does not expect this update will have a material impact on the Company’s consolidated financial position, results of operations and cash flows. In February 2017, the FASB issued ASU No. 2017‑05 (“ASU 2017‑05”) to provide guidance for recognizing gains and losses from the transfer of nonfinancial assets and in-substance nonfinancial assets in contracts with non-customers, unless other specific guidance applies. The standard requires a company to derecognize nonfinancial assets once it transfers control of a distinct nonfinancial asset or distinct in substance nonfinancial asset. Additionally, when a company transfers its controlling interest in a nonfinancial asset, but retains a noncontrolling ownership interest, the company is required to measure any noncontrolling interest it receives or retains at fair value. The guidance requires companies to recognize a full gain or loss on the transaction. ASU 2017‑05 is effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period. The effective date of this guidance coincides with revenue recognition guidance. The Company does not expect this update will have a material impact on the Company’s consolidated financial position, results of operations and cash flows. In May 2017, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2017‑09 (“ASU 2017‑09”) to provide guidance to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the changes in terms or conditions. ASU 2017‑09 is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted and application is prospective. The Company does not expect this update will have a material impact on the Company’s consolidated financial position, results of operations and cash flows. Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material effect on the Company’s financial position, result of operations or cash flows. |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 12 Months Ended |
Sep. 30, 2019 | |
ACCOUNTS RECEIVABLE | |
ACCOUNTS RECEIVABLE | NOTE 3 – ACCOUNTS RECEIVABLE Accounts receivable consisted of the following as of September 30, 2019 and 2018: As of September 30, 2019 2018 Accounts receivable, gross $ 27,034,192 $ 29,131,547 Less: allowance for doubtful accounts (1,919,152) (1,997,310) Accounts receivable, net $ 25,115,040 $ 27,134,237 Bad debt expense recorded by the Company during the years ended September 30, 2019 and 2018 were $0 and $286,606, respectively. Bad debt write-off recorded by the Company during the years ended September 30, 2019 and 2018 were $0 and $36,037, respectively. As of September 30, 2019, the Company pledged accounts receivable of $2,028,624 to secure banking facilities granted to the Company. Changes of allowance for doubtful accounts for the years ended September 30, 2019 and 2018 are as follow: As of September 30, 2019 2018 Beginning balance $ 1,997,310 $ 1,817,050 Additional reserve through bad debt expense — 272,783 Bad debt write-off — (36,037) Exchange difference (78,158) (56,486) Ending balance $ 1,919,152 $ 1,997,310 |
NOTES RECEIVABLE AND OTHER RECE
NOTES RECEIVABLE AND OTHER RECEIVABLES | 12 Months Ended |
Sep. 30, 2019 | |
NOTES RECEIVABLE AND OTHER RECEIVABLES | |
NOTES RECEIVABLE AND OTHER RECEIVABLES | NOTE 4 –NOTES RECEIVABLE AND OTHER RECEIVABLES Notes receivable consisted of bank notes of $385,519 and $414,352 provided by the Company’s customers as of September 30, 2019 and 2018, respectively, these notes are guaranteed by the banks. Other receivables consisted of mainly the legal claims of $0.62 million and $0.64 million to be collected from the Company’s debtors as of September 30, 2019 and 2018, respectively. During 2010, the Company entered into two loan agreements with Raozhou Dianli Ltd and Xianjin Cao, and advanced RMB 9 million on the first loan and RMB 1.5 million on the second loan, totaled RMB 10.5 million (approximately USD 1.52 million). The terms of these two loans are both one year. Both borrowers defaulted and didn’t make any repayment when the terms expired. The Company thus sued these two parties and pursuant to the final judgment ruled by Jiangsu High People’s Court, the Company is entitled to a repayment of RMB 10.5 million plus interest with an interest rate that is four times higher than the normal interest rate in the corresponding period. The claim has been covered by real estate assets of Raozhou Dianli Ltd, which have been seized by the Court and has an appraised value of RMB 143.1 million, or about USD 21.5 million as of September 19, 2017, according the recent appraisal report, which is much higher than the Company’s claim. The Company is listed as the first-in-line creditor and the management believes that the repayment of RMB 10.5 million and outstanding interest is reasonably assured. The Company recorded RMB 10.5 million as Other Receivable. As of September 30, 2019 and 2018, the outstanding balance is RMB 4.4 million (USD 0.62 million) and RMB 4.4 million (USD 0.64 million), respectively. In the opinion of the management, after consultation with the Company’s legal counsel, the management believes it is assured the balance will be collected as the debtor has real properties seized by the Court worth much more than the debt owed to the Company. |
INVENTORIES
INVENTORIES | 12 Months Ended |
Sep. 30, 2019 | |
INVENTORIES | |
INVENTORIES | NOTE 5 – INVENTORIES Inventories as of September 30, 2019 and 2018 consisted of the following: As of September 30, 2019 2018 Raw materials $ 5,360,445 $ 4,789,860 Work-in-process 8,902,211 6,532,826 Finished goods 6,533,419 6,469,501 Total $ 20,796,075 $ 17,792,187 There were no inventory write-downs recognized for the years ended September 30, 2019 and 2018. As of September 30, 2019, the Company pledged inventories of $1,608,909 to secure banking facilities granted to the Company. |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Sep. 30, 2019 | |
PROPERTY, PLANT AND EQUIPMENT | |
PROPERTY, PLANT AND EQUIPMENT | NOTE 6 – PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following as of September 30, 2019 and 2018: As of September 30, 2019 2018 Buildings $ 5,211,781 $ 5,188,568 Machinery 5,080,964 4,040,773 Furniture, fixtures and equipment 545,881 639,356 Motor vehicles 235,555 234,229 Total property plant and equipment, at cost 11,074,181 10,102,926 Less: accumulated depreciation (4,597,893) (4,533,745) 6,476,288 5,569,181 Construction in progress (“CIP”) 119,416 711,231 Property, plant and equipment, net $ 6,595,704 $ 6,280,412 Depreciation expense was $375,286 and $395,604 for the years ended September 30, 2019 and 2018, respectively. As of September 30, 2019 and 2018, the Company pledged buildings and machinery to secure banking facilities granted to the Company. The carrying values of the pledged buildings to secure bank borrowings by the Company are shown in Note 11. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Sep. 30, 2019 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | NOTE 7 – INTANGIBLE ASSETS As of September 30, 2019 2018 Land use rights, cost $ 557,011 $ 579,695 Software, cost 517,105 506,600 Other intangible assets, cost 1,561 — Less: accumulated amortization (156,960) (148,074) Intangible assets, net $ 918,717 $ 938,221 The land use right represents the Company’s land use rights in Wenzhou’s plant, which had been pledged to secure the Company’s banking facilities granted to the Company as of September 30, 2019 and 2018. The carrying values of the pledged land use rights to secure bank borrowings by the Company are shown in Note 11. Amortization expense was $13,638 and $12,137 for the years ended September 30, 2019 and 2018, respectively. |
LONG-TERM INVESTMENT
LONG-TERM INVESTMENT | 12 Months Ended |
Sep. 30, 2019 | |
LONG-TERM INVESTMENT | |
LONG-TERM INVESTMENT | NOTE 8 – LONG-TERM INVESTMENT The Company made an investment in Wenzhou Longlian Development Co., Ltd. ("Longlian") in 2011 by RMB 2,083,300 with equity percentage of 2.0833%. The principal activities of Longlian are property and infrastructure construction. As of September 30, 2019 and 2018, the Company carried this investment at its cost in the amount of $291,464 and $303,334, respectively. During 2018 fiscal year, the Company received a total of RMB 290,000 as dividend income from Longlian. During 2019 fiscal year, the Company received no dividend income from Longlian. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Sep. 30, 2019 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 9 – RELATED PARTY TRANSACTIONS Net amounts due to related parties consisted of the following as of September 30, 2019 and 2018: As of September 30, Accounts Name of related parties 2019 2018 Related party payables Shareholder, HUANG Jian Cong $ 1,323,734 $ 3,584,216 Related party payables Other Affiliates of the Company 122,727 110,253 Due from Related Parties Other Affiliates of the Company 110,990 22,278 This represented unsecured and interest free borrowings between the Company and Huang Jiancong and other related parties to the Company. For the years end September 30, 2019 and 2018, the Company borrowed $1,323,734 and $3,584,216 from its shareholder, HUANG Jian Cong, which have a loan term from October 01, 2017 to September 30, 2020. |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended |
Sep. 30, 2019 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | NOTE 10 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consisted of the following as of September 30, 2019 and 2018: As of September 30, 2019 2018 VAT payable $ 4,158,171 $ 3,918,119 Other tax payables 51,292 50,104 Other 229,107 1,966,510 Total $ 4,438,570 $ 5,934,733 Other current liabilities contain primarily unsecured, due on demand and interest free short-term loan to the Company from third party entities and deposits for bidding from suppliers to the Company. |
SHORT-TERM BANK BORROWINGS
SHORT-TERM BANK BORROWINGS | 12 Months Ended |
Sep. 30, 2019 | |
SHORT-TERM BANK BORROWINGS | |
SHORT-TERM BANK BORROWINGS | NOTE 11 – SHORT-TERM BANK BORROWINGS Short-term bank borrowings consisted of the following at September 30, 2019: Bank Name Amount - RMB Amount - USD Issuance Date Expiration Date Interest Agricultural Bank - Longwan Branch 6,190,000 866,013 11/5/2018 11/1/2019 6.09 % Agricultural Bank - Longwan Branch 8,000,000 1,119,241 11/19/2018 11/18/2019 6.09 % Agricultural Bank - Longwan Branch 8,700,000 1,217,175 1/2/2019 1/1/2020 6.09 % Agricultural Bank - Longwan Branch 5,750,000 804,455 7/23/2019 7/22/2020 6.65 % Agricultural Bank - Longwan Branch 4,300,000 601,592 8/1/2019 7/1/2020 6.65 % Agricultural Bank - Longwan Branch 6,000,000 839,431 8/26/2019 8/25/2020 5.66 % Bank of China 2,850,000 398,730 9/11/2019 9/9/2020 5.27 % Bank of China 4,250,000 594,597 9/24/2019 9/22/2020 5.27 % Bank of China 3,400,000 475,677 9/20/2019 9/18/2020 5.27 % China Merchants Bank 13,500,000 1,888,719 12/14/2018 12/9/2019 5.44 % China Merchants Bank 3,000,000 419,715 3/20/2019 12/9/2019 5.44 % China Merchants Bank 1,955,000 273,516 9/3/2019 2/29/2020 4.35 % Industrial Bank 1,000,000 139,905 12/5/2018 12/4/2019 6.50 % Industrial Bank 7,000,000 979,336 11/8/2018 11/8/2019 6.50 % Industrial Bank 6,000,000 839,431 11/12/2018 11/5/2019 6.50 % China Minsheng Bank 3,000,000 419,715 6/19/2019 6/19/2020 6.74 % China Minsheng Bank 2,880,000 402,927 6/20/2019 6/20/2020 6.74 % Ping An Bank 3,600,000 503,659 9/20/2019 9/20/2020 7.96 % CZBANK 3,200,000 447,696 8/9/2019 4/10/2020 6.00 % CZBANK 4,700,000 657,554 8/14/2019 4/14/2020 6.00 % CZBANK 1,500,000 209,858 8/12/2019 4/14/2020 6.09 % CZBANK 1,000,000 139,905 9/11/2019 4/9/2020 6.00 % CZBANK 3,000,000 419,715 9/12/2019 4/13/2020 6.00 % CZBANK 2,600,000 363,753 9/17/2019 4/10/2020 6.00 % Bank of Communications 4,500,000 629,573 7/25/2019 2/20/2020 7.80 % Bank of Communications 4,500,000 629,573 7/26/2019 2/20/2020 7.40 % Total 116,375,000 16,281,461 Short-term bank borrowings consisted of the following at September 30, 2018: Bank Name Amount - RMB Amount - USD Issuance Date Expiration Date Interest Agricultural Bank - Longwan Branch 6,190,000 901,281 12/1/2017 11/25/2018 6.00 % Agricultural Bank - Longwan Branch 8,000,000 1,164,822 1/18/2018 12/5/2018 6.00 % Agricultural Bank - Longwan Branch 7,580,000 1,103,669 1/18/2018 10/8/2018 6.00 % Agricultural Bank - Longwan Branch 8,700,000 1,266,744 1/29/2018 1/5/2019 6.22 % Agricultural Bank - Longwan Branch 4,300,000 626,092 8/16/2018 8/15/2019 6.09 % Agricultural Bank - Longwan Branch 5,750,000 837,216 8/21/2018 8/1/2019 6.09 % Agricultural Bank - Longwan Branch 6,000,000 873,617 9/27/2018 9/1/2019 6.09 % Bank of China 4,250,000 618,812 4/3/2018 4/2/2019 5.27 % Bank of China 6,800,000 990,099 4/3/2018 4/2/2019 5.27 % China Merchants Bank 15,000,000 2,184,042 12/12/2017 12/6/2018 5.44 % China Merchants Bank 1,500,000 218,404 2/8/2018 12/1/2018 5.66 % Industrial Bank 6,500,000 946,419 12/6/2017 12/3/2018 6.50 % Industrial Bank 3,000,000 436,809 12/7/2017 11/27/2018 6.00 % Industrial Bank 5,500,000 800,815 12/8/2017 11/20/2018 6.45 % China Minsheng Bank 4,000,000 582,411 6/28/2018 3/31/2019 5.44 % China Minsheng Bank 2,200,000 320,326 6/28/2018 3/31/2019 5.44 % Ping An Bank 6,200,000 902,737 9/25/2018 9/25/2019 7.96 % CZBANK 3,500,000 509,610 4/20/2018 10/19/2018 6.53 % CZBANK 6,000,000 873,617 4/19/2018 10/18/2018 6.48 % CZBANK 6,000,000 873,617 4/17/2018 10/16/2018 6.53 % CZBANK 1,500,000 218,404 4/19/2018 10/18/2018 6.50 % Bank of Communications 9,000,000 1,310,425 9/10/2018 9/7/2019 6.34 % CZBANK 4,880,000 710,542 4/26/2018 4/26/2019 4.35 % Total 132,350,000 19,270,530 The Company’s short-term bank borrowings are pledged by its assets as listed below, and guaranteed by the Company’s major shareholders: HUANG Jian Cong, WANG Jian Di, WANG Guo Lin, WANG Min Jie, and WANG Yang Ming, and their immediate family members. The carrying values of the Company’s pledged assets to secure short-term borrowings by the Company are as follows: As of September 30, 2019 2018 Term Deposit as Collateral $ — $ 728,014 Accounts receivable 2,028,624 — Buildings, net 4,312,115 4,583,560 Land use rights, net 402,622 431,621 Machinery, net 98,210 154,795 Inventory 1,608,909 1,674,432 Total $ 8,450,480 $ 7,572,422 |
COMMITMENT AND CONTINGENCIES
COMMITMENT AND CONTINGENCIES | 12 Months Ended |
Sep. 30, 2019 | |
COMMITMENT AND CONTINGENCIES | |
COMMITMENT AND CONTINGENCIES | NOTE 12 – COMMITMENT AND CONTINGENCIES The Company, from time to time, may be a party to claims and legal proceedings generally incidental to its business. As of September 30, 2019, Company has no material purchase commitments, significant leases and unused letter of credit. The Company has one pending legal claim against a third party as of September 30, 2018. See Note 4 for disclosure related to the claim with Raozhou Dianli Ltd. There were no other legal matters that are likely to have a material adverse effect on the Company’s financial position as of September 30, 2019 and 2018 and the results of operations or cash flows for the years ended September 30, 2019 and 2018. |
UNCERTAIN TAX POSITION
UNCERTAIN TAX POSITION | 12 Months Ended |
Sep. 30, 2019 | |
UNCERTAIN TAX POSITION | |
UNCERTAIN TAX POSITION | NOTE 13 – UNCERTAIN TAX POSITION In the normal course of its business, our Company, including in particular Zhejiang Zhengkang and Wenzhou Zhengfeng, may be subject to challenges from various PRC taxing authorities regarding the amounts of taxes due. Although the Company’s management believes the Company has paid all accrued for all taxes owed by the Company, from time to time, in order for our Company to stay competitive in the market, we may need to accept unfavorable contract terms from our clients, including the accrue of accounts receivables for the delivery of our products until the completion of a certain construction project and without recognizing the revenue in the interim. PRC taxing authorities may also take the position that the Company owes more taxes than it has paid based on transactions conducted by ZK Pipe, which may be deemed a resident enterprise, thereby resulting in taxable liability for Zhejiang Zhengkang. In addition, the Company recorded a potential income tax liability of $4,176,537 and $4,263,289 for the years ended September 30, 2019 and 2018, respectively, and for the possible underpayment of income and other taxes, not include potential interests or penalties. It is possible that the tax liability of the Company for past taxes may be higher than those amounts. The Company’s management believes it has sufficient cash on hand to adequately meet any tax liability for the underpayment of income and VAT taxes. Additionally, the Company’s management believes it may be able to negotiate with local PRC taxing authorities a reduction to any amounts that such authorities may believe are due and a reduction to any interest or penalties thereon. We have no guarantee that we will be able to negotiate such a reduction. To the extent our Company is able to negotiate such amounts, the Company records such reduction as unrecognized tax benefits due to the fact that national-level taxing authorities may take the position that localities are without power to reduce such liabilities, and such PRC taxing authorities may attempt to collect unpaid taxes. The PRC tax law provides statute of limitations of 3 years to collect unpaid taxes. The Company recognizes the portion of unrecognized tax benefit that is beyond 3 years as reduction of its tax liabilities due to the fact that the statute of limitations for the relevant taxing authorities to examine and challenge the tax position has expired. The changes of unrecognized tax benefit recorded by the Company are shown in Note 17. |
CUSTOMER AND SUPPLIER CONCENTRA
CUSTOMER AND SUPPLIER CONCENTRATION | 12 Months Ended |
Sep. 30, 2019 | |
CUSTOMER AND SUPPLIER CONCENTRATION | |
CUSTOMER AND SUPPLIER CONCENTRATION | NOTE 14 – CUSTOMER AND SUPPLIER CONCENTRATION Significant customers and suppliers are those that account for greater than 10% of the Company’s revenues and purchases. The Company had no such significant customer for the fiscal year ended September 30, 2019. The Company sold a substantial portion of products to one customer (21.1%) in 2018 and as of September 30, 2018, the amount due from this customer included in accounts receivable was $9,507,491. The loss of the significant customer or the failure to attract the new customers could have a material adverse effect on our business, results of operations and financial condition for the Company. For the year ended September 30, 2019, two suppliers accounted for 58.25% and 17.53% of the Company's total raw material purchase, respectively. As of September 30, 2019, the net amount due to the vendors (accounts payable - advance to vendors) was -$4,256,984, where negative number means net advance paid to the vendors. The Company purchased a substantial portion of materials from two third-party vendors (62.4%) in 2018. As of September 30, 2018, the net amount due to the vendors (accounts payable - advance to vendors) was -$5,787,900, where negative number means net advance paid to the vendors. The Company believes there are numerous other suppliers that could substitute the current significant vendors should they become unavailable or non-competitive. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Sep. 30, 2019 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | NOTE 15 – STOCKHOLDERS’ EQUITY Recapitalization On December 19, 2016, the Board of Directors of the Company approved i) decrease of par value of the ordinary shares from $1 to no par value, (the “Par Value Change”); ii) a 180 for 1 forward stock split whereby every authorized, issued and outstanding ordinary shares was exchanged for 180 new ordinary shares (the “Stock Split”) and iii) increase of authorized shares from 9,000,000 to 50,000,000 ordinary shares (the “Shares Increase”, collectively with Par Value Change and Stock Split referred as the “Recapitalization”). As of March 20, 2017, the Recapitalization was complete and effectuated. Shares Issuances On December 21, 2017, the Company completed a Regulation S closing of private placement offering of ordinary shares of ZK International, no par value per share, at a purchase price of $6.00 per share, for an aggregate purchase price of $100,000 or 5.89BTC in cryptocurrency. Upon the closing, the Company issued a total of 16,666 ordinary shares to the subscribers in the Offering, subject to customary restrictions pursuant to Rule 144 of the Securities Act of 1933, as amended. On December 22, 2017, the Company completed a Regulation D closing of private placement offering of ordinary shares of ZK International, no par value per share, at a purchase price of $6.00 per share, for an aggregate purchase price of $420,000. Upon the closing, the Company issued a total of 70,000 ordinary shares to the subscribers in the Offering, subject to customary restrictions pursuant to Rule 144 of the Securities Act of 1933, as amended. On January 9, 2018, the Company completed a closing of private placement offering of ordinary shares of ZK International, no par value per share, at a purchase price of $8.00 per share, for an aggregate purchase price of $500,000 or 34.123BTC in cryptocurrency. Upon the closing, the Company issued a total of 62,500 ordinary shares to the subscribers in the Offering, subject to customary restrictions pursuant to Rule 144 of the Securities Act of 1933, as amended. On March 21, 2018 the Company issued 30,000 ordinary shares of ZK International, no par value per share, to render the consulting contract with a consultant of the Company. The shares are measured based on the fair market value of $5.88 per share and the value of this share issuance is recognized as consulting expense. On August 15, 2018, ZK International entered into a debt settlement and mutual release agreement (the “Debt Settlement and Mutual Release Agreement”) with Mr. Jiancong Huang, the Chief Executive Officer and Chairman of the Board of our Company. As of August 15, 2018, the Company was indebted to Mr. Huang approximately RMB 69 million and both parties agreed to settle the amount of RMB 64,079,472 (approximately $9,242,676 based on the exchange rate of 0.144238 on August 15, 2018) (the “Debt”), in respect to prior advances to finance the Company’s working capital. Mr. Huang agreed to accept 3,280,525 restricted ordinary shares, subject to Rule 144 of the Securities Act of 1933 as amended (the “Securities Act”), at $2.82 per share, representing 75% of the average closing bid price for the period from July 23, 2018 to August 3, 2018 (the “Shares”) to settle the Debt pursuance to the terms and conditions set forth in the Debt Settlement and Mutual Release Agreement (the “Settlement”). The Settlement, deemed as a related party transaction, was reviewed and approved by Company’s compensation committee, the Board of Directors and Nasdaq. As a foreign private issuer, we are permitted to, and did in this instance, follow certain home country corporate governance practices instead of those otherwise required under the applicable rules of the Nasdaq Capital Market for domestic U.S. issuers, provided that we disclose the requirements we are not following and describe the home country practices we are following. On December 17, 2018 the Company issued 30,000 ordinary shares of ZK International, no par value per share, to render the consulting contract with a consultant of the Company. The shares are measured based on the fair market value of $1.69 per share and the value of this share issuance is recognized as consulting expense. Public Offering Warrants In connection with the IPO on September 1, 2017, the Company issued warrants equal to seven percent (7%) of the shares issued, totaling 74,784 units to the placement agents (the “warrants”). The warrants carry a term of five years, and shall not be exercisable for a period of six months from the closing of the IPO and shall be exercisable at $5 per share. Management determined that these warrants are equity instruments because the warrants are both a) indexed to its own stock; and b) classified in stockholders’ equity. The warrants were recorded at their fair value on the date of grant as a component of stockholders’ equity. As of September 30, 2019, the total number of warrants outstanding was 74,784 with weighted average remaining life of 3 years. The warrants were exercisable as of September 30, 2019 but no warrants has been exercised. The fair value of this Warrants was $438,234 as determined on September 01, 2017. The fair value has been estimated using the Binomial Options pricing model with the following weighted-average assumptions: risk free rate of 2%; expected term of 5 years; exercise price of the warrants of $5; volatility of 67.4%; number of tree step of 10; and expected future dividends of nil. Statutory surplus reserves Pursuant to Chinese Company law applicable to foreign investment companies, the Company’s PRC subsidiaries are required to maintain statutory surplus reserves. The statutory surplus reserves are to be appropriated from net income after taxes, and should be at least 10% of the after tax net income determined in accordance with accounting principles and relevant financial regulations applicable to PRC enterprises (“PRC GAAP”). The Company has an option of not appropriating the statutory surplus reserve after the statutory surplus reserve is equal to 50% of the subsidiary’s registered capital. Statutory surplus reserves are recorded as a component of shareholders’ equity. The statutory surplus reserve as of September 30, 2019 is $2,904,699. Wenzhou Weijia has not commenced operation since inception. No appropriation to the statutory surplus reserves. Zhejiang Zhengkang appropriated $872,924 to the statutory surplus reserves for the year ended September 30, 2019. For the year ended September 30, 2018, statutory surplus reserves appropriated was $858,412. Wenzhou Zhengfeng recorded a net loss for the years ended September 30, 2019 and 2018, so no appropriation to the statutory surplus reserves and staff welfare and bonus fund was made. Zhenglong Ecommerce recorded a net loss for the years ended September 30, 2019 and 2018, so no appropriation to the statutory surplus reserves and staff welfare and bonus fund was made. Dividends declared by the Company’s PRC subsidiaries are based on the distributable profits as reported in their statutory financial statements reported in accordance with PRC GAAP, which differ from the results of operations reflected in the consolidated financial statements prepared in accordance with US GAAP. The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its PRC subsidiaries. As of September 30, 2019, the Company has no dividend payable. Under PRC laws and regulations, statutory surplus reserves are restricted to set-off against losses, expansion of production and operation and increasing registered capital of the respective company, and are not distributable other than upon liquidation. The reserves are not allowed to be transferred to the Company in terms of cash dividends, loans or advances, nor are they allowed for distribution except under liquidation. Amounts restricted include the PRC subsidiaries’ paid-in capital and statutory surplus reserves of the Company’s PRC subsidiaries totaling $7,157,061 as of September 30, 2019 and $6,325,541 as of September 30, 2018. Non-controlling interests Non-controlling interests represent the interest of non-controlling shareholders in Zhejiang Zhengkang based on their proportionate interests in the equity of that company adjusted for its proportionate share of income or losses from operations. On September 29, 2015, Wenzhou Weijia acquired 99% equity percentage of Zhejiang Zhengkang from 5 individual shareholders: HUANG Jian Cong, WANG Ming Jie, WANG Guo Lin, WANG Jian Di and WANG Yang Ming. After that, Zhejiang Zhengkang’s equity interest is 99% held by Wenzhou Weijia and 1% held by HUANG Jian Cong as of the year end. The non-controlling interest in Zhejiang Zhengkang was 1% as of September 30, 2019 and 2018. The non-controlling interest in Zhenglong Ecommerce and ZK Uganda was 10.9% and 20% as of September 30, 2019 respectively. |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Sep. 30, 2019 | |
SEGMENT REPORTING | |
SEGMENT REPORTING | NOTE 16 – SEGMENT REPORTING ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operation results by the revenue of different products. Based on management’s assessment, the Company has determined that it has one operating segment as defined by ASC 280. For the years ended September 30, 2019, 2018 and 2017, revenue and assets within PRC contributed over 90% of the Company’s total revenue and assets. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Sep. 30, 2019 | |
INCOME TAXES | |
INCOME TAXES | NOTE 17 – INCOME TAXES As of September 30, 2019 2018 2017 Deferred tax assets: Bad debt allowance recorded for accounts receivable $ 289,756 $ 299,596 $ 272,557 Net operating loss carry-forward 159,219 152,257 — Less: valuation allowance (159,219) (152,257) — Total $ 289,756 $ 299,596 $ 272,557 Deferred income taxes reflect the net effects of temporary difference between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. The Company’s deferred tax assets as of September 30, 2019, 2018 and 2017 were $289,756, $299,596 and $272,557, respectively, which were mainly derived from the temporary difference from provision of doubtful accounts and net operating loss carry forward of Wenzhou Zhengfeng with effective period from October 01, 2018 to September 30, 2023. The Company evaluated the likelihood of the realization of deferred tax assets and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. Income taxes for the years ended September 30, 2019 and 2018 are attributed to the Company’s continuing operations in China and consisted of: For the year ended September 30, 2019 2018 2017 Current $ 250,186 $ 1,435,521 $ 1,019,147 Deferred (1,958) (37,311) (24,142) Total $ 248,228 $ 1,398,210 $ 995,005 Per the consolidated statements of operations and comprehensive income, the income tax expenses for the Company can be reconciled to the income before income taxes for the years ended September 30, 2019 and 2018 as follows: For the year ended September 30, 2019 2018 2017 Income before taxes excluded the amounts of loss incurring entities $ 8,979,640 $ 9,982,326 7,178,353 PRC EIT tax rates 15 % 15 % 15 % Tax at the PRC EIT tax rates 1,346,946 1,497,349 1,076,753 Tax effect of 75% (50% for 2018 and 2017) R&D expenses deduction (163,357) (123,948) (99,833) Tax effect of deferred tax recognized (1,958) (37,311) (24,142) Tax effect of non-deductible expenses 18,307 62,120 42,227 Change in unrecognized tax benefits (951,710) — — Income tax expenses $ 248,228 $ 1,398,210 995,005 Under the Law of the People’s Republic of China on Enterprise Income Tax ("New EIT Law"), which was effective from January 1, 2008, both domestically- owned enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%. Zhejiang Zhengkang was entitled High and New Technology Enterprise ("HNTE") and enjoyed preferential tax rate of 15% for a three-year validity period from April 16, 2009. And the HNTE certificate was renewed on October 29, 2012, September 17, 2015 and September 17, 2018 all with a three-year validity period respectively. Thus, Zhejiang Zhengkang is eligible for a 15% preferential tax rate from April 16, 2009 to September 16, 2021. ZK International and XSigma is not subject to income taxes under the current laws of BVI. ZK Pipe was registered in Hong Kong and is subject to corporate income tax at 16.5% if revenue is generated in Hong Kong. Wenzhou Zhengfeng, Zhenglong Ecommerce and Wenzhou Weijia were both registered in the PRC and have applicable EIT rate of 25%. ZK Uganda was registered in the Republic of Uganda and is subject to corporate income tax at 30% if revenue is generated in Uganda. Due to the Company's status as a public company, the Company is able to negotiate with local PRC taxing authorities a reduction to certain amounts that such authorities may believe are due and a reduction to any interest or penalties thereon. To the extent our Company is able to negotiate such amounts, national-level taxing authorities may take the position that localities are without power to reduce such liabilities, and such PRC taxing authorities may attempt to collect the unpaid taxes. The Company records such reduction as unrecognized tax benefits due to the fact that national-level taxing authorities are able to challenge the tax position taken by the Company and local taxing authorities. The PRC tax law provides statute of limitations of 3 years to collect unpaid taxes. The Company recognizes the portion of unrecognized tax benefit that is beyond 3 years as reduction of its tax liabilities due to the fact that the statute of limitations for the relevant taxing authorities to examine and challenge the tax position has expired. The changes in unrecognized tax benefits are as follows: For the year ended September 30, 2019 2018 2017 Balance at beginning period $ 4,098,783 $ 2,789,135 $ 1,916,789 Addition for tax positions of the current year 993,194 1,309,648 872,346 Lapse of statute of limitations (915,440) — — Balance at ending period $ 4,176,537 $ 4,098,783 $ 2,789,135 As of September 30, 2019, the Company had unrecognized tax benefits of $4,176,537 and such balance was included in "income tax payable" account. For the fiscal years 2019, 2018 and 2017, no tax authority initiated tax examination against the Company and the Company was issued Certificate of No Tax Arrears on November 26, 2019 by local tax authority which indicates the Company has fully paid income taxes for its tax returns since January 01, 2017. The reasonable possible change on the Company's unrecognized tax benefits in the next 12 months ranges from RMB nil to RMB 7,157, 343 . |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Sep. 30, 2019 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 18 - SUBSEQUENT EVENTS In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through January 31, 2020, the date the financial statements were available to be issued. No events require adjustment to or disclosure in the consolidated financial statements. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Sep. 30, 2019 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Presentation and Principles of Consolidation | 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. Registered Ownership as of the Entity Name Location Background issuance date of the report ZK BVI 29.38% by HUANG Jian Cong International • Incorporated on May 13, 2015 10.87% by WANG Ming Jie • Registered capital of USD 50,000, not paid 10.87% by WANG Guo Lin • A holding company with no operation activities itself for the years then ended 1.09% by WANG Jian Di ZK Pipe Hong Kong • Incorporated on May 28, 2015 100% by ZK International • Registered capital of HKD 1,000,000, not paid • Have not commenced operations Wenzhou Weijia Wenzhou • Incorporated on June 17, 2015 100% by ZK Pipe • Registered capital of USD 20,000,000, not paid • Have not commenced operations Zhejiang Zhengkang Wenzhou • Incorporated on December 4, 2001 99% by Wenzhou Weijia • Registered capital of RMB 100,000,000, RMB 30,000,000 paid 1% by HUANG Jian Cong • Principally operated in manufacturing and sales of steel strip, steel pipe and fittings Wenzhou Zhengfeng Wenzhou • Incorporated on December 24, 1999 100% by Zhejiang Zhengkang • Registered capital of RMB 2,880,000, fully paid • Principally operated in trading of steel strip, mainly purchased from Zhejiang Zhengkang Zhenglong Ecommerce Wenzhou • Incorporated on March 15, 2018 • Registered capital of RMB 5,000,000, RMB 1,020,000 paid 90% by Zhejiang Zhengkang • Principally operated in online sales and promoting of steel strip, steel pipe and fittings ZK Uganda Uganda • Incorporated on March 23, 2018 • Registered capital of 20 Million Uganda Shillings, not paid. 80% by ZK International • Have not commenced operations XSigma BVI • Incorporated on January 18, 2018 • Registered capital of USD 50,000, not paid 100% by ZK International • Have not commenced operations |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (US GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, allowances of accounts receivable, inventory valuation, useful life of property, plant and equipment and income taxes related to realization of deferred tax assets and uncertain tax position. Actual results could differ from those estimates. |
Foreign Currency Translation | Foreign Currency Translation The financial records of the Company’s PRC subsidiaries are maintained in their local currencies which are RMB and ZK Pipe in Hong Kong also use RMB as functional currency. Monetary assets and liabilities denominated in currencies other than their local currencies are translated into local currencies at the rates of exchange in effect at the balance sheet dates. Transactions denominated in currencies other than their local currencies during the year are converted into local currencies at the applicable rates of exchange prevailing when the transactions occur. Transaction gains and losses are recorded in other income/ (expense), net in the statements of operations and comprehensive income. ZK International maintained its financial record using the United States dollar (“US dollar”) as the functional currency, while the subsidiaries of the Company in Hong Kong and mainland China maintained their financial records using RMB as the functional currencies. The reporting currency of the Company is US dollar. When translating local financial reports of the Company’s subsidiaries into US dollar, assets and liabilities are translated at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenue, expenses, gains and losses are translated at the average rate for the period. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the statements of operations and comprehensive income. The relevant exchange rates are listed below: For the Fiscal Years Ended September 30 2019 2018 2017 Period Ended RMB: USD exchange rate 7.1477 6.8680 6.6545 Period Average RMB: USD exchange rate 6.8753 6.5368 6.8126 |
Cash and Cash Equivalents | 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. |
Short-term Investment | Short-term Investment The Company’s short-term Investment consists of short-term held-to-maturity investments, mainly term deposits, in commercial banks with original maturities of more than 90 day but less than one year. As of September 30, 2019, the Company has short-term investment of $279,810, while it had $850,829 short-term investment as of September 30, 2018. |
Long-term Deposit | Long-term Deposit Long-term deposit consists of cash deposit of RMB 81,867,541 Zhejiang Zhengkang pledged to three entities, which the Company is seeking to acquire certain percentage of ownership of each ("Target Company” or collectively "Target Companies"). The deposits are used as acquisition deposits required by the three Target Companies in order to execute their respective acquisition memorandum which details the acquisition and valuation methods but is not legally binding. As of September 30, 2019 the total deposits pledged were $11,453,690, with $10,397,406 to one Target Company and $1,056,284 to the other two. The fund pledged to the Target Companies have no definite term, however the Company anticipates the detailed acquisition proposals will be presented to the Board of Directors and shareholders of the Company for voting within one year. In the case that any acquisition is approved by both parties, the deposits will be used as initial payments and offset the total cash considerations of the deal. If any of the acquisition failed to be approved, the Target Companies are obligated to return the deposit to Zhejiang Zhengkang. As of September 30, 2019, no acquisitions were either approved or disapproved as the two acquisitions are still in the process of undergoing legal and financial due diligence. |
Accounts Receivable, net | Accounts Receivable, net Accounts receivable arise from the product sales in the normal course of business. The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. Based on management of customers’ credit and ongoing relationship, management makes conclusions whether any balances outstanding at the end of the period will be deemed uncollectible on an individual basis and on aging analysis basis. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Uncollectible receivable are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. The allowance for doubtful accounts recognized as of September 30, 2019 and 2018 was $1,919,152 and $1,997,310, respectively. |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value. Cost is principally determined using the weighted-average method. The Company records adjustments to inventory for excess quantities, obsolescence or impairment when the appropriate to reflect inventory at net realizable value. These adjustments are based upon a combination of factors including current sales volume, market conditions, lower of cost or market analysis and expected realizable value of the inventory. There were no write-downs recognized of inventories as of September 30, 2019 and 2018. |
Advance to Suppliers and Advance from Customers | 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. During fiscal year ended September 30, 2019, the Company wrote off advance to suppliers of $102,523. There was no such expense recognized during the years ended September 30, 2018. |
Fair Value of Financial Instruments | 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. |
Property and Equipment, net | Property and Equipment, net Property, plant, and equipment are recorded at cost less accumulated depreciation. Depreciation commences upon placing the asset in usage and is recognized on a straight-line basis over the estimated useful lives of the assets, as follows: Useful lives Buildings 40 years Machinery 10 years Furniture, fixtures, and equipment 10 years Motor vehicles 10 years Upon retirement or disposition, the asset cost and related accumulated depreciation are removed with any gain or loss recognized in the consolidated statements of operations and comprehensive income. Repair and maintenance costs that do not extend the economic life of the underlying assets are expensed as incurred. Costs incurred in constructing new facilities, including progress payments and other costs related to construction, are capitalized, and transferred to property, plant and equipment on completion, at which time depreciation commences. |
Intangible Assets | Intangible Assets Intangible assets consist primarily of land use rights and software. Under the PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company. The government grants individuals and companies the right to use parcels of land for specified periods of time. These land use rights are sometimes referred to informally as “ownership.” Land use rights are stated at cost less accumulated amortization. Intangible assets are amortized using the straight-line method with the following estimated useful lives: Useful lives Land use rights 46 years Software 5 years |
Impairment of Long-lived Assets | Impairment of Long-lived Assets The Company management review the carrying values of long-lived assets whenever events and circumstances, such as a significant decline in the asset’s market value, obsolescence or physical damage affecting the asset, significant adverse changes in the assets use, deterioration in the expected level of the assets performance, cash flows for maintaining the asset are higher than forecast, indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value. There was no impairment charge recognized for long-lived assets as of September 30, 2019, 2018 and 2017. |
Value-added Tax | Value-added Tax Value-added taxes (“VAT”) collected from customers relating to product sales and remitted to governmental authorities are presented on a net basis. VAT collected from customers is excluded from revenue. The Company is subject to a VAT rate of 17% before May 1, 2018, a VAT rate of 16% effective on May 1, 2018, and the most current VAT rate of 13% effective on April 1, 2019. The VAT payable may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing or acquiring its finished products. |
Revenue Recognition | Revenue Recognition The Company generates its revenues mainly from sales of steel piping products. 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. 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. As the Company's standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. 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. |
Government Grant | Government Grant Government grants are recognized when received and all the conditions for their receipt have been met. Government grants as the compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related cost are recognized in profit or loss in the period in which they become receivable. During the period ended as of September 30, 2019, 2018 and 2017, $912,844, $59,238 and $87,250, respectively, government grants were recognized as other income for financial support to the Company under local government’s innovation incentive programs. |
Research and Development Costs | Research and Development Costs Research and development costs are expensed as incurred. Research and development reimbursements and grants received from government are recorded by the Company as a reduction of research and development costs. |
Income Taxes | Income Taxes The Company accounts for income taxes using the asset and liability method whereby it calculates deferred tax assets or liabilities for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits by applying enacted tax rates applicable to the years in which those temporary differences are expected to be reversed or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. The components of the deferred tax assets and liabilities are individually classified as non-current amounts. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. There were no tax benefits recorded as of September 30, 2019 and 2018. |
Advertising costs | Advertising costs Advertising costs are expensed as incurred in accordance with ASC 720‑35 Other Expense-Advertising costs. Advertising costs were $306,288, $265,538 and $69,535 for years ended September 30, 2019, 2018 and 2017, respectively. |
Earnings Per Share | 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. |
Concentration of Risks | Concentration of Risks Exchange Rate Risks The Company operates in China, which may give rise to significant foreign currency risks mainly from fluctuations and the degree of volatility of foreign exchange rates between the USD and the RMB. Currency Convertibility Risks Substantially all of the Company’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with other information such as suppliers’ invoices, shipping documents and signed contracts. Concentration of Credit Risks Financial instruments that potentially subject the Company to concentration of credit risks consist primarily of cash and cash equivalents, short-term investment, notes receivable, accounts receivable and other receivables, the balances of which are stated on the consolidated balance sheets which represent the Company’s maximum exposure. The Company places its cash and cash equivalents, and short-term investment in good credit quality financial institutions in Hong Kong and China. Concentration of credit risks with respect to accounts receivables is linked to the concentration of revenue. To manage credit risk, the Company performs ongoing credit evaluations of customers’ financial condition. The concentration analysis of our revenue and accounts receivable is shown in Note 14. Interest Rate Risks The Company is subject to interest rate risk. The Company has bank interest bearing loans charged at variable interest rates. And although some bank interest bearing loans are charged at fixed interest rates within the reporting period, the Company is still subject to the risk of adverse changes in the interest rates charged by the banks when these loans are refinanced. |
Subsequent Events | Subsequent Events The Company’s management reviewed all material events through the date of the consolidated financial statements were issued for subsequent event disclosure consideration. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The Company considers the applicability and impact of all accounting standards updates. Management periodically reviews new accounting standards that are issued. In May 2014, FASB issued ASU 2014‑09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of ASU 2014‑09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. We have elected to early adopt ASU 2014-09 and its related amendments or collectively Topic 606, effective October 1, 2018, as permitted by the standard, using the modified retrospective implementation method. Accordingly, we have applied the five-step method outlined in Topic 606 for determining when and how revenue is recognized to all contracts that were not completed as of the date of adoption. Revenues for reporting periods beginning after October 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported under the previous revenue recognition guidance. For contracts that were modified before the effective date, we have considered the modification guidance within the new standard and determined that the revenue recognized and contract balances recorded prior to adoption for such contracts were not impacted. While Topic 606 requires additional disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, its adoption has not had a material impact on the measurement or recognition of our revenues. Our modified retrospective adoption, for which we were not required to make any material changes to the prior year presentation, did not have a material effect on our consolidated financial statements. In January 2016, the FASB issued ASU No. 2016‑01, “Financial Instruments – Overall (Subtopic 825‑10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to existing U.S. GAAP by: (1) Requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (2) Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; (3) Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and. (4) Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company evaluates the impact of this new standard and believes there is no material impact on its consolidated financial statements. In August 2016, the FASB issued ASU No. 2016 15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company evaluates the impact of this new standard and believes there is no impact on its consolidated financial statements. In October 2016, the FASB issued ASU No. 2016‑17, Consolidation (Topic 810): Interest Held through Related Parties That Are under Common Control, to provide guidance on the evaluation of whether a reporting entity is the primary beneficiary of a VIE by amending how a reporting entity, that is a single decision maker of a VIE, treats indirect interests in that entity held through related parties that are under common control. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The Company evaluates the impact of this new standard and believes there is no impact on its consolidated financial statements. In November 2016, the FASB issued ASU No. 2016‑18, "Statement of Cash Flows: Restricted Cash". The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company evaluates the impact of this new standard and believes there is no material impact on its consolidated financial statements. In January 2017, the FASB issued ASU No. 2017‑01, "Business Combinations (Topic 805): Clarifying the Definition of a Business". The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. These amendments take effect for public businesses for fiscal years beginning after December 15, 2017 and interim periods within those periods, and all other entities should apply these amendments for fiscal years beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The Company does not expect this update will have a material impact on the Company’s consolidated financial position, results of operations and cash flows. In February 2017, the FASB issued ASU No. 2017‑05 (“ASU 2017‑05”) to provide guidance for recognizing gains and losses from the transfer of nonfinancial assets and in-substance nonfinancial assets in contracts with non-customers, unless other specific guidance applies. The standard requires a company to derecognize nonfinancial assets once it transfers control of a distinct nonfinancial asset or distinct in substance nonfinancial asset. Additionally, when a company transfers its controlling interest in a nonfinancial asset, but retains a noncontrolling ownership interest, the company is required to measure any noncontrolling interest it receives or retains at fair value. The guidance requires companies to recognize a full gain or loss on the transaction. ASU 2017‑05 is effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period. The effective date of this guidance coincides with revenue recognition guidance. The Company does not expect this update will have a material impact on the Company’s consolidated financial position, results of operations and cash flows. In May 2017, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2017‑09 (“ASU 2017‑09”) to provide guidance to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the changes in terms or conditions. ASU 2017‑09 is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted and application is prospective. The Company does not expect this update will have a material impact on the Company’s consolidated financial position, results of operations and cash flows. Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material effect on the Company’s financial position, result of operations or cash flows. |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of ownership interests | Registered Ownership as of the Entity Name Location Background issuance date of the report ZK BVI 29.38% by HUANG Jian Cong International • Incorporated on May 13, 2015 10.87% by WANG Ming Jie • Registered capital of USD 50,000, not paid 10.87% by WANG Guo Lin • A holding company with no operation activities itself for the years then ended 1.09% by WANG Jian Di ZK Pipe Hong Kong • Incorporated on May 28, 2015 100% by ZK International • Registered capital of HKD 1,000,000, not paid • Have not commenced operations Wenzhou Weijia Wenzhou • Incorporated on June 17, 2015 100% by ZK Pipe • Registered capital of USD 20,000,000, not paid • Have not commenced operations Zhejiang Zhengkang Wenzhou • Incorporated on December 4, 2001 99% by Wenzhou Weijia • Registered capital of RMB 100,000,000, RMB 30,000,000 paid 1% by HUANG Jian Cong • Principally operated in manufacturing and sales of steel strip, steel pipe and fittings Wenzhou Zhengfeng Wenzhou • Incorporated on December 24, 1999 100% by Zhejiang Zhengkang • Registered capital of RMB 2,880,000, fully paid • Principally operated in trading of steel strip, mainly purchased from Zhejiang Zhengkang Zhenglong Ecommerce Wenzhou • Incorporated on March 15, 2018 • Registered capital of RMB 5,000,000, RMB 1,020,000 paid 90% by Zhejiang Zhengkang • Principally operated in online sales and promoting of steel strip, steel pipe and fittings ZK Uganda Uganda • Incorporated on March 23, 2018 • Registered capital of 20 Million Uganda Shillings, not paid. 80% by ZK International • Have not commenced operations XSigma BVI • Incorporated on January 18, 2018 • Registered capital of USD 50,000, not paid 100% by ZK International • Have not commenced operations |
Schedule of relevant exchange rates | For the Fiscal Years Ended September 30 2019 2018 2017 Period Ended RMB: USD exchange rate 7.1477 6.8680 6.6545 Period Average RMB: USD exchange rate 6.8753 6.5368 6.8126 |
Schedule of property, plant and equipment, useful lives | Useful lives Buildings 40 years Machinery 10 years Furniture, fixtures, and equipment 10 years Motor vehicles 10 years |
Schedule of intangible assets, useful lives | Useful lives Land use rights 46 years Software 5 years |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
ACCOUNTS RECEIVABLE | |
Schedule of accounts receivable | As of September 30, 2019 2018 Accounts receivable, gross $ 27,034,192 $ 29,131,547 Less: allowance for doubtful accounts (1,919,152) (1,997,310) Accounts receivable, net $ 25,115,040 $ 27,134,237 |
Schedule of changes of allowance for doubtful accounts | As of September 30, 2019 2018 Beginning balance $ 1,997,310 $ 1,817,050 Additional reserve through bad debt expense — 272,783 Bad debt write-off — (36,037) Exchange difference (78,158) (56,486) Ending balance $ 1,919,152 $ 1,997,310 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
INVENTORIES | |
Schedule of inventories | As of September 30, 2019 2018 Raw materials $ 5,360,445 $ 4,789,860 Work-in-process 8,902,211 6,532,826 Finished goods 6,533,419 6,469,501 Total $ 20,796,075 $ 17,792,187 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
PROPERTY, PLANT AND EQUIPMENT | |
Schedule of property, plant and equipment | As of September 30, 2019 2018 Buildings $ 5,211,781 $ 5,188,568 Machinery 5,080,964 4,040,773 Furniture, fixtures and equipment 545,881 639,356 Motor vehicles 235,555 234,229 Total property plant and equipment, at cost 11,074,181 10,102,926 Less: accumulated depreciation (4,597,893) (4,533,745) 6,476,288 5,569,181 Construction in progress (“CIP”) 119,416 711,231 Property, plant and equipment, net $ 6,595,704 $ 6,280,412 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
INTANGIBLE ASSETS | |
Schedule of intangible assets | As of September 30, 2019 2018 Land use rights, cost $ 557,011 $ 579,695 Software, cost 517,105 506,600 Other intangible assets, cost 1,561 — Less: accumulated amortization (156,960) (148,074) Intangible assets, net $ 918,717 $ 938,221 |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
RELATED PARTY TRANSACTIONS | |
Schedule of related party transactions | Net amounts due to related parties consisted of the following as of September 30, 2019 and 2018: As of September 30, Accounts Name of related parties 2019 2018 Related party payables Shareholder, HUANG Jian Cong $ 1,323,734 $ 3,584,216 Related party payables Other Affiliates of the Company 122,727 110,253 Due from Related Parties Other Affiliates of the Company 110,990 22,278 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
Schedule of accrued expenses and other current liabilities | Accrued expenses and other current liabilities consisted of the following as of September 30, 2019 and 2018: As of September 30, 2019 2018 VAT payable $ 4,158,171 $ 3,918,119 Other tax payables 51,292 50,104 Other 229,107 1,966,510 Total $ 4,438,570 $ 5,934,733 |
SHORT-TERM BANK BORROWINGS (Tab
SHORT-TERM BANK BORROWINGS (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
SHORT-TERM BANK BORROWINGS | |
Schedule of short-term bank borrowings | Short-term bank borrowings consisted of the following at September 30, 2019: Bank Name Amount - RMB Amount - USD Issuance Date Expiration Date Interest Agricultural Bank - Longwan Branch 6,190,000 866,013 11/5/2018 11/1/2019 6.09 % Agricultural Bank - Longwan Branch 8,000,000 1,119,241 11/19/2018 11/18/2019 6.09 % Agricultural Bank - Longwan Branch 8,700,000 1,217,175 1/2/2019 1/1/2020 6.09 % Agricultural Bank - Longwan Branch 5,750,000 804,455 7/23/2019 7/22/2020 6.65 % Agricultural Bank - Longwan Branch 4,300,000 601,592 8/1/2019 7/1/2020 6.65 % Agricultural Bank - Longwan Branch 6,000,000 839,431 8/26/2019 8/25/2020 5.66 % Bank of China 2,850,000 398,730 9/11/2019 9/9/2020 5.27 % Bank of China 4,250,000 594,597 9/24/2019 9/22/2020 5.27 % Bank of China 3,400,000 475,677 9/20/2019 9/18/2020 5.27 % China Merchants Bank 13,500,000 1,888,719 12/14/2018 12/9/2019 5.44 % China Merchants Bank 3,000,000 419,715 3/20/2019 12/9/2019 5.44 % China Merchants Bank 1,955,000 273,516 9/3/2019 2/29/2020 4.35 % Industrial Bank 1,000,000 139,905 12/5/2018 12/4/2019 6.50 % Industrial Bank 7,000,000 979,336 11/8/2018 11/8/2019 6.50 % Industrial Bank 6,000,000 839,431 11/12/2018 11/5/2019 6.50 % China Minsheng Bank 3,000,000 419,715 6/19/2019 6/19/2020 6.74 % China Minsheng Bank 2,880,000 402,927 6/20/2019 6/20/2020 6.74 % Ping An Bank 3,600,000 503,659 9/20/2019 9/20/2020 7.96 % CZBANK 3,200,000 447,696 8/9/2019 4/10/2020 6.00 % CZBANK 4,700,000 657,554 8/14/2019 4/14/2020 6.00 % CZBANK 1,500,000 209,858 8/12/2019 4/14/2020 6.09 % CZBANK 1,000,000 139,905 9/11/2019 4/9/2020 6.00 % CZBANK 3,000,000 419,715 9/12/2019 4/13/2020 6.00 % CZBANK 2,600,000 363,753 9/17/2019 4/10/2020 6.00 % Bank of Communications 4,500,000 629,573 7/25/2019 2/20/2020 7.80 % Bank of Communications 4,500,000 629,573 7/26/2019 2/20/2020 7.40 % Total 116,375,000 16,281,461 Short-term bank borrowings consisted of the following at September 30, 2018: Bank Name Amount - RMB Amount - USD Issuance Date Expiration Date Interest Agricultural Bank - Longwan Branch 6,190,000 901,281 12/1/2017 11/25/2018 6.00 % Agricultural Bank - Longwan Branch 8,000,000 1,164,822 1/18/2018 12/5/2018 6.00 % Agricultural Bank - Longwan Branch 7,580,000 1,103,669 1/18/2018 10/8/2018 6.00 % Agricultural Bank - Longwan Branch 8,700,000 1,266,744 1/29/2018 1/5/2019 6.22 % Agricultural Bank - Longwan Branch 4,300,000 626,092 8/16/2018 8/15/2019 6.09 % Agricultural Bank - Longwan Branch 5,750,000 837,216 8/21/2018 8/1/2019 6.09 % Agricultural Bank - Longwan Branch 6,000,000 873,617 9/27/2018 9/1/2019 6.09 % Bank of China 4,250,000 618,812 4/3/2018 4/2/2019 5.27 % Bank of China 6,800,000 990,099 4/3/2018 4/2/2019 5.27 % China Merchants Bank 15,000,000 2,184,042 12/12/2017 12/6/2018 5.44 % China Merchants Bank 1,500,000 218,404 2/8/2018 12/1/2018 5.66 % Industrial Bank 6,500,000 946,419 12/6/2017 12/3/2018 6.50 % Industrial Bank 3,000,000 436,809 12/7/2017 11/27/2018 6.00 % Industrial Bank 5,500,000 800,815 12/8/2017 11/20/2018 6.45 % China Minsheng Bank 4,000,000 582,411 6/28/2018 3/31/2019 5.44 % China Minsheng Bank 2,200,000 320,326 6/28/2018 3/31/2019 5.44 % Ping An Bank 6,200,000 902,737 9/25/2018 9/25/2019 7.96 % CZBANK 3,500,000 509,610 4/20/2018 10/19/2018 6.53 % CZBANK 6,000,000 873,617 4/19/2018 10/18/2018 6.48 % CZBANK 6,000,000 873,617 4/17/2018 10/16/2018 6.53 % CZBANK 1,500,000 218,404 4/19/2018 10/18/2018 6.50 % Bank of Communications 9,000,000 1,310,425 9/10/2018 9/7/2019 6.34 % CZBANK 4,880,000 710,542 4/26/2018 4/26/2019 4.35 % Total 132,350,000 19,270,530 |
Schedule of carrying values of pledged assets to secure short-term borrowings | The carrying values of the Company’s pledged assets to secure short-term borrowings by the Company are as follows: As of September 30, 2019 2018 Term Deposit as Collateral $ — $ 728,014 Accounts receivable 2,028,624 — Buildings, net 4,312,115 4,583,560 Land use rights, net 402,622 431,621 Machinery, net 98,210 154,795 Inventory 1,608,909 1,674,432 Total $ 8,450,480 $ 7,572,422 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
INCOME TAXES | |
Schedule of deferred income taxes | As of September 30, 2019 2018 2017 Deferred tax assets: Bad debt allowance recorded for accounts receivable $ 289,756 $ 299,596 $ 272,557 Net operating loss carry-forward 159,219 152,257 — Less: valuation allowance (159,219) (152,257) — Total $ 289,756 $ 299,596 $ 272,557 |
Schedule of income taxes attributed to continuing operations | Income taxes for the years ended September 30, 2019 and 2018 are attributed to the Company’s continuing operations in China and consisted of: For the year ended September 30, 2019 2018 2017 Current $ 250,186 $ 1,435,521 $ 1,019,147 Deferred (1,958) (37,311) (24,142) Total $ 248,228 $ 1,398,210 $ 995,005 |
Schedule of income tax reconciliation | Per the consolidated statements of operations and comprehensive income, the income tax expenses for the Company can be reconciled to the income before income taxes for the years ended September 30, 2019 and 2018 as follows: For the year ended September 30, 2019 2018 2017 Income before taxes excluded the amounts of loss incurring entities $ 8,979,640 $ 9,982,326 7,178,353 PRC EIT tax rates 15 % 15 % 15 % Tax at the PRC EIT tax rates 1,346,946 1,497,349 1,076,753 Tax effect of 75% (50% for 2018 and 2017) R&D expenses deduction (163,357) (123,948) (99,833) Tax effect of deferred tax recognized (1,958) (37,311) (24,142) Tax effect of non-deductible expenses 18,307 62,120 42,227 Change in unrecognized tax benefits (951,710) — — Income tax expenses $ 248,228 $ 1,398,210 995,005 |
Schedule of changes in unrecognized tax benefits | For the year ended September 30, 2019 2018 2017 Balance at beginning period $ 4,098,783 $ 2,789,135 $ 1,916,789 Addition for tax positions of the current year 993,194 1,309,648 872,346 Lapse of statute of limitations (915,440) — — Balance at ending period $ 4,176,537 $ 4,098,783 $ 2,789,135 |
ORGANIZATION AND NATURE OF OP_2
ORGANIZATION AND NATURE OF OPERATIONS (Details) | Jun. 08, 2015 | Jul. 31, 2016CNY (¥) | Sep. 29, 2015 | Sep. 22, 2015 | May 28, 2015USD ($) | May 24, 2006 | Sep. 30, 2019UGX (USh)shares | Sep. 30, 2019CNY (¥)shares | Sep. 30, 2019USD ($)$ / sharesshares | Sep. 30, 2018UGX (USh)shares | Sep. 30, 2018$ / shares | Mar. 21, 2018$ / shares | Sep. 28, 2017CNY (¥) | Dec. 19, 2016shares | Dec. 04, 2001CNY (¥) | Dec. 24, 1999CNY (¥) |
Common stock, shares authorized | shares | 50,000,000 | 50,000,000 | 50,000,000 | 50,000,000 | 9,000,000 | |||||||||||
Common stock, no par value | $ / shares | $ 0 | $ 0 | $ 0 | |||||||||||||
Common stock, shares, issued | shares | 16,558,037 | 16,558,037 | 16,558,037 | 16,528,037 | ||||||||||||
Common stock, shares outstanding | shares | 16,558,037 | 16,558,037 | 16,558,037 | 16,528,037 | ||||||||||||
Holding One | ||||||||||||||||
Ownership interest | 52.21% | |||||||||||||||
Holding Two | ||||||||||||||||
Registered capital | $ | $ 1,000,000 | |||||||||||||||
Paid in capital | $ | $ 0 | |||||||||||||||
Holding Three | ||||||||||||||||
Registered capital | $ | 20,000,000 | |||||||||||||||
Paid in capital | $ | 0 | |||||||||||||||
Holding Four | ||||||||||||||||
Registered capital | ¥ 100,000,000 | |||||||||||||||
Registered and paid in capital | ¥ 30,000,000 | ¥ 20,000,000 | ||||||||||||||
Proceeds from contributed capital | 9,900,000 | |||||||||||||||
Ownership interest | 99.00% | |||||||||||||||
Holding Five | ||||||||||||||||
Registered and paid in capital | ¥ 2,880,000 | |||||||||||||||
Ownership interest | 100.00% | 100.00% | ||||||||||||||
Holding Six | ||||||||||||||||
Registered capital | ¥ 5,000,000 | |||||||||||||||
Paid in capital | ¥ 1,020,000 | |||||||||||||||
Ownership interest | 90.00% | |||||||||||||||
Holding Six | Third Party | ||||||||||||||||
Ownership interest | 10.00% | |||||||||||||||
Holding Seven | ||||||||||||||||
Registered capital | USh | USh 20,000,000 | |||||||||||||||
Paid in capital | USh | USh 0 | USh 0 | ||||||||||||||
Ownership interest | 80.00% | |||||||||||||||
Holding Seven | Third Party | ||||||||||||||||
Ownership interest | 20.00% | |||||||||||||||
Holding Eight | ||||||||||||||||
Registered capital | $ | 50,000 | |||||||||||||||
Paid in capital | $ | $ 0 | |||||||||||||||
ZK Industry | ||||||||||||||||
Ownership interest | 40.00% | 100.00% | ||||||||||||||
HUANG Jian Cong | Holding One | ||||||||||||||||
Ownership interest | 29.38% | |||||||||||||||
HUANG Jian Cong | Holding Four | ||||||||||||||||
Proceeds from contributed capital | ¥ 100,000 | |||||||||||||||
Ownership interest | 1.00% | 45.00% | ||||||||||||||
HUANG Jian Cong | Holding Five | ||||||||||||||||
Ownership interest | 22.57% | |||||||||||||||
WANG Ming Jie | Holding One | ||||||||||||||||
Ownership interest | 10.87% | |||||||||||||||
WANG Ming Jie | Holding Four | ||||||||||||||||
Ownership interest | 20.00% | |||||||||||||||
WANG Ming Jie | Holding Five | ||||||||||||||||
Ownership interest | 38.89% | |||||||||||||||
WANG Guo Lin | Holding One | ||||||||||||||||
Ownership interest | 10.87% | |||||||||||||||
WANG Guo Lin | Holding Four | ||||||||||||||||
Ownership interest | 20.00% | |||||||||||||||
WANG Guo Lin | Holding Five | ||||||||||||||||
Ownership interest | 27.78% | |||||||||||||||
WANG Jian Di | Holding One | ||||||||||||||||
Ownership interest | 1.09% | |||||||||||||||
WANG Jian Di | Holding Four | ||||||||||||||||
Ownership interest | 10.00% | |||||||||||||||
WANG Jian Di | Holding Five | ||||||||||||||||
Ownership interest | 5.21% | |||||||||||||||
WANG Yang Ming | Holding Four | ||||||||||||||||
Ownership interest | 5.00% | |||||||||||||||
WANG Yang Ming | Holding Five | ||||||||||||||||
Ownership interest | 5.55% | |||||||||||||||
CHENG Kai Chun | Holding Two | ||||||||||||||||
Ownership interest | 60.00% |
SIGNIFICANT ACCOUNTING POLICI_4
SIGNIFICANT ACCOUNTING POLICIES - Ownership (Details) - 12 months ended Sep. 30, 2019 USh in Millions | HKD ($) | UGX (USh) | CNY (¥) | USD ($) |
Subsidiary One | ||||
Entity Name | ZK International | |||
Registered Location | BVI | |||
Incorporated date | May 13, 2015 | |||
Registered capital | $ | $ 50,000 | |||
Background | A holding company with no operation activities itself for the years then ended | |||
Subsidiary One | HUANG Jian Cong | ||||
Ownership as of the issuance date of the report | 29.38% | |||
Subsidiary One | WANG Ming Jie | ||||
Ownership as of the issuance date of the report | 10.87% | |||
Subsidiary One | WANG Guo Lin | ||||
Ownership as of the issuance date of the report | 10.87% | |||
Subsidiary One | WANG Jian Di | ||||
Ownership as of the issuance date of the report | 1.09% | |||
Subsidiary Two | ||||
Entity Name | ZK Pipe | |||
Registered Location | Hong Kong | |||
Incorporated date | May 28, 2015 | |||
Registered capital | $ | $ 1,000,000 | |||
Background | Have not commenced operations | |||
Subsidiary Two | ZK International | ||||
Ownership as of the issuance date of the report | 100.00% | |||
Subsidiary Three | ||||
Entity Name | Wenzhou Weijia | |||
Registered Location | Wenzhou | |||
Incorporated date | Jun. 17, 2015 | |||
Registered capital | $ | 20,000,000 | |||
Background | Have not commenced operations | |||
Subsidiary Three | ZK Pipe | ||||
Ownership as of the issuance date of the report | 100.00% | |||
Subsidiary Four | ||||
Entity Name | Zhejiang Zhengkang | |||
Registered Location | Wenzhou | |||
Incorporated date | Dec. 4, 2001 | |||
Registered capital | ¥ 100,000,000 | |||
Paid in capital | 30,000,000 | |||
Background | Principally operated in manufacturing and sales of steel strip, steel pipe and fittings | |||
Subsidiary Four | HUANG Jian Cong | ||||
Ownership as of the issuance date of the report | 1.00% | |||
Subsidiary Four | Wenzhou Weijia | ||||
Ownership as of the issuance date of the report | 99.00% | |||
Subsidiary Five | ||||
Entity Name | Wenzhou Zhengfeng | |||
Registered Location | Wenzhou | |||
Incorporated date | Dec. 24, 1999 | |||
Registered capital | 2,880,000 | |||
Background | Principally operated in trading of steel strip, mainly purchased from Zhejiang Zhengkang | |||
Subsidiary Five | Zhejiang Zhengkang | ||||
Ownership as of the issuance date of the report | 100.00% | |||
Subsidiary Six | ||||
Entity Name | Zhenglong Ecommerce | |||
Registered Location | Wenzhou | |||
Incorporated date | Mar. 15, 2018 | |||
Registered capital | 5,000,000 | |||
Background | Principally operated in online sales and promoting of steel strip, steel pipe and fittings | |||
Subsidiary Six | Zhejiang Zhengkang | ||||
Paid in capital | ¥ 1,020,000 | |||
Ownership as of the issuance date of the report | 90.00% | |||
Subsidiary Seven | ||||
Entity Name | ZK Uganda | |||
Registered Location | Uganda | |||
Incorporated date | Mar. 23, 2018 | |||
Registered capital | USh | USh 20 | |||
Background | Have not commenced operations | |||
Subsidiary Seven | ZK International | ||||
Ownership as of the issuance date of the report | 80.00% | |||
Subsidiary Eight | ||||
Entity Name | XSigma | |||
Registered Location | BVI | |||
Incorporated date | Jan. 18, 2018 | |||
Registered capital | $ | $ 50,000 | |||
Background | Have not commenced operations | |||
Subsidiary Eight | ZK International | ||||
Ownership as of the issuance date of the report | 100.00% |
SIGNIFICANT ACCOUNTING POLICI_5
SIGNIFICANT ACCOUNTING POLICIES - Exchange Rates (Details) | Sep. 30, 2019 | Sep. 30, 2018 | Aug. 15, 2018 | Sep. 30, 2017 |
SIGNIFICANT ACCOUNTING POLICIES | ||||
Period Ended RMB: USD exchange rate | 7.1477 | 6.8680 | 0.144238 | 6.6545 |
Period Average RMB: USB exchange rate | 6.8753 | 6.5368 | 6.8126 |
SIGNIFICANT ACCOUNTING POLICI_6
SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment (Details) | 12 Months Ended |
Sep. 30, 2019 | |
Buildings | |
Useful lives | 40 years |
Machinery | |
Useful lives | 10 years |
Furniture, fixtures, and equipment | |
Useful lives | 10 years |
Motor vehicles | |
Useful lives | 10 years |
SIGNIFICANT ACCOUNTING POLICI_7
SIGNIFICANT ACCOUNTING POLICIES - Intangible Assets (Details) | 12 Months Ended |
Sep. 30, 2019 | |
Land use rights, cost | |
Useful lives | 46 years |
Software, cost | |
Useful lives | 5 years |
SIGNIFICANT ACCOUNTING POLICI_8
SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) | 12 Months Ended | ||||||||
Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2019CNY (¥) | Sep. 30, 2019USD ($) | Apr. 01, 2019 | May 01, 2018 | Apr. 30, 2018 | Sep. 30, 2016USD ($) | |
Short-term investments | $ 850,829 | $ 279,810 | |||||||
Long-term deposits | 4,229,827 | 11,453,690 | |||||||
Allowance for doubtful accounts | 1,997,310 | $ 1,817,050 | 1,919,152 | ||||||
Inventory write-downs | $ 0 | 0 | |||||||
Wrote off advance to suppliers | 102,523 | 0 | |||||||
Impairment of long-lived assets | 0 | 0 | |||||||
Value-added taxes, rate | 13.00% | 16.00% | 17.00% | ||||||
Revenue | 912,844 | 59,238 | 87,250 | ||||||
Unrecognized tax benefits | 4,098,783 | 2,789,135 | 4,176,537 | $ 1,916,789 | |||||
Advertising costs | $ 306,288 | $ 265,538 | $ 69,535 | ||||||
Target Company | |||||||||
Long-term deposits | 10,397,406 | ||||||||
Other | |||||||||
Long-term deposits | $ 1,056,284 | ||||||||
Cash | |||||||||
Long-term deposits | ¥ | ¥ 81,867,541 |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 |
ACCOUNTS RECEIVABLE | |||
Accounts receivable, gross | $ 27,034,192 | $ 29,131,547 | |
Less: allowance for doubtful accounts | (1,919,152) | (1,997,310) | $ (1,817,050) |
Accounts receivable, net | $ 25,115,040 | $ 27,134,237 |
ACCOUNTS RECEIVABLE - Allowance
ACCOUNTS RECEIVABLE - Allowance for Doubtful Accounts (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
ACCOUNTS RECEIVABLE | ||
Beginning balance | $ 1,997,310 | $ 1,817,050 |
Additional reserve through bad debt expense | 0 | 272,783 |
Bad debt write-off | 0 | (36,037) |
Exchange difference | (78,158) | (56,486) |
Ending balance | $ 1,919,152 | $ 1,997,310 |
ACCOUNTS RECEIVABLE - Additiona
ACCOUNTS RECEIVABLE - Additional Information (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 | |
ACCOUNTS RECEIVABLE | |||
Bad debt expense | $ 0 | $ 286,606 | $ 160,944 |
Bad debt write-off | 0 | $ 36,037 | |
Accounts receivable pledged | $ 2,028,624 |
NOTES RECEIVABLE AND OTHER RE_2
NOTES RECEIVABLE AND OTHER RECEIVABLES (Details) | 12 Months Ended | ||||||||
Dec. 31, 2010CNY (¥)item | Dec. 31, 2010USD ($)item | Sep. 30, 2019CNY (¥) | Sep. 30, 2019USD ($) | Sep. 30, 2018CNY (¥) | Sep. 30, 2018USD ($) | Sep. 19, 2017CNY (¥) | Sep. 19, 2017USD ($) | Sep. 30, 2010CNY (¥) | |
Notes receivable | $ | $ 385,519 | $ 414,352 | |||||||
Other receivables | $ | 1,866,321 | 2,624,022 | |||||||
Number of loan agreements | item | 2 | 2 | |||||||
Loan advances | ¥ 10,500,000 | $ 1,520,000 | |||||||
Terms of loans | 1 year | 1 year | |||||||
Number of other parties sued | 2 | ||||||||
Final judgment, amount awarded from other party | ¥ 10,500,000 | ||||||||
Final judgment amount, interest percentage multiplier | 4 | 4 | |||||||
Other Receivables | ¥ 4,400,000 | 620,000 | ¥ 4,400,000 | 640,000 | ¥ 10,500,000 | ||||
Raozhou Dianli Ltd | |||||||||
Loan advances | ¥ 9,000,000 | ||||||||
Fair value of real estate assets used as collateral | ¥ 143,100,000 | $ 21,500,000 | |||||||
Xianjin Cao | |||||||||
Loan advances | ¥ 1,500,000 | ||||||||
Legal claims | |||||||||
Other receivables | $ | $ 620,000 | $ 640,000 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Raw materials | $ 5,360,445 | $ 4,789,860 |
Work-in-process | 8,902,211 | 6,532,826 |
Finished goods | 6,533,419 | 6,469,501 |
Total | 20,796,075 | 17,792,187 |
Inventory write-downs | 0 | 0 |
Carrying values of pledged assets | 8,450,480 | 7,572,422 |
Inventory | ||
Carrying values of pledged assets | $ 1,608,909 | $ 1,674,432 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 |
Property, Plant and Equipment | ||
Property, plant and equipment, at cost | $ 11,074,181 | $ 10,102,926 |
Less: accumulated depreciation | (4,597,893) | (4,533,745) |
Property, plant and equipment before construction in progress | 6,476,288 | 5,569,181 |
Construction in progress ("CIP") | 119,416 | 711,231 |
Property, plant and equipment, net | 6,595,704 | 6,280,412 |
Buildings | ||
Property, Plant and Equipment | ||
Property, plant and equipment, at cost | 5,211,781 | 5,188,568 |
Machinery | ||
Property, Plant and Equipment | ||
Property, plant and equipment, at cost | 5,080,964 | 4,040,773 |
Furniture, fixtures, and equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, at cost | 545,881 | 639,356 |
Motor vehicles | ||
Property, Plant and Equipment | ||
Property, plant and equipment, at cost | $ 235,555 | $ 234,229 |
PROPERTY, PLANT AND EQUIPMENT -
PROPERTY, PLANT AND EQUIPMENT - Depreciation (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 | |
PROPERTY, PLANT AND EQUIPMENT | |||
Depreciation | $ 375,286 | $ 395,604 | $ 425,696 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 |
Less: accumulated amortization | $ (156,960) | $ (148,074) |
Intangible assets, net | 918,717 | 938,221 |
Land use rights, cost | ||
Intangible assets, gross | 557,011 | 579,695 |
Software, cost | ||
Intangible assets, gross | 517,105 | $ 506,600 |
Other intangible assets, cost | ||
Intangible assets, gross | $ 1,561 |
INTANGIBLE ASSETS - Additional
INTANGIBLE ASSETS - Additional Information (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 | |
INTANGIBLE ASSETS | |||
Amortization expense | $ 13,638 | $ 12,137 | $ 12,705 |
LONG-TERM INVESTMENT (Details)
LONG-TERM INVESTMENT (Details) | 12 Months Ended | |||
Sep. 30, 2019CNY (¥) | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Dec. 31, 2011CNY (¥) | |
Schedule Of Cost Method Investment | ||||
Long-term investment | $ | $ 291,464 | $ 303,334 | ||
Wenzhou Longlian Development | ||||
Schedule Of Cost Method Investment | ||||
Dividend income | ¥ | ¥ 290,000 | |||
Wenzhou Longlian Development Co., Ltd. | ||||
Schedule Of Cost Method Investment | ||||
Equity method investments | ¥ | ¥ 2,083,300 | |||
Ownership percentage | 2.0833% | |||
Long-term investment | $ | $ 291,464 | $ 303,334 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 |
Related Party Transaction | ||
Due to related parties | $ 1,446,461 | $ 3,694,469 |
Due from Related Parties | 110,990 | 22,278 |
HUANG Jian Cong | ||
Related Party Transaction | ||
Due to related parties | 1,323,734 | 3,584,216 |
Other Affiliates of the Company | ||
Related Party Transaction | ||
Due to related parties | 122,727 | 110,253 |
Due from Related Parties | $ 110,990 | $ 22,278 |
RELATED PARTY TRANSACTIONS - Ad
RELATED PARTY TRANSACTIONS - Additional Information (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
HUANG Jian Cong | ||
Borrowings from related party | $ 1,323,734 | $ 3,584,216 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ||
VAT payable | $ 4,158,171 | $ 3,918,119 |
Other tax payables | 51,292 | 50,104 |
Other | 229,107 | 1,966,510 |
Total | $ 4,438,570 | $ 5,934,733 |
SHORT-TERM BANK BORROWINGS (Det
SHORT-TERM BANK BORROWINGS (Details) | 12 Months Ended | |||
Sep. 30, 2019CNY (¥) | Sep. 30, 2018CNY (¥) | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | |
Amount | ¥ 116,375,000 | ¥ 132,350,000 | $ 16,281,461 | $ 19,270,530 |
Agricultural Bank Loan One | ||||
Amount | ¥ 6,190,000 | ¥ 6,190,000 | $ 866,013 | $ 901,281 |
Issuance Date | Nov. 5, 2018 | Dec. 1, 2017 | ||
Expiration Date | Nov. 1, 2019 | Nov. 25, 2018 | ||
Interest | 6.09% | 6.00% | 6.09% | 6.00% |
Agricultural Bank Loan Two | ||||
Amount | ¥ 8,000,000 | ¥ 8,000,000 | $ 1,119,241 | $ 1,164,822 |
Issuance Date | Nov. 19, 2018 | Jan. 18, 2018 | ||
Expiration Date | Nov. 18, 2019 | Dec. 5, 2018 | ||
Interest | 6.09% | 6.00% | 6.09% | 6.00% |
Agricultural Bank Loan Three | ||||
Amount | ¥ 8,700,000 | ¥ 7,580,000 | $ 1,217,175 | $ 1,103,669 |
Issuance Date | Jan. 2, 2019 | Jan. 18, 2018 | ||
Expiration Date | Jan. 1, 2020 | Oct. 8, 2018 | ||
Interest | 6.09% | 6.00% | 6.09% | 6.00% |
Agricultural Bank Loan Four | ||||
Amount | ¥ 5,750,000 | ¥ 8,700,000 | $ 804,455 | $ 1,266,744 |
Issuance Date | Jul. 23, 2019 | Jan. 29, 2018 | ||
Expiration Date | Jul. 22, 2020 | Jan. 5, 2019 | ||
Interest | 6.65% | 6.22% | 6.65% | 6.22% |
Agricultural Bank Loan Five | ||||
Amount | ¥ 4,300,000 | ¥ 4,300,000 | $ 601,592 | $ 626,092 |
Issuance Date | Aug. 1, 2019 | Aug. 16, 2018 | ||
Expiration Date | Jul. 1, 2020 | Aug. 15, 2019 | ||
Interest | 6.65% | 6.09% | 6.65% | 6.09% |
Agricultural Bank Loan Six | ||||
Amount | ¥ 6,000,000 | ¥ 5,750,000 | $ 839,431 | $ 837,216 |
Issuance Date | Aug. 26, 2019 | Aug. 21, 2018 | ||
Expiration Date | Aug. 25, 2020 | Aug. 1, 2019 | ||
Interest | 5.66% | 6.09% | 5.66% | 6.09% |
Agricultural Bank Loan Seven | ||||
Amount | ¥ 6,000,000 | $ 873,617 | ||
Issuance Date | Sep. 27, 2018 | |||
Expiration Date | Sep. 1, 2019 | |||
Interest | 6.09% | 6.09% | ||
Bank of China Loan One | ||||
Amount | ¥ 2,850,000 | ¥ 4,250,000 | $ 398,730 | $ 618,812 |
Issuance Date | Sep. 11, 2019 | Apr. 3, 2018 | ||
Expiration Date | Sep. 9, 2020 | Apr. 2, 2019 | ||
Interest | 5.27% | 5.27% | 5.27% | 5.27% |
Bank OF China Loan Two | ||||
Amount | ¥ 4,250,000 | ¥ 6,800,000 | $ 594,597 | $ 990,099 |
Issuance Date | Sep. 24, 2019 | Apr. 3, 2018 | ||
Expiration Date | Sep. 22, 2020 | Apr. 2, 2019 | ||
Interest | 5.27% | 5.27% | 5.27% | 5.27% |
Bank OF China Loan Three | ||||
Amount | ¥ 3,400,000 | $ 475,677 | ||
Issuance Date | Sep. 20, 2019 | |||
Expiration Date | Sep. 18, 2020 | |||
Interest | 5.27% | 5.27% | ||
China Merchants Bank Loan One | ||||
Amount | ¥ 13,500,000 | ¥ 15,000,000 | $ 1,888,719 | $ 2,184,042 |
Issuance Date | Dec. 14, 2018 | Dec. 12, 2017 | ||
Expiration Date | Dec. 9, 2019 | Dec. 6, 2018 | ||
Interest | 5.44% | 5.44% | 5.44% | 5.44% |
China Merchants Bank Loan Two | ||||
Amount | ¥ 3,000,000 | ¥ 1,500,000 | $ 419,715 | $ 218,404 |
Issuance Date | Mar. 20, 2019 | Feb. 8, 2018 | ||
Expiration Date | Dec. 9, 2019 | Dec. 1, 2018 | ||
Interest | 5.44% | 5.66% | 5.44% | 5.66% |
China Merchants Bank Loan Three | ||||
Amount | ¥ 1,955,000 | $ 273,516 | ||
Issuance Date | Sep. 3, 2019 | |||
Expiration Date | Feb. 29, 2020 | |||
Interest | 4.35% | 4.35% | ||
Industrial Bank Loan One | ||||
Amount | ¥ 1,000,000 | ¥ 6,500,000 | $ 139,905 | $ 946,419 |
Issuance Date | Dec. 5, 2018 | Dec. 6, 2017 | ||
Expiration Date | Dec. 4, 2019 | Dec. 3, 2018 | ||
Interest | 6.50% | 6.50% | 6.50% | 6.50% |
Industrial Bank Loan Two | ||||
Amount | ¥ 7,000,000 | ¥ 3,000,000 | $ 979,336 | $ 436,809 |
Issuance Date | Nov. 8, 2018 | Dec. 7, 2017 | ||
Expiration Date | Nov. 8, 2019 | Nov. 27, 2018 | ||
Interest | 6.50% | 6.00% | 6.50% | 6.00% |
Industrial Bank Loan Three | ||||
Amount | ¥ 6,000,000 | ¥ 5,500,000 | $ 839,431 | $ 800,815 |
Issuance Date | Nov. 12, 2018 | Dec. 8, 2017 | ||
Expiration Date | Nov. 5, 2019 | Nov. 20, 2018 | ||
Interest | 6.50% | 6.45% | 6.50% | 6.45% |
China Minsheng Bank Loan One | ||||
Amount | ¥ 3,000,000 | ¥ 4,000,000 | $ 419,715 | $ 582,411 |
Issuance Date | Jun. 19, 2019 | Jun. 28, 2018 | ||
Expiration Date | Jun. 19, 2020 | Mar. 31, 2019 | ||
Interest | 6.74% | 5.44% | 6.74% | 5.44% |
China Minsheng Bank Loan Two | ||||
Amount | ¥ 2,880,000 | ¥ 2,200,000 | $ 402,927 | $ 320,326 |
Issuance Date | Jun. 20, 2019 | Jun. 28, 2018 | ||
Expiration Date | Jun. 20, 2020 | Mar. 31, 2019 | ||
Interest | 6.74% | 5.44% | 6.74% | 5.44% |
Pingan Bank Loan | ||||
Amount | ¥ 3,600,000 | ¥ 6,200,000 | $ 503,659 | $ 902,737 |
Issuance Date | Sep. 20, 2019 | Sep. 25, 2018 | ||
Expiration Date | Sep. 20, 2020 | Sep. 25, 2019 | ||
Interest | 7.96% | 7.96% | 7.96% | 7.96% |
CZBANK Loan One | ||||
Amount | ¥ 3,200,000 | ¥ 3,500,000 | $ 447,696 | $ 509,610 |
Issuance Date | Aug. 9, 2019 | Apr. 20, 2018 | ||
Expiration Date | Apr. 10, 2020 | Oct. 19, 2018 | ||
Interest | 6.00% | 6.53% | 6.00% | 6.53% |
CZBANK Loan Two | ||||
Amount | ¥ 4,700,000 | ¥ 6,000,000 | $ 657,554 | $ 873,617 |
Issuance Date | Aug. 14, 2019 | Apr. 19, 2018 | ||
Expiration Date | Apr. 14, 2020 | Oct. 18, 2018 | ||
Interest | 6.00% | 6.48% | 6.00% | 6.48% |
CZBANK Loan Three | ||||
Amount | ¥ 1,500,000 | ¥ 6,000,000 | $ 209,858 | $ 873,617 |
Issuance Date | Aug. 12, 2019 | Apr. 17, 2018 | ||
Expiration Date | Apr. 14, 2020 | Oct. 16, 2018 | ||
Interest | 6.09% | 6.53% | 6.09% | 6.53% |
CZBANK Loan Four | ||||
Amount | ¥ 1,000,000 | ¥ 1,500,000 | $ 139,905 | $ 218,404 |
Issuance Date | Sep. 11, 2019 | Apr. 19, 2018 | ||
Expiration Date | Apr. 9, 2020 | Oct. 18, 2018 | ||
Interest | 6.00% | 6.50% | 6.00% | 6.50% |
Bank of Communications Loan One | ||||
Amount | ¥ 4,500,000 | $ 629,573 | ||
Issuance Date | Jul. 25, 2019 | |||
Expiration Date | Feb. 20, 2020 | |||
Interest | 7.80% | 7.80% | ||
CZBANK Loan Five | ||||
Amount | ¥ 3,000,000 | ¥ 4,880,000 | $ 419,715 | $ 710,542 |
Issuance Date | Sep. 12, 2019 | Apr. 26, 2018 | ||
Expiration Date | Apr. 13, 2020 | Apr. 26, 2019 | ||
Interest | 6.00% | 4.35% | 6.00% | 4.35% |
CZBANK Loan Six | ||||
Amount | ¥ 2,600,000 | $ 363,753 | ||
Issuance Date | Sep. 17, 2019 | |||
Expiration Date | Apr. 10, 2020 | |||
Interest | 6.00% | 6.00% | ||
Bank of Communications Loan Two | ||||
Amount | ¥ 4,500,000 | $ 629,573 | ||
Issuance Date | Jul. 26, 2019 | |||
Expiration Date | Feb. 20, 2020 | |||
Interest | 7.40% | 7.40% | ||
Bank of Communications Loan Five | ||||
Amount | ¥ 9,000,000 | $ 1,310,425 | ||
Issuance Date | Sep. 10, 2018 | |||
Expiration Date | Sep. 7, 2019 | |||
Interest | 6.34% | 6.34% |
SHORT-TERM BANK BORROWINGS - Pl
SHORT-TERM BANK BORROWINGS - Pledged Assets (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 |
Carrying values of pledged assets | $ 8,450,480 | $ 7,572,422 |
Term Deposit as Collateral | ||
Carrying values of pledged assets | 728,014 | |
Accounts receivable | ||
Carrying values of pledged assets | 2,028,624 | |
Buildings, net | ||
Carrying values of pledged assets | 4,312,115 | 4,583,560 |
Land use rights, net | ||
Carrying values of pledged assets | 402,622 | 431,621 |
Machinery, net | ||
Carrying values of pledged assets | 98,210 | 154,795 |
Inventory | ||
Carrying values of pledged assets | $ 1,608,909 | $ 1,674,432 |
COMMITMENT AND CONTINGENCIES (D
COMMITMENT AND CONTINGENCIES (Details) | Sep. 30, 2018claim |
COMMITMENT AND CONTINGENCIES | |
Number of pending legal claims | 1 |
UNCERTAIN TAX POSITION (Details
UNCERTAIN TAX POSITION (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Statute of limitations period (in years) | 3 years | |
Local tax authority | ||
Potential tax liability | $ 4,176,537 | $ 4,263,289 |
CUSTOMER AND SUPPLIER CONCENT_2
CUSTOMER AND SUPPLIER CONCENTRATION (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Concentration Risk [Line Items] | ||
Accounts receivable | $ 25,115,040 | $ 27,134,237 |
Customer Concentration Risk | Accounts Receivables | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 21.10% | |
Accounts receivable | $ 9,507,491 | |
Customer Concentration Risk | Maximum | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 10.00% | |
Supplier Concentration Risk | Trade Payable | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 62.40% | |
Accounts payable | $ 4,256,984 | $ 5,787,900 |
Supplier One | Trade Payable | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 58.25% | |
Supplier Two | Trade Payable | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 17.53% |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) | Dec. 17, 2018shares | Aug. 15, 2018CNY (¥)shares | Mar. 21, 2018$ / sharesshares | Jan. 09, 2018USD ($)$ / sharesshares | Dec. 22, 2017USD ($)$ / sharesshares | Dec. 21, 2017USD ($)$ / sharesshares | Sep. 01, 2017USD ($)$ / sharesshares | Dec. 19, 2016$ / sharesshares | Sep. 30, 2019USD ($)$ / sharesshares | Sep. 30, 2018USD ($)$ / sharesshares | Sep. 30, 2017USD ($) | Aug. 15, 2018USD ($)$ / shares | Sep. 29, 2015 |
Total stockholders' equity | $ | $ 43,518,039 | $ 37,041,845 | |||||||||||
Common stock, par value | $ / shares | $ 1 | ||||||||||||
Common stock, no par value | $ / shares | $ 0 | $ 0 | $ 0 | ||||||||||
Stock split description | a 180 for 1 forward stock split whereby every authorized, issued and outstanding ordinary shares was exchanged for 180 new ordinary shares | ||||||||||||
Common stock, shares authorized | shares | 9,000,000 | 50,000,000 | 50,000,000 | ||||||||||
Shares issued | shares | 30,000 | ||||||||||||
Shares issued, price per share | $ / shares | $ 5.88 | ||||||||||||
Number of warrants issued | shares | 74,784 | ||||||||||||
Warrants issued, percentage | 7.00% | ||||||||||||
Warrants expiration term | 5 years | ||||||||||||
Class of warrant or right, exercise price of warrants or rights | $ / shares | $ 5 | ||||||||||||
Class of warrant or right, outstanding | shares | 74,784 | ||||||||||||
Warrants not settleable in cash, fair value disclosure | $ | $ 438,234 | ||||||||||||
Risk free interest rate | 2.00% | ||||||||||||
Expected term | 5 years | 3 years | |||||||||||
Warrants exercised | shares | 0 | ||||||||||||
Exercise price | $ / shares | $ 5 | ||||||||||||
Volatility rate | 67.40% | ||||||||||||
Number of tree step | $ | 10 | ||||||||||||
Statutory surplus reserve | $ | $ 2,904,699 | $ 2,031,775 | |||||||||||
Net loss | $ | 8,193,694 | 7,103,057 | $ 5,933,688 | ||||||||||
Retained earnings, appropriated | $ | $ 7,157,061 | $ 6,325,541 | |||||||||||
Debt conversion, shares issued | shares | 3,280,525 | ||||||||||||
Exchange rate | 0.144238 | 7.1477 | 6.8680 | 6.6545 | 0.144238 | ||||||||
Statutory surplus reserve | |||||||||||||
Net loss | $ | $ 872,924 | $ 858,412 | $ 593,369 | ||||||||||
Minimum | |||||||||||||
Statutory surplus reserves percentage | 10.00% | ||||||||||||
Maximum | |||||||||||||
Statutory surplus reserves percentage | 50.00% | ||||||||||||
Private Placement | |||||||||||||
Common stock, no par value | $ / shares | $ 0 | $ 0 | $ 0 | ||||||||||
Proceeds from issuance of private placement | $ | $ 500,000 | $ 420,000 | $ 100,000 | ||||||||||
Shares issued | shares | 62,500 | 70,000 | 16,666 | ||||||||||
Shares issued, price per share | $ / shares | $ 8 | $ 6 | $ 6 | ||||||||||
Zhenglong Ecommerce | |||||||||||||
Noncontrolling interest, ownership percentage by parent | 10.90% | ||||||||||||
ZK Uganda | |||||||||||||
Noncontrolling interest, ownership percentage by parent | 20.00% | ||||||||||||
Wenzhou Weijia | |||||||||||||
Noncontrolling interest, ownership percentage by parent | 99.00% | 99.00% | |||||||||||
HUANG Jian Cong | |||||||||||||
Noncontrolling interest, ownership percentage by noncontrolling owners | 1.00% | 1.00% | |||||||||||
Notes payable, related parties | ¥ 64,079,472 | $ 9,242,676 | |||||||||||
Debt instrument, convertible, conversion price | $ / shares | $ 2.82 | ||||||||||||
Debt instrument, convertible, threshold percentage of stock price trigger | 75.00% | ||||||||||||
Notes payable | ¥ | ¥ 69,000,000 | ||||||||||||
WANG Jian Di | |||||||||||||
Ownership interest | 1.69% | ||||||||||||
WANG Ming Jie | Subsidiary One | |||||||||||||
Ownership interest | 10.87% | ||||||||||||
WANG Guo Lin | Subsidiary One | |||||||||||||
Ownership interest | 10.87% | ||||||||||||
ZK International | Subsidiary Two | |||||||||||||
Ownership interest | 100.00% | ||||||||||||
Shares issued | shares | 30,000 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - segment | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 | |
Number of operating segments | 1 | ||
CHINA | Geographic Concentration Risk | Total revenue | |||
Percentage of revenue and assets | 90.00% | 90.00% | 90.00% |
INCOME TAXES - Deferred Tax Ass
INCOME TAXES - Deferred Tax Assets (Details) - USD ($) | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 |
INCOME TAXES | |||
Bad debt allowance recorded for accounts receivable | $ 289,756 | $ 299,596 | $ 272,557 |
Net operating loss carry-forward | 159,219 | 152,257 | |
Less: valuation allowance | (159,219) | (152,257) | |
Total | $ 289,756 | $ 299,596 | $ 272,557 |
INCOME TAXES - Expense (Details
INCOME TAXES - Expense (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 | |
INCOME TAXES | |||
Current | $ 250,186 | $ 1,435,521 | $ 1,019,147 |
Deferred | (1,958) | (37,311) | (24,142) |
Total | $ 248,228 | $ 1,398,210 | $ 995,005 |
INCOME TAXES - Reconciliation (
INCOME TAXES - Reconciliation (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 | |
INCOME TAXES | |||
Income before taxes excluded the amounts of loss incurring entities | $ 8,979,640 | $ 9,982,326 | $ 7,178,353 |
PRC EIT tax rates | 15.00% | 15.00% | 15.00% |
Tax at the PRC EIT tax rates | $ 1,346,946 | $ 1,497,349 | $ 1,076,753 |
Tax effect of 75% (50% for 2018) R&D expenses deduction | (163,357) | (123,948) | (99,833) |
Tax effect of deferred tax recognized | (1,958) | (37,311) | (24,142) |
Tax effect of non-deductible expenses | 18,307 | 62,120 | 42,227 |
Change in unrecognized tax benefits | (951,710) | ||
Income tax expenses | $ 248,228 | $ 1,398,210 | $ 995,005 |
Percent of tax effect of R & D expenses deduction | 75.00% | 50.00% | 50.00% |
INCOME TAXES - Additional Infor
INCOME TAXES - Additional Information (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 | |
Deferred tax assets | $ 289,756 | $ 299,596 | $ 272,557 |
Income tax rate | 15.00% | 15.00% | 15.00% |
Statute of limitations period (in years) | 3 years | ||
State Administration of Taxation, China | |||
Income tax rate | 25.00% | ||
State Administration of Taxation, China | Zhengkang | |||
Income tax rate | 15.00% | ||
Preferential tax rate, validity period | 3 years | ||
State Administration of Taxation, China | Zhengfeng and Weijia | |||
Income tax rate | 25.00% | ||
Inland Revenue, Hong Kong | ZK Pipe Industry Co | |||
Income tax rate | 16.50% | ||
Uganda Revenue Authority | ZK Uganda | |||
Income tax rate | 30.00% |
INCOME TAXES - Changes in Unrec
INCOME TAXES - Changes in Unrecognized Tax Benefits (Details) | 12 Months Ended | |||
Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2019CNY (¥) | |
Income Tax Contingency [Line Items] | ||||
Balance at beginning period | $ 4,098,783 | $ 2,789,135 | $ 1,916,789 | |
Addition for tax positions of the current year | 993,194 | 1,309,648 | 872,346 | |
Lapse of statute of limitations | (915,440) | |||
Balance at ending period | $ 4,176,537 | $ 4,098,783 | $ 2,789,135 | |
Minimum | ||||
Income Tax Contingency [Line Items] | ||||
Possible change on company's unrecognized tax benefits for next twelve months | ¥ | ¥ 0 | |||
Maximum | ||||
Income Tax Contingency [Line Items] | ||||
Possible change on company's unrecognized tax benefits for next twelve months | ¥ | ¥ 7,157,343 |