ZKTeco 2023 Annual Report
ZKTECO CO., LTD.
2023 Annual Report
Announcement No.: 2024-011
April 2024
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ZKTeco 2023 Annual Report
Adhering to integrity, innovation and stable development, seeing far
and wide to win the future
A Letter to Shareholders
The year 2023 is the first complete accounting year since the listing of ZKTeco. This year,
we continue to adhere to the globalization strategy, and continuously improve our core
competitiveness driven by innovation. In 2023, the Company achieved an operating revenue of
RMB 1.9701837 billion, a YoY increase of 2.69%, and a net profit attributable to the owners of
the parent company of RMB 177.2637 million, a YoY decrease of 7.92%. Excluding the impact of
share-based payment fees, the net profit attributable to the owners of the parent company was
RMB 215.4326 million, a YoY increase of 9.04%. ZKTeco is committed to becoming a world-
class enterprise for technological innovation and sustainable development in the access control
industry. Through continuous R&D investment and market expansion, it has achieved stable
business growth and global layout. On behalf of the Board of Directors, I would like to express
sincere gratitude to all colleagues, users, partners, as well as investors of the Company!
In 2023, we still focused on the Company's main business, deeply cultivating the three major
business sectors of smart entrance and exit, smart identity verification, and smart office. Driven
by the market and consumers, we deepened our main business, refined our services, and expanded
our ecosystem horizontally.
In 2023, also known as the "Year of Artificial Intelligence", we officially entered the field of
smart retail cloud services. It is an innovative business sector newly developed by ZKTeco, and
we have integrated the Company's accumulated technology and business capabilities over the
years, focusing on the "AI+Digital Signage" field and accelerating the transformation of
traditional retail industry to data-driven smart retail.
In the era of AI, ZKTeco continues to focus on edge based multimodal AI for small devices,
empowering industries such as home, community, enterprise, and education with technologies
such as human-computer interaction, knowledge learning, multimodal fusion, and offline proxy
experts. The Company continues to invest in the research of multimodal hybrid biometric
recognition algorithms, promoting technological innovation and product upgrades. We ensure
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ZKTeco 2023 Annual Report
continuous leadership in technology and R&D advantages.
Looking ahead to 2024, stability, innovation and surpassing will be the main keynote of
our development.
1. Being stable and practical, simple and responsible, focusing on customer value
creation
We always uphold the corporate spirit of simplicity, honesty and practicality, which is not
only the cultural gene of the Company, but also the cornerstone of its stable development. In 2024,
ZKTeco will continue to deeply cultivate the access control industry, continuously meeting and
exceeding customer expectations by providing high-quality products and services. The Company
will adhere to the development goals of "being more refined, wider and higher", and achieve
continuous optimization and innovation of products and services through refined management and
in-depth understanding of consumer needs.
Meanwhile, ZKTeco will take on the social responsibility of the enterprise, not only pursuing
profit maximization in commercial activities, but also focusing on creating long-term value for
customers, employees, society and the environment. The Company will continue to promote
sustainable development strategies, reduce environmental impact through the application of green
production and environmental protection technologies, and achieve a win-win situation of
economic benefits and social responsibility.
2. Leaping forward in innovation, adhering to and practicing dreams, enhancing core
competitiveness
We firmly believe that innovation is the core driving force for enterprise development. The
Company will continue to increase R&D investment, especially in the fields of computer vision
and edge side multimodal AI human-computer interaction technology. Through continuous
technological innovation, ZKTeco will drive the upgrading of products and solutions, thereby
enhancing its core competitiveness.
3. Surpassing while setting sail, deepening cultivation while constantly surpassing,
seizing historical opportunities of multimodal AI
We will still be committed to seizing the historic opportunities brought by multimodal AI
technology in the "cloud-edge-end-server" for access control. The Company will continuously
deepen its application in industries such as home furnishings, communities, enterprises and
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ZKTeco 2023 Annual Report
education, and achieve diversified development of products and services through technological
innovation and cross-border cooperation.
We will adhere to the strategy of "agile evolution", respond quickly to market changes and
customer needs, and continuously explore innovative products and services. The Company will
work together with its partners to build an agile ecosystem, achieving rapid innovation and market
response through digital transformation and cross-organizational collaboration. We will grow
together with our partners to achieve resource sharing and mutual benefit.
Finally, thank all shareholders for their trust and support in the Company's management team!
We will develop through the integration of core technology innovation and main business track
innovation, and look forward to the power of vigorous and upward evolution, becoming a leading
enterprise in world-class access control industries, and satisfying all investors!
Chairman Che Quanhong
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ZKTeco 2023 Annual Report
2023 Annual Report
Section I Important Notes, Contents and Definitions
The Board of Directors, the Board of Supervisors, directors, supervisors
and senior managers guarantee that the information presented in this report is
true, accurate and complete without any false records, misleading statements
or material omissions, and will undertake individual and joint legal liabilities.
The Company's legal representative, Jin Hairong, the person in charge of
the accounting work, Wang Youwu, and the person in charge of accounting
institution (accounting supervisor), Fang Li, hereby declare that the financial
information in this report is true, accuracy and complete.
All directors have attended the board meeting to review this report.
The forward-looking statements regarding future plans in this annual
report do not constitute substantial commitments of the Company to investors.
Investors are advised to pay attention to investment risks.
Investors are advised to refer to the full text of this annual report and
pay special attention to the content of "Section III Management Discussion and
Analysis XI. Prospects for the Future Development of the Company (III)
Possible Risks and Countermeasures" in this annual report.
The profit distribution proposal passed upon deliberation at the meeting
of the Board of Directors is set out as follows: Based on the total share capital
on the registration date of future equity distribution, after deducting the
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ZKTeco 2023 Annual Report
repurchased shares in the Company's repurchase account, the Company
proposed to distribute cash dividend of RMB 4.5 (tax inclusive) per 10 shares
to all shareholders. There will be no bonus shares or conversion of capital
reserve into share capital.
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ZKTeco 2023 Annual Report
Table of Contents
Section I Important Notes, Contents and Definitions .......................................................................................... 5
Section II Company Profile and Key Financial Indicators ................................................................................. 12
Section III Management Discussion and Analysis ............................................................................................... 18
Section IV Corporate Governance ........................................................................................................................ 92
Section V Environmental and Social Responsibility ............................................................................................ 115
Section VI Significant Events................................................................................................................................. 116
Section VII Changes in Shares and Information about Shareholders ............................................................... 140
Section VIII Information of Preferred Shares ..................................................................................................... 155
Section IX Bonds..................................................................................................................................................... 156
Section X Financial Report .................................................................................................................................... 157
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ZKTeco 2023 Annual Report
Documents Available for Inspection
I. Financial statements affixed with official stamps and the signatures of the Company’s legal representative, the person in
charge of accounting and the charge of accounting institution (accounting supervisor) of the Company.
II. Original of the audit report affixed with the stamp of the accounting firm as well as stamps and signatures of the certified
public accountants.
III. All original copies of the Company's documents and the original drafts of the Company's announcements as disclosed on
websites designated by the CSRC during the reporting period.
IV. Other relevant documents.
Place for document inspection: Office of the Company's Board of Directors
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ZKTeco 2023 Annual Report
Definitions
Terms Refers to Definitions
Company, our Company, joint-stock
Refers to ZKTECO CO., LTD.
company, ZKTeco
Shenzhen ZKTeco Times Investment Co., Ltd., a controlling shareholder
ZKTeco Times Refers to
of the Company
Shenzhen JYHY Investment Enterprise (Limited Partnership), a
JYHY Refers to
shareholder of the Company
Shenzhen JYSJ Investment Enterprise (Limited Partnership), a
JYSJ Refers to
shareholder of the Company
Dongguan LX Investment Partnership Enterprise (Limited Partnership), a
LX Investment Refers to
shareholder of the Company
Shenzhen JYLX Consulting Enterprise (Limited Partnership), a
JYLX Refers to
shareholder of the Company
Shenzhen JYQL Investment Consulting Enterprise (Limited Partnership),
JYQL Refers to
a shareholder of the Company
Shenzhen Fuhai Juanyong I Venture Investment Fund (Limited
Fuhai Juanyong Refers to
Partnership), a shareholder of the Company
Yiwu Walden Yuanjing Venture Capital Center (Limited Partnership), a
Yiwu Walden Refers to
shareholder of the Company
Qingdao Walden Zhongxiang Investment Center (Limited Partnership), a
Qingdao Walden Refers to
shareholder of the Company
ZKTECO (GUANGDONG) CO., LTD, a wholly-owned subsidiary of the
Guangdong ZKTeco Refers to
Company
Shenzhen ZKTeco Biometric Identification Technology Co., Ltd., a
Shenzhen ZKTeco Refers to
wholly-owned subsidiary of the Company
Shenzhen Zhongjiang Intelligent Technology Co., Ltd., a company
Shenzhen Zhongjiang Refers to
holding 51% equity of the Company
XIAMEN ZKTECO CO., LTD., a wholly-owned subsidiary of the
XIAMEN ZKTECO Refers to
Company
Shenzhen Zhongan Intelligent Control Technology Co., Ltd., previously
Zhongan Intelligent Control Refers to a controlling subsidiary of the Company, with its equity in the Company
transferred in 2019
Zokon Industry Refers to Shenzhen Zokon Industry Development Co., Ltd.
Ministry of Public Security Refers to Ministry of Public Security of the PRC
Company Law Refers to Company Law of the People's Republic of China
Securities Law Refers to Securities Law of the People's Republic of China
Articles of Association Refers to Articles of Association of ZKTECO CO., LTD.
A shares Refers to RMB denominated ordinary shares
RMB, RMB '0,000 Refers to RMB, RMB '0,000
Reporting Period Refers to 2023
End of Reporting Period Refers to December 31, 2023
CV Refers to Computer Vision
BioCV Refers to Biometrics & Computer Vision
A computer technology that utilizes the analysis of human biological
characteristics to distinguish biological organisms. It is used for personal
identification by a close combination of computer technology with high-
Biometrics Refers to tech methods such as optics, acoustics, biosensors, and biostatistics, and
utilizing the inherent physiological characteristics of the human body
(fingerprints, facial features, palm veins, iris, etc.) or behavioral
characteristics (sound, gait, etc.)
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ZKTeco 2023 Annual Report
Used to simulate biological vision using cameras, computers, and related
equipment; simulate human visual abilities, capture and process three-
Computer Vision Refers to dimensional information of the scene by using optical systems and image
processing tools, understand and command specific devices to execute
decisions
Radio Frequency Identification (RFID), a wireless communication
technology that can identify specific targets and read and write relevant
RF, RFID Refers to
data through radio signals without establishing mechanical or optical
contact between the identification system and specific targets
Used to connect any object to the network by using information sensing
devices and following agreed protocols. The object exchanges and
Internet of Things/IoT Refers to communicates information through information dissemination media to
achieve intelligent recognition, positioning, tracking, supervision, and
other functions
GA/T 1012-2019 Technical The national standard for resident identity cards issued by the Ministry of
Specifications for Fingerprint collection Public Security in 2019, stipulating the requirements for fingerprint
Refers to
and Comparison of Resident Identity collection and comparison of resident identity cards, as well as the
Card technical indicators and testing methods of fingerprint algorithms
The national standard for general technical requirements of ID card
GA450-2013 General Technical
readers issued by the Ministry of Public Security in 2013, stipulating the
Requirements for Desktop Readers of the Refers to
technical requirements, test methods, inspection rules, marking,
Resident ID Card
packaging, transportation and storage of desktop ID card readers
The national standard for General Technical Requirements for
GA/T1011-2012 General Technical Fingerprint Capture Device of the Resident ID Card issued by the
Requirements for Fingerprint Capture Refers to Ministry of Public Security in 2012, stipulating the technical
Device of the Resident ID Card requirements, test methods, inspection rules, marking, packaging,
transportation and storage of ID card fingerprint capture devices
2nd-Generation ID Card, Resident ID
Refers to 2nd-Generation Resident ID Card
Card
Single Minute Exchange of Die, a process improvement method that
minimizes the product die exchange time, production startup time, or
SMED Refers to
adjustment time of the die. It can significantly shorten the time required
for machine installation and die exchange setting
Software as a Service, a software application model that provides
SaaS Refers to
software services through the Internet
Cyber Trusted Identity, an authoritative network identity certificate
CTID Refers to issued to individuals by the "Internet+" trusted identity authentication
platform (CTID Platform)
ZigBee Refers to A wireless network protocol for low speed short distance transmission
A protection level for electrical equipment casings against foreign object
IP65 Refers to intrusion, which can completely prevent dust from entering and wash
with water without any harm
The active push technology on the server side, enabling the timely
PUSH Refers to transmission of data updates, which is characterized by high efficiency
and low terminal energy consumption
Material Requirement Planning, the process in which a production
enterprise gradually derives the production and procurement plans for the
MRP Mode Refers to components, raw materials, and other materials required for the
production of the main product based on the production plan, the
structure of the main product, and the inventory situation
Secure Access Module, a module used for encrypting and decrypting
SAM Refers to
identity card information
International standards for environmental management systems
ISO14001 Refers to
developed by the International Organization for Standardization (ISO)
Frost & Sullivan Consulting, an independent third-party industry
Frost & Sullivan Refers to research and analysis institution. The Company purchased the
professional report "Independent Market Research of the Global and
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ZKTeco 2023 Annual Report
Chinese Biometric Industry" from Frost & Sullivan
Surface Mount Technology, a circuit assembly technology used to install
surface mounted components without pins or with short leads on the
SMT Refers to surface of printed circuit boards (PCBs) or other substrates, and then
solder and assemble them through methods such as reflow soldering or
immersion soldering
Printed Circuit Board, a substrate used for assembling electronic
PCB Refers to
components
Printed Circuit Board Assembly, the process of soldering components
PCBA Refers to
onto a PCB substrate to form a printed circuit board (PCB)
A professional industry media company under the Messe Frankfurt
Exhibition GmbH, aiming to provide market analysis, technical
asmag Refers to information, solution evaluation, industry forecasting, etc. for
practitioners in smart security, smart life, smart transportation, smart
buildings, IT communication, and networking
AI Refers to Artificial Intelligence
AIoT Refers to The Artificial Intelligence of Things
IoT Refers to Internet of Things
NB-IOT Refers to Narrow Band Internet of Things, NB-IoT
The rebate the Company provides to dealers based on the rebate policy
Rebate Refers to
and the completion of dealer performance
SDK Refers to Software Development Kit
Optical character recognition, the process of electronic devices (such as
scanners or digital cameras) using image processing and pattern
OCR Refers to
recognition techniques to examine characters on images, bills, or
certificates and translate them into computer text
WM Refers to Warehouse Management
SAP Refers to System Applications and Products
PDA Refers to Personal Digital Assistant
AGV Refers to Automated Guided Vehicle
BioCode Refers to Biometric feature code, converted from encrypted biometric features
Refers to Two-dimensional barcode format: Quick Response Code, which can
QR code
quickly read data
Transformer Refers to Deep learning model based on attention mechanism
Note:
1.If there is a discrepancy between the total count and the sum of the sub item values in any table of this annual report, it is due to
rounding reasons.
2.This report has been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the
two versions, the Chinese version shall prevail.
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ZKTeco 2023 Annual Report
Section II Company Profile and Key Financial Indicators
I. Company Information
Stock Abbreviation ZKTECO Stock code 301330
Chinese name of the
熵基科技股份有限公司
Company
Chinese abbreviation of the
熵基科技
Company
English name of the Company
ZKTECO CO., LTD.
(if any)
English abbreviation of the
ZKTeco
Company (if any)
Legal representative of the
Jin Hairong
Company
Registered address No.32, Pingshan Industrial Road, Tangxia Town, Dongguan, Guangdong, China
Postal code of registered
523710
address
Historical changes in the
registered address of the The registered address of the Company has not changed since its listing
Company
Office address No.32, Pingshan Industrial Road, Tangxia Town, Dongguan, Guangdong, China
Postal code of office address 523710
Company website www.ZKTeco.com
E-mail ir@ZKTeco.com
II. Contacts and Contact Information
Board Secretary Securities Affairs Representative
Name Guo Yanbo Wang Jia
No.32, Pingshan Industrial Road, No.32, Pingshan Industrial Road,
Contact address Tangxia Town, Dongguan, Guangdong, Tangxia Town, Dongguan, Guangdong,
China China
Tel. 0769-82618868 0769-82618868
Fax 0769-82618848 0769-82618848
E-mail ir@ZKTeco.com ir@ZKTeco.com
III. Information Disclosure and Place of the Report
Website of the stock exchange where the Company discloses its
Shenzhen Stock Exchange http://www.szse.cn
Annual Report
Securities Times, China Securities Journal, Shanghai Securities
Media and website for the disclosure of the Annual Report News, Securities Daily, and CNINFO
(http://www.cninfo.com.cn)
Office of the Board of Directors No.32, Pingshan Industrial
Location for inspection of the Annual Report
Road, Tangxia Town, Dongguan, Guangdong, China
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ZKTeco 2023 Annual Report
IV. Other Relevant Information
Accounting firm engaged by the Company
Dahua Certified Public Accountants (Special General
Name of the accounting firm
Partnership)
Room 1101, Building 7, No. 16 West Fourth Ring Middle
Office address of the accounting firm
Road, Haidian District, Beijing
Name of signing accountants Li Hanbing, Chen Ming
Sponsor engaged by the Company to continuously perform its supervisory function during the reporting period
Applicable □ Not applicable
Name of sponsor Period of continuous
Name of sponsor Office address of sponsor
representative supervision
12th floor (F1201-F1210,
F1211B-F1215A, F1231-
F1232) and 15th floor
(F1519-F1521, F1523-F1531) August 17, 2022-December
UBS Securities Co., Ltd. Luo Yong, Chen Chuan
Winland International Finance 31, 2025
Center, No. 7 Finance Street,
Xicheng District, Beijing,
China
Financial advisor engaged by the Company to perform the duties of continuous supervision during the reporting period
□ Applicable Not applicable
V. Main Accounting Data and Financial Indicators
Whether the Company performed a retroactive adjustment or restatement of the previous accounting data
Yes □ No
Reasons for retroactive adjustment or restatement of the previous accounting data
Accounting policy change
YoY
2022 2021
change
2023
After
Before adjustment After adjustment Before adjustment After adjustment
adjustment
Operating revenue
1,970,183,682.34 1,918,559,191.76 1,918,559,191.76 2.69% 1,955,286,516.10 1,955,286,516.10
(RMB)
Net profit
attributable to
shareholders of 177,263,675.15 192,239,793.75 192,502,163.93 -7.92% 170,923,050.93 170,890,113.76
listed companies
(RMB)
Net profit
attributable to
shareholders of
listed companies
178,122,838.64 189,342,503.20 189,604,873.38 -6.06% 148,069,383.85 148,036,446.68
after deducting
non-recurring
profits and losses
(RMB)
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ZKTeco 2023 Annual Report
Net cash flows
from operating 236,000,890.21 124,520,033.18 124,520,033.18 89.53% 98,120,441.87 98,120,441.87
activities (RMB)
Basic EPS
0.9176 1.5027 1.1307 -18.85% 1.5347 1.0961
(RMB/share)
Diluted EPS
0.9133 1.5235 1.1275 -19.00% 1.5347 1.0961
(RMB/share)
Weighted average
return on net 5.63% 9.39% 9.40% -3.77% 13.20% 13.20%
assets
Increase or
decrease at
the end of
this year
At the end of 2022 compared At the end of 2021
At the end of to the end
2023 of the
previous
year
After
Before adjustment After adjustment Before adjustment After adjustment
adjustment
Total assets
3,923,900,732.70 3,655,960,456.30 3,664,679,907.15 7.07% 2,082,923,037.22 2,082,890,100.05
(RMB)
Net assets
attributable to
shareholders of 3,265,413,589.20 3,057,467,189.68 3,057,662,843.22 6.79% 1,372,534,346.38 1,372,501,409.21
listed companies
(RMB)
Reasons for changes in accounting policies and situations of correction of accounting errors
1. Changes in important accounting policies
On November 30, 2022, the Ministry of Finance issued and implemented the "Interpretation No. 16 of the Accounting
Standards for Business Enterprises", which stipulates that "deferred income tax related to assets and liabilities arising from
individual transactions shall not be subject to the accounting treatment of initial recognition exemption". The Company shall
implement it from January 1, 2023. For the lease liabilities and right-of-use assets recognized due to the application of this
regulation in the earliest period of financial statement presentation for the first time, as well as the estimated liabilities and
corresponding assets related to the disposal obligation recognized, which generate taxable temporary differences and deductible
temporary differences, the Company shall adjust the cumulative impact to present the initial retained earnings and other related
financial statement items for the earliest period in the financial statements in accordance with this regulation and the provisions of
"Accounting Standards for Enterprises No. 18 - Income Tax".
2. During the reporting period, the Company increased its total share capital by RMB 44,547,615.00 due to the conversion of
capital reserve to share capital, but it did not affect the amount of shareholder equity. According to the "Accounting Standards for
Enterprises No. 34- EPS", the latest share capital adjustments were made and the basic EPS and diluted EPS for the past three
years were reported.
The lower of the Company's net profit before and after deducting non-recurring profits and losses in the past three fiscal years is
negative, and the audit report in the last year shows that there is uncertainty in the Company's ability to continue as a going
concern
□ Yes No
The lower of the net profit before and after deducting non-recurring profits and losses is negative
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ZKTeco 2023 Annual Report
□ Yes No
VI. Main Financial Indicators by Quarter
Unit: RMB
First quarter Second quarter Third quarter Fourth quarter
Operating revenue 403,022,827.48 534,159,842.52 502,800,942.03 530,200,070.31
Net profit attributable
to shareholders of 31,690,542.22 57,063,793.40 49,889,198.20 38,620,141.33
listed companies
Net profit attributable
to shareholders of
listed companies after
30,281,180.21 64,195,296.29 50,126,505.67 33,519,856.47
deducting non-
recurring profits and
losses
Net cash flows from
64,369,898.55 66,360,128.57 52,572,808.75 52,698,054.34
operating activities
Whether there is a significant difference between the above financial indicators or their total amount and the financial indicators
related to the disclosed quarterly and semi-annual reports of the Company
□ Yes No
VII. Differences in Accounting Data under Domestic and Foreign Accounting Standards
1. Differences in net profit and net assets in financial reports disclosed in accordance with international
accounting standards and Chinese accounting standards
□ Applicable Not applicable
During the reporting period, there were no differences in net profit and net assets between the financial reports disclosed in
accordance with international accounting standards and Chinese accounting standards.
2. Differences in net profit and net assets in financial reports disclosed in accordance with foreign
accounting standards and Chinese accounting standards
□ Applicable Not applicable
During the reporting period, there were no differences in net profit and net assets between the financial reports disclosed in
accordance with foreign accounting standards and Chinese accounting standards.
VIII. Items and Amounts of Non-recurring Gains and Losses
Applicable □ Not applicable
Unit: RMB
Item Amount in 2023 Amount in 2022 Amount in 2021 Remarks
Losses and gains from
-626,426.46 -353,911.28 -196,340.91
disposal of non-current
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ZKTeco 2023 Annual Report
assets (including the
offsetting portion of
the provision for losses
from impairment of
assets)
Government subsidies
included in current
profits and losses
(except those closely
related to the normal
business of the
Company, which are in
line with national
6,119,808.45 12,705,234.71 15,928,005.99
policies and
regulations, enjoyed
according to
determined standards,
and have a continuous
impact on the
Company's profits and
losses)
Profits and losses from
fair value changes
arising from the
holding of financial
assets and financial Mainly due to
liabilities by non- investment gains and
financial enterprises, as losses and changes in
well as the gains and fair value generated by
-2,644,568.64 -5,791,116.41 9,453,151.11
losses arising from the partial forward
disposal of financial exchange settlement to
assets and financial hedge against exchange
liabilities except for rate fluctuations risk
effective hedging
business related to the
normal operation of the
Company
Capital occupancy fees
charged to non-
financial enterprises 50,222.65 50,026.13 45,991.54
included in current
profits and losses
Reversal of the
provision on
receivables with
239,389.68
impairment test
conducted on an
individual basis
Other non-operating
Mainly due to material
revenue and expenses
-4,210,700.05 -2,833,347.63 -695,883.75 losses and other
other than the above
extraordinary losses
items
Less: income tax
-281,003.45 722,071.62 1,079,847.30
impact
Minority interest 67,892.57 157,523.35 601,409.60
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ZKTeco 2023 Annual Report
impact (after tax)
Total -859,163.49 2,897,290.55 22,853,667.08 --
Details of other profit and loss items that meet the definition of non-recurring profits and losses:
□ Applicable Not applicable
The Company has no specific situation of other profit and loss items that meet the definition of non-recurring profits and losses.
Description on defining the non-recurring profit and loss items listed in the "Explanatory Announcement for Information
Disclosure by Companies that Issue Securities to the Public No. 1 - Non-recurring Profits and Losses" as recurring profit and loss
items
□ Applicable Not applicable
The Company has no situation where the non-recurring profit and loss items listed in the "Explanatory Announcement for
Information Disclosure by Companies that Issue Securities to the Public No. 1 - Non-recurring Profits and Losses" are defined as
recurring profit and loss items.
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ZKTeco 2023 Annual Report
Section III Management Discussion and Analysis
I. Industry situation of the Company during the reporting period
(I) Basic situation of the industry of the Company
The Company is an international enterprise in the field of multimodal "Computer Vision and Biometrics" (BioCV), and is a
national high-tech enterprise specializing in providing smart entrance and exit management, smart identity verification, smart
office products, smart retail products and solutions. The Company is mainly committed to integrating core biometric technologies
such as fingerprints, palm veins, palmprints, facial features, finger veins, and iris with computer vision, radio frequency, IoT,
cloud computing and other technologies. It provides smart terminals, industry application software, and platforms with object
detection, identity recognition and verification functions to multiple fields such as commerce, transportation, finance, education,
healthcare, and government affairs.
Relying on the global ecosystem of R&D, manufacturing, and sales services, the Company actively deploys the field of smart
retail cloud services while deeply cultivating the three major business sectors of smart entrance and exit, smart identity verification,
and smart office, providing digital products and services for users in the public service field, enterprises, and personal users.
The downstream end users of the Company involve numerous industries, diverse customer types and a wide range of
application scenarios. Therefore, there is no obvious periodicity.
(II) Industry development status of the main application areas of the products
1. Global biometric industry situation in 2023
(1) Global market overview
In 2023, the global biometric market reached a scale of USD 39 billion. Looking ahead, it is expected that the market size will
reach USD 144 billion by 2032, and the compound annual growth rate (CAGR) from 2024 to 2032 will reach 15.2%. The
continuous progress of technology and innovation, the strengthening of border controls and travel security, and the increasing
focus on maintaining workplace security to reduce the risk of unauthorized access are some of the main factors driving the market.
(Data source: IMARC Group)
The main driving factor in the global market is the increasing number of data theft incidents among numerous enterprises.
This has encouraged some organizations to invest heavily in the deployment of biometric systems, thereby driving the
development of the market. Meanwhile, continuous technological progress and the widespread integration of the Internet of Things
(IoT) and biometric technology are creating positive market prospects. Due to the sudden outbreak of COVID-19, the demand for
non-contact biometric solutions in the entire healthcare industry has rapidly increased. In addition, biometric technology is
increasingly integrated into consumer electronics products, including smartphones and laptops, which largely supports global
demand. With the emergence of cloud based automatic biometric systems (ABIS), law enforcement agencies and government
agencies are also adopting biometric devices, which in turn is a major growth inducing factor. Other factors, including rapid
urbanization and industrialization, sustained product innovation, and extensive R&D activities by key participants, also have a
positive impact on the market.
(2) Global development of biometric technology
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The demand for biometric technology continues to grow as it eliminates the need to remember passwords or carry ID cards,
making authentication more convenient and driving market growth. The increasing integration of biometric technology in the
medical field to ensure that only authorized medical staff can access sensitive patient records and reduce the risk of data leakage
and medical ID theft presents a promising prospect for the market. The application of biometric technology in accessing vehicles
and adjusting settings based on individual driver preferences is constantly increasing, which has a positive effect on the
development of the market. In addition, increasing attention to maintaining workplace safety to reduce the risk of unauthorized
access has also supported market growth. Moreover, the increasing popularity of online transactions on mobile devices has also
promoted market growth.
According to Juniper Research, we will see biometric technology used for payments in stores in 2024. One of the main
reasons is the development of Amazon One, a biometric system with palm vein scanning function, which is expected to be widely
used in supermarkets. Due to the uniqueness of the palm vein, it is less likely to be forged compared to palmprint, fingerprint and
facial features. In addition, recognition does not require contact with the skin and is not affected by skin recognition. The pace of
implementation of "palm brush" recognition technology is accelerating in 2024.
With higher accuracy, reliability and security, multimodal biometric technology that integrates two or more biometric features
has ushered in large-scale commercialization. The performance of multimodal biometrics in the market is outstanding, especially
in member self-service scenarios such as retail, catering, and FMCG chains. Multiple retailers around the world have launched
self-service retail solutions, all of which combine multimodal biometrics with computer vision, greatly improving customers'
offline shopping experience. In addition, computer vision technology is also showcasing its capabilities in smart retail scenarios.
Smart retail scenarios integrate front-end perception devices of computer vision technology, helping brand merchants achieve
virtual interaction between intelligent devices and consumers from the four dimensions of sound, text, video and image, achieving
highly personalized marketing.
(3) The application situation of the global biometric industry
The highlight of the main application scenarios of global biometrics in 2023 is the application of non-contact authentication
and mixed online and offline authentication, which continues the trend of application in recent years, while others are still
dominated by traditional applications.
At the same time, biometric technology is developing towards diversified and vertical fields. According to a report by Grand
View Research, a leading research organization in the United States, "Analyzing the Size, Share, and Trend of the Medical
Biometric Market from the Perspective of Technology (Facial Recognition, Fingerprint Recognition, Iris Recognition, Vein
Recognition) and Segmentation Prediction from 2013 to 2024". The report shows that the global medical biometric market is
expected to reach USD 11.7 billion by 2024. According to CB Insights' Industry Analyst Consumer research, the global market for
automotive biometric technology is expected to reach USD 303 million by 2024, with a compound annual growth rate of nearly
17%.
Due to the significant differences in accuracy, security, stability, recognition speed, convenience, cost, power consumption,
and other aspects among different biometric technologies, they also have their own unique characteristics and advantages and
disadvantages in different application fields. We believe that the integration of multimodal biometric technology will be a major
trend in the future. With the accelerated popularization of intelligent hardware technology and cloud computing applications,
multimodal biometric technology has become one of the important technologies for the development of modern AI. Biometrics
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will have a broader market prospect, meet the business needs of various industries, serve socio-economic development, and further
promote the construction of an honest society.
2. China's biometric industry situation in 2023
(1) Overview of China's biometric market
According to data from S&P Consulting Group, the market size of China's biometric technology industry is expected to reach
RMB 51.2 billion in 2023, a YoY increase of 28.1%. It is expected that by 2026, the market size of China's biometric technology
industry will reach RMB 98 billion, with a compound annual growth rate (CAGR) of 24.8%.
(2) China's development of biometric technology
Multimodal biometric technology is a fusion application of various biometric technologies such as fingerprint recognition,
facial recognition, palmprint recognition, palm vein recognition, finger vein recognition, iris recognition, voiceprint recognition,
etc. Compared to single modal biometric systems, multimodal biometrics has significant advantages in recognition performance,
accuracy, and reliability.
From the perspective of technological applications, new features emerge in China's biometric market in 2023: Multimodal
products have gradually become the mainstream choice in the market; non-contact palmprint and palm vein fusion recognition and
iris recognition technology are moving towards commercialization; biometric technology is further integrated with industry
scenarios, with more extensive applications in various fields.
From the perspective of the interaction between the demand side and the supply side, the biometric intelligent access control
with multimodal fusion will break through the function of access control. The integration of IoT, cloud computing and AI
technology will form a series of solutions closely related to vertical industry application scenarios such as communities, parks,
education, healthcare and transportation, further providing richer and more extensive contents and functions, which will bring
broader growth space for market promotion and application. In the future, while placing higher demands on biometric technology,
it also provides unprecedented opportunities. Biometric technology should leverage the rapid development of sensors, optics and
other fields to shift towards miniaturization, mobility, multimodality and high throughput.
According to IDC's forecast, China's biometric intelligent access control integrated machine market is expected to achieve
rapid growth at a CAGR of 11.6% in the coming years, and the market size will exceed USD 870 million by 2027. IDC research
also found that biometric intelligent access control will exhibit trends such as non-contact, multimodal recognition fusion,
integration with other business systems, and product going overseas. (Data source: IDC "Market Analysis Report on China's
Biometric Intelligent Access Control Integrated Machine")
(3) The application situation of the Chinese biometric industry
The rise of smartphones, smart door locks, portable smart devices, and wearable smart devices has improved the security and
operation convenience of electronic products through biometric technology, driving the widespread application of biometric
technology in consumer products.
Identity authentication has always been a great necessity in today's society, and biometrics is the most convenient, secure, and
reliable personal identity authentication technology. China's identity authentication has already expanded from public security
needs to various industries, with applications covering transportation, hotels, finance, social security, education, and healthcare. In
2023, we see the rapid growth of biometric authentication applications.
The Report to the 20th National Congress of the Communist Party of China proposes to accelerate the construction of a
strong online country and a digital China. Vigorously promoting the construction of new types of infrastructure, accelerating the
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development of the digital economy, and promoting the deep integration of the digital economy and the real economy will help to
continuously promote the widespread application of entrance and exit management equipment and digital identity verification
solutions mainly based on multimodal biometric technology in parks, communities, construction sites and other scenarios. In
recent years, these applications have shown a rapid growth trend, and the deep integration of entrance and exit management with
biometric technology, AI, IoT, and cloud computing will become the development norm in the future. Promoting the application of
electronic resident ID cards is an important measure to build a digital China and improve government service capabilities. In
recent years, in order to improve the level of convenient services, various industries in various regions have vigorously promoted
the application of electronic ID cards in various scenarios such as finance, education, healthcare, social security, taxation, etc.,
bringing more convenience in digital lives of the people.
Although China's biometric market currently has a relatively low global share, as one of the countries with rapid global
economic development, the size of the biometric market in the future will maintain rapid growth.
3. Development of the smart retail industry
The increasing integration of technologies such as artificial intelligence (AI), virtual reality (VR), augmented reality (AR),
and the Internet of Things (IoT) to enhance consumer shopping experience, promote accurate inventory management, and improve
store operations is one of the significant trends driving the growth of the smart retail market. Especially, AR changes the retail
industry by allowing brands to interact with consumers through mobile devices. Adopting AR in marketing helps establish
consumer relationships, enhance customer experience, and subsequently drive sales. The significant increase in the number of
retail stores in various regions has also driven the demand for advanced technology.
In 2022, the global smart retail market is expected to grow at a CAGR of 29.1% from 2023 to 2030, with a market size of
USD 30.25 billion. (Data source: Grand View Research "2023-2030 Smart Retail Market Size, Share and Trend Analysis Report")
(III) Overview and development trends of major technologies in the industry in 2023
There are various types of biometric technologies, including fingerprint recognition, facial recognition, palmprint recognition,
palm vein recognition, finger vein recognition, iris recognition, voiceprint recognition, etc. Due to the development of AI
technology, big data, and cloud computing, biometrics is closely combined with computer vision, and it has developed from
simple identification to the empathetic experience ecology of scene interaction such as "Who are you? What kind of service should
I provide for you?" .
1. Overview and trends of global biometric technology development
The global development of biometric technology, especially in developed Western countries, has always had a high market
share in government level applications. The related biometric technology, especially multimodal biometric technology, is an
important trend in biometric applications. The fusion application of two or more biometric technologies will greatly improve the
computing speed, accuracy, security, and reliability of large systems. Multimodal biometrics will continue to be a key
development direction for biometric application technology, and companies with multiple biometric technologies have a first
mover advantage.
The popularization and application of biometric technology in consumer electronics, such as applications in smartphones and
other portable or wearable devices, as well as the use of smart door locks, smart homes, security devices, IoT, cars, game
controllers and other products, are also a huge driving force for the development of biometric industry at present. Fingerprint
recognition, facial recognition and palm recognition will, driven by these application needs, evolve iteratively towards
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miniaturized computing, low power consumption, low resource allocation, better robustness and ease of use, so that the application
of these biometric technologies in consumer electronics will continue to improve rapidly.
Another obvious trend in the global biometric industry is the continuous restructuring, mergers and acquisitions, or strategic
cooperation among industry enterprises, especially well-known ones. For example, in 2023, American fingerprint biometrics
provider Idex Biometrics announced an agreement with Eastern Bank (EBL) to jointly launch the first publicly available biometric
metal card using Idex Pay technology; Thales is preparing to deploy its next-generation biometric payment card, Fingerprint Cards
AB, which uses the T2 sensor module of fingerprint cards and a biometric payment software platform, providing users with
advanced transaction speed, improved power efficiency and enhanced security. In addition to considering commercial interests,
these mergers and acquisitions within and outside the relevant industry also have a special driving role in the development of
biometric technology: different technological resources are integrated, gradually matching reasonably through trial and error, and
achieving high-quality combinations to promote technological development, such as the strong combination of multimodal
recognition in the above examples, and the continuous development and application of online behavioral characteristic recognition
technology under capital support.
The impact on the market structure of biometric technology and applications in recent years will continue to expand. In the
coming years, non-contact technologies such as non-contact fingerprint, facial recognition, iris recognition, palmprint recognition,
palm vein recognition, voiceprint recognition, etc. will continue to win priority development opportunities and achieve better
technological progress. Due to the rapid development of technologies such as AI, IoT, big data and cloud computing, the
integration of biometrics & computer vision has become more closely applied, making it highly efficient for large-scale image and
data processing, with stronger real-time performance and faster responsiveness. From the perspective of application form, from the
initial simple identification of identity, it has evolved to "Who are you? What kind of service should I provide for you?" .
Especially in retail, catering, healthcare, elderly care, and other interactive scenarios, there are huge application and development
spaces.
2. Overview and trends of China's biometric technology development
Although China's biometric market currently has a relatively low global share, as one of the countries with rapid global
economic development, the size of the biometric market in the future will maintain rapid growth.
China's biometric technology has been widely applied in many fields, including banking, public security, social security,
education, healthcare, finance, commercial security, transportation, online consumption, and so on. In the coming years, the
following technologies and application development trends will become increasingly evident:
Firstly, multimodal biometric technology will continue to become the mainstream of technological development and market
applications. In various segmented application industries, multimodal biometric technology has been widely applied and
successfully implemented due to its excellent performance in security, reliability, ease of use, and data management. In recent
years, non-contact identity authentication and recognition will continue to become a rigid demand, and multimodal biometrics can
provide sufficient flexibility for system design and deployment based on different application needs and scenario changes. With
the continuous expansion of the market size in the biometric industry, new demands are also continuously emerging, and
multimodal recognition self-service terminals are gradually entering industries such as government, finance, and hotels.
Traditional physical security awareness is no longer sufficient to meet the current development of the biometric industry in
the digital era. Due to the government's full investment in social security, the traditional security era of personal safety has come to
an end. Instead, how to use the such dimensions as innovative technologies, products and services combining biometric technology
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and computer vision technology as OMO "empathetic micro scene ultimate experience" featuring "people-oriented, harmony of
body and mind" for recognition. Especially in the fields of healthcare, retail, catering, transportation, education, government affairs,
etc., there is enormous potential for application.
The digital transformation vigorously promoted by the strategy for domestic new types of infrastructure and the construction
of "digital China" means that there will be a great construction need in the digital infrastructure. Whether in the real physical world
or the virtual world, security considerations and accurate identity authentication will be a necessary requirement for geometrics
progression. Biometric technologies such as facial recognition, fingerprint recognition, palmprint recognition, palm vein
recognition, iris recognition, voiceprint recognition, as well as emerging behavioral recognition technologies such as network
usage habits and payment habits, will be widely applied in the synchronous operation of the real and virtual worlds.
In addition, biometric technology is also one of the supporting technologies of AI, and it has transitioned from traditional
algorithm driving to deep learning algorithm driving. The advancement of biometric technology is closely linked to the
development of computer vision technology. As computer vision algorithms become more efficient and precise, biometric
technology has also achieved significant improvements in recognition accuracy, processing speed and data processing. This not
only enhances the core functionality of biometrics, but also promotes its effective integration with object detection and recognition
technology, making the recognition of biometric and object features from images or videos more precise and reliable. By using AI
technology to generate simulated biometric data, the accuracy and robustness of biometric algorithms can be effectively improved
without violating personal privacy. Furthermore, the integration of biometric technology and AI algorithms has opened up new
ways for technological innovation, especially in the field of intelligent robots. The integration of biometric technology, such as
facial recognition and speech recognition, has become a key to providing personalized and enhanced security services. With the
continuous progress of technology and the gradual acceptance of the market, the application of biometric technology in intelligent
robots and other fields is expected to further expand, promoting the development of personalized services and intelligent
automation to new levels, and its application scale will also grow rapidly.
In summary, with the accelerated development of the AI market, technological innovation, and continuous increase in
application scenarios, the biometric market will maintain a high-speed growth trend. It is expected that the domestic biometric
industry market size will increase to RMB 60 billion by 2024. (Data source: Frost & Sullivan)
II. Main Businesses Engaged by the Company During the Reporting Period
(I) Basic situation of the Company's main businesses and products
The Company is an international enterprise in the field of multimodal "Computer Vision and Biometrics" (BioCV), and is a
national high-tech enterprise specializing in providing smart entrance and exit management, smart identity verification, smart
office products, smart retail products and solutions. The Company is mainly committed to integrating core multimodal biometric
technologies such as fingerprints, palm veins, palmprints, facial features, finger veins, and iris with computer vision, radio
frequency, IoT, cloud computing and other technologies. It provides smart terminals, industry application software, and platforms
with object detection, identity recognition and verification functions to multiple fields such as commerce, transportation, finance,
education, healthcare, government affairs and retail.
Relying on the global ecosystem of R&D, manufacturing, and sales services, the Company actively deploys the field of smart
retail cloud services while deeply cultivating the three major business sectors of smart entrance and exit, smart identity verification,
and smart office, providing digital products and services for users in the public service field, enterprises, and personal users.
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From the perspective of the main application scenarios of the product, the Company's main business during the reporting
period mainly covered three major areas: smart entrance and exit management, smart identity verification, and smart office.
The main business income obtained from the three major scenarios of the Company during the reporting period is as follows:
Unit: RMB '0,000
2023 2022
Item
Amount Proportion Amount Proportion
I. Smart entrance and exit
143,755.48 73.29% 139,671.52 72.99%
management products
II. Smart identity
15,582.85 7.94% 18,803.78 9.83%
verification products
III. Smart office products 36,812.50 18.77% 32,880.01 17.18%
Total 196,150.83 100.00% 191,355.31 100.00%
1. Smart entrance and exit management
(1) Smart terminal products and functions
During the reporting period, the Company's smart terminal products for smart entrance and exit management mainly include
access control management, pedestrian channels, vehicle channels, security inspection products, intelligent videos, smart locks,
elevator control, charging piles, and self-service visitor services.
Product Product
Product Description Product Image
Category Name
The access control is a smart terminal that
achieves single door access control
permission verification and logical judgment
through biometric information verification or
other verification methods. According to
different biometric verification methods, it
can be divided into fingerprint, facial, palm
vein, and palmprint recognition access
Access control integrated machines, equipped with
Access
control RFID cards, passwords, and other
control
products verification methods. The device supports
unified management on the software
platform.
During the reporting period, the Company
launched a new generation of multimodal
palm recognition technology and under-
screen fingerprint recognition technology,
accelerating the implementation of
technology products.
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The access controller is a smart terminal
used to receive data from biometrics card
readers, radio frequency card readers, and
access control, and perform access
permission verification and logical
judgment. It is mainly used in large and
medium-sized project locations with a large
number of access points and high security
Access requirements. Accessible collection methods
controller include facial features, palms, fingerprints,
RFID cards, QR codes and passwords. The
device has professional access control
function and supports unified management
on the software platform.
The Company actively deploys advanced
access controllers and multiple-step
controllers for large and medium-sized
enterprises and public sector applications.
Facial recognition card readers are mainly
used to collect and verify facial and card
information of personnel, and transmit the
comparison results to the access controller
through Wiegand for access permission
verification and logical judgment. Dual
Facial verification can greatly improve the security
recognition of the control area. With a 2 million pixel
card reader binocular live detection camera, it accurately
resists various 2D and 3D simulation image
and model attacks. By outputting data
through Wiegand, most access controllers
can be directly upgraded to facial
verification methods, which has strong
compatibility.
The RF card reader is mainly used for the
collection and transmission of RFID
technologies and passwords, and can send
RF card
the collected data to the access controller for
reader
comparison and verification. The data
information whose collection is supported
includes RFID cards, passwords, etc.
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The elevator controller supports two modes
of online and offline operation, controlling a
maximum of 128 floors. It has multiple
verification methods such as face, palm,
fingerprint, RFID card, QR code, etc. and
Elevator
can accurately identify elevator user
controller
instructions without the need for buttons,
directly reaching the target floor. In addition,
it also supports seamless integration with the
visitor system, achieving one code
interconnection for visitors.
The multimodal acquisition terminal is an
Elevator inductive terminal used to collect
control information such as the cardholder's face,
fingerprint, palm, QR code, RFID card,
password, etc., and transmit it to the access
controller and elevator controller. It is used
Multimodal in conjunction with software to achieve
acquisition single or multiple door access control
terminal permission verification. The multimodal
acquisition terminal is equipped with a high-
definition binocular camera, configured with
a facial liveness algorithm, which can
quickly capture faces and has strong anti-
counterfeiting ability. The dustproof and
waterproof level can reach IP65.
The pedestrian gate is an intelligent device
used to control the entry and exit of
personnel. With the rapid development of
digital technology, the application of
intelligent pedestrian gates is becoming
increasingly widespread. At present, schools,
high-end residential areas, scenic spots,
stations, customs, airports, terminals, office
buildings, sports venues, and other places
that require pedestrian flow management,
identity recognition, and self-service fee
management are all provided with automated
channel gates instead of traditional manual
ticket or admission verification. The
Company's pedestrian gate products support
the integrated integration of multimodal
biometrics and radio frequency
identification, and support various infrared
passage detection functions for human and
object, enabling intelligent control and
Pedestrian Pedestrian
management of the channel.
channel gate
With the extension of the Company's core
technologies in video detection, image
recognition, behavior analysis, and feature
matching, and combined with the
characteristics of various scenarios in
pedestrian channels, the Company has
developed self-service settlement and
passage products and solutions that can meet
the usage needs of multiple scenarios such as
libraries, unmanned supermarkets,
communities, schools, airports, subways, and
stations, promoting convenient travel in the
above passage scenarios. The video passage
detection algorithm and device
independently developed by the Company
use AI technology to detect, alarm, and
dissuade abnormal behaviors such as
tailgating, intrusion, shoulder to shoulder,
and hugging. This not only reduces the work
pressure of staff, but also greatly improves
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the safety of control and the accuracy of
passage data.
During the reporting period, the Company
promoted the integration and application of
technologies such as pedestrian gates,
multimodal recognition, and holographic
projection according to the needs of high-
end commercial scenarios.
The license plate recognition all-in-one
machine is mainly used to obtain and
recognize license plate information such as
license plate number, license plate color, and
license plate logo type. The Company's
license plate recognition all-in-one machine
License adopts an integrated structure of license plate
plate recognition camera, control panel, display
recognition screen, fill light, automatic barrier, etc. It can
all-in-one realize voice broadcasting in local language
machine and display information such as license plate
numbers. The license plate recognition
parking lot management system can help car
owners to park automatically, support
various mobile payment functions, and can
set flexible and diverse charging rules to
meet the needs of different scenarios.
The automatic barrier can be independently
Vehicle controlled to lift and lower the pole, or it can
channel be accessed through the parking lot
management system to lift and lower the
pole. The Company's gate is composed of a
reducer, motor, balancing device, chassis,
gate pole support, gate rod and other parts.
Automatic
According to the application location of the
barrier
gate, its gate poles can be divided into
straight poles, 90° curved arm poles, fence
poles, anti-collision round poles, and other
pole types. The gate with license plate
recognition all-in-one machine is suitable for
entrance and exit management of parking
lots in different scenarios.
New energy vehicle charging piles can be
fixed on the ground or walls, installed in
public buildings (buildings, shopping malls,
public parking lots, etc.), residential parking
lots, and dedicated charging stations to
provide charging and energy replenishment
services for electric vehicles and hybrid
Charging vehicles. According to the output power of
pile the charging pile, it is generally divided into
various different power charging methods
such as AC slow charging, DC fast charging,
and overcharging to meet the charging needs
of new energy vehicles in different
scenarios. On the basis of iteratively
upgrading the performance of the 7kW AC
charging pile series, the Company has
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developed 30kW/60kW/120kW/160kW DC
charging piles and other series products. The
main focus is on application scenarios that
require fast charging and energy
replenishment, such as administrative
agencies, enterprises and institutions,
industrial parks, shopping centers, scenic
spots, communities, public charging stations,
etc. It supports functions such as card
swiping charging, QR code scanning
charging, mobile payment, self-service,
online monitoring, cloud management, OTA
remote upgrade, etc. (integrated management
and service of charging and parking can be
achieved with the Company's smart parking
business).
Intelligent walk through metal detector is a
security inspection terminal that integrates
identity verification, personnel access and
metal detection. It is applied in public places
with high pedestrian flow, such as stations,
factories, public service departments and
large conferences, for personnel identity
verification, personnel access, and inspection
of metal items carried by personnel.
Walk
According to usage requirements, the
through
product integrates multiple functions such as
metal
metal detection, thermal imaging
detector
temperature measurement, real-time
monitoring, channel management, real name
verification, and environmental gas
detection. It is equipped with a 29 inch 21:9
ultra wide screen. Through a brand new
software UI visualization platform and the
integration of multiple functions and
visualized display of data, the product has a
wider range of applications.
Security The smartphone detector can detect the
inspection smartphone and provide audible and visual
products alarms. On the basis of excluding daily
carry-on items such as wallets, glasses,
watches, buckles, magnets, keys, cigarettes,
Smartphone lighters, etc., the detector can trigger alarms
detector for smartphones, portable hard drives,
laptops, tablets, digital cameras, cameras,
etc. The product has the characteristics of
high sensitivity, strong stability, easy
installation, low power consumption and
long service life.
The X-Ray Scanner is a detection device
used to detect whether packages and other
items contain specific prohibited items. The
Company's X-Ray Scanner products have X-
ray image acquisition and processing
X-Ray functions, which can intelligently identify,
Scanner mark the items in the package, and alert for
prohibited items such as knives, lighters,
batteries, etc. The device can integrate
functions such as people and bag
association, intelligent video and security
inspection management platform.
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Intelligent video cameras have intelligent
analysis functions that enable machines to
possess the capabilities of the human brain.
The cameras can meet the requirements of
Entrance
complex urban scene deployment, as well as
Video and exit
the increasingly wide and in-depth analysis
surveillance video
of target objects, promoting the era of visual
device
intelligence in intelligent video. They are
suitable for various entrance and exit
scenarios such as residential areas, campuses
and enterprises.
Smart locks are mainly used for opening and
closing control of doors in homes, hotels,
offices, and other areas. The Company's
biometrics smart lock products have the
function of extracting and comparing various
information such as fingerprints, faces,
Biometrics
Smart lock RFID cards, etc. They can be managed
smart lock
through software, smart speakers, or apps,
and are compatible with lock bodies in line
with national standards, American standards,
European standards, and Korean standards.
They support WiFi, NB IoT, ZigBee, and
Bluetooth communication methods.
Cooperating with the One Card Solution
Cube Visitor Management System, it can
achieve "real name" + "real person" visitor
authentication; support CTID trusted identity
Intelligent authentication; support mobile visitor
Visitor
visitor appointment, dual screen display, QR code
Terminal
terminal and OCR document scanning, barcode
printer, and other functions. SDKs can be
provided for customers to conduct secondary
development to meet the visitor management
needs of users in different industries.
(2) ZKBio Access IVS Integrated Entrance and Exit Management Platform V6000
The ZKBio Access IVS V6000, based on multimodal BioCV technology, provides an integrated entrance and exit
management platform that integrates pedestrian, vehicle, and object inspection. It includes multiple business subsystems such as
personnel, attendance, access control, visitors, consumption, patrol, parking lot, elevator control, channel, intelligent video,
information screen, system management, etc. The platform adopts a micro-service development framework, which has the
characteristics of high system performance, high service availability, module scalability, high communication security, and strong
third-party integration scalability. At the same time, the platform provides a unified and open smart cloud platform for data unified
management and mobile internet applications, creating a virtuous ecological loop of effective pre warning, quick response to
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incidents, and precise verification after the incident, providing effective security guarantees for people's production and life.
(3) ZKBio Intelligent Integrated Management Platform V6600
ZKBio V6600, based on multimodal BioCV technology, focuses on intelligent integrated entrance and exit management, and
provides an intelligent integrated management platform that integrates "pedestrian, vehicle, and object inspection". With the help
of machine vision intelligent analysis technology, the platform realizes intelligent analysis and safety supervision to meet the needs
of users for diversified and fragmentation application scenarios based on target recognition, intelligent scene algorithm and IoT
perception technology, combined with business subsystems such as attendance, access control, visitors, consumption, patrol,
parking lot, elevator control, channel, information screen, intelligent video, and smart scenarios.
(4) Shang'an Yuntong Smart Park Integrated Management Platform V8800
The ZKBio V8800, based on multimodal BioCV technology, provides an integrated park management platform that
integrates pedestrian, vehicle, and object inspection. The platform adopts a micro-service development framework, which has the
characteristics of high system performance, high service availability, module scalability, high communication security, and strong
third-party integration scalability. With the Company's long-term experience and user needs in the field of smart parks, we will
comprehensively integrate intelligent video applications to empower entrance and exit businesses, providing comprehensive and
security guarantees and office convenience for the production and life of the park.
2. Smart identity verification
(1) Smart terminal products and functions
During the reporting period, the Company's smart terminal products of smart identity verification mainly included
multimodal biometrics products, card recognition and reading products, and industry smart terminals.
Product
Product Name Product Description Product Image
Category
Fingerprint scanner has the characteristics
of large capture area, high fingerprint
Fingerprint image pixels, and good imaging effects for
scanner dry and wet fingerprints. It supports the
development and use of systems such as
Windows, Android, and Linux.
Multimodal
biometrics The specialized fingerprint scanner of the
products resident ID cards complies with the
"Technical Specifications for Fingerprint
Acquisition and Comparison of Resident
Identity Card" (GA/T 1012-2019) and the
Fingerprint "General Technical Requirements for
scanner of the Fingerprint Scanner of the Resident ID
resident ID Card" (GA/T 1011-2012). The device is
card small and exquisite in appearance.
Combined with high-performance
processors and international semiconductor
fingerprint sensors, it has the characteristics
of fast capture speed and excellent image
quality.
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ZKTeco 2023 Annual Report
It can simultaneously collect fingerprint
and finger vein information. Fingerprint
and finger vein two-factor authentication
Finger vein can improve the anti-counterfeiting ability,
capture device and is mostly used in scenarios with high
security requirements. It supports the
development and use of systems such as
Windows, Android, and Linux.
The biometrics reader is a smart terminal
used to collect human biological
characteristics, mainly used in access
control systems. It can send the collected
Biometrics
biometrics information to the access
reader
controller for comparison and verification.
The data information whose collection is
supported includes fingerprints, faces,
RFID cards, etc.
The palm vein information capture device
adopts a high-definition near-infrared
Palm
dedicated lens, which supports near-
information
infrared light compensation, and can obtain
capture device
clear vein images. It supports palm
recognition at large angles.
A hardware level module designed for
various application scenarios of CTID
authentication certificates, fully supporting
QR code the recognition and reading of CTID
module of authentication certificate QR codes,
CTID terminal mainstream QR codes, and one-
dimensional barcodes, with strong decoding
and code verification capabilities for CTID
authentication certificate.
The built-in ID card reader complies with
Card the "General Technical Requirements for
recognition Desktop Readers of the Resident ID Card"
and reading (GA 450-2013), and can support the
products recognition and reading of the 2nd-
Trusted generation ID Card, Foreign Permanent
Digital Resident ID Card, and Residence Card for
Identity Hong Kong, Macao and Taiwan Residents.
Authentication In addition, it supports recognition and
Terminal reading of CTID authentication certificate
QR codes, mainstream QR codes, and one-
dimensional barcodes through docking,
with strong CTID authentication certificate
decoding, code verification, and other
capabilities.
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ZKTeco 2023 Annual Report
It complies with "General Technical
Requirements for Desktop Readers of the
Resident ID Card" (GA 450-2013),
"Technical Specifications for Fingerprint
collection and Comparison of Resident
Identity Card" (GA/T 1012-2019), and
"General Technical Requirements for
Fingerprint Capture Device of the Resident
ID Card" (GA/T 1011-2012). It is an ID
card reader with fingerprint verification
function, and can support the recognition
and reading of the 2nd-generation ID Card,
ID card reader
Foreign Permanent Resident ID Card and
Residence Card for Hong Kong, Macao and
Taiwan Residents. According to different
application scenarios, the ID card reader
can be divided into three types: desktop,
built-in, and handheld. Desktop ID card
reader can be directly connected to a
computer for use, built-in ID card reader
can be integrated into various terminal
devices to achieve ID card machine reading
function, and handheld ID card reader can
be directly used offline.
A dual screen smart government terminal
that integrates basic functions such as ID
card recognition and reading, fingerprint
collection and verification, and facial
Smart recognition. It is designed with dual screens
Government and supports handwritten electronic
Terminal signatures. Equipped with a built-in high-
definition camera, it supports shooting up
to A4 format and can capture and retain
documents, certificates, invoices, etc.,
achieving paperless office.
A Smart Human Certificate Verification
Terminal that integrates functions such as
portrait collection, fingerprint collection,
and 2nd-generation ID card reading. It can
also support the recognition and reading of
various documents such as 2nd-generation
Resident ID Card, Foreign Permanent
Resident ID Card, and Residence Card for
Human Hong Kong, Macao and Taiwan Residents.
Certificate According to different application
Verification scenarios, it can be divided into four types:
Terminal wall mounted, handheld, desktop, and floor
mounted. The Company's Human
Certificate Verification Terminal is pre-
Industry
installed with One Card Solution Cube
Smart
Identity Authentication Software, which
Terminal
can be used in conjunction with the
certificate One Card Solution Cube
Backend Management System for unified
use.
A desktop device that integrates various
functions such as social security card, ID
card reading, contact/non-contact smart
Medical
card recognition and reading, one-
Insurance
dimensional/QR code electronic voucher
Identity
recognition, fingerprint comparison
Verification
recognition, etc. The built-in ID card reader
Terminal
meets the requirements of " General
Technical Requirements for Desktop
Readers of the Resident ID Card" (GA450-
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ZKTeco 2023 Annual Report
2013) and supports reading smart cards
such as social security cards and bank
cards. The device supports 4 sets of PSAM
cards, has a multi-platform SDK, and
supports USB (drive free). This product is
suitable for scenarios in fields such as
social security, health, medical insurance,
pharmacies, industry and commerce,
taxation, electricity, telecommunications,
hotels, transportation, banking, insurance,
and fast payment.
(2) One Card Solution Cube Identity Authentication Management System
The One Card Solution Cube Identity Authentication Management System is a "real person system" identity verification
system independently developed by the Company based on multimodal biometric technology for "the integration of people and
certificates". It consists of two parts: the Human Certificate One Card Solution Cube Terminal Software (APP) and the Identity
Authentication Management Platform, integrating the Company's ZKLiveFace facial recognition algorithm and ZKFinger V15.0
ID card fingerprint comparison algorithm. The software can read 2nd-generation ID cards, Hong Kong and Macao resident
residence permit, foreign permanent residence permit and other certificate information, compare the fingerprint or face of the
holder on the spot for the "integration of people and certificates", and accurately and quickly verify user identity information. One
Card Solution Cube Identity Authentication Management Platform has functions such as intelligent device management, personnel
management, and black/white list monitoring, which can achieve real-time and comprehensive multi-dimensional monitoring and
analysis of devices, personnel, and data. Moreover, the One Card Solution Cube Identity Authentication Management System
supports access to large capacity facial recognition servers, CTID Platform (Trusted Identity Authentication Platform), and
million-level large capacity facial backend verification and trusted identity authentication capabilities, providing authoritative,
reliable, stable and secure identity authentication services for customers in different vertical fields, and providing a one-stop
industry solution of "algorithm+smart terminal+authentication platform+application" for the identity authentication industry chain.
The system topology diagram is as follows:
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ZKTeco 2023 Annual Report
Third party
Visitor appointment system
Visitor QR code Other functions
Visitor end
Scan the QR code Manual Scan the QR code QR code sign in QR code sign off Message Visitor's record Account
for appointment appointment for passage notification cancellation
Data
Mobile end
Application
Docking ERP system
Management end
WeChat invitation Data dashboard Scan QR code for Scan QR code to
follow-up sign off
Access QR code
Appointment Message notification Reception records
approval
Third party
Data management Device management Personnel management device
management
system
Original Statistical Regional Device Advertising
records management management Ordinary Whitelist Blacklist Department
report settings
personnel management
Application layer
Visitor management Identity authentication
Visitor's Traffic Mini program Human OA system
Visitor Visitor Large capacity comparison
record records devices settings management certificate server
verification
System settings
One Card Solution Cube Management System
User Database HTTPS Standard
Basic settings Change Command Operation log Dictionary
management backup configuration interface
password monitoring configuration
Data API
interface
Docking
Nacos Application layer
Service Register Config Register Basic framework Business services
Basic components
Service layer
Redis PostgreSQL MQ CMD Option
Public Service
Message Push Service Scheduled Tasks Service
Data Personnel
Whitelist Blacklist Server connection
management management
Equipment
Product
Perception
layer
Authentication Verification Advertising Visitor settings Visitor function Adaptat
method function management ion
(3) Biowhois CTID Platform
Biowhois CTID Platform is an identity authentication SaaS service platform launched by the Company based on multimodal
biometric technology and an "Internet+" CTID Platform. It can provide developers and industry users with multimodal biometrics,
online identity authentication, real name offline identity authentication and other open, scalable, cross-platform multi-dimensional
identity authentication services. The data interconnection between Biowhois CTID Platform and "Internet+" CTID Platform can
provide users with authoritative, reliable, stable and secure online identity authentication services such as two real names, two real
people, four real names, four real people, etc., which can not only intelligently upgrade the existing offline identity authentication
scenarios in finance, medical care, government affairs, transportation, education, etc., but also is suitable for internet identity
authentication scenarios such as e-commerce, online games, social networking sites, online education, online healthcare, and
online live streaming in the digital economy.
The system topology diagram is as follows:
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ZKTeco 2023 Annual Report
Finance Medical Governme Traffic Education
treatment nt affairs
Control Mini programs and cloud platforms Information collection, detection, Sec O
interface input and recognition
urit &
Authentica
y M Sta
Fingerprint Large capacity Two Two
comparison fingerprint real real
tion
certificate
Data/Device man sup nd
comparison names people
age por ard
Authentica Visual Large capacity
visual
Four
real
Four
real
QR Human certificate men t sys Technical
comparison code verification
tion comparison names people t sys te support
capabilitie Multimodal Privatization One Card Solution syst te m
Cube Identity Middle
backend
s comparison
comparison CTID Platform Authentication System
ware
em m
system server
Privatized hybrid Internet trusted identity Real name offline
Service biometric services authentication service identity authentication
service
model
Biowhois CTID Platform
(4) Scenario solutions
During the reporting period, based on the existing rich identity verification products, the Company deeply integrated specific
segmentation scenarios and incubated identity verification solutions for three major segmentation scenarios: "smart examination,
smart healthcare, and smart correction". In terms of intelligent examination, solutions based on the needs of candidate identity
verification can cover the entire business scenario of candidate information collection, candidate identity verification, and
examination data analysis before, during and after the examination. The solutions can not only be self-contained and directly
implemented, but also seamlessly connect with third-party standardized examination site construction plans, with competitive
advantages such as intelligence, convenience and flexible deployment. In the medical field, the Company has launched a smart
medical identity verification solution for identity verification scenarios such as newborn birth medical certificates and assisted
reproductive management. The solution not only meets the information collection and identity verification needs of various
windows in the hospital, but also can be securely integrated with the hospital and third-party systems to achieve the embedding of
identity verification function modules, helping major medical institutions provide patients with high-quality and caring medical
services.
3. Smart office
(1) Smart terminal products and functions
During the reporting period, the Company's smart terminal products of smart office mainly included attendance products and
consumer products.
Product Product
Product Description Product Image
Category Name
A self service attendance terminal, mainly
registering and comparing biometrics
information, recording personnel attendance time
data, and cooperating with backend software to
Attendance
Attendance scientifically and effectively manage enterprise
Smart
product personnel. The Company's biometrics attendance
Terminal
terminal can support multiple verification
methods such as fingerprint, face, palm, RFID
card, and password, and has personnel
management functions such as self-service
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ZKTeco 2023 Annual Report
scheduling and report generation.
The product has fixed installation and handheld
applications, combined with wireless
communication technology, suitable for a wide
range of application scenarios.
Support face, RFID card, QR code and other
verification methods; mainly used in
consumption scenarios such as internal canteens,
Consumer gyms, and schools within enterprises, supporting
Consumer
Smart various consumption modes such as free amount
product
Terminal deduction, count deduction, and fixed value
deduction. The system can be equipped with mini
programs to achieve convenient and intelligent
consumption management.
(2) E-ZKEco Pro Time & Security Refined Service Platform
The E-ZKeco Pro Time & Security Refined Management Platform focuses on enterprise time and security management,
combining the three core elements of internet applications: time, computing, and storage. It integrates multimodal BioCV, IoT
perception technology, and connectivity into software and hardware to achieve standardization, modularization, and
platformization of functions such as personnel, attendance, consumption, access control, visitors, meetings, assets, and salaries,
and assists in the digital upgrading of enterprise management. Through the intelligent application of the E-ZKeco Pro Platform,
enterprises can standardize their management processes, significantly improving their level of time and security refined
management, while reducing the burden of tedious work such as human resources, administration, and finance, and helping
enterprises reduce operating costs and improve operational efficiency.
（3）ZKBioTime
ZKBioTime is an independently developed attendance management software platform that supports remote, multi-branch,
and multi-site attendance management based on the needs and characteristics of overseas markets. ZKBioTime can be stably
connected to standard attendance PUSH devices of the Company. At the same time, employees perform various self-service office
operations such as check-in, check-out, out of office check-in, leave approval, and self query reports through mobile apps and
browsers. The platform can ultimately record employee attendance status and output attendance reports based on attendance rules.
In addition, the software has gradually been localized in more than ten countries around the world, including localized language,
attendance rules, attendance reports, and payroll rules. The interface between localization and third-party social security, tax,
banking, and other institutions is seamlessly connected, greatly improving the efficiency of enterprise office operations and
receiving high praise.
(4) ZKTeco Interconnection Smart Office Digital Assistant
ZKTeco Interconnection Smart Office Digital Assistant is a lightweight SaaS application for end customers in office scenes.
Mobile end is a lightweight software application based on WeChat mini programs and mobile Apps, providing small and medium-
sized enterprises (SMEs) with functions such as venue management, personnel management, attendance management, access
control management, visitor management, device management, video management, etc. It accompanies micro and small
enterprises from basic software to standardized software development, and creates a simple and easy-to-use digital assistant for
micro and small enterprises.
ZKTeco Interconnection includes an online O&M service system, positioned as a digital tool for collaborating intermediary
service providers to develop from traditional operations to digital service operations, providing high-quality products and services
to end customers, and working together with service provider partners to build online service and marketing channels.
The ZKTeco Interconnection Platform leverages the front-end intelligent hardware product matrix of ZKTeco, the Paas base
capability of the back-end ZKTeco IoT cloud platform MinervaIoT, and the comprehensive three-dimensional advantages of
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ZKTeco 2023 Annual Report
various Saas applications to provide "business premise management, comprehensive service management" solutions for SME
customers.
(II) The Company business model
1. Procurement model
(1) Procurement execution
In order to fully leverage the advantages of centralized procurement, reduce procurement costs, improve operational
efficiency, and optimize procurement resources, the Company has a Procurement Center that manages the procurement of
electronic materials, structural components, and other materials required in the production process.
The Procurement Center consists of three departments: Resource Development Department, Executive Procurement
Department, and Comprehensive Procurement Department. Among them, the Resource Development Department is mainly
responsible for developing and managing supplier resources, following up on samples, and conducting business negotiations
during the sampling period. The Executive Procurement Department is mainly responsible for executing purchase orders and
following up on material delivery and reconciliation and payment request. The Comprehensive Procurement Department is mainly
responsible for administrative, office, and fixed asset procurement, except for production materials.
The Company mainly adopts the MRP procurement model. The material control specialist of the Company's Manufacturing
Center mainly analyzes the raw material usage based on the production plan and the material structure of the product, formulates
priority levels, allocates materials based on inventory, and gradually deduces the raw material procurement plan required for the
production of the product. For some general materials, the Company has set up a minimum safe stocking point for inventory
warning and replenishment.
(2) Supplier selection and management
The Company has established strict supplier selection and management measures. For newly introduced suppliers who need
to develop new products, expand supply resources, and reduce costs, after the supplier submits basic information, the Resource
Development Department of the Company's Procurement Center will organize the Material Certification Department, the
Executive Procurement Department, the Manufacturing Center, and the R&D Center to conduct on-site reviews of the supplier. For
suppliers who pass the assessment, formal certification will be carried out for storage.
In the daily procurement process, in order to ensure the quality of the Company's raw material supply, except for the SAM
(security module) involved in the card business, which can only be purchased from Xingtang Communication Technology Co.,
Ltd., the only supplier selected by the Ministry of Public Security, the Company usually selects two or more suppliers that meet the
Company's certification standards for the main raw materials for supply. The Company will also strengthen the management of
suppliers by signing relevant "Supply Quality Agreement" and conducting monthly and annual reviews. Suppliers with scores
below 60 for three consecutive months will be disqualified from being suppliers.
2. Production model
From the perspective of process characteristics, the Company's smart terminal products are mainly produced by the
production methods of processing and assembly. According to the different production planning methods, the production method
can be divided into two production models: Make to Stock (MTS) and Make to Order (MTO). The MTS of the Company mainly
combines historical sales data and the Company's sales strategy to predict and produce standardized products, and meets market
demand in a timely manner by maintaining a certain amount of finished product inventory. The MTO is a production method
according to personalized needs such as variety, model specifications, and performance based on customer orders. Once the
product is produced, it can be directly sent to customers without the need to maintain finished product inventory.
After successful development and testing, the Company's application software and platform products are delivered to users
through CD or website distribution and download. Both the basic version software and the advanced version software and platform
provide users with free trials. The basic version software provides free activation, while the advanced version software and
platform require users to pay a software license fee before activation and use. For large-scale engineering projects, the Company
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ZKTeco 2023 Annual Report
will assign engineering personnel to the user's site for installation, debugging, and training services. The application software and
platforms released by the Company are locally deployed, used, and managed by users. The Company does not provide operation
services, but only provides necessary after-sales services according to the sales contract.
3. Marketing and management models
The Company adopts a sales model that combines distribution and direct sales.
(1) Distribution model
In the distribution model, the Company's customers are mainly dealers, and the relationship between the Company and
dealers belongs to a purchase and sales relationship, adopting a buyout sales method.
(2) Direct sales model
The Company's direct sales customers mainly include system integrators, engineering contractors, end users, etc. On the one
hand, the Company can provide smart terminal devices and application software platforms to system integrators and engineering
contractors, which can integrate or include the aforementioned products in products, systems, or engineering services sold to
downstream end users. On the other hand, the Company can also directly sell to end users through offline direct sales or online self
operated platforms.
Normally, the Company's direct sales business can be divided into two categories based on whether installation and O&M are
required: product sales and project implementation. For project implementation related businesses, the Company will customize its
own smart terminals and application software platforms based on different engineering project requirements and provide O&M
services.
(III) Market position of the Company's products during the reporting period
The Company has been listed as one of the "Top 50 Global Security Companies" by asmag for four consecutive years from
2020 to 2023. In 2023, it ranked 14th on the list and was awarded awards such as "Top 50 Innovation", "Top 10 Brands in Smart
Parks", and "Top 10 Brands in Smart Office" in 2023 Global Industry Digital Innovation Ranking by asmag; it was selected by the
organizing committee and relevant institutions of the 19th Security China as the "DC World - Top Enterprise of the DC World
Awards", "3rd China Security Innovation Enterprise in 2023", and "11th China Intelligent Transportation Construction
Recommended Brand in 2023"; it was selected by the organizing committee of the Huicong Brand Festival as the "AIoT
Innovation Enterprise" and "Leading Brand in Access Control" of the 20th China IoT Industry Conference and Brand Festival in
2023; it won the second place in the "2023 Top 10 Access Control Brands Award" awarded by Qianjia Smart Tech and other
entities; it ranked first on the "Top 15 Access Control Brands" list by the Latin American security technology media SecuriTIC in
2023; it received the "Technology Innovation Award" in the field of physical security at the 2023 Security FESTA in South Korea;
it was also selected as one of the "Top 100 Global Security Enterprises in 2023" by BOANEWS and Security World magazines. In
May 2023, the Company's trusted digital identity QR code module ZKB10M was successfully shortlisted for the "Trusted Digital
Identity Ecological Product Recommendation List" of Beijing Zhongdun Security Technology Development Co., Ltd. In June
2023, the Company's ZKTeco perception data gate was awarded the "Excellent Innovative Product Award" at the 16th China
International Public Safety Products Expo. Internationally, the Company has won 6 industrial design industry awards, including 2
German Red Dot Awards and 4 iF Design Awards. In addition, since 2016, the Company has been awarded the title of "Top 500
Manufacturing Enterprises in Guangdong Province" by Guangdong Manufacturers Association and other entities for 8 consecutive
years. In 2023, the Company was rated by the General Administration of Customs of the People's Republic of China as a "Sample
Enterprise of China Customs Trade Prosperity Survey (Export)". In 2023, the Company also joined industry organizations such as
the Guangdong Chain Operations Association (GDCOA), the E-paper Industry Alliance (EPIA), and the China Chain-Store &
Franchise Association (CCFA), becoming a new retail technology and service provider in the retail industry. Guangdong ZKTeco
has been rated as a "SRDI small and medium-sized enterprise (SME)" by the Department of Industry and Information Technology
of Guangdong Province.
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ZKTeco 2023 Annual Report
(IV) Key performance drivers
1. Accelerated development of multimodal biometric technology
In recent years, biometrics products have mainly focused on single biometrics recognition. In many application scenarios, a
single biometric technology (such as fingerprint recognition) can meet the needs of most customers, and many single biometric
technology products have price advantages and can be easily installed. Although the accuracy and anti-counterfeiting performance
of a single biometric technology have gradually improved, with the continuous development and evolution of deep learning
algorithms and big data technologies, the importance of information security has become increasingly prominent, and higher
requirements have been placed on the security and accuracy of identity recognition information. The development of multimodal
biometric technology utilizing multiple biometric technologies has become a new trend in the field of biometrics.
Multimodal recognition technology has better recognition performance than single biometric technology, greatly improving
product security. Multimodal biometric technology is not a simple superposition of biometric technologies, but rather the R&D of
new algorithms based on the characteristics of different biometrics to improve computational efficiency and accuracy. This
requires enterprises to have a deep understanding of different biometric technologies and be able to innovate products through
algorithm optimization. At present, multimodal biometrics, which integrates multiple biometric technologies, will become more
flexible. Suitable fusion methods and weight decisions can be selected based on different application needs and scenario changes,
which becomes a development trend in the biometric market.
2. The rise of non-contact biometric technology applications
With the development of biometric technology, non-contact biometric technology has gradually matured. Due to its non-
contact characteristics, which can avoid physical contact between users and machines, and have efficient and hygienic
characteristics, its application in the global market has gradually emerged. In recent years, it has been further accepted by the
market with market-oriented applications.
Non-contact biometric technology mainly includes facial recognition, palm recognition, and iris recognition. With the
development of big data and AI technologies, facial recognition has become increasingly mature in terms of recognition accuracy,
and is applied in many scenarios such as real name verification. Its characteristic is that it does not require active cooperation from
the recognition object, and the difficulty of information collection is low. The recognition accuracy can reach the same level as
fingerprint recognition in specific situations. The palm and finger vein recognition technology currently mainly focuses on
applications in medium and small scenes, such as ATM systems. With the development of wide dynamic image acquisition
technology, the palm recognition technology has also entered a growth period, and its non-contact and concealment characteristics
can avoid the risk of information leakage. Iris technology has the characteristics of high accuracy and high difficulty in
information collection, and is generally applied in situations with high security requirements. Due to its high accuracy, it is also
suitable for unified and standardized identity authentication and recognition at the national level.
The Company promotes the application of non-contact palm recognition technology in financial and other fields by
participating in the development of group standards related to non-contact palm recognition technology, and promotes the patent
and technical layout of non-contact fingerprint capture devices. Non-contact fingerprint recognition has become an important
development direction of traditional fingerprint recognition, and its non-contact characteristics will bring more security and better
user experience.
3. The rise of mobile terminal biometric technology applications
In recent years, the application of biometric technology on mobile terminal devices has gradually emerged. For example,
fingerprint recognition, facial recognition, palm recognition, and iris recognition technologies are gradually used on mobile
terminal devices to generate BioCode from these biometric methods and are integrated into entrance and exit access control,
smartphones, tablets and other mobile devices in the form of QR codes, to provide convenient identity authentication, and improve
the high security application functions such as users' independent storage of biometric templates.
4. National industrial policies provide a favorable development environment for industry development
The "Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and Vision 2035 of the
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ZKTeco 2023 Annual Report
People's Republic of China" (hereinafter referred to as the "Outline of the 14th Five-Year Plan") released in March 2021 clearly
states that new types of infrastructure will be an important component of China's modern infrastructure system, and the
construction of traditional and new types of infrastructure will be promoted in a coordinated manner to create a complete, efficient,
practical, intelligent, green, safe and reliable modern infrastructure system. In the "Outline of the 14th Five-Year Plan", the entire
section of "Construction of new types of infrastructure" proposes requirements for the construction and development of new types
of infrastructure: With the aim of strengthening the support for digital transformation, intelligent upgrade, and integrated
innovation, we will build new types of infrastructure in such areas as information technology, integration, and innovation, and
provide guidance on the development of industries such as intelligent home appliances, intelligent lighting, intelligent security, and
intelligent video surveillance systems. In the context of new types of infrastructure, the Company will adhere to innovation driven
and long-term principles, continue to strengthen multimodal BioCV core technology and precise investment in R&D, and enhance
the core competitiveness of products and solutions. In addition, the Company will work with partners to promote global leadership
and commercial scale applications and enhance customer value based on multimodal BioCV technology according to customer
needs.
5. Digital China construction provides new development opportunities for the Company
On February 27, 2023, the CPC Central Committee and the State Council issued the "Overall Layout Plan for the
Construction of Digital China" (hereinafter referred to as the "Plan"), pointing out that building a digital China is an important
engine to promote Chinese path to modernization in the digital era and a strong support to build a new competitive advantage of
the country. The "Plan" will propose to ensure capital investment, innovate funding support methods, strengthen the overall
guidance of various funds, play the role of the national industry finance cooperation platform, guide financial resources to support
digital development, encourage and guide capital in the construction of digital China in a standardized manner, and build an
investment and financing system with effective participation of social capital. By 2025, the digital economy will enter a period of
comprehensive expansion, with the added value of core industries in the digital economy accounting for 10% of GDP. According
to the CAICT, the scale of China's digital economy is expected to reach RMB 56.1 trillion in 2023 and RMB 70.8 trillion in 2025.
The digital economy policies, including the "Plan", will catalyze the further development of new smart city projects. In the wave
of digital economy, the Company, as the driver and practitioner of digitalization and intelligence, actively explores, builds and
improves the computer vision field, multi-dimensional perception smart terminals, scene interactive robots, scene cloud service
software, AR digital twins, digital identity cards and other track industry chains, forms a digital ecosystem integrating upstream,
downstream and cross industries, and works with Xingniu Fund to jointly establish an ecological innovation fund to accelerate
product incubation, and assist in the ecological construction of the digital industry.
6. The driving force of AI technology on company business development
With rapidly changing technologies today, AI technology, with its unique charm and unparalleled potential, is causing
profound changes worldwide. The large language model represented by ChatGPT of OpenAI reveals that algorithm models with
Transformer as the core architecture are steadily moving towards the direction of Artificial General Intelligence (AGI). This
transformation not only promotes the depth and breadth of AI research in theory, but also demonstrates enormous potential and
value in practical applications. Multimodal large models have become an important means for AI to perceive and understand the
real world by integrating natural language, images, speech and various other signals. This integration approach not only improves
the understanding ability of AI, but also endows it with stronger adaptability and wider application scope. It can be used in
multiple fields such as image recognition, speech recognition, natural language processing, etc., greatly improving the practicality
and efficiency of AI. Moreover, AIhas demonstrated its important application value in fields such as smart security and smart
office. It implements automatic monitoring through image recognition technology to improve security efficiency. By using natural
language processing technology, it achieves automated office work and improves work efficiency. In addition, AI is also highly
valuable for the Company's smart business scenario based applications. By using AI technology, deep mining and analysis of
business data can be achieved, thus providing more accurate basis for company decision-making. Through speech recognition,
speech synthesis and Large Language Model (LLM), Q&A robots that interact with natural language can be developed to achieve
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ZKTeco 2023 Annual Report
intelligent frontend, intelligent customer service and other services. The Company has been committed to conducting in-depth
research in the field of AI and has made significant breakthroughs in multiple directions. This includes continuous iteration and
frontier tracking of the BioCV LLM and the BioCV VLM multimodal large model. Moreover, the Company actively leverages the
power of the open source technology community to maintain synchronous development with the latest global technologies. These
technological breakthroughs have provided strong impetus for the Company's new business development. Through continuous
technological innovation and business expansion, the Company will be able to achieve greater breakthroughs in the field of AI,
thus injecting stronger vitality into its development.
III. Analysis of Core Competitiveness
1. Technological and R&D advantages
(1) Mastering the core algorithms of biometrics, leading the industry in multimodal biometric technology
After years of technological accumulation, the Company has built a core technology system focusing on single biometric
technology and multimodal biometric technology. In the field of single biometric recognition, the Company has successfully
developed biometric technologies such as fingerprints, palm veins, palmprints, facial features, finger veins and irises. Among them,
the Company's resident ID card fingerprint recognition algorithm has been recognized by regulatory agencies and is listed in the
"Qualified List of Quality Consistency Evaluation and Inspection of Resident ID Card Fingerprint Application Algorithms". The
Company has become one of the seven recognized manufacturers.
In the field of multimodal biometrics, the Company continues to innovate and has launched various multimodal biometric
technologies such as "fingerprint+facial recognition", "facial+palm vein recognition", "fingerprint+finger vein recognition",
"facial+iris recognition", and "fingerprint+palm+facial recognition". It has obtained 18 invention and utility model patents in the
field of multimodal biometrics.
The Company possesses core algorithms in the field of biometrics and has a strong competitive advantage. In addition, the
Company also has a comprehensive industry incubation ability to combine various application technologies with biometric
technology, providing support for the development of various industries.
The Company combines basic R&D of biometrics with application R&D. As of December 31, 2023, the Company has
obtained a total of 858 patents, including 149 invention patents and obtained a total of 675 computer software copyrights and 67
work copyrights.
(2) The Company's unique ultra short delay supercomputing technology provides innovative solutions for the deployment of
edge and end devices in biometric technology, with three prominent advantages:
Firstly, this technology is deployed on edge and end devices without being constrained by network quality and stability. This
provides a more stable environment for applications and ensures efficient operation.
Secondly, it can run on mid to low frequency chips (such as the ARM9 with 1GHz main frequency), which can effectively
reduce power consumption and costs, and avoid high requirements for chip manufacturing processes. In the current fierce "chip
war" environment, it has achieved the freedom of independent R&D.
Most importantly, this technology minimizes the transmission and centralized storage of sensitive information, effectively
avoiding the risk of leakage and malicious attacks and ensuring data security.
In summary, the Company's ultra short latency supercomputing technology provides revolutionary advantages for the
practical application of biometric technology, maximizing the performance of edge and end devices while ensuring data privacy
and security.
(3) Deep research on multimodal BioCV AI technology
The Company has evolved from a single biometric technology to a pioneer in computer vision and biometric multimodal
BioCV AI technology. It is no longer just about identifying "I'll tell you who you are", but about combining computer vision and
biometrics to realize the multimodal AI attribute: "Who are you? What kind of service should I provide for you?" as well as the
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ZKTeco 2023 Annual Report
empathetic experience ecology of scene interaction. Minerva, an AIoT platform based on smart retail scenarios and independent
intellectual property rights, has launched a ZKDIGIMAX Level 3 digital marketing solution for traditional small and medium-
sized retailers. This solution provides five core services, including Minerva IoT platform, machine vision analysis platform, big
data analysis platform, AIGC platform, advertising production and distribution platform, as well as corresponding smart terminals.
Relying on the IoT, big data and cloud computing technologies, the Company has delved into the field of smart retail and utilized
machine vision analysis technology to integrate the interactive value of people and scenarios and the empowering value of
scenarios into innovative value. The Company is committed to building a multi-dimensional intelligent business analysis platform
based on the data lake, and creating a new service provider of boundless all-round, full scene and full chain retail platform.
(4) Technological accumulation of computer vision AI technology and smart retail scenarios
Computer vision, as an important branch of AI, has been widely applied in various industries. In the retail industry, computer
vision technology has multiple functions such as supervising shelves, identifying and recommending products, analyzing
passenger flow density, and supporting unmanned retail stores. The Company launched the research on BioCV LLM3.0 large
model project through the research on the layout of large models, which is mainly used for the simulation and enhancement of
small models and enables the smart retail scene on the edge computing side. Large model technology has emerged in recent years
as a promising field that can be applied to smart shopping guidance, product advertising content generation, and online and offline
interaction experiences.
With the widespread application of large models in smart retail scenarios, they have gradually become an indispensable
component in the field of AI. The Company closely tracks the latest development of large model technology and has achieved key
technological reserves in lightweight and edge local deployment, which have been applied in multiple pilot projects. The Company
has successfully implemented programming and validation of algorithms such as GPT and BERT, and trained them on medium-
sized open corpus data, achieving the best level of advanced open source projects currently available. In the era of AI, the
Company continuously innovates product service interaction experiences and enhances competitiveness.
The application of digital humans in intelligent access control products is mainly reflected in providing more intelligent and
interactive management methods. Based on advanced AI technology, digital human access control devices can recognize, verify
and manage access of personnel, while providing customized virtual images and voice interaction functions. This application
makes access control management more convenient and efficient, and provides enterprises with a more intelligent service
experience. With the continuous development of technology, the application of digital humans in intelligent access control
products will continue to expand and optimize, bringing richer functions and services to enterprises.
(5) Advantages of R&D team and extension cooperation
The biometric industry belongs to a technology intensive industry, and the R&D strength and industrialization ability largely
determine whether the Company can occupy a commanding position in future market competition. Therefore, the Company
attaches great importance to R&D investment. As of December 31, 2023, the Company has 1,226 global R&D and engineering
technicians, with R&D Centers in Dongguan, Shenzhen, Xiamen, Dalian, and India.
The Company has been approved by the People's Government of Guangdong Province to establish the Guangdong Biometrics
and Security Technology Engineering Technology Research Center, strengthen the introduction and training of biometrics
engineering technicians, and improves the efficiency of technology transformation. The Guangdong Biometrics and Security
Technology Engineering Technology Research Center is the only provincial-level engineering center in the biometric industry in
Guangdong Province. Relying on the talent team and research equipment of ZKTeco, the center accelerates the transformation of
scientific research achievements into real productivity with the goal of building a provincial-level first-class research platform for
deep integration of biometrics by researching and developing key common technologies in the industry, thereby promoting
industrial technological progress.
The Company and Dongguan Institute of Optoelectronics, Peking University jointly established the Dongguan Key
Laboratory of Multimodal Computer Vision and Biometric Recognition. Taking advantage of the advantages of both parties in
cooperation, we actively carry out research on multimodal computer vision and biometric related technologies, timely realize the
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ZKTeco 2023 Annual Report
industrialization transformation of research results, provide a platform for the development dynamics of industry technology, and
cultivate talents for enterprises.
(6) Actively participate in the formulation of industry standards and norms, occupying the industry's commanding heights
Participating in the formulation of industry standards and norms can enable the Company to grasp the forefront of industry
development direction and carry out technology development and product layout in advance. Since its establishment, the Company
has been focused on the R&D of biometric technology, and is one of the main participants in drafting and revising multiple
technical standards and specifications in the industry.
2. Product array advantages
The Company's products include hardware and software products, connecting different product combinations through
digitalization and intelligence, and creating diversified smart solutions to meet the needs of numerous industries. With the
increasing demand for downstream fragmentation, the Company continues to expand a rich product array, which can provide a full
range of product services in various segmentation scenarios such as smart entrance and exit management, smart identity
verification, smart office and smart retail.
In terms of smart terminals, the Company can provide various products in the field of smart entrance and exit management,
such as access control management, pedestrian channels, vehicle channels, security inspection products, intelligent videos, smart
locks, elevator controls, charging piles, and self-service visitors; products in the field of smart identity verification, such as Human
Certificate Verification Terminal, biometrics capture devices, biometrics modules, and card readers; products such as employee
attendance, smart consumption, and smart conferences in the field of smart office; products such as employee attendance, smart
consumption, and smart conferences in the field of smart office; digital signage, self-service machines, and POS machines in the
field of smart retail.
In terms of smart retail business, we provide smart commercial products, commercial display products, electronic tag
products, and a series of products that apply AI technology. The commercial display product array of the smart commercial
product includes two categories: indoor and outdoor. The information screens and advertising screens used indoors are mainly
high brightness commercial LCDs and small pitch commercial LEDs; commercial outdoor waterproof LEDs are mainly used
outdoors. The core advantage of the Company is a one-stop vertical solution from device application to platform management,
providing a multi-end operation interface. The electronic tag product array of the smart commercial product includes color LCDs
and multi-color e-ink screens, which are implemented through fully self-developed solutions. A series of smart business products
that apply AI technology, including terminal devices that use self-developed machine vision algorithms for passenger flow
counting and customer group analysis, have accurate statistical results.
In terms of software systems and platforms, the Company has always attached great importance to the development and
design of software and hardware linkage, focusing on building an AIoT ecosystem that integrates software and hardware. The
Company can provide diversified, personalized and customized system software and platforms for different users, application
scenarios, and vertical fields. On the one hand, the Company has laid out the ZKTeco cloud IoT platform Minerva IoT based on
Amazon cloud technology as the technical foundation, providing deployment-free SaaS application products for smart office
scenarios, smart entrance and exit scenarios, and smart home scenarios. Moreover, for system integration customers, the Company
can provide ZKTeco Biowhois CTID Platform. For large park type enterprise customers, the Company can provide ZKBio Smart
Park Integrated Management Platform V8800, ZKTeco ZKBio Intelligent Integrated Management Platform V6600, and ZKBio
Access IVS Integrated Entrance and Exit Management Platform V6000. For medium to large enterprise customers, the Company
can provide E-ZKEco Pro Time & Security Refined Service Platform. For overseas customers, the Company can provide ZKTeco
Cloud Attendance and Access Control Management System such as BioTime 8.0; on the other hand, the Company combines the
mature technical modules and software middleware of the aforementioned platforms for application, providing users with flexible
platform function customization and development services, thereby meeting their personalized needs and forming a good brand
awareness.
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ZKTeco 2023 Annual Report
The Company's main products rely on multimodal BioCV technology. In the future, as the boundaries of user application
scenarios continue to expand and extend, the Company will continue to enrich and improve its diversified product array to meet
the needs of users in the field of multimodal BioCV applications and provide customers with comprehensive, professional and
high-quality solutions.
3. Global marketing service network and localized service advantages
After years of development, the Company has accumulated rich experience in operating channel products, has a large number
of customer resources, and has established a relatively complete global marketing service network system. Sales channels and
service networks cover major cities in China and in multiple countries and regions around the world. Moreover, the Company
actively expands its online sales channels and has established a comprehensive online marketing network on major e-commerce
platforms and self built shopping malls. The integration and complementarity of international, domestic, online, and offline
channels have formed a strong marketing service network advantage.
As of December 31, 2023, the Company has established 28 branches, 14 subsidiaries, and 193 service outlets in 31 provinces,
cities, and autonomous regions across China, with a sales and service system covering the whole country. The Company has
established a total of 47 controlling subsidiaries overseas, located in 31 countries and regions worldwide, with product sales
covering over 100 countries and regions.
During the reporting period, the Company continued to implement regional expansion and market lead strategies in China,
worked together with core partners and distributor customers to continuously promote terminal image construction mainly focused
on lightboxes, doors, car stickers, outdoor advertising, etc., actively participated in regional industry exhibitions and forums, and
expanded precise brand coverage in multiple dimensions; accelerated the establishment of marketing service centers of ZKTeco
and the establishment of digital marketing service platforms, and accelerated the sinking of marketing and service networks to
county-level cities around the third, fourth and fifth tier cities in the region and core cities. The Company has deeply explored the
innovative marketing model of "short video+live streaming+e-commerce". In the future, the Company will continue to develop the
market in the third, fourth and fifth tier cities to build marketing and service outlets, and simultaneously promote the integration of
online and offline channels.
The Company always adheres to the concept of localized services in the process of developing global markets. During the
reporting period, the Company continued to expand its marketing and service network to second and third tier cities in medium-
sized and large countries. The Company has resident business, technical service personnel and marketers in the global market,
which can provide customers with comprehensive pre-sales, in-sales, and after-sales support and services. The localized service
system helps the Company quickly understand the personalized needs of local users based on factors such as local economic
development level, social stability, religion, and culture, providing flexible software and hardware personalized customization
services, thereby improving customer satisfaction and brand awareness, and enhancing customer viscosity. Based on a localized
service team, the Company actively guides some overseas subsidiaries to transform from traditional channel sales to value-added
development, expanding vertical and deep projects, and thereby improving the Company's sales revenue and profit level.
4. Production and manufacturing advantages
(1) Integrated production process chain configuration
The Company's rich product array benefits from its integrated production process chain and high-quality production
supporting facilities. The Company has a complete process chain for injection molding, laser cutting, optical processing, sheet
metal processing, SMT, plug-in welding, algorithm burning program, PCBA production, final assembly, testing, and packaging
programs required for various products. The complete process depth provides favorable conditions for the Company to achieve
pull production based on market demand. The Company's various process flows are closely connected, with smooth coordination
between production capacity and production pace, and the Company has a strong competitive advantage in the industry.
(2) Customized and flexible production capacity
The Company can provide comprehensive product services in segmented scenarios such as smart entrance and exit
management, smart identity verification, and smart office, and has the ability to quickly respond to customized needs in mass
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ZKTeco 2023 Annual Report
production. The Company's customized and flexible production capacity benefits from a professional R&D and engineering
technical team, diverse product component production capabilities, and flexible product component coupling characteristics. The
Company has achieved SMED in the production process, from SMT to injection molding, which can achieve rapid exchange of
production equipment. In addition, the refined material supply system and lean line design in the assembly workshop can meet the
flexible production needs of customers from different countries for small batches, multiple varieties, and customization.
(3) Advantages of lean production
The Company has achieved industry-leading lean production model in multiple production lines through overall planning of
various processes in the product production process, and optimization of process flow. The lean production model can effectively
reduce waste throughout the entire production and manufacturing process, reduce workers, improve labor productivity, improve
output and product quality, shorten delivery cycles, and quickly meet customer needs while reducing manufacturing costs.
(4) Advantages of automation and informatization
The Company continues to promote and improve the automation and informatization of production processes, introducing the
WM module of SAP system, achieving automatic posting of warehouse raw materials and finished products through PDA
scanning, and utilizing AGV to achieve automatic handling function. Meanwhile, automation technology on the production line
has also been widely applied, including automatic dispensing, locking screws, stacking and other processes. The combination of
automation and informatization in the entire production process improves production efficiency and can quickly meet customer
delivery needs.
5. Brand advantages
The Company is committed to creating a high-quality brand image and always regards brand strategy as a systematic project.
After years of deep cultivation, the Company's brand has been highly recognized by customers both domestically and
internationally, and has received numerous honors both domestically and internationally.
The Company has been listed as one of the "Top 50 Global Security Companies" by asmag for four consecutive years from
2020 to 2023. In 2023, it ranked 14th on the list and was awarded awards such as "Top 50 Innovation", "Top 10 Brands in Smart
Parks", and "Top 10 Brands in Smart Office" in 2023 Global Industry Digital Innovation Ranking by asmag; it was selected by the
organizing committee and relevant institutions of the 19th Security China as the "DC World - Top Enterprise of the DC World
Awards", "3rd China Security Innovation Enterprise in 2023", and "11th China Intelligent Transportation Construction
Recommended Brand in 2023"; it was selected by the organizing committee of the Huicong Brand Festival as the "AIoT
Innovation Enterprise" and "Leading Brand in Access Control" of the 20th China IoT Industry Conference and Brand Festival in
2023; it won the second place in the "2023 Top 10 Access Control Brands Award" awarded by Qianjia Smart Tech and other
entities; it ranked first on the "Top 15 Access Control Brands" list by the Latin American security technology media SecuriTIC in
2023; it received the "Technology Innovation Award" in the field of physical security at the 2023 Security FESTA in South Korea;
it was also selected as one of the "Top 100 Global Security Enterprises in 2023" by BOANEWS and Security World magazines. In
May 2023, the Company's trusted digital identity QR code module ZKB10M was successfully shortlisted for the "Trusted Digital
Identity Ecological Product Recommendation List" of Beijing Zhongdun Security Technology Development Co., Ltd. In June
2023, the Company's ZKTeco perception data gate was awarded the "Excellent Innovative Product Award" at the 16th China
International Public Safety Products Expo. Internationally, the Company has won 6 industrial design industry awards, including 2
German Red Dot Awards and 4 iF Design Awards. In addition, since 2016, the Company has been awarded the title of "Top 500
Manufacturing Enterprises in Guangdong Province" by Guangdong Manufacturers Association and other entities for 8 consecutive
years. In 2023, the Company was rated by the General Administration of Customs of the People's Republic of China as a "Sample
Enterprise of China Customs Trade Prosperity Survey (Export)". In 2023, the Company also joined industry organizations such as
the Guangdong Chain Operations Association (GDCOA), the E-paper Industry Alliance (EPIA), and the China Chain-Store &
Franchise Association (CCFA), becoming a new retail technology and service provider in the retail industry. Guangdong ZKTeco
has been rated as a "SRDI small and medium-sized enterprise (SME)" by the Department of Industry and Information Technology
of Guangdong Province.
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ZKTeco 2023 Annual Report
6. Advantages of management team and mechanism
The core team of the Company has over two decades of industry experience, and has a deep understanding of the
development trends of biometrics related technologies and products. They have a clear understanding of the Company's
development strategy, product direction, technology roadmap, and marketing strategy. From user needs to solutions, from product
architecture to software and hardware development, from product trial production to standardized mass production, from large-
scale production organization to improved quality assurance system, from model market creation to global sales service network
construction, the Company has accumulated rich operational management experience, laying a solid foundation for the Company's
subsequent sound and rapid development. The core management team of the Company is stable, and currently, core team members
and key employees also directly or indirectly hold shares in the Company. The Company will combine equity incentive policies in
the future to achieve coordinated development between the Company and the management team.
7. Quality control advantages
Leading quality management level is an important factor for the Company to gain customer recognition. Since its
establishment, the Company has always attached great importance to product quality control, adhered to the close integration of
quality management and production management, established a complete and strict product quality control system, and formed the
advantage of product quality control. The Company has passed multiple management system certifications.
The Company strictly adheres to the requirements of the quality system and the close integration of quality management and
production management, implements the guiding ideology of management informatization, standardized process systems,
professional personnel, and stable personnel in key positions, and comprehensively promotes quality management. The Company
has established quality management systems including the "Design and Development Management Control Procedure",
"Production Process Control Procedure", "Nonconforming Product Management Control Procedure", "Nonconformance
Correction and Prevention Control Procedure", "Continuous Improvement Control Procedure", and "Change Management Control
Procedure". The Quality Management Department strictly controls product quality throughout the entire process, including project
approval review, development process, trial production review, design verification, material selection, production process, and
after-sales service, to ensure product quality and meet customer needs.
IV. Main Business Analysis
1. Overview
See relevant contents of "II. Main Businesses Engaged by the Company During the Reporting Period".
In 2023, the operating revenue and gross profit increased by RMB 51.6245 million and RMB 116.3954 million respectively,
an increase of 2.69% and 13.65%, respectively. However, the net profit attributable to shareholders of the listed company
decreased by RMB 15.2385 million or 7.92% compared to last year, due to the significant impact of share-based payment fees
generated by the Company's equity incentives. In 2023, the share-based payment fees generated by the Company's equity
incentives amounted to RMB 37.2854 million, an increase of RMB 32.6515 million or 704.62% compared to RMB 4.6339 million
generated by the equity incentives in 2022. If the impact of share-based payment fees is excluded, the net profit attributable to
shareholders of the listed company in 2023 is RMB 215.4326 million, an increase of RMB 17.8596 million or 9.04% compared to
the previous year.
2. Revenue and costs
(1) Composition of operating revenue
Composition of revenue
Unit: RMB
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ZKTeco 2023 Annual Report
2023 2022
Proportion in Proportion in YoY change
Amount Amount
operating revenue operating revenue
Total operating
1,970,183,682.34 100% 1,918,559,191.76 100% 2.69%
revenue
By industry
By product
Smart office
368,124,957.10 18.68% 328,800,143.52 17.14% 11.96%
products
Smart entrance and
exit management 1,437,554,773.20 72.97% 1,396,715,150.30 72.80% 2.92%
products
Smart identity
verification 155,828,574.29 7.91% 188,037,838.90 9.80% -17.13%
products
Others 8,675,377.75 0.44% 5,006,059.04 0.26% 73.30%
By region
Domestic sales 643,710,059.42 32.67% 719,564,575.31 37.51% -10.54%
Overseas sales 1,326,473,622.92 67.33% 1,198,994,616.45 62.49% 10.63%
By sales model
Distribution 1,347,955,344.48 68.42% 1,284,940,494.64 66.98% 4.90%
Direct sales 613,552,960.11 31.14% 628,612,638.08 32.76% -2.40%
Others 8,675,377.75 0.44% 5,006,059.04 0.26% 73.30%
(2) Industries, products, regions, or sales models that accounted for more than 10% of the Company's operating revenue or
profit
Applicable □ Not applicable
Unit: RMB
YoY change of
Operating Gross profit YoY change of YoY change of
Operating cost gross profit
revenue margin revenue costs
margin
By industry
By product
Smart office
368,124,957.10 151,678,099.49 58.80% 11.96% -14.72% 12.90%
products
Including:
attendance 232,446,335.40 108,241,727.33 53.43% 18.89% -7.22% 13.10%
products
Other products 135,678,621.70 43,436,372.16 67.99% 1.80% -29.03% 13.91%
Smart entrance
and exit
1,437,554,773.20 753,156,799.23 47.61% 2.92% -3.74% 3.63%
management
products
Including: access
895,951,790.36 429,557,409.77 52.06% 3.78% -6.20% 5.11%
control products
Other products 541,602,982.84 323,599,389.46 40.25% 1.54% -0.26% 1.08%
Smart identity
verification 155,828,574.29 96,033,286.19 38.37% -17.13% -8.85% -5.60%
products
Including:
57,573,145.76 25,254,246.82 56.14% -15.65% -12.51% -1.57%
biometrics
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ZKTeco 2023 Annual Report
sensor products
Card products 72,764,681.34 64,433,475.71 11.45% -12.40% -4.63% -7.21%
Other products 25,490,747.19 6,345,563.66 75.11% -30.57% -28.97% -0.56%
Other products 8,675,377.75 0.00 100.00% 73.30% 0.00%
By region
Domestic sales 643,710,059.42 438,877,805.00 31.82% -10.54% -11.51% 0.75%
Overseas sales 1,326,473,622.92 561,990,379.91 57.63% 10.63% -1.35% 5.14%
By sales model
Distribution 1,347,955,344.48 744,098,760.98 44.80% 4.90% -3.23% 4.64%
Direct sales 613,552,960.11 256,769,423.93 58.15% -2.40% -13.46% 5.35%
Others 8,675,377.75 0.00 100.00% 73.30% 0.00%
In the event that the statistical scope of the Company's main business data is adjusted during the reporting period, the main
business data of the Company has been adjusted according to the scope at the end of the reporting period in the past year
□ Applicable Not applicable
(3) Whether the Company's physical products sales greater than revenue from labor services
Yes □ No
Industry
Item Unit 2023 2022 YoY change
classification
Computer, Sales volume Pcs./Set 2,688,539 2,836,800 -5.23%
communication,
Production Pcs./Set 2,681,533 2,777,191 -3.44%
and other
electronic
equipment Inventory Pcs./Set 461,673 468,679 -1.49%
manufacturing
industry
Description of the reasons for the year-on-year change of over 30% in relevant data
□ Applicable Not applicable
(4) Performance status of major sales and procurement contracts signed by the Company as of this reporting period
□ Applicable Not applicable
(5) Composition of operating costs
Unit: RMB
2023 2022
Industry
Item Proportion in Proportion in YoY change
classification
Amount operating Amount operating
costs costs
Computer,
communication
, and other
Raw
electronic 905,130,307.33 90.43% 981,136,835.29 92.07% -7.75%
materials
equipment
manufacturing
industry
Computer,
Labor cost 31,279,084.44 3.13% 29,057,564.72 2.73% 7.65%
communication
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ZKTeco 2023 Annual Report
, and other
electronic
equipment
manufacturing
industry
Computer,
communication
, and other
Manufactu
electronic 64,458,793.14 6.44% 55,444,719.42 5.20% 16.26%
re cost
equipment
manufacturing
industry
Total 1,000,868,184.91 100.00% 1,065,639,119.43 100.00% -6.08%
Remarks
No major change
(6) Any change in consolidation scope during the reporting period
Yes □ No
Percentage
Reason for
S/N Company Name Establishment Date Registered Capital of Shares
Change
(%)
New
1 RALVIE AI INC. August 22, 2023 USD 10,000 100.00
establishment
New
2 ZKDIGIMAX PTE. LTD. March 7, 2023 USD 20 million 80.00
establishment
New
3 ZKDIGIMAX PANAMA, S.A. April 11, 2023 USD 10,000 80.00
establishment
New
4 ZKDIGIMAX COLOMBIA SAS April 26, 2023 COP 10 million 80.00
establishment
New
5 ZKDIGIMAX (PTY) LTD March 14, 2023 --- 80.00
establishment
New
6 PT. ZKDIGIMAX EXCEL NOBLE May 25, 2023 IDR 10.01 billion 56.00
establishment
New
7 ZKDIGIMAX CHINA CO., LTD. May 18, 2023 USD 300,000 80.00
establishment
New
8 ZK TECHNOLOGY MOROCCO October 17, 2023 MAD 100,000 100.00
establishment
Note: ZKDIGIMAX (PTY) LTD uses the paid up capital as its registered capital, which has not been paid as of the end of the
period; on August 7, 2023, Xiamen ZKTeco Cloud Valley Design and Development Co., Ltd. was deregistered, and at the end of
the period, the subsidiary was no longer included in the consolidation scope.
(7) Significant changes or adjustments of the Company's business, products or services during the reporting period
□ Applicable Not applicable
(8) Major customers and suppliers
Major sales customers of the Company
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ZKTeco 2023 Annual Report
Total sales amount of the top five customers (RMB) 234,894,344.56
Proportion of the total sales amount to the annual total sales
11.93%
amount among the top five customers
Proportion of related party sales to annual total sales among the
3.53%
top five customers
Information of top five customers of the Company
Proportion to Annual Total
S/N Customer Name Sales Amount (RMB)
Sales
1 Customer 1 75,844,465.86 3.85%
2 Customer 2 69,479,326.72 3.53%
3 Customer 3 31,265,809.71 1.59%
4 Paylocity 29,476,583.72 1.50%
5 Customer 5 28,828,158.55 1.46%
Total -- 234,894,344.56 11.93%
Other information of major customers
□ Applicable Not applicable
Main suppliers of the Company
Total procurement amount of the top five suppliers (RMB) 172,935,367.73
Proportion of the total procurement amount to the total annual
18.87%
procurement amount among the top five suppliers
Proportion of related party procurement amount to annual total
0.00%
procurement amount among the top five suppliers
Information of top five suppliers of the Company
Proportion to Annual Total
S/N Supplier Name Procurement Amount (RMB)
Procurement Amount
1 Supplier 1 45,723,008.87 4.99%
2 Supplier 2 40,817,098.98 4.46%
3 Supplier 3 32,137,781.27 3.51%
4 Supplier 4 29,553,048.92 3.22%
5 Supplier 5 24,704,429.69 2.69%
Total -- 172,935,367.73 18.87%
Other information of major suppliers
□ Applicable Not applicable
3. Expenses
Unit: RMB
2023 2022 YoY change Description of major changes
Mainly due to the increased advertising and
promotional expenses for business expansion and
exhibition expenses, the growth of overseas sales
Selling
445,414,065.93 361,264,181.17 23.29% business, an increase in employee compensation
expenses
due to the increase in personnel in international
business groups, as well as an increase in share-
based payment fees for the current period
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ZKTeco 2023 Annual Report
Mainly due to an increase in share-based payment
Administrati
122,693,501.96 106,748,932.32 14.94% fees and intermediary consulting fees in the current
ve expenses
period
Mainly due to an increase in interest income from
Financial
-54,330,867.73 -40,928,834.96 -32.74% fund deposits and a decrease in exchange gains and
expenses
losses caused by exchange rate fluctuations
Mainly due to an increase in salaries of R&D
R&D personnel, technical service fees and sample and
213,613,414.56 187,983,847.42 13.63%
expenses prototype fees, as well as an increase in share-based
payment fees in the current period
4. R&D Investment
Applicable □ Not applicable
Main R&D Project Expected Impact on the
Project Objective Proposed Objective
Project Name Progress Company's Future Development
With the rapid development of
1. Improving the core technical
computer vision and natural 1. Track the latest development of
capabilities of the Company's
language processing, multimodal vision model
products in the field of computer
multimodal vision model has technology, and continuously
vision and natural language
gradually become a popular optimize and improve BioCV
processing, and providing
research direction. The VLM 2.0, ensuring that the
customers with more intelligent
multimodal vision model Company maintains a leading
and efficient solutions;
combines computer vision and position in this field;
2. Promoting the Company's
natural language processing, 2. Based on this model, improve
innovation and development in
and can process images, videos the accuracy of palm recognition
BioCV VLM the field of AI, and providing
and text information to achieve algorithms and promote their
2.0 In the technical support for the
more efficient and intelligent commercialization;
Multimodal research Company's long-term strategic
image and video recognition 3. Based on this model, improve
Computer stage goals;
and understanding. The Project other biometrics algorithms and
Vision Model 3. Greatly accelerating the
aims to develop a model computer vision algorithms;
Company's algorithm
training technology with 4. Explore the application of
development and iteration speed
advanced multimodal visual multimodal vision models in
in the field of computer vision;
representation capabilities, and various fields, such as security
4. Having improved the
train a universal base model. monitoring, smart home, office
Company's ability to apply
Based on this base model, it automation, etc., to provide
computer vision algorithms in
aims to improve the accuracy of technical support for the
various scenarios, laying a solid
current computer vision Company to expand into new
foundation for expanding its
algorithms and biometric business areas.
business in the global market.
technology.
Based on the Company's core 1. Based on the base capacity of 1. Assisting the Company in
business of "smart office, smart IoT PaaS Platform, and focusing leveraging its customer base in
entrance and exit, and smart on the terminal needs of IoT the long tail market, and creating
multimodal BioCV", focusing scenario solutions and SME a new performance growth model
on the SMB small and medium- digital and reality integration, focusing on the needs of small
ZKTeco sized enterprise customer serve as the SME cloud scenario and medium-sized enterprise
Interconnectio group, serve the long tail linker; customer base based on cloud
n Cloud market, leverage the 2. Through ZKTeco service scenarios and the digital
Scenario comprehensive three- Closed Interconnection (for small and and reality integration;
Service dimensional advantages of medium-sized enterprise users) 2. By utilizing a digital and
Platform ZKTeco frontend intelligent and ZKTeco Cloud Commerce intelligent scenario solution of
V2.0.0 hardware+backend offline (for intermediate service provider software+hardware+cloud
smart account service users), jointly establish a services, laying out a new track in
system+Goddess Cloud comprehensive operation system advance to meet the needs of the
Platform PaaS+SaaS for IoT product research, sales, post-90s and post-00s for
application, provide a "business operation, and service through enterprise management and
premises management end-edge-management-cloud-use- business management;
51
ZKTeco 2023 Annual Report
scenario+business management service-operation; 3. Driving the sales of hardware
scenario+service scenario" 3. Based on the precipitation of or scenario solutions through
solution for the small and user scenario data, provide a cloud services, and bringing
medium-sized enterprise market soil for commercial about changes in business models
customer group, accompany verification of customer such as operational model
small and medium-sized foundation and operational validation through cloud service
enterprises in the growth, and transformation for SaaS subscription models;
provide multiple digital and subscription services. 4. Through the precipitation of
intelligent "assistants" for user data and scenario data,
enterprises from "rough" to providing rich product R&D
"refined" management. support for commercial
transformation models.
Train detection and recognition
algorithms for cigarette and
Research on In the retail application of bottled beverage products, with a
Satisfy the Company's computer
the supermarkets, multi- detection accuracy of over 80%
vision technology needs in
Application of dimensional perception of In the and a recognition accuracy of
supermarket application
Retail targets in the scenario is the research over 90%. Train detection and
scenarios, and better support the
Scenario foundation of intelligent stage recognition algorithms for bulk
Company's smart retail related
Detection and application through computer weighing commodities, with a
business.
Recognition vision technology. detection accuracy of over 80%
and a recognition accuracy of
over 90%.
Cloud The Project aims to develop an The Project integrates Workday,
Implement a solution for cloud
Attendance enterprise level time In the Synerion, Prime Point, 3M and
time management to enhance the
Scenario management solution based on research other software to provide
Company's cloud product
Service cloud architecture for Europe stage enterprise level time management
capabilities.
Platform V3.0 and America. solutions for cloud architecture.
The Project plans to develop an
1. Meeting the general trend of
identity authentication terminal The Project aims to implement
the construction of a digital
device based on the CTID terminal device equipment based
China;
authentication certificate on authentication and verification
2. Improving the technical gap of
R&D of recognition technology, which methods such as CTID
digital identity card identification
Technology can identify the information authentication certificate and
and information security
and Device encrypted by the CTID digital physical identity card; this
transmission;
for identity card and complete the In the recognition device supports both
3. Improving the basic ability of
Authenticatio corresponding scenario research physical and electronic identity
digital identity card application
n Application applications. The identification stage cards, which not only ensures the
technology, and laying a
Based on device supports both the convenience of physical identity
foundation for the subsequent
CTID Digital physical ID card and the cards, but also solves the
development of digital identity
Identity Card electronic identity card, which problems of network data
card products;
can effectively guarantee the transmission security and
4. Giving the Company a leading
network data transmission personal privacy of identity card
edge in the field of digital
security of the identity card information.
identity cards.
information.
The NLP model has become
one of the most promising and
potential fields in recent years.
With its widespread application The Project achieves efficient
In the era of AI, continuous
in fields such as natural fine-tuning training of models
innovation in product service
BioCV LLM language processing, intelligent based on application scenario data
interaction experience lays the
3.0 NLP customer service, and Closed and the research on related
foundation for core technology
Model intelligent translation, the NLP technologies in engineering
capabilities and enhances the
model has gradually become an implementation of NLP model
Company's competitiveness.
indispensable part of the field of applications.
AI. The Project aims to track
the latest development of the
NLP model technology and
52
ZKTeco 2023 Annual Report
prepare relevant technical
reserves.
The Project plans to develop a
visual access control core
technology platform and device
based on IoT video technology,
break through industrial level
IoT communication access
technology mainly based on the
1. Breaking through BioCV video
cloud platform, with BIOCV as Taking user demands as the
access control terminal of audio
the core technology, and audio starting point, based on IoT video
and video, access control, and
and video as the core technology, access controller, and
IoT communication access
technology, especially based on NVR technology, the Project
technologies, and breaking the
R&D of Core hardware devices. Based on develops an access
current situation of on-site access
Technology intelligent video+access control+video+gateway multi-
control and video business
Platform and controller, a multifunctional functional control device relying
separation in the industry;
Device for intelligent video access control on ZKBioCV Security offline
2. Enriching the array of access
Access box with a combination of Closed software and cloud platform,
control video products by highly
Controller access control and video achieving multiple door control,
integrating video and access
Based on IoT linkage and with facial multiple video channels, access
control;
Video recognition capture supported in control events, alarms, and other
3. Providing new technological
Technology videos, solving the problem of functions, solving the problem of
directions for access control
independent two-part products users' independent configuration
video products and accumulating
in the current market, which of access control and video, and
core technologies for the
greatly troubles customers in providing customers with a new
Company in building video
product selection and choice.
access control capabilities.
configuration operations, and
greatly compresses the product
cost of video+access control; it
is widely used in residential
communities, commercial
buildings, logistics parks and
other scenarios.
The face anti-counterfeiting
The Project aims to solve the
The Project aims to develop a covers and meets the
problem of high security for
recognition module based on requirements of face attack risk
palms and faces. Face anti-
face, palm, and 3D structural and UnionPay face live detection
R&D of counterfeiting can prevent
anti-counterfeiting technology, of GB/T 38427.1-2019 issued by
Structured electronic image attacks, live
achieving simultaneous the Ministry of Public Security in
Light Module video attacks, synthetic video
recognition of face and palm. July 2020, and improves palm
for Face and attacks, 2D laser photo and
The 3D live projection system anti-counterfeiting ability,
Palm Hybrid ordinary photo attacks, hole
has over 30,000 speckle points, Closed effectively enhances the
Recognition digging photo attacks, 3D mask
and can decode 1 million 3D competitiveness of the
Based on attacks, injection attacks, etc.
coordinate point clouds and Company's products, enhances
High Security Palm anti-counterfeiting can
complete comprehensive and economic benefits, and drives the
and High prevent electronic image attacks,
secure recognition of face and sound development of the
Accuracy palm video attacks, synthetic
palm databases, widely used in industry's intelligent access
video attacks, 2D laser photo and
the equipment of manufacturers control and attendance industries
ordinary photo attacks, 3D palm
of face and palm applications. towards high-end technology
attacks, injection attacks, etc.
industries.
Wide Access Relying on computer vision Focusing on the actual needs of 1. Relying on the accumulation
IoT technology+multimodal BIOCV intelligence and scenario, the and sedimentation of existing
Perception core technology as the core, Project implements uniform technology, the Project can
Application implement security supervision monitoring of front-end and back- quickly respond to market
Closed
Platform V1.0 linkage and joint defense and end devices, entrances and exits, demand;
(formerly intelligent video analysis application software, and 2. The Project can increase the
known as management, and build a perception data, implements the share of products in enterprises,
ZKBioCV reliable and stable security platform's intelligent analysis and parks, shopping malls, hospitals,
53
ZKTeco 2023 Annual Report
Security V1) integration and visualization security management and control factories, construction sites and
platform and solution by to meet the needs of diversified other scenes, integrate intelligent
utilizing intelligent video and fragmentation application perception to improve precision
technology, based on access scenarios of users. Build an management and control
control, vehicle recognition, intelligent security capabilities, and help the industry
emergency alarm, perimeter comprehensive management digital transformation;
defense, etc., combined with platform with intelligent security, 3. The Project helps the Company
multiple business subsystems collaborative efficiency, and further expand and consolidate its
such as personnel, attendance, scenario application, and enhance market position, bringing greater
access control, visitor, customers' intelligent perception profits.
consumption, patrol, elevator and precise control capabilities in
control, passage, storage enterprises, parks, shopping
cabinet, intrusion alarm, malls, hospitals, factories,
monitoring center, wide access, construction sites, and other
and system management. venues.
ZLink
(International Provide intelligent solutions for
Version) V2.0 office scenes, supporting multi-
Implement a solution for smart
(ZKTeco user, multi-company, and multi-
Connect end/edge/cloud to office scenarios to enhance the
Interconnectio role SaaS software, thus Closed
enhance customer experience. Company's cloud service
n Cloud providing users with better
capabilities.
Scenario scenario adaptability, better user
Service experience and lower costs.
Platform)
1. Assist the Company in
expanding its arsenal of smart
retail business, provide more
1. Based on the base capacity of
powerful weapons, and create a
In addition to the Company's Goddess's IoT PaaS Platform in
new performance growth model
traditional three core businesses India, and focusing on the smart
based on cloud services and
of "smart office, entrance and retail scenario, the cloud
hosting services around enterprise
exit, and smart identity broadcasting system provided
customer groups in the retail
recognition", we also focus on provides a one-stop solution to
industry;
launching a new innovative meet the terminal needs of
2. By utilizing a digital and
business segment - smart retail. integrating data and reality for
intelligent scenario solution of
By integrating the resources, small and medium-sized
cloud software+AI
technology and business enterprises (SMEs), serving as the
ZKDigimax- hardware+cloud hosting services,
capabilities accumulated over SME cloud scenario linker;
L3 V1.0 laying out a new track in advance
the years by ZKTeco and In the 2. Integrate the rich AIoT
(Cloud Digital for smart retail scenarios;
DMMX, we focus on the research hardware ecosystem, AI, big data,
Retail 3. Providing long-term O&M
"Al+Digital Signage" field in stage and cloud service capabilities of
Management services to increase the
the retail and catering ZKTeco, and provide
Platform) Company's service attributes,
industries, providing digital end/edge/cloud/server one-stop
driving the sales of hardware or
infrastructure and smart smart retail scenario solutions;
scenario solutions through cloud
business cloud services for 3. Based on the precipitation of
hosting services, and bringing
front-end carriers, accelerating user scenario data, provide a
about changes in business models
the transformation of traditional market soil for commercial
such as operational model
retail industry to data-driven verification of customer
validation through cloud service
smart retail, and helping global foundation and operational
subscription models;
retail customers create greater transformation of commercial
4. Through the precipitation of
commercial value. advertising for SaaS subscription
user data and scenario data,
services.
creating richer product models
for commercial transformation
models.
Continuous Continuously build IoT Continue to build capabilities In the era of the Internet of
Capacity platforms in accordance with based on the IoT platform, Everything (IoE), providing
Closed
Building of the Company's end/edge/cloud including device connectivity, infrastructure support for building
the IoT strategy. payment, subscription, and video a cloud/edge/end ecosystem and
54
ZKTeco 2023 Annual Report
Platform based multimodal processing enhancing the competitiveness of
(Minerva/God capabilities. IoT capabilities.
dess Platform)
V3.0
The Project plans to develop an
intelligent AI robot based on AI
scenarios, utilizing ChatGPT
technology and the fusion of
machine vision and speech
recognition technology to
achieve multiple interactive
methods such as dialogue,
R&D of
vision and speech, thus
Smart Integrate LLM technology and
achieving comprehensive
Terminal machine vision technology,
intelligent applications in Integrate LLM technology and
Based on develop an intelligent terminal
various scenarios. The content In the machine vision technology to
LLM and that enables multiple interactive
of the Project covers multiple research enhance product interaction
Large Model modes such as visual and voice
aspects such as semantic stage experience and enhance the
Technology of between humans and computers,
understanding, emotional Company's competitiveness.
Multimodal and provide a fast and efficient
analysis, natural language
Computer user experience.
generation, image recognition,
Vision
speech recognition, intelligent
recommendation, etc. It can
achieve natural dialogue
between humans and
computers, provide a fast and
efficient user experience, and
has a wide range of application
scenarios.
1. Conduct attribute analysis
based on an open facial image
In security and supermarket dataset for refined control of
applications, people are often various attributes in digital human
the most concerned visual synthesis;
Research on targets. This project aims to 2. Implement augmented reality
Meet the Company's demand for
Algorithms explore the analysis and image technologies such as makeup and
In the digital human generation
Related to generation methods of various wear testing to serve smart retail
research technology in smart retail
Digital facial features, in order to scenarios and enhance customer
stage scenarios, and better support the
Human provide strong support for shopping experience;
Company's basic business.
Generation practical scenario based 3. Research on digital human
applications and achieve generation technology based on
human-oriented computer AIGC;
vision applications 4. Investigation and research on
voice driven digital human speech
video generation technology.
This project aims to develop a This project aims to use human, 1. Wide market applications: This
R&D of
hybrid image acquisition and vehicle and object target device can be widely used in
Device for
intelligent recognition device recognition technology combined multiple scenarios such as smart
Collecting
based on the application with sound and light warning parks, smart communities, smart
and
technology of target recognition interactive application technology transportation, smart office,
Recognizing
for people, vehicles and objects to enhance the image acquisition logistics, supermarkets, etc., to
Mixed Images
in multispectral environments, Closed and recognition ability in different explore a wider market space for
of Humans,
achieving image acquisition and environments, and to enhance the the Company;
Vehicles and
intelligent recognition of user experience and practicality 2. Technological leadership and
Objects Based
people, vehicles and objects in through perceivable sound and continuous innovation: The
on
different environments and light warnings and real-time voice project involves numerous
Multispectral
regions. At the same time, it can interaction. At the same time, the technical fields and requires
Analysis
also have multi-channel, multi- linkage between storage devices continuous iteration and
55
ZKTeco 2023 Annual Report
light source controllable sound and controllers can be triggered upgrading to maintain a
and light warning functions, as by the collected image signals, competitive advantage.
well as real-time voice further enhancing the intelligence Therefore, this project helps to
interaction, mobile interaction and practicality of the system. drive the Company's continuous
and other functions. On the end technological R&D and
side, the use of embedded innovation, thereby maintaining a
LINUX platform based NVR leading position in market
storage to collect images and competition. Meanwhile,
alarm signal output can achieve continuous technological
linkage with the controller. It innovation also helps the
can be widely used in smart Company acquire more patents
parks, smart communities, and technological barriers, and
smart transportation, intelligent improve industry barriers and
office, logistics, supermarkets competitiveness.
and many other scenarios.
The project plans to develop a
smart office terminal
management platform and
device based on the cloud
service MinervaIoT platform,
mainly combining the ZKTeco
Minerva IoT smart office cloud
platform, with "time
management+security
management" as the key service This project aims to develop a
core, cloud platform as the core, smart office terminal management 1. Connect IoT devices such as
R&D of
application as the carrier, and platform and device based on the smart office attendance, access
Smart Office
hardware devices as the cloud service MinervaIoT control, visitors, and videos to
Terminal
foundation, archiving device platform. This platform takes provide a one-stop O2O solution
Management
data on a high security cloud "time management+security for enterprise smart office. It
Platform and
platform for management, and Closed management" as its core service, improved the management
Device Based
providing a more refined providing enterprises with a more efficiency and security of the
on Cloud
enterprise smart office refined smart office management enterprise;
Service
management mode; the feature model by integrating the ZKTeco 2. Provide support for the
MinervaIoT
is that the terminal device MinervaIoT smart office cloud Company's digital cloud platform
platform
supports various biometric platform, applications, and strategic layout.
(fingerprint, face), RFID, QR hardware devices.
code information collection,
and video intercom capabilities,
connecting smart office
attendance, access control,
visitors, videos, and other IoT
devices, providing a one-stop
O2O solution for enterprise
smart office. It is mainly used in
smart office scenarios.
R&D of This project plans to develop a The goal of the project is to
Mobile mobile access control scheme develop a mobile access control
Access device based on multimodal solution based on multimodal
Solution BioCV technology and BioCV technology and
Device Based Bluetooth/NFC near-field Bluetooth/NFC near-field The project adds a high security
on communication technology, communication technology, and privacy access authentication
Closed
Multimodal which is mainly oriented to which aims to provide an method to provide more options
BioCV smart entrance and exit integrated solution for smart for scenario solutions.
Technology scenarios, integrates mobile entrance and exit scenarios, and
and Internet technology, realizes the achieve convenient access control
Bluetooth/NF integration scheme of mobile solutions by integrating mobile
C Near-field access control, and supports Internet technology.
56
ZKTeco 2023 Annual Report
Communicati NFC&BLE mobile card
on swiping. The permission virtual
Technology card is managed uniformly by a
credential management system
developed based on the
Goddess Platform. It can enable
individuals to log in with
multimodal biological templates
on their own mobile App,
implement the application of
mobile access solutions for end
users, and redefine the
application of access control
services in SMBG scenarios.
This project is based on
Bluetooth near-field
R&D of communication technology,
Electromecha which enables data exchange
nical Product between mobile devices and
This project aims to optimize
O&M electromechanical products. 1. It increased the added value of
electromechanical products using
Platform Through IoT communication electromechanical products and
mobile IoT technology, and
Based on technology, it achieves a enhanced product
achieve unified management and
Bluetooth network topology of cloud, competitiveness;
Closed control of mobile, IoT cloud, and
Near-field edge and end, enhancing cloud 2. It realized data aggregation and
device ends. This project
Communicati O&M attributes on the basis of created a digital ecosystem
improved equipment O&M
on electromechanical products together with the Company's
capabilities and reduced
Technology such as brakes, achieving related products.
management costs.
and IoT remote device O&M and
Cloud control capabilities, greatly
Platform improving efficiency and
reducing product maintenance
costs.
R&D personnel of the Company
2023 2022 Change ratio
Number of R&D staff (ppl) 1,226 1,125 8.98%
Proportion of R&D personnel 29.86% 29.70% 0.16%
Education background of R&D personnel
Bachelor's degree 794 702 13.11%
Master's degree 76 66 15.15%
Age composition of R&D personnel
Under 30 years old 652 665 -1.95%
30~40 years old 459 376 22.07%
Amount of R&D investment and its proportion in operating revenue of the Company in the past three years
2023 2022 2021
R&D investment amount
213,613,414.56 187,983,847.42 196,786,694.35
(RMB)
Ratio of R&D investment to
10.84% 9.80% 10.06%
operating revenue
Amount of R&D expenditure
0.00 0.00 0.00
capitalization (RMB)
Ratio of capitalized R&D
0.00% 0.00% 0.00%
expenditure to R&D
57
ZKTeco 2023 Annual Report
investment
Proportion of capitalized
R&D expenditure to current 0.00% 0.00% 0.00%
net profit
Reasons and impacts of significant changes in the composition of R&D personnel in the Company
□ Applicable Not applicable
Reasons for significant changes in the proportion of total R&D investment to operating revenue compared to the previous year
□ Applicable Not applicable
Reasons for significant changes in the capitalization rate of R&D investment and their rationality explanation
□ Applicable Not applicable
5. Cash flow
Unit: RMB
Item 2023 2022 YoY change
Subtotal of cash inflows from
2,165,751,516.53 2,042,594,811.28 6.03%
operating activities
Subtotal of cash outflows
1,929,750,626.32 1,918,074,778.10 0.61%
from operating activities
Net cash flows from operating
236,000,890.21 124,520,033.18 89.53%
activities
Subtotal of cash inflows from
787,667,352.37 101,984,070.59 672.34%
investing activities
Subtotal of cash outflows
718,997,205.91 1,118,723,941.52 -35.73%
from investing activities
Net cash flows from operating
68,670,146.46 -1,016,739,870.93 106.75%
activities
Subtotal of cash inflows from
171,289,430.52 1,496,730,622.16 -88.56%
financing activities
Subtotal of cash outflows
237,940,435.66 61,330,346.01 287.97%
from financing activities
Net cash flows from financing
-66,651,005.14 1,435,400,276.15 -104.64%
activities
Net increase in cash and cash
239,412,294.92 561,319,832.34 -57.35%
equivalents
Main influencing factors for significant year-on-year changes in relevant data
Applicable □ Not applicable
Description of reason:
(1) The net cash flow generated from operating activities increased, mainly due to an increase in sales receipts in the current period
and a decrease in payment for purchasing materials;
(2) The increase in the subtotal of cash inflows from investing activities is mainly due to the increase in time deposits and
redemption of financial products in the current period;
(3) The net cash flow generated from investing activities decreased, mainly due to an increase in cash inflows from investing
activities caused by the increase in time deposits and redemption of financial products in the current period, and an increase in
cash outflows from investment payments due to the decrease in the purchase of financial products during the year; the cash inflow
58
ZKTeco 2023 Annual Report
from investing activities is greater than the cash outflow from investing activities, resulting in an increase in the net cash flow
generated from investing activities;
(4) The decrease in net cash flow generated by financing activities is mainly due to the Company's initial public offering and
listing of stocks in August 2022, the receipt of raised funds, and the payment of cash dividends for the 2022 profit distribution in
the current period.
Description of the significant difference between the net cash flow generated by the Company's operating activities and the net
profit of the current year during the reporting period
□ Applicable Not applicable
V. Non-main Business
Applicable □ Not applicable
Unit: RMB
Proportion to
Amount Description of Reason Sustainable or Not
Total Profit
Mainly due to the gains and losses
generated from the purchase of
Investment income -599,875.51 -0.28% financial products and the mature No
delivery of forward foreign exchange
settlement and sales contracts
Mainly due to the gains and losses
Profits and losses generated from the purchase of
from fair value 755,429.17 0.35% financial products and the mature No
changes delivery of forward foreign exchange
settlement and sales contracts
Mainly due to the provision for
Losses from
depreciation of current inventory, long-
impairment of -3,163,733.31 -1.47% No
term equity investments and provision
assets
for depreciation of contract assets
Mainly due to government subsidies
Non-operating and other income received during the
834,759.26 0.39% No
revenue reporting period that are not related to
production and operation
Mainly due to expenses for disposal of
Non-operating obsolescence materials and disposal of
5,760,416.86 2.68% No
expenditure non-current assets during the reporting
period
Mainly due to other income generated
Other income 13,382,751.13 6.22% by government subsidies during the No
reporting period
Mainly due to the provision of bad debt
Losses from credit
-6,426,264.03 -2.99% reserves for accounts receivable during No
impairment
the reporting period
Gains from disposal Mainly due to income from disposal of
-129,852.62 -0.06% No
of assets fixed assets during the reporting period
59
ZKTeco 2023 Annual Report
VI. Analysis of Assets and Liabilities
1. Material changes of asset items
Unit: RMB '0,000
At the end of 2023 At the beginning of 2023 Proportion
Proportion Proportion increase
Description of major changes
Amount to total Amount to total or
assets assets decrease
Monetary funds 199,092.50 50.74% 191,294.50 52.20% -1.46% No major change
Increase in overseas business, resulting in
Accounts accounts receivable increase due to the
47,980.33 12.23% 40,349.79 11.01% 1.22%
receivable relatively long collection cycle of overseas
business
Contract assets 28.22 0.01% 30.68 0.01% 0.00% No major change
Inventories 37,271.48 9.50% 34,828.06 9.50% 0.00% No major change
Part of the properties of Xiamen ZKTeco
Investment real
2,314.55 0.59% 0.00 0.00% 0.59% Biometric Identification Technology Co.,
estate
Ltd. were converted from self use to rent
Due to the increased capital for
Long-term establishment of the ecological innovation
equity 2,978.19 0.76% 715.13 0.20% 0.56% fund by Xiamen Xingniu Yunyu Venture
investment Capital Partnership Enterprise (Limited
Partnership) in the current period
Due to transfer to fixed assets for the
Fixed assets 47,012.18 11.98% 44,685.75 12.19% -0.21% current period by the Hybrid Biometrics
IoT Intelligent Industrial Base Project
Due to new investment in the Multimodal
Construction in Biometrics Digitalization Industrial Base
13,898.65 3.54% 5,704.13 1.56% 1.98%
progress Construction Project and the Thai factory
construction in current period
Right-of-use
3,866.97 0.99% 5,064.07 1.38% -0.39% No major change
asset
Short-term loan 0.00 0.00% 985.50 0.27% -0.27% No major change
Contract
6,533.11 1.66% 5,883.88 1.61% 0.05% No major change
liabilities
Long-term loan 781.04 0.20% 14.18 0.00% 0.20% No major change
Lease liabilities 1,971.33 0.50% 2,825.67 0.77% -0.27% No major change
Trading Mainly due to the decrease in financial
8,098.02 2.06% 20,431.84 5.58% -3.52%
financial asset products
High proportion of overseas assets
Applicable □ Not applicable
Unit: RMB '0,000
Proportion
Control Is there a
Specific of overseas
Cause of Operation measures to significant
content of Asset size Location Income assets to the
formation mode ensure asset impairme
assets Company's
security nt risk
net assets
ZK Wholly-
Overseas Subsidiary
INVESTMEN owned 12,663.97 America 5,560.28 3.85% No
investment control
TS INC. subsidiary
60
ZKTeco 2023 Annual Report
ZK
Controlling Overseas Subsidiary
TECHNOLOG 6,213.88 America 7,185.21 1.89% No
subsidiary sales control
Y LLC
Wholly-
ZKTECO CO., Hong Overseas Subsidiary
owned 44,403.04 2,079.34 13.49% No
LIMITED Kong sales control
subsidiary
Note: Significant overseas assets mean that the assets of overseas individual companies exceed 10% of the
Other
consolidated assets or the net profit of overseas individual companies exceeds 10% of the consolidated net profit of
explanations
the Group
2. Assets and liabilities measured at fair value
Applicable □ Not applicable
Unit: RMB
Profits and Cumulativ Impair
losses from e changes ment
Purchase
Beginning fair value in fair accrued Sales amount in Ending
Item amount in the Other changes
balance changes in value in the current period balance
current period
the current recognized current
period in equity period
Financial assets
1. Trading
financial assets
(excluding 204,318,406.05 662,811.35 74,559,524.77 200,057,224.36 1,404,068.00 80,887,585.81
derivative
financial assets)
2. Derivative
92,617.82 92,617.82
financial assets
Subtotal of
204,318,406.05 755,429.17 74,559,524.77 200,057,224.36 1,404,068.00 80,980,203.63
financial assets
Others
Total 204,318,406.05 755,429.17 74,559,524.77 200,057,224.36 1,404,068.00 80,980,203.63
Financial
0.00 0.00 0.00 0.00 0.00 0.00 0.00
liabilities
Other changes
Other changes mainly include changes in funds and exchange rates on the e-commerce platform Yu E Bao
Has there been any major change in the measurement attributes of the Company's main assets during the reporting period
□ Yes No
3. Assets right restrictions as of the end of the reporting period
Please refer to "Section X Financial Report VII. Notes to Consolidated Financial Statements 22. Assets with Restricted Ownership
or Use Rights" in this report for details
61
ZKTeco 2023 Annual Report
VII. Investment Analysis
1. Overall
Applicable □ Not applicable
Investment in 2023(RMB) Investment in 2022 (RMB) YoY
508,828,238.94 468,954,619.82 8.50%
2. Significant equity investments obtained during the reporting period
□ Applicable Not applicable
3. Significant non-equity investments during the reporting period
Applicable □ Not applicable
62
ZKTeco 2023 Annual Report
Unit: RMB
Accumulated
Accumulated Reasons for
Fixed Actual
Investment Realized Not Achieving
Invest Asset Investment Investment Disclosure Disclosure
Project Amount During Source of Project Expected Income as of Planned
ment Assess Project Amount as of Date (if Index (if
Name the Reporting Funds Progress Income the End of the Progress and
Mode ment Industry the End of the any) any)
Period Reporting Expected
or Not Reporting
Period Benefits
Period
Hybrid
Biometrics Own funds,
Plant and
IoT Self- bank loans, Under Not
Yes supporting 17,044,756.02 225,311,420.32 17,106,181.03 Not applicable
Intelligent built and raised construction applicable
facilities
Industrial funds
Base Project
Multimodal
Biometrics
Digitalizatio Plant and Own funds
Self- Under Not
n Industrial Yes supporting 84,434,465.75 87,417,407.70 and raised Not applicable Not applicable
built construction applicable
Base facilities funds
Construction
Project
Thai factory
Plant and
construction Self- Under Not
Yes supporting 26,210,787.40 26,210,787.40 Own funds Not applicable Not applicable
and office built construction applicable
facilities
buildings
Not
Total -- -- -- 127,690,009.17 338,939,615.42 -- -- -- -- --
applicable
63
ZKTeco 2023 Annual Report
4. Financial asset investment
(1) Securities investment
□ Applicable Not applicable
There were no securities investments during the Company's reporting period.
(2) Derivative investment
Applicable □ Not applicable
1) Derivative investments for hedging purposes during the reporting period
Applicable □ Not applicable
Unit: RMB '0,000
Ratio of ending
Profits
investment
and losses Cumulative Purchase Sales
Initial amount to the
Types of from fair changes in amount amount
investme Opening Closing Company's net
derivative value fair value during the during the
nt amount amount assets at the
investments changes in recognized in reporting reporting
amount end of the
the current equity period period
reporting
period
period
Forward
foreign
exchange 0 0 9.26 0 30,657.87 29,833.6 824.27 0.25%
settlement and
sales
Total 0 0 9.26 0 30,657.87 29,833.6 824.27 0.25%
Accounting
policies and
specific
accounting
principles for
hedging
business during
the reporting
period, as well
No major change
as description
on whether
there have been
significant
changes
compared to
the previous
reporting
period
Description of
actual profit
During the reporting period, the Company obtained investment income of RMB -8.6906 million through forward
and loss during
foreign exchange settlement and sales, and generated profits and losses from fair value changes of RMB 92,600
the reporting
period
64
ZKTeco 2023 Annual Report
In the daily operation process of the Company, foreign currency transaction is involved. In order to prevent exchange
rate fluctuation risks, it is necessary for the Company to carry out foreign exchange derivative trading business related
Description of to daily operation needs according to specific circumstances to reduce the risk of exchange rate or interest rate
hedging effect fluctuations that the Company continues to face. The Company's forward foreign exchange settlement and sales
business can achieve the goal of locking in business contract profits at most time points, without significant risks,
which achieves the purpose of hedging.
Source of
funding for
Own funds
derivative
investment
I. Risk analysis of the Company's hedging business
Forward foreign exchange settlement and sales business can reduce the impact of exchange rate fluctuations on the
Company's production and operation in the event of significant fluctuations in exchange rates, but there are still certain
risks in conducting forward foreign exchange settlement and sales transactions:
1. Exchange rate fluctuation risk: In cases of significant fluctuations in exchange rate courses, exchange losses may
occur when the exchange rate of the forward foreign exchange settlement and sales agreed in the confirmation letter for
the forward foreign exchange settlement and sales is lower than the real-time exchange rate.
2. Risk of payment collection prediction: Business departments make payment prediction based on customer orders and
expected orders. During the actual execution process, customers may adjust their own orders and predictions, resulting
in inaccurate company payment prediction and the risk of delayed delivery of forward exchange settlement.
3. Internal control risk: Forward foreign exchange settlement and sales transactions are highly specialized and complex,
Risk analysis which may result in risks due to imperfect internal control systems.
and control 4. Customer default risk: If the customer's accounts receivable are overdue and the payment cannot be collected within
measures of the predicted payment period, it will cause a delay in forward exchange settlement and result in losses to the Company.
derivatives
5. Transaction performance risk: Conducting financial derivative trading business carries the risk of default caused by
positions
the inability of counterparties to perform when the contract expires.
during the
reporting II. Preparation work and risk control measures for hedging by the Company
period The Company follows the principle of hedging when conducting forward foreign exchange settlement and sales
(including but transactions, and does not engage in speculative arbitrage transactions. The main risk control measures are as follows:
not limited to
market risk, 1. When signing forward foreign exchange settlement and sales contracts, transactions are carried out in strict
liquidity risk, accordance with the Company's predicted collection amount, and all forward foreign exchange settlement and sales
credit risk, businesses have a true trade background.
operational 2. The Company has formulated the "Management System for Forward Foreign Exchange Settlement and Sales of
risk, legal risk, ZKTECO CO., LTD.", which clearly stipulates the amount, variety, approval authority, internal audit process,
etc.) information disclosure, and other aspects of forward foreign exchange settlement and sales. Moreover, the Company
has strengthened the business training and professional ethics of relevant personnel, improved the quality of relevant
personnel, and established a timely reporting system for abnormal conditions to avoid the occurrence of operational
risk to the maximum extent.
3. To prevent the delayed delivery of forward foreign exchange settlement and sales, the Company will attach great
importance to the management of foreign currency accounts receivable, avoid the phenomenon of overdue accounts
receivable, and strive to improve the accuracy of payment collection prediction and reduce prediction risks.
Meanwhile, the Company has purchased credit insurance for some export products, thus reducing the customer default
risk.
4. To control transaction performance risks, the Company carefully selects counterparties engaged in financial
derivatives business. The Company only conducts financial derivative trading business with legally qualified large
commercial banks and other financial institutions, and carefully reviews the contract terms signed with the
counterparties to prevent credit and legal risks.
Changes in The Company's accounting for the fair value of derivatives mainly focuses on the unexpired contracts for forward
market price or foreign exchange settlement and sales transactions signed between the Company and banks during the reporting period.
fair value of Trading financial assets or trading financial liabilities are recognized based on the difference between the quoted price
products during of the unexpired forward foreign exchange settlement and sales contract at the end of the period and the forward
65
ZKTeco 2023 Annual Report
the reporting foreign exchange price.
period of the
invested
derivatives.
The analysis of
the fair value
of derivatives
shall disclose
the specific
methods used
and the setting
of relevant
assumptions
and parameters
Litigation
situation (if Not applicable
applicable)
Disclosure date
of
announcement
by the Board of
Directors for April 28, 2023
approval of
derivative
investment (if
any)
Disclosure date
of
announcement
by the Board of
Shareholders
for approval of
derivative
investment (if
any)
Special
opinions of
independent The Company's business of forward foreign exchange settlement and sales meets the Company's business development
directors on the needs, and the Company has established corresponding internal control systems and risk management mechanisms. The
Company's feasibility analysis report issued by the Company for conducting forward foreign exchange settlement and sales
derivative complies with the provisions of laws and regulations and the Company's business development needs, and is feasible.
investment and
risk control
2) Derivative investments for speculative purposes during the reporting period
□ Applicable Not applicable
There were no derivative investments for speculative purposes during the Company's reporting period.
5. Use of raised funds
Applicable □ Not applicable
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ZKTeco 2023 Annual Report
(1) Overall use of raised funds
Applicable □ Not applicable
Unit: RMB '0,000
Proporti The
on of purpose Amou
Total
accumul and nt of
amount of Accumula
Total ated destinati raised
Accumula raised ted total Total
Year Fundr amount of total on of funds
Total Net amount ted total funds with amount of amount of
of aising raised amount the idle
amount of of raised amount of changed raised unused
fundra metho funds used of raised raised for
raised funds funds raised purposes funds with raised
ising d in this funds funds more
funds used during the changed funds
period with that than
reporting purposes
change have not two
period
purpose been years
s used yet
Stored
in the
bank's
Initial special
public account
2022 offerin 160,816.89 145,729.84 15,104.71 52,903.01 25,189.32 28,537.02 17.75% 95,816.81 for 0
g of fundrais
stocks ing and
wealth
manage
ment
Total -- 160,816.89 145,729.84 15,104.71 52,903.01 25,189.32 28,537.02 17.75% 95,816.81 -- 0
Description of the overall use of raised funds
1. According to the approval of the "Reply CSRC to Approval for the Registration of Initial Public Offering of Stocks of ZKTECO CO., LTD."
(ZJXK [2022] No. 926), the Company has publicly issued 37,123,013 RMB denominated ordinary shares (A shares) with a face value of RMB 1.00
per share, an issuance price of RMB 43.32 per share, and a total amount of raised funds of RMB 1,608,168,923.16. After deducting the issuance
expenses (excluding value-added tax) of RMB 150,870,545.46, the actual net amount of raised funds is RMB 1,457,298,377.70. The receipt date of
the raised funds is August 12, 2022. The availability of the raised funds has been verified by Baker Tilly China Certified Public Accountants (Special
General Partnership) and a "Capital Verification Report" (TZYZ [2022] No. 38658) has been issued.
2. All the raised funds mentioned above have been deposited in a special account for raised funds for management, and a regulatory agreement for
raised funds has been signed with the sponsor and the commercial bank that deposited the raised funds.
3. As of December 31, 2023, the Company has invested a total of RMB 529.0301 million in raised funds, with a total of RMB 958.1681 million in
unused raised funds (including related interest income after deducting handling fees).
(2) Committed projects with raised funds
Applicable □ Not applicable
67
ZKTeco 2023 Annual Report
Unit: RMB '0,000
Accumulate Has there
Has the
Committed Committed Investment Accumulated Investment Benefits d benefits been a
project been Date when the Have the
investment projects total Amount investment progress as of achieved achieved as significant
changed Adjusted total project reaches its expected
and the investment investment During the amount as of the end of the during this of the end of change in
(including investment (1) expected conditions benefits been
direction of over- amount of Reporting the end of the period reporting the the
partial for use achieved
raised funds raised funds Period period (2) (3)=(2)/(1) period reporting feasibility of
changes)
period the project
Committed investment projects
1. Tangxia Production
Not Not
Base Construction Yes 24,841.18 0 0 0 0.00% Not applicable Yes
applicable applicable
Project
2. Hybrid Biometrics
IoT Intelligent
No 43,689.94 43,689.94 3,136.59 26,557.86 60.79% August 31, 2024 1,710.62 1,710.62 Not applicable No
Industrial Base
Project
3. American
Manufacturing Not Not
Yes 17,392.21 14,392.65 8.46 105.99 0.74% August 31, 2026 Not applicable No
Factory Construction applicable applicable
Project
4. R&D Center Not Not
No 18,240.58 18,240.58 1,253.28 10,274.35 56.33% August 31, 2024 Not applicable No
Construction Project applicable applicable
5. Global Marketing
Not Not
Service Network No 26,802.01 26,802.01 2,933.69 8,192.12 30.57% August 31, 2025 Not applicable No
applicable applicable
Construction Project
6. Remaining funds
after the previous
change in the
Not Not
American Yes 0 2,999.56 0 0 0.00% Not applicable No
applicable applicable
Manufacturing
Factory Construction
Project
7. Multimodal
Biometrics
Not Not
Digitalization Yes 0 39,605.1 7,772.69 7,772.69 19.63% June 30, 2026 Not applicable No
applicable applicable
Industrial Base
Construction Project
Subtotal of committed -- 130,965.92 145,729.84 15,104.71 52,903.01 -- -- -- --
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ZKTeco 2023 Annual Report
investment projects
Direction of over-raised fund investment direction
Not Not
Undetermined funds Yes 14,763.92 0 0 0.00 0.00% Not applicable No
applicable applicable
Subtotal of over-
raised fund -- 14,763.92 0 0 0 -- -- -- --
investment direction
Total -- 145,729.84 145,729.84 15,104.71 52,903.01 -- -- -- --
The planned investment for the "Tangxia Production Project" is RMB 248.4118 million, with a construction period of 2 years. The Project plans to build a production base in Tangxia
Town, Dongguan City to meet the Company's future business development needs, including the expansion of production capacity for access control products, biometrics module
Describe the situation products, and card products, as well as the need for supporting production, office, and living facilities. As of December 31, 2022, the Project has not yet started investment, and the
and reasons why the difference between the actual use of the raised funds in the year of the investment project and the estimated use amount of the raised funds disclosed last time exceeds 30%.
planned progress and
expected benefits On January 18, 2023, the Company held the 23rd Session of the Second Board Meeting and the 17th Session of the Second Supervisory Board Meeting. On February 6, 2023, the
have not been Company held the Second Extraordinary General Meeting of 2023, and deliberated and approved the "Proposal on Changing the Investment Projects of Raised Funds, Changing the
achieved by projects Special Account for Raised Funds, Increasing Capital and Providing Loans to Subsidiaries to Implement Investment Projects". This matter does not constitute a related party
(including the reason transaction. In order to further promote the development of the Company's business, accelerate production capacity planning and industrial layout, and improve the efficiency of the
for selecting "not use of raised funds, the original investment project Tangxia Production Project has been changed to "Digitalization Base Project", and the Tangxia Production Project will no longer be
applicable" for constructed. The Tangxia Production Project was constructed by the Company as the main entity, while the Digitalization Base Project was constructed by Guangdong ZKTeco, a
"whether the expected wholly-owned subsidiary of the Company, as the implementation entity. The total investment amount of the Digitalization Base Project is RMB 431.8689 million. The Digitalization
benefits have been Base Project uses the unused raised funds and over-raised funds of the Tangxia Production Project, as well as the corresponding fund returns. Among them, the raised funds of the
achieved") Tangxia Production Project are RMB 248.4118 million, and the over-raised funds are RMB 147.6392 million. The actual income of the funds corresponding to these two parts shall be
based on the net income of the funds corresponding to the transfer of relevant funds to the special account for the Digitalization Base Project after approval by the shareholders'
meeting. The insufficient part will be invested by Guangdong ZKTeco with its own funds.
The original investment project (Tangxia Production Base Construction Project) was formulated in 2020, which was a comprehensive layout of the Company based on factors such as
the market environment, industry development trends and the actual situation of the Company at that time. With the development of the Company and market changes, the planning of
the original Tangxia Production Base Construction Project can no longer meet the current production and operation needs of the Company, and cannot reflect the development trend of
new technologies and new formats. In order to further promote the development of the Company's business, accelerate production capacity planning and industrial layout, and improve
the efficiency of the use of raised funds, the Company reviewed and approved relevant proposals during the reporting period to change the original investment project: Tangxia
Production Base Construction Project to the Digitalization Base Project. The original Tangxia Production Base Construction Project will no longer be constructed, and the
Description of
implementation entity of the Digitalization Base Project will be changed to the Company's wholly-owned subsidiary Guangdong ZKTeco.
significant changes in
project feasibility
The specific reasons for the change are as follows:
1. At present, the Company's production sites are scattered. According to the overall plan of the Company at this stage, Guangdong ZKTeco will mainly undertake the Company's
manufacturing functions, and will transfer the investment projects of production nature to Guangdong ZKTeco for implementation, facilitating the Company's centralized production
management, saving management costs, and improving production efficiency.
2. As the current production model and capacity of Guangdong ZKTeco are not conducive to controlling the Company's costs, quality, and delivery time, and cannot meet the
Company's future sustainable development needs after Guangdong ZKTeco mainly undertakes the Company's manufacturing function. The change of investment projects helps to
69
ZKTeco 2023 Annual Report
enhance the Company's production capacity and technological process level, thereby improving product quality, production efficiency, and market competitiveness.
3. With the change of the market, multimodal biometrics and non-contact biometric technology have developed rapidly. Computer vision products such as edge computing and
intelligent perception self-help of the IoT, intelligent robots and so on have entered the field of smart wide entrance and exit, and the business model has also been upgraded rapidly,
from the original products and solutions to the subscription and cloud service model. The Company closely tracks cutting-edge technologies and standards in the market, continuously
promotes production technology innovation, and conducts technological application engineering transformation based on biometrics core technology, continuously develops and
designs products to meet market demand. The changes in investment projects are also necessary for the Company's business development and technological achievement
transformation.
In summary, firstly, it can meet the Company's production capacity and technical process requirements, improve the production capacity of core components, ensure product quality
stability, reduce product production costs, and enhance product market competitiveness through the implementation of the Digitalization Base Project; secondly, it can fundamentally
solve the problem of mismatch between the Company's development and production sites, unify the layout and scientific centralized management of production bases, improve
production efficiency, and reduce costs; thirdly, it is beneficial for the Company to combine its acquired knowledge achievements with the latest industry technical standards, and
achieve the industrialization of the Company's technological achievements.
Applicable
The amount of over-raised funds from the Company's initial public offering of stocks was RMB 147.6392 million.
The amount, purpose,
On January 18, 2023, the Company held the 23rd Session of the Second Board Meeting and the 17th Session of the Second Supervisory Board Meeting. On February 6, 2023, the
and progress of the
Company held the Second Extraordinary General Meeting of 2023, and deliberated and approved the "Proposal on Changing the Investment Projects of Raised Funds, Changing the
over-raised funds
Special Account for Raised Funds, Increasing Capital and Providing Loans to Subsidiaries to Implement Investment Projects". The Company agrees to use the over-raised funds of
147.6392 million to invest in the construction of the Digitalization Industrial Base Project.
Applicable
Changes in the
Occurred during the reporting period
implementation
On April 26, 2023, the Company held the Second Session of the Third Board Meeting and the Second Session of the Third Supervisory Board Meeting. On May 19, 2023, the
location of projects
Company held 2022 Annual General Meeting, and deliberated and approved the "Proposal on Changing the Implementation Location and Total Investment Amount of Some Raised
invested with raised
Fund Investment Projects, and Adjusting Some Construction Contents", and adjusted the implementation location of the investment project "American Manufacturing Factory
funds
Construction Project" from "6775 Meadow Ln, Alpharetta, GA 30005" to "1600 Union Hill Rd, Alpharetta, GA 30005".
Applicable
Adjustment of
Occurred during the reporting period
implementation
On April 26, 2023, the Company held the Second Session of the Third Board Meeting and the Second Session of the Third Supervisory Board Meeting. On May 19, 2023, the
methods for projects
Company held 2022 Annual General Meeting, and deliberated and approved the "Proposal on Changing the Implementation Location and Total Investment Amount of Some Raised
invested with raised
Fund Investment Projects, and Adjusting Some Construction Contents", and changed the construction method of the investment project "American Manufacturing Factory
funds
Construction Project" from purchase to self-construction.
Applicable
The Company held the 19th Session of the Second Board Meeting and the 13th Session of the Second Supervisory Board Meeting on September 29, 2022, and deliberated and
approved the "Proposal on Using Raised Funds to Replace Self Raised Funds for Pre-invested Raised Investment Projects and Paid Issuance Expenses". It is agreed that the Company
Advance investment
will use the raised funds to replace the self raised funds of RMB 358.6078 million invested in the raised investment project and paid issuance expenses as of August 21, 2022, as well
and replacement of
as the pre-paid issuance fees of RMB 13.8425 million (excluding value-added tax) with the self raised funds.
raised funds for
On September 16, 2022, the Company held the 18th Session of the Second Board Meeting and the 12th Session of the Second Supervisory Board Meeting, and deliberated and
investment projects
approved the "Proposal on Using Its Own Funds and Foreign Exchange to Pay for Part of the Funds Raised for Investment Projects and Exchanging Them with the Raised Funds in
Equal Amounts". On January 18, 2023, the Company held the 23rd Session of the Second Board Meeting and the 17th Session of the Second Supervisory Board Meeting. On February
6, 2023, the Company held the Second Extraordinary General Meeting, and deliberated and approved the "Proposal on Changing the Investment Projects of Raised Funds, Changing
70
ZKTeco 2023 Annual Report
the Special Account for Raised Funds, Increasing Capital and Providing Loans to Subsidiaries to Implement Investment Projects". The salaries, social insurance premiums, housing
provident fund, utilities, etc. of domestic personnel of the Company in implementing the investment projects "Hybrid Biometrics IoT Intelligent Industrial Base Project", "R&D Center
Construction Project", "Global Marketing Service Network Construction Project" and the "Multimodal Biometrics Digitalization Industrial Base Construction Project" are planned to
be paid by the Company or its subsidiary implementing the investment projects in advance with their own funds. The Company collected and calculated the aforementioned advance
expenses incurred by each investment project on a monthly basis, and then transferred an equal amount of funds from the special account for investment to the Company's or its
subsidiary's own fund account for implementing the investment projects. The implementation location of the Company's investment project "American Manufacturing Factory
Construction Project" is in the United States, and the investment project construction funds need to be paid in USD. The Company's investment projects "Global Marketing Service
Network Construction Project" and "R&D Center Construction Project" include overseas construction content, and the operability of paying funds required for overseas construction
directly from the special account for raised funds is poor. Therefore, the Company plans to use its own foreign exchange to pay the required funds for the overseas parts of the "Global
Marketing Service Network Construction Project", "American Manufacturing Factory Construction Project", and "R&D Center Construction Project". Subsequently, the amount of
advance payments will be calculated monthly, and equal amounts will be transferred from the special account for raised funds to the Company's own fund account.
As of December 31, 2023, the Company has used its own funds and foreign exchange replaced with the raised funds to pay a portion of the funds raised for the investment project,
totaling RMB 44.4275 million.
Temporary
replenishment of
Not applicable
working capital with
idle raised funds
The amount and
reasons for the surplus
of raised funds during Not applicable
project
implementation
The purpose and
As of December 31, 2023, the balance of the Company's unused IPO raised funds is RMB 958.1681 million (including interest income and deducting handling fees), including RMB
destination of the
395.9781 million of demand deposit in the special account for raised funds and RMB 562.19 million of time deposit. The above financial products have high safety, meet the
raised funds that have
requirements of capital preservation, and have good liquidity, which does not affect the normal operation of the investment plan for raised funds.
not been used yet
Problems or other
situations in the use
None
and disclosure of
raised funds
71
ZKTeco 2023 Annual Report
(3) Change in the use of raised funds
Applicable □ Not applicable
Unit: RMB '0,000
Has there
The total Actual been a
amount of Actual accumulat Date when significant
Investment Benefits Have the
Correspondi raised funds investmen ed the project change in
progress as achieved expected
Changed ng original to be t amount investmen reaches its the
of the end of during this benefits
project committed invested in during this t amount expected feasibility
the period reporting been
projects the project reporting as of the conditions of the
(3)=(2)/(1) period achieved
after the period end of the for use project
change (1) period (2) after the
change
Multimodal
Biometrics Tangxia
Digitalization Production
June 30, Not Not
Industrial Base 39,605.1 7,772.69 7,772.69 19.63% No
2026 applicable applicable
Base Constructio
Construction n Project
Project
American American
Manufacturin Manufacturi
August Not Not
g Factory ng Factory 14,392.65 8.46 105.99 0.74% No
31, 2026 applicable applicable
Construction Constructio
Project n Project
Total -- 53,997.75 7,781.15 7,878.68 -- -- -- --
1. The Tangxia Production Base Construction Project has been changed to the Multimodal
Biometrics Digitalization Industrial Base Construction Project. For details, please refer to "The
situation and reasons for not achieving the planned progress or expected benefits" and
"Explanations on major changes in project feasibility" columns in the "Comparison Table for
the Use of Raised Funds".
2. On April 26, 2023, the Company held the Second Session of the Third Board Meeting and
the Second Session of the Third Supervisory Board Meeting for the American Manufacturing
Factory Construction Project, and deliberated and approved the "Proposal on Changing the
Implementation Location and Total Investment Amount of Some Raised Fund Investment
Projects, and Adjusting Some Construction Contents". On May 19, 2023, the Company held
the 2022 Annual General Meeting, and deliberated and approved the "Proposal on Changing
the Implementation Location and Total Investment Amount of Some Raised Funds Investment
Projects and Adjusting the Construction Content of Some Projects". The Company adjusted the
Description of reasons for changes, decision-
implementation location of the investment project "American Manufacturing Factory
making procedures, and information
Construction Project" from "6775 Meadow Ln, Alpharetta, GA 30005" to "1600 Union Hill
disclosure (by specific project)
Rd, Alpharetta, GA 30005", and the construction method of the Project was changed from
purchase to self-construction. After adjustment, the total investment of the Project increased by
RMB 3.4814 million, and the total investment of the Project increased from RMB 140.4451
million to RMB 143.9265 million. After this change, the additional investment amount of
RMB 3.4814 million for the Project was paid out of the previously reduced RMB 33.477
million for the Project. After this adjustment, the Project planned to use the raised funds of
RMB 143.9265 million for investment and construction. The remaining funds after this change
was changed to RMB 29.9956 million.
Reason for change:
The Company originally planned to purchase the property at "6775 Meadow Ln, Alpharetta,
GA 30005" to build American Manufacturing Factory Construction Project. Due to the
72
ZKTeco 2023 Annual Report
continuous rise in real estate prices in Georgia, the original planned purchase price of the
factory building has been constantly adjusted. The adjusted purchase cost of the building has
increased by more than 40% compared to the Company's initial budget, which has hindered the
Company's purchase plan for the factory building. At the same time, the Company has been
actively seeking suitable locations for the implementation of the American Manufacturing
Factory Investment Project, but has not been able to find suitable properties for the
construction of the investment project. Given the importance and urgency of implementing the
US investment project, as well as considering various factors such as supply chain stability and
security, the Company plans to adjust the implementation location of the US investment
project from "6775 Meadow Ln, Alpharetta, GA 30005" to "1600 Union Hill Rd, Alpharetta,
GA 30005", and to implement the US factory construction project from purchasing factory
buildings to building new facilities on the US subsidiary's own premises.
The situation and reasons for not achieving
the planned progress or expected benefits (by Not applicable
specific project)
Description of significant changes in project
Not applicable
feasibility after the change
VIII. Disposal of Significant Assets and Equity
1. Disposal of significant assets
□ Applicable Not applicable
There is no disposal of significant asset for the Company during the reporting period.
2. Disposal of significant equity
□ Applicable Not applicable
IX. Analysis of Major Holding and Joint-stock Companies
Applicable □ Not applicable
Major subsidiaries and partially-owned companies with an impact on the Company's net profit of over 10%
Unit: RMB
Compa
Company Main Registered Operating Operating
ny Total assets Net assets Net profit
Name business Capital revenue profit
type
ZK
INVESTM Subsid Establis
2,049,570.00 126,639,700.44 126,639,700.44 0.00 68,315,376.24 55,602,758.92
ENTS iaries hed
INC.
ZK
Subsid Sales of
TECHNOL 2,716,194.00 62,138,769.06 25,548,180.34 150,842,020.31 71,852,073.39 71,852,073.39
iaries goods
OGY LLC
ZKTECO
Subsid Sales of
CO., 104,469,000.00 444,030,382.71 267,761,165.40 430,025,149.79 24,623,871.26 20,793,438.25
iaries goods
LIMITED
R&D,
ZKTECO
producti
(GUANGD Subsid
on, and 800,000,000.00 1,308,313,567.83 879,157,652.69 434,527,828.99 39,679,411.94 34,127,028.54
ONG) CO., iaries
sales of
LTD
products
73
ZKTeco 2023 Annual Report
and
software
Acquisition and disposal of subsidiaries during the reporting period
Applicable □ Not applicable
Method of acquiring and disposing of Impact on overall production, operation,
Company Name
subsidiaries during the reporting period and performance
New establishment, with no significant
impact on the overall production,
RALVIE AI INC. New establishment
operation, and performance of the
Company
New establishment, with no significant
impact on the overall production,
ZKDIGIMAX PTE. LTD. New establishment
operation, and performance of the
Company
New establishment, with no significant
impact on the overall production,
ZKDIGIMAX PANAMA, S.A. New establishment
operation, and performance of the
Company
New establishment, with no significant
impact on the overall production,
ZKDIGIMAX COLOMBIA SAS New establishment
operation, and performance of the
Company
New establishment, with no significant
impact on the overall production,
ZKDIGIMAX (PTY) LTD New establishment
operation, and performance of the
Company
New establishment, with no significant
impact on the overall production,
PT. ZKDIGIMAX EXCEL NOBLE New establishment
operation, and performance of the
Company
New establishment, with no significant
impact on the overall production,
ZKDIGIMAX CHINA CO., LTD. New establishment
operation, and performance of the
Company
New establishment, with no significant
impact on the overall production,
ZK TECHNOLOGY MOROCCO New establishment
operation, and performance of the
Company
With no significant impact on the overall
Xiamen ZKTeco Cloud Valley Design
Cancellation production, operation, and performance
and Development Co., Ltd.
of the Company
Description of the main controlling and participating companies
Please refer to the relevant content of "Section X Financial Report - X. Equity in Other Entities" for details
X. Structured Entities Controlled by the Company
□ Applicable Not applicable
XI. Outlook for the Future Development of the Company
(I) Industry structure and trends
Since its establishment, the Company has been focusing on providing smart terminals with identity recognition and
verification functions, industry application software and platforms for three main application scenarios, namely smart entrance and
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ZKTeco 2023 Annual Report
exit management, smart identity verification, and smart office using multimodal "Computer Vision and Biometrics" (BioCV) as
the core technology. During the reporting period, the Company expanded its smart retail business and continued to promote the
layout of new businesses.
The application and trends of biometric technology in relevant scenarios are as follows:
(1) Application of biometric technology in the field of entrance and exit management
The biometrics entrance and exit management achieves control and management of access permissions, identity recognition,
fees, records, and alarms for people, vehicles, and objects by collecting, storing, analyzing, calculating, and processing data,
images, and other information with the biometric technology.
The application of biometric technology in the entrance and exit management industry mainly includes physical access
control, pedestrian and vehicle channels, and smart locks.
In recent years, with the increasing demand for safety, convenience, and intelligent management of entrances and exits in
cities, communities, enterprises, parks, and hospitals, as well as the continuous promotion of various biometric technologies such
as fingerprint recognition, facial recognition and palm recognition in the field of entrance and exit control management, the
intelligent transformation and construction of many offline scenarios such as transportation, buildings, communities, parks, and
parking areas have been accelerating, which enables the rapid development of the biometrics entrance and exit management
market. In the future, based on the consideration of labor costs, the current combination of manual management and equipment
management in the field of entrance and exit management and control will gradually develop towards self-service and unmanned
direction. As an important market for biometrics equipment and supporting solutions, entrance and exit management will continue
to maintain a rapid growth trend.
The main product of biometrics entrance and exit management is access control products. China's access control market was
initially dominated by keys and keyboard password locks. With the continuous expansion of market size and the development of
biometric and sensor technologies, the access control product market has shown a trend of product diversification and intelligence.
New access control management methods such as fingerprint door opening, face brushing door opening, code scanning door
opening, and remote door opening are becoming increasingly common. With the maturity of biometric technology, it has become
more and more outstanding in terms of security, convenience, non-contact, and ease of management, and its application fields are
becoming wider and wider.
With the development of the commercial intelligent buildings, as well as the promotion of the security industry and the
further intelligent upgrading of access control products, the size of China's access control market is expected to grow from RMB
14.7 billion in 2020 to RMB 23.6 billion in 2024, with a compound annual growth rate of 12.6%.
Overall, in the field of biometrics entrance and exit management, with the proposal of the national policy for new types of
infrastructure, entrance and exit management equipment mainly based on multimodal biometric technology and digital identity
verification solutions have been more widely applied in scenarios such as parks, communities, and construction sites, bringing new
business needs and development opportunities for solution providers of intelligent entrance and exit management and smart
identity verification scenarios. It is expected that the size of the domestic biometrics entrance and exit management market will
reach RMB 14.2 billion by 2024. (Data source: Frost & Sullivan)
(2) Application of biometric technology in the field of identity authentication
The application of biometric technology in the field of information security has also started very early in the Chinese market.
The application of information security starts with simple product forms such as fingerprint USB drives, fingerprint mice, and
fingerprint hard drives (system and data access authorization, file encryption, etc.), and gradually occupies the market starting
from the financial industry (internal personnel operation authorization). The development and promotion of authentication systems
(platforms) that belong to infrastructure and are compatible with various biometric technology products started around 2014, and
the initial progress was slow. Now, they have achieved fruitful results, and the number and strength of manufacturers involved in
this application field have greatly increased.
With the continuous maturity of biometric technology, biometric authentication is widely used in industries such as
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ZKTeco 2023 Annual Report
government affairs, public security, finance, social security, civil aviation, railways, hotels, etc. The continuous development of the
IoT, cloud applications, intelligent devices, and gradually mature biometric technology are key factors driving the growth of the
biometric authentication market. In addition, an increasing number of identity theft and fraud behaviors have made small and
medium-sized enterprises and large enterprises realize the importance of identity verification, and they have begun to adopt
biometric authentication solutions and services to combat these behaviors. According to a report by Frost & Sullivan, it is expected
that the global market size for biometric authentication will increase at a compound annual growth rate of 13.9% from USD 4.1
billion in 2020 to USD 6.9 billion in 2024. The continuously expanding global market will also provide a favorable market
environment and development opportunities for China's biometric authentication market.
In addition, with the requirements of the real name system for various public services and the increasing awareness of safety
requirements in society, China's identity verification is currently developing from the initial public security needs to various
industries, including aviation, railways, hotels, finance, campuses, and hospitals. With the extension and expansion of industry
applications, the size of the biometric authentication market will continue to increase. The market size of China's biometric
authentication industry is expected to reach RMB 8 billion by 2024.
Biometric authentication is the only large-scale commercial application of biometrics today. The application technology
covers facial recognition, fingerprint recognition, iris recognition, etc., and the huge demand will inevitably promote the
continuous iterative progress of these technologies.
(3) Application of biometric technology in the office field
The biometric office market is a series of intelligent office scene products and solutions that utilize technologies such as
biometrics, AI, and cloud computing to create a new type of office system that is "safe, efficient, energy-saving, healthy, and
intelligent". The main products include attendance machines, visitor machines, meeting attendance systems, and cloud attendance
systems.
With the improvement of enterprise informatization level and the increasing demand for intelligent office, as well as the
continuous development and upgrading of biometric technology, the biometric office market has developed rapidly. In the future,
based on the integrated development and application of various technologies such as biometric technology and the IoT, the global
level of office intelligence will further improve, and the biometric office market will enter a broad development space. According
to a report by Frost & Sullivan, the global biometric office market is expected to grow at a compound annual growth rate of 20.7%,
from USD 1.6 billion in 2020 to USD 3.4 billion in 2024.
With the application of biometric technology in various office smart devices such as attendance devices, meeting attendance
devices, and visitor registration devices, the size of China's biometric office market has expanded. According to a report by Frost
& Sullivan, with the further development of various biometric technologies and their application in the office field, the size of
China's biometric office market will further expand to RMB 2.8 billion by 2024 in the future, with an annual compound growth
rate of 21.1%.
Attendance machines are important products for scientific human resource management in office scenes. New technologies
are adopted for biometric attendance machines, cloud attendance solutions, etc. With the further improvement of administrative
management requirements by enterprises, the improvement of intelligent office capabilities, and the further penetration and
integration of biometric technology and IoT technology in the attendance field, the size of China's attendance market will increase
from RMB 3.1 billion in 2020 to RMB 5.5 billion in 2024, with a compound annual growth rate of 15.4% according to statistics
from CICC Qixin.
With the development of social economy and the improvement of living standards, people's demand for comfortable,
convenient, and intelligent working methods has become more urgent. Higher requirements have been put forward in terms of
intelligent and convenient office work, and intelligent attendance has become an industry trend. Currently, with the continuous
development and improvement of biometric technology, its application in attendance scenarios has become very widespread. In the
early days, biometric attendance machines mainly included fingerprint recognition attendance machines. However, with the
development of other biometric technologies, facial recognition and palm recognition have gradually entered the attendance
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ZKTeco 2023 Annual Report
market due to their non-contact characteristics.
In the overall attendance market, the proportion of biometric attendance market is also constantly increasing. In the future,
with the acceleration of the construction of the biometric office industry, as well as the upgrading and integration of various
biometric technologies, especially the development of non-contact biometric technology and cloud attendance software systems,
the size of China's biometric attendance market is expected to further expand to RMB 2.5 billion by 2024 at a compound annual
growth rate of 22.8% according to the report by Frost & Sullivan.
(4) The application of computer vision and AIGC in the field of smart retail
With the development of social economy and the acceleration of people's pace of life, convenience stores have become an
indispensable part of people's daily lives. Convenience stores are popular among consumers for their convenience, speed, and 24-
hour operation.
Currently, the global convenience store market is showing a rapid growth trend. Especially in first tier cities, the number and
scale of convenience stores are constantly expanding, and brand competition is becoming increasingly fierce. Meanwhile, the
business model of convenience stores is constantly innovating, shifting from traditional single sales models to diversified and
intelligent models. For example, many convenience stores have begun to introduce intelligent means such as self-service selling
and mobile payments to improve service efficiency and user experience.
However, the convenience store market also faces some challenges. On the one hand, with the rise of e-commerce, the
traditional retail industry has been impacted to a certain extent, so do convenience stores. On the other hand, due to the relatively
low entry threshold of the convenience store industry, there is a large amount of homogeneous competition in the market, making
it difficult to form a differentiated competitive advantage.
So, what is the future development trend of convenience stores? Firstly, convenience stores will place greater emphasis on
brand building. Building a brand image with differentiated competitive advantages through strengthening brand image and
improving service quality is the key to the development of convenience stores. Secondly, convenience stores will place greater
emphasis on intelligent development. With the advancement of technology, intelligent means will become an important means for
convenience stores to improve service efficiency and user experience. For example, by introducing technologies such as self-
service selling, mobile payment, and intelligent recommendation, intelligent service upgrades can be achieved. Finally,
convenience stores will place greater emphasis on diversified development. In addition to traditional food and beverage products,
convenience stores can also consider introducing more types of goods and services, such as coffee, quick meals, express delivery
collection, etc., to meet the diversified needs of consumers.
Computer vision refers to the technology that utilizes cameras and machine vision algorithms to classify, track and recognize
target objects, allowing computers to replace the human eye and output structured event data in real time. The application of
computer vision technology in traditional retail scenarios can obtain potential multi-dimensional data, such as passenger flow,
customer group situation, regional hotspots, and movement trajectories, achieving scientific management of people, goods, and
venues, improving operational decision-making efficiency, and improving sales per square foot.
AIGC refers to Artificial Intelligence Generated Content, which can currently include text, videos, etc. In smart retail
scenarios, the application of AIGC can quickly realize the implementation of marketing ideas, and through one click deployment
of smart retail cloud solutions, greatly improve the production efficiency of the solution.
With the rapid development of computer vision and AIGC technology, the smart retail business will also usher in
opportunities.
(II) The Company's future development strategy and specific plans
1. Overall development strategy of the Company
The root cause for the development of biometric technology is to verify "who are you?" and prove "I am me". Contemporary
biometrics has undergone more than 50 years of technological progress and widespread commercial applications. In today's
information and network society, the connotation and application of biometrics have begun to undergo a paradigm shift.
ZKTeco provides insights into the trend of transformation, elevating the attribute of biometric technology from "I tell you
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ZKTeco 2023 Annual Report
who you are" to a combination of computer vision and biometric recognition: "I know who you are and I will serve you". From a
simple technical switch function to an intelligent channel leading to personalized services, it has opened up a vast field of value-
added services.
The continuous development of information technology and the emergence of IoT have given rise to the arrival of the cyber-
physical-human ternary universe (ternary universe refers to the physical world, human society, and cyberspace). The interaction
and integration of the ternary universe constitute a complete and unified smart society. The essence of a smart society is the
extension, expansion, and closed-loop evolution of human intelligence in the ternary universe. In the development and
construction of a smart society, information technology plays an essential foundational role. The network and big data are the
bonds of the ternary universe, while AI strengthens and accelerates the communication and interaction efficiency of the ternary
universe.
Cyberspace
(3)
Human
Physical world
society
(2)
In the era of IoE, we believe that the innovative value of ZKTeco lies in the interaction value between people and scenes and
the empowering value of scenes. This value is fully reflected in the interaction and integration of the ternary universe and the
construction process of a smart society. The core technology of ZKTeco BioCV multimodal computer vision (including
biometrics), is the most efficient intelligent means and tool for communicating with the ternary universe. ZKTeco has built an
ecosystem of end, edge, cloud, and server technologies. These innovative elements of ZKTeco not only conform to the trend of
technological and industry evolution, but also lay a solid foundation for the healthy development and technological leadership of
the enterprise.
Smart entrance and exit management makes the interaction smoother, safer, and more intelligent by reprocessing, integrating
and mapping the original direct interaction process between people and the physical space in the cyberspace. In addition, the
system loads and presents more information to bring more services and value to customers. Based on multimodal BioCV core
technology, AI big model, audio and video technology, etc., ZKTeco smart entrance and exit system consolidates user scene needs
and a warm space for longing for a better experience, as well as an implementation platform for cloud, edge and end all-round
value-added services. With data as the core link, it creates true intelligent management and services, providing enterprises with a
one-stop and all-round digital transformation and upgrading solution.
Smart time management will integrate AI technology to substantially improve the level of digitization and intelligence based
on years of deep cultivation and development. Digital employees can achieve precise time management by projecting data on
social factors of people and job management factors into the cyberspace. In details such as working hour statistics, job
compensation evaluation, time cost accounting, cost reduction and efficiency improvement, and fragmented time management,
personal information, time data, management, and financial information are seamlessly integrated and comprehensively utilized,
elevating the level of refined and intelligent management to a new level.
2. Specific plan for company development
(1) Technological development planning
Continuously promote the deep integration of various products and software platforms, create a scenario data
connectivity ecosystem, and enhance the scenario customization and delivery capabilities of software platforms
The Company will continue to deeply integrate multimodal BioCV with technologies such as AI and the IoT utilizing
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ZKTeco 2023 Annual Report
independent intellectual property rights to meet the diverse management needs of users. The Company will collaborate with global
localization technical service personnel to deeply explore user personalized needs, enhance the scene customization and delivery
capabilities of software platforms in major regions around the world, and provide more diverse scene customization services to
target customers worldwide. Accelerating the implementation of technical solutions for smart retail business is an important task
currently.
Increase investment in core technologies of multimodal biometrics and deepen the integration of computer vision and
biometric technology
The Company will continue to promote the iteration of core technologies of multimodal biometrics and computer vision on
the basis of existing technologies, focusing on improving the accuracy of small models, training large models, and enhancing anti-
counterfeiting capabilities, and accelerating the application of AIGC algorithm combined with smart retail scenarios. The
Company will increase the investment in computer vision and AI research to achieve the ability to comprehensively use AI
technology to conduct structured analysis on specific scene data.
Accelerate the upgrading of product globalization engineering design capabilities and agile production capabilities,
and enhance engineering integration capabilities
The Company has a rich product line with a solid product foundation and huge integration potential. The Company will
continue to improve product design and manufacturing processes, strengthen development team building, and enhance the
intelligence level of equipment production lines. In the field of smart space entrance and exit for enterprise level applications, the
Company will continuously improve its comprehensive capabilities in engineering integration, modular manufacturing, and
linkage with global assembly plants, committed to becoming the largest manufacturer of front-end intelligent perception devices
and a localized engineering service provider in the industry.
(2) Market development plan
On the basis of the existing marketing and service network layout, the Company will continue to increase the promotion of
the investment project Global Marketing Service Network Construction Project based on domestic and international business and
market conditions, improve the coverage of potential customers, and enhance the penetration rate of current key sales areas.
(3) Continuously promoting intelligent manufacturing plans
As a global provider of biometric products and solutions, the Company will fully promote the construction and operation of
production oriented investment projects, including the Hybrid Biometrics IoT Intelligent Industrial Base Project, the ZKTeco
Multimodal Biometrics Digitalization Industrial Base Construction Project, and the American Manufacturing Factory Construction
Project. In addition, the Company will invest in the construction of a Thai factory project with its own funds to enhance global
manufacturing capacity, satisfy global order delivery and provide strong global production capacity support for the Company's
subsequent development.
(4) Human resource development plan
Human resource development is the support and guarantee for the Company's business development. The Company will
focus on introducing professional technical personnel and expert senior talents as needed, optimizing the talent structure, and
establishing a talent team that adapts to market development and technological upgrading needs. From the international aspects,
the Company will continue to introduce international localized talents, strengthen the localization team, and achieve a soft landing
in culture, management, talent, and business.
The Company will carry out training on management, professional fields and job skills for senior managers, core technicians,
middle managers and ordinary employees respectively; meanwhile, the Company will establish a human resource compensation
system that is suitable for the development of the Company and employees, and make good use of equity incentive tools to achieve
a virtuous cycle of company performance growth and employee personal wealth growth.
(5) Information construction plan
The Company will accelerate digital transformation and comprehensively promote the construction of information systems.
In 2024, the Company will continue to be committed to promoting the development of information technology. The Company
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ZKTeco 2023 Annual Report
plans to further optimize the functionality and performance of the SAP system to meet ever-changing business needs. At the same
time, we will strengthen training and technical support for employees to enhance their work abilities in the information
environment. In addition, we will also explore new information technology and solutions to further enhance the digital
transformation level of the enterprise.
(III) Risks Faced by the Company and Countermeasures
1. Operational risk
(1) Market competition risk
After years of deep cultivation in the biometric industry, the Company has formed competitive advantages in the fields of
smart entrance and exit management, smart identity verification, smart office, smart retail, and computer vision applications,
including technological and R&D strength, flexible production capacity, brand influence, and marketing service network. However,
in recent years, China's access control and management, identity authentication, office and other industries have shown an
increasing number of market entities, increased industry concentration, and increasingly fierce market competition. The
Company's main business products are facing competition pressure from various aspects such as quality, price, service and brand.
Other competitors may compete for market share through different market positioning, strategies or cost controls, making the
competition more intense. In order to maintain the Company's leading position in the industry, the Company has continuously
increased its R&D investment in recent years, insisting on developing and optimizing single and multimodal biometrics and
computer vision technology, continuously expanding and enriching the types of biometric and computer vision products and
services, and paying more attention to the overall linkage design of product software and hardware, and strengthening
competitiveness of multiple categories, thus consolidating the Company's leading position in the industry. However, with the
increasing market competition, if the Company cannot continuously optimize product design, improve production quality, enhance
brand competitiveness, expand and consolidate sales network, and Improve market penetration, the Company's existing industry
and market position will be affected, and the Company will face the risk of declining market share and profitability.
(2) Overseas business operational risks
In 2023, the Company's overseas sales revenue from countries and regions was RMB 1.3264736 billion, accounting for 67.33%
of the Company's main business income. The Company's overseas business income accounted for a relatively large proportion.
In recent years, the global economy has been facing changes in trade policies of major economies, the rise of international
trade protectionism, the deterioration of local economic environments, geopolitical conflicts and maritime restrictions caused by
geopolitical conflicts, the depreciation of currencies in many countries around the world caused by the continuous interest rate
hikes of the USD and geopolitical tensions, resulting in strong uncertainty in global trade policies. The Company's international
sales business may face international trade friction, especially the risk of Trade disputes between China and the United States.
Although China and the United States are still constantly trying to find solutions, if trade disputes between China and the United
States worsen in the future, it may have a certain adverse impact on the Company's product sales, which in turn will affect the
Company's future business performance. In addition, the Company's international business accounts for a relatively large
proportion of exports to developing countries such as India, Mexico, and Indonesia. Although the overall political, financial, and
economic systems of relevant countries are currently relatively stable, the economic development momentum is good, their
infrastructure is relatively weak, and government efficiency is relatively inefficient, compared to developed countries, which poses
potential social instability factors. If major changes occur in its political environment, economic environment, geopolitics, trade
policies with China, tariff and non-tariff barriers, and industry standards in the future, it will have a negative impact on the
Company's export business.
In addition to the risks of global economic and political environment changes and trade frictions that the Company may face,
the multinational enterprise business model of the Company will increase the difficulty of operating, financial management, and
personnel management, and the operation will be influenced by the legal and regulatory environments and business environments
of different countries and systems. Although the Company has accumulated rich experience in international business development,
if the Company's management personnel and various systems cannot meet the requirements of global operation, cross regional
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ZKTeco 2023 Annual Report
management, and standardized operation, it will also affect its operational efficiency and profitability.
(3) Tax compliance risks caused by transfer pricing arrangements between various tax entities within the Company both
domestically and internationally
As of December 31, 2023, the Company has a total of 47 overseas controlling subsidiaries located in countries and regions
such as Hong Kong, the United States, Mexico, the United Arab Emirates, and India. During the reporting period, there were cases
where the Company sold products to overseas subsidiaries and sold them locally through these subsidiaries due to business needs
between the Company and some overseas subsidiaries. There was a situation of transfer pricing in the above-mentioned transaction
links. According to the Company's self inspection, there were no cases of the Company or its overseas subsidiaries being punished
by the tax department due to transfer pricing issues during the reporting period. From the perspective of its own compliance, the
Company regularly hires professional consulting agencies to analyze and demonstrate the transfer pricing strategies involved in the
operation of the Company and some overseas subsidiaries, and issues special reports.
If there are major changes in the tax policies of the Company in different tax jurisdictions in the future, or if the Company
fails to be correctly or timely informed of the changes in tax policies, or if there are cases of tax recovery and fines due to the re-
approval of transaction prices by the competent tax authorities, it may lead to adverse effects on the Company's operations.
(4) Legal risks of the impact of industry regulatory policies related to personal information protection and data protection on
company operations
Laws, regulations, and industry norms such as the "Civil Code of the People's Republic of China", the "Cybersecurity Law of
the People's Republic of China", the "Data Security Law of the People's Republic of China", the "Personal Information Protection
Law of the People's Republic of China", and the "General Data Protection Regulation" all stipulate the collection and use of
personal information by citizens, as well as the compliance obligations of personal information controllers, and emphasizes the
legal liability for violating personal information protection and data security has been strengthened. The "Provisions of the
Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Civil Cases Relating to Processing of
Personal Information by Using the Facial Recognition Technology" (FS [2021] No. 15) provides detailed provisions on the
behavior and civil liability of information processors who violate the personal rights and interests of individuals by processing
facial information in violation of regulations.
In recent years, personal information protection and data security have become regulatory priorities in various countries
around the world, and regulatory policies related to them have been increasingly strengthened. If the Company fails to make
timely and effective adjustments and responses to relevant policies and regulations in its future business operations, there may be
potential legal risks in data compliance caused by changes in legislation or regulatory policies. Meanwhile, if the Company is
unable to strictly comply with the relevant laws, regulations, and industry norms mentioned above in the future, and if employees
violate the Company's internal regulations, or data collaborators, customers, etc. violate agreements or cause improper use or
leakage of data due to other personal reasons, it/they may be subject to administrative penalties from relevant departments or
complaints from users, and even lead to disputes such as litigation or arbitration, which may have adverse effects on the
Company's reputation and business.
2. Technology and product innovation risks
Driven by market demand and technological development, biometric technology has achieved rapid development globally.
Biometric technology is gradually iterating towards non-contact and multimodal biometrics. In addition, with the development of
cutting-edge technologies such as cloud computing, the IoT, and AI, users' personalized needs for smart terminal products and
even ecological platforms are constantly increasing in the fields of biometric technology applications such as smart entrance and
exit management, smart identity verification, and smart office where the Company is located. Industry technology is updated and
iterated quickly, requiring industry enterprises to have strong technological innovation capabilities to adapt to the rapid
development of the industry. The continuous innovation ability of products and technologies is increasingly becoming an
important component of the core competitiveness of related product and solution suppliers. The Company always attaches great
importance to technological innovation and new product R&D. In 2023, the Company's R&D expenses were RMB 213.6134
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ZKTeco 2023 Annual Report
million, accounting for 10.84% of operating revenue. As of December 31, 2023, the Company has 858 patents, including 149
invention patents; 675 computer software copyrights and 67 work copyrights, as well as strong sustained innovation capabilities.
However, if the Company cannot keep up with the development trends of domestic and foreign biometric technology and related
application products, and fully pay attention to the diverse individual needs of customers, and the subsequent R&D investment is
insufficient, resulting in the Company's technology development and product upgrading not being able to adapt to industry
technology iterations and market demand changes in a timely manner, it will face the risk of declining market competitiveness due
to the inability to maintain sustained innovation capabilities.
3. Internal control risk
(1) Management risks caused by future expansion of the Company's scale
With the construction and production of investment projects, the Company's scale has rapidly expanded, and the number of
sales, R&D, and management personnel has increased significantly, posing higher requirements for the Company's management
level and system. Although the Company has established a series of relatively complete enterprise management systems, such as
clear institutional processes in procurement, production, sales, R&D, and service, to ensure the competitiveness and reliability of
the Company's products and services, if the Company's management ability cannot be further effectively improved, it may trigger
corresponding management risks, hinder the Company's future development, and have a negative impact on the overall
profitability of the Company.
(2) Dealer management risk
During the reporting period, the Company mainly adopted a sales model that combines distribution and direct sales, and the
proportion of distribution was relatively high. In 2023, the Company achieved a revenue of RMB 1.3479553 billion through the
distribution model, accounting for 68.72% of the Company's main business income of 2023.
Except for business cooperation, each dealer is independent of the Company, and its business plan is determined
independently based on its own business goals and risk preferences. Although the Company has established strict dealer
management systems and effective and reasonable rebate policies, and maintains good cooperative relationships with major
dealers, the coverage area of marketing and service networks will continue to expand in the future with the rapid development of
the Company, and the difficulty of training, organizing, and risk management for dealers will also continue to increase. If the
Company is unable to improve its management capabilities for dealers in a timely manner, and if dealers engage in disorderly
management, poor management, illegal or irregular behavior, or if the Company cannot maintain good relationships with dealers in
the future, resulting in dealers ceasing to cooperate with the Company, and the Company is unable to quickly obtain orders from
other channels in the short term, or the incentive effect of the rebate policy decreases, it may lead to a regional decline in the sales
of the Company's products, and have a negative impact on the Company's market promotion.
4. Financial risk
(1) Risk of bad debt losses on accounts receivable
At the end of the reporting period, the book balance of the Company's accounts receivable was RMB 514.2402 million,
accounting for 26.10% of the current operating revenue. With the further expansion of the Company's business scale, the amount
of accounts receivable may continue to increase. If there are changes in the macroeconomic environment, customer operating
conditions, etc., and accounts receivable cannot be recovered in a timely manner, resulting in bad debt losses, the Company's
operating results may be adversely affected.
(2) Inventory depreciation risk
With the growth of the Company's business scale, the inventory scale has been increasing year by year. At the end of the
reporting period, the book value of the Company's inventory was RMB 372.7148 million, accounting for 12.33% of the total
current assets at the end of the period. During the reporting period, the Company comprehensively considered factors such as
expected selling price and inventory age, and made sufficient provision for inventory depreciation. At the end of the reporting
period, the provision ratio for inventory depreciation was 4.05%. The Company's inventory mainly consists of raw materials,
inventory goods, etc. The Company has always maintained a good cooperative relationship with raw material suppliers and
82
ZKTeco 2023 Annual Report
customers, and reasonably arranged the inventory of raw materials and inventory goods. However, with the further growth of the
Company's sales revenue and asset size, the Company's inventory also increases accordingly, which may lead to a decline in price,
backlog, and unsold inventory due to market changes, resulting in the risk of deteriorating financial position and declining
profitability.
(3) Risk of RMB exchange rate fluctuations
The Company's current business layout is highly internationalized, and there are many local controlling subsidiaries and
participating companies in the overseas export market. The majority of export sales are settled in USD or EUR, resulting in
significant exchange rate fluctuations in production and operation. On the one hand, the fluctuations of the RMB exchange rate
will directly affect the sales prices of the Company's exported products, thereby affecting the price competitiveness of the
Company's products; on the other hand, fluctuations of the RMB exchange rate may also affect exchange gains and losses of the
Company. If the RMB appreciates in the future, it will have a significant adverse impact on the Company's operating performance.
(4) Risk of exchange rate fluctuations in mainstream countries
Due to the high degree of internationalization of the Company, with the increase in interest rates in the United States,
currencies in many countries have depreciated, and countries with weak industrial capabilities may even implement foreign
exchange controls, which will lead to longer payment collection times for downstream customers and increased risks. Although the
Company has effectively reduced this risk through measures such as Sinosure in the past year, further interest rate hikes in the
United States this year may further exacerbate the situation and pose risks to the Company's accounts receivable.
5. Risks related to raising funds to invest in projects
(1) The risk of raising funds to invest in projects that do not yield expected returns
The investment projects with raised funds are a prudent decision and planning made by the Company based on a thorough
analysis of the current market situation, development speed, industrial environment, and future development trends of the industry,
as well as the Company's existing technological level, management ability, and expected future customer needs combined with
development prospects of the biometric industry and related application fields, as well as the expected changes in the international
trade environment. However, if there are major changes in the future market demand, industry structure, industrial policies or the
global economic and political situation, it may prevent the smooth implementation of investment projects with raised funds as
planned or prevent them from achieving expected returns.
(2) The risks of cross-border implementation of investment projects
The American Manufacturing Factory Construction Project, R&D Center Construction Project, and Global Marketing Service
Network Construction Project among these investment projects with raised funds all involve overseas investment. Although the
Company has accumulated rich experience in cross-border operations and management in overseas markets, including the United
States, through various overseas subsidiaries, the construction progress of the Company's American Manufacturing Factory
Construction Project, R&D Center Construction Project, and Global Marketing Service Network Construction Project may be
affected by multiple factors considering the global economic situation and the complex diversity of policies and cultures in various
countries. Operations in various countries also face certain uncertainties. In addition, during the implementation process of the
overseas investment projects, there may be a risk of delaying the implementation of the investment projects due to the need to
increase or re-fulfill the filing or approval procedures due to subsequent needs, policy changes, and other reasons. The Company
reminds investors to pay attention to the risks of cross-border investment projects.
XII. Reception of Activities including Research, Communication and Interviews During the
Reporting Period
Applicable □ Not applicable
83
ZKTeco 2023 Annual Report
The main content
Reception Reception Reception Reception of the discussion Index of basic information
Reception object
time location methods object type and the materials of research
provided
CITIC Securities: Yan Li, Liang Nan, Liang Shilin, and Ni Yancheng
CNINFO
Harmony Capital: Cui Danwei
http://www.cninfo.com.cn,
Beijing Xiaoying Investment Management Co., Ltd.: Deng Haocheng
Company See CNINFO Announcement date:
February Field Yinhua Fund Management Co., Ltd.: Shao Zihao
Meeting Institution (http://www.cninf February 11, 2023, Investor
9, 2023 research V-FUND Management Co., Ltd.: Zeng Jie
Room o.com.cn) Relations Activity Record
ICBC-AXA Asset Management Co., Ltd.: Liu Shang
Form of ZKTECO CO.,
Lion Fund Management Co, Ltd.: Lu Weicheng
LTD. (No. 2023-001)
Shenzhen Self-knowledge Investment Management Co., Ltd .: Zhou Jie
CNINFO
http://www.cninfo.com.cn,
Company Pacific Securities Co., Ltd.: Cao Pei See CNINFO Announcement date:
February Field
Meeting Institution Shanghai Qisheng Asset Management Co., Ltd.: He Zheng (http://www.cninf February 15, 2023, Investor
14, 2023 research
Room Guangdong Hengli Asset Management Co., Ltd.: Li Jinbo o.com.cn) Relations Activity Record
Form of ZKTECO CO.,
LTD. (No. 2023-002)
Host:
Joint Chief Analyst of Computer at CSC: Jin Ge
Chief Analyst of AI at CSC: Yu Fangbo
Other participating organizations:
Hotland Innovation Asset Management Co., Ltd., HZBANK WEALTH
MANAGEMENT CO., LTD., China Merchants Fund Management Co., Ltd., CNINFO
Shanghai Boomleading Investment Management Co., Ltd., Shanghai Mingyu Asset http://www.cninfo.com.cn,
Management Co., Ltd., AXA SPDB Investment Managers Co., Ltd., RBC Global See CNINFO Announcement date: March
March 12, Online
Others Institution Asset Management (Asia) Limited, Sage Investment Management Co,. Ltd., (http://www.cninf 13, 2023, Investor Relations
2023 Meeting
Prudence Investment Management (Hong Kong) Ltd., Comein Finance, Truvalue o.com.cn) Activity Record Form of
Asset Management Co., Ltd., Western Leadbank Fund Management Co., Ltd., ZKTECO CO., LTD. (No.
Beijing Longrising Asset Management Co., Ltd., HFT Investment Management 2023-003)
Co., Ltd., Harvest Fund Management Co., Ltd., China Post Life Insurance
Company Limited, Guotai Junan Securities Co., Ltd., Shanghai Jiupeng Asset
Management Center (Limited Partnership), CITIC Group Corporation, Shenzhen
Mingda Capital Management Co., Ltd., Shanghai Xitai Investment Management
Co., Ltd., Penghua Fund Management Co., Ltd., King Tower Asset Management
Company Ltd., Pacific Asset Management Co., Ltd., China Capital Management
84
ZKTeco 2023 Annual Report
Co., Ltd., Caitong Fund Management Co., Ltd., Fujian Haixia Bank Co., Ltd.,
China Universal Asset Management Co., Ltd., China International Fund
Management Co., Ltd., PICC Asset Management Company Limited, Shanghai
Harmony Huiyi Asset Management Co., Ltd., Changjiang Securities Company
Limited, SWS MU Fund Management Co., Ltd., AIA Company Limited Shanghai
Branch, Huatai-PineBridge Fund Management Co., Ltd., Xi'an Curiosity
Investment Management Co., Ltd., Dajia Asset Management Co., Ltd., Shanghai
Chaser Asset Management Company Limited, Qian He Capital Management Co.,
Ltd., Shanghai Hexi Investment Management Co., Ltd., Kingsun (Shanghai)
Investment Co., Ltd., Zhejiang Jingan Investment Management Co., Ltd., China
Coal Energy Company Limited, Shanghai Chengshi Asset Management Co., Ltd.,
Jiangsu Ruihua Investment Holding Group Co., Limited, Soochow Asset
Management Co., Ltd., Baoying Fund Management Co., Ltd., Beijing Zechang
Asset Management Co., Ltd., Shenzhen Sandstone Fund Management Co., Ltd.,
Zhong Ou Asset Management Co., Ltd., Shanghai Panwen Investment
Management Co., Ltd., Chang'an Fund Management Co., Ltd., Beijing Ren Bridge
Asset Management Co., Ltd, Shanghai Quanxi Investment Management Co., Ltd.,
Customer of Wealth Management Department of CSC Economic and Management
Commission, Orient Fund Management Co., Ltd., Zhejiang
BUTTONWOOD&RIGHT Asset Management Co., Ltd., Guotai Asset
Management Co., Ltd., Huashang Fund Management Co., Ltd., China Southern
Fund Management Co., Ltd., Hangzhou Yudi Investment Management Co., Ltd.,
Harfor Fund Management Co., Ltd., Beijing Derivative Sailing Investment Co.,
Ltd., Hua An Fund Management Co., Ltd., Xiamen JIN HENG YU Investment
Managerment Co., Ltd., Gfund Management Co., Ltd., Three Gorges Capital
Holding Co., Ltd., ABC-CA Fund Management Co., Ltd., Huaxi Fund
Management Co., Ltd., Shanghai Chengyi Private Equity Fund Management
Center (Limited Partnership), Everbright Wealth Management Co., Ltd., The Green
Le Investment management (Shanghai) Co., Ltd., Xiamen Zhonglue Investment
Management Co., Ltd., ABC Wealth Management Co., Ltd., Shanghai Feng Run
Capital Company Ltd., Oriental Alpha Fund Management Co., Ltd., Zhongrong
Fund Management Co., Ltd., China Life Asset Management Company Limited,
ICBC Credit Suisse Asset Management Co., Ltd., Haijin (Dalian) Investment
Management Co., Ltd., Yaokang Private Equity Fund (Hangzhou) Co., Ltd.,
Minsheng Royal Fund, Shanghai Eureka Investment Partner Co., Ltd., Beijing
Eastern Smart Rock Asset Management Co., Ltd., Beijing Heju Investment
Management Co., Ltd., GF Fund Management Co., Ltd., Shanghai XCFund
Management Co., Ltd., Qianhai Life Insurance Co., Ltd., Orient Securities Asset
Management Company Limited, Chang Xin Asset Management Co., Ltd., Taikang
85
ZKTeco 2023 Annual Report
Asset Management Co., Ltd., Fullerton Investment Management (Shanghai) Co.,
Ltd., Tongtai Fund Management Co., Ltd., China Securities (International) Finance
Holding Company Limited, Zhejiang Longhang Asset Management Co., Ltd.,
Industrial Fund Management Co., Ltd., Invesco Great Wall Fund Management Co.,
Ltd., Securities Asset Management Branch of Sealand Securities Co., Ltd., Harvest
Forever Capital Management (Beijing) Co., Ltd., Shanghai Jingxi Asset
Management Co., Ltd., Yuance (Shanghai) Investment Management LLP, National
Council for Social Security Fund, CCT Fund Management Co., Ltd., Purekind
Fund Management Co., Ltd., Yingda Insurance Asset Management Co., Ltd.,
Huatai Asset Management Co., Ltd., Shanghai Panjing Investment Center (Limited
Partnership), Xinhua Asset Management Co., Ltd., and CCB Life Insurance Asset
Management Company Limited.
CNINFO
XIAMEN China Securities Co., Ltd.: Jin Ge http://www.cninfo.com.cn,
ZKTECO Shenzhen Minsen Investment Co., Ltd.: Li Yajun See CNINFO Announcement date: March
March 15, Field
CO., LTD. Institution Shenzhen Upright Asset Management Co., Ltd.: Ma Li (http://www.cninf 17, 2023, Investor Relations
2023 research
Meeting Shanghai Guotai Junan Securities Asset Management Co., Ltd.: Fan Ming o.com.cn) Activity Record Form of
Room Sunon Investment Management Co., Ltd.: Tang Heng ZKTECO CO., LTD. (No.
2023-004)
Shenzhen Branch of Haiyin Wealth Management Co., Ltd., Haitong Securities Co.,
Ltd., Shenzhen Qianhai Decheng Asset Management Co., Ltd., Everbright
Securities Co., Ltd., Shenzhen Qianhai Wanli Private Equity Fund Management
Co., Ltd., Beijing Ding Investment Co., Ltd., China Merchants Securities Co., Ltd.,
Shenzhen Qianhai Deyun Investment Co., Ltd., Elitimes Capital Management Co.,
Ltd., :China Great Wall Securities Co., Ltd., Zheshang Securities Co., Ltd.,
CNINFO
Shenzhen Kingstone Investment Management Limited, Guangdong Branch of
Company Online http://www.cninfo.com.cn,
Shenwan Hongyuan Securities Co., Ltd., Shenzhen Hongliwan Investment
March 22 Meeting Communica See CNINFO Announcement date: March
Management Co., Ltd., Shenzhen Gaoyi Private Equity Fund Management Co.,
and 23, Rooms and tion on Institution (http://www.cninf 24, 2023, Investor Relations
Ltd., Upright Asset, Mingfu Fund, Minmetals Securities Co., Ltd., Shenzhen
2023 Online Online o.com.cn) Activity Record Form of
Xinzheng Asset Management Co., Ltd., Tebon Securities Co., Ltd., Sinolink
Meetings Platforms ZKTECO CO., LTD. (No.
Securities Co., Ltd., CHINAMATE INTERNATIONAL INVESTMENT
2023-005)
HOLDINGS LIMITED, China Securities Co., Ltd., Huachuang Asset
Management, China Capital Management, Shanghai Tourmaline Asset
Management, Broad Fund, CICC Fund, Sunrise Asset, QIN CHEN ASSET,
Soochow Self-management, Yuexi Investment, Guangzhou Xuan Yuan Investment,
Fuyun Private Equity Fund, Tiancheng Investment, Valoran Investment, Songxi
Private Fund, Hongsheng Asset, and CITIC-Prudential Fund
May 8, Quanjing Online See CNINFO CNINFO
Others Investors participating in the 2022 annual performance briefing
2023 "Investor Communica (http://www.cninf http://www.cninfo.com.cn,
86
ZKTeco 2023 Annual Report
Relations tion on o.com.cn) Announcement date: May
Interactive Online 12, 2023, Investor Relations
Platform" Platforms Activity Record Form of
(https://ir.p5 ZKTECO CO., LTD. (No.
w.net) 2023-006)
Host:
Chief Analyst of AI at CSC: Yu Fangbo
Researcher of AI at CSC: Chen Siyue
Other participating organizations and personnel:
Baoying Fund Management Co., Ltd., China Post Life Insurance Company
Limited, Dajia Asset Management Co., Ltd., Mingshi Partners Private Equity Fund
Management (Zhuhai) Co., Ltd., Shanghai Mingyu Asset Management Co., Ltd.,
CSOP Asset Management Limited, Huiquan Fund Management Co., Ltd., Chasing
Securities Co., Ltd., Shanghai Xunbao Investment Management Co., Ltd., Springs
Capital (Beijing) Limited, Xinghe Fund Management Co., Ltd., Fengyan
Investment Management (Shanghai) Co., Ltd., Shanghai Chaos Investment
(Group) Co., Ltd., Harvest Fund Management Co., Ltd., Shanghai Chaser Asset
Management Company Limited, Shanghai Alluvium Asset Management (Limited
CNINFO
Partnership), Changjiang Securities Company Limited, China Universal Asset
http://www.cninfo.com.cn,
Management Co., Ltd., Shanghai Qiyao Capital Management Partnership Limited,
See CNINFO Announcement date: May
May 29, Online CITIC Group Corporation, Beijing Longrising Asset Management Co., Ltd.,
Others Institution (http://www.cninf 30, 2023, Investor Relations
2023 Meeting Shaanxi Baopu Rongyi Asset Management Co., Ltd., Tianjin Yixinan Asset
o.com.cn) Activity Record Form of
Management Co., Ltd., CCB Life Insurance Asset Management Company Limited,
ZKTECO CO., LTD. (No.
Evergrande Life Insurance Co., Ltd., Bank of Beijing Scotiabank Asset
2023-007)
Management Co., Ltd., Hangzhou Linnuo Private Equity Fund Management Co.,
Ltd., Shanghai Simike Materials Technology Co., Ltd., Zheshang Securities Co.,
Ltd., Guorong Securities Co., Ltd., First State Cinda Fund Management Co., Ltd.,
Kingsun (Shanghai) Investment Co., Ltd., Hainan Tuopu Private Equity Fund
Management Co., Ltd., BOSERA FUNDS MANAGEMENT CO., LIMITED,
Dacheng Fund Management Co., Ltd., Xiamen JIN HENG YU Investment
Managerment Co., Ltd., Harfor Fund Management Co., Ltd., Donghai Securities
Co., Ltd., ABC-CA Fund Management Co., Ltd., Green Court Capital Management
Ltd, Tebon Fund Management Co., Ltd., Wealth Management Department of CSC
Economic and Management Commission, Broad VISION Investment Co., Ltd.,
Nanhua Fund Management Co., Ltd., Securities Asset Management Branch of
Sealand Securities Co., Ltd., Tianhong Asset Management Co., Ltd., Guangzhou
Loongzi Investment Management Co., Ltd., China Securities (International)
Finance Holding Company Limited, Beihai Dizeng Investment Consulting Co.,
87
ZKTeco 2023 Annual Report
Ltd., Caitong Securities Co., Ltd.,Western Leadbank Fund Management Co., Ltd.,
Shenzhen Sandstone Fund Management Co., Ltd., Amundi BOC Wealth
Management Co., Ltd., Beijing Ziwei Private Fund Management Co., Ltd., AXA
SPDB Investment Managers Co., Ltd., Hangzhou Yudi Investment Management
Co., Ltd., China Resources Yuanda Fund Management Co., Ltd., China Life
Pension Company Limited, Shanghai Zhonglan Fund Management Co., Ltd.,
Shanghai Liling Private Fund Management Co., Ltd., Gelin Fund Management
Co., Ltd., Zhejiang BUTTONWOOD&RIGHT Asset Management Co., Ltd.,
Soochow Asset Management Co., Ltd., GF Fund Management Co., Ltd., Shanghai
Eureka Investment Partner Co., Ltd., ZHONG CHUAN FINANCE COMPANY
LIMITED, Shanghai Kemai Asset Management Co., Ltd., China Capital
Management Co., Ltd., Fuanda Fund Management Co., Ltd., Zhongke Richland
Asset Management Co., Ltd., Jiangdong Holdings Group Co., Ltd.,Founder
Securities Co., Ltd., China Guangfa Bank Co., Ltd., Hainan Fudao Private Equity
Fund Management Co., Ltd., Cathay Lujiazui Life Insurance Company Limited,
New China Fund Management Co., Ltd., Jinxin Fund Management Co., Ltd.,
Shanghai Xiangyi Asset Management Co., Ltd., and Fuzhou Development Zone
Sanxin Asset Management Co., Ltd., etc.
CNINFO
XIAMEN COFCO Futures Co., Ltd., Nomura Orient International Securities Co., Ltd., Sunon http://www.cninfo.com.cn,
June 12 ZKTECO Investment Management Co., Ltd., Beijing Suncapital Co., Ltd., Zheshang See CNINFO Announcement date: June
Field
and 14, and ZKTeco Institution Securities Co., Ltd., Wisdomshire Asset Management Co., Ltd., Minsheng Royal (http://www.cninf 15, 2023, Investor Relations
research
2023 Meeting Fund Management Co., Ltd., Khazanah Nasional Berhad, Matthews Asia, Modular o.com.cn) Activity Record Form of
Room Asset Management, Sunshine Life, Yiheng Capital, and UBS ZKTECO CO., LTD. (No.
2023-008)
CNINFO
Value Online http://www.cninfo.com.cn,
Online Communica See CNINFO Announcement date: August
August Investors participating in the Company's 2023 semi-annual performance briefing
(https://ww tion on Others (http://www.cninf 30, 2023, Investor Relations
30, 2023 online
w.ir- Online o.com.cn) Activity Record Form of
online.cn/) Platforms ZKTECO CO., LTD. (No.
2023-009)
CICC Yinhai (Hong Kong) Fund Co., Ltd., Happy Factorial (Hong Kong) Private CNINFO
ZKTeco Online Equity Fund, Shandong Futuo Private Equity Fund, Capital Securities Corporation http://www.cninfo.com.cn,
Meeting Communica Limited, Beijing Ziyi Private Equity Fund, Beijing Red Flag Bearer Investment See CNINFO Announcement date:
September
Room and tion on Institution Management Consulting Co., Ltd., Yuekai Securities Co., Ltd., Lion Fund (http://www.cninf September 4, 2023, Investor
4, 2023
Online Online Management Co, Ltd., Guorong Fund Management Co., Ltd., China Reform o.com.cn) Relations Activity Record
Meetings Platforms Securities Fund Management Co., Ltd., Beijing Midastouch Investment Co., Ltd., Form of ZKTECO CO.,
Shenzhen Gohedge Fund Management Co., Ltd., Xi'an Fengxiang Investment LTD. (No. 2023-010)
88
ZKTeco 2023 Annual Report
Management Co., Ltd., Hongyun Private Equity Fund Management (Hainan) Co.,
Ltd., Zhuhai Haize Equity Investment Fund Management Co., Ltd., Shenzhen
Qianhai Julong Investment Co., Ltd., Jiangxi BoRun Investment Management Co.,
Ltd., and Zhuhai Heying Rongtong Investment Co., Ltd.
CNINFO
http://www.cninfo.com.cn,
Institutional investors: Zeng Yigang from ShenZhen Qian Hai Hua Lin He Chuang
ZKTeco See CNINFO Announcement date:
September Field Asset Management Ltd. and Xiao Meng from Shenzhen Junhong Investment Co.,
Meeting Others (http://www.cninf September 5, 2023, Investor
5, 2023 research Ltd.
Room o.com.cn) Relations Activity Record
Individual investors: Jiang Zheng, Peng Chaohui, Li Yuchong
Form of ZKTECO CO.,
LTD. (No. 2023-11)
Quanjing CNINFO
"Investor Online http://www.cninfo.com.cn,
Relations Communica See CNINFO Announcement date:
September
Interactive tion on Others Online investors (http://www.cninf September 19, 2023,
19, 2023
Platform" Online o.com.cn) Investor Relations Activity
(https://ir.p5 Platforms Record Form of ZKTECO
w.net) CO., LTD. (No. 2023-12)
Shenzhen
Stock
Exchange
Listing Hall
CNINFO
and
http://www.cninfo.com.cn,
Shenzhen
See CNINFO Announcement date:
September Stock All investors participating in the "Digital Economy Vitality - 2023 Half Year
Others Others (http://www.cninf September 21, 2023,
21, 2023 Exchange Collective Performance Briefing of Shenzhen Private Listed Companies"
o.com.cn) Investor Relations Activity
"Easy to
Record Form of ZKTECO
Interact"
CO., LTD. (No. 2023-13)
Platform
(http://irm.c
ninfo.com.c
n)
CNINFO
http://www.cninfo.com.cn,
Guangdong Mingxi Investment Private Equity Fund Management Co., Ltd.,
ZKTeco See CNINFO Announcement date:
November Field Shenzhen Century Zhiyuan Private Securities Fund Management Co., Ltd.,
Meeting Institution (http://www.cninf November 13, 2023,
13, 2023 research Xiamen International Bank Co., Ltd., Essence Securities Co., Ltd., and Shenzhen
Room o.com.cn) Investor Relations Activity
Hongyuan Jufu Asset Management Co., Ltd.
Record Form of ZKTECO
CO., LTD. (No. 2023-14)
89
ZKTeco 2023 Annual Report
CNINFO
http://www.cninfo.com.cn,
China Post Securities Co., Ltd., Ningbo Ruoxi Investment Management Co., Ltd.,
ZKTeco See CNINFO Announcement date:
November Field China Merchants Securities Asset Management Co., Ltd., Xiangcai Securities Co.,
Meeting Institution (http://www.cninf November 23, 2023,
23, 2023 research Ltd., Guolian Securities Co., Ltd., Shenzhen Leader Investment Holdings Co., Ltd.,
Room o.com.cn) Investor Relations Activity
and Prima Capital Investment Limited
Record Form of ZKTECO
CO., LTD. (No. 2023-15)
90
ZKTeco 2023 Annual Report
XIII. Implementation of the Action Plan for "Double Improvement of Quality and Return"
Has the Company disclosed an action plan for "double improvement of quality and return".
□ Yes No
91
ZKTeco 2023 Annual Report
Section IV Corporate Governance
I. Basic Situation of Corporate Governance
During the reporting period, the Company continuously improved its corporate governance structure based on the specific
situation of the Company, established and improved the internal management and control system of the Company, continuously
carried out in-depth corporate governance activities, and promoted standardized operation of the Company in strict accordance
with the requirements of laws, regulations, and normative documents such as the "Company Law", "Securities Law", "Code of
Corporate Governance for Listed Companies", "Rules Governing the Listing of Shares on the ChiNext Market of Shenzhen Stock
Exchange", "Shenzhen Stock Exchange Guideline No. 2 on Self Regulation of Listed Companies - Normative Operation of Listed
Companies on the Growth Enterprise Board". The Company has established a corporate governance structure composed of the
board of shareholders, Board of Directors, Board of Supervisors, and management, established and improved the rules of
procedure for board of shareholders, Board of Directors, Board of Supervisors, and independent director work system, and
established an Audit Committee, Strategy and Development Committee, Salary and Assessment Committee, and Nomination
Committee under the Board of Directors.
During the reporting period, based on the revision of relevant laws and regulations and in combination with the actual
situation of the Company, the Company improved its governance system and formulated the "Special Meeting System for
Independent Directors of ZKTECO CO., LTD.", the "Registration Management System for Insider Information of ZKTECO CO.,
LTD.", and the "Selection System for Accounting Firms of ZKTECO CO., LTD.", and revised relevant regulatory governance
systems, including the "Rules of Procedure for Shareholders' Meeting of ZKTECO CO., LTD.", the "Rules of Procedure of the
Board of Directors of ZKTECO CO., LTD.", the "Independent Director System of ZKTECO CO., LTD.", the "Related Party
Transaction Management System of ZKTECO CO., LTD.", the "Fundraising Management System of ZKTECO CO., LTD.", the
"External Guarantee Management System of ZKTECO CO., LTD." the "Implementation Rules of the Audit Committee of the
Board of Directors of ZKTECO CO., LTD.", the "Implementation Rules of the Nomination Committee of the Board of Directors
of ZKTECO CO., LTD.", the "Implementation Rules of the Salary and Assessment Committee of the Board of Directors of
ZKTECO CO., LTD.", the "Information Disclosure Management System of ZKTECO CO., LTD.", and the "Standardized
Management System for Related Party Fund Transactions of ZKTECO CO., LTD."
1. Shareholders and shareholders' meeting
The Company standardizes the convening of the shareholders' meeting in strict accordance with the requirements of the
"Rules for the Shareholders' Meetings of Listed Companies", "Rules Governing the Listing of Shares on the ChiNext Market of
Shenzhen Stock Exchange", "Articles of Association", "Rules of Procedure for Shareholders' Meeting" and other regulations,
treats all shareholders equally, and creates convenient conditions for shareholders to participate in the shareholders' meeting as
much as possible, enabling them to fully exercise their shareholder rights and protect the interests of all shareholders. Meanwhile,
the Company hires professional lawyers to witness the shareholders' meeting, ensuring that the convening and voting procedures
of the meeting comply with relevant laws and regulations, and safeguarding the legitimate rights and interests of shareholders.
During the reporting period, the Company held one annual general meeting and four extraordinary general meetings of
shareholders , all of which were held through a combination of on-site and online voting. The Company hired lawyers to attend
and witness the General Meetings, and provides legal opinions on the convening and voting procedures of the General Meetings,
fully respecting and safeguarding the legitimate rights and interests of all shareholders.
2. The Company and the controlling shareholders
The Company has independent and complete business and independent management capabilities, which are separated from
the controlling shareholders in terms of personnel, assets, finance, institutions, business, and other aspects. Each of them
independently calculates and assumes responsibilities and risks. During the reporting period, major decisions of the Company were
92
ZKTeco 2023 Annual Report
made by the board of shareholders and the Board of Directors in accordance with the law. The controlling shareholders exercised
their shareholder rights through the board of shareholders, and there were no direct or indirect interventions beyond the
shareholders' meeting in the Company's decision-making and operating activities. There were no violations of commitments, and
there were no situations such as occupying company funds or requiring guarantees for them or others.
3. Directors and the Board of Directors
The Company's Board of Directors has 7 directors, including 3 independent directors. The number of directors and personnel
composition meet the requirements of laws, regulations, and the Company's Articles of Association. All directors fulfill their
duties with integrity, diligence, and conscientiousness, attend meetings on time, actively participate in training, and continuously
improve their performance level. The Board of Directors of the Company has four specialized committees: the Audit Committee,
the Strategy and Development Committee, the Salary and Assessment Committee, and the Nomination Committee. Each
specialized committee strictly performs its duties in accordance with relevant laws and regulations, the Company's "Articles of
Association", and the rules of procedure of each specialized committee of the Board of Directors, and operates well. During the
reporting period, the Company established a special meeting mechanism for independent directors of the Board of Directors to
make decisions on relevant matters, which played a positive role in improving the Company's governance structure and
standardizing operations, and safeguarding the interests of public shareholders.
4. Supervisors and the Board of Supervisors
The Company's Board of Supervisors is composed of three supervisors, with one employee representative supervisor. The
number of members, appointment and removal of members, composition and qualifications of the Board of Directors all comply
with the requirements of the Company's "Articles of Association" and the "Rules of Procedure for the Board of Supervisors".
The supervisors and Board of Supervisors of the Company strictly implement the relevant provisions of the Company's
"Articles of Association" and the "Rules of Procedure for the Board of Supervisors", conscientiously fulfill their responsibilities,
and are able to attend the supervisory board meetings, attend board meetings, and shareholders' meetings in a spirit of being
responsible to shareholders; review the regular reports prepared by the Board of Directors and provide written verification
opinions, effectively supervise the legality and compliance of the Company's major issues, financial position, and the performance
of duties by directors and senior managers, and effectively safeguard the legitimate rights and interests of all shareholders.
5. Performance appraisal and incentive and restraint mechanisms
The Company has gradually established and improved an enterprise performance evaluation and incentive system, and the
appointment of senior managers is open and transparent, in accordance with laws and regulations. During the reporting period, the
senior managers of the Company have conscientiously fulfilled their work responsibilities, as indicated by assessment.
6. Improve the quality of information disclosure and effectively protect the rights and interests of investors
The Company truthfully, accurately, timely, fairly, and completely discloses relevant information in strict accordance with
relevant laws and regulations, as well as the requirements of the "Articles of Association" and the "Information Disclosure
Management System". The Board Secretary of the Company is designated to be responsible for information disclosure and
investor relationship management, strengthen communication with investors through channels such as investor hotlines, faxes,
dedicated email, exchange interactive platforms, and receiving shareholder visits, strictly implement the requirements for insider
information management, ensure that all shareholders and investors of the Company can obtain information fairly, and
continuously improve the transparency of the Company.
7. Regarding stakeholders
The Company fully respects and safeguards the legitimate rights and interests of stakeholders, achieves coordination and
balance of interests among shareholders, employees, society, and other parties, and jointly promotes the sustained and sound
development of the Company.
Are there significant differences between the actual situation of corporate governance and laws, administrative regulations, and the
regulations on listed company governance issued by the CSRC
□ Yes No
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ZKTeco 2023 Annual Report
There are no significant differences between the actual situation of corporate governance and laws, administrative regulations, and
the regulations on listed company governance issued by the CSRC.
II. Company's Independence in Assets, Personnel, Finances, Organizations and Businesses
from Controlling Shareholders and Actual Controller
The Company operates in strict accordance with relevant laws, regulations, and the requirements of the "Company Law",
"Securities Law", and the "Articles of Association". It is independent of the controlling shareholders and actual controllers of the
Company in terms of assets, personnel, finance, institutions, and business, and has a complete asset and business system and the
ability to operate independently in the market.
1. Asset Completeness
The ownership of the necessary assets for the Company's current business and production operations is fully enjoyed by the
Company independently, with complete control and domination over all assets, and there is no situation of sharing with
shareholder units. The Company has an independent R&D, procurement, production, and sales system, as well as a business
system and main assets related to operations.
2. Personnel independence
The Company shall appoint directors and supervisors in accordance with the relevant provisions of the "Company Law" and
the "Articles of Association". The Board of Directors shall appoint senior managers, and the labor, personnel, and salary
management of the Company shall be completely independent of the shareholder unit. The general manager, deputy general
manager, CFO, and secretary of the Board of Directors and other senior managers of the Company have not held any positions
other than directors or supervisors in other enterprises controlled by the controlling shareholder or actual controller, and have not
received salaries in other enterprises controlled by the controlling shareholder or actual controller. The financial personnel of the
Company do not work part-time in other enterprises controlled by the controlling shareholder or actual controller.
3. Financial independence
The Company has established an independent financial accounting system, capable of making financial decisions
independently, with standardized financial accounting systems and financial management systems for branches and subsidiaries.
The Company has not shared bank accounts with controlling shareholders, actual controllers, and other enterprises under its
control.
4. Independence in organizations
The Company has established and improved its internal business management structure, independently exercising its business
management powers, and there is no institutional confusion with other enterprises controlled by controlling shareholders or actual
controllers.
5. Business independence
The Company uses multimodal "Computer Vision and Biometrics" (BioCV) as its core technology and does not rely on
shareholder units or their affiliated enterprises. There is no situation where shareholders intervene in the Company's business
operations by retaining procurement and sales institutions, monopolizing business channels, etc. There is no horizontal
competition or significantly unfair related party transactions between the Company and other enterprises controlled by the
controlling shareholder or actual controller, and the controlling shareholder or actual controller has promised not to engage in any
business or activity that constitutes or may constitute horizontal competition with ZKTeco and enterprises controlled by ZKTeco.
III. Horizontal Competition
□ Applicable Not applicable
94
ZKTeco 2023 Annual Report
IV. Annual General Meetings and Extraordinary General Meetings Convened During the
Reporting Period
1. General Meetings convened during this reporting period
Proportion
Meeting of Convenin Disclosure
Meeting Resolution of the Meeting
Type participating g Date Date
investors
The 1st
Extraordi
Extraordinary
nary January January 16, Deliberation and approval of the "Proposal on
General Meeting 70.96%
General 16, 2023 2023 Renewing the Appointment of Accounting Firms"
of Shareholders in
Meeting
2023
The 2nd Deliberation and approval of the "Proposal on
Extraordi
Extraordinary Changing the Investment Projects of Raised
nary February February 6,
General Meeting 70.97% Funds, Changing the Special Account for Raised
General 6, 2023 2023
of Shareholders in Funds, Increasing Capital and Providing Loans to
Meeting
2023 Subsidiaries to Implement Investment Projects"
Deliberation and approval of the "Proposal on the
Election and Nomination of Non-Independent
The 3rd Director Candidates for the Third Board of
Extraordi
Extraordinary Directors", the "Proposal on the Election and
nary April 7, April 7,
General Meeting 73.65% Nomination of Independent Director Candidates
General 2023 2023
of Shareholders in for the Third Board of Directors", and the
Meeting
2023 "Proposal on the Election and Nomination of
Candidates for Non-employee Representative
Supervisors of the 3rd Board of Supervisors"
Deliberation and approval of the "Proposal on the
2022 Annual Report and Its Summary", the
"Proposal on the 2022 Work Report of the Board
of Directors", the "Proposal on the 2022 Work
Report of the Board of Supervisors", the
"Proposal on the 2022 Annual Financial
Settlement Report", the "Proposal on the 2022
Profit Distribution proposal", the "Proposal on
Changing the Registered Capital, Amending the
Articles of Association, and Handling the
Annual
Annual General May 19, May 19, Procedures for Changing Industrial and
General 73.66%
Meeting of 2022 2023 2023 Commercial Registration", the "Proposal on
Meeting
Applying for Comprehensive Credit Line from
Banks and Handling Bank Loans", the "Proposal
on Using Idle Self-owned Funds to Purchase
Financial Products", the "Proposal on 2023
Compensation Plan for Directors", the "Proposal
on 2023 Compensation Plan for Supervisors", and
the "Proposal on Changing the Implementation
Location and Total Investment Amount of Some
Raised Funds Investment Projects and Adjusting
the Construction Content of Some Projects"
The 4th
Extraordi
Extraordinary
nary November November Deliberation and approval of the "Proposal on
General Meeting 70.36%
General 27, 2023 27, 2023 Proposed Change of Accounting Firm"
of Shareholders in
Meeting
2023
95
ZKTeco 2023 Annual Report
2. Extraordinary General Meetings Convened at the Request of Preferred Shareholders with Resumed
Voting Rights
□ Applicable Not applicable
V. Arrangement for Differences in Voting Rights of the Company
□ Applicable Not applicable
VI. Governance of Red Chip Structured Companies
□ Applicable Not applicable
VII. Information about Directors, Supervisors, and Senior Managers
1. Basic information
Share
Share Reason
s Other
Shares s s for
increa changes Shares
held at decre change
Commenc Termin sed in held at
the ased s in
Gen A Tenure ement of ation of durin increase the end
Name Positions beginnin durin share
der ge status term of term of g the or of the
g of the g the increas
office office perio decreas period
period period e or
d e (shares)
(shares) (share decreas
(share (shares)
s) e
s)
Che Equity
Mal Chairma Incum December April 6, 26,171,0 7,851,3 34,022,3
Quanh 55 distribu
e n bent 14, 2007 2026 00.00 00.00 00.00
ong tion
Registr
Incum April 11, April 6, ation of
Director owners
bent 2020 2026
Jin 7,800.0 hip of
Mal 0.00 7,800.00
Hairo 42 0 Class II
e
ng restrict
General Incum January April 6, ed
manager bent 31, 2019 2026 shares
Incum June 28, April 6,
Director
Ma bent 2016 2026
Mal
Wenta 41 Deputy April 6, 0.00
e Incum June 28,
o General 2026
bent 2016
Manager
Registr
ation of
owners
Fu
Mal Incum June 28, April 6, 7,150.0 hip of
Zhiqia 40 Director 0.00 7,150.00
e bent 2016 2026 0 Class II
n
restrict
ed
shares
Dong Independ
Fem Incum June 3, April 6,
Xiuqi 52 ent 0.00
ale bent 2020 2026
n director
Zhuo Independ
Fem Incum April 11, April 6,
Shuya 43 ent 0.00
ale bent 2020 2026
n director
Pang Mal Independ Incum January April 6,
53 0.00
Chunli e ent bent 12, 2021 2026
96
ZKTeco 2023 Annual Report
n director
Employe
e
Represen
tative
Jiang Supervis
Fem Incum June 28, April 6,
Wenn 41 or, 0.00
ale bent 2016 2026
a Chairma
n of the
Board of
Supervis
ors
Wu Mal Supervis Resign April 11, April 7,
42 0.00
Xinke e or ed 2020 2023
Liu Fem Supervis Resign June 28, April 7,
40 0.00
Jiajia ale or ed 2016 2023
Li Deputy June 28,
Mal Incum April 6,
Zhino 51 General 2016 0.00
e bent 2026
ng Manager
Secretary
Incum April 15, April 6,
of the 0.00
bent 2020 2026
Guo Fem board
43
Yanbo ale Deputy
Incum September April 6,
General 0.00
bent 16, 2022 2026
Manager
Wang
Mal Incum April 15, April 6,
Youw 58 CFO 0.00
e bent 2020 2026
u
Registr
ation of
owners
Mu Deputy
Fem Incum September April 6, 11,700. 11,700.0 hip of
Wenti 37 General 0.00
ale bent 16, 2022 2026 00 0 Class II
ng Manager
restrict
ed
shares
Wang
Mal Supervis Incum April 7, April 6,
Huine 36 0.00
e or bent 2023 2026
ng
Yang
Mal Supervis Incum April 7, April 6,
Xianfe 40 0.00
e or bent 2023 2026
ng
26,171,0 7,877,9 34,048,9
Total -- -- -- -- -- -- 0.00 0.00 --
00.00 50.00 50.00
Any resignation of directors or supervisors and dismissals of senior managers during their term of office during the reporting
period
Yes □ No
The Company's supervisors Liu Jiajia and Wu Xinke will no longer serve as supervisors from April 7, 2023 due to the expiration
of their terms of office.
Changes of directors, supervisors, and senior managers of the Company
Applicable □ Not applicable
Name Positions Type Date Reasons
Resignation upon
Resignation upon
Liu Jiajia Supervisor April 7, 2023 expiration of
expiration of term
term
Resignation upon Resignation upon
Wu Xinke Supervisor April 7, 2023
expiration of term expiration of
97
ZKTeco 2023 Annual Report
term
Yang Xianfeng Supervisor Elected April 7, 2023 Newly appointed
Wang Huineng Supervisor Elected April 7, 2023 Newly appointed
2. Positions and Incumbency
The professional background, main work experience, and current responsibilities of the Company's current directors, supervisors,
and senior managers
(1) Directors
Mr. Che Quanhong, born in August 1968, Chinese nationality, without permanent residency abroad, holds a bachelor's degree.
He graduated from Lanzhou University with a major in Semiconductor Physics in July 1991 and currently serves as the Chairman
of the Company. Mr. Che Quanhong served as the Chairman and General Manager of the Company from December 2007 to
January 2019, and has been serving as the Chairman of the Company since January 2019. Mr. Che Quanhong is currently a
supervisor of Fujian Zhongkong Mining Co., Ltd. and a member of the First Council of Lanzhou University.
Mr. Jin Hairong, born in July 1981, Chinese nationality, without permanent residency abroad, holds a bachelor's degree, and
currently serves as the Legal Representative, Director, and General Manager of the Company. Mr. Jin Hairong served as the Sales
Manager and General Manager Assistant of the Company from February 2008 to February 2014. From February 2014 to January
2019, he served as the General Manager of the Card Business Unit of the Global Marketing Center of the Company. From
February 2019 to March 2020, he served as the General Manager and Legal Representative of the Company. From April 2020 to
present, he has served as a Director, General Manager, and Legal Representative of the Company.
Mr. Ma Wentao, born in August 1982, Chinese nationality, without permanent residency abroad, holds a bachelor's degree
and currently serves as the Director and Deputy General Manager of the Company. Mr. Ma Wentao served as the European
Regional Head of the Global Marketing Center and the Sales Director of the International Business Group from December 2007 to
June 2016. From June 2016 to February 2020, he served as a Director and Deputy General Manager of the Company. From
February 2020 to present, he has served as a Director, Deputy General Manager, and Head of the R&D Center.
Mr. Fu Zhiqian, born in February 1984, Chinese nationality, without permanent residency abroad, holds a bachelor's degree
and currently serves as a Director of the Company. Mr. Fu Zhiqian served as the Marketing Manager of the Global Marketing
Center from January 2008 to December 2009, President Assistant from January 2010 to December 2012, General Manager of the
Security Division of the Global Marketing Center in China from January 2013 to December 2018, Director of the Company from
June 2016 to December 2018, and Director and Head of the Global Marketing Center in China from January 2019 to present.
Ms. Zhuo Shuyan, born in November 1980, Chinese nationality, without permanent residency abroad, holds a bachelor's
degree and currently serves as an independent director of the Company. Ms. Zhuo Shuyan served as a legal assistant/lawyer at
China Commercial Law Firm from June 2004 to March 2009, and as a lawyer at Guangdong Gaorui Law Firm from March 2009
to July 2015. From November 2017 to October 2020, she served as a Supervisor of Shenzhen Landa Investment Development Co.,
Ltd. She currently serves as an independent director of the Company, a partner of Shanghai GF Law Firm (Shenzhen Branch), a
Supervisor of Guangzhou Aiji Food Co., Ltd. and a Supervisor of Zizai Zhongxing Health Culture (Shenzhen) Co., Ltd.
Ms. Dong Xiuqin, born in October 1971, Chinese nationality, without permanent residency abroad, holds a doctoral degree, is
a CPA, and currently serves as an independent director of the Company. Ms. Dong Xiuqin has been a teacher at the School of
Economics at Shenzhen University since August 1996. From November 2014 to October 2019, she served as an independent
director of Shenzhen Tempus Global Business Service Group Holding Ltd. From February 2015 to August 2020, she served as an
independent director of Shenzhen Invt Electric Co., Ltd. From October 2020 to April 2021, she served as an independent director
of Shenzhen Soocas Technology Co., Ltd. From October 2018 to March, 2024, she has served as an independent director of
Shenzhen Longood Intelligent Electric Co., Ltd. From January 2019 to present, she has served as an independent director of
Shenzhen Jingquanhua Technology Co., Ltd. From February 2021 to January, 2024, she has served as an independent director of
98
ZKTeco 2023 Annual Report
Colorlight Cloud Tech Ltd. From July 2021 to present, she has served as an independent director of Shenzhen Riland Industry Co.,
Ltd.
Mr. Pang Chunlin, born in 1971, Chinese nationality, without permanent residency abroad, holds a master's degree and
currently serves as an independent director of the Company. Mr. Pang Chunlin served as an engineer at Oriental STAR Machine
Manufacture Co., Ltd. from 1993 to 1996. From 1997 to 2000, he served as the Technical Manager of Murakami Shanghai Office.
From 2000 to 2006, he served as the Deputy General Manager of Shenzhen Qingyi Photomask Limited. From 2007 to December
2017, he served as the Executive Director and Deputy Secretary General of the China Electronics Standardization Association.
From November 2014 to March 2018, he served as an independent director of Zhuhai TOPSUN Electronic Technology Co., Ltd.
From 2015 to December 2018, he served as the Deputy Secretary General of the Chinese Association of Automation. From
September 2016 to June 2019, he served as the Director of Unicom Intelligent Network Technology Co., Ltd. From January 2015
to May 2021, he served as the independent director of Shenzhen Qingyi Photomask Limited. From February 2015 to present, he
has served as the Legal Representative, General Manager and Executive Director of Chelian Innovation (Beijing) Science and
Technology Center. From December 2016 to present, he has served as the Secretary General of the Zhongguancun Telematics
Industry Application Alliance. From June 2018 to present, he has been serving as the Legal Representative and the Executive
Director of Open Unmanned Farm Engineering Technology (Jiangsu) Co., Ltd. From November 2021 to present, he has been
serving as the Legal Representative and Executive Director of the Whole Process Unmanned Operation Technology Promotion
(Jiangsu) Co., Ltd. From December 2021 to present, he has served as a Director of Shanghai Pateo Electronic Equipment
Manufacturing Co., Ltd. From May 2022 to April 2023, he has served as a Director of Shenzhen Qingyi Photomask Limited. From
February 2023 to present, he has served as an Executive Director of Qiaosuan Information Technology (Beijing) Co., Ltd. From
June 2023 to present, he has served as the General Manager, Legal Representative, and Executive Director of Onman Intelligent
Machinery (Beijing) Co., Ltd. From August 2023 to present, he has served as the General Manager, Legal Representative, and
Executive Director of Onman International Trade (Beijing) Co., Ltd.
(2) Supervisors
Ms. Jiang Wenna, born in February 1983, Chinese nationality, without permanent residency abroad, holds a bachelor's degree,
and currently serves as the Chairman of the Company's Board of Supervisors. Ms. Jiang Wenna served as Assistant Manager,
Marketing Specialist, Manager of International Comprehensive Department, Manager of International Human Resources
Department, and Manager of Group Human Resources Center in Shenzhen ZKTeco Overseas Department from September 2007 to
May 2016. From June 2016 to April 2018, he served as the Manager of the Company's Human Resources Center, and since April
2018, he has been the Head of the Company's Business and Tourism Department. Since June 2016, he has served as the Chairman
of the Company's Board of Supervisors.
Mr. Yang Xianfeng, born in December 1984, Chinese nationality, without permanent residency abroad, holds a bachelor's
degree and currently serves as the Product Director of the Product Department of Xiamen ZKTeco International Business Group.
Mr. Yang Xianfeng has held various positions such as Technical Supporter, Department Manager, and Product Manager in the
Company since May 2010. He is currently the Product Director of the Global Marketing Center Armatura and the Global Market
Product Sharing Center of the ZKTeco International Business Group. He has been serving as the Supervisor of the Company since
April 7, 2023.
Mr. Wang Huineng, born in June 1987, Chinese nationality, without permanent residency abroad, holds a bachelor's degree
and currently serves as the Manager of International Project and Ecological Cooperation Department of XIAMEN ZKTECO. Mr.
Wang Huineng served as the Hardware Assistant Engineer, Testing Team Leader of the Pre-research Department, Software
Testing Department Manager, and Testing Department Manager in Shenzhen ZKTeco from March 2010 to November 2013. From
December 2013 to November 2017, he served as the Operations Director, General Manager of the Management Department, and
Operations Director of the Biometric Card Business Unit of Xiamen ZKTeco Biometric Identification Technology Co., Ltd. From
December 2017 to November 2019, he served as the Operations Director and General Manager of Guizhou Zhongjiang Intelligent
Technology Co., Ltd. From February 2019 to January 2021, he served as the Head of the International Security and Project
99
ZKTeco 2023 Annual Report
Services Department of the International Business Group of the Company's Global Marketing Center. Since February 2021, he has
been serving as the Manager of the Armatura Global Marketing Center and Project and Ecological Cooperation Department of
ZKTeco International Business Group. Since April 7, 2023, he has been serving as the Supervisor of the Company.
(3) Senior managers
Mr. Jin Hairong is the Director and General Manager of the Company, and his resume can be found in "(1) Appointment of
directors" in this section.
Mr. Ma Wentao is the Director and Deputy General Manager of the Company, and his resume can be found in "(1)
Appointment of directors" in this section.
Mr. Li Zhinong, born in July 1972, Chinese nationality, without permanent residency abroad, holds a master's degree. Mr. Li
Zhinong served as the Technical Director of Shenzhen ZKTeco from May 2006 to December 2007, the Technical Director of the
Company from December 2007 to May 2016, and the Deputy General Manager and Technical Director of the Company from June
2016 to present.
Mr. Wang Youwu, born in December 1965, Chinese nationality, without permanent residency abroad, holds a bachelor's
degree. Mr. Wang Youwu served as the Investment Banking Headquarters Manager of Dongxing Securities Co., Ltd. from
October 2007 to December 2009. From January 2010 to December 2015, he served as the Executive General Manager of the
Enterprise Financing Department of Changjiang Securities Consignment Inward & Sponsoring Broker Co., Ltd. He joined the
Company in January 2016 and served as a Director and Deputy General Manager from June 2016 to April 2020. Since April 2020,
he has been serving as the Company's CFO and has also served as the Chairman Assistant of the Company since January 2022.
Ms. Guo Yanbo, born in January 1981, Chinese nationality, without permanent residency abroad, holds a bachelor's degree, is
Certified Management Accountant (CMA), and currently serves as the Secretary of the Board of Directors, Head of the Investment
and Financing Department, and Deputy General Manager of the Company. Ms. Guo Yanbo served as the Head of the Company's
Overseas Department, CFO, and the Head of HR Department from December 2007 to December 2015. From January 2016 to
October 2017, she served as the Head of the Company's Audit Department. From October 2017 to March 2020, she served as the
Head of the Audit and Investment and Financing Department. From April 2020 to September 2022, she served as the Secretary of
the Company's Board of Directors and the Head of the Investment and Financing Department. From September 2022 to present,
she has served as the Deputy General Manager, Secretary of the Company's Board of Directors, and the Head of the Investment
and Financing Department. From February 2018 to October 2022, she served as a Supervisor of Xinhuaxin (Xi'an) Information
Technology Co., Ltd. (formerly known as "Xi'an Huaxin Smart Digital Technology Co., Ltd.").
Ms. Mu Wenting, born in December 1986, Chinese nationality, without permanent residency abroad, holds a bachelor's
degree. From August 2010 to January 2017, Ms. Mu Wenting served as the Sales Representative for the Latin American Business
Group of the International Sales Department, Project Management Specialist for the AFIS Project Group of the R&D Business
Group, Marketing Specialist and Department Manager for the International Market and Brand Strategy Department, and Manager
for the Company's Brand Strategy Department. From February 2017 to February 2018, she served as the Director of the
Chairman's Office and Chairman Assistant. From February 2018 to January 2022, she served as the General Manager of the
Management Department of the Manufacturing Center. From January 2022 to September 2022, she served as the Director of the
General Manager's Office and Chairman Assistant. From September 2022 to present, she has served as the Deputy General
Manager, Director of the General Manager's Office, and Chairman Assistant of the Company.
Employment in shareholder units
□ Applicable Not applicable
Positions held in other entities
Applicable □ Not applicable
Compensation and
Positions held in Commencement Termination of the
Name Name of other entities allowance from the
other entities of the term term
other entities
100
ZKTeco 2023 Annual Report
December 30,
ZK TIMES CO., LIMITED Director March 3, 2023 No
Che 2016
Quanhong Fujian Zhongkong Mining
Supervisor March 26, 2008 No
Co., Ltd.
School of Economics,
Teacher August 1, 1996 Yes
Shenzhen University
Shenzhen Jingquanhua Independent
January 10, 2019 Yes
Technology Co., Ltd. director
Shenzhen Longood
Dong Independent
Intelligent Electric Co., October 12, 2018 March 27, 2024 Yes
Xiuqin director
Ltd.
Independent
Colorlight Cloud Tech Ltd. February 3, 2021 January 19, 2024 Yes
director
Shenzhen Riland Industry Independent
July 13, 2021 Yes
Co., Ltd. director
Shanghai GF Law Firm
Partner, Lawyer July 1, 2015 Yes
(Shenzhen Branch)
Guangzhou Aiji Food Co.,
Zhuo Supervisor October 1, 2013 No
Ltd.
Shuyan
ZiZai Zhongxing Health
Culture (Shenzhen) Co., Supervisor May 1, 2019 No
Ltd.
Qingyi Photomask Limited Director May 12, 2022 April 4, 2023 Yes
Legal
Chelian Innovation Representative,
(Beijing) Science and General Manager February 1, 2015 No
Technology Center and Executive
Director
Zhongguancun Telematics
Industry Application Secretary General December 9, 2016 Yes
Alliance
Open Unmanned Farm Legal
Engineering Technology representative and June 1, 2018 No
(Jiangsu) Co., Ltd. executive director
Whole Process Unmanned
Legal
Operation Technology
representative and November 5, 2021 No
Promotion (Jiangsu) Co.,
executive director
Pang Ltd.
Chunlin Shanghai Pateo Electronic
Equipment Manufacturing Director December 2, 2021 Yes
Co., Ltd.
Qiaosuan Information
Technology (Beijing) Co., Executive Director February 15, 2023 No
Ltd.
Legal
Onman Intelligent Representative,
Machinery (Beijing) Co., General Manager June 9, 2023 No
Ltd. and Executive
Director
Legal
Representative,
Onman International Trade
General Manager August 7, 2023 No
(Beijing) Co., Ltd.
and Executive
Director
Penalties imposed by securities regulatory authorities on current and resignation directors, supervisors, and senior managers of the
Company in the past three years during the reporting period
101
ZKTeco 2023 Annual Report
□ Applicable Not applicable
3. Remuneration of directors, supervisors and senior managers
Decision making process, determination basis and actual payment situation of remuneration for directors, supervisors and senior
managers
The decision-making procedure for the remuneration of directors, supervisors and senior managers: In accordance with
relevant provisions such as the "Articles of Association", the remuneration of directors and supervisors of the Company shall be
determined by the board of shareholders of the Company after being deliberated and approved by the Board of Directors, and the
remuneration of senior managers shall be determined by the Board of Directors of the Company.
The basis for determining the remuneration of directors, supervisors and senior managers: Independent directors of the
Company only receive allowances, with each person receiving RMB 120,000 per year. Mr. Che Quanhong, as the Full-time
Chairman of the Company, receives the Chairman's salary, which is based on the salary standards of senior managers. Non-
independent directors who hold other positions within the Company shall not receive additional director allowances in addition to
their own position salary. Directors, supervisors, and senior managers serving in the Company shall receive compensation in
accordance with the Company's relevant salary and performance evaluation management system based on their specific
management positions in the Company. Salary is divided into basic salary and performance related pay. The basic salary is paid
monthly based on fixed salary, while performance related pay is assessed based on annual business goals, and is determined and
paid based on the annual achievement of benefits and personal work performance completion.
The actual payment of compensation for directors, supervisors and senior managers: During the reporting period, the total
compensation for directors, supervisors and senior managers of the Company was RMB 7.5094 million.
Remuneration of directors, supervisors, and senior managers during the reporting period of the Company
Unit: RMB '0,000
Whether to
Total pre-tax receive
compensation remuneration
Name Gender Age Position Tenure status
received from from related
the Company parties of the
Company
Che
Male 55 Chairman Incumbent 122.47 No
Quanhong
Jin Hairong Male 42 Director and General Manager Incumbent 60.92 No
Director and Deputy General
Ma Wentao Male 41 Incumbent 57.43 No
Manager
Fu Zhiqian Male 40 Director Incumbent 46.12 No
Dong
Female 52 Independent director Incumbent 12 No
Xiuqin
Zhuo
Female 43 Independent director Incumbent 12 No
Shuyan
Pang
Male 53 Independent director Incumbent 12 No
Chunlin
Employee Representative
Jiang Wenna Female 41 Supervisor, Chairman of the Incumbent 22.76 No
Board of Supervisors
Wu Xinke Male 42 Supervisor Resigned 16.74 No
Liu Jiajia Female 40 Supervisor Resigned 11.27 No
Wang
Male 36 Supervisor Incumbent 20.98 No
Huineng
Yang
Male 40 Supervisor Incumbent 31.05 No
Xianfeng
102
ZKTeco 2023 Annual Report
Li Zhinong Male 51 Deputy General Manager Incumbent 149.26 No
Secretary of the Board of
Guo Yanbo Female 43 Directors and Deputy General Incumbent 51.46 No
Manager
Wang
Male 58 CFO Incumbent 65.05 No
Youwu
Mu Wenting Female 37 Deputy General Manager Incumbent 59.43 No
Total -- -- -- -- 750.94 --
Other explanations
Applicable □ Not applicable
In 2023, Li Zhinong, the Deputy General Manager of the Company, mainly engaged in R&D and its management work abroad.
His salary for the year was RMB 1.4926 million, an increase of 136.55% compared to the previous year. In addition, the salaries of
other directors (excluding independent directors), supervisors, and senior managers for the year 2023 have slightly increased
compared to the previous year, consistent with the trend of slight increase in net profit attributable to the parent company after
excluding share-based payment fees.
VIII. Performance of Duties by Directors during the Reporting Period
1. The Board of Directors during this reporting period
Session Convening Date Disclosure Date Resolution of the Meeting
The 23rd
See CNINFO "Announcement on the Resolutions of the 23rd
Session of the
January 18, 2023 January 20, 2023 Session of the Second Board Meeting" (Announcement No.
Second Board
2023-002)
Meeting
The 24th
See CNINFO "Announcement on the Resolutions of the 24th
Session of the
March 21, 2023 March 23, 2023 Session of the Second Board Meeting" (Announcement No.
Second Board
2023-014)
Meeting
The 1st
See CNINFO "Announcement on the Resolutions of the 1st
Session of the
April 7, 2023 April 7, 2023 Session of the Third Board Meeting" (Announcement No.
Third Board
2023-027)
Meeting
The Second
See CNINFO "Announcement on the Resolutions of the
Session of the
April 26, 2023 April 28, 2023 Second Session of the Third Board Meeting" (Announcement
Third Board
No. 2023-031)
Meetin
The 3rd
See CNINFO "Announcement on the Resolutions of the 3rd
Session of the
June 21, 2023 June 21, 2023 Session of the Third Board Meeting" (Announcement No.
Third Board
2023-051)
Meeting
The 4th
See CNINFO "Announcement on the Resolutions of the 4th
Session of the
August 28, 2023 August 30, 2023 Session of the Third Board Meeting" (Announcement No.
Third Board
2023-064)
Meeting
The 5th
See CNINFO "Announcement on the Resolutions of the 5th
Session of the
October 13, 2023 October 13, 2023 Session of the Third Board Meeting" (Announcement No.
Third Board
2023-072)
Meeting
The 6th
Session of the Deliberation and approval of the "Proposal on the Third
October 25, 2023 Not applicable
Third Board Quarter Report of the Company in 2023"
Meeting
The 7th November 10, 2023 November 11, 2023 See CNINFO "Announcement on the Resolutions of the 7th
103
ZKTeco 2023 Annual Report
Session of the Session of the Third Board Meeting" (Announcement No.
Third Board 2023-077)
Meeting
The 8th
See CNINFO "Announcement on the Resolutions of the 8th
Session of the
December 22, 2023 December 23, 2023 Session of the Third Board Meeting" (Announcement No.
Third Board
2023-091)
Meeting
2. Attendance of directors in Board Meetings and General Meetings
Attendance of directors in board meetings and general meetings
Board Board
Board
meeting Board meeting not
Board meeting Board Presence at
presence meeting attend in
Name of meeting presence by meeting shareholders'
required in presence person for
director presence on telecom- absence meetings
the reporting through a two
site (times) communicati (times) (times)
period proxy (times) consecutive
on (times)
(times) times
Che
10 1 9 0 0 N 5
Quanhong
Jin Hairong 10 5 5 0 0 N 5
Ma Wentao 10 8 2 0 0 N 5
Fu Zhiqian 10 4 6 0 0 N 5
Dong Xiuqin 10 0 10 0 0 N 5
Zhuo Shuyan 10 0 10 0 0 N 5
Pang Chunlin 10 0 10 0 0 N 4
Description of not attending the board meeting in person for two consecutive times
Not applicable
3. Objections from Directors on Related Issues of the Company
Do directors raise objections to relevant matters of the Company
□ Yes No
During the reporting period, the directors did not raise any objections to the relevant matters of the Company.
4. Other descriptions for directors performing their duties
Whether the directors' suggestions on the Company have been adopted
Yes □ No
Directors' explanation on whether the Company's relevant suggestions have been adopted or not
During the reporting period, the directors of the Company were diligent and responsible in accordance with relevant laws and
regulations, attended relevant meetings on time, carefully reviewed various proposals, objectively expressed their opinions and
ideas, and the Company adopted all reasonable suggestions put forward by the directors.
IX. The Special Committees under the Board of Directors during the Reporting Period
Number Other Specifics
Committee Convening Important Opinions and
Members of Meeting Content Perform of
Name Date Suggestions Proposed
Meeting ance of Objection
104
ZKTeco 2023 Annual Report
s Held Duties (if any)
The Nomination Committee
strictly carried out its work in
Deliberation and approval of
accordance with relevant laws
the "Proposal on the Election
and regulations, as well as the
and Nomination of Non-
provisions of the Company's
Independent Director
"Articles of Association" and
March 17, Candidates for the Third Board
the "Implementation Rules of None None
2023 of Directors" and the "Proposal
the Nomination Committee".
on the Election and
The qualifications of the
Nomination of Independent
Company's director candidates
Director Candidates for the
Che were reviewed and the relevant
Third Board of Directors"
Nomination Quanhong, proposals were unanimously
Committee Pang passed.
2
of the Board Chunlin, Deliberation and approval of The Nomination Committee
of Directors and Zhuo the "Proposal on the strictly carried out its work in
Shuyan Appointment of the General accordance with relevant laws
Manager of the Company", the and regulations, as well as the
"Proposal on the Appointment provisions of the Company's
of the Deputy General "Articles of Association" and
April 4,
Manager of the Company", the the "Implementation Rules of None None
2023
"Proposal on the Appointment the Nomination Committee".
of the Secretary of the Board The qualifications of the
of Directors of the Company", Company's senior executives
and the "Proposal on the were reviewed and the relevant
Appointment of CFO of the proposals were unanimously
Company" passed.
Deliberation and approval of
the "Proposal on the 2022
Annual Report and Its
Summary", the "Proposal on
the 2022 Annual Financial
Settlement Report", the The Audit Committee carries
"Proposal on the 2022 Profit out work in strict accordance
Distribution proposal", the with the "Company Law", the
"Proposal on the 2022 Internal regulatory rules of the CSRC,
Audit Work Summary and the the "Articles of Association",
2023 Internal Audit Work the "Rules of Procedure of the
April 14, Plan", the "Proposal on the Board of Directors", and the
None None
2023 2022 Annual Internal Control "Implementation Rules of the
Zhuo
Audit Self Evaluation Report", the Audit Committee of the Board
Shuyan,
Committee "Proposal on Applying for of Directors". It is diligent and
Dong 5
of the Board Comprehensive Credit Line responsible, and after
Xiuqin, and
of Directors from Banks and Handling sufficient communication and
Fu Zhiqian
Bank Loans", the "Proposal on discussion, unanimously
Using Idle Self-owned Funds adopts relevant proposals
to Purchase Financial
Products", and the "Proposal
on Carrying out Forward
Foreign Exchange Settlement
and Sales in 2023"
The Audit Committee carries
Deliberation and approval of out work in strict accordance
April 25, the "Proposal on the 2023 Q1 with the "Company Law", the
None None
2023 Report of ZKTECO CO., regulatory rules of the CSRC,
LTD." the "Articles of Association",
the "Rules of Procedure of the
105
ZKTeco 2023 Annual Report
Board of Directors", and the
"Implementation Rules of the
Audit Committee of the Board
of Directors". It is diligent and
responsible, and after
sufficient communication and
discussion, unanimously
adopts relevant proposals
The Audit Committee carries
out work in strict accordance
with the "Company Law", the
regulatory rules of the CSRC,
the "Articles of Association",
the "Rules of Procedure of the
Deliberation and approval of
August 17, Board of Directors", and the
the "Proposal on the 2023 Half None None
2023 "Implementation Rules of the
Year Report and Abstract"
Audit Committee of the Board
of Directors". It is diligent and
responsible, and after
sufficient communication and
discussion, unanimously
adopts relevant proposals
The Audit Committee carries
out work in strict accordance
with the "Company Law", the
regulatory rules of the CSRC,
the "Articles of Association",
Deliberation and approval of the "Rules of Procedure of the
October 21, the "Proposal on the 2023 Q3 Board of Directors", and the
None None
2023 Report of ZKTECO CO., "Implementation Rules of the
LTD." Audit Committee of the Board
of Directors". It is diligent and
responsible, and after
sufficient communication and
discussion, unanimously
adopts relevant proposals
The Audit Committee carries
out work in strict accordance
with the "Company Law", the
regulatory rules of the CSRC,
the "Articles of Association",
the "Rules of Procedure of the
Deliberation and approval of
November Board of Directors", and the
the "Proposal on Proposed None None
6, 2023 "Implementation Rules of the
Change of Accounting Firm"
Audit Committee of the Board
of Directors". It is diligent and
responsible, and after
sufficient communication and
discussion, unanimously
adopts relevant proposals
The Salary and Assessment
Deliberation and approval of Committee carries out work in
Salary and Jin Hairong,
the "Proposal on 2023 strict accordance with the
Assessment Pang
April 14, Compensation Plan for "Company Law", the
Committee Chunlin, 1 None None
2023 Directors" and the "Proposal regulatory rules of the CSRC,
of the Board and Zhuo
on the 2023 Compensation the "Articles of Association",
of Directors Shuyan
Plan for Senior Managers" the "Rules of Procedure of the
Board of Directors", and the
106
ZKTeco 2023 Annual Report
"Implementation Rules of the
Salary and Assessment
Committee of the Board of
Directors". It is diligent and
responsible, and after
sufficient communication and
discussion, unanimously
adopts all proposals according
to the actual situation of the
Company.
X. Performance of Duties by the Board of Supervisors
Were there any risks to the Company identified by Board of Supervisors when performing its duties during the reporting period
□ Yes No
The Board of Supervisors has no objection to the supervision matters during the reporting period.
XI. Employee of the Company
1. Number, Professional Structure and Education Background of Employee
Number of in-service employees of the parent company at the
1,800
end of the reporting period
Number of in-service employees of the major subsidiaries at
2,306
the end of the reporting period
Total number of in-service employees at the end of the
4,106
reporting period
Total number of employees receiving salaries in current period 4,106
Number of retired employees requiring the parent Company
20
and its subsidiaries to bear costs
Professional structure
Type of professions Number of employees
Production personnel 994
Sales personnel 1,568
Technical personnel 1,226
Financial personnel 79
Administrative personnel 239
Total 4,106
Education background
Education background Number of employees
PhD candidate 2
Master's degree 135
Bachelor degree 1,902
Other 2,067
Total 4,106
107
ZKTeco 2023 Annual Report
2. Remuneration policy
In 2023, the Human Resources Department completed the SAP information system layout, and the Group's Human Resources
Data Center was successfully established. The organization's personnel data achieved cross software process interconnection,
significantly improving the efficiency and experience of human resources. At the same time, the salary and performance system
has also been professionally and uniformly standardized, achieving automated salary calculation and further strengthening the
correlation between performance and salary. A differentiated salary system based on performance and individual contributions has
been implemented, achieving a close linkage between salary and individual, team and overall business performance of the
Company.
3. Training plan
This year, the Company organized a total of 1,081 specialized training sessions and completed the comprehensive
deployment of online training platforms. The online learning and operation mechanism of employees have been significantly
improved. Meanwhile, the Group Human Resources Center organized various departments to provide diversified vocational skills
training and modern enterprise management development courses, broaden internal promotion channels, and encourage employees
to continue learning and career growth. Through regular talent inventory and development plans, cross departmental
communication and rotation were activated, and diverse talent training measures were taken to cultivate diverse and high potential
teams, injecting inexhaustible momentum into the long-term stable development of the Company.
4. Labor outsourcing
□ Applicable Not applicable
XII. Profit Distribution and Conversion of Capital Reserve to Share Capital of the
Company
Formulation, implementation or adjustment of profit distribution policies of ordinary shares especially the cash dividend plan
during the reporting period
Applicable □ Not applicable
During the reporting period, the Company reviewed and implemented the profit distribution proposal in strict accordance
with the profit distribution policy stipulated in the Company's "Articles of Association". The relevant decision-making procedures
and mechanisms were complete, and the profit distribution proposal was implemented within the specified time after being
reviewed and approved, ensuring the interests of all shareholders. During the reporting period, the Company did not make any
changes to its profit distribution policy.
On April 26, 2023 and May 19, 2023, the Second Session of the Third Board Meeting and the 2022 Annual General Meeting
held by the Company respectively deliberated and approved the "Proposal on the 2022 Profit Distribution proposal": to distribute a
cash dividend of RMB 3.5 (including tax) per 10 shares to all shareholders based on the Company's total capital of 148,492,051
shares, with the total amount of RMB 51,972,217.85; at the same time, to convert capital reserves to share capital by converting 3
shares per 10 shares to all shareholders, with the total conversion of 44,547,615 shares. After the conversion, the total share capital
of the Company will increase to 193,039,666 shares. On May 31, 2023, the Company implemented the above profit distribution
implementation plan. This profit distribution proposal complies with the provisions of the Company's "Articles of Association"
and the requirements of the resolution on the General Meetings.
Special explanation of cash dividend policy
Whether it complies with the provisions of the Company's Yes
108
ZKTeco 2023 Annual Report
Articles of Association or the requirements of the shareholders'
meeting resolution:
Whether dividend standards and ratio are definite and clear: Yes
Whether the relevant decision-making procedures and
Yes
mechanisms are complete:
Whether independent directors performed their duties and
Yes
played their due role:
If the Company does not distribute cash dividends, specific
reasons, as well as the measures to be taken next to enhance Not applicable
investor returns should be disclosed:
Whether minority shareholders have the opportunity to fully
express their opinions and demands, and whether their Yes
legitimate rights and interests have been fully protected:
If the cash dividend policy is adjusted or changed, whether the
Not applicable
conditions and procedures are compliant and transparent:
The profit distribution proposal and the plan for converting capital reserve into share capital during the reporting period of the
Company are consistent with the relevant provisions of the Company's Articles of Association and dividend management measures
Yes □ No □ Not applicable
The profit distribution proposal and the plan for converting capital reserve into share capital during the reporting period of the
Company comply with relevant regulations such as the Company's Articles of Association.
Profit distribution and conversion of capital reserve into share capital for the current year
Bonus issue per 10 shares (share) 0
Cash dividend per 10 shares (RMB) (tax inclusive) 4.5
Additional shares converted from capital reserves per 10 shares
0
(share)
Total capital shares as the basis for the distribution proposal
192,449,508
(share)
Cash dividend amount (RMB) (tax inclusive) 86,602,278.60
Cash dividend amount in other ways (such as repurchase of
784,685.00
shares) (RMB)
Total cash dividends (including other ways) (RMB) 87,386,963.60
Distributable profit (RMB) 484,336,562.43
Proportion of total cash dividends (including other ways) to
100.00%
total profit distribution
Cash dividend of the reporting period
If the Company is in a growth stage of development and there are significant capital expenditure arrangements, the minimum
proportion of cash dividends in this profit distribution shall reach 20%
Details of profit distribution or plan for converting capital reserve into share capital
After the audit by Dahua Certified Public Accountants (Special General Partnership), the net profit attributable to the owners
of the parent company in the 2023 consolidated statements of the Company was RMB 177,263,675.15, and the net profit realized
by the parent company in 2023 was RMB 64,774,175.61. According to the provisions of the "Company Law" and the "Articles of
Association", after withdrawing the statutory surplus reserve fund of RMB 6,477,417.56 from 10% of the parent company's net
profit, the net profit available for distribution for the parent company in 2023 was RMB 58,296,758.05. As of the end of 2023, the
accumulated undistributed profit of the Company's consolidated statements was RMB 907,583,024.38, while the accumulated
undistributed profit of the parent company was RMB 484,336,562.43. According to the principle of profit distribution of
whichever is lower in the consolidated statements or parent company's statements, the Company's profit available for distribution
to shareholders in 2023 was RMB 484,336,562.43.
According to the guidance of the CSRC on encouraging cash dividends for listed companies, the Company has formulated a
profit distribution proposal for 2023 as follows based on the current operating conditions and profitability of the Company, while
ensuring the normal operation and long-term development of the Company, taking into account shareholder returns and company
109
ZKTeco 2023 Annual Report
development, according to the "Regulatory Guidelines for Listed Companies No. 3 - Distribution of Cash Dividends of Listed
Companies", the "Articles of Association", and the "Plan for Dividend Returns within Three Years after the Initial Public Offering
and Listing of ZKTECO CO., LTD.": The Company plans to distribute a cash dividend of RMB 4.5 (including tax) per 10 shares
to all shareholders based on the total share capital on the registration date of future equity distribution, after deducting the
repurchased shares in the Company's repurchase special account. No bonus shares will be given, no capital reserve will be
converted into share capital, and the remaining undistributed profits will be carried forward to future years. As of April 22, 2024,
the total share capital of the Company is 194,679,508 shares. After deducting 2,230,000 shares that have been repurchased in the
Company's repurchase account, the total amount of cash dividends planned to be distributed for 2023 is RMB 86,602,278.60
(including tax).
During the reporting period, the Company made profits and the parent company had a positive profit available for shareholder
distribution, but no cash dividend distribution proposal was proposed
□ Applicable Not applicable
XIII. Implementation of the Company's Equity Incentive Plans, Employee Stock Ownership
Plans, or Other Employee Incentive Plans
Applicable □ Not applicable
1. Equity incentives
On September 29, 2022, the Company held the 19th Session of the Second Board Meeting and the 13th Session of the Second
Supervisory Board Meeting. On October 17, 2022, the Company held the second extraordinary general meeting of 2022,
deliberated and approved the "Proposal on the Company's Restricted Share Incentive Plan 2022 (Draft) and its Abstract", the
"Proposal on the Company's Restricted Share Incentive Plan Implementation Assessment Management Measures 2022", and the
"Proposal on Submitting to the Shareholders' Meeting to Authorize the Board of Directors to Handle Matters Related to Equity
Incentive" and other relevant proposals.
During the period from September 29, 2022 to October 9, 2022, the Company publicly announced the names and positions of
the incentive objects granted for the first time under this incentive plan. During the announcement period, the Company's board of
supervisor did not receive any objections related to the proposed incentive objects of this incentive plan for the first time. On
October 11, 2022, the Company announced the "Statement and Verification Opinions of the Board of Supervisors on the Publicity
of the List of Incentive Objects First Granted with the Incentive Plan of Restricted Share in 2022".
According to the "Proposal on the Company's Restricted Share Incentive Plan 2022 (Draft) and its Abstract" and the
authorization of the shareholders' meeting to the Board of Directors, the Company held the 21st Session of the Second Board
Meeting and the 15th Session of the Second Supervisory Board Meeting on November 16, 2022, and deliberated and approved the
"Proposal on Adjusting the List of Incentive Objects of Restricted Share Incentive Plan in 2022 and the Number of Granted
Objects" and the "Proposal on Granting Restricted Share to Incentive Objects of 2022 Restricted Share Incentive Plan for the First
Time". The independent directors gave their opinions on the above equity incentive plan, adjustment and grant, and the Board of
Supervisors verified the list of incentive objects granted with restricted share.
The progress of the 2022 restricted share incentive plan during the reporting period is as follows:
On June 21, 2023, the Company held the Third Session of the Third Board Meeting and the Third Session of the Third
Supervisory Board Meeting, and deliberated and approved the "Proposal on Adjusting the Granting Price and Quantity of 2022
Restricted Share Incentive Plan", "Proposal on Cancelling Some Granted but Not Affiliated Restricted Shares", and "Proposal on
Granting Reserved Restricted Shares to the Incentive Objects of 2022 Restricted Share Incentive Plan". The Board of Directors of
the Company believes that the reserved grant conditions stipulated in this incentive plan have been met, and agrees to determine
June 21, 2023 as the reserved grant date to grant reserved restricted shares to the incentive objects of the 2022 restricted share
incentive plan. The independent directors gave their opinions on the above equity incentive adjustment, cancellation and reserved
grant, and the Board of Supervisors verified the list of incentive objects granted with reserved restricted share. Please refer to the
"Announcement on Adjusting the Granting Price and Quantity of 2022 Restricted Share Incentive Plan" (Announcement No.
110
ZKTeco 2023 Annual Report
2023-053), "Announcement on Cancelling Some Granted but Not Affiliated Restricted Shares" (Announcement No. 2023-054),
and "Announcement on Granting Reserved Restricted Shares to the Incentive Objects of 2022 Restricted Share Incentive Plan"
(Announcement No. 2023-055) disclosed by the Company on the website of CNINFO (http://www.cninfo.com.cn) on June 21,
2023.
On November 10, 2023, the Company held the 7th Session of the Third Board Meeting and the 7th Session of the Third
Supervisory Board Meeting, and deliberated and approved the "Proposal on Cancelling Some Granted but Not Affiliated
Restricted Shares" and the "Proposal on the Achievement of the Attribution Conditions for the First Attribution Period of the 2022
Restricted Share Incentive Plan". Due to the resignation, unqualified assessment, or voluntary abandonment of some incentive
objects, a total of 53,603 restricted shares that have been granted but not yet attributed to the relevant incentive objects were
invalidated; due to the achievement of the attribution condition for the first grant of the first attribution period under the
Company's 2022 restricted share incentive plan, the Board of Directors has agreed to allocate a total of 1,639,842 shares to 466
incentive objects. The independent directors have expressed their agreement on the invalidation of some of the incentive object
shares and the achievement of the attribution condition for the first grant of the first attribution period. The Board of Supervisors
has verified the list of attribution for the first attribution period granted for the first time. Please refer to the "Announcement on
Cancelling Some Granted but Not Affiliated Restricted Shares" (Announcement No. 2023-080), and the "Announcement on the
Achievement of Attribution Conditions for the First Attribution Period of the 2022 Restricted Share Incentive Plan"
(Announcement No. 2023-081) disclosed by the Company on the website of CNINFO (http://www.cninfo.com.cn) on November
11, 2023.
The Company has completed the registration of the first attribution period of the 2022 restricted share incentive plan in
accordance with relevant regulations, and the relevant shares were listed and circulated on November 22, 2023. Please refer to the
"Announcement on the Attribution Results of the First Attribution Period of the 2022 Restricted Share Incentive Plan and the
Listing of Shares" (Announcement No. 2023-087) disclosed by the Company on the website of CNINFO
(http://www.cninfo.com.cn) on November 17, 2023.
Equity incentives obtained by the directors and senior managers
Applicable □ Not applicable
Unit: share
Exerci
Numb se
Numb
er of price Marke
Numb Numb er of
new of Numb t price Number Number
er of Exerci er of newly Grant
stock exerci er of at the of of
stock sable exerci Number grante price
option sed stock end of restricted restricte
option shares sed of d of
s shares option the shares d
s held during shares unlocke restric restric
Name Position grante during s held report held at sharess
at the the during d shares ted ted
d the at the ing the held at
begin report the in this shares shares
during report end of period beginnin the end
ning ing report period in the (RMB
the ing the (RMB g of the of the
of the period ing reporti /share)
report period period /share period period
year period ng
ing (RMB )
period
period /share
)
Directo
r and
Jin
General 0 0 0 0 0 0 0 15,600 7,800 14.12 7,800
Hairong
Manage
r
Fu Directo
0 0 0 0 0 0 0 14,300 7,150 14.12 7,150
Zhiqian r
111
ZKTeco 2023 Annual Report
Deputy
Mu General
0 0 0 0 0 0 0 23,400 11,700 14.12 11,700
Wenting Manage
r
Total -- 0 0 0 0 -- 0 -- 53,300 26,650 0 -- 26,650
The restricted shares held by the above personnel are classified as Class II restricted shares. Due to the implementation
of the 2022 annual equity distribution by the Company, the above "number of restricted shares held at the beginning of
the period" and "grant price of restricted shares" are the adjusted number of shares and grant price based on the equity
Remarks (if any)
distribution situation. The "number of restricted shares held at the beginning of the period" and "number of restricted
shares held at the end of the period" refer to the number of shares granted but not yet attributed, while "number of
unlocked shares in this period" refers to the number of shares attributed to individuals in this period.
Assessment and incentive mechanism of the senior managers
The Board of Directors of the Company formulated the "Salary and Assessment Management System for Directors,
Supervisors, and Senior Managers" on September 28, 2020, and established a relatively complete performance evaluation system
for senior managers. The salary of senior managers in the Company consists of basic salary and year-end bonus. The calculation
formula is: annual salary=basic salary+year-end bonus. The basic salary is mainly determined based on factors such as position,
responsibility, ability, and market salary level, while the year-end bonus is determined based on the Company's annual business
performance, job performance evaluation, and other comprehensive factors. The assessment is annual assessment, and the final
payment will be calculated based on the assessment results of the current year. During the reporting period, the Company strictly
implemented the "Salary and Assessment Management System for Directors, Supervisors, and Senior Managers".
2. Implementation of employee stock ownership plan
□ Applicable Not applicable
3. Other employee incentive plans
□ Applicable Not applicable
XIV. Construction and Implementation of Internal Control System during the Reporting
Period
1. Construction and Implementation of Internal Control
The Company has formed a relatively complete internal control system in accordance with the "Basic Norms for the Internal
Control of Enterprises" and its supporting guidelines, as well as other regulatory requirements, and combined with the actual
situation of the Company, and continuously optimized to adapt to the constantly changing external environment and internal
management requirements. With the joint efforts of the Board of Directors, management, and all employees, the Company has
established a relatively complete and effective internal control management system. From the company level to the business
process level, a systematic internal control system and necessary internal supervision mechanisms have been established to
provide reasonable guarantees for the legality and compliance of the Company's business management, asset safety, truthfulness
and completeness of financial reports and related information, improvement of operational efficiency and effectiveness, and the
implementation of development strategies.
During the reporting period, the Company organized an internal control evaluation for 2023, and there were no significant or
important deficiencies in internal control related to financial and non-financial reporting.
2. Particulars of material internal control defects detected during the reporting period
□ Yes No
112
ZKTeco 2023 Annual Report
XV. Management and Control of Subsidiaries During the Reporting Period of the Company
Company Integration Problems in Resolution Subsequent
Integration Plan Solutions Taken
Name Progress Integration Progress Resolution Plan
Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable
XVI. Self-evaluation Report on Internal Control or Internal Control Audit Report
1. Self-evaluation report on internal control
Disclosure date of the full text of the
April 24, 2024
internal control evaluation report
Disclosure index of the full text of the
CNINFO (http://www.cninfo.com.cn)
internal control evaluation report
The proportion of the total assets of the
unit included in the evaluation scope to
100.00%
the total assets of the Company in the
consolidated financial statements
The proportion of operating revenue of
the unit included in the evaluation scope
100.00%
to the operating revenue of the Company
in the consolidated financial statements
Deficiency Identification Criteria
Category Financial Reports Non-financial Reports
Significant deficiencies: control
environment is ineffective; the
supervision of internal control by the Significant deficiencies: violation against
Company's Audit Committee and internal national laws, regulations, or normative
audit institutions is ineffective; documents; lack of decision-making
discovering fraud by directors, procedures or unscientific decision-
supervisors, and senior managers; the making procedures, leading to significant
Company has made significant errors; lack of institutional control or
corrections to the published financial systematic failure of important
statements; significant deficiencies that businesses; the results of internal control
have been identified and reported to evaluation, especially significant or
management have not been corrected important deficiencies, have not been
within a reasonable time frame; other rectified; other situations that have a
deficiencies that may affect the correct significant impact on the Company.
Qualitative Criteria judgment of report users. Important deficiencies: deficiencies in
Important deficiencies: failure to select important business institutions or
and apply accounting policies in systems; important deficiencies in the
accordance with generally accepted results of internal control evaluation are
accounting standards; invalid anti-fraud not promptly rectified; other situations
procedures and control measures; one or that have a significant negative impact
more deficiencies in the control of the on the Company, with a severity lower
final financial reporting process. than significant deficiencies, but may
Although the significant deficiency still lead to the Company deviating from
criteria have not been met, there is no its control objectives.
reasonable guarantee that the financial General deficiencies: refer to internal
statements prepared will achieve true and control deficiencies that do not constitute
accurate objectives. significant or important deficiencies.
General deficiencies: refer to other
control deficiencies besides the
113
ZKTeco 2023 Annual Report
significant and important deficiencies
mentioned above.
Significant deficiencies: misstated
amount ≥ 1% of total assets; misstated
amount ≥ 2% of main business income;
misstated amount ≥ 5% of total profits
Important deficiencies: 0.5% of total
Significant deficiencies: loss amount >
assets ≤ misstated amount < 1% of total
RMB 10 million; important deficiencies:
assets; 1% of main business income ≤
Quantitative Criteria RMB 1 million＜ loss amount ≤ RMB
misstated amount < 2% of total main
10 million; general deficiencies: loss
business income; 2% of total profits ≤
amount ≤ RMB 1 million
misstated amount < 5% of total profits
General deficiencies: misstated amount <
0.5% of total assets; misstated amount <
1% of total main business income;
misstated amount < 2% of total profits
Number of significant deficiencies in
0
financial reports
Number of significant deficiencies in
0
non-financial reports
Number of important deficiencies in
0
financial reports
Number of important deficiencies in non-
0
financial reports
2. Internal control audit report
Not applicable
XVII. Special Rectification Actions for Self-inspected Problems of Listed Companies
Not applicable.
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ZKTeco 2023 Annual Report
Section V Environmental and Social Responsibility
I. Significant Environmental Issues
Whether the Company or any of its subsidiaries should be categorized as a critical pollutant enterprise published by the
environmental protection department
□ Yes No
Administrative penalties for environmental problems during the reporting period
The impact on the
Rectification
Name of company production and
Reason for penalty Violations Penalty results measures of the
or subsidiary operation of listed
Company
companies
Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable
Refer to other environmental information disclosed by key pollutant discharge units
The Company and its subsidiaries are not listed as key pollutant discharge units by the environmental protection department. The
Company and its subsidiaries conscientiously implement environmental protection laws and regulations such as the
"Environmental Protection Law of the People's Republic of China", the "Law of the People's Republic of China on Prevention and
Control of Water Pollution", the "Law of the People's Republic of China on the Prevention and Control of Atmospheric Pollution",
the "Law of the People's Republic of China on Prevention and Control of Environmental Noise Pollution", and the "Law of the
People's Republic of China on Prevention and Control of Environmental Pollution by Solid Waste" in their daily production and
operation. The production and operating activities of the Company and its subsidiaries comply with the relevant national
environmental protection requirements, and there are no cases of being punished for violations of laws and regulations.
The Company has passed the ISO14001:2015 environmental management system certification, and has developed and
implemented systems such as the "Environmental Factor Identification and Evaluation Procedure", the "Environmental Monitoring
and Control Procedure", and the "Waste Management Specification".
Measures taken to reduce carbon emissions during the reporting period and their effects
□ Applicable Not applicable
Reasons for not disclosing other environmental information
Not applicable
II. Social Responsibilities
For specific information, please refer to the "2023 Environmental, Social and Corporate Governance (ESG) Report of ZKTECO
CO., LTD." disclosed by the Company on April 24, 2024, on CNINFO (http://www.cninfo.com.cn).
III. Efforts of Poverty Alleviation and Rural Revitalization
For progress of consolidating and expanding poverty alleviation achievements and rural revitalization related work during the
reporting period, please refer to the "2023 Environmental, Social and Corporate Governance (ESG) Report of ZKTECO CO.,
LTD." disclosed by the Company on April 24, 2024, on CNINFO (http://www.cninfo.com.cn).
115
ZKTeco 2023 Annual Report
Section VI Significant Events
I. Performance of Commitments
1. Commitments completed by actual controllers, shareholders, related parties, purchasers, orthe
Company within the reporting period and commitments not fulfilled by the end of the reporting period
Applicable □ Not applicable
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ZKTeco 2023 Annual Report
Causes of
Undertaking Commitmen Date of Term of Performan
Commitmen Commitment Content
Party t Type commitments commitments ce
t
1. Within 36 months from the date of ZKTeco's initial public offering and listing, I will not
transfer or entrust others to manage the previously issued shares of ZKTeco that the Company
holds before the public offering, nor will ZKTeco repurchase such shares.
2. Within six months after ZKTeco's initial public offering and listing, if the closing price of
ZKTeco's shares is lower than the issuance price of ZKTeco's initial public offering for twenty
consecutive trading days (if ex-right or ex-dividend is carried out due to reasons such as cash
dividend distribution, stock dividend, conversion to share capital, or issuance of new shares,
corresponding adjustments must be made in accordance with the relevant regulations of the
CSRC and the Shenzhen Stock Exchange), or the closing price is lower than the issuance price
of ZKTeco's initial public offering of stocks at the end of the six-month period after listing (if
IPO-related that day is not a trading day, it is the first trading day after that day) (if ex-right or ex-dividend is Strict
Stock August 17, February 16,
commitment ZKTeco Times carried out due to reasons such as cash dividends distribution, stock dividends, conversion to performan
lockup 2022 2026
s share capital, or issuance of new shares, corresponding adjustments must be made in accordance ce
with the relevant regulations of the CSRC and the Shenzhen Stock Exchange), the lockup period
for ZKTeco stocks the Company holds is automatically extended by six months.
3. The Company will faithfully fulfill the above commitments and bear corresponding legal
responsibilities. If I fail to fulfill the obligations and responsibilities conferred by this
commitment, the company will bear any losses suffered by ZKTeco, other shareholders or
stakeholders of ZKTeco. The profits from illegal reduction of stocks will belong to ZKTeco.
4. If there are different provisions in laws, regulations, normative documents, as well as the
CSRC or Shenzhen Stock Exchange on the lockup period of the aforementioned shares and the
relevant responsibilities that the company should bear due to violating the above commitments,
the company will voluntarily and unconditionally comply with these provisions.
1. Within 36 months from the date of ZKTeco's initial public offering and listing, I will not
transfer or entrust others to manage the previously issued shares of ZKTeco that I directly or
indirectly hold before the public offering, nor will ZKTeco repurchase such shares.
2. Within six months after ZKTeco's initial public offering and listing, if the closing price of
ZKTeco's shares is lower than the issuance price of ZKTeco's initial public offering for twenty
IPO-related Strict
Stock consecutive trading days (if ex-right or ex-dividend is carried out due to reasons such as cash August 17, February 16,
commitment Che Quanhong performan
lockup dividend distribution, stock dividend, conversion to share capital, or issuance of new shares, 2022 2026
s ce
corresponding adjustments must be made in accordance with the relevant regulations of the
CSRC and the Shenzhen Stock Exchange), or the closing price is lower than the issuance price
of ZKTeco's initial public offering of stocks at the end of the six-month period after listing (if
that day is not a trading day, it is the first trading day after that day) (if ex-right or ex-dividend is
carried out due to reasons such as cash dividends distribution, stock dividends, conversion to
117
ZKTeco 2023 Annual Report
share capital, or issuance of new shares, corresponding adjustments must be made in accordance
with the relevant regulations of the CSRC and the Shenzhen Stock Exchange), the lockup period
for ZKTeco stocks I hold directly or indirectly is automatically extended by six months.
3. After the expiration of the aforementioned stock lockup period, during my tenure as a director
and senior manager of ZKTeco, I will not directly or indirectly transfer more than 25% of the
total number of ZKTeco shares held by me each year. Within six months after resignation, I will
not transfer or entrust others to manage ZKTeco shares I directly and indirectly hold.
4. I will faithfully fulfill the above commitments and bear corresponding legal responsibilities. If
I fail to fulfill the obligations and responsibilities conferred by this commitment, I will bear any
losses suffered by ZKTeco, other shareholders or stakeholders of ZKTeco. The profits from
illegal reduction of company stocks will belong to ZKTeco.
5. If there are different provisions in laws, regulations, normative documents, as well as the
CSRC or Shenzhen Stock Exchange on the lockup period of the aforementioned shares and the
relevant responsibilities that I should bear due to violating the above commitments, I voluntarily
and unconditionally comply with these provisions.
1. Within 36 months from the date of ZKTeco's initial public offering and listing, I will not
transfer or entrust others to manage the previously issued shares of ZKTeco that the enterprise
holds before the public offering, nor will ZKTeco repurchase such shares.
2. The enterprise will faithfully fulfill the above commitments and bear corresponding legal
IPO-related responsibilities. If I fail to fulfill the obligations and responsibilities conferred by this Strict
Stock August 17,
commitment LX Investment commitment, the enterprise will bear any losses suffered by ZKTeco, other shareholders or August 16, 2025 performan
lockup 2022
s stakeholders of ZKTeco. The profits from illegal reduction of stocks will belong to ZKTeco. ce
3. If there are different provisions in laws, regulations, normative documents, as well as the
CSRC or Shenzhen Stock Exchange on the lockup period of the aforementioned shares and the
relevant responsibilities that the enterprise should bear due to violating the above commitments,
the enterprise will voluntarily and unconditionally comply with these provisions.
1. The enterprise promises to lock in the shares of ZKTeco held in accordance with the following
principles:
(1) The shares held by the enterprise in ZKTeco are unlocked in four batches, with each batch
unlocking one fourth of the shares held by the enterprise. The unlocking period is one year, two
years, three years, and four years from the date of ZKTeco's initial public offering and listing.
IPO-related For the shares involved in the aforementioned lockup period arrangement that have not been Strict
Stock August 17, February 17,
commitment JYSJ and JYHY unlocked, the enterprise will not transfer or entrust others to manage the shares already issued by performan
lockup 2022 2027
s ZKTeco before its public offering, nor will ZKTeco repurchase such shares. ce
(2) For the newly added shares subscribed by the enterprise by participating in the capital
increase of ZKTeco within 6 months prior to the completion of the initial public offering of
shares by ZKTeco, the enterprise will not transfer or entrust others to manage the newly added
shares held by the enterprise, nor will ZKTeco repurchase such shares within three years from
the date of completing the industrial and commercial registration procedures for the
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ZKTeco 2023 Annual Report
aforementioned capital increase. If a portion of the shares held by a Japanese enterprise whose
lockup period expires earlier than the expiration date of the lockup period promised in the first
item of this article, the corresponding lockup period for that portion of the shares shall be subject
to the first item of this article.
2. The enterprise will faithfully fulfill the above commitments and bear corresponding legal
responsibilities. If I fail to fulfill the obligations and responsibilities conferred by this
commitment, the enterprise will bear any losses suffered by ZKTeco, other shareholders or
stakeholders of ZKTeco. The profits from illegal reduction of stocks will belong to ZKTeco.
3. If there are different provisions in laws, regulations, normative documents, as well as the
CSRC or Shenzhen Stock Exchange on the lockup period of the aforementioned shares and the
relevant responsibilities that the enterprise should bear due to violating the above commitments,
the enterprise will voluntarily and unconditionally comply with these provisions.
1. The enterprise promises to lock in the shares of ZKTeco held in accordance with the following
principles:
(1) The shares held by the enterprise in ZKTeco are unlocked in four batches, with each batch
unlocking one fourth of the shares held by the enterprise. The unlocking period is one year, two
years, three years, and four years from the date of ZKTeco's initial public offering and listing.
For the shares involved in the aforementioned lockup period arrangement that have not been
unlocked, the enterprise will not transfer or entrust others to manage the shares already issued by
ZKTeco before its public offering, nor will ZKTeco repurchase such shares.
(2) For the newly added shares subscribed by the enterprise by participating in the capital
increase of ZKTeco within 6 months prior to the completion of the initial public offering of
IPO-related shares by ZKTeco, the enterprise will not transfer or entrust others to manage the newly added Strict
JYLX and Stock August 17, February 17,
commitment shares held by the enterprise, nor will ZKTeco repurchase such shares within three years from performan
JYQL lockup 2022 2027
s the date of completing the industrial and commercial registration procedures for the ce
aforementioned capital increase. If a portion of the shares held by a Japanese enterprise whose
lockup period expires earlier than the expiration date of the lockup period promised in the first
item of this article, the corresponding lockup period for that portion of the shares shall be subject
to the first item of this article.
2. The enterprise is willing to bear legal responsibilities arising from violating the above
commitments.
3. If there are different provisions in laws, regulations, normative documents, as well as the
CSRC or Shenzhen Stock Exchange on the lockup period of the aforementioned shares and the
relevant responsibilities that the enterprise should bear due to violating the above commitments,
the enterprise will voluntarily and unconditionally comply with these provisions.
Qingdao 1. If the period from the date of participating in the capital increase subscription of ZKTeco and
IPO-related
Walden, Fuhai Stock completing the relevant industrial and commercial changes to the filing date of ZKTeco's initial August 17,
commitment August 16, 2023 Fulfilled
Juanyong and lockup public offering of stocks is less than 6 months, then within three years from the date of 2022
s
Yiwu Walden completing the industrial and commercial change registration procedures for the aforementioned
119
ZKTeco 2023 Annual Report
capital increase, the enterprise shall not transfer or entrust others to manage the abovementioned
shares held by the enterprise, nor shall ZKTeco repurchase such shares.
2. If the newly added shares subscribed for by the enterprise by participating in the capital
increase of ZKTeco are more than 6 months away from the filing date of ZKTeco's initial public
offering, we will not transfer or entrust others manage the shares of ZKTeco held by the
enterprise within one year from the date of ZKTeco's initial public offering and listing, nor shall
ZKTeco repurchase such shares.
The enterprise is willing to bear legal responsibilities arising from violating the above
commitments.
If there are different provisions in laws, regulations, normative documents, as well as the CSRC
or Shenzhen Stock Exchange on the lockup period of the aforementioned shares and the relevant
responsibilities that the enterprise should bear due to violating the above commitments, the
enterprise will voluntarily and unconditionally comply with these provisions.
1. Strictly abide by the stock lockup commitments made by myself and my shareholding
platform, and during the stock lockup period, I will not transfer or entrust others to manage the
previously issued shares of ZKTeco that I directly or indirectly hold before the public offering,
nor will ZKTeco repurchase such shares;
2. During my tenure as a director/supervisor and/or senior manager of ZKTeco, the number of
ZKTeco shares transferred annually shall not exceed 25% of the total number of ZKTeco shares
held directly or indirectly by me. Within six months after my resignation, I will not transfer the
ZKTeco shares held directly or indirectly by me. If I declare my resignation within six months
from the date of the initial public offering of ZKTeco, I will not transfer the shares of ZKTeco
Jin Hairong, Ma
that I directly or indirectly hold within eighteen months from the date of my resignation. If I
Wentao, Fu
declare the resignation between the seventh and twelfth months from the date of the initial public
Zhiqian, Jiang
offering of ZKTeco, I will not transfer the ZKTeco shares directly or indirectly held by me
IPO-related Wenna, Wu Strict
Stock within twelve months from the date of declaration for resignation. August 17,
commitment Xinke, Liu Long term performan
lockup 3. If I reduce my holdings of ZKTeco stocks within two years after the expiration of the lockup 2022
s Jiajia, Wang ce
period, the reduction price shall not be lower than the issuance price of ZKTeco's initial public
Youwu, Li
offering (if an ex-right or ex-dividend is made due to the distribution of cash dividends, stock
Zhinong, and
dividends, conversion into capital stock, or issuance of new shares after this issuance,
Guo Yanbo
corresponding adjustments shall be made in accordance with the relevant regulations of the
CSRC and the Shenzhen Stock Exchange).
4. Within six months after ZKTeco's initial public offering and listing, if the closing price of
ZKTeco's shares is lower than the issuance price of ZKTeco's initial public offering for twenty
consecutive trading days (if ex-right or ex-dividend is carried out due to reasons such as cash
dividend distribution, stock dividend, conversion to share capital, or issuance of new shares,
corresponding adjustments must be made in accordance with the relevant regulations of the
CSRC and the Shenzhen Stock Exchange), or the closing price is lower than the issuance price
of ZKTeco's initial public offering of stocks at the end of the six-month period after listing (if
120
ZKTeco 2023 Annual Report
that day is not a trading day, it is the first trading day after that day) (if ex-right or ex-dividend is
carried out due to reasons such as cash dividends distribution, stock dividends, conversion to
share capital, or issuance of new shares, corresponding adjustments must be made in accordance
with the relevant regulations of the CSRC and the Shenzhen Stock Exchange), the lockup period
for ZKTeco stocks I hold is automatically extended by six months. The commitment shall not be
terminated due to job change or resignation.
5. I will faithfully fulfill the above commitments and bear corresponding legal responsibilities. If
I fail to fulfill the obligations and responsibilities conferred by this commitment, I will bear any
losses suffered by ZKTeco, other shareholders or stakeholders of ZKTeco. The profits from
illegal reduction of stocks will belong to ZKTeco.
6. If I resign or change my position, it will not affect the validity of this commitment letter, and I
will continue to fulfill the above commitments.
7. If there are different provisions in laws, regulations, normative documents, as well as the
CSRC or Shenzhen Stock Exchange on the lockup period of the aforementioned shares and the
relevant responsibilities that I should bear due to violating the above commitments, I voluntarily
and unconditionally comply with these provisions.
1. The Company and/or any enterprise controlled by the Company, jointly controlled with others,
or with significant influence, currently does not engage in any business or activity that
constitutes or may constitute horizontal competition with ZKTeco and enterprises controlled by
ZKTeco. The Company and/or enterprises controlled by the Company, jointly controlled with
others, and with significant influence will not engage in any business or activities that constitute
or may constitute horizontal competition with ZKTeco and enterprises controlled by ZKTeco in
the future.
2. If, due to changes in national laws, policies, or other unavoidable reasons, the Company
and/or enterprises controlled by the Company, jointly controlled with others, or with significant
Commitmen influence, constitute or may constitute horizontal competition with ZKTeco, the Company will
IPO-related Strict
t to avoid cease the business and activities that exist in horizontal competition, or the entrusted August 17,
commitment ZKTeco Times Long term performan
horizontal management, contracted operation, or acquisition of such business that constitutes horizontal 2022
s ce
competition competition, and ZKTeco will enjoy priority under equal conditions.
3. If ZKTeco expands into new business areas in the future, ZKTeco enjoys priority. The
Company and other enterprises or economic organizations controlled by the Company, jointly
controlled with others, and with significant influence (excluding ZKTeco and its subsidiaries)
will no longer develop similar businesses.
The aforementioned commitment shall come into effect from the date of signing, and shall
continue to be valid and irrevocable during the period when the Company serves as the
controlling shareholder of ZKTeco. If the Company and other companies controlled by the
Company violate the aforementioned commitments, the Company will bear the relevant losses
suffered by ZKTeco, ZKTeco's other shareholders or stakeholders as a result.
IPO-related Che Quanhong Commitmen 1. I and/or the enterprise controlled by me, jointly controlled with others, or with significant August 17, Long term Strict
121
ZKTeco 2023 Annual Report
commitment t to avoid influence, currently does not engage in any business or activity that constitutes or may constitute 2022 performan
s horizontal horizontal competition with ZKTeco and enterprises controlled by ZKTeco. I and/or enterprises ce
competition controlled by me, jointly controlled with others, and with significant influence will not engage in
any business or activities that constitute or may constitute horizontal competition with ZKTeco
and enterprises controlled by ZKTeco in the future.
2. If, due to changes in national laws, policies, or other unavoidable reasons, I and/or enterprises
controlled by me, jointly controlled with others, or with significant influence, constitute or may
constitute horizontal competition with ZKTeco, I will cease the business and activities that exist
in horizontal competition, or the entrusted management, contracted operation, or acquisition of
such business that constitutes horizontal competition, and ZKTeco will enjoy priority under
equal conditions.
3. If ZKTeco expands into new business areas in the future, ZKTeco enjoys priority. I and other
enterprises or economic organizations controlled by me, jointly controlled with others, and with
significant influence (excluding ZKTeco and its subsidiaries) will no longer develop similar
businesses.
The aforementioned commitment shall come into effect from the date of signing, and shall
continue to be valid and irrevocable during the period when I serve as the actual controller of
ZKTeco. If I and other companies controlled by me violate the aforementioned commitments, I
will bear the relevant losses suffered by ZKTeco, ZKTecos other shareholders or stakeholders as
a result.
1. The Company and/or enterprises controlled by the Company, jointly controlled with others,
and with significant influence will make every effort to reduce related party transactions with
ZKTeco and other enterprises under its control.
2. For necessary and unavoidable related party transactions, the Company guarantees that the
related party transactions will be conducted under normal commercial conditions, and does not
require ZKTeco and enterprises under its control to provide any conditions superior to those
Commitmen
given to third parties in fair market transactions. The related party transactions involved will
t to
IPO-related comply with relevant laws and regulations, the "Articles of Association", and the "Related Party Strict
standardize August 17,
commitment ZKTeco Times Transaction Management System", and other relevant provisions of the relevant documents. The Long term performan
and reduce 2022
s Company will timely disclose information to ensure that the legitimate rights and interests of ce
related party
ZKTeco and other shareholders are not harmed through related party transactions;
transactions
3. During the period when the Company serves as the controlling shareholder of ZKTeco, the
Company will faithfully fulfill the above commitments and assume corresponding legal
responsibilities. If the violation of the above commitments by the Company and other enterprises
controlled by the Company results in damage to the interests of ZKTeco or the legitimate
interests of other shareholders, the Company will bear corresponding compensation
responsibilities in accordance with the law.
IPO-related Commitmen 1. I and/or enterprises controlled by me, jointly controlled with others, and with significant August 17, Strict
Che Quanhong Long term
commitment t to influence will make every effort to reduce related party transactions with ZKTeco and other 2022 performan
122
ZKTeco 2023 Annual Report
s standardize enterprises under its control. ce
and reduce 2. For necessary and unavoidable related party transactions, I guarantee that the related party
related party transactions will be conducted under normal commercial conditions, and do not require ZKTeco
transactions and enterprises under its control to provide any conditions superior to those given to third parties
in fair market transactions. The related party transactions involved will comply with relevant
laws and regulations, the "Articles of Association", and the "Related Party Transaction
Management System", and other relevant provisions of the relevant documents. The Company
will timely disclose information to ensure that the legitimate rights and interests of ZKTeco and
other shareholders are not harmed through related party transactions;
3. During the period when I serve as the actual controller of ZKTeco, the Company will
faithfully fulfill the above commitments and assume corresponding legal responsibilities. If the
violation of the above commitments by me and other enterprises controlled by me results in
damage to the interests of ZKTeco or the legitimate interests of other shareholders, I will bear
corresponding compensation responsibilities in accordance with the law.
1. I and my immediate family members/other enterprises controlled by me and my immediate
Che Quanhong, family members will make every effort to reduce related party transactions with ZKTeco and
Jin Hairong, Ma other enterprises under its control.
Wentao, Fu 2. For necessary and unavoidable related party transactions, I guarantee that the related party
Zhiqian, Dong transactions will be conducted under normal commercial conditions, and do not require ZKTeco
Commitmen
Xiuqin, Pang and enterprises under its control to provide any conditions superior to those given to third parties
t to
IPO-related Chunlin, Zhuo in fair market transactions. The related party transactions involved will comply with relevant Strict
standardize August 17,
commitment Shuyan, Jiang laws and regulations, the "Articles of Association", and the "Related Party Transaction Long term performan
and reduce 2022
s Wenna, Wu Management System", and other relevant provisions of the relevant documents. The Company ce
related party
Xinke, Liu will timely disclose information to ensure that the legitimate rights and interests of ZKTeco and
transactions
Jiajia, Wang other shareholders are not harmed through related party transactions;
Youwu, Li 3. I will faithfully fulfill the above commitments and bear corresponding legal responsibilities. If
Zhinong, and the violation of the above commitments by me and other enterprises controlled by me results in
Guo Yanbo damage to the interests of ZKTeco or the legitimate interests of other shareholders, I will bear
corresponding compensation responsibilities in accordance with the law.
1. The Company/I will strictly abide by the restrictions on the circulation of ZKTeco shares and
the commitment to voluntary lockup issued by the Company/me, and strictly comply with the
relevant provisions of laws, regulations, and normative documents. The Company/I will not
Shareholdin
reduce our holdings of ZKTeco shares during the lockup period.
IPO-related ZKTeco Times g and Strict
2. Within two years after the expiration of the lockup period promised by the Company/me, if the August 17,
commitment and Che intention to Long term performan
Company/I plan(s) to reduce our holdings of ZKTeco shares, the reduction price will not be 2022
s Quanhong reduce ce
lower than the issuance price at the time of the initial public offering of the shares (if ZKTeco
holdings
experiences dividends, stock dividends, or capital gains during this period)
For matters such as the conversion of the reserve into shares and other ex-right and ex-dividend
matters, the issuance price shall be adjusted accordingly.
123
ZKTeco 2023 Annual Report
3. After the expiration of the lockup period promised by the Company/me, the Company/I will
reduce our holdings of ZKTeco stocks in strict accordance with the relevant provisions of the
"Company Law", "Securities Law", CSRC, and stock exchange.
4.
If the Company/I obtain(s) (excess) income due to failure to fulfill the above commitments, the
(excess) income shall belong to ZKTeco and shall be paid to the designated account of ZKTeco
within five days of receiving the income. If the Company/I fail(s) to fulfill the above
commitments and cause(s) losses to ZKTeco or other investors, the Company/I will bear
compensation liability to ZKTeco or other investors in accordance with the law.
1.
The enterprise will not reduce its holdings of ZKTeco stocks during the lockup period in strict
accordance with the commitments issued by the enterprise on the circulation restrictions and
voluntary lockup of its holdings of ZKTeco shares, and with the relevant provisions of laws,
Shareholdin regulations, and normative documents.
IPO-related JYSJ, JYHY g and 2. Strict
August 17,
commitment and LX intention to After the expiration of the lockup period promised by the enterprise, if the enterprise plans to Long term performan
2022
s Investment reduce reduce its holdings, it will notify ZKTeco of the reduction in accordance with the regulations of ce
holdings the CSRC and the Shenzhen Stock Exchange, and after the reduction is announced, it will reduce
its holdings in accordance with the relevant regulations of the CSRC and the Shenzhen Stock
Exchange.
If the enterprise fails to fulfill the above commitments, it will agree to bear the legal liability
arising from the violation of the above commitments.
Within three years from the date of the official listing of the Company's stocks, if there is a
situation where the closing price of the stocks for 20 consecutive trading days is lower than the
latest audited net assets per share of the Company, it will meet the starting conditions of the
stable stock price plan.
When the closing price of the Company's stock for 20 consecutive trading days is lower than the
latest audited net assets per share of the Company, it reaches the starting condition of the stable
stock price plan. The Company shall convene a board meeting within 10 trading days to review
Commitmen
IPO-related specific plans for stabilizing the Company's stock price, clarify the implementation period of Strict
t to August 17,
commitment ZKTeco such specific plans, and initiate the implementation of specific plans for stabilizing the stock August 16, 2025 performan
stabilizing 2022
s price within 5 trading days after the approval of such plans by the shareholders' meeting. ce
stock prices
When the Company meets the starting conditions for the stable stock price plan, the Company,
controlling shareholders, directors (excluding independent directors), and senior managers will
carry out the implementation in the following order:
① Company repurchase;
② Increase in holdings by controlling shareholders;
③ Directors (excluding independent directors) and senior managers increase their holdings.
Until the stopping conditions of the stable stock price plan are met.
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ZKTeco 2023 Annual Report
ZKTeco Times,
Che Quanhong,
Jin Hairong, Ma Commitmen When the Company initiates a stock price stablizing plan in accordance with the "Plan for
IPO-related Strict
Wentao, Fu t to Stabilizing the Stock Price within Three Years after Listing", it will fulfill corresponding August 17,
commitment August 16, 2025 performan
Zhiqian, Wang stabilizing obligations in accordance with the law in strict accordance with the requirements of the stock 2022
s ce
Youwu, Li stock prices price stablizing plan.
Zhinong, and
Guo Yanbo
Commitmen When the Company initiates a stock price stablizing plan in accordance with the "Plan for
IPO-related Strict
t to Stabilizing the Stock Price within Three Years after Listing", it will fulfill corresponding September 16,
commitment Mu Wenting August 16, 2025 performan
stabilizing obligations in accordance with the law in strict accordance with the requirements of the stock 2022
s ce
stock prices price stablizing plan.
There are no false records, misleading statements, or significant omissions in the prospectus and
other information disclosure materials of the Company's initial public offering of stocks and
Commitmen
listing on the ChiNext.
t letter on
If it is determined by the CSRC, Shenzhen Stock Exchange, or other competent departments that
the absence
there are false records, misleading statements, or significant omissions in the prospectus and
of false
other information disclosure materials of the Company's initial public offering of stocks and
records,
listing on the ChiNext, which constitutes a significant and substantial impact on determining
misleading
whether the Company meets the issuance conditions stipulated by law: Within 10 trading days
statements,
IPO-related from the date when the Shenzhen Stock Exchange or other competent departments determine Strict
or August 17,
commitment ZKTeco that the Company has the aforementioned situation, the Company will convene a board meeting Long term performan
significant 2022
s and propose to convene a shareholders' meeting to review the proposal to repurchase all shares ce
omissions in
issued for the initial public offering. The repurchase price will be determined based on the
the
issuance price and with reference to relevant market factors.
prospectus
If it is determined by the CSRC, Shenzhen Stock Exchange, or other competent departments that
and other
there are false records, misleading statements, or significant omissions in the prospectus and
information
other information disclosure materials of the Company's initial public offering of stocks and
disclosure
listing on the ChiNext, resulting in losses to investors in securities trading, the Company will
materials
compensate investors for losses in accordance with the law according to the relevant decisions of
the CSRC, Shenzhen Stock Exchange, or other competent departments.
Commitmen The prospectus and other information disclosure materials of ZKTeco's initial public offering of
t letter on stocks and listing on the ChiNext are true, accurate, and complete, without any false records,
the absence misleading statements, or significant omissions.
IPO-related ZKTeco Times Strict
of false If it is determined by the CSRC, Shenzhen Stock Exchange, or other competent departments that August 17,
commitment and Che Long term performan
records, ZKTeco has false records, misleading statements, or significant omissions in the prospectus and 2022
s Quanhong ce
misleading other information disclosure materials of its initial public offering of stocks and listing on the
statements, ChiNext, resulting in losses to investors in securities issuance and trading, the Company/I will
or compensate investors for losses in accordance with the law according to the provisions of the
125
ZKTeco 2023 Annual Report
significant relevant decisions of the CSRC, Shenzhen Stock Exchange or other authorized departments.
omissions in If it is determined by the CSRC, Shenzhen Stock Exchange, or other competent departments that
the there are false records, misleading statements, or significant omissions in the prospectus and
prospectus other information disclosure materials of ZKTeco's initial public offering of stocks and its listing
and other on the ChiNext, which constitutes a significant and substantial impact on determining whether
information ZKTeco meets the issuance conditions stipulated by law, the Company/I will urge ZKTeco to
disclosure repurchase all new shares issued in the initial public offering in accordance with the law, and at
materials the same time, the Company/I will repurchase the original restricted shares that have been
transferred at the price in the secondary market in accordance with the law. When the Company/I
repurchase(s) stocks, we will comply with the relevant provisions of the "Company Law",
"Securities Law", CSRC and Shenzhen Stock Exchange, as well as the "Articles of Association".
Commitmen
t letter on There are no false records, misleading statements, or significant omissions in the prospectus and
Che Quanhong,
the absence other information disclosure materials of the Company's initial public offering of stocks and
Jin Hairong, Ma
of false listing on the ChiNext.
Wentao, Fu
records, If there are false records, misleading statements, or significant omissions in the Company's
Zhiqian, Dong
misleading prospectus and other information disclosure materials, resulting in losses to investors in
Xiuqin, Pang
statements, securities issuance and trading, I will compensate the investors for the losses in accordance with
IPO-related Chunlin, Zhuo Strict
or the law. August 17,
commitment Shuyan, Jiang Long term performan
significant If I fail to fulfill the above commitments, I will publicly explain the specific reasons for my 2022
s Wenna, Wu ce
omissions in failure in the Company's shareholders' meeting and newspapers and magazines designated by the
Xinke, Liu
the CSRC, apologize to the Company's shareholders and public investors, and cease receiving salary,
Jiajia, Wang
prospectus allowances, and shareholder dividends from the Company from the date of violating the above
Youwu, Li
and other commitments. Meanwhile, my shares directly or indirectly held in the Company will not be
Zhinong, and
information transferred, until I take corresponding compensation measures according to the above
Guo Yanbo
disclosure commitments and implement them completely.
materials
(1) Do not interfere with the Company's management activities beyond my authority, and do not
encroach on the Company's interests.
(2) From the date of issuance of this commitment letter to the completion of the Company's
Commitmen
public offering of stocks, if the CSRC makes other new regulatory provisions on filling in return
IPO-related ZKTeco Times t to fill in Strict
measures and commitments, and the above commitments cannot meet the requirements of the August 17,
commitment and Che diluted Long term performan
CSRC, the commitment will be issued in accordance with the latest regulations of the CSRC. 2022
s Quanhong immediate ce
I promise to effectively fulfill relevant measures for filling in returns in the Company's system
returns
and any commitments made on these measures. If I violate these commitments and cause losses
to the Company or investors, I will be liable for compensation for the Company or investors in
accordance with the law.
IPO-related ZKTeco, Che Commitmen "In order to ensure the effective implementation of the Company's compensation measures, the August 17, Strict
Long term
commitment Quanhong, Jin t on Company, directors, and senior managers make the following commitments: 2022 performan
126
ZKTeco 2023 Annual Report
s Hairong, Ma guarantee (1) They will not transfer benefits to other units or individuals free of charge or under unfair ce
Wentao, Fu measures conditions, nor will they damage the interests of the Company in other ways;
Zhiqian, Dong for filling in (2) They will constrain duty consumption behavior;
Xiuqin, Pang the diluted (3) They will not use company assets to engage in investment or consumption activities
Chunlin, Zhuo immediate unrelated to their performance of duties;
Shuyan, Wang return (4) They will actively promote the further improvement of the Company's compensation system,
Youwu, Li and fully support the linkage between the compensation system formulated by the Company's
Zhinong, and Board of Directors or compensation committee and the implementation of the Company's
Guo Yanbo compensation measures;
(5) If the Company launches an equity incentive plan in the future, I promise to make every
effort within my own responsibilities and authority to link the exercise conditions of the equity
incentive that the Company intends to announce with the implementation of the Company's
compensation and return measures;
(6) From the date of issuance of this commitment letter to the completion of the Company's
public offering of stocks, if the CSRC makes other new regulatory provisions on filling in return
measures and commitments, and the above commitments cannot meet the requirements of the
CSRC, the commitment will be issued in accordance with the latest regulations of the CSRC.
I promise to effectively fulfill relevant measures for filling in returns in the Company's system
and any commitments made on these measures. If I violate these commitments and cause losses
to the Company or investors, I will be liable for compensation for the Company or investors in
accordance with the law."
If the Company fails to fulfill the commitments disclosed in the prospectus, the specific reasons
for the failure will be disclosed through the Company's shareholders' meeting, securities
Commitmen
regulatory authority, or designated channels of the Shenzhen Stock Exchange, as appropriate,
t on relevant
and supplementary or alternative commitments will be proposed to the Company's investors to
binding
protect their rights and interests as much as possible.
IPO-related measures in Strict
If investors suffer losses in securities trading due to the Company's failure to fulfill relevant August 17,
commitment ZKTeco case of Long term performan
commitments, the Company will compensate the investors for the relevant losses in accordance 2022
s failure to ce
with the law. Within 10 days after the securities regulatory authority or other competent
fulfill
departments determine that the Company has the aforementioned situation, the Company will
commitment
initiate relevant work to compensate investors for losses. Investor losses are determined based on
s
the amount determined through consultation with investors, or based on methods or amounts
recognized by securities regulatory authorities or judicial authorities.
Commitmen 1. If the Company fails to fulfill the commitments disclosed in the prospectus, the specific
t on relevant reasons for the failure will be disclosed through ZKTeco's shareholders' meeting, securities
IPO-related Strict
binding regulatory authority, or designated channels of the Stock Exchange, as appropriate, and August 17,
commitment ZKTeco Times Long term performan
measures in supplementary or alternative commitments will be proposed to ZKTeco's investors to protect 2022
s ce
case of their rights and interests as much as possible.
failure to 2. If investors suffer losses in securities trading due to the Company's failure to fulfill relevant
127
ZKTeco 2023 Annual Report
fulfill commitments, the Company will compensate the investors for the relevant losses in accordance
commitment with the law.
s 3. If the Company fails to bear the aforementioned compensation liability, the shares of ZKTeco
held by the Company shall not be transferred until the Company has fulfilled the aforementioned
compensation liability, and ZKTeco has the right to deduct the cash dividends distributed to the
Company for bearing the aforementioned compensation liability.
4. During the period when the Company serves as the controlling shareholder of ZKTeco, if
ZKTeco fails to fulfill the commitments disclosed in the prospectus and causes losses to
investors, the Company promises to bear compensation liability in accordance with the law.
1. If I fail to fulfill the commitments disclosed in the prospectus, the specific reasons for the
failure will be disclosed through ZKTeco's shareholders' meeting, securities regulatory authority,
or designated channels of the Stock Exchange, as appropriate, and supplementary or alternative
Commitmen
commitments will be proposed to ZKTeco's investors to protect their rights and interests as much
t on relevant
as possible.
binding
2. If investors suffer losses in securities trading due to my failure to fulfill relevant commitments,
IPO-related measures in Strict
I will compensate the investors for the relevant losses in accordance with the law. August 17,
commitment Che Quanhong case of Long term performan
3. If I fail to bear the aforementioned compensation liability, the shares of ZKTeco held by me 2022
s failure to ce
shall not be transferred until I have fulfilled the aforementioned compensation liability, and
fulfill
ZKTeco has the right to deduct the cash dividends distributed to me for bearing the
commitment
aforementioned compensation liability.
s
4. During the period when I serve as the actual controller of ZKTeco, if ZKTeco fails to fulfill
the commitments disclosed in the prospectus and causes losses to investors, I promise to bear
compensation liability in accordance with the law.
Che Quanhong,
Jin Hairong, Ma
1. If I fail to fulfill the public commitments made by myself in the prospectus of ZKTeco's initial
Wentao, Fu Commitmen
public offering and listing on the ChiNext:
Zhiqian, Dong t on relevant
(1) I will publicly explain the specific reasons for not fulfilling my commitments in the
Xiuqin, Pang binding
Company's shareholders' meeting and newspapers and magazines designated by the CSRC, and
IPO-related Chunlin, Zhuo measures in Strict
apologize to the Company's shareholders and public investors. August 17,
commitment Shuyan, Jiang case of Long term performan
(2) I will stop receiving my salary within 10 trading days from the date of the aforementioned 2022
s Wenna, Wu failure to ce
event, and my shares directly or indirectly held in the Company (if any) shall not be transferred
Xinke, Liu fulfill
until I fulfill the relevant commitments.
Jiajia, Wang commitment
2. If I fail to fulfill the relevant commitments, I will be liable for compensation to the Company
Youwu, Li s
or investors in accordance with the law.
Zhinong, and
Guo Yanbo
IPO-related Commitmen (1) The Company guarantees that there will be no fraudulent issuance of shares in this public Strict
August 17,
commitment ZKTeco t to offering and listing on the ChiNext. Long term performan
2022
s repurchase (2) If the securities regulatory authorities, stock exchanges, or judicial authorities determine that ce
128
ZKTeco 2023 Annual Report
shares for the Company has engaged in fraudulent issuance behavior, which has a significant substantive
fraudulent impact on determining whether the Company meets the issuance conditions stipulated by law,
issuance and the Company will initiate the share repurchase procedure in accordance with relevant laws and
listing regulations and the Company's Articles of Association within 5 working days after final
determination by the securities regulatory authorities, stock exchanges, or judicial authorities to
repurchase all new shares issued by the Company in this public offering.
Commitmen (1) Guarantee that there will be no fraudulent issuance of shares in ZKTeco's public offering and
t to listing on the ChiNext.
IPO-related ZKTeco Times repurchase (2) If the securities regulatory authorities, stock exchanges, or judicial authorities determine that Strict
August 17,
commitment and Che shares for ZKTeco has engaged in fraudulent issuance, the Company/I will initiate a share repurchase Long term performan
2022
s Quanhong fraudulent procedure within 5 working days after confirmation by the securities regulatory authorities, stock ce
issuance and exchanges, or judicial authorities to repurchase all original restricted shares transferred by the
listing Company/me.
(1) I guarantee that there is no fraudulent issuance of ZKTeco's initial public offering and listing
Che Quanhong,
on the ChiNext.
Jin Hairong, Ma
(2) If the securities regulatory authorities, stock exchanges, or judicial authorities determine that
Wentao, Fu
ZKTeco has engaged in fraudulent issuance behavior, causing investors to suffer losses in
Zhiqian, Dong Commitmen
securities issuance and trading, I will compensate investors for their losses in accordance with
Xiuqin, Pang t to
the law after the securities regulatory authorities, stock exchanges, or judicial authorities
IPO-related Chunlin, Zhuo repurchase Strict
determine the compensation liability. August 17,
commitment Shuyan, Jiang shares for Long term performan
(3) If I violate the above commitments, I will publicly explain the specific reasons for my failure 2022
s Wenna, Wu fraudulent ce
to fulfill them in the shareholders' meeting of ZKTeco and newspapers and magazines designated
Xinke, Liu issuance and
by the CSRC, and apologize to shareholders and public investors. Within 5 working days from
Jiajia, Wang listing
the date of the violation of the above commitments, I will stop receiving salary or allowances
Youwu, Li
and shareholder dividends from ZKTeco, and my shares in ZKTeco will not be transferred, until
Zhinong, and
I take corresponding compensation measures according to the above commitments and
Guo Yanbo
implement them completely.
The Company's shareholders include ZKTeco Times, Che Quanhong, LX Investment, JYSJ,
JYHY, JYLX, JYQL, Fuhai Juanyong, Yiwu Walden, and Qingdao Walden. Among them, Che
Quanhong is the actual controller of the Company, ZKTeco Times is a limited liability company
Special jointly held by Che Quanhong and his brother Che Quanzhong, LX Investment is a limited
commitment partnership jointly held by Che Quanhong and his father Che Jun, and individual De Wang, and
IPO-related Strict
on JYSJ, JYHY, JYLX and JYQL are the employee stock holding platform of the Company, and August 17,
commitment ZKTeco Long term performan
shareholder Fuhai Juanyong, Yiwu Walden and Qingdao Walden are investors introduced by the Company. 2022
s ce
information Fuhai Junyong, Yiwu Walden and Qingdao Walden are private investment funds registered with
disclosure the Asset Management Association of China (AMAC). The aforementioned entities all have the
qualification to hold shares in the Company, and there is no situation where entities prohibited by
laws and regulations from holding shares directly or indirectly hold shares in the Company. The
intermediary or its responsible persons, senior managers, or handlers involved in this issuance do
129
ZKTeco 2023 Annual Report
not directly or indirectly hold any shares or other interests of the Company. There is no situation
where shareholders of the Company engage in improper transfer of benefits through the
Company's equity.
The Company and its shareholders have promptly provided truthful, accurate, and complete
information to the intermediary involved in this issuance, actively and comprehensively
cooperated with the intermediary involved in this issuance to conduct due diligence, and
truthfully, accurately, and completely disclosed shareholder information in the application
documents for this issuance in accordance with the law, fulfilling the obligation of information
disclosure.
If a lawsuit, arbitration dispute, or administrative penalty occurs due to the Company's
IPO-related ZKTeco Times Other Strict
involvement in the installation and use of unauthorized software, we voluntarily and jointly bear August 17,
commitment and Che commitment Long term performan
all economic consequences and losses for the Company, and will not seek compensation from the 2022
s Quanhong s ce
Company under any conditions or methods.
1. If ZKTeco (including its predecessor) and its controlling subsidiaries fail to pay social
insurance premiums and/or housing provident fund for employees in accordance with the law or
in full, causing ZKTeco and/or its controlling subsidiaries to have a supplementary payment
obligation or suffer any fines or losses, the Company/I will unconditionally and voluntarily bear
such supplementary payment obligation, fines or losses to ensure that ZKTeco and its holding
subsidiaries do not suffer any economic losses due to such matters.
IPO-related ZKTeco Times Other Strict
2. If ZKTeco (including its predecessor) and its controlling subsidiaries use labor employment August 17,
commitment and Che commitment Long term performan
methods in certain positions, causing ZKTeco and/or its controlling subsidiaries to suffer any 2022
s Quanhong s ce
fines or losses, the Company/I will unconditionally and voluntarily bear such fines or losses to
ensure that ZKTeco and its controlling subsidiaries do not suffer any economic losses due to
such matters.
The aforementioned commitments are unconditional and irrevocable.
The Company/I will bear any losses suffered by stakeholders as a result of violating the
aforementioned commitments.
If the Company is unable to continue using the defective property due to defects, or if the
IPO-related ZKTeco Times Other Strict
relevant government authorities require the demolition of the relevant property or impose August 17,
commitment and Che commitment Long term performan
penalties on the Company in the future, they will unconditionally bear all losses, costs, and 2022
s Quanhong s ce
expenses incurred by the Company arising therefrom.
Whether the
commitment
Yes
is fulfilled
on time
130
ZKTeco 2023 Annual Report
2. If there are assets or projects of the Company which have profit forecast while the reporting period is
still in the profit forecast period, the Company shall state whether the assets or projects meet the original
profit forecast and the reasons
□ Applicable Not applicable
II. Non Operating Occupation of Funds by Controlling Shareholders and Other Related
Parties of Listed Company
□ Applicable Not applicable
During the reporting period, there was no non-operating occupation of funds by controlling shareholders or other related parties of
the listed company.
III. Illegal Provision of Guarantees for External Parties
□ Applicable Not applicable
There were no illegal external guarantees during the reporting period of the Company.
IV. Explanation Given by the Board of Directors on the Latest "Non-standard Audit
Report"
□ Applicable Not applicable
V. Explanation Given by the Board of Directors, Board of Supervisors, and Independent
Directors (if any) on the "Non-standard Audit Report" Issued by the CPA Firm for the
Current Reporting Period
□ Applicable Not applicable
VI. Explanation Given by the Board of Directors on Changes in Accounting Policies,
Accounting Estimates, or Correction of Major Accounting Errors during the Reporting
Period
□ Applicable Not applicable
VII. Explanation on Changes in the Scope of Consolidated Financial Statements Compared
to the Financial Report for the Previous Year
Applicable □ Not applicable
During the reporting period, the Company established eight new subsidiaries within the consolidation scope, as shown below:
Percentage
Reason for
S/N Company Name Establishment Date Registered Capital of shares
Change
(%)
New
1 RALVIE AI INC. August 22, 2023 USD 10,000 100.00
establishment
New
2 ZKDIGIMAX PTE. LTD. March 7, 2023 USD 20 million 80.00
establishment
131
ZKTeco 2023 Annual Report
New
3 ZKDIGIMAX PANAMA, S.A. April 11, 2023 USD 10,000 80.00
establishment
New
4 ZKDIGIMAX COLOMBIA SAS April 26, 2023 COP 10 million 80.00
establishment
New
5 ZKDIGIMAX (PTY) LTD March 14, 2023 --- 80.00
establishment
PT. ZKDIGIMAX EXCEL New
6 May 25, 2023 IDR 10.01 billion 56.00
NOBLE establishment
ZKDIGIMAX CHINA CO., New
7 May 18, 2023 USD 300,000 80.00
LTD. establishment
ZK TECHNOLOGY New
8 October 17, 2023 MAD 100,000 100.00
MOROCCO establishment
Note: ZKDIGIMAX (PTY) LTD uses the paid up capital as its registered capital, which has not been paid as of the end of the
period; on August 7, 2023, Xiamen ZKTeco Cloud Valley Design and Development Co., Ltd. was deregistered, and at the end of
the period, the subsidiary was no longer included in the consolidation scope.
VIII. Appointment and Dismissal of Accounting Firms
Accounting firm currently employed
Dahua Certified Public Accountants (Special General
Name of domestic accounting firms
Partnership)
Remuneration of domestic accounting firms (RMB '0,000) 130
Continuous years of audit services of domestic accounting
1
firms
Name of certified public accountant (CPA) of domestic
Li Hanbing, Chen Ming
accounting firms
Continuous years of audit services provided by certified public
1
accountant (CPA) of domestic accounting firms
Whether the accounting firm was changed in the reporting period
Yes □ No
Whether to hire a new accounting firm during the audit period
□ Yes No
Whether the replacement of the accounting firm follows the approval procedure
Yes □ No
Explanations on the appointment and dismissal of accounting firms
Whereas the audit institution Baker Tilly China Certified Public Accountants (Special General Partnership) has provided
audit services to the Company for 7 consecutive years, and in accordance with the relevant provisions of the "Notice on Issuing the
Management Measures for the Selection of Accounting Firms for State-owned Enterprises and Listed Companies" (CK [2023] No.
4) issued by the Ministry of Finance of the People's Republic of China, the State-owned Assets Supervision and Administration
Commission of the State Council, and the China Securities Regulatory Commission, in order to ensure the independence and
objectivity of audit, and taking into account the Company's future business development, demand for audit services, personnel
arrangements and work plans of the accounting firm, the Company held the 7th Session of the Third Board Meeting on November
10, 2023 and the 4th Extraordinary General Meeting of Shareholders in 2023 on November 27, 2023, which deliberated and
approved the "Proposal on Proposed Change of Accounting Firm". They agreed to hire Dahua Certified Public Accountants
(Special General Partnership) as the Company's audit institution for the year 2023.
132
ZKTeco 2023 Annual Report
Appointment of audit accounting firms, financial advisors or sponsors for internal control
□ Applicable Not applicable
IX. Delisting after the Disclosure of the Annual Report
□ Applicable Not applicable
X. Matters Related to Bankruptcy Reorganization
□ Applicable Not applicable
There were no bankruptcy or restructuring related matters during the reporting period of the Company.
XI. Material Litigation and Arbitration
Applicable □ Not applicable
Amount Is there an Litigation Execution of
Basic information Progress of
involved estimated (arbitration) litigation Disclosure Disclosure
of litigation litigation
(RMB liability trial results (arbitration) Date Index
(arbitration) (arbitration)
'0,000) formed and effects judgments
Patent dispute filed The court
The Beijing "Announcement
by Hanwang ruled to
Intellectual on the Progress
Technology Co., dismiss the
Property Court of Litigation
Ltd. against the other party's June 30,
11,048.6 No has ruled to Not involved Matters" on
Company and its lawsuit, 2023
reject all CNINFO
subsidiary which has no
lawsuits filed by (Announcement
XIAMEN impact on the
the other party No.: 2023-059)
ZKTECO Company
The Company and
Shenzhen ZKTeco
submitted an
"Application for
Execution" to the
Shenzhen
Intermediate
People's Court and
The second
was accepted by
instance
the Shenzhen CNINFO
court ruled
The Guangdong Intermediate (http://www.cni
that Zokon
Higher People's People's Court. As nfo.com.cn)
Unfair competition Industry
Court ruled on the other party had "2023 Half Year
dispute filed by the compensate August 30,
200 No August 25, 2023 no property Report of
Company against the Company 2023
to reject the available for ZKTECO CO.,
Zokon Industry and
application for execution, the LTD."
Shenzhen
retrial court ruled on (Announcement
ZKTeco for a
September 25, No. 2023-062)
loss of RMB
2023 to terminate
2 million
the execution. On
October 27, 2023,
the court notified
the Company to
freeze the
execution fee of
RMB 25,004.51
from Zokon
133
ZKTeco 2023 Annual Report
Industry
The
Company has
suspended
the
description
of "Zokon"
on relevant
platforms
Disputes filed by The Guangdong
and
Zokon Industry Higher People's
compensated
over infringement Court issued a CNINFO
Zokon
of trademark rights civil judgment (http://www.cni
Industry with
and unfair (2022) YMZ nfo.com.cn)
a total of
competition No. 4634 on "2023 Half Year
RMB August 30,
against the 60 Yes December 29, Not yet executed Report of
600,000 for 2023
Company and 2023, rejecting ZKTECO CO.,
economic
Shenzhen the appeal of the LTD."
losses and
Xinjiacheng Company and (Announcement
reasonable
Intelligent upholding the No. 2023-062)
expenses for
Technology Co., original
rights
Ltd. judgment.
protection;
the judgment
result has no
significant
impact on the
Company's
production
and operation
Other
lawsuits/arbitration
s where the
CNINFO
Company
(http://www.cni
(including
nfo.com.cn)
subsidiary The Company The Company
No "2023 Half Year
companies in the strictly follows strictly follows the August 30,
1,688.2 No significant Report of
consolidated the progress of progress of each 2023
impact ZKTECO CO.,
financial each case case
LTD."
statements) as the
(Announcement
plaintiff fails to
No. 2023-062)
meet the disclosure
standards for major
lawsuits
Other
lawsuits/arbitration
s where the
CNINFO
Company
(http://www.cni
(including
nfo.com.cn)
subsidiary The Company The Company
No "2023 Half Year
companies in the strictly follows strictly follows the August 30,
155.48 No significant Report of
consolidated the progress of progress of each 2023
impact ZKTECO CO.,
financial each case case
LTD."
statements) as the
(Announcement
defendant fails to
No. 2023-062)
meet the disclosure
standards for major
lawsuits
134
ZKTeco 2023 Annual Report
XII. Punishment and Rectification
□ Applicable Not applicable
There were no penalties or rectifications during the reporting period of the Company.
XIII. The Integrity of the Company, Its Controlling Shareholders, and Actual Controllers
Applicable □ Not applicable
During the reporting period, the Company, its controlling shareholders, and actual controllers were in good faith, and there were
no instances of failure to fulfill effective court judgments or outstanding debts of significant amounts.
XIV. Significant Related-Party Transactions
1. Related-party transactions related to daily operations
□ Applicable Not applicable
There were no related party transactions related to daily operations during the reporting period of the Company.
2. Related-party transactions arising from the acquisition and sale of assets or equity
□ Applicable Not applicable
There were no related party transactions related to asset or equity acquisitions or sales during the reporting period of the Company.
3. Related-party Transactions Arising from Joint Investments on External Parties
□ Applicable Not applicable
During the reporting period, the Company did not engage in any related party transactions related to joint foreign investment.
4. Related Credit and Debt Transactions
□ Applicable Not applicable
There were no current associated rights of credit and liabilities during the reporting period of the Company.
5. Transactions with Related Financial Companies
□ Applicable Not applicable
There is no deposit, loan, credit or other financial businesses between the Company and its affiliated financial companies and
related parties.
6. Transactions between financial companies controlled by the Company and related parties
□ Applicable Not applicable
There is no deposit, loan, credit or other financial businesses between the financial company controlled by the Company and its
affiliated parties.
135
ZKTeco 2023 Annual Report
7. Other significant related party transactions
□ Applicable Not applicable
There were no other major related party transactions during the reporting period of the Company.
XV. Significant Contracts and Their Performance
1. Custody, contracting, and leasing matters
(1) Custody
□ Applicable Not applicable
There was no custody during the reporting period of the Company.
(2) Contracting
□ Applicable Not applicable
There was no contracting during the reporting period of the Company.
(3) Leasing
Applicable □ Not applicable
Explanations on leasing
During the reporting period, the Company and its subsidiaries rented offices at relevant locations for business use due to
operational needs, and both parties have signed housing rental contracts.
Projects that bring profits and losses to the Company that exceed 10% of the total profit during the reporting period
□ Applicable Not applicable
There are no leasing projects that bring profits or losses to the Company during the reporting period that exceed 10% of the total
profits of the Company during the reporting period.
2. Significant guarantee
Applicable □ Not applicable
Unit: RMB '0,000
External guarantees provided by the Company and its subsidiaries (excluding guarantees provided to subsidiaries)
Disclosu
re date Whether
of Actual Whether to
Name of Guarante Actual Type of Counter
guarante guarante Collatera Guarante it has guarante
guarante e occurren guarante guarante
e limit e l (if any) e period been e for
e object amount ce date e e (if any)
related amount fulfilled related
announc parties
ements
Guarantee of the Company to its subsidiaries
Name of Disclosu Guarante Actual Actual Type of Collatera Counter Guarante Whether Whether
guarante re date e occurren guarante guarante l (if any) guarante e period it has to
136
ZKTeco 2023 Annual Report
e object of amount ce date e e e (if any) been guarante
guarante amount fulfilled e for
e limit related
related parties
announc
ements
ZKTEC
Joint and
O
Decemb several
(GUAN April 28,
25,000 er 16, 0.00 liability 15 years No No
GDONG 2023
2019 guarante
) CO.,
e
LTD
Total approved Total actual amount
guarantee amount of guarantee for
for subsidiaries 100,000 subsidiaries during 0
during the reporting the reporting period
period (B1) (B2)
Total approved Total actual
guarantee amount guarantee balance
for subsidiaries at for subsidiaries at
100,000 0
the end of the the end of the
reporting period reporting period
(B3) (B4)
Guarantee provided by subsidiaries to subsidiaries
Disclosu
re date Whether
of Actual Whether to
Name of Guarante Actual Type of Counter
guarante guarante Collatera Guarante it has guarante
guarante e occurren guarante guarante
e limit e l (if any) e period been e for
e object amount ce date e e (if any)
related amount fulfilled related
announc parties
ements
Total amount of company guarantee (i.e. the total of the first three major items)
Total actual amount
Total approved
of guarantees
guarantee amount
100,000 incurred during the 0
during the reporting
reporting period
period (A1+B1+C1)
(A2+B2+C2)
Total approved Total actual
guarantee amount at guarantee balance at
the end of the 100,000 the end of the 0
reporting period reporting period
(A3+B3+C3) (A4+B4+C4)
Proportion of actual total guarantee amount
0.00%
(i.e. A4+B4+C4) to the Company's net assets
Including:
Balance of guarantees provided to
shareholders, actual controllers, and their 0
related parties (D)
Balance of debt guarantee provided directly
or indirectly for guaranteed objects with an 0
asset liability ratio exceeding 70% (E)
Amount of the total guarantee exceeding 0
137
ZKTeco 2023 Annual Report
50% of net assets (F)
Total amount of the above three guarantees
0
(D+E+F)
Explanations of situations where there is a
guarantee liability or evidence indicating the
possibility of assuming joint and several Not applicable
liability for the unexpired guarantee contract
during the reporting period (if any)
Explanations of providing external
guarantees in violation of prescribed Not applicable
procedures (if any)
Explanations of the specific situation of using composite guarantee
Not applicable
3. Entrustment of others to manage cash assets
(1) Entrustment of financial management
Applicable □ Not applicable
Overview of entrusted financial management during the reporting period
Unit: RMB '0,000
Provision for
Source of funds
Amount of Overdue impairment
for entrusted Outstanding
Specific types entrusted financial uncollected amount of overdue
financial balance
management amount uncollected
management
financial assets
Bank financial
Own funds 5,571.68 2,965.63 0 0
products
Bank financial
Own funds 1,902.11 1,902.11 0 0
products
Bank financial
Own funds 42.38 0 0 0
products
Bank financial
Own funds 145.95 75.12 0 0
products
Bank financial
Own funds 3,000 3,000 0 0
products
Bank financial
Fundraising 14,760 0 0 0
products
Other categories Own funds 133.35 79.62 0 0
Total 25,555.47 8,022.48 0 0
Specific situation of high-risk entrusted financial management with significant individual amounts, low safety, and poor liquidity
□ Applicable Not applicable
Expected inability to recover principal or other situations that may lead to impairment in entrusted financial management
□ Applicable Not applicable
(2) Entrusted loan
□ Applicable Not applicable
There were no entrusted loans during the reporting period of the Company.
138
ZKTeco 2023 Annual Report
4. Other significant contracts
□ Applicable Not applicable
There were no other significant contracts during the reporting period of the Company.
XVI. Other Significant Events
□ Applicable Not applicable
There are no other significant matters that need to be explained during the reporting period of the Company.
XVII. Significant Events of the Company's Subsidiaries
□ Applicable Not applicable
139
ZKTeco 2023 Annual Report
Section VII Changes in Shares and Information about Shareholders
I. Changes in Shares
1. Changes in shares
140
ZKTeco 2023 Annual Report
Unit: share
Before the change Increase or decrease in this change (+, -) After this change
Share transferred
Issue new
Quantity Proportion Bonus from capital Others Subtotal Quantity Proportion
shares
reserve
I. Restricted
115,239,376 77.61% 19,987 34,012,262 -20,944,466 13,087,783 128,327,159 65.92%
shares
1. Shares held
by State
2. Shares held
by state-owned 6,996 0.00% -6,996 -6,996 0
legal persons
3. Shares held
by other domestic 115,227,138 77.60% 19,987 34,012,262 -20,932,228 13,100,021 128,327,159 65.92%
enterprises
Including:
shares held by
89,051,893 59.97% 26,160,962 -20,927,983 5,232,979 94,284,872 48.43%
domestic legal
persons
Shares held
by domestic 26,175,245 17.63% 19,987 7,851,300 -4,245 7,867,042 34,042,287 17.49%
natural persons
4. Foreign
5,242 0.00% -5,242 -5,242 0
shareholding
Including:
shares held by
5,158 0.00% -5,158 -5,158 0
overseas legal
persons
Shares held
by overseas 84 0.00% -84 -84 0
natural persons
II. Shares not
subject to trading 33,252,675 22.39% 1,619,855 10,535,353 20,944,466 33,099,674 66,352,349 34.08%
restrictions
1. RMB 33,252,675 22.39% 1,619,855 10,535,353 20,944,466 33,099,674 66,352,349 34.08%
141
ZKTeco 2023 Annual Report
denominated
ordinary shares
2. Domestic
listed foreign
shares
3. Overseas
listed foreign
shares
4. Others
III. Total shares 148,492,051 100.00% 1,639,842 44,547,615 46,187,457 194,679,508 100.00%
142
ZKTeco 2023 Annual Report
Reasons for changes in shares
Applicable □ Not applicable
1、 Reasons for changes in restricted shares
On February 17, 2023, the lockup period of the Company's initial public offering of offline restricted shares expired and the
shares went public. The number of shareholders with the restrictions lifted was 5,361, with 1,865,168 shares, accounting for 1.26%
of the Company's total share capital at the time of lifting the restrictions;
On August 22, 2023, some of the shares already issued before the Company's initial public offering and the strategic
allocation shares in the initial public offering were lifted from restrictions and listed for circulation. The number of shareholders
with the restrictions lifted was 9, with 19,079,298 shares, accounting for 9.8836% of the Company's total share capital at the time
of lifting the restrictions;
On November 22, 2023, the shares obtained by Jin Hairong, the Director and General Manager of the Company, Fu Zhiqian,
the Director, and Mu Wenting, the senior managers, from the first grant of the first attribution period under the 2022 restricted
share incentive plan were locked up at a ratio of 75% in accordance with relevant regulations. A total of 19,987 restricted shares
were added.
2、 Reasons for changes in total shares
Conversion of capital reserve to share capital: On May 25, 2023, the Company disclosed the "2022 Annual Equity
Distribution Implementation Announcement". After deliberation and approval by the Company's 2022 Annual General Meeting,
the Company converted 3 shares of capital reserve to all shareholders for every 10 shares. After the completion of the capital
reserve conversion, the total share capital of the Company increased from 148,492,051 shares to 193,039,666 shares.
On November 17, 2023, the Company disclosed the "Announcement on the Attribution Results of the First Attribution Period
of the 2022 Restricted Share Incentive Plan and the Listing of Shares". After deliberation and approval by the 7th Session of the
Third Board Meeting, the attribution condition for the first grant of the first attribution period under the Company's 2022
Restricted Share Incentive Plan was met, and the number of attributed shares was 1,639,842 shares, which were listed for
circulation on November 22, 2023. After the completion of the attribution, the total share capital of the Company increased from
193,039,666 shares to 194,679,508 shares.
Approval of changes in shares
Applicable □ Not applicable
The 2022 annual equity distribution proposal of the Company has been deliberated and approved by the 2022 annual general
meeting held on May 19, 2023, and the Company disclosed the "2022 Annual Equity Distribution Implementation Announcement"
(Announcement No.: 2023-049) on CNINFO (http://www.cninfo.com.cn) on May 25, 2023;
The attribution condition for the first attribution period of the first grant under the 2022 Restricted Share Incentive Plan of the
Company has been met, and it has been approved by the 7th Session of the Third Board Meeting and the 7th Session of the Third
Supervisory Board Meeting held on November 10, 2023. In addition, the "Announcement on the Achievement of Attribution
Conditions for the First Attribution Period of the 2022 Restricted Share Incentive Plan" (Announcement No. 2023-081) was
disclosed on November 11, 2023 on CNINFO (http://www.cninfo.com.cn).
Transfer of changes in shares
Applicable □ Not applicable
The registration date for the Company's annual equity distribution in 2022 is May 30, 2023, and the ex-dividend date is May
31, 2023. The increased shares were registered in the shareholder's securities account on May 31, 2023.
The attribution condition for the first grant of the first attribution period under the Company's 2022 Restricted Share Incentive
Plan was met, and the number of attributed shares was 1,639,842 shares. The shares attributed this time were registered in the
relevant incentive object's securities account on November 21, 2023.
143
ZKTeco 2023 Annual Report
The impact of share changes on financial indicators such as basic EPS and diluted EPS for the most recent year and period, and net
assets per share attributable to common shareholders of the Company
Applicable □ Not applicable
During the reporting period, due to the Company's implementation of converting capital reserve to share capital and the 2022
restricted share incentive plan granting the first attribution period of shares for the first time, the total share capital increased from
148,492,051 shares to 194,679,508 shares, resulting in corresponding dilution of EPS and net assets per share. The relevant data
can be found in "V. Main Accounting Data and Financial Indicators" of "Section II Company Profile and Key Financial
Indicators" of the report.
Other contents deemed necessary by the Company or required to be disclosed by the securities regulatory authority
□ Applicable Not applicable
2. Changes in restricted shares
Applicable □ Not applicable
Unit: share
Number of Number of Number of
Increase in Date of
restricted shares released restricted
Name of restricted Reason for releasing from
shares at the from trading shares at the
shareholder shares during restrictions trading
beginning of restrictions in end of the
the period restrictions
the period this period period
Shenzhen
Restricted
ZKTeco Times February 17,
45,000,000 13,500,000 0 58,500,000 shares before
Investment Co., 2026
IPO
Ltd.
Restricted
February 17,
Che Quanhong 26,171,000 7,851,300 0 34,022,300 shares before
2026
IPO
One quarter of
the shares will
Shenzhen JYSJ be unlocked
Investment Restricted from August
Enterprise 10,852,000 3,255,600 3,526,900 10,580,700 shares before 17, 2023, until
(Limited IPO all shares are
Partnership) unlocked on
August 17,
2026
One quarter of
the shares will
Shenzhen
be unlocked
JYHY
Restricted from August
Investment
10,708,500 3,212,550 3,480,263 10,440,787 shares before 17, 2023, until
Enterprise
IPO all shares are
(Limited
unlocked on
Partnership)
August 17,
2026
Dongguan LX
Restricted
Investment August 17,
7,600,000 2,280,000 0 9,880,000 shares before
Partnership 2025
IPO
Enterprise
144
ZKTeco 2023 Annual Report
(Limited
Partnership)
One quarter of
the shares will
Shenzhen
be unlocked
JYLX
Restricted from August
Consulting
3,652,600 1,095,780 1,187,095 3,561,285 shares before 17, 2023, until
Enterprise
IPO all shares are
(Limited
unlocked on
Partnership)
August 17,
2026
Shenzhen Fuhai
Juanyong I
Restricted
Venture August 22,
2,009,646 602,894 2,612,540 0 shares before
Investment 2023
IPO
Fund (Limited
Partnership)
Huaxin
Yuanchuang
(Qingdao)
Investment
Management Restricted
August 22,
Co., Ltd. - 1,406,752 422,025 1,828,777 0 shares before
2023
Yiwu Walden IPO
Yuanjing
Venture Capital
Center (Limited
Partnership)
Huaxin
Yuanchuang
(Qingdao)
Investment
Management
Restricted
Co., Ltd. - August 22,
2,612,540 783,762 3,396,302 0 shares before
Qingdao 2023
IPO
Walden
Zhongxiang
Investment
Center (Limited
Partnership)
One quarter of
Shenzhen the shares will
JYQL be unlocked
Investment Restricted from August
Consulting 1,356,000 406,800 440,700 1,322,100 shares before 17, 2023, until
Enterprise IPO all shares are
(Limited unlocked on
Partnership) August 17,
2026
Changjiang
Wealth Asset
Management -
Bank of
Restricted August 22,
Nanjing - 1,733,148 519,944 2,253,092 0
shares after IPO 2023
Changjiang
Wealth -
ZKTeco
Employee
145
ZKTeco 2023 Annual Report
Strategic
Placement No.1
Collective
Asset
Management
Plan
Changjiang
Wealth Asset
Management -
Bank of
Nanjing -
Changjiang
Wealth -
Restricted August 22,
ZKTeco 272,022 81,607 353,629 0
shares after IPO 2023
Employee
Strategic
Placement No.2
Collective
Asset
Management
Plan
Offline
issuance Restricted February 17,
1,865,168 0 1,865,168 0
restricted shares after IPO 2023
shares
During the
tenure of
supervisors,
directors and
senior
executives,
25% of the total
Executive
Fu Zhiqian 0 5,362 0 5,362 number of
lockup shares
shares held will
be unlocked
annually, while
the remaining
75% will be
automatically
locked
During the
tenure of
supervisors,
directors and
senior
executives,
25% of the total
Executive
Jin Hairong 0 5,850 0 5,850 number of
lockup shares
shares held will
be unlocked
annually, while
the remaining
75% will be
automatically
locked
During the
Executive
Mu Wenting 0 8,775 0 8,775 tenure of
lockup shares
supervisors,
146
ZKTeco 2023 Annual Report
directors and
senior
executives,
25% of the total
number of
shares held will
be unlocked
annually, while
the remaining
75% will be
automatically
locked
Total 115,239,376 34,032,249 20,944,466 128,327,159 -- --
II. Issuance and Listing of Securities
1. Securities issuance (excluding preferred shares) during the reporting period
Applicable □ Not applicable
Transact
Type of Listing
Issue Price ion
stocks and Issue Number approved Disclosure
(or Interest Listing Date Termina Disclosure Index
derivative Date of Issues amount Date
Rate) tion
securities (share)
Date
Stock Category
"Announcement
on the
Attribution
Results of the
First Attribution
Period of the
2022 Restricted
Novemb Share Incentive
Restricted RMB November 22, November
er 22, 1,639,842 1,639,842 Plan and the
share 14.12/share 2023 17, 2023
2023 Listing of Shares
of ZKTECO
CO., LTD."
(Announcement
No. 2023-087)
on the website of
CNINFO
Convertible corporate bonds, convertible corporate bonds with separate transactions and
other derivative securities of corporate bonds
Explanations on securities issuance (excluding preferred shares) during the reporting period
Explanations on the Attribution Results of the First Attribution Period of the 2022 Restricted Share Incentive Plan and the Listing
of Shares:
On November 10, 2023, the Company held the 7th Session of the Third Board Meeting and the 7th Session of the Third
Supervisory Board Meeting, respectively, and deliberated and approved the "Proposal on the Achievement of the Attribution
Conditions for the First Attribution Period of the 2022 Restricted Share Incentive Plan". The attribution condition for the first
grant of the first attribution period under the Company's 2022 Restricted Share Incentive Plan was met. After being reviewed and
approved by the Shenzhen Stock Exchange and China Securities Depository and Clearing Co., Ltd. Shenzhen Branch, the number
147
ZKTeco 2023 Annual Report
of shares attributed this time was 1,639,842 shares, with an attributable price of RMB 14.12 per share. The listing and circulation
date was November 22, 2023.
2. Explanations on Changes in Total Share Capital, the Structure of Shareholders, and the Structure of
Assets and Liabilities of the Company
Applicable □ Not applicable
During the reporting period, due to the implementation of the 2022 annual equity distribution proposal, the Company
increased its total share capital from 148,492,051 shares to 193,039,666 shares by converting 3 shares per 10 shares to share
capital for all shareholders; due to the share attribution when the attribution condition for the first grant of the first attribution
period under the Company's 2022 Restricted Share Incentive Plan is met, the total share capital of the Company increased from
193,039,666 shares to 194,679,508 shares.
As of the end of 2023, the total assets of the Company were RMB 3.9239007 billion, an increase of 7.07% compared to the
end of 2022 (RMB 3.6646799 billion); the total liabilities were RMB 633.1114 million, an increase of 12.26% compared to the
end of 2022 (RMB 563.9592 million), and the asset liability ratio was 16.13%, maintaining within a reasonable range.
3. Internal employee shares
□ Applicable Not applicable
III. Shareholders and Actual Controllers
1. Number of shareholders of the Company and shareholding
Unit: share
Total
number
Total
of Total number
number of
commo of preferred
preferred
n shareholders Total
sharehold
shareho whose voting number
ers whose
Total number lders at rights have of
voting
of common the end been sharehol
rights
shareholders at of the recovered at ders
20,213 19,470 have been 0 0 0
the end of the previou the end of last holding
recovered
reporting s month month before special
at the end
period before the disclosure voting
of the
the date of the shares
reporting
disclos annual report (if any)
period (if
ure date (if any) (see
any) (see
of the Note 9)
Note 9)
annual
report
Particulars about shareholders holding more than 5% or the top 10 shareholders (excluding shares lent through refinancing)
Changes Pledge, marking or frozon
Total shares Number of
Nature in increase Number of
Percent held at the shares not
Name of of and shares with
age of end of the subject to
shareholder sharehol decrease trading Share status Amount
shares reporting trading
der during the restrictions
period restrictions
reporting
148
ZKTeco 2023 Annual Report
period
Domestic
Shenzhen ZKTeco non state-
Times Investment owned 30.05% 58,500,000 13,500,000 58,500,000 0 Not applicable 0
Co., Ltd. corporati
on
Domestic
Che Quanhong 17.48% 34,022,300 7,851,300 34,022,300 0 Not applicable 0
individual
Shenzhen JYSJ
Domestic
Investment
non state-
Enterprise 7.25% 14,107,600 3,255,600 10,580,700 3,526,900 Not applicable 0
owned
(Limited
corporation
Partnership)
Shenzhen JYHY
Domestic
Investment
non state-
Enterprise 7.15% 13,921,050 3,212,550 10,440,787 3,480,263 Not applicable 0
owned
(Limited
corporation
Partnership)
Dongguan LX
Investment Domestic
Partnership non state-
5.08% 9,880,000 2,280,000 9,880,000 0 Not applicable 0
Enterprise owned
(Limited corporation
Partnership)
Shenzhen JYLX
Domestic
Consulting
non state-
Enterprise 2.42% 4,717,910 1,065,310 3,561,285 1,156,625 Not applicable 0
owned
(Limited
corporation
Partnership)
Huaxin
Yuanchuang
(Qingdao)
Investment
Management Co.,
Ltd. - Qingdao Others 0.89% 1,742,121 -870,419 0 1,742,121 Not applicable 0
Walden
Zhongxiang
Investment Center
(Limited
Partnership)
Shenzhen JYQL
Domestic
Investment
non state-
Consulting
owned 0.89% 1,731,300 375,300 1,322,100 409,200 Not applicable 0
Enterprise
corporati
(Limited
on
Partnership)
Hong Kong Overseas
Securities Clearing corporati 0.65% 1,257,430 1,257,430 0 1,257,430 Not applicable 0
Company Limited on
Shenzhen Gohedge
Fund Management
Co., Ltd. -
Others 0.36% 709,580 709,580 0 709,580 Not applicable 0
Gohedge Pearl
No.1 Private
Equity Fund
Strategic investors or
Not applicable
general corporations
149
ZKTeco 2023 Annual Report
become the top 10
shareholders due to the
placement of new shares
(if any) (see Note 4)
Shareholder Che Quanhong is elder brother of shareholder Che Quanzhong from ZKTeco Times are brothers,
and son of Che Jun, partner of LX Investment.
Explanations on the above The shareholder Che Quanhong holds 76.02% of the equity of ZKTeco Times, being the controlling shareholder
shareholder's association of ZKTeco Times. Meanwhile, Che Quanhong holds 1.18% of the property share of shareholder LX Investment.
or concerted action Che Quanzhong, the younger brother of shareholder Che Quanhong, holds a 23.98% equity in ZKTeco Times.
Che Jun, the father of shareholder Che Quanhong, holds 98.68% of the property share of LX Investment.
In addition, there is no affiliated relationship between the other shareholders of the Company.
Explanations on the above
shareholders' involvement
in entrusting/entrusted Not involved
voting rights and waiver of
voting rights
Special explanations on
the existence of
repurchased accounts
Not involved
among the top 10
shareholders (if any) (see
Note 10)
Particulars about the top 10 common shareholders that are not subject to trading restrictions
Number of shares not subject to trading restrictions held at the end of the Types of shares
Name of shareholder
reporting period Types Amount
Shenzhen JYSJ Investment RMB
Enterprise (Limited 3,526,900 denominated 3,526,900
Partnership) ordinary shares
Shenzhen JYHY RMB
Investment Enterprise 3,480,263 denominated 3,480,263
(Limited Partnership) ordinary shares
Huaxin Yuanchuang
(Qingdao) Investment
Management Co., Ltd. - RMB
Qingdao Walden 1,742,121 denominated 1,742,121
Zhongxiang Investment ordinary shares
Center (Limited
Partnership)
Hong Kong Securities RMB
Clearing Company 1,257,430 denominated 1,257,430
Limited ordinary shares
Shenzhen JYLX RMB
Consulting Enterprise 1,156,625 denominated 1,156,625
(Limited Partnership) ordinary shares
Shenzhen Gohedge Fund
RMB
Management Co., Ltd. -
709,580 denominated 709,580
Gohedge Pearl No.1
ordinary shares
Private Equity Fund
Shenzhen Fuhai Juanyong RMB
I Venture Investment Fund 666,138 denominated 666,138
(Limited Partnership) ordinary shares
RMB
Zhu Yongjian 610,484 denominated 610,484
ordinary shares
Changjiang Wealth Asset 418,092 RMB 418,092
150
ZKTeco 2023 Annual Report
Management - Bank of denominated
Nanjing - Changjiang ordinary shares
Wealth - ZKTeco
Employee Strategic
Placement No.1 Collective
Asset Management Plan
Shenzhen JYQL
RMB
Investment Consulting
409,200 denominated 409,200
Enterprise (Limited
ordinary shares
Partnership)
Explanations on the
association or concerted
action between the top 10
shareholders of
outstanding shares not
subject to trading The Company does not know whether there is a related relationship between the top 10 shareholders of shares
restrictions, as well as not subject to trading restrictions, as well as between the top 10 shareholders outstanding shares not subject to
between the top 10 trading restrictions and the top 10 shareholders, or whether they belong to persons acting in concert.
shareholders of
outstanding shares not
subject to trading
restrictions and the top 10
shareholders
Among the top 10 shareholders not subject to trading restrictions, Shenzhen Gohedge Fund Management Co.,
Explanations on Ltd. - Gohedge Pearl No.1 Private Equity Fund held a total of 709,580 shares of the Company at the end of the
shareholders participating reporting period, including 584,520 shares held through ordinary securities accounts and 125,060 shares held
in margin trading (if any) through a margin account of CITIC Securities Co., Ltd. At the end of the reporting period, Zhu Yongjian held a
(see Note 5) total of 610,484 shares of the Company, including 0 share held through ordinary securities accounts and
610,484 shares held through a margin account of Industrial Securities Co., Ltd.
Participation of Top Ten Shareholders in Lending of Shares Through Refinancing Business
□ Applicable Not applicable
Changes to Top Ten Shareholders Compared to the Previous Period
Applicable □ Not applicable
Unit: share
Changes to Top Ten Shareholders Compared to the End of the Previous Period
Number of shares held in the ordinary
account and credit account of shareholders
Entries/exit Number of shares lent through refinancing
at the end of the period, as well as the
Name of shareholder s during the and not yet repaid at the end of the period
shares lent through refinancing that have
(full name) reporting not yet been returned
period
Proportion to total Proportion to total
Total quantity Total quantity
share capital share capital
Shenzhen JYQL
Investment Consulting
Entry 0 0.00% 1,731,300 0.89%
Enterprise (Limited
Partnership)
Hong Kong Securities
Clearing Company Entry 0 0.00% 1,257,430 0.65%
Limited
Shenzhen Gohedge Fund
Management Co., Ltd. -
Entry 0 0.00% 709,580 0.36%
Gohedge Pearl No.1
Private Equity Fund
151
ZKTeco 2023 Annual Report
Shenzhen Fuhai
Juanyong I Venture
Exit Unknown Unknown 666,138 0.34%
Investment Fund
(Limited Partnership)
Changjiang Wealth Asset
Management - Bank of
Nanjing - Changjiang
Wealth - ZKTeco
Exit Unknown Unknown 418,092 0.21%
Employee Strategic
Placement No.1
Collective Asset
Management Plan
Huaxin Yuanchuang
(Qingdao) Investment
Management Co., Ltd. -
Exit Unknown Unknown Unknown Unknown
Yiwu Walden Yuanjing
Venture Capital Center
(Limited Partnership)
Note: The Company is unaware of whether other shareholders other than the top ten shareholders have participated in the lending
of shares through refinancing; the Company is unaware of the shareholding information of shareholders outside the list of top 200
shareholders issued by CSDC at the end of the period.
Does the Company have voting right difference arrangements
□ Applicable Not applicable
Did the top 10 common shareholders and the top 10 shareholders of ordinary shares not subject to trading restrictions engage in
agreed repurchase transactions during the reporting period
□ Yes No
The top 10 common shareholders and the top 10 shareholders of ordinary shares not subject to trading restrictions did not engage
in any agreed repurchase transactions during the reporting period.
2. Controlling shareholders of the Company
Nature of controlling shareholder: controlled by individual
Type of controlling shareholder: corporation
Name of controlling
Legal representative Date of establishment Organizational code Main business
shareholder
Shenzhen ZKTeco
Times Investment Co., Wang Haitao July 13, 2015 91440300335415347N Investment
Ltd.
Equity of other
domestic and foreign
listed companies
controlled and The controlling shareholders of the Company did not hold or participate in other domestic and foreign
participated in by listed companies.
controlling
shareholders during the
reporting period
Changes in controlling shareholders during the reporting period
□ Applicable Not applicable
There was no change in the controlling shareholder of the Company during the reporting period.
152
ZKTeco 2023 Annual Report
3. Particulars about the Company’s Actual Controller & Concerted Parties
Nature of actual controller: domestic individual
Type of actual controller: individual
Relationship with actual Have you obtained residency
Name of actual controller Nationality
controller in other countries or regions
Che Quanhong Oneself China No
Che Quanhong is the Chairman of the Company. Please refer to "2. Appointment" in "II.
Main occupation and position Information on Directors, Supervisors, and Senior Managers" in "Section IV Corporate
Governance" of this annual report for details.
Domestic and foreign listed
companies that have None
controlled in the past 10 years
Changes in actual controller during the reporting period
□ Applicable Not applicable
There has been no change in the actual controller of the Company during the reporting period.
Block diagram of property rights and control relationship between the Company and actual controller
Che Quanhong
Shenzhen
ZKTeco
Times
Investmen
t Co., Ltd.
ZKTECO CO., LTD.
The actual controller controls the Company through trust or other asset management methods
□ Applicable Not applicable
4. The Company's Controlling Shareholder or the Largest Shareholder and its Concerted Action Person's
Cumulative Pledged Shares Account for 80% of the Company's Shares Held by Them
□ Applicable Not applicable
5. Particulars about Other Corporate Shareholders with Shareholding Proportion over 10%
□ Applicable Not applicable
153
ZKTeco 2023 Annual Report
6. Restricted reduction of shares held by controlling shareholders, actual controllers, restructuring
parties, and other committed entities
□ Applicable Not applicable
IV. Specific Implementation of Share Repurchase During the Reporting Period
Implementation progress of share repurchase
Applicable □ Not applicable
Proportion of
repurchased
quantity to
Proposed the
Plan Number of shares Proportion to Proposed Number of
repurchase Repurchase underlying
disclosure to be repurchased total share repurchase repurchase
amount (RMB purpose shares
time (shares) capital period d shares
'0,000) involved in
the equity
incentive
plan (if any)
The
Based on the proportion of
upper limit of the 193,039,666
Not less than
repurchase price shares of the Implement
RMB 30
of RMB 48.07 per total share employee
million November 10,
share (inclusive), capital of the stock
November (inclusive) 2023-
the expected Company as ownership 25,000
11, 2023 and not more November 9,
number of of the plans or
than RMB 60 2024
repurchased disclosure equity
million
shares is 624,090 date of the incentives
(inclusive)
to 1,248,180 repurchase
shares plan is 0.32%
-0.65%
The Company held the 7th Session of the Third Board Meeting on November 10, 2023, and deliberated and approved the
"Proposal on Repurchasing Company Shares through Centralized Bidding Trading": it plans to use its own funds to repurchase
some of the Company's shares through centralized bidding trading, for the implementation of employee stock ownership plans or
equity incentives. The total amount of repurchase funds is not less than RMB 30 million and not more than RMB 60 million. As of
February 1, 2024, the share repurchase plan has been completed. The Company has repurchased a total of 2,230,000 shares of the
Company through a dedicated securities account for share repurchases. The cumulative number of repurchased shares accounts for
1.1455% of the total share capital of the Company at that time, with a maximum transaction price of RMB 31.40 per share and a
minimum transaction price of RMB 23.20 per share. The total transaction amount is RMB 59,683,228.10 (excluding transaction
costs).
Progress in implementing centralized bidding trading to reduce holdings and repurchase shares
□ Applicable Not applicable
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ZKTeco 2023 Annual Report
Section VIII Information of Preferred Shares
□ Applicable Not applicable
There is no preferred share in the Company during the reporting period.
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Section IX Bonds
□ Applicable Not applicable
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ZKTeco 2023 Annual Report
Section X Financial Report
I. Audit Report
Audit opinion Standard unqualified opinions
Audit report signing date April 22, 2024
Dahua Certified Public Accountants (Special General
Audit institution name
Partnership)
Audit Report No. DHSZ [2024] No. 0011001165
Name of CPA Li Hanbing, Chen Ming
Audit Report Text
1. Audit Opinion
We have audited the financial statements of ZKTECO CO., LTD. (hereinafter referred to as "ZKTeco"), including the
consolidated and parent company's balance sheet as of December 31, 2023, the consolidated and parent company's profit statement,
the consolidated and parent company's cash flow statement, the consolidated and parent company's Statement of Changes in
Equity and notes to financial statements as of 2023.
In our opinion, the accompanying financial statements have been prepared in accordance with the provisions of the
Accounting Standards for Enterprises in all material aspects and fairly reflect the ZKTeco's consolidated and parent company's
financial position as of December 31, 2023, as well as the consolidated and parent company's operating results and cash flows as
of 2023.
2. Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing ("CSAs"). The "CPA's Responsibility for the Audit
of Financial Statements" section of the Audit Report further elaborates our responsibilities under these standards. We are
independent of ZKTeco in accordance with the China Code of Ethics for Certified Public Accountants, and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
3. Key Audit Matters
Key audit matters are the most important matters we believe to audit the current financial statements according to our
professional judgment. The response to these matters is based on the audit of the financial statements as a whole and the formation
of an audit opinion, and we do not express an opinion on these matters separately.
We have identified the following key audit matters that need to be communicated in the audit report.
Revenue recognition
(1) Description of matters
ZKTeco is mainly engaged in the R&D, design, production, sales, and service of biometric technology and related products.
The operating revenue of ZKTeco in 2023 was RMB 1.9701837 billion. Due to the fact that operating revenue is a key
performance indicator of ZKTeco and its significant amount, the authenticity of revenue and whether revenue is included in the
appropriate accounting period have a significant impact on ZKTeco's operating results, and there may be potential misstatements.
Therefore, we consider the recognition of operating revenue of ZKTeco as a key audit matter.
Please refer to Note V 34 and Note VII 42 for relevant information disclosure.
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ZKTeco 2023 Annual Report
(2) Audit response
Our significant audit procedures for revenue recognition include:
1) Understand, evaluate, and test the effectiveness of internal control design and operation related to sales and collection of
ZKTeco;
2) Understand revenue recognition policies through interviews with management, examine relevant clauses of major
customer contracts, analyze and evaluate whether the actual revenue recognition policies are appropriate, and review whether
relevant accounting policies have been consistently applied;
3) Implement analysis procedures for operating revenue, analyze the rationality of changes in the sales structure of major
products, compare with the gross profit margin of the same industry in the same period of history, analyze the changes in gross
profit margin of major products and major customers, and review the rationality of sales revenue;
4) Confirm the sales revenue of major customers combined with the audit of accounts receivable, and perform substitution
test on customers who have not responded to the letter;
5) Check the major customer contracts, sales outbound orders, acceptance certificates, logistics documents, customs
declarations, invoices, and statements of accounts to verify the authenticity of ZKTeco's revenue confirmation;
6) Conduct cut-off tests on revenue transactions recorded before and after the balance sheet date, select samples to verify with
relevant supporting documents for revenue recognition under each sales model, to evaluate whether sales revenue is recorded in
the appropriate accounting period.
Based on the audit work performed, we believe that revenue recognition complies with the Accounting Standards for
Enterprises and the Company's accounting policies for revenue recognition.
4. Other Information
The management of ZKTeco is responsible for other information. The other information comprises the information included
in the annual report for 2023, but does not include the financial statements and our audit report thereon.
Our audit opinions published in the financial statements do not cover other information and we do not publish any form of
assured conclusion on other information.
In combination with our audit of the financial statements, our responsibility is to read other information. In the process, we
consider whether there is significant inconsistency in other information with the financial statements or what we have learned
during the audit process, or other material misstatement existed.
Based on the work we have performed, if we determine that there is a material misstatement of other information, we should
report that fact. In this regard, we have nothing to report. In this regard, we have nothing to report.
5. Responsibilities of Management and Those Charged with Governance for the Financial Statements
The management of ZKTeco is responsible for the preparation of financial statements that give a fair view in accordance with
the Accounting Standards for Enterprises and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the statements, management of ZKTeco is responsible for assessing ZKTeco's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern assumption unless the
management either intends to liquidate ZKTeco or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing ZKTeco's financial reporting process.
6. CPA's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an audit report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material
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ZKTeco 2023 Annual Report
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with CSAs, we exercise professional judgment and maintain professional skepticism
throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
(3) Evaluate the appropriateness of accounting policies selected by the Management Layer and the reasonableness of
accounting estimates and related disclosures.
(4) Conclude on the appropriateness of Management's use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
ZKTeco's ability to continue as a going concern. If we conclude that there is a material uncertainty, we are required to draw
attention in our Audit Report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our Audit Report. However, future events
or conditions may cause ZKTeco to cease to continue as a going concern.
(5) Evaluate the overall presentation, structure and content of the financial statements, and whether the financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
(6) Obtain sufficient appropriate audit evidence on the financial information of the entities or business activities within
ZKTeco to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of
the audit on the Company, and we remain solely responsible for our audit opinion.
We communicate with those charged with governance on, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide a statement to those charged with governance that we have complied with ethical requirements related to
independence and communicate with those charged with governance all relationships and other matters that may reasonably be
considered to affect our independence, as well as related precautions, if applicable.
From the matters communicated with those charged with governance, we determine which matters are most important to the
audit of the current financial statements, thus constituting key audit matters. We describe these matters in the audit report unless
laws and regulations prohibit public disclosure of these matters, or in rare cases, if the negative consequences of communicating a
matter in the audit report are reasonably expected to exceed the benefits in the public interest, we determine that the matter should
not be communicated in the audit report.
II. Financial Statements
The unit of the financial statements in the financial notes is: RMB
1. Consolidated Balance Sheet
Prepared by: ZKTECO CO., LTD.
December 31, 2023
Unit: RMB
Item December 31, 2023 January 1, 2023
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ZKTeco 2023 Annual Report
Current assets:
Monetary funds 1,990,924,954.78 1,912,945,031.97
Deposit reservation for balance
Lendings to banks and other financial
institutions
Trading financial asset 80,980,203.63 204,318,406.05
Derivative financial assets
Notes receivable
Accounts receivable 479,803,313.66 403,497,924.27
Receivable financing
Prepayment 23,457,907.24 30,954,685.58
Premiums receivable
Reinsurance accounts receivable
Reserves for reinsurance contract
receivable
Other receivables 32,744,574.20 34,207,287.53
Including: interest receivable
Dividends receivable
Buying back the sale of financial
assets
Inventories 372,714,784.31 348,280,641.59
Contract assets 282,186.31 306,799.94
Held-for-sale assets
Non-current assets due within one year 17,257,614.74 10,025,638.89
Other current assets 25,865,809.28 17,861,354.81
Total current assets 3,024,031,348.15 2,962,397,770.63
Non-current assets:
Loans and advances to customers
Debt investment 42,284,596.90 12,331,160.29
Other debt investment
Long-term receivables 2,447,228.23 0.00
Long-term equity investment 29,781,888.62 7,151,332.70
Other equity instrument investments
Other non-current financial assets 0.00
Investment real estate 23,145,488.85 0.00
Fixed assets 470,121,791.29 446,857,509.06
Construction in progress 138,986,483.73 57,041,298.90
Productive biological assets
Oil and gas assets
Right-of-use asset 38,669,718.86 50,640,675.59
Intangible assets 66,016,371.68 68,110,512.79
Development expenditures
Goodwill 504,803.72 496,386.40
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ZKTeco 2023 Annual Report
Long-term deferred expenses 3,768,847.81 3,056,310.34
Deferred income tax assets 67,257,559.01 55,469,173.13
Other non-current assets 16,884,605.85 1,127,777.32
Total non-current assets 899,869,384.55 702,282,136.52
Total assets 3,923,900,732.70 3,664,679,907.15
Current liabilities:
Short-term loan 0.00 9,855,000.00
Borrowings from the Central Bank
Borrowings from banks and other
financial institutions
Trading financial liabilities 0.00 0.00
Derivative financial liabilities
Notes payable 122,573,544.09 68,293,818.22
Accounts payable 245,084,182.32 226,000,476.96
Advances from customer
Contract liabilities 65,331,106.17 58,838,840.39
Financial assets sold for repurchase
Deposit from customers and interbank
Acting trading securities
Acting underwriting securities
Payroll payable 56,630,101.98 58,940,852.80
Taxes and dues payable 28,892,229.44 22,621,805.04
Other payables 36,735,314.36 31,429,478.43
Including: interest payable
Dividends payable
Handling charges and commissions
payable
Reinsurance accounts receivable
Liabilities held for sale
Non-current liabilities due within one
21,094,682.36 23,718,225.39
year
Other current liabilities 16,463,934.35 21,173,620.79
Total current liabilities 592,805,095.07 520,872,118.02
Non-current liabilities:
Reserves for insurance contracts
Long-term loan 7,810,405.04 141,757.54
Bonds payable
Including: preferred stock
Perpetual bonds
Lease liabilities 19,713,286.21 28,256,717.44
Long-term payables
Long-term payroll payable
Estimated liabilities 600,000.00 600,000.00
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ZKTeco 2023 Annual Report
Deferred income 1,853,549.62 2,039,702.49
Deferred tax liability 10,329,053.48 12,048,904.97
Other non-current liabilities
Total non-current liabilities 40,306,294.35 43,087,082.44
Total liabilities 633,111,389.42 563,959,200.46
Owner's equity:
Share capital 194,679,508.00 148,492,051.00
Other equity instruments
Including: preferred stock
Perpetual bonds
Capital reserve 2,075,479,375.13 2,061,172,912.28
Less: treasury stock 784,700.00 0.00
Other comprehensive income 28,000,959.19 5,250,890.36
Special reserve
Surplus reserves 60,455,422.50 53,978,004.94
General risk reserves
Undistributed profits 907,583,024.38 788,768,984.64
Total owner's equity attributable to the
3,265,413,589.20 3,057,662,843.22
parent company
Minority interests 25,375,754.08 43,057,863.47
Total owner's equity 3,290,789,343.28 3,100,720,706.69
Total liabilities and owner's equity 3,923,900,732.70 3,664,679,907.15
Legal Representative: Jin Hairong Person in charge of accounting work: Wang Youwu Person in charge of accounting institution:
Fang Li
2. Balance Sheet of Parent Company
Unit: RMB
Item December 31, 2023 January 1, 2023
Current assets:
Monetary funds 997,496,318.79 1,356,208,501.46
Trading financial asset 888,780.80 147,962,384.55
Derivative financial assets 0.00 0.00
Notes receivable 0.00 0.00
Accounts receivable 674,768,619.85 584,894,333.69
Receivable financing 0.00 0.00
Prepayment 16,580,313.51 27,798,174.17
Other receivables 59,135,419.22 33,980,555.26
Including: interest receivable 192,033.24 122,433.25
Dividends receivable
Inventories 220,338,772.92 201,604,881.25
Contract assets 274,794.84 297,021.59
Held-for-sale assets 0.00 0.00
Non-current assets due within one year 11,261,761.38 10,025,638.89
Other current assets 2,221,965.93 4,880,995.15
Total current assets 1,982,966,747.24 2,367,652,486.01
Non-current assets:
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ZKTeco 2023 Annual Report
Debt investment 0.00 10,670,541.33
Other debt investment 0.00 0.00
Long-term receivables 1,553,576.04 0.00
Long-term equity investment 1,273,046,481.87 781,906,396.17
Other equity instrument investments 0.00 0.00
Other non-current financial assets 0.00
Investment real estate 0.00 0.00
Fixed assets 62,080,079.28 66,876,094.68
Construction in progress 0.00 0.00
Productive biological assets 0.00 0.00
Oil and gas assets 0.00 0.00
Right-of-use asset 11,281,532.81 14,733,170.98
Intangible assets 8,193,258.13 8,082,316.47
Development expenditures 0.00 0.00
Goodwill 0.00 0.00
Long-term deferred expenses 1,314,622.72 1,312,121.13
Deferred income tax assets 39,737,047.18 29,799,536.02
Other non-current assets 15,725,991.21 0.00
Total non-current assets 1,412,932,589.24 913,380,176.78
Total assets 3,395,899,336.48 3,281,032,662.79
Current liabilities:
Short-term loan 0.00 0.00
Trading financial liabilities 0.00 0.00
Derivative financial liabilities 0.00 0.00
Notes payable 114,437,751.98 71,337,129.13
Accounts payable 293,594,334.82 268,538,611.36
Advances from customer 0.00 0.00
Contract liabilities 51,073,453.29 29,070,869.80
Payroll payable 26,129,332.92 31,351,658.90
Taxes and dues payable 4,029,704.54 1,986,839.30
Other payables 48,521,459.02 86,241,351.29
Including: interest payable
Dividends payable
Liabilities held for sale 0.00 0.00
Non-current liabilities due within one
6,036,995.12 7,376,143.83
year
Other current liabilities 17,818,576.02 17,999,117.66
Total current liabilities 561,641,607.71 513,901,721.27
Non-current liabilities:
Long-term loan 0.00 0.00
Bonds payable 0.00 0.00
Including: preferred stock 0.00 0.00
Perpetual bonds 0.00 0.00
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ZKTeco 2023 Annual Report
Lease liabilities 4,932,540.65 7,095,945.72
Long-term payables 0.00 0.00
Long-term payroll payable 0.00 0.00
Estimated liabilities 600,000.00 600,000.00
Deferred income 400,966.62 543,212.69
Deferred tax liability 4,529,736.45 5,231,980.02
Other non-current liabilities 0.00 0.00
Total non-current liabilities 10,463,243.72 13,471,138.43
Total liabilities 572,104,851.43 527,372,859.70
Owner's equity:
Share capital 194,679,508.00 148,492,051.00
Other equity instruments 0.00 0.00
Including: preferred stock 0.00 0.00
Perpetual bonds 0.00 0.00
Capital reserve 2,085,198,988.61 2,073,269,021.41
Less: treasury stock 784,700.00 0.00
Other comprehensive income 0.00 0.00
Special reserve 0.00 0.00
Surplus reserves 60,364,126.01 53,886,708.45
Undistributed profits 484,336,562.43 478,012,022.23
Total owner's equity 2,823,794,485.05 2,753,659,803.09
Total liabilities and owner's equity 3,395,899,336.48 3,281,032,662.79
3. Consolidated Income Statement
Unit: RMB
Item 2023 2022
I. Total operating revenue 1,970,183,682.34 1,918,559,191.76
Including: operating revenue 1,970,183,682.34 1,918,559,191.76
Interest income
Premium earned
Revenue from handling
charges and commissions
II. Total operating cost 1,753,903,528.91 1,699,753,810.25
Including: operating cost 1,000,868,184.91 1,065,639,119.43
Interest expenses
Expenses from handling
charges and commissions
Surrender value
Net payments for insurance
claims
Net provisions for reserves in
insurance liability contracts
Policy dividend expenses
Reinsurance expenses
Taxes and surcharges 25,645,229.28 19,046,564.87
Selling expenses 445,414,065.93 361,264,181.17
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ZKTeco 2023 Annual Report
Administrative expenses 122,693,501.96 106,748,932.32
R&D expenses 213,613,414.56 187,983,847.42
Financial expenses -54,330,867.73 -40,928,834.96
Including: interest expenses 4,114,078.22 3,101,947.12
Interest income 59,489,145.42 28,810,088.84
Plus: other income 13,382,751.13 17,849,018.68
Investment income ( loss
-599,875.51 -2,429,189.18
expressed with "-")
Including: income from
investment in associates and joint 2,800,122.30 2,660,914.13
ventures
Gains from
derecognition of financial assets 0.00 0.00
measured at amortized cost
Gains from foreign exchange
(loss expressed with "-")
Gains from net exposure hedging
(loss expressed with "-")
Gains from changes in fair value
755,429.17 -701,013.10
(loss expressed with "-")
Losses from credit impairment
-6,426,264.03 -10,954,110.82
(loss expressed with "-")
Losses from impairment of assets
-3,163,733.31 -6,294,754.92
(loss expressed with "-")
Gains from disposal of assets
-129,852.62 88,133.35
(loss expressed with "-")
III. Operating profit (loss expressed with
220,098,608.26 216,363,465.52
"-")
Plus: non-operating revenue 834,759.26 859,519.49
Less: non-operating expenditure 5,760,416.86 4,134,911.75
IV. Total profit (loss expressed with "-") 215,172,950.66 213,088,073.26
Less: income tax expenses 18,328,946.09 8,754,314.92
V. Net profit (loss expressed with "-") 196,844,004.57 204,333,758.34
(I) Classification by business
continuity
1. Net profit from continuing
196,844,004.57 204,333,758.34
operations (net loss expressed with "-")
2. Net profit from discontinued
operations (net loss expressed with "-")
(II) Classification by ownership
1. Net profits attributable to
177,263,675.15 192,502,163.93
shareholders of parent company
2. Minority shareholders' profit and
19,580,329.42 11,831,594.41
loss
VI. Other comprehensive income - after
23,345,735.16 32,564,473.55
tax
Net of tax of other comprehensive
income attributable to the owner of the 22,750,068.83 30,740,713.70
parent company
Other comprehensive income that
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ZKTeco 2023 Annual Report
cannot be transferred to profit or loss
1. Changes in re-measurement of
the defined benefit plan
2. Other comprehensive income
that cannot be transferred to profit or loss
under the equity method
3. Changes in fair value of other
equity instrument investments
4. Changes in the fair value of the
Company's own credit risk
5. Other
(2) Other comprehensive income
22,750,068.83 30,740,713.70
that will be reclassified into profit or loss
1. Other comprehensive income
that can be transferred to profit or loss
under the equity method
2. Changes in fair value of other
debt investments
3. Amount of financial assets
reclassified into other comprehensive
income
4. Provision for credit impairment
of other debt investments
5. Cash flow hedging reserve
6. Translation difference of
22,750,068.83 30,740,713.70
foreign currency financial statements
7. Others
After-tax net amount of other
comprehensive income attributable to the 595,666.33 1,823,759.85
minority shareholders
VII. Total comprehensive income 220,189,739.73 236,898,231.89
Total comprehensive income
attributable to owners of the parent 200,013,743.98 223,242,877.63
company
Total comprehensive income
20,175,995.75 13,655,354.26
attributable to minority shareholders
VIII. EPS
(I) Basic EPS 0.9176 1.1307
(II) Diluted EPS 0.9133 1.1275
In the event of a merger of enterprise under the same control in the current period, the net profit realized by the combined party
before the merger is RMB , and the net profit realized by the combined party in the previous period is RMB .
Legal Representative: Jin Hairong Person in charge of accounting work: Wang Youwu Person in charge of accounting institution:
Fang Li
4. Parent Company's Profit Statement
Unit: RMB
Item 2023 2022
I. Operating revenue 1,434,036,070.91 1,542,538,719.71
Less: operating cost 1,036,126,707.81 1,144,810,483.95
Taxes and surcharges 6,684,004.73 7,105,264.81
Selling expenses 175,665,854.54 164,958,281.03
Administrative expenses 67,623,578.42 65,358,679.39
R&D expenses 144,342,341.95 133,296,955.01
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ZKTeco 2023 Annual Report
Financial expenses -38,859,429.21 -45,203,220.06
Including: interest expenses 586,120.76 447,465.80
Interest income 34,186,238.20 25,178,318.31
Plus: other income 3,629,196.23 7,416,424.52
Investment income ( loss
16,583,880.30 34,313,370.27
expressed with "-")
Including: income from
investment in associates and joint 0.00 0.00
ventures
Derecognition of
income for financial assets measured at 0.00 0.00
amortized cost (loss expressed with "-")
Gains from net exposure hedging
0.00 0.00
(loss expressed with "-")
Gains from changes in fair value
92,617.82 -752,215.42
(loss expressed with "-")
Losses from credit impairment
-2,211,851.80 -1,228,959.32
(loss expressed with "-")
Losses from impairment of assets
-409,714.74 -1,832,657.66
(loss expressed with "-")
Gains from disposal of assets
-179,099.95 12,558.50
(loss expressed with "-")
II. Operating profit (loss expressed with
59,958,040.53 110,140,796.47
"-")
Plus: non-operating revenue 435,721.28 758,163.67
Less: non-operating expenditure 3,911,338.96 3,619,836.60
III. Total profits (total losses expressed
56,482,422.85 107,279,123.54
with "-")
Less: income tax expenses -8,291,752.76 -6,682,392.19
IV. Net profit (net loss expressed with "-
64,774,175.61 113,961,515.73
")
(I) Net profit from continuing
64,774,175.61 113,961,515.73
operations (net loss expressed with "-")
(II) Net profit from discontinued
operations (net loss expressed with "-")
V. Net of tax of other comprehensive
income
Other comprehensive income that
cannot be transferred to profit or loss
1. Changes in re-measurement of
the defined benefit plan
2. Other comprehensive income
that cannot be transferred to profit or loss
under the equity method
3. Changes in fair value of other
equity instrument investments
4. Changes in the fair value of the
Company's own credit risk
5. Other
(2) Other comprehensive income
that will be reclassified into profit or loss
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ZKTeco 2023 Annual Report
1. Other comprehensive income
that can be transferred to profit or loss
under the equity method
2. Changes in fair value of other
debt investments
3. Amount of financial assets
reclassified into other comprehensive
income
4. Provision for credit impairment
of other debt investments
5. Cash flow hedging reserve
6. Translation difference of
foreign currency financial statements
7. Others
VI. Total comprehensive income 64,774,175.61 113,961,515.73
VII. EPS:
(I) Basic EPS
(II) Diluted EPS
5. Consolidated Cash Flow Statement
Unit: RMB
Item 2023 2022
I. Cash flows from operating activities:
Cash received from sale of goods and
2,033,852,451.38 1,914,391,818.50
rendering of services
Net increase in deposits from
customers and deposits in banks and
other financial institutions
Net increase in borrowings from the
Central Bank
Net increase in borrowings from banks
and other financial institutions
Cash received from receiving
insurance premiums of original insurance
contracts
Net cash received from reinsurance
business
Net increase in deposits and
investments from policyholders
Cash received from interest, handling
fees and commissions
Net increase in borrowings from banks
and other financial institutions
Net capital increase in repurchase
business
Net cash received from vicariously
traded securities
Refund of taxes and surcharges 60,737,638.17 51,679,360.47
Cash received from other operating
71,161,426.98 76,523,632.31
activities
Subtotal of cash inflows from operating
2,165,751,516.53 2,042,594,811.28
activities
Cash paid for purchase of goods and 1,044,071,616.08 1,122,518,900.85
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ZKTeco 2023 Annual Report
rendering of services
Net increase in loans and advances to
customers
Net increase in deposits in Central
Bank and other banks and financial
institutions
Cash paid for original insurance
contract claims
Net increase in lendings to banks and
other financial institutions
Cash paid for interest, handling fees
and commissions
Cash paid for policy dividends
Cash paid to and for employees 561,085,387.58 513,551,759.10
Payments of all types of taxes 82,583,436.99 80,036,076.98
Other cash payments relating to
242,010,185.67 201,968,041.17
operating activities
Subtotal of cash outflows from operating
1,929,750,626.32 1,918,074,778.10
activities
Net cash flows from operating activities 236,000,890.21 124,520,033.18
II. Cash flows from investing activities:
Cash received from disinvestment 783,138,035.71 100,302,919.28
Cash received from investment
4,208,115.07 1,111,481.30
income
Net cash received from disposal of
fixed assets, intangible assets and other 321,201.59 569,670.01
long-term assets
Net cash received from disposal of
subsidiaries and other business units
Cash received from other investing
activities
Subtotal of cash inflows from investing
787,667,352.37 101,984,070.59
activities
Cash paid to acquire and construct
fixed assets, intangible assets and other 182,155,154.01 77,486,733.93
long-term assets
Cash paid for investments 528,151,496.90 1,034,748,807.59
Net increase in pledge loans
Net cash paid to acquire subsidiaries
and other business units
Cash paid for other investing activities 8,690,555.00 6,488,400.00
Subtotal of cash outflows from investing
718,997,205.91 1,118,723,941.52
activities
Net cash flows from operating activities 68,670,146.46 -1,016,739,870.93
III. Cash flows from financing activities:
Cash received from investors 25,584,824.02 1,486,667,165.16
Including: cash received by
subsidiaries from the absorption of 2,430,254.98 0.00
minority shareholders' investments
Cash received from borrowings 7,938,955.96 10,063,457.00
Cash received from other financing
137,765,650.54 0.00
activities
Subtotal of cash inflows from financing
171,289,430.52 1,496,730,622.16
activities
Cash paid for debt repayments 10,237,295.27 467,504.08
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ZKTeco 2023 Annual Report
Cash paid for distribution of dividends
80,004,680.35 6,797,610.36
and profits or payment of interest
Including: dividends and profits paid
27,714,601.96 6,781,992.94
to minority shareholders by subsidiaries
Cash paid for other financing activities 147,698,460.04 54,065,231.57
Subtotal of cash outflows from financing
237,940,435.66 61,330,346.01
activities
Net cash flows from financing activities -66,651,005.14 1,435,400,276.15
IV. Effect of exchange rate changes on
1,392,263.39 18,139,393.94
cash and cash equivalents
V. Net increase in cash and cash
239,412,294.92 561,319,832.34
equivalents
Plus: beginning balance of cash and
1,077,608,258.10 516,288,425.76
cash equivalents
VI. Closing balance of cash and cash
1,317,020,553.02 1,077,608,258.10
equivalents
6. Cash Flow Statement of Parent Company
Unit: RMB
Item 2023 2022
I. Cash flows from operating activities:
Cash received from sale of goods and
1,394,253,617.34 1,588,277,476.82
rendering of services
Refund of taxes and surcharges 55,671,157.48 46,142,202.38
Cash received from other operating
59,485,236.93 266,424,568.39
activities
Subtotal of cash inflows from operating
1,509,410,011.75 1,900,844,247.59
activities
Cash paid for purchase of goods and
1,006,446,805.25 1,265,144,062.65
rendering of services
Cash paid to and for employees 248,840,477.65 245,811,321.01
Payments of all types of taxes 8,266,181.82 13,005,949.72
Other cash payments relating to
274,001,567.18 326,385,829.93
operating activities
Subtotal of cash outflows from operating
1,537,555,031.90 1,850,347,163.31
activities
Net cash flows from operating activities -28,145,020.15 50,497,084.28
II. Cash flows from investing activities:
Cash received from disinvestment 677,121,784.42 62,764,651.20
Cash received from investment
24,931,563.69 17,195,540.59
income
Net cash received from disposal of
fixed assets, intangible assets and other 178,820.17 2,874,752.46
long-term assets
Net cash received from disposal of
0.00 0.00
subsidiaries and other business units
Cash received from other investing
0.00 0.00
activities
Subtotal of cash inflows from investing
702,232,168.28 82,834,944.25
activities
Cash paid to acquire and construct
fixed assets, intangible assets and other 24,779,496.76 2,241,859.00
long-term assets
Cash paid for investments 479,932,157.86 1,139,688,242.70
Net cash paid to acquire subsidiaries 0.00 0.00
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ZKTeco 2023 Annual Report
and other business units
Cash paid for other investing activities 8,690,555.00 6,488,400.00
Subtotal of cash outflows from investing
513,402,209.62 1,148,418,501.70
activities
Net cash flows from operating activities 188,829,958.66 -1,065,583,557.45
III. Cash flows from financing activities:
Cash received from investors 23,154,569.04 1,486,667,165.16
Cash received from borrowings 0.00 0.00
Cash received from other financing
131,789,487.54 0.00
activities
Subtotal of cash inflows from financing
154,944,056.58 1,486,667,165.16
activities
Cash paid for debt repayments 0.00 0.00
Cash paid for distribution of dividends
51,972,217.85 0.00
and profits or payment of interest
Cash paid for other financing activities 120,453,358.00 33,873,386.92
Subtotal of cash outflows from financing
172,425,575.85 33,873,386.92
activities
Net cash flows from financing activities -17,481,519.27 1,452,793,778.24
IV. Effect of exchange rate changes on
710,387.29 3,470,318.23
cash and cash equivalents
V. Net increase in cash and cash
143,913,806.53 441,177,623.30
equivalents
Plus: beginning balance of cash and
731,506,487.43 290,328,864.13
cash equivalents
VI. Closing balance of cash and cash
875,420,293.96 731,506,487.43
equivalents
7. Consolidated Statement of Changes in Equity
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ZKTeco 2023 Annual Report
Amount in current period
Unit: RMB
2023
Equity attributable to owners of the parent company
Other equity
Item Speci
instruments Other General Minority Total owner's
Less: treasury al Surplus Undistributed Other
Share capital Capital reserve comprehensive risk Subtotal interests equity
Prefer Perpe
Oth stock reserv reserves profits s
red tual income reserves
ers e
stock bonds
I. Ending balance of
148,492,051.00 2,061,172,912.28 0.00 5,255,222.65 53,975,085.77 788,571,917.98 3,057,467,189.68 43,025,126.30 3,100,492,315.98
previous year
Plus: changes in
0.00 0.00 0.00 -4,332.29 2,919.17 197,066.66 195,653.54 32,737.17 228,390.71
accounting policies
Correction
s of prior period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
errors
Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
II. Beginning
148,492,051.00 2,061,172,912.28 0.00 5,250,890.36 53,978,004.94 788,768,984.64 3,057,662,843.22 43,057,863.47 3,100,720,706.69
balance of this year
III. Amount
increase/decrease of
the current period 46,187,457.00 14,306,462.85 784,700.00 22,750,068.83 6,477,417.56 118,814,039.74 207,750,745.98 -17,682,109.39 190,068,636.59
(decrease expressed
with "-")
(I) Total
comprehensive 0.00 0.00 0.00 22,750,068.83 0.00 177,263,675.15 200,013,743.98 20,175,995.75 220,189,739.73
income
(II) Capital invested
and reduced by the 1,639,842.00 59,277,005.39 784,700.00 0.00 0.00 0.00 60,132,147.39 -10,143,503.18 49,988,644.21
owners
1. Common stock
contributed by 1,639,842.00 21,514,727.04 784,700.00 0.00 0.00 0.00 22,369,869.04 -10,499,575.10 11,870,293.94
owners
2. Capital invested 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
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ZKTeco 2023 Annual Report
by holders of other
equity instruments
3. Amount of share-
based payments 0.00 36,929,284.99 0.00 0.00 0.00 0.00 36,929,284.99 356,071.92 37,285,356.91
recognized in equity
4. Others 0.00 832,993.36 0.00 0.00 0.00 0.00 832,993.36 0.00 832,993.36
(III) Profit
0.00 0.00 0.00 0.00 6,477,417.56 -58,449,635.41 -51,972,217.85 -27,714,601.96 -79,686,819.81
distribution
1. Surplus reserves
0.00 0.00 0.00 0.00 6,477,417.56 -6,477,417.56 0.00 0.00 0.00
withdrawal
2. Withdrawal of
general risk 0.00 0.00
preparation
3. Distribution to
owners (or 0.00 0.00 0.00 0.00 0.00 -51,972,217.85 -51,972,217.85 -27,714,601.96 -79,686,819.81
shareholders)
4. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(IV) Internal
carryover of owner's 44,547,615.00 -44,547,615.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
equity
1. Capital surplus
transfer to capital (or 44,547,615.00 -44,547,615.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
equity capital)
2. Surplus reserve
transfer to capital (or 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
equity capital)
3. Surplus reserve
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
offsetting losses
4. Changes in
defined benefit plans
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
carried forward to
retained earnings
5. Retained income
carried forward from 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
other comprehensive
173
ZKTeco 2023 Annual Report
income
6. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(V) Special reserve 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1. Withdrawal in this
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
period
2. Use in the current
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
period
(VI) Others 0.00 -422,927.54 0.00 0.00 0.00 0.00 -422,927.54 0.00 -422,927.54
IV. Ending balance
194,679,508.00 2,075,479,375.13 784,700.00 28,000,959.19 60,455,422.50 907,583,024.38 3,265,413,589.20 25,375,754.08 3,290,789,343.28
of current period
Amount of previous period
Unit: RMB
2022
Equity attributable to owners of the parent company
Other equity
Item instruments Minority Total owner's
Less: Other General
Special Surplus Undistributed Other
Share capital Capital reserve treasury comprehensive risk Subtotal interests equity
Prefer Perpe Ot
reserve reserves profits s
red tual her stock income reserves
stock bonds s
I. Ending balance of
111,369,038.00 636,363,658.40 0.00 -25,505,560.02 42,581,853.37 607,725,356.63 1,372,534,346.38 36,170,791.65 1,408,705,138.03
previous year
Plus: changes in
0.00 0.00 0.00 15,736.68 -6,835.39 -55,548.96 -46,647.67 13,710.50 -32,937.17
accounting policies
Corrections of
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
prior period errors
Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
II. Beginning balance of
111,369,038.00 636,363,658.40 0.00 -25,489,823.34 42,575,017.98 607,669,807.67 1,372,487,698.71 36,184,502.15 1,408,672,200.86
this year
III. Amount
increase/decrease of the 37,123,013.00 1,424,809,253.88 0.00 30,740,713.70 11,402,986.96 181,099,176.97 1,685,175,144.51 6,873,361.32 1,692,048,505.83
current period (decrease
174
ZKTeco 2023 Annual Report
expressed with "-")
(I) Total comprehensive
0.00 0.00 0.00 30,740,713.70 0.00 192,502,163.93 223,242,877.63 13,655,354.26 236,898,231.89
income
(II) Capital invested and
37,123,013.00 1,424,809,253.88 0.00 0.00 0.00 0.00 1,461,932,266.88 0.00 1,461,932,266.88
reduced by the owners
1. Common stock
37,123,013.00 1,420,175,364.70 0.00 0.00 0.00 0.00 1,457,298,377.70 0.00 1,457,298,377.70
contributed by owners
2. Capital invested by
holders of other equity 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
instruments
3. Amount of share-
based payments 0.00 4,633,889.18 0.00 0.00 0.00 0.00 4,633,889.18 0.00 4,633,889.18
recognized in equity
4. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(III) Profit distribution 0.00 0.00 0.00 0.00 11,402,986.96 -11,402,986.96 0.00 -6,781,992.94 -6,781,992.94
1. Surplus reserves
0.00 0.00 0.00 0.00 11,402,986.96 -11,402,986.96 0.00 0.00 0.00
withdrawal
2. Withdrawal of
0.00
general risk preparation
3. Distribution to
owners (or 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -6,781,992.94 -6,781,992.94
shareholders)
4. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(IV) Internal carryover
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
of owner's equity
1. Capital surplus
transfer to capital (or 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
equity capital)
2. Surplus reserve
transfer to capital (or 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
equity capital)
3. Surplus reserve
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
offsetting losses
4. Changes in defined 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
175
ZKTeco 2023 Annual Report
benefit plans carried
forward to retained
earnings
5. Retained income
carried forward from
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
other comprehensive
income
6. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(V) Special reserve 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1. Withdrawal in this
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
period
2. Use in the current
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
period
(VI) Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
IV. Ending balance of
148,492,051.00 2,061,172,912.28 0.00 5,250,890.36 53,978,004.94 788,768,984.64 3,057,662,843.22 43,057,863.47 3,100,720,706.69
current period
8. Statement of Changes in Equity of the Parent Company
Amount in current period
Unit: RMB
2023
Other equity instruments Other
Item Specia
Prefer Perpet Less: treasury compreh Undistributed
Share capital Capital reserve l Surplus reserves Others Total owner's equity
red ual Others stock ensive profits
reserve
stock bonds income
I. Ending
balance of
148,492,051.00 2,073,269,021.41 0.00 0.00 53,883,789.28 478,054,153.62 2,753,699,015.31
previous
year
Plus:
changes in 0.00 0.00 0.00 0.00 2,919.17 -42,131.39 -39,212.22
accounting
176
ZKTeco 2023 Annual Report
policies
C
orrections of
0.00 0.00 0.00 0.00 0.00 0.00 0.00
prior period
errors
Ot
0.00 0.00 0.00 0.00 0.00 0.00 0.00
hers
II.
Beginning
148,492,051.00 2,073,269,021.41 0.00 0.00 53,886,708.45 478,012,022.23 2,753,659,803.09
balance of
this year
III. Amount
increase/dec
rease of the
current
46,187,457.00 11,929,967.20 784,700.00 0.00 6,477,417.56 6,324,540.20 70,134,681.96
period
(decrease
expressed
with "-")
(I) Total
comprehens 0.00 0.00 0.00 0.00 0.00 64,774,175.61 64,774,175.61
ive income
(II) Capital
invested and
1,639,842.00 56,477,582.20 784,700.00 0.00 0.00 0.00 57,332,724.20
reduced by
the owners
1. Common
stock
1,639,842.00 21,514,727.04 784,700.00 0.00 0.00 0.00 22,369,869.04
contributed
by owners
2. Capital
invested by
holders of 0.00 0.00 0.00 0.00 0.00 0.00 0.00
other equity
instruments
3. Amount 0.00 34,962,855.16 0.00 0.00 0.00 0.00 34,962,855.16
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ZKTeco 2023 Annual Report
of share-
based
payments
recognized
in equity
4. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(III) Profit
0.00 0.00 0.00 0.00 6,477,417.56 -58,449,635.41 -51,972,217.85
distribution
1. Surplus
reserves 0.00 0.00 0.00 0.00 6,477,417.56 -6,477,417.56 0.00
withdrawal
2.
Distribution
to owners
0.00 0.00 0.00 0.00 0.00 -51,972,217.85 -51,972,217.85
(or
shareholders
)
3. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(IV) Internal
carryover of
44,547,615.00 -44,547,615.00 0.00 0.00 0.00 0.00 0.00
owner's
equity
1. Capital
surplus
transfer to
44,547,615.00 -44,547,615.00 0.00 0.00 0.00 0.00 0.00
capital (or
equity
capital)
2. Surplus
reserve
transfer to
0.00 0.00 0.00 0.00 0.00 0.00 0.00
capital (or
equity
capital)
3. Surplus
0.00 0.00 0.00 0.00 0.00 0.00 0.00
reserve
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ZKTeco 2023 Annual Report
offsetting
losses
4. Changes
in defined
benefit
plans
0.00 0.00 0.00 0.00 0.00 0.00 0.00
carried
forward to
retained
earnings
5. Retained
income
carried
forward 0.00 0.00 0.00 0.00 0.00 0.00 0.00
from other
comprehens
ive income
6. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(V) Special
0.00 0.00 0.00 0.00 0.00 0.00 0.00
reserve
1.
Withdrawal
0.00 0.00 0.00 0.00 0.00 0.00 0.00
in this
period
2. Use in the
current 0.00 0.00 0.00 0.00 0.00 0.00 0.00
period
(VI) Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
IV. Ending
balance of
194,679,508.00 2,085,198,988.61 784,700.00 0.00 60,364,126.01 484,336,562.43 2,823,794,485.05
current
period
Amount of previous period
Unit: RMB
Item 2022
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ZKTeco 2023 Annual Report
Other equity instruments Other
Prefer Perpet Less: treasury compreh Special Surplus Undistributed
Share capital Capital reserve Others Total owner's equity
red ual Others stock ensive reserve reserves profits
stock bonds income
I. Ending
balance of 111,369,038.00 648,463,311.34 0.00 0.00 42,490,556.88 375,515,011.98 1,177,837,918.20
previous year
Plus:
changes in
0.00 0.00 0.00 0.00 -6,835.39 -61,518.52 -68,353.91
accounting
policies
Corr
ections of
0.00 0.00 0.00 0.00 0.00 0.00 0.00
prior period
errors
Othe
0.00 0.00 0.00 0.00 0.00 0.00 0.00
rs
II. Beginning
balance of this 111,369,038.00 648,463,311.34 0.00 0.00 42,483,721.49 375,453,493.46 1,177,769,564.29
year
III. Amount
increase/decre
ase of the
current period 37,123,013.00 1,424,805,710.07 0.00 0.00 11,402,986.96 102,558,528.77 1,575,890,238.80
(decrease
expressed with
"-")
(I) Total
comprehensive 0.00 0.00 0.00 0.00 0.00 113,961,515.73 113,961,515.73
income
(II) Capital
invested and
37,123,013.00 1,424,805,710.07 0.00 0.00 0.00 0.00 1,461,928,723.07
reduced by the
owners
1. Common
37,123,013.00 1,420,175,364.70 0.00 0.00 0.00 0.00 1,457,298,377.70
stock
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ZKTeco 2023 Annual Report
contributed by
owners
2. Capital
invested by
holders of 0.00 0.00 0.00 0.00 0.00 0.00 0.00
other equity
instruments
3. Amount of
share-based
payments 0.00 4,630,345.37 0.00 0.00 0.00 0.00 4,630,345.37
recognized in
equity
4. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(III) Profit
0.00 0.00 0.00 0.00 11,402,986.96 -11,402,986.96 0.00
distribution
1. Surplus
reserves 0.00 0.00 0.00 0.00 11,402,986.96 -11,402,986.96 0.00
withdrawal
2. Distribution
to owners (or 0.00 0.00 0.00 0.00 0.00 0.00 0.00
shareholders)
3. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(IV) Internal
carryover of 0.00 0.00 0.00 0.00 0.00 0.00 0.00
owner's equity
1. Capital
surplus
transfer to 0.00 0.00 0.00 0.00 0.00 0.00 0.00
capital (or
equity capital)
2. Surplus
reserve
transfer to 0.00 0.00 0.00 0.00 0.00 0.00 0.00
capital (or
equity capital)
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ZKTeco 2023 Annual Report
3. Surplus
reserve
0.00 0.00 0.00 0.00 0.00 0.00 0.00
offsetting
losses
4. Changes in
defined benefit
plans carried
0.00 0.00 0.00 0.00 0.00 0.00 0.00
forward to
retained
earnings
5. Retained
income carried
forward from
0.00 0.00 0.00 0.00 0.00 0.00 0.00
other
comprehensive
income
6. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(V) Special
0.00 0.00 0.00 0.00 0.00 0.00 0.00
reserve
1. Withdrawal
0.00 0.00 0.00 0.00 0.00 0.00 0.00
in this period
2. Use in the
0.00 0.00 0.00 0.00 0.00 0.00 0.00
current period
(VI) Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
IV. Ending
balance of 148,492,051.00 2,073,269,021.41 0.00 0.00 53,886,708.45 478,012,022.23 2,753,659,803.09
current period
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ZKTeco 2023 Annual Report
III. Basic Information of the Company
1. Company registration location, organizational form and headquarters address
ZKTECO CO., LTD. (hereinafter referred to as "Company" or "the Company"), formerly known as Dongguan
ZKTeco Electronic Technology Co., Ltd., was approved by the Dongguan Administration for Market Regulation on
July 14, 2016. It was jointly established by Shenzhen ZKTeco Times Investment Co., Ltd., Che Quanhong, and Che
Jun. The Company was listed on the Shenzhen Stock Exchange on August 17, 2022 and currently holds a business
license with a unified social credit code of 914419006698651618.
As of December 31, 2023, the Company has issued a total of 194,679,508.00 shares of share capital after years
of converting into share capital and issuing new shares, with a registered capital of RMB 194,679,508.00. The
registered address is: No. 32, Pingshan Industrial Road, Tangxia Town, Dongguan, Guangdong, China. The parent
company is Shenzhen ZKTeco Times Investment Co., Ltd., and the actual controller is Che Quanhong.
2. Nature of business and main operating activities of the Company
The Company belongs to the computer, communication and other electronic equipment manufacturing
industries, mainly engaged in the R&D, design, production, sales and services of computer vision and biometric
technology and related products.
3. Scope of consolidated financial statements
There are 61 subsidiaries incorporated in the consolidation scope of the Company in current period, as detailed
in Note X "Rights and Interests in Other Entities". Compared to the previous period, the number of entities included
in the scope of consolidated financial statements in the current period increased by 8 and decreased by 1. For specific
information on the entities subject to changes in the scope of consolidation, please refer to Note IX Changes in
Consolidation Scope.
4. Approval of financial statements
This financial statement was approved by the Board of Directors of the Company on April 22, 2024.
IV. Preparation Basis for Financial Statements
1. Basis of preparation
Based on actual transactions and events, the Company recognizes and measures them in accordance with the
"Accounting Standards for Enterprises - Basic Standards" issued by the Ministry of Finance, specific enterprise
accounting standards, application guidelines for Accounting Standards for Enterprises, interpretations of Accounting
Standards for Enterprises, and other relevant regulations (hereinafter collectively referred to as "Accounting
Standards for Enterprises"). On this basis, we prepare financial statements in accordance with the provisions of the
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"Preparation Rules for Information Disclosure by Companies Offering Securities to the Public No. 15 - General
Provisions on Financial Reports" (revised in 2023) issued by China Securities Regulatory Commission.
2. Going concern
The Company has evaluated the going-concern ability in 12 months from the end of the reporting period, and
fails to find the significant suspicious matters or situations on going-concern ability. Therefore, the Financial
Statements were prepared on the basis of going-concern hypothesis.
V. Important Accounting Policies and Estimates
Tips of specific accounting policies and estimates:
The specific accounting policies and estimates formulated by the Company based on the actual production and
operation characteristics include operating cycle, recognition and measurement of bad debt reserves for accounts
receivable, inventory measurement, classification and depreciation methods of fixed assets, amortization of intangible
assets, revenue recognition and measurement, etc.
1. Declaration of compliance with Accounting Standards for Business Enterprises
The financial statement prepared by the Company meets the requirements of Accounting Standards for
Enterprises, and authentically and completely reflects financial position, business performance, cash flow and other
relative information on the Company during the reporting period.
2. Accounting period
The accounting year is from January 1 to December 31 in calendar year.
3. Operating cycle
The Company's operating cycle is 12 months.
4. Recording currency
Renminbi is adopted as the recording currency.
Overseas subsidiaries use the currency of the main economic environment in which they operate as the
recording currency and convert it into RMB when preparing financial statements.
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5. Method for recognizing significance criteria and selection basis
Applicable □ Not applicable
Item Significance criteria
The amount of individual construction in progress
Important construction in progress
exceeds 1% of the total assets
Receivables with individual provision for The amount of individual receivables exceeds 1% of
significant items the total assets
Other important payables with an aging of
Other individual payables exceeding 1% of total assets
over one year
Important accounts payable with an aging of The amount of individual accounts payable exceeds 1%
over one year of the total assets
The proportion of total revenue and total profit exceeds
Important partly-owned subsidiaries
10%
Important prepayments with an aging of over The amount of individual prepayments exceeds 1% of
one year the total assets
Important contract liabilities with an aging of The amount of individual contract liabilities exceeds
over one year 1% of the total assets
The carrying amount of long-term equity investment
Important joint ventures or associates
exceeds 5% of the total assets
Significant cash flows from investing The amount of cash flows from individual investing
activities activities exceeds 1% of the total assets
6. Accounting treatment methods of business merger under the common control and merger under
different control
The terms, conditions, and economic impact of various transactions related to the step by step implementation of
various transactions in the process of business merger in one or more of the following circumstances usually indicate
that multiple transactions shall be accounted for as a package deal
1) These transactions were entered into simultaneously or taking into account mutual influence;
2) These transactions as a whole can achieve a complete business result;
3) The occurrence of a transaction depends on the occurrence of at least one other transaction;
4) A transaction alone is not economical, but it is economic when considered with other transactions.
(2) Business merger under the common control
The enterprises involved in the combination are subject to the same party or ultimate parties before and after the
merger, meanwhile the control is not temporary, this business combination is under the same control.
The assets and liabilities obtained by the Company in the business merger shall be measured according to the
book value of the assets and liabilities of the combined party (including the goodwill formed by the acquisition of the
combined party by the ultimate controller) in the consolidated financial statements of the ultimate controller on the
combination date. The stock premium in capital reserves is adjusted according to the difference between the book
value of net assets acquired through combination and the book value of consideration paid for the combination (or
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total par value of shares issued). If the stock premium in capital reserves is insufficient to cover the difference, the
remaining amount will be charged against retained earnings.
If there is a contingent consideration and an estimated liability or asset needs to be recognized, the difference
between the estimated liability or asset amount and the subsequent settlement amount of the contingent consideration
shall be adjusted to the capital reserve (capital premium or share premium). If the capital reserve is insufficient, the
retained earnings shall be adjusted.
Where a business merger is ultimately achieved through multiple transactions, and it belongs to a "package
deal", each transaction shall be treated as a transaction to obtain control for accounting treatment; if it does not belong
to a "package deal", on the date of obtaining control, the difference between the initial investment cost of the long-
term equity investment and the sum of the book value of the long-term equity investment before the merger plus the
book value of the new payment for the shares obtained on the combination date shall be adjusted to the capital
reserve; if the capital reserve is insufficient to offset, the retained earnings shall be adjusted. For equity investments
held before the combination date, other comprehensive income recognized using the equity method or financial
instrument recognition and measurement standards will not be subject to accounting treatment until the disposal of
the investment is carried out on the same basis as the direct disposal of relevant assets or liabilities by the investee;
other changes in owner's equity in the net assets of the investee recognized using the equity method, except for net
profit or loss, other comprehensive income, and profit distribution, will not be accounted for until the investment is
disposed of and transferred to the current profits and losses.
(3) Business merger not under common control
The enterprises involved in the combination are not subject to the same party or ultimate parties before and after
the merger, this business combination is not under the same control.
On the date of acquisition, the Company shall measure the assets paid, liabilities incurred or assumed as the
consideration for business combination at fair value, and the difference between the fair value and its book value shall
be included in current profits and losses.
The difference between the merger cost and the fair value of the identifiable net assets obtained from the
acquiree is recognized as goodwill by the Company. If the merger cost is less than the fair value share of the
identifiable net assets obtained from the acquiree in the merger, the fair values of the identifiable assets, liabilities,
and contingent liabilities obtained from the acquiree, as well as the measurement of the merger cost, are first
reviewed. After review, if the merger cost is still less than the fair value share of the identifiable net assets obtained
from the acquiree in the merger, the difference is included in current profits and losses.
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If the merger under different control achieved through multiple exchange transactions in steps belongs to a
"package deal", each transaction shall be treated as a transaction to obtain control for accounting treatment; for equity
investments held before the combination date that do not belong to a package deal and are accounted for using the
equity method, the initial investment cost of the investment shall be the sum of the book value of the equity
investment held by the acquiree before the date of acquisition and the new investment cost on the date of acquisition;
other comprehensive income recognized through equity method accounting for equity investments held before the
date of acquisition shall be accounted for on the same basis as the direct disposal of relevant assets or liabilities by the
investee when disposing of the investment. If the equity investments held before the combination date are accounted
for using financial instrument recognition and measurement standards, the initial investment cost on the combination
date shall be the sum of the fair value of the equity investment on the combination date and the new investment cost.
The difference between the fair value and book value of the originally held equity, as well as the cumulative fair
value changes originally recognized in other comprehensive income, shall be fully transferred to the current
investment income on the combination date.
(4) Related expenses incurred for the merger
The agency fees for auditing, legal services, evaluation and consulting, as well as other directly related expenses
incurred for the merger of enterprises, shall be included in current profits and losses at the time of occurrence; the
transaction costs of issuing equity securities for enterprise mergers can be directly attributed to equity transactions
and deducted from equity.
7. Judgment criteria for control and preparation methods for consolidated financial statements
(1) Judgment criteria for control
Control means the investor has the power over the investee and enjoys the variable return through participating
in activities related to the investee, and has the ability to the investor's return by using the power over the investee.
The Company makes a judgment on whether to control the investee based on comprehensive consideration of all
relevant facts and circumstances. Once changes in the related facts and circumstances have resulted in a variation to
the relevant factors involved in the aforesaid control definition, the Company shall perform reappraisal. The relevant
facts and situations mainly include:
1) The purpose of the establishment of the investee.
2) The relevant activities of the investee and how to make decisions on these activities.
3) Whether the rights enjoyed by the investor currently enable them to lead the relevant activities of the investee.
4) Whether the investor enjoys variable returns by participating in related activities of the investee.
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5) Whether the investor has the ability to exercise the power over the investee to affect its return amount.
6) The relationship between the investor and other parties.
(2) Consolidation scope
The consolidation scope of the Company's consolidated financial statements is determined based on control, and
all subsidiaries (including separate entities controlled by the Company) are included in the consolidated financial
statements.
(3) Consolidation procedure
The Company prepares consolidated financial statements based on the financial statements of itself and its
subsidiaries, and other relevant information. The Company prepares consolidated financial statements, treating the
entire enterprise group as one accounting entity. In accordance with the recognition, measurement, and presentation
requirements of relevant Accounting Standards for Enterprises, and in accordance with unified accounting policies,
we reflect the overall financial position, operating results, and cash flows of the enterprise group.
The accounting policies and accounting periods adopted by all subsidiaries included in the scope of consolidated
financial statements are consistent with those of the Company. If the accounting policy or accounting period of any
subsidiary is different from that of the Company, the consolidated financial statements of the subsidiary, upon
preparation, will be adjusted according to the accounting policy and accounting period of the Company.
When consolidating financial statements, we offset the impact of internal transactions between the Company
and its subsidiaries, as well as between subsidiaries, on the consolidated balance sheet, consolidated income
statement, consolidated cash flow statement, and consolidated statement of changes in shareholders' equity. If the
recognition of the same transaction from the perspective of the consolidated financial statements of the enterprise
group is different from that of the accounting entity of the Company or its subsidiaries, the transaction shall be
adjusted from the perspective of the enterprise group.
The share of owners' equity, current net profit or loss and current comprehensive income of subsidiaries
attributable to minority owners are respectively and separately presented under the owner's equity in the consolidated
balance sheet, the net profit in the consolidated income statement, and the total comprehensive income in the
consolidated income statement. If the current losses shared by a minority shareholder of a subsidiary exceed the
balances arising from the shares enjoyed by the minority shareholder in the owners' equity of the subsidiary at the
beginning of the period, minority shareholders' equity will be offset accordingly.
For subsidiaries acquired through a merger of enterprises under the same control, adjustments are made to their
financial statements based on the book value of their assets and liabilities (including goodwill formed by the ultimate
controller's acquisition of the subsidiary) in the ultimate controller's financial statements.
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1) Increase of subsidiaries or business
During the reporting period, if a subsidiary or business is added due to a merger of enterprises under the same
control, the opening balance of the consolidated balance sheet shall be adjusted; the income, expenses, and profits of
subsidiaries or businesses from the beginning of the current period to the end of the reporting period are incorporated
into the consolidated income statement; the cash flows of subsidiaries or businesses from the beginning of the current
period to the end of the reporting period are included in the consolidated cash flow statement, and the relevant items
in the comparative statements are adjusted, as if the merged reporting entity has existed since the point when the
ultimate controller began to control.
If it is possible to exercise control over the investee under the same control due to additional investment or other
reasons, it shall be deemed that the parties participating in the merger have made adjustments in their current state
when the ultimate controller began to control. Equity investments held before obtaining the control over the
combined party, relevant gains or losses and other comprehensive income recognized from the later of the date when
the original equity is obtained or the date when the combining party and the combined party are under the same
control to the combination date and other changes in net assets will respectively be used to offset the retained
earnings at the beginning of period for the comprehensive financial statements or the current profit or loss.
During the reporting period, if a subsidiary or business is added due to a merger under different control, the
opening balance of the consolidated balance sheet shall not be adjusted; the income, expenses, and profits of
subsidiaries or businesses from the date of acquisition to the end of the reporting period are incorporated into the
consolidated income statement; the cash flows of subsidiaries or businesses from the date of acquisition to the end of
the reporting period are included in the consolidated cash flow statement; the cash flows of the subsidiary or business
from the date of acquisition to the end of the reporting period are included in the consolidated cash flow statement.
If the control can be exercised over the investee not under common control as a result of additional investments
and other reasons, the equity of the acquiree held before the date of acquisition will be remeasured by the Company at
the fair value of such equity on the date of acquisition, and the difference between the fair value and book value of
such equity will be included in the current investment income. If the equity of the acquiree held before the date of
acquisition involves other comprehensive income accounted for under the equity method, as well as other changes in
owner's equity other than net profit and loss, other comprehensive income, and profit distribution, the related other
comprehensive income and other changes in owner's equity shall be converted into current investment income on the
date of acquisition, except for other comprehensive income arising from the remeasurement of net liability or net
asset changes of the defined benefit plan by the investee.
2) Disposal of subsidiaries or businesses
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① General disposal method
During the reporting period, if the Company disposed of a subsidiary or business, the income, expenses and
profits of the subsidiary or business from the beginning of the period to the disposal date were included in the
consolidated income statement; the cash flow of the subsidiary or business from the beginning of the period to the
disposal date is included in the consolidated cash flow statement.
In the event the Company loses the right of control over the investee due to disposal of partial equity investment
or other reasons, the remaining equity investment shall be re-measured at the fair value on the date of loss of control.
The difference by using the sum of value received from disposal of equity and fair value of the residual equity to
deduct the difference between the share of net assets and the sum of goodwill continually counted from the
acquisition date or combination date of the original subsidiary (calculated as per original share proportion) shall be
recorded into the investment income of the current period in which the control right is lost. Other comprehensive
income related to equity investments in existing subsidiaries or changes in owner's equity other than net profit or loss,
other comprehensive income, and profit distribution shall be converted into current investment income when control
is lost, except for other comprehensive income arising from the remeasurement of net liability or net asset changes in
the defined benefit plan by the investee.
② Disposal of subsidiaries step by step
For the various deals for step-by-step equity investment disposal that lead to the loss of control over the
subsidiary, the terms, conditions, and economic impact of various transactions related to the disposal of equity
investments in subsidiaries in one or more of the following circumstances usually indicate that multiple transactions
shall be accounted for as a package deal:
A. These transactions were entered into simultaneously or taking into account mutual influence;
B. These transactions as a whole can achieve a complete business result;
C. The occurrence of a transaction depends on the occurrence of at least one other transaction;
D. A transaction alone is not economical, but it is economic when considered with other transactions.
If all transactions involving the disposal of equity investment in subsidiaries until the loss of control right are
treated as a package deal, the Company shall treat each transaction as the one involving the disposal of subsidiaries
and the loss of control right for accounting treatment. However, the difference between each disposal price and the
share of the subsidiary's net assets corresponding to the investment disposal before the loss of control right shall be
recognized as other comprehensive income in the consolidated financial statements, and shall be transferred into the
current profits and losses when the control right is lost.
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If various transactions on disposal of the equity investment of the Company until the loss of control do not
belong to a package deal, before loss of control, accounting treatment shall be conducted as per the relevant policy of
the disposal of part of equity investment in subsidiaries without loss of control; for loss of control, accounting
treatment shall be conducted as per the general disposal method for subsidiaries.
3) Purchase of minority shares of subsidiaries
For the difference between the newly increased long-term equity investment from the acquisition of minority
equity and the share of net assets in the subsidiary calculated constantly from the date of acquisition (or combination
date) as per the newly increased equity ratio, the share premium in capital reserves in the consolidated balance sheet
shall be adjusted; where such share premium is insufficient to offset the difference, the retained earnings shall be
adjusted.
4) Disposal of partial equity investment in subsidiaries without loss of control
Without losing control, the difference between the disposal price obtained from the partial disposal of long-term equity
investment in subsidiaries and the share of net assets continuously calculated by subsidiaries from the date of acquisition or the
combination date corresponding to the disposal of long-term equity investment shall be adjusted for the share premium in the
capital reserve in the consolidated balance sheet. If the share premium in the capital reserve is insufficient to offset, the retained
earnings shall be adjusted.
8. Classification of joint venture arrangement and accountant treatment method of joint operation
(1) Classification of joint venture arrangements
The Company divides the joint venture arrangement into joint operation and joint venture based on factors such
as the structure, legal form, provisions stipulated in the joint venture arrangement, other relevant facts and
circumstances. Joint operations refer to an arrangement that the joint party enjoys the assets related to such
arrangement and bears the liabilities related to such arrangement. Joint venture refers to a joint venture arrangement
in which the joint venture party only has rights to the net assets of the arrangement.
(2) Accounting treatment of joint operations
The Company confirms the following items related to the share of interests in joint operations and conducts
accounting treatment in accordance with the relevant Accounting Standards for Enterprises:
1) Recognize the assets held separately and the assets held jointly according to their shares;
2) Recognize the liabilities assumed separately and the liabilities assumed jointly according to their shares;
3) Recognize the income generated by the sale of its share of joint operating output;
4) Recognize the income generated by the sale of output in the joint operation according to its share;
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5) Recognize the expenses incurred separately and the expenses incurred in joint operation according to their
share.
9. Recognition criteria of cash and cash equivalents
When preparing the cash flow statement, the Company recognizes the cash on hand and deposits that can be
used for payment at any time as cash. Investments with short term (generally due within three months from the date
of acquisition), strong liquidity, easy conversion to known amounts of cash and little risk of value change (four
conditions) are recognized as cash equivalents.
10. Foreign currency transactions and foreign currency statement translation
(1) Foreign currency transaction
When foreign currency transaction is initially recognized, the spot exchange rate on the transaction date is used
as the conversion rate to convert the foreign currency amount into RMB for bookkeeping.
The foreign currency monetary items on the balance sheet date are translated at the spot exchange rate on the
balance sheet date; the resulting exchange differences are included in current profits and losses, except for the
exchange differences arising from special foreign currency borrowings related to the acquisition and construction of
assets eligible for capitalization, which are treated in accordance with the principle of capitalization of borrowing
costs. Foreign currency non-monetary items measured at historical cost shall still be converted at the spot exchange
rate on the date of transaction, and the amount of their recording currency shall not be changed.
Foreign currency non-monetary items measured at fair value shall be translated at the spot exchange rate on the
date when the fair value is determined. After conversion, the difference between the amount of bookkeeping
functional currency and the amount of the original bookkeeping functional currency shall be treated as a change in
fair value (including changes in exchange rates) and included in the current profits and losses or recognized as other
comprehensive income.
(2) Translation of foreign currency financial statements
The asset items and liability items in the balance sheet shall be translated at the exchange rate of the balance
sheet date; the owner's equity items, except for "undistributed profits", shall be translated at the spot rate when
incurred. The income and expenses items in the Income Statement are translated at the average spot exchange rate.
The translation difference of foreign currency financial statements arising from the above conversion is included in
other comprehensive income.
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When disposing of overseas operations, the translation difference of foreign currency financial statements
related to the overseas operations listed in other comprehensive income items on the balance sheet shall be transferred
from other comprehensive income items to the current profit and loss for disposal. If the reduction of the proportion
of interests held overseas but not losing control over overseas operations is resulted from the disposing of partial
equity investment or other reasons, the translation balance of foreign currency statements related to such overseas
operations shall be vested in minority interest and will not be transferred to current profits and losses. When
disposing of part of the equity of an overseas operation as a joint venture or associate, the conversion difference of
foreign currency statements related to the overseas operation shall be transferred to the disposed current profits and
losses according to the proportion of the disposal of the overseas operation.
11. Financial instruments
A financial asset or financial liability is recognized when the Company becomes a party to a financial
instrument contract.
The effective interest rate method refers to the method of calculating the amortized cost of financial assets or
financial liabilities and allocating interest income or interest expenses to each accounting period.
Actual interest rate refers to the interest rate used to discount the estimated future cash flows of a financial asset
or financial liability over its expected lifespan into the book balance of the financial asset or the amortized cost of the
financial liability. When determining the actual interest rate, it is necessary to estimate the expected cash flow based
on all contract terms of financial assets or liabilities (such as early repayment, extension, call options, or other similar
options), but do not consider expected credit losses.
The amortized cost of a financial asset or financial liability is the accumulated amortization amount formed by
deducting the repaid principal from the initial recognition amount of the financial asset or financial liability, plus or
minus the difference between the initial recognition amount and the amount on the maturity date using the effective
interest rate method, and then deducting the accumulated provision for losses (only applicable to financial assets).
(1) Classification, recognition and measurement of financial assets
The Company categorizes financial assets into the following three categories based on their business model and
contractual cash flow characteristics:
1) Financial assets measured at the amortized cost.
2) Financial assets measured at fair value and whose changes are included in other comprehensive income.
3) Financial assets measured at fair value and whose changes are included in the current profits and losses.
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Financial assets are measured at fair value upon initial recognition, but if the accounts receivable or notes
receivable arising from the sale of goods or provision of services do not include significant financing components or
do not consider financing components for a period not exceeding one year, they are initially measured at the
transaction price.
For financial assets measured at fair value and whose changes are included in the current profits and losses, the
related transaction expenses is directly included in current profits and losses. For other types of financial assets,
related transaction costs are included in the initial recognition amount.
The subsequent measurement of financial assets depends on their classification. All affected related financial
assets are reclassified only when the Company changes its business model of managing financial assets.
1) Classified as financial assets measured at the amortized cost
If the contract terms of a financial asset stipulate that the cash flows generated on a specific date are only
payments of principal and interest based on the unpaid principal amount, and the business model for managing the
financial asset is aimed at collecting contractual cash flows, then the Company classifies the financial asset as
financial assets measured at the amortized cost. The Company classifies financial assets as financial assets measured
at the amortized cost, including monetary funds, notes receivable, accounts receivable, other receivables, debt
investments, long-term receivables, etc.
The Company recognizes interest income for such financial assets using the effective interest rate method and
subsequently measures them at amortized cost. Any gains or losses arising from impairment or derecognition or
modification are included in current profits and losses. Except for the following situations, the Company determines
interest income based on the book balance of financial assets multiplied by the actual interest rate:
① For financial assets that have been purchased or generated with credit impairment, the Company determines
their interest income from initial recognition based on the amortized cost of the financial asset and the actual interest
rate adjusted by credit.
② For the financial asset purchased or originated without credit impairment but with credit impairment in the
subsequent period, the interest income shall be calculated and determined by the Company according to the amortized
cost and the effective interest rate of the financial asset in the subsequent period. If the financial instrument no longer
experiences credit impairment due to an improvement in its credit risk in subsequent periods, the Company will
calculate and determine interest income by multiplying the actual interest rate by the book balance of the financial
asset.
2) Classified as financial assets measured at fair value and whose changes are included in other comprehensive
income
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If the contract terms of a financial asset stipulate that the cash flow generated on a specific date is only the
payment of principal and interest based on the unpaid principal amount, and the business model for managing the
financial asset is aimed at both collecting contractual cash flow and selling the financial asset, the Company classifies
the financial asset as financial assets measured at fair value and whose changes are included in other comprehensive
income.
The Company recognizes interest income for such financial assets using the effective interest rate method.
Except for interest income, impairment losses, and exchange differences recognized in current profits and losses,
other fair value changes are recognized in other comprehensive income. At the derecognition of the financial asset,
the accumulated profits and losses previously included in other comprehensive incomes are transferred and included
in current profits and losses.
Notes receivable and accounts receivable measured at fair value with changes recognized in other
comprehensive income are reported as receivable financing, while other such financial assets are reported as other
debt investments. Other debt investments that mature within one year from the balance sheet date are reported as non-
current assets that mature within one year, and other debt investments that originally mature within one year are
reported as other current assets.
3) Designated as financial assets measured at fair value and whose changes are included in other comprehensive
income
At initial recognition, the Company may irrevocably designate non-trading equity instrument investments as
financial assets measured at fair value and whose changes are included in other comprehensive income based on
individual financial assets.
The fair value changes of such financial assets are recognized in other comprehensive income and do not require
provision for impairment. At the derecognition of the financial asset, the accumulated profits and losses previously
included in other comprehensive incomes are transferred from there to the retained earnings. During the investment
period of the equity instrument held by the Company, when the right to receive dividends has been established and
the economic benefits related to dividends are likely to flow into the Company, and the amount of dividends can be
reliably measured, dividend income is recognized and included in current profits and losses. The Company reports
this type of financial asset under other equity instrument investment items.
If equity instrument investment meets one of the following conditions, it belongs to financial assets measured at
fair value and whose changes are included in the current profits and losses: the main purpose of acquiring the
financial asset is to sell it in the near future; at initial recognition, it is a part of the identifiable financial asset
instrument portfolio under centralized management, and there is objective evidence to suggest the existence of short-
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term profit models in the near future; it belongs to derivative instruments (excluding derivative instruments that meet
the definition of financial guarantee contracts and are designated as effective hedging instruments).
4) Classified as financial assets measured at fair value and whose changes are included in the current profits and
losses
Financial assets that do not meet the criteria for classification as financial assets measured at fair value and
whose changes are included in other comprehensive income, and are not designated as financial assets measured at
fair value and whose changes are included in other comprehensive income, are classified as financial assets measured
at fair value and whose changes are included in the current profits and losses.
Financial assets that are measured at fair value and whose changes are included in the current profits and losses
of the Company will be subsequently measured at fair value; and the gains or losses resulting from changes in fair
value, as well as dividends and interest income related to the financial assets, shall be included in current profits and
losses.
The Company reports such financial assets as trading financial assets and other non-current financial assets
based on their liquidity.
5) Designated as financial assets measured at fair value and whose changes are included in the current profits
and losses
At initial recognition, in order to eliminate or significantly reduce accounting mismatches, the Company may
irrevocably designate financial assets as financial assets measured at fair value and whose changes are included in the
current profits and losses on an individual financial asset basis.
If a mixed contract contains one or more embedded derivative instruments, and its main contract does not
belong to the above financial assets, the Company may designate it as a financial instrument measured at fair value
with its changes included in current profits and losses. Except for the following situations:
① Embedded derivative instruments will not cause significant changes to the cash flow of the mixed contract.
② When determining for the first time whether a similar mixed contract needs to be spun off, it is almost
impossible to determine whether the embedded derivative instruments included shall not be spun off without analysis.
If embedded in the early repayment right of a loan, the holder is allowed to repay the loan in an amount close to the
amortized cost, and this early repayment right does not need to be split.
Financial assets that are measured at fair value and whose changes are included in the current profits and losses
of the Company will be subsequently measured at fair value; and the gains or losses resulting from changes in fair
value, as well as dividends and interest income related to the financial assets, shall be included in current profits and
losses.
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The Company reports such financial assets as trading financial assets and other non-current financial assets
based on their liquidity.
(2) Classification, recognition and measurement of financial liabilities
The Company classifies financial instruments or their components as financial liabilities or equity instruments at
initial recognition based on the contract terms of the issued financial instruments and the economic substance
reflected, rather than solely in legal form, combined with the definitions of financial liabilities and equity instruments.
Financial liabilities are classified at initial recognition as financial liabilities measured at fair value and whose
changes are included in the current profits and losses, other financial liabilities, and derivative instruments designated
as effective hedging instruments.
Financial liabilities are measured at fair value at initial recognition. For the financial liabilities measured at fair
value and whose changes are included in the current profits and losses, related transaction costs shall be directly
included in current profits and losses. For other financial liabilities, related transaction costs shall be recorded into the
initially recognized amount.
The subsequent measurement of financial liabilities depends on their classification:
1) Financial liabilities measured at fair value and whose changes are included in the current profits and losses
This type of financial liability includes trading financial liabilities (including derivative instruments belonging to
financial liabilities) and financial liabilities measured at fair value and whose changes are included in the current
profits and losses at initial recognition.
If one of the following conditions is met, it belongs to trading financial liabilities: the main purpose of assuming
relevant financial liabilities is to sell or repurchase them in the near future; it belongs to part of a identifiable financial
instrument portfolio under centralized management, with objective evidence indicating that the Company has recently
adopted a short-term profit model; it belongs to derivative instruments, except for derivative instruments designated
as effective hedging instruments and derivative instruments that comply with financial guarantee contracts. Trading
financial liabilities (including derivatives that are financial liabilities) are subsequently measured at fair value. In
addition to related to hedge accounting, changes in fair value are included in current profits and losses.
At initial recognition, in order to provide more relevant accounting information, the Company irrevocably
designates financial liabilities that meet one of the following conditions as financial liabilities measured at fair value
and whose changes are included in the current profits and losses:
① It is possible to eliminate or significantly reduce accounting mismatches.
② Management and performance evaluation are conducted for the financial liability portfolio or the portfolio of
financial assets and financial liabilities based on fair value in accordance with the enterprise risk management or
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investment strategy specified in the official written documents, and report to the key management personnel on this
basis inside the enterprise.
The Company adopts fair value for subsequent measurement of such financial liabilities. Except for fair value
changes caused by changes in the Company's own credit risk, which are included in other comprehensive income,
other fair value changes are included in current profits and losses. Unless fair value changes caused by changes in the
Company's own credit risk are included in other comprehensive income, which would cause or expand accounting
mismatches in profit or loss, the company will include all fair value changes (including the amount affected by
changes in its own credit risk) in current profits and losses.
1) Other financial liabilities
Except for the following items, the Company classifies financial liabilities as financial liabilities measured at
amortized costs, and adopts the effective interest rate method for subsequent measurement at amortized cost. Gains or
losses arising from derecognition or amortization are included in current profits and losses.
① Financial liabilities measured at fair value and whose changes are included in the current profits and losses.
② The transfer of financial assets does not meet the conditions for derecognition or continues to involve
financial liabilities formed by the transferred financial assets.
③ Financial guarantee contracts that do not fall under the first two categories of this article, as well as loan
commitments for loans at interest rates lower than the market rate that do not fall under the first category of this
article.
A financial guarantee contract refers to a contract in which the issuer is required to pay a specific amount to the
contract holder who has suffered losses when the specific debtor is unable to pay its debts at maturity in accordance
with the terms of the original or revised debt instrument. Financial guarantee contracts that do not belong to financial
liabilities measured at fair value and whose changes are included in the current profits and losses shall be measured at
the higher of the loss provision amount or the initial recognition amount minus the accumulated amortization amount
during the guarantee period after initial recognition.
(3) Derecognition of financial assets and financial liabilities
1) If a financial asset meets one of the following conditions, it shall be derecognized and written off from its
account and balance sheet:
① The contractual rights for collecting the cash flow of the financial asset are terminated;
② The financial asset has been transferred and the transfer meets the requirements for derecognition of financial
assets.
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If the current obligation of a financial liability (or part of it) has been discharged, the recognition of the financial
liability (or part of it) shall be terminated.
If the Company signs an agreement with the lender to replace the original financial liability by assuming a new
financial liability, and the contract terms of the new financial liability are substantially different from those of the
original financial liability, or if there are substantial modifications to the contract terms of the original financial
liability (or a part of it), the recognition of the original financial liability shall be terminated, and a new financial
liability shall be recognized. The difference between the book value and the consideration paid (including non cash
assets transferred out or liabilities assumed) shall be included in current profits and losses.
If the Company repurchases a portion of its financial liabilities, the overall book value of the financial liability
shall be allocated based on the proportion of the fair value of the continuously recognized part and the derecognized
part on the repurchase date to the overall fair value. The difference between the book value distributed to the
derecognized part and the consideration paid (including non-cash assets transferred out or liabilities undertaken) shall
be included in current profits and losses.
(4) The recognition basis and measuring method for transfer of financial assets
When the Company transfers financial assets, it evaluates the degree of risk and reward in retaining ownership
of the financial assets, and treats them separately in the following situations:
1) If almost all risks and rewards related to the ownership of financial assets have been transferred, the
recognition of the financial asset shall be terminated, and the rights and obligations arising or retained during the
transfer shall be separately recognized as assets or liabilities.
2) If almost all risks and rewards related to ownership of financial assets are retained, the recognition of the
financial asset will continue.
3) If there is neither transfer nor retention of almost all risks and rewards related to the ownership of financial
assets (i.e. other situations except for (1) and (2) of this article), the following situations shall be treated based on
whether the control over the financial assets has been retained:
① If control over the financial asset is not retained, the recognition of the financial asset shall be terminated,
and the rights and obligations arising or retained in the transfer shall be separately recognized as assets or liabilities.
② If control over the financial asset is retained, the relevant financial asset shall be recognized based on its
continued involvement in the transferred financial asset, and corresponding liabilities shall be recognized. The degree
of continued involvement in the transferred financial assets refers to the degree to which the Company bears the risk
or reward of changes in the value of the transferred financial assets.
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The principle of "substance over form" shall be adopted in judging whether the transfer of financial assets meets
the above-mentioned conditions for derecognition. The Company divides the transfer of financial assets into entire
transfer and partial transfer.
1) If the entire transfer satisfies the derecognition condition, the difference between the following amount shall
be included in current profits and losses:
① The book value of the transferred financial asset on the date of derecognition.
② The sum of the consideration received for the transfer of financial assets and the amount corresponding to the
derecognized part of the cumulative fair value changes originally recognized in other comprehensive income (the
financial assets involved in the transfer are financial assets measured at fair value and whose changes are included in
other comprehensive income).
2) If a financial asset is partially transferred and the transferred part as a whole meets the conditions for
derecognition, the book value of the entire financial asset before the transfer shall be apportioned between the
derecognized part and the continuously recognized part (in which case, the retained service asset shall be considered
as part of the continuously recognized financial asset) according to their respective relative fair values on the transfer
date, and the difference between the following two amounts shall be included in current profits and losses:
① The book value of the derecognized part on the date of derecognition.
② The sum of the consideration received from the derecognized part and the amount corresponding to the
derecognized part of the cumulative fair value changes originally recognized in other comprehensive income (the
financial assets involved in the transfer are financial assets measured at fair value and whose changes are included in
other comprehensive income).
If the financial assets transferred does not meet the conditions of derecognition, the financial assets shall
continue to be recognized and the consideration received shall be recognized as a financial liability.
(5) Determination methods for fair value of financial assets and financial liabilities
The fair value of financial assets or liabilities with an active market shall be determined based on the quoted
price in the active market, unless there is a restricted share trade period for the asset itself. For financial assets subject
to restrictions on the sale of the asset itself, the compensation amount requested by market participants for bearing the
risk of not being able to sell the financial asset in the open market within a specified period shall be determined based
on the quoted price in the active market. Active market quotes include quotes that are easily and regularly obtained
from exchanges, traders, brokers, industry groups, pricing agencies, or regulatory agencies for relevant assets or
liabilities, and can represent actual and frequent market transactions on an arm's length basis.
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The fair value of initially acquired or derived financial assets or assumed financial liabilities is determined based
on market transaction prices.
For a financial asset or financial liability without active market, its fair value shall be recognized by adopting the
estimation technique. During estimation, the Company adopts the estimation technique that is currently applicable
and is supported by sufficient available data and other information, and selects the input value with characteristics
consistent with the assets or liabilities considered by market participants in relevant transactions of assets or liabilities.
The related observable input value is preferred. The non-observable input value can be used only when it is
impossible or not feasible to obtain relevant observable input value.
(6) Impairment of financial instruments
The Company conducts impairment accounting and recognizes loss provisions based on expected credit losses
for financial assets measured at the amortized cost, financial assets measured at fair value and whose changes are
included in other comprehensive income, lease receivables, contract assets, loan commitments other than financial
liabilities measured at fair value and whose changes are included in the current profits and losses, financial liabilities
other than financial liabilities measured at fair value and whose changes are included in the current profits and losses,
as well as financial guarantee contracts formed by financial asset transfers that do not meet the derecognition
conditions or continue to be involved in transferred financial assets.
Expected credit losses refer to the weighted average value of credit losses of financial instruments weighted by
the risk of default. Credit loss refers to the difference between all contractual cash flows receivable from the contract
and all cash flows expected to be received by the Company at the original effective interest rate, that is, the present
value of all cash shortages. Among them, the financial assets that have been credit-depreciated by the Company or
purchased by the Company shall be discounted according to the effective interest rate adjusted by the financial assets.
The Company measures loss provisions for all contract assets and accounts receivable formed by transactions
regulated by revenue standards at an amount equivalent to the expected credit loss over the whole duration.
For financial assets purchased or originated by the Company that have suffered credit impairment, only the
cumulative changes in expected credit losses during the whole duration after initial recognition are recognized as loss
reserves on the balance sheet date. On each balance sheet date, the change amount of expected credit loss during the
whole duration shall be included in the current profits and losses as impairment losses or gains. Even if the expected
credit loss determined on the balance sheet date for the whole duration is less than the amount of the expected credit
loss reflected in the estimated cash flow at the time of initial recognition, the favorable change in the expected credit
loss is recognized as impairment gains.
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For other financial assets other than those that have been measured using simplified measurement methods and
those that have been purchased or incurred credit impairment, the Company assesses on each balance sheet date
whether the credit risk of the relevant financial instruments has significantly increased since initial recognition, and
measures the loss provision and recognizes expected credit losses, and their changes according to the following
circumstances:
1) If the credit risk of the financial instrument has not significantly increased since initial recognition and is in
the first stage, the loss provision shall be measured at an amount equivalent to the expected credit loss of the financial
instrument in the next 12 months, and interest income shall be calculated based on the book balance and actual
interest rate.
2) If the credit risk of the financial instrument has significantly increased since initial recognition but has not yet
experienced credit impairment, and it is in the second stage, the loss provision shall be measured at an amount
equivalent to the expected credit loss of the financial instrument throughout its duration, and interest income shall be
calculated based on the book balance and actual interest rate.
3) If the financial instrument has experienced credit impairment since initial recognition and is in the third stage,
the Company measures its loss provision at an amount equivalent to the expected credit loss for the whole duration of
the financial instrument, and calculates interest income at amortized cost and actual interest rate.
The increase or reversal of the provision for credit losses on financial instruments shall be included in current
profits and losses as impairment losses or gains. Except for financial assets classified as financial assets measured at
fair value and whose changes are included in other comprehensive income, the provision for credit losses is offset
against the book balance of financial assets. For financial assets classified as financial assets measured at fair value
and whose changes are included in other comprehensive income, the Company recognizes their provision for credit
losses in other comprehensive income without reducing the book value of the financial asset on the balance sheet.
The Company has already measured the loss provision in the previous accounting period at an amount
equivalent to the expected credit loss for the whole duration of the financial instrument. However, on the current
balance sheet date, if the financial instrument is no longer subject to a significant increase in credit risk since initial
recognition, the Company measures the loss provision in the financial instrument at an amount equivalent to the
expected credit loss for the next 12 months on the current balance sheet date. The reversal amount of the resulting
provision for losses is included in current profits and losses as impairment gains.
1) Significant increase in credit risk
The Company utilizes available and reasonable forward-looking information to determine whether the credit
risk of financial instruments has significantly increased since initial recognition by comparing the risk of default on
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the balance sheet date with the risk of default on the initial recognition date. For financial guarantee contracts, when
applying impairment provisions for financial instruments, the date on which the Company becomes the party making
an irrevocable commitment shall be regarded as the initial recognition date.
When evaluating whether credit risk has significantly increased, the Company will consider the following
factors:
① Whether there has been a significant change in the actual or expected operating results of the debtor;
② Whether there have been significant adverse changes in the regulatory, economic, or technological
environment in which the debtor is located;
③ Whether there has been a significant change in the value of collateral as collateral for debt collateral or the
quality of collateral or credit enhancement provided by third parties, which is expected to reduce the economic
motivation of the debtor to repay within the period stipulated in the contract or affect the probability of default;
④ Whether there have been significant changes in the debtor's expected performance and repayment behavior;
⑤ Whether there have been changes in the Company's credit management methods for financial instruments.
On the balance sheet date, if the Company determines that the financial instrument only has a lower credit risk,
the Company assumes that the credit risk of the financial instrument has not significantly increased since initial
recognition. Where the Company determines that the default risk of financial instruments is low, the borrower has a
strong ability to fulfill its contractual cash flow obligations in a short term, and the borrower's ability to fulfill its
contractual cash flow obligations will not be necessarily reduced even if there are adverse changes in the economic
situation and operating environment for a long period of time, the financial instrument can be regarded as having low
credit risk.
2) Financial assets that have experienced credit impairment
When one or more events that the expected future cash flow of a financial asset has an adverse impact occur, the
financial asset becomes a financial asset with credit impairment. Evidence of credit impairment of financial assets
includes the following observable information:
① Significant financial difficulties of the issuer or the debtor;
② The debtor violates the contract, such as default or overdue payment of interest or principal;
③ The creditor grants concessions that the debtor would not otherwise make for economic or contractual
reasons related to the debtor's financial difficulties;
④ The debtor is likely to go bankrupt or undergo other financial restructuring;
⑤ The financial difficulties of the issuer or the debtor lead to the disappearance of the active market of the
financial asset;
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⑥ A financial asset is purchased or originated at a substantial discount that reflects the fact that a credit loss has
occurred.
The credit impairment of financial assets may be caused by the joint action of multiple events, not necessarily
by individually identifiable events.
3) Determination of expected credit losses
The Company evaluates the expected credit losses of financial instruments based on individual and combination
evaluations. When evaluating expected credit losses, the Company considers reasonable and evidence-based
information about past events, current conditions, and future economic forecasts.
The Company divides financial instruments into different portfolios based on common credit risk characteristics.
The common credit risk characteristics adopted by the Company include: financial instrument type, credit risk rating,
aging portfolio, overdue aging portfolio, contract settlement period, debtor's industry, etc. The individual evaluation
criteria and combined credit risk characteristics of relevant financial instruments are detailed in the accounting
policies of relevant financial instruments.
The Company determines the expected credit losses of related financial instruments using the following methods:
① For financial assets, credit loss is the present value of the difference between the contractual cash flows that
the Company should receive and the expected cash flows to receive.
② For lease receivables, credit loss is the present value of the difference between the contractual cash flows that
the Company should receive and the expected cash flows to receive.
③ For financial guarantee contracts, credit loss is the present value of the difference between the expected
payment amount that the Company will make to the contract holder for the credit loss incurred and the expected
amount that the Company will collect from the contract holder, debtor, or any other party.
④ For financial assets that have experienced credit impairment on the balance sheet date but whose credit
impairment has not occurred upon purchase or origination, credit loss is the difference between the book balance of
the financial asset and the present value of estimated future cash flows discounted at the original effective interest
rate.
The factors reflected in the Company's method of measuring expected credit losses of financial instruments
include: the unbiased probability weighted average amount determined by evaluating a range of possible outcomes;
the time value of money; reasonable and evidence-based information about past events, current conditions, and future
economic forecasts that can be obtained without unnecessary additional costs or efforts on the balance sheet date.
4) Write down financial assets
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Where the Company does not reasonably expect that the contract cash flow of financial assets can be recovered
in whole or in part, it shall directly write down the book balance of financial assets. This write down constitutes the
derecognition of related financial assets.
(7) Offset of financial assets and financial liabilities
Financial assets and financial liabilities are listed separately in the balance sheet and do not offset each other.
However, if the following conditions are met at the same time, the net amount after mutual offset shall be listed in the
balance sheet:
1) The Company has the legal right to offset the recognized amount, and this legal right is currently enforceable;
2) The Company plans to settle at a net amount, or realize the financial assets and settle the financial liabilities
at the same time.
12. Notes receivable
The recognition method and accounting treatment method for the expected credit loss of the Company's notes
receivable are detailed in Note V 11.6. Impairment of financial instruments.
For notes receivable with significantly different credit risks compared to portfolio credit risks, the Company
provides expected credit losses on a single basis. The Company separately determines the credit loss of notes
receivable that provide sufficient evidence to evaluate expected credit losses at a reasonable cost at the individual
instrument level.
When there is insufficient evidence to evaluate expected credit losses at a reasonable cost at the individual tool
level, the Company divides notes receivable into several portfolios based on credit risk characteristics with reference
to historical credit loss experience, combining current conditions with judgments of future economic conditions, and
calculates expected credit losses on the basis of the portfolio. Basis for determining portfolio:
Portfolio Name Basis for determining portfolio Accrual method
With reference to historical credit loss
The acceptor has a high credit rating, has not defaulted
experience, combined with the current situation
Banker's acceptance on bills in history, has extremely low credit loss risk,
and the prediction of future economic
portfolio and has a strong ability to fulfill its cash flow
conditions, the Company shall measure the bad
obligations under payment contracts in the short term
debt reserve
With reference to historical credit loss
experience, combined with the current situation
and the forecast of future economic conditions,
Commercial acceptance
According to the credit rating of the acceptor the Company shall prepare a comparison table
bill portfolio
between the aging of notes receivable and the
expected credit loss rate to calculate the
expected credit loss.
The comparison table between the aging of commercial acceptance bills and the expected credit loss rate is as
follows:
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Aging Expected credit loss rate of notes receivable (%)
Within 1 year 5.00
1-2 years 10.00
2-3 years 30.00
Over 3 years 100.00
The aging of notes receivable is calculated using the first in, first out method (FIFO).
13. Accounts receivable
The recognition method and accounting treatment method for the expected credit loss of the Company's
accounts receivable are detailed in Note V 11.6. Impairment of financial instruments.
The Company separately determines the credit loss of accounts receivable that provide sufficient evidence to
evaluate expected credit losses at a reasonable cost at the individual instrument level.
When there is insufficient evidence to evaluate expected credit losses at a reasonable cost at the individual tool
level, the Company divides accounts receivable into several portfolios based on credit risk characteristics with
reference to historical credit loss experience, combining current conditions with judgments of future economic
conditions, and calculates expected credit losses on the basis of the portfolio. Basis for determining portfolio:
Portfolio Name Basis for determining portfolio Accrual method
Expected credit loss rate is calculated with
reference to historical credit loss experience,
Accounts receivable from related parties within the
combined with the current situation and the
Related party portfolio scope of the Company's consolidated financial
forecast of future economic conditions, through
statements
default risk exposure and the expected credit
loss rate of the entire duration
With reference to historical credit loss
experience, combined with the current situation
and the forecast of future economic conditions,
Including accounts receivable other than the above
Aging portfolio the Company shall prepare a comparison table
portfolio
between the aging of accounts receivable and the
expected credit loss rate to calculate the
expected credit loss.
The comparison table between the aging of aging portfolios and the expected credit loss rate is as follows:
Aging Expected credit loss rate of accounts receivable (%)
Within 1 year 5.00
1-2 years 10.00
2-3 years 30.00
Over 3 years 100.00
The aging of accounts receivable is calculated using the first in, first out method (FIFO).
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14. Receivable financing
Notes receivable classified as measured at fair value with changes recognized in other comprehensive income,
with a maturity period of one year (including one year) from the initial recognition date, are listed as receivable
financing; if the maturity period is more than one year from the initial recognition date, they shall be listed as other
debt investments. The relevant accounting policies are detailed in Note V 11.
The recognition method and accounting treatment method for the expected credit loss of the Company's
receivable financing receivable are detailed in Note V 11.6. Impairment of financial instruments.
15. Other receivables
The recognition method and accounting treatment method for the expected credit loss of the Company's other
receivables are detailed in Note V 11.6. Impairment of financial instruments.
For other receivables with significantly different credit risks compared to portfolio credit risks, the Company
provides expected credit losses on a single basis. The Company separately determines the credit loss of other
receivables that provide sufficient evidence to evaluate expected credit losses at a reasonable cost at the individual
instrument level.
When there is insufficient evidence to evaluate expected credit losses at a reasonable cost at the individual tool
level, the Company divides other receivables into several portfolios based on credit risk characteristics with reference
to historical credit loss experience, combining current conditions with judgments of future economic conditions, and
calculates expected credit losses on the basis of the portfolio. Basis for determining portfolio:
Portfolio Name Basis for determining portfolio Accrual method
With reference to historical credit loss experience, combined with
This portfolio takes the aging of the current situation and the forecast of future economic
Aging portfolio accounts receivable as the credit risk conditions, the Company shall prepare a comparison table between
characteristics. the aging of other accounts receivable and the expected credit loss
rate to calculate the expected credit loss.
Expected credit loss rate is calculated with reference to historical
This portfolio includes accounts
credit loss experience, combined with the current situation and the
receivable from subsidiaries and
Related party portfolio forecast of future economic conditions, through default risk
other related parties within the
exposure and the expected credit loss rate within the following 12
consolidation scope.
months
Expected credit loss rate is calculated with reference to historical
Portfolio of deposits, This portfolio features deposits, credit loss experience, combined with the current situation and the
security deposits, security deposits and employee loans forecast of future economic conditions, through default risk
employee loans, etc. as credit risk characteristics. exposure and the expected credit loss rate within the following 12
months
The comparison table between the aging of aging portfolios and the expected credit loss rate is as follows:
Aging Expected credit loss rate of other receivables (%)
Within 1 year 5.00
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1-2 years 10.00
2-3 years 30.00
Over 3 years 100.00
The aging of other receivables is calculated using the first in, first out method (FIFO).
16. Contract assets
The Company has transferred the right to receive the consideration for commodities to the customers, and such
right depends on the factors other than the passage of time shall be recognized as the contract assets. The Company's
unconditional (i.e., only depending on the time lapses) right to collect consideration from the customers shall be listed
separately as receivables.
The recognition method and accounting treatment method for the expected credit loss of the Company's contract
assets are detailed in Note V 11.6. Impairment of financial instruments.
The Company separately determines the credit loss of contract assets that provide sufficient evidence to evaluate
expected credit losses at a reasonable cost at the individual instrument level.
When there is insufficient evidence to evaluate expected credit losses at a reasonable cost at the individual tool
level, the Company divides contract assets into several portfolios based on credit risk characteristics with reference to
historical credit loss experience, combining current conditions with judgments of future economic conditions, and
calculates expected credit losses on the basis of the portfolio. Basis for determining portfolio:
Portfolio Name Basis for determining portfolio Accrual method
With reference to historical credit loss
Accounts receivable from related parties within the experience, combined with the current situation
Related party portfolio scope of the Company's consolidated financial and the forecast of future economic conditions,
statements the Company shall calculate the expected credit
loss
Expected credit loss rate is calculated with
reference to historical credit loss experience,
Including accounts receivable other than the above combined with the current situation and the
Aging portfolio
portfolio forecast of future economic conditions, through
default risk exposure and the expected credit
loss rate of the entire duration
17. Inventory
(1) Inventory category, valuation method for issuing inventory, inventory taking system, amortization method
for low value consumables and packaging materials
1) Inventory category
Inventories refer to finished products or commodities held by the Company for sale in daily activities, products
in process of production, and materials consumed in the process of production or provision of labor services. Mainly
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including raw materials, products in process, goods in stock, goods in transit, consigned processing materials,
contract performance costs, etc.
2) Valuation method for issuing inventory
Inventory is initially measured at cost upon acquisition, including procurement costs, processing costs, and other
costs. Inventory is valued using the weighted average method when issued.
3) Inventory taking system
Inventory taking system of the company is a perpetual inventory system.
4) Amortization method for low value consumables and packaging materials
① Low value consumables are amortized by the one-off write-off method;
② Packaging materials are amortized by the one-off write-off method;
③ Other turnover materials are amortized using the one-off write-off method.
(2) Recognition conditions and accrual method of inventory depreciation reserves
After conducting a comprehensive inventory at the end of the period, the provision for inventory depreciation
shall be withdrawn or adjusted based on the lower of the cost and net realizable value of the inventory. For goods
inventories directly used for sale, such as finished products and materials for sale, during the normal production and
operation process, the net realizable value shall be recognized by the estimated selling price of the inventory minus
the estimated selling and distribution expenses and related taxes; for material inventories to be processed, during the
normal production and operation process, the net realizable value shall be recognized by the estimated selling price of
the finished products produced minus the estimated costs to be incurred upon completion, estimated selling and
distribution expenses and relevant taxes. The net realizable value of the inventory held for execution of the sales
contract or service contract is calculated on the basis of the contract price; if the quantity of inventory held is more
than the quantity ordered in the sales contract, net realizable value for the excess of the inventory is calculated based
on the general sales price.
At the end of the period, the inventory falling price reserves are accrued according to individual inventory items;
however, for the inventory with large quantity and low unit price, the inventory falling price reserves shall be accrued
according to the inventory category; and for inventories that are related to product series produced and sold in the
same region, have the same or similar end use or purpose, and are difficult to be measured separately from other
items, the inventory falling price reserves shall be accrued on a consolidated basis.
18. Held-for-sale assets
(1) Recognition standards for classifying as held-for-sale assets
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The Company will recognize non-current assets or disposal groups that meet the following conditions as held-
for-sale components:
(1) In accordance with the practice of selling such assets or disposal groups in similar transactions, they can be
sold immediately under current conditions;
(2) The sale is highly likely to occur, as the Company has already made a resolution on a sale plan, obtained
approval of regulatory authorities, and obtained a confirmed purchase commitment. It is expected that the sale will be
completed within one year.
The determined purchase commitment refers to the legally binding purchase agreement signed between the
Company and other parties, which contains important clauses such as transaction price, time and sufficiently severe
penalty for breach of contract, so that the possibility of major adjustment or cancellation of the agreement is
extremely small.
(2) Accounting method for held-for-sale assets
The Company does not provide depreciation or amortization for non-current assets or disposal groups held for
sale. If the book value is higher than the net amount of fair value minus selling expenses, the book value shall be
written down to the net amount of fair value minus selling expenses. The written down amount is recognized as
losses from impairment of assets and included in current profits and losses. At the same time, a provision for
impairment of held-for-sale assets is made.
For non-current assets or disposal groups that are classified as held for sale on the acquisition date, the initial
measurement amount and the net amount of fair value (assuming that they are not classified as held for sale) minus
selling expenses shall be compared, and the lower amount shall be measured at the initial measurement.
The above principles apply to all non-current assets, but do not include Investment real estate measured using
the fair value model for subsequent measurement, biological assets measured using the net amount of fair value
minus selling expenses, assets formed by employee compensation, deferred income tax assets, financial assets
regulated by accounting standards related to financial instruments, and rights arising from insurance contracts
regulated by accounting standards related to insurance contracts.
19. Debt investment
The recognition method and accounting treatment method for the expected credit loss of the Company's debt
investment are detailed in Note V 11.6. Impairment of financial instruments.
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20. Other debt investments
The determination method and accounting treatment method for the expected credit loss of other debt
investments by the company are detailed in Note 5, 11.6. Impairment of financial instruments.
21. Long-term receivables
The recognition method and accounting treatment method for the expected credit loss of the Company's long-
term receivables are detailed in Note V 11.6. Impairment of financial instruments.
22. Long-term equity investment
(1) Recognition of initial investment cost
1) The specific accounting policies for long-term equity investments formed by business mergers are detailed in
Note V 6. Accounting treatment methods of business merger under the common control and merger under different
control.
2) Long-term equity investments obtained through other means
For long-term equity investment acquired by cash payment, the actual purchase price shall be regarded as the
initial investment cost. The initial investment cost includes expenses, taxes and other necessary expenses directly
related to the acquisition of long-term equity investment.
For the long-term equity investment obtained by issuing equity securities, the fair value of the issued equity
securities shall be taken as the initial investment cost. The transaction costs incurred when issuing or acquiring equity
instruments can be directly attributed to equity transactions and deducted from equity.
On the premise that the non-monetary asset exchange has commercial substance and the fair value of the assets
received or exchanged can be reliably measured, the initial investment cost of the long-term equity investment
received from the non-monetary asset exchange is determined based on the fair value of the exchanged assets, unless
there is conclusive evidence that the fair value of the exchanged assets is more reliable; for non-monetary asset
exchanges that do not meet the above conditions, the book value of the exchanged assets and the relevant taxes and
fees payable shall be used as the initial investment cost for the long-term equity investment received.
The initial investment cost of long-term equity investments obtained through debt restructuring is determined
based on fair value.
(2) Subsequent measurement and profit and loss recognition
1) Cost method
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The long-term equity investments that the Company is able to control over the investee are accounted for using
the cost method and are valued at the initial investment cost. The cost of long-term equity investments is adjusted by
adding or recovering investments.
Except the declared but not released cash dividends or profits which are included in actual amount or
consideration paid for acquiring investments, the profit distribution or cash dividends declared by the investees are
recognized as the current investment income by the Company.
2) Equity method
The Company adopts the equity method to account for long-term equity investments in associates and joint
ventures; for equity investments in joint ventures indirectly held through venture capital institutions, mutual funds,
trust companies, or similar entities including investment linked insurance funds, fair value measurement is adopted
and changes are included in profits and losses.
If the cost of initial investment of long-term equity investment exceeds the difference of the identifiable fair
value of net assets of the investee sharable at investment, cost of initial investment of long-term equity investment
shall not be adjusted; if the cost of initial investment of long-term equity investment is less than identifiable fair value
of net assets of the investee sharable at investment, the difference is included in current profits and losses when it is
incurred.
After the Company obtains the long-term equity investment, the investment income and other comprehensive
income shall be recognized respectively according to the share of net profit and loss and other comprehensive income
realized by the investee that should be enjoyed or shared, and the book value of the long-term equity investment shall
be adjusted; the Company shall calculate the attributable part according to the profits or cash dividends declared to be
distributed by the investee, and reduce the book value of long-term equity investment accordingly; the Company shall
adjust the book value of long-term equity investment and include it in the owner's equity for other changes in the
owner's equity of the invested entity other than net profits and losses, other comprehensive income and profit
distribution.
In recognition of the share of the net profit or loss of the investee entity by the Company, the net profit of the
investee shall be adjusted and confirmed on the basis of the fair value of the identifiable assets of the investee entity
when the investment is made. The unrealized profits or losses arising from the intra-company transactions amongst
the Company and its associates and joint ventures are eliminated in proportion to the Company's equity interest in the
associates and joint ventures, and then based on which the investment profits and losses are recognized.
When the Company confirms that it shall share the losses incurred by the investee, it shall handle them in the
following order: firstly, offset the book value of long-term equity investments. Secondly, if the book value of long-
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term equity investments is not sufficient to offset, investment losses shall be recognized to the extent of other long-
term equity book values that essentially constitute net investments in the investee, and the book value of long-term
accounts receivable shall be offset. Finally, after the above processing, if the enterprise still bears additional
obligations as stipulated in the investment contract or agreement, the expected liabilities shall be recognized based on
the expected obligations and included in the current investment loss.
If the investee realizes profits in the future period, the Company shall handle it in the opposite order after
deducting the unrecognized loss sharing, write down the book balance of the recognized expected liabilities, restore
the book value of other long-term equity and long-term equity investments that essentially constitute the net
investment in the investee, and then restore the recognition of investment income.
(3) Conversion of accounting methods for long-term equity investments
1) Fair value measurement to equity method accounting
For equity investments held by the Company that do not have control, joint control, or significant impact over
the investee and are accounted for according to the financial instrument recognition and measurement standards, if
they can exert significant impact or implement joint control over the investee but do not constitute control due to
additional investment or other reasons, the fair value of the original equity investment determined in accordance with
"Accounting Standards for Enterprises No. 22 - Recognition and Measurement of Financial Instruments" plus the
additional investment cost shall be used as the initial investment cost accounted for using the equity method.
For the difference between the initial investment cost calculated using the equity method and the fair value share
of the identifiable net assets of the investee on the date of the additional investment, calculated based on the new
shareholding percentage after the additional investment, the book value of the long-term equity investment shall be
adjusted and included in the current non-operating revenue.
2) Fair value measurement or equity method accounting to cost method accounting
For equity investments held by the Company that do not have control, joint control, or significant impact on the
investee and are accounted for according to financial instrument recognition and measurement standards, or for long-
term equity investments held by the Company in associates or joint ventures that can exert control over the investee
under different control due to additional investments or other reasons, when preparing individual financial statements,
the initial investment cost calculated using the cost method is the sum of the book value of the original equity
investment held and the additional investment cost.
The other comprehensive income recognized by the equity investment held on the date of acquisition due to the
equity method is used for accounting treatment on the same basis as the direct disposal of related assets or liabilities
by the investee when the asset is disposed of.
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If the equity investments held before the date of acquisition are accounted for in accordance with the relevant
provisions of the "Accounting Standards for Enterprises No. 22 - Recognition and Measurement of Financial
Instruments", the cumulative fair value changes originally recognized in other comprehensive income are transferred
to the current profits and losses when the cost method is used for accounting.
3) Equity method accounting to fair value measurement
Where the joint control or significant impact on the investee is lost due to the disposal of part of the equity
investment or other reasons, and the remaining equity after disposal shall be accounted for in accordance with the
"Accounting Standards for Enterprises No. 22 - Recognition and Measurement of Financial Instruments", the
difference between the fair value and the book value of the remaining equity on the date of loss of joint control or
significant impact is included in current profits and losses.
The other comprehensive income recognized by the original equity investment due to the equity method is used
for accounting treatment on the same basis as the direct disposal of related assets or liabilities by the investee when
the equity method is terminated.
4) Cost method to equity method
When the Company loses control over the investee due to partial disposal of equity investment and the residual
equity after disposal can implement joint control over or significant impact on the investee at the time of preparing
individual financial statements, the equity method is adopted, and the residual equity is adjusted deeming to have
been accounted for with the equity method since its acquisition.
5) Cost method to fair value measurement
If the Company loses control over the investee due to the disposal of some equity investments or other reasons,
and the remaining equity after disposal cannot exercise joint control or have a significant impact on the investee in
the preparation of individual financial statements, the accounting treatment shall be carried out in accordance with the
relevant provisions of the "Accounting Standards for Enterprises No. 22 - Recognition and Measurement of Financial
Instruments". The difference between the fair value and the book value on the date of loss of control shall be included
in current profits and losses.
(4) Disposal of long-term equity investments
When disposing of long-term equity investment, the balance between the book value and actual price for
acquisition shall be included in current profits and losses. For long-term equity investments accounted for using the
equity method, when disposing of the investment, the accounting treatment for the portion originally recognized in
other comprehensive income shall be carried out on the same basis as the direct disposal of relevant assets or
liabilities by the investee in a corresponding proportion.
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The terms, conditions, and economic impact of various transactions related to the disposal of equity investments
in subsidiaries in one or more of the following circumstances usually indicate that multiple transactions shall be
accounted for as a package deal:
1) These transactions were entered into simultaneously or taking into account mutual influence;
2) These transactions as a whole can achieve a complete business result;
3) The occurrence of a transaction depends on the occurrence of at least one other transaction;
4) A transaction alone is not economical, but it is economic when considered with other transactions.
If the control over the original subsidiary is lost due to the disposal of some equity investments or other reasons,
which is not a package deal, relevant accounting treatment shall be distinguished between individual financial
statements and consolidated financial statements:
1) In individual financial statements, the difference between the book value of the disposed equity and the actual
acquisition price is included in current profits and losses. If the remaining equity after disposal can exercise joint
control or have a significant impact on the investee, it shall be accounted for using the equity method, and the
remaining equity shall be adjusted as if it was accounted for using the equity method at the time of acquisition; if the
remaining equity after disposal cannot exercise joint control or have a significant impact on the investee in the
preparation of individual financial statements, the accounting treatment shall be carried out in accordance with the
relevant provisions of the "Accounting Standards for Enterprises No. 22 - Recognition and Measurement of Financial
Instruments". The difference between the fair value and the book value on the date of loss of control shall be included
in current profits and losses.
2) In the consolidated financial statements, for all transactions before the loss of control over the subsidiary, the
difference between the disposal price and the corresponding share of net assets of the subsidiary calculated
continuously from the date of acquisition or combination date for the disposal of long-term equity investments, the
capital reserve (share premium) shall be adjusted. If the capital reserve is insufficient to offset, the retained earnings
shall be adjusted; when losing control over a subsidiary, the remaining equity shall be remeasured at its fair value on
the date of loss of control. The difference between the sum of the consideration obtained from the disposal of equity
and the fair value of the remaining equity minus the share of the net assets of the original subsidiary continuously
calculated from the date of acquisition calculated according to the original shareholding percentage shall be included
in the investment income of the current period when the control right is lost, and the goodwill shall be offset. Other
comprehensive income related to equity investments in the original subsidiary shall be converted into current
investment income when control is lost.
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If all transactions related to the disposal of equity investments in subsidiaries until the loss of control belong to a
package deal, each transaction shall be treated as a transaction related to the disposal of equity investments in
subsidiaries and the loss of control, and relevant accounting treatment shall be distinguished between individual
financial statements and consolidated financial statements:
1) In individual financial statements, the difference between the disposal price and the book value of the long-
term equity investment corresponding to the disposed equity before the loss of control is recognized as other
comprehensive income and transferred to the current profits and losses when the control is lost.
2) In the consolidated financial statements, the difference between the disposal price and the net asset share of
the subsidiary corresponding to the disposal investment before the loss of control is recognized as other
comprehensive income, and is transferred to the current profits and losses when the control is lost.
(5) Judgment standard for common control and significant impact
If the Company collectively controls a certain arrangement with other participants in accordance with relevant
agreements, and any activity decision that has a significant impact on the return of the arrangement requires the
unanimous consent of the participants who share control, it shall be deemed that the Company and other participants
jointly control a certain arrangement, which is a joint venture arrangement.
When a joint venture arrangement is reached through a separate entity, and it is determined based on relevant
agreements that the Company has rights to the net assets of the separate entity, the separate entity shall be treated as a
joint venture and accounted for using the equity method. If it is determined according to relevant agreements that the
Company does not have the right to the net assets of the separate entity, the separate entity shall be considered as an
entity in joint operation, and the Company shall recognize the items related to the share of joint operation interests
and conduct accounting treatment in accordance with the relevant Accounting Standards for Enterprises.
Significant impact means that the investor has the power to participate in the decision-making of the financial
and operating policies of the investee, but is not able to control or jointly control the formulation of these policies
with other parties. After considering all facts and circumstances, the Company determines that it has a significant
impact on the investee through one or more of the following circumstances: (1) Having representatives on the Board
of Directors or similar authorities of the investee; (2) Participating in the process of formulating financial and
operational policies for the investee; (3) Significant transactions occur with the investee; (4) Dispatching
management personnel to the investee; (5) Providing key technical information to the investee.
23. Investment real estate
Measurement model of investment real estate
Cost method measurement
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Depreciation or amortization method
The investment real estate refers to the properties held for earning rentals or capital appreciation or both,
including the land use right which has already been leased out, land use right which is held for transfer after its
appreciation and buildings which have already been leased out. Moreover, idle buildings owned by the Company
ready for operating lease, with the written announcement from the Board of Directors, that it has an explicit intention
to hold the buildings for operating lease and such intention will not change in short-term, are disclosed as investment
real estate as well.
The investment real estate of the Company is used as the entry value at its cost, and the cost of purchasing
investment real estate includes the purchase price, relevant taxes, and other expenses directly attributable to the asset;
the cost of self constructing investment real estate is composed of the necessary expenses incurred before the
construction of the asset reaches its expected conditions for use.
The impairment test method and impairment provision method for investment real estate are detailed in Note V
28. Long-term assets impairment.
When investment real estate is converted for self-use, such real estate shall be converted into fixed assets or
intangible assets since the date of conversion. When properties for self-use are converted for earning rents or capital
appreciation, the fixed assets or intangible assets shall be converted into investment real estate since the date of
conversion. When conversion occurs, the book value prior to conversion shall be the entry value after conversion.
When an investment real estate is disposed of, or permanently withdrawn from use and is not expected to obtain
economic benefits from its disposal, the recognition of the investment real estate shall be terminated. The amount of
proceeds on sale, transfer, retirement or damage of any investment real estate net of the book value of the investment
real estate and the relevant taxes shall be included in current profits and losses.
24. Fixed assets
(1) Recognition conditions
Fixed assets mean the tangible assets held for producing commodities, providing services, renting or operating
management, with a service life in excess of one accounting year. Fixed assets shall be recognized when the
following the conditions are met simultaneously:
1) Economic benefits associated with such fixed assets are likely to flow into the Company;
2) Cost of such fixed assets can be measured reliably.
(2) Depreciation methods
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Depreciation Life Annual depreciation
Category Depreciation method Residual value rate (%)
(year) rate (%)
Houses and buildings Straight-line method 20-50 5 1.90-4.75
Machinery equipment Straight-line method 5-10 5 9.50-19.00
Electronic equipment
Straight-line method 3-5 5 19.00-31.67
and others
Transportation vehicles Straight-line method 4 5 23.75
25. Construction in progress
The construction in progress projects constructed by the Company are priced at actual cost, which is composed
of necessary expenses incurred before the construction of the asset reaches its expected conditions for use, including
the cost of engineering materials, labor costs, relevant taxes and fees paid, capitalized borrowing costs, and indirect
expenses to be shared.
All expenses incurred before the asset reaches its expected conditions for use in construction in progress projects
shall be recognized as the entry value of fixed assets. If the construction in progress has reached the expected
conditions for use but has not yet completed the final settlement, from the date of reaching the expected conditions
for use, the estimated value shall be transferred to fixed assets based on the project budget, cost, or actual project cost,
and the depreciation of fixed assets shall be calculated according to the Company's fixed asset depreciation policy.
After completing the final settlement, the original estimated value shall be adjusted according to the actual cost, but
the depreciation amount already calculated shall not be adjusted.
The impairment test method and impairment provision method for construction in progress are detailed in Note
V 28. Long-term assets impairment.
26. Borrowing costs
(1) Recognition principles for capitalization of borrowing costs
Borrowing costs of the Company which can be classified directly as expenses for the acquisition, construction or
production activities for preparing an asset eligible for capitalization, shall be capitalized and booked into cost of
capital; other borrowing costs shall be defined upon occurred as expenses on the basis of the amount and included in
current profits and losses.
The assets meeting the capitalization conditions refer to the fixed assets, investment properties and inventories
that need a substantially long period for acquisition, construction or production to be ready for their intended use or
sale.
The borrowing costs shall be capitalized when all of the following conditions are satisfied:
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1) Expenditures on an asset have been incurred, and expenditures on the asset comprise payments in cash,
transfer of non-cash assets or assumption of debts with interest for acquisition and construction or production of the
asset qualifying for capitalization;
2) The borrowing costs have already been incurred;
3) Acquisition, construction or production activities necessary to bring the asset to reach expected conditions for
use or sale are in progress.
(2) Period of capitalization of borrowing costs
Period of capitalization refers to the period from the beginning time point of capitalization to the end time point
of capitalization. The suspension period of capitalization of borrowing costs shall be excluded.
When the acquisition, construction or production of assets that meet the capitalization conditions is ready for its
intended use or sale, the capitalization of borrowing costs will cease.
When a portion of the assets that meet the capitalization conditions are completed and can be used separately,
the capitalization of the borrowing costs for that portion of the assets shall cease.
If each part of the purchased or produced asset is completed separately, but can only be used or sold to the
outside world after the overall completion, the capitalization of borrowing costs shall be stopped when the entire asset
is completed.
(3) Suspension period of capitalization
Where the acquisition, construction or production of eligible assets is interrupted abnormally and the
interruption period lasts for more than 3 months, capitalization of the borrowing costs shall be suspended; if the
interruption is a necessary step for making the eligible assets under acquisition, construction or production reach the
expected serviceable or marketable state, the capitalization of the borrowing costs shall be continued. The borrowing
costs incurred during the period of cease will be determined as current profit and loss, and the borrowing costs will
continue to be capitalized after the acquisition, construction or production activities of the assets are resumed.
(4) Calculation methods for capitalized amount of borrowing costs
The interest expenses of special loans (excluding interest income obtained from unused loan funds deposited in
banks or investment income obtained from temporary investments) and their auxiliary expenses shall be capitalized
before the purchased or produced assets that meet the capitalization conditions reach their expected conditions for use
or sale.
The amount of capitalization of the interest amount shall be determined by multiplying the weighted average of
difference between accumulative assets expenditure and assets expenditure of specially borrowed loans by the
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capitalization rate of general borrowings. The capitalization rate is calculated and determined based on the weighted
average interest rate of general borrowings.
If there is a discount or premium on the loan, the amount of discount or premium to be amortized for each
accounting period shall be determined using the effective interest rate method, and the interest amount for each
period shall be adjusted.
27. Intangible assets
(1) Useful life and its determination basis, estimated situation, amortization method or review procedure
Intangible assets are identifiable non-monetary assets without physical substance owned or controlled by the
Company, including land use rights, software, others, etc.
1) Initial measurement of intangible assets
Costs of purchased intangible assets include purchase price, related taxes as well as other expenditures directly
attributable to making such assets ready for intended use. Where the payment of the acquisition price for intangible
assets is delayed beyond the normal credit terms, for those with financing nature, the cost of intangible assets is
determined at the present value of the acquisition price.
For intangible assets from debt restructuring used by the debtor to offset debts, its entry value is determined
based on the fair value of the intangible asset. The difference between the book value of the restructured debt and the
fair value of the intangible asset used to offset debts is included in current profits and losses.
On the premise that the non-monetary asset exchange has commercial substance and the fair value of the assets
received or exchanged can be reliably measured, the entry value of the intangible asset received from the non-
monetary asset exchange is determined based on the fair value of the exchanged assets, unless there is conclusive
evidence that the fair value of the exchanged assets is more reliable; for non-monetary asset exchanges that do not
meet the above conditions, the book value of the exchanged assets and the relevant taxes and fees payable shall be
used as the cost for the intangible asset received, and no profit or loss shall be recognized.
The entry value of intangible assets obtained by absorption and merger of enterprises under the same control
shall be determined according to the book value of the merged party; the entry value of intangible assets obtained by
absorption and merger of enterprises not under the same control shall be determined at fair value.
The costs of intangible assets developed internally include: materials, service costs and registration fees
consumed in the development of the intangible assets, amortization of other patents and franchise used in the
development process, interest costs that meet the capitalization conditions, as well as other direct costs incurred
before the achievement of intended use of intangible asset.
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2) Subsequent measurement of intangible assets
The Company analyzes and determines the useful life of intangible assets when acquiring them, and divides
them into intangible assets with limited or uncertain useful lives.
① Intangible assets with limited useful life
For intangible assets with limited useful lives, they are amortized using the straight-line method within the
period of bringing economic benefits to the enterprise. The estimated life and basis for intangible assets with limited
useful life are as follows:
Item Estimated Useful Lives Basis
Software 2-10 years Benefit period
From obtaining the land use right to the termination date
Land use rights Benefit period
of the land use right
At the end of the period, the useful life and amortization method of intangible assets with limited useful life
shall be reviewed, and adjustments shall be made if necessary.
② Tangible assets with unclear useful life
If it is impossible to foresee the period within which intangible assets will bring economic benefits to the
enterprise, it shall be regarded as an intangible asset with an uncertain useful life. At the end of the period, the useful
life of intangible assets with uncertain service life shall be reviewed. If there is evidence that the period of intangible
assets bringing economic benefits to the enterprise is foreseeable, the useful life shall be estimated and amortized
according to the amortization policy of intangible assets with limited useful life.
The impairment test method and impairment provision method for intangible assets are detailed in Note V 28.
Long-term assets impairment.
(2) The scope of R&D expenditure collection and related accounting treatment methods
1) Specific standards for dividing the research stage and development stage of the company's internal research
and development projects
Research stage: the stage of original planned investigation and research activities to acquire and understand new
scientific or technical knowledge.
Development stage: the stage where research results or other knowledge are applied to a plan or design to
produce new or substantially improved materials, devices, products and other activities before commercial production
or use.
Expenditures of internal research and development projects during research stage are included in current profits
and losses upon occurrence.
2) Expenditures at the development stage meet the specific standards for capitalization
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Expenses incurred during the development phase of internal research and development projects are recognized
as intangible assets when the following conditions are met:
① Complete such intangible asset to make it usable or salable with technical feasibility;
② Intention of completing such intangible asset for use or sale;
③ Method for intangible assets to produce economic benefits, including the ability to prove that the products
from such intangible assets exist in the market or that the intangible assets themselves exist in the market, and the
ability to prove the serviceability of the intangible asset if used internally;
④ There is sufficient support from technical, financial resources and other resources, to complete development
of such intangible assets, and the ability of using or selling such intangible assets;
⑤ The expenditures attributable to development stage of such intangible assets shall be measured reliably.
Expenditures in the development stage that do not meet the above conditions shall be included in the current
profits and losses when incurred. If expenditure in research stage and expenditure in development stage fail to be
divided, generated research expenditure shall be concluded in current profits and losses when they are incurred. The
cost of intangible assets formed by internal development activities only includes the total expenditure incurred from
the time when the capitalization conditions are met until the intangible assets reach their intended use. Expenditures
for the same intangible asset that have been expensed and included in profit or loss before reaching the capitalization
conditions during the development process will not be adjusted.
28. Long-term assets impairment
The Company inspects long-term equity investments, fixed assets, construction in progress, intangible assets
with determined useful lives, and any signs of potential impairment on each balance sheet date. If there are signs of
impairment in long-term assets, the Company shall estimate their recoverable amount based on individual assets; if it
is difficult to estimate the recoverable amount of a single asset, the recoverable amount of the asset group shall be
determined based on the asset group to which the asset belongs.
The estimate of the recoverable amount of an asset is determined based on the higher of its fair value minus
disposal expenses and the present value of the expected future cash flows of the asset.
The measurement results of the recoverable amount indicate that if the recoverable amount of an asset is lower
than its book value, the book value of the long-term asset shall be written down to the recoverable amount. The
written down amount is recognized as losses from impairment of assets and included in current profits and losses. At
the same time, a corresponding provision for losses from impairment of assets shall be made. Once the losses from
impairment of assets are recognized, they shall not be reversed in subsequent accounting periods.
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After the losses from impairment of assets are recognized, the depreciation or amortization expenses of the
impaired assets shall be adjusted accordingly in the future, so that the adjusted book value of the assets can be
systematically amortized within the remaining useful life of the assets (deducting the expected net residual value).
Intangible assets with uncertain goodwill and useful life formed by business mergers shall undergo impairment
test annually, regardless of whether there are signs of impairment.
During the impairment test of the goodwill, the book value of the goodwill is divided to the asset group or
portfolio of asset groups that are expected to benefit from the business merger synergies. When conducting
impairment tests on the related asset portfolio or portfolio of asset groups that contain(s) goodwill, if there are
indications of impairment, test the asset groups or groups of asset groups that do(es) not contain goodwill firstly and
calculate the recoverable amount, and compare it with the related book value to confirm the corresponding
impairment loss. Then conduct an impairment test on the asset group or asset group portfolio containing goodwill,
and compare the book value (including the book value of the apportioned goodwill) of these relevant asset groups or
asset group portfolios with their recoverable amount. If the recoverable amount of the relevant asset group or asset
group portfolios is lower than its book value, the impairment loss of goodwill shall be recognized.
29. Long-term unamortized expenses
Long-term deferred expenses refer to all expenses which have occurred and shall be amortized by the Company
in more than one year in the current period and subsequent period. Long-term deferred expenses are amortized over
the benefit period using the straight-line method.
30. Contract liabilities
The Company recognizes the obligation to transfer goods to customers for consideration received or receivable
as contract liabilities.
31. Employee compensation
(1) Accounting treatment methods for short-term compensation
Short-term remuneration refers to the remuneration of employees that the Company needs to pay in full within
12 months after the end of the annual reporting period for employees to provide relevant services, except for post
employment benefits and termination benefits. During the accounting period when employees provide services, the
Company recognizes the short-term remuneration payable as liabilities, and includes it in the relevant asset costs and
expenses according to the beneficiary of the services provided by employees.
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(2) Accounting treatment method for post employment benefits
Post employment benefits refer to various forms of remuneration and benefits provided by the Company after
the retirement of employees or the termination of labor relations with the enterprise in order to obtain the services
provided by employees, except short-term remuneration and dismission welfare.
The post employment welfare plan of the Company includes a defined contribution plan and a defined benefit
plan.
The defined contribution plan for the post employment benefit mainly involves participating in social basic
pension insurance, unemployment insurance, etc. organized and implemented by labor and social security institutions
in various regions; during the accounting period when employees provide services to the Company, the amount of
deposit payable calculated according to the defined contribution plan will be recognized as a liability and included in
current profits and losses or related asset costs.
After the Company regularly pays the above-mentioned funds in accordance with national standards, it has no
further payment obligations.
(3) Accounting treatment method for dismissal benefits
The dismission welfare refers to the compensation given by the Company to terminate the labor relationship
with employees before the expiration of their labor contracts, or propose compensation to encourage employees to
voluntarily accept layoffs. When the Company cannot unilaterally withdraw the termination plan or layoff proposal,
or when the Company recognizes the costs and expenses related to the restructuring involving the payment of
dismission welfare, whichever is earlier, the liabilities arising from the compensation for the termination of the labor
relationship with employees are recognized and included in current profits and losses.
32. Estimated liabilities
(1) Recognition standards for estimated liabilities
When the obligation related to product quality assurance contingency is a current obligation undertaken by the
Company, and the fulfillment of this obligation is likely to result in the outflow of economic benefits, and the amount
of this obligation can be reliably measured, it is recognized as an estimated liability.
(2) Measurement method for estimated liabilities
Estimated liabilities of the Company shall be measured initially pursuant to the optimal estimate of expenditure
required to perform relevant current obligations.
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When determining the optimal estimate, the Company shall comprehensively consider such factors as relevant
risks and uncertainties related to contingencies and the time value of currency. If there is significant effect on time
value of money, the best estimate is determined by discounting the relevant future cash outflow.
The best estimate is handled in the following situations:
If there is a continuous range (or interval) of required expenses and the likelihood of various outcomes occurring
within that range is the same, the best estimate is determined based on the average of the upper and lower limits of
the range.
If there is no continuous range (or interval) of required expenses, or although there is a continuous range, the
likelihood of various outcomes occurring within that range is different, in the event that there is a contingency
involving a single item, the best estimate shall be determined based on the amount most likely to occur; if the
contingency involves multiple items, the best estimate shall be determined based on various possible outcomes and
related probabilities.
If all or part of the expenditures to pay off estimated liabilities by the Company are expected to be compensated
by third parties, once it is basically certain that compensation amount can be received, that amount can be recognized
as asset individually but will not exceed book value of estimated liabilities.
33. Share-based payments
(1) Types of share-based payments
The share-based payment of the Company is divided into equity settled share-based payment and cash settled
share-based payment.
(2) Method for determining the fair value of equity instruments
For equity instruments such as options granted in an active market, their fair value is determined based on the
quoted price in the active market. For equity instruments such as options granted without an active market, the fair
value is determined using option pricing models, etc. The selected option pricing model considers the following
factors: 1) The exercise price of the option; 2) The validity period of the option; 3) The current price of the
underlying shares; 4) The expected volatility of stock price; 5) The expected dividend of the shares; 6) The risk-free
interest rate during the validity period of the option.
When determining the fair value of equity instruments on the grant date, the Company shall consider the impact
of market conditions and non-vesting conditions specified in the share-based payment agreement. If there are non-
vesting conditions for share-based payment, as long as the employee or other party meets all non-market conditions
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(such as service period, etc.) of the vesting conditions, it is confirmed that the corresponding cost of the service has
been received.
(3) Basis for confirming the best estimate of exercisable equity instruments
On each balance sheet date during the waiting period, the best estimate is made based on the latest changes in
the number of eligible employees and subsequent information, and the estimated number of eligible equity
instruments is revised. On the vesting date, the final estimated number of exercisable equity instruments is consistent
with the actual number of exercisable equity instruments.
(4) Accounting treatment method
1) Accounting treatment for equity settlement and cash settlement of share-based payments
The share-based payment settled by equity shall be measured at the fair value of the equity instruments granted
to employees. If the right is exercisable immediately after the grant, it shall be included in the relevant costs or
expenses according to the fair value of the equity instruments on the grant date, and the capital reserve shall be
increased accordingly. If the right can be exercised only after completing the services within the waiting period or
meeting the prescribed performance conditions, on each balance sheet date within the waiting period, the services
obtained in the current period shall be included in the relevant costs or expenses and capital reserves on the basis of
the best estimate of the number of equity instruments exercisable and according to the fair value on the grant date of
equity instruments. After the exercisable date, the recognized relevant costs or expenses and the total amount of
owner's equity will not be adjusted.
Cash-settled share-based payment will be measured according to the fair value of liabilities borne by the
Company which is calculated and recognized based on shares or other equity instruments. If the right is exercisable
immediately after the grant, the fair value of the Company's liabilities shall be included in the relevant costs or
expenses on the date of grant, and the liabilities shall be increased accordingly. For cash settled share-based payment
that can be exercised only after completing the services in the waiting period or meeting the prescribed performance
conditions, on each balance sheet date in the waiting period, based on the best estimate of the exercisable rights, the
services obtained in the current period shall be included in the cost or expenses and the corresponding liabilities
according to the fair value amount of the Company's liabilities. On each balance sheet date and settlement date before
the settlement of relevant liabilities, the fair value of liabilities shall be re-measured, and the changes shall be
included in the current profits and losses.
2) Accounting treatment for modification of terms and conditions of share-based payment
For adverse modifications, the Company considers that the change has never occurred and continues to account
for the services obtained.
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For favorable modifications, the Company shall handle them in accordance with the following provisions: if the
modification increases the fair value of the equity instruments granted, the enterprise shall recognize the increase in
services obtained accordingly based on the increase in fair value of the equity instruments. If the modification occurs
during the waiting period, the fair value of the services obtained between the confirmation of the modification date
and the modified vesting date shall include both the service amount determined based on the fair value of the original
equity instrument on the grant date during the remaining original waiting period and the increase in the fair value of
the equity instrument. If the modification occurs after the vesting date, the increase in the fair value of the equity
instrument shall be immediately recognized. If the share-based payment agreement requires employees to only obtain
the modified equity instrument after completing a longer period of service, the enterprise shall recognize the increase
in the fair value of the equity instrument throughout the waiting period.
If the modification increases the number of equity instruments granted, the enterprise will recognize the fair
value of the increased equity instruments as an increase in the acquisition of services. If the modification occurs
during the waiting period, the fair value of the services obtained between the confirmation of the modification date
and the vesting date of the added equity instruments shall include both the service amount determined based on the
fair value of the original equity instrument on the grant date during the remaining original waiting period and the
increase in the fair value of the equity instrument.
If the enterprise modifies its vesting conditions in a way that benefits its employees, such as shortening the
waiting period, and changing or canceling performance conditions (rather than market conditions), the Company shall
consider the modified vesting conditions when dealing with them.
3) Accounting treatment for cancellation of share-based payment
If the equity instruments granted are canceled within the waiting period, the Company shall regard cancellation
of the equity instruments granted as acceleration of exercising the rights. The amount which shall be recognized
within the remaining waiting period shall be included in current profits and losses immediately, and the capital
reserve shall be recognized simultaneously. If employees or other parties are able to choose to meet non-vesting
conditions but fail to do so during the waiting period, the Company will treat them as cancellation of equity
instruments granted.
34. Revenue
The Company's revenue mainly comes from selling goods.
(1) General principles for revenue recognition
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The Company has fulfilled its contractual obligations by recognizing revenue based on the transaction price
allocated to the performance obligation when the customer obtains control of the relevant goods or services.
Performance obligation refers to the commitment made by the Company in the contract to transfer goods or services
that can be clearly distinguished to customers. Obtaining the control power over the relevant goods means being able
to dominate the use of such goods and obtain almost all economic benefits from them.
The Company evaluates the contract from the commencement date, identifies the individual performance
obligations included in the contract, and determines whether each individual performance obligation is to be
performed within a certain period of time or at a certain point in time. If one of the following conditions is met, it
belongs to the performance obligation fulfilled within a certain period of time, and the Company recognizes revenue
within a certain period of time according to the performance progress: 1) The customer obtains the contract at the
same time as the Company fulfills the contract. Consuming the economic benefits of the Company's performance; 2)
The customer can control the goods under construction in the Company's performance; 3) The products produced
during the Company's performance are irreplaceable, and the Company has the right to receive the payment for
completed part of the performance in the entire contract period. Otherwise, the Company recognizes the revenue
when the consumer obtains the control power over relevant goods or services.
For performance obligations performed within a certain period of time, the Company adopts the input method to
determine the appropriate progress of performance based on the nature of goods and services. The input method is to
determine the progress of performance based on the investment made by the Company to fulfill its obligations. If the
performance progress cannot be reasonably determined and the costs incurred are expected to be compensated, the
Company will recognize the revenue according to the amount of costs incurred until the performance progress can be
reasonably determined.
(2) Specific methods of revenue recognition
1) The principle for recognizing domestic offline sales revenue of products: If the Company sells its products to
engineering contractors, dealers, and end customers, and the contract is signed without installation, the Company will
send the goods to the customer or the customer will pick them up at their doorstep according to the delivery method
agreed in the sales contract. The customer receives the goods and accepts them as qualified. The revenue is
recognized when the Company obtains the customer's receipt certificate.
2) The principle for recognizing revenue from overseas offline sales of products: For domestic companies that
directly export and sell products, FOB terms are adopted. For those that declare and export through sea and air freight,
the export customs declaration procedures are completed, the customs declaration form is obtained, and the revenue
is recognized when obtaining the bill of lading. For customs declaration and export through express delivery, revenue
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shall be recognized based on the date of the customs declaration. If the overseas subsidiary sells overseas, the goods
shall be delivered to the customer or picked up at the customer's doorstep according to the agreed delivery method
with the customer. Revenue shall be recognized when the customer receives the goods and the acceptance is qualified.
3) The principle for recognizing sales revenue through online self operation mode of products: In self operation
mode, the Company mainly sells products directly to consumers through domestic e-commerce platforms (Tmall,
Taobao, JD, PDD, Suning) and overseas e-commerce platforms (Amazon, Lazada, Shoppe). The Company confirms
online self operated business revenue when sending out goods, either directly confirmed by consumers or
automatically confirmed by the system's default delivery time and meeting the return period terms.
4) Principle for recognizing sales revenue of system integration: The sales of company system integration
products include providing customers with supporting products, installation, debugging, and system trial operation,
and other supporting services. After passing the acceptance inspection, sales revenue is recognized.
5) Software sales revenue recognition principle: The software is directly provided to the buyer and requires a
dedicated software authorization code to be used. After the software authorization code is provided to the buyer, the
realization of software sales revenue is recognized. If the company contract stipulates that the software needs to be
installed, debugged, or inspected, the software sales revenue will be recognized after the installation, debugging, or
inspection are completed and an acceptance report is obtained.
(3) Principles for income processing of specific transactions
1) A contract with quality assurance clauses attached
The Company shall assess whether the quality assurance provides a separate service beyond ensuring that the
products sold meet established standards to customers. If the Company provides additional services, it shall be treated
as a single performance obligation and subject to accounting treatment in accordance with the income standards;
otherwise, the quality assurance responsibility shall be accounted for in accordance with the accounting standards for
contingencies.
2) Main responsible persons and agents
The Company determines whether it the main responsible person or agent when engaging in transactions based
on whether it has control over the goods or services before transferring them to customers. If the Company is able to
control the goods or services before transferring them to customers, it is the main responsible person and recognizes
revenue based on the total amount of consideration received or receivable; otherwise, the Company acts as an agent
and recognizes revenue based on the expected amount of commission or handling fees entitled to receive. This
amount is determined by deducting the total amount of consideration received or receivable from the amount payable
to other relevant parties.
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35. Contract cost
(1) Contract performance cost
If the cost incurred by the Company in performing the contract does not fall within the scope of other
Accounting Standards for Enterprises (except revenue standards), it shall be recognized as an asset as contract
performance cost when the following conditions are met simultaneously:
1) The cost is directly related to a current or expected contract, including direct labor, direct materials,
manufacturing expenses (or similar expenses), costs clearly borne by the customer and other costs incurred solely as a
result of the contract;
2) This cost increases the resources that the enterprise will use to fulfill its performance obligations in the future;
3) The cost is expected to be recovered.
The asset is reported in inventory or other non-current assets based on whether its initial recognition
amortization period has exceeded a normal operating cycle.
(2) Contract acquisition cost
If the incremental cost incurred by the Company for acquiring the contract is expected to be recovered, it shall
be recognized as an asset as the contract acquisition cost. Incremental cost refers to the cost (such as sales
commission) that will not be incurred if the company does not obtain the contract. For amortization periods not
exceeding one year, they are included in current profits and losses when incurred.
(3) Amortization of contract costs
The assets related to contract costs mentioned above are recognized on the same basis as the revenue from goods
or services related to the asset, and are amortized at the time of performance or according to the progress of
performance, and are included in current profits and losses.
(4) Impairment of contract costs
If the book value of the assets related to contract costs mentioned above is higher than the difference between
the expected remaining consideration for the transfer of goods related to the asset and the estimated cost to be
incurred for the transfer of the related goods of the Company, the excess shall be subjected to provision for
impairment and recognized as losses from impairment of assets.
After the provision for impairment has been made, if the factors causing impairment in the previous period
change, resulting in a difference between the above two items higher than the book value of the asset, the original
provision for impairment of the asset shall be reversed and included in current profits and losses. However, the
reversed book value of the asset shall not exceed the book value of the asset on the reversal date assuming no
provision for impairment.
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36. Government subsidies
(1) Type
Government subsidies refer to monetary and non-monetary assets acquired by the Company from the
government for free. According to the subsidy target specified in the government documents, government subsidies
are divided into government subsidies related to assets and government subsidies related to income.
For government subsidies that are not clearly defined in government documents, the Company divides them into
government subsidies related to assets or government subsidies related to income based on the actual subsidy targets.
The relevant judgment basis is explained in Note VII 35. Deferred income/48. Other income.
Asset-related governmental subsidies refer to the governmental subsidies that are obtained by the Company and
used for constructing long-term assets, or forming the long-term assets in other ways. The government subsidies
related to income refer to other government subsidies other than those related to assets.
(2) Recognition of government subsidies
If there is evidence at the end of the period that the Company can meet the relevant conditions stipulated in the
financial support policy and is expected to receive financial support funds, government subsidies shall be recognized
based on the receivable amount. In addition, government subsidies are recognized upon actual receipt.
If a government subsidy is a monetary asset, it shall be measured at the amount received or receivable. If
government subsidies are non-monetary assets, they shall be measured at fair value. If the fair value cannot be
obtained reliably, it shall be measured at the nominal amount Government subsidies measured at their nominal
amounts (RMB 1) are directly included in the current profits and losses. Government subsidies measured at their
nominal amounts are directly included in the current profits and losses.
(3) Accounting treatment method
Based on the essence of economic transactions, the Company determines whether a certain type of government
subsidy business shall be accounted for using the gross price method or the net amount method. Normally, the
Company only uses one method for similar government subsidy businesses, and consistently applies this method for
that business.
Item Accounting content
Government subsidy categories accounted
Other government subsidies except for government interest subsidies
for using the gross price method
Government subsidy categories accounted
Government interest subsidies
for using the net amount method
Government subsidies related to assets shall be used to offset the book value of the related assets or recognized
as deferred incomes. Government subsidies related to assets are recognized as deferred income and included in the
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profits and losses in stages within the useful life of the assets constructed or purchased in a reasonable and systematic
way.
Government subsidies related to income used to compensate related costs or losses in later periods shall be
recognized as deferred income, and included in current profits and losses or to write off related costs during the
period of recognition of related costs or losses. Relevant costs or losses incurred for compensation shall be directly
included in current profits and losses or to write off related costs.
The government subsidies related to the enterprise's daily activities shall be included in other income or offset
against relevant costs; and the government subsidies unrelated to the enterprise's daily activities shall be included in
non-operating revenue and expenditure.
Government subsidies related to policy preferential loan interest subsidies are received to offset related
borrowing costs; if a policy preferential interest rate loan provided by the lending bank is obtained, the actual
received loan amount shall be used as the entry value of the loan, and the relevant borrowing costs shall be calculated
based on the loan principal and the policy preferential interest rate.
When confirmed government subsidies need to be returned, if the book value of the relevant assets is offset at
the initial recognition, the book value of the assets shall be adjusted; if there is a balance of related deferred income, it
shall be offset against the book balance of related deferred income, and the excess shall be included in current profits
and losses; if there is no relevant deferred income, it shall be directly included in current profits and losses.
37. Deferred income tax assets/deferred income tax liabilities
Deferred income tax assets and deferred income tax liabilities are calculated and recognized based on the
differences (temporary differences) between the tax bases of assets and liabilities and their book values. On the
balance sheet date, the deferred income tax assets and deferred income tax liabilities shall be measured according to
the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected
to be paid off.
(1) Basis for recognizing deferred income tax assets
The Company recognizes deferred income tax assets arising from deductible temporary differences to the extent
that it is likely to obtain taxable income that can be used to offset deductible temporary differences, deductible losses
that can be carried forward to future years, and tax deductions. However, deferred income tax assets arising from the
initial recognition of assets or liabilities in transactions with the following characteristics are not recognized: (1) The
transaction is not a business merger; (2) At the time of transaction, neither accounting profit nor taxable income (or
deductible loss) will be affected.
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For deductible temporary differences related to the investments of associates, the corresponding deferred income
tax assets are recognized if the following conditions are met: the temporary differences are likely to be reversed in the
foreseeable future, and the taxable income amount used to offset the deductible temporary differences is likely to be
obtained in the future.
(2) Basis for recognizing deferred income tax liabilities
The Company recognizes temporary differences in taxable income between the current and previous periods as
deferred income tax liabilities. But it does not include:
1) Temporary differences formed by the initial recognition of goodwill;
2) Transactions or events that are not formed by business mergers and do not affect accounting profits or
temporary differences in taxable income (or deductible losses) at the time of their occurrence;
3) The temporary taxable difference related to the subsidiaries and associates, whose time of the reverse can be
controlled and which is unlikely to be reversed in the excepted future.
(3) When the following conditions are met simultaneously, the deferred income tax assets and deferred income
tax liabilities shall be presented as the net amount after offsetting
1) The enterprise has the legal right to carry out the net settlement for the current tax assets and current tax
liabilities;
2) Deferred income tax assets and deferred income tax liabilities are related to the income tax levied by the same
tax collection and management department on the same taxpayer or different taxpayers. However, in each future
period in which significant deferred income tax assets and deferred income tax liabilities are reversed, the involved
taxpayers intend to settle current income tax assets and current income tax liabilities at net amount or acquire assets
and settle liabilities at the same time.
38. Leasing
(1) Accounting treatment method for leasing as a lessee
On the commencement date of the lease term, except for short-term leases and low value asset leases that apply
simplified processing, the Company recognizes right-of-use assets and lease liabilities for leases.
1) Short-term leases and low-value asset leases
Short-term leases are leases with a lease term of 12 months or less, excluding the purchase option. Low value
asset lease refers to the lease with lower value when the single leased asset is a brand-new asset.
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The Company does not recognize the right-of-use assets and lease liabilities for the following short-term leases
and low-value asset leases, and the relevant lease payments are included in the relevant asset costs or current profits
and losses according to the straight-line method in each period of the lease term.
The Company recognizes right-of-use assets and lease liabilities for short-term leases and low value asset leases
other than those mentioned above.
2) Accounting policies for right-of-use assets
The Company initially measures the right-of-use assets at cost, which includes:
① The initial measurement amount of lease liabilities;
② For the lease payment paid on or before the commencement date of the lease term, if there is lease incentive,
the relevant amount of lease incentive enjoyed shall be deducted;
③ Initial direct expenses incurred by the Company;
④ The costs expected to be incurred by the Company to dismantle and remove the leased assets, restore the site
where the leased assets are located or restore the leased assets to the state agreed in the lease terms, but excluding the
costs incurred for the production of inventories.
After the commencement date of the lease term, the Company adopts a cost model for subsequent measurement
of the right-of-use asset.
If the lessee can be reasonably determined that the ownership of the leased asset can be obtained when the lease
term expires, depreciation shall be accrued by the Company during the remaining useful life of the leased asset. If it
cannot be reasonably determined that the ownership of the leased asset can be obtained when the lease term expires,
depreciation shall be accrued by the Company during the shorter period of the lease term and the remaining useful
life of the leased asset. For right-of-use assets with provision for impairment, depreciation shall be calculated in
future periods based on the book value after deducting the impairment provision in accordance with the above
principles.
The Company determines whether the right-of-use assets have been impaired and accounts for any identified
impairment losses according to the "Accounting Standards for Enterprises No. 8 - Losses from Impairment of Assets
". Please refer to Note (XXVIII) Long-term assets impairment for details.
3) Accounting policies for lease liabilities
Lease liabilities are initially measured by the Company according to the present value of the unpaid lease
payments on the commencement date of the lease term. In calculating the present value of the lease payment, the
Company adopts the embedded interest rate of the lease as the discount rate; if the embedded interest rate of the lease
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cannot be determined, the incremental borrowing rate of the Company shall be used as the discount rate. Lease
payments include:
① The fixed payment amount and substantial fixed payment amount after deducting the amount related to lease
incentives;
② Variable lease payments depending on index or ratio;
③ When the Company reasonably determines that the option will be exercised, the lease payment amount
includes the exercise price of the purchase option;
④ When the lease term reflects that the Company will exercise the right to terminate the lease, the lease
payment amount includes the amount that needs to be paid to exercise the right to terminate the lease;
⑤ The amount expected to be paid according to the residual value of the guarantee provided by the Company.
The Company calculates the interest expenses of the lease liability in each period of the lease term according to
the fixed discount rate and records it into the current profits and losses or the cost of relevant assets.
The amount of variable lease payments not included in the measurement of lease liabilities shall be included in
current profits and losses or relevant asset costs when actually incurred.
(2) Accounting treatment method for leasing as a lessor
1) Classification of leases
On the lease commencement date, the Company divides the lease into financial lease and operating lease. The
finance lease means almost all leases that substantially transfer all risks and rewards related to the ownership of a
leased asset, the ownership of which may be finally transferred or may not be transferred. Operating leases refer to
leases other than financial leases.
If a lease involves one or more of the following situations, the Company usually classifies it as a financing lease:
① At the expiration of the lease term, the ownership of the leased asset is transferred to the lessee;
② The lessee has the right to choose to purchase the leased asset; the established purchase price is expected to
be much lower than the fair value of the leased asset when exercising the right of choice, and hence it can be
reasonably determined that the Company will exercise this right of choice on the lease beginning date.
③ Even if the ownership of the asset is not transferred, the lease term accounts for the majority of the useful life
of the leased asset.
④ On the lease commencement date, the present value of the lease proceeds is almost equivalent to the fair
value of the leased asset.
⑤ The leased asset is of a special nature. Only the lessee can use the leased asset without major transformation.
If a lease shows one or more of the following signs, the Company may also classify it as a financing lease:
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① If the lessee cancels the lease, the losses incurred by the lessor due to the cancellation of the lease shall be
borne by the lessee.
② The gains or losses arising from fluctuations in the fair value of residual assets are attributable to the lessee.
③ The lessee has the ability to continue leasing at a rent significantly lower than the market level until the next
period.
2) Accounting treatment of financial leasing
On the lease commencement date, the Company recognizes the finance lease receivables for the finance lease
and terminates the recognition of the finance lease assets.
At the initial measurement of receivable financing lease payments, the sum of the unguaranteed residual value
and the present value of lease payments not yet received on the commencement date of the lease term discounted at
the implicit interest rate of the lease shall be used as the entry value of receivable financing lease payments. The lease
receipt amount includes:
① The fixed payment amount and substantial fixed payment amount after deducting the amount related to lease
incentives;
② Variable lease payments depending on index or ratio;
③ When it is reasonably determined that the lessee will exercise the purchase option, the lease receipt amount
includes the exercise price of the purchase option;
④ When the lease term reflects that the lessee will exercise the right to terminate the lease, the lease receipt
amount includes the amount that needs to be paid by the lessee to exercise the right to terminate the lease;
⑤ The residual value of the guarantee provided by the lessee, the party related to the lessee, and an independent
third party with the ability to fulfill the guarantee obligation to the lessor.
The Company calculates and recognizes interest income for each period of the lease term based on a fixed lease
interest rate. Variable lease payments that are not included in the net lease investment measurement are included in
current profits and losses when actually incurred.
3) Accounting treatment of operating leases
The Company adopts the straight-line method or other systematic and reasonable methods to recognize the
rental income from operating leases during each period of the lease term; the capitalization of initial direct expenses
related to operating leases shall be amortized over the lease term on the same basis as the recognition of rental
income, and shall be included in current profits and losses in installments; the variable lease payments related to
operating leases that are not included in the lease income are included in current profits and losses when actually
incurred.
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39. Other important accounting policies and estimates
None
40. Changes of significant accounting policies and accounting estimates
(1) Significant accounting policy changes
Applicable □ Not applicable
Unit: RMB
Contents and reasons for changes in Name of report items that are
Affected amount
accounting policies significantly affected
1) The impact of implementing Interpretation No. 16 of the Accounting Standards for Business Enterprises on
the Company
On December 13, 2022, the Ministry of Finance issued the "Interpretation No. 16 of the Accounting Standards
for Business Enterprises" (CK [2022] No. 31, hereinafter referred to as "Interpretation No. 16"). The provision
"deferred income tax related to assets and liabilities arising from individual transactions shall not be subject to the
accounting treatment of initial recognition exemption" of Interpretation No. 16 was implemented from January 1,
2023, allowing the enterprise to execute it ahead of schedule from the year of publication. The Company
implemented accounting treatment related to this matter in the current year.
For the lease liabilities and right-of-use assets recognized due to the application of Interpretation No. 16 in the
earliest period of financial statement presentation for the first time (i.e. January 1, 2022), as well as the estimated
liabilities and corresponding assets related to the disposal obligation recognized, which generate taxable temporary
differences and deductible temporary differences, the Company shall adjust the cumulative impact to present the
initial retained earnings and other related financial statement items for the earliest period (i.e. January 1, 2022) in the
financial statements in accordance with Interpretation No. 16 and the provisions of "Accounting Standards for
Enterprises No. 18 - Income Tax".
According to the relevant provisions of Interpretation No. 16, the Company has adjusted the cumulative impact
of financial statement related items as follows:
January 1, 2022 January 1, 2022
Item Cumulative impact amount
Original reported amount Adjusted reported amount
Deferred income tax assets 37,494,061.22 5,549,831.23 43,043,892.45
Deferred tax liability 3,150,369.30 5,582,768.40 8,733,137.70
Other comprehensive income -25,505,560.02 15,736.68 -25,489,823.34
Surplus reserves 42,581,853.37 -6,835.39 42,575,017.98
Undistributed profits 607,725,356.63 -55,548.96 607,669,807.67
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January 1, 2022 January 1, 2022
Item Cumulative impact amount
Original reported amount Adjusted reported amount
Minority interests 36,170,791.65 13,710.50 36,184,502.15
For the lease liabilities and right-of-use assets recognized due to the application of Interpretation No. 16 from
the earliest period of financial statement presentation for the first time (January 1, 2022) to the implementation date
of the Implementation (i.e. January 1, 2023), as well as the estimated liabilities and corresponding assets related to
the disposal obligation recognized, the Company shall handle in accordance with Interpretation No. 16.
According to Interpretation No. 16, the Company has adjusted the relevant items on the balance sheet as follows:
December 31, 2022
Balance Sheet Items Cumulative impact
Before the change After the change
amount
Deferred income tax assets 46,749,722.28 8,719,450.85 55,469,173.13
Deferred tax liability 3,557,844.83 8,491,060.14 12,048,904.97
Other comprehensive income 5,255,222.65 -4,332.29 5,250,890.36
Surplus reserves 53,975,085.77 2,919.17 53,978,004.94
Undistributed profits 788,571,917.98 197,066.66 788,768,984.64
Minority interests 43,025,126.30 32,737.17 43,057,863.47
According to Interpretation No. 16, the Company has adjusted the relevant items on the income statement as
follows:
2022
Income statement items Cumulative impact
Before the change After the change
amount
Income tax expenses 9,035,711.77 -281,396.85 8,754,314.92
2) On October 25, 2023, the Ministry of Finance issued the "Interpretation No. 17 of the Accounting Standards
for Enterprises" (CK [2023] No. 21, hereinafter referred to as "Interpretation No. 17"), and the Company
implemented the "Accounting Treatment for Sale and Leaseback Transactions" from October 25, 2023.
The implementation of the "Accounting Treatment for Sale and Leaseback Transactions" has no significant
impact on the financial statements for the current period.
(2) Changes in significant accounting estimates
□ Applicable Not applicable
(3) Implementation of new accounting standards adjustment for the first time starting from 2023.
Relevant project information on financial statements at the beginning of the year
Applicable □ Not applicable
Explanations on adjustment situation: Please refer to Note V 40 (1) Changes in significant accounting policies
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41. Others
None
VI. Taxation
1. Main tax types and tax rates
Tax Type Tax Basis Tax rates
13.00%, 9.00%, 6.00%, 5.00%,
Selling goods or providing taxable 3.00%, and applicable value-added tax
VAT
services rate for overseas subsidiaries in their
registered location
Urban maintenance and construction tax Paid turnover tax amount 7.00%、5.00%
Education surcharge Paid turnover tax amount 3%
Local education surcharges Paid turnover tax amount 2%
Based on 70% of the original value of
Property tax the property (or rental income) as the tax 1.2%、12%
benchmark
Disclosure of information on taxpayers with different corporate income tax rates
Name of Taxpayer Income tax rate
ZKTECO CO., LTD. 15%
Xiamen ZKTeco Biometric Identification Technology Co., Ltd. 25%
Shenzhen ZKTeco Biometric Identification Technology Co.,
20%
Ltd.
ZK INVESTMENTS INC. 21%
ZK TECHNOLOGY LLC Not applicable
ZKTeco Sales Co., Ltd. 25%
Hangzhou ZKTeco Hanlian E-commerce Co., Ltd. 20%
ZKCserv Technology Limited Co., Ltd. 25%
Dalian ZKTeo CO., Ltd. 20%
XIAMEN ZKTECO CO., LTD. 15%
ZKTeco Huayun (Xiamen) Integrated Circuit Co., Ltd. 25%
Xiamen ZKTeco Cloud Valley Design and Development Co.,
25%
Ltd.
ZKTECO VIETNAM TECHNOLOGY COMPANY LIMITED 20%
ZKTECO (GUANGDONG) CO., LTD 15%
Xi'an ZKTeco Co., Ltd. 20%
Shenzhen Zhongjiang Intelligent Technology Co., Ltd. 25%
ZKTECO CO., LIMITED 16.50%、8.25%
ZKTECO TURKEY ELEKTRONIK SANAYI VE TICARET
25%
LIMITED SIRKETI.
ZKTECO LATAM, S.A. DE C.V. 30%
ZK SOFTWARE DE MEXICO, S.A. DE C.V. 30%
ZKTECO COLOMBIA SAS 31%
ZKTECO (M) SDN. BHD. 24%
ZKTECO BIOMETRICS INDIA PRIVATE LIMITED 25.00%、15.00%
ZKTECO EUROPE SL 25%
ZKTECO IRELAND LIMITED 12.5%
ZKTECO Deutschland GmbH 31.225%
ZKTECO ITALIA S.R.L. 27.9%
ZKTECO UK LTD 19%、25%
ZKTECO PERU SOCIEDAD ANONIMA CERRADA 29.5%
ZKTECO THAI CO., LTD. 20%、15%、0%
239
ZKTeco 2023 Annual Report
ZKTECO Chile SpA 27%
SOLUCIONES INTEGRALES Y SISTEMAS SpA 27%
ZKTECO SECURITY L.L.C 0%
ZKTECO ARGENTINA S.A. 25.00%、30.00%、35.00%
Limited Liability Company "ZKTeco biometrics and security" 20%
ZKTeco Investment Inc. 21%
ZKTECO USA LLC Not applicable
ARMATURA LLC. Not applicable
Armatura Co., Ltd. 25.00%、22.00%、20.00%、10.00%
RALVIE AI INC. 38%
ZKTeco Japan Co., Ltd. 15.00%、23.20%
PT. ZKTECO BIOMETRICS INDONESIA 22.00%、11.00%
ZK INVESTIMENTOS DO BRASIL LTDA. 25.00%、15.00%
ZKTECO DO BRASIL S.A. 25.00%、15.00%
ZKTeco Latam R&D S.A. 25.00%、30.00%、35.00%
NGTECO CO., LIMITED 16.50%、8.25%
ZKTECO BIOMETRIC LIMITED 30%
ZKTECO PANAMA, S.A. 5.00%
ZK INTELLIGENT SOLUTIONS (PTY) LTD 27.00%、28.00%
ZKTECO BIOMETRICS KENYA LIMITED 30%
ZKTECO ROMANIA S.R.L 16%
Hubei ZKTeco Co., Ltd. 20%
Wuhan ZKTeco Perception Technology Co., Ltd. 20%
ZKTECO SG INVESTMENT PTE. LTD. 17.00%、4.25%
ZKTECO SINGAPORE PTE. LTD. 17.00%、4.25%
ZKDIGIMAX PTE. LTD. 4.25%、8.5%、17%
ZKDIGIMAX PANAMA, S.A. 25%
Armatura Tech Co., Ltd. 20%、15%、0%
ZKDIGIMAX (PTY) LTD 27%
PT. ZKDIGIMAX EXCEL NOBLE 0.5%、22%
ZKDIGIMAX CHINA CO., LTD. 25%
ZKDIGIMAX COLOMBIA SAS 35%
2. Tax incentives
(1) Article 28 of the "Law of the People's Republic of China on Enterprise Income Tax" stipulates that high-tech
enterprises that require key support from the state shall be subject to corporate income tax at a rate of 15%.
1) In December 2021, the Company obtained a high-tech enterprise certificate (No. GR202144002274), which is
valid for three years.
2) In November 2022, XIAMEN ZKTECO CO., LTD. obtained a high-tech enterprise certificate (No.
GR202235100737), which is valid for three years.
3) In December 2022, ZKTeco (Guangdong) Co., LTD obtained a high-tech enterprise certificate (No.
GR202244002616), which is valid for three years.
(2) According to the relevant provisions of the "Notice of the Ministry of Finance and the State Administration
of Taxation on Value-added Tax Policies for Software Products" (CS [2011] No. 100) and the "Notice on Questions
of Policies on Encouraging the Development of the Software and Integrated Circuit Industries" (CS [2000] No. 25),
240
ZKTeco 2023 Annual Report
from January 1, 2011, for general taxpayers of value-added tax who sell software products developed and produced
by themselves, after value-added tax is levied at the applicable tax rate, a policy of taxation and drawback has been
implemented for the portion of its actual value-added tax burden exceeding 3.00%.
(3) According to the "Announcement on Further Supporting the Development of Micro and Small Enterprises
and Individual Industrial and Commercial Households" (Announcement No. 12 of the State Administration of
Taxation of the Ministry of Finance, 2023), from January 1, 2023 to December 31, 2027, small-scale value-added tax
taxpayers, small and micro profit enterprises, and individual industrial and commercial households can reduce
resource tax by half (excluding water resource tax), urban maintenance and construction tax, property tax, urban land
use tax, stamp duty (excluding securities transaction stamp duty), farmland occupation tax, education surcharge, and
local education surcharge. The policy of reducing the taxable income of small and micro profit enterprises by 25%
and paying corporate income tax at a rate of 20% will continue to be implemented until December 31, 2027. This
policy is applicable to Shenzhen ZKTeco Biometric Identification Technology Co., Ltd., Hangzhou ZKTeco Hanlian
E-commerce Co., Ltd., Xi'an ZKTeco Co., Ltd., Hubei ZKTeco Co., Ltd., and Wuhan ZKTeco Perception
Technology Co., Ltd., and Dalian ZKTeo CO., Ltd.
3. Others
When the total taxable income of ZK INVESTIMENTOS DO BRASIL LTDA. and ZKTECO DO BRASIL S.A.
is below 240,000 Reals, the tax rate is 15.00%; an additional 10.00% will be levied on the portion exceeding 240,000
Reals.
LLC type companies are not required to pay corporate income tax, and the profits of LLC companies are
summarized to C-corp type company shareholders or individual shareholders, and then shareholders pay income tax.
If the accumulated taxable net income of ZKTECO ARGENTINA S.A. and ZKTECO Latam R&D S.A.
exceeds 5 million pesos, they will be taxed at a tax rate of 25.00%; those between 5 million and 50 million pesos will
be taxed at a tax rate of 30.00%; those exceeding 50 million pesos will be taxed at a tax rate of 35.00%.
Coexistence of two types of corporate income tax of ZKTECO BIOMETRICS INDIA PRIVATE LIMITED: (1)
Normal Tax corporate income tax rate is 25.00%; (2) MAT Tax: In 2023, the MAT Tax rate was 15.00%. When the
Company's tax payable is less than 15.00% of its book profit, the minimum alternative tax is paid, calculated as 15.00%
of its book profit; Normal Tax and MAT Tax, whichever is higher.
The corporate income tax rate for ZKTeco Deutschland GmbH in 2023 is 31.225%.
ZKTECO THAI CO., LTD. and Armatura Tech Co., Ltd. are small and medium-sized enterprises (SMEs) that
meet the following two conditions: (1) As of the last day of the accounting cycle, the paid in capital shall not exceed
241
ZKTeco 2023 Annual Report
THB 5 million; (2) The total annual revenue from selling goods or providing services shall not exceed THB 30
million. Applicable to tax rates of 20%, 15%, and 0%, specifically including: accounting profits below THB
300,000.00, with a tax rate of 0.00%; from THB 300,000.00 to THB 3,000,000.00, with a tax rate of 15.00%; above
THB 3,000,000.00, with tax rate is 20.00%. If the above two conditions are not met, the tax rate is applicable at
20.00%.
The corporate income tax rate of ZKTECO TURKEY ELEKTRONIK SANAYI VE TICARET LIMITED
SIRKETI for the year 2023 was 25%.
PT. ZKTECO BIOMETRICS INDONESIA, an Indonesian subsidiary, applies the corporate income tax rate for
the year 2023 as follows:
(1) When the total sales revenue does not exceed IDR 4.8 billion, the applicable income tax rate is 11.00%;
(2) When the total sales exceed IDR 4.8 billion and do not exceed IDR 50 billion, the taxable income of IDR 4.8
billion accounting for the proportion of total sales shall be calculated at a tax rate of 11.00%, and the taxable income
of the part exceeding IDR 4.8 billion accounting for the proportion of total sales shall be calculated at a tax rate of
22.00%;
(3) When the total sales exceed IDR 50 billion, the applicable income tax rate is 22.00%.
Armatura Co., Ltd. has an income tax rate of 10.00% for sales between KRW 0.00 to KRW 200 million; 20.00%
for KRW 200 million to 20 billion; 22.00% for KRW 20-300 billion, and 25.00% for over KRW 300 billion.
The applicable income tax rates for ZKTECO CO., LIMITED and NGTECO CO., LIMITED are 8.25% and
16.50% respectively; the tax rate is 8.25% for accounting profits of HKD 2 million, and the tax rate is 16.50% for
those exceeding HKD 2 million.
ZKTECO PANAMA, S.A. obtained the letter of authorization for the Colon Free Zone, Panama on August 30,
2021. In 2022, export income of enterprises within the zone was exempt from corporate income tax. From January to
February 2022, the corporate income tax rate for sales revenue in Panama was 25.00%. On March 3, 2022, they
obtained the SEM license, and from March 2022, the corporate income tax rate for sales revenue in Panama was
5.00%.
The applicable income tax rates for ZKTECO SG INVESTMENT PTE. LTD. and ZKTECO SINGAPORE PTE.
LTD. in 2023 were 4.25% and 17.00% respectively; the income tax rate was 4.25% for those within SGD 100,000,
and 17.00% for those exceeding SGD 100,000.
242
ZKTeco 2023 Annual Report
The applicable income tax rates for ZKDIGIMAX PTE.LTD. in 2023 were 4.25%, 8.5% and 17.00%
respectively; the taxable income rate was 4.25% for those within SGD 10,000, 8.5% for those between SGD 10,000
and SGD 200,000, and 17% for the excess.
PT.ZKDIGIMAX EXCEL NOBLE was established in May 2023, with tax incentives for the first year. The tax
rate is 0.5% for income below IDR 4.8 billion, and 22% for excess tax.
The applicable corporate income tax rate for ZKTECO UK LTD in 2023 is as follows: Starting from April 2023,
if the profit exceeds GBP 250,000, the income tax rate is 25%; if the profit is below GBP 50,000, 19% still applies; if
the profit is between GBP 50,000 and GBP 250,000, 25% applies, and marginal relief is implemented.
The applicable corporate income tax rate for RALVIE AI INC. in 2023 is as follows: The basic tax rate for
federal income tax is 38%. After deducting the tax exemption items specified in Section 149 (1) (t) of the "Law of the
People's Republic of China on Enterprise Income Tax", enterprises can enjoy a 10% federal tax credit for income
obtained in various provinces (or territories) of Canada, which is a preferential tax rate of 28%. However, for income
sourced from outside Canada, the 10% credit policy is not applicable.
If the registered capital of ZKTeco Japan Co., Ltd. is less than JPY 100 million and there is no capital fund, the
corporate tax rate (income tax) is 15.00% for the income of less than JPY 8 million; for income exceeding JPY 8
million, the corporate tax rate (income tax) is 23.20%.
For ZK INTELLIGENT SOLUTIONS (PTY) LTD, the corporate income tax rate for residents on or after
March 31, 2023 is 27%, and for the period from April 1, 2022 to March 30, 2023, the corporate income tax rate is
28%.
VII. Notes to Consolidated Financial Statements
1. Monetary fund
Unit: RMB
Item Ending Balance Beginning Balance
Cash on hand 1,401,947.05 2,646,715.85
Cash in bank 1,921,774,208.61 1,876,652,122.37
Other monetary funds 67,748,799.12 33,646,193.75
Total 1,990,924,954.78 1,912,945,031.97
Including: total amount deposited
269,209,971.66 200,783,792.34
abroad
Other explanations:
243
ZKTeco 2023 Annual Report
Note 1: The funds deposited overseas mainly refer to the monetary funds of subsidiary companies ZK
INVESTEMENTS INC., ZKTECO CO., LIMITED, ZKTECO EUROPE SL, ZKTeco Investment Inc., ZK
TECHNOLOGY LLC, ZKTECO SECURITY L.L.C and Armatura Tech Co., Ltd., as shown in the table below:
Item Ending Balance Beginning Balance
ZK INVESTMENTS INC. 50,836,806.93 5,488,562.65
ZKTECO CO., LIMITED 21,156,346.88 15,460,746.98
ZKTECO EUROPE SL 31,524,794.43 13,570,285.55
ZKTeco Investment Inc. 14,446,108.58 12,478,045.71
ZK TECHNOLOGY LLC 14,890,877.77 49,108,592.44
ZKTECO SECURITY L.L.C 30,848,104.48 17,077,386.32
Armatura Tech Co., Ltd. 22,185,840.84 33,067,155.46
Total 185,888,879.91 146,250,775.11
Note 2: As of December 31, 2023, in the ending balance of bank deposits, the principal ending balance of the
time deposit was RMB 598,547,190.12, and the unearned interest receivable amount was RMB 20,402,541.16,
which does not belong to cash and cash equivalents. Please refer to "VII. Notes to Main Items in the Consolidated
Financial Statements Note 59. Supplementary information of cash flow statement" for details.
Note 3: Details of restricted monetary capital are as follows:
Item Ending Balance Beginning Balance
Margin of bank acceptance draft 46,693,268.67 30,551,118.11
Non withdrawable funds on e-commerce platforms --- 8,000.00
Pledged guarantee time deposits --- 2,243.32
Frozen litigation funds 800,000.00 18.71
Funds in transit 7,461,401.81 557,108.80
Total 54,954,670.48 31,118,488.94
2. Trading financial assets
Unit: RMB
Item Ending Balance Beginning Balance
Financial assets measured at fair value
and whose changes are included in the 80,980,203.63 204,318,406.05
current profits and losses
Including:
Financial products 80,887,585.81 204,318,406.05
Forward foreign exchange settlement and
92,617.82
sales
Including:
Total 80,980,203.63 204,318,406.05
Other explanations:
244
ZKTeco 2023 Annual Report
3. Accounts receivable
(1) Disclosure by aging
Unit: RMB
Aging Closing book balance Opening book balance
Within 1 year (including 1 year) 465,244,619.74 408,148,527.11
1-2 years 41,128,894.34 19,594,239.86
2-3 years 4,763,523.90 1,938,043.20
Over 3 years 3,103,189.24 1,922,892.18
3-4 years 1,424,766.06 539,762.25
4-5 years 377,084.95 752,784.17
Over 5 years 1,301,338.23 630,345.76
Total 514,240,227.22 431,603,702.35
(2) Disclosure by bad debt accrual method
Unit: RMB
Ending Balance Beginning Balance
Book balance Bad debt reserve Book balance Bad debt reserve
Category Accrual Accrual
Proporti Book value Proporti Book value
Amount Amount proportio Amount Amount proporti
on on
n on
Accounts
receivable
with 7,025,009.3
1.37% 6,009,009.31 85.54% 1,016,000.00 5,430,619.60 1.26% 5,430,619.60 100.00% 0.00
individual 1
provision for
bad debts
Including:
Accounts
receivable
with
insignificant
single 7,025,009.3
1.37% 6,009,009.31 85.54% 1,016,000.00 5,430,619.60 1.26% 5,430,619.60 100.00% 0.00
amount and 1
bad debt
reserve
withdrawn
separately
Receivable
with
combined 507,215,217 426,173,082. 22,675,158.4 403,497,924.2
98.63% 28,427,904.25 5.60% 478,787,313.66 98.74% 5.32%
provision for .91 75 8 7
bad debt
reserve
Including:
Aging 507,215,217 426,173,082. 22,675,158.4 403,497,924.2
98.63% 28,427,904.25 5.60% 478,787,313.66 98.74% 5.32%
portfolio .91 75 8 7
245
ZKTeco 2023 Annual Report
514,240,227 431,603,702. 28,105,778.0 403,497,924.2
Total 100.00% 34,436,913.56 6.70% 479,803,313.66 100.00% 6.51%
.22 35 8 7
Bad debt reserve made individually: 6,009,009.31
Unit: RMB
Beginning Balance Ending Balance
Name Bad debt Accrual Reasons for
Book balance Bad debt reserve Book balance
reserve proportion provision
Hainan Jialing Digital Risk in payment
2,032,000.00 1,016,000.00 50.00%
Technology Co., Ltd. collection
Shanghai Leqi
Expected non-
Automation Technology 490,186.63 490,186.63 521,950.00 521,950.00 100.00%
recoverable
Co., Ltd.
Noble IT Solutions Co., Expected non-
408,557.71 408,557.71 415,485.70 415,485.70 100.00%
Ltd recoverable
Zicom Electronic Expected non-
365,258.45 365,258.45 371,452.20 371,452.20 100.00%
Securit recoverable
Expected non-
Al Asma Technology 346,077.38 346,077.38 353,391.81 353,391.81 100.00%
recoverable
Guizhou Zhongjiang
Expected non-
Intelligent Technology 334,800.21 334,800.21 334,800.21 334,800.21 100.00%
recoverable
Co., Ltd.
Shenzhen Xuhui
Expected non-
Information Technology 326,350.00 326,350.00 326,350.00 326,350.00 100.00%
recoverable
Co., Ltd.
TIMEWATCH Expected non-
295,708.98 295,708.98 300,723.36 300,723.36 100.00%
INFOCOM PVT. LTD. recoverable
Northwood Investors Expected non-
240,696.58 240,696.58 244,778.11 244,778.11 100.00%
LLC recoverable
Gansu Fourth
Expected non-
Construction Group 224,676.00 224,676.00 224,676.00 224,676.00 100.00%
recoverable
Co., Ltd.
VENDEMMIA
COMERCIO Expected non-
197,665.93 197,665.93 201,017.79 201,017.79 100.00%
INTERNACIONAL recoverable
LTDA
Hainan Zhongkong IOT Expected non-
199,579.00 199,579.00 200,089.00 200,089.00 100.00%
Technology Co., Ltd. recoverable
Tianjin Eagle Eye Expected non-
193,330.00 193,330.00 178,130.00 178,130.00 100.00%
Biotechnology Co., Ltd. recoverable
ASIA
IDENTIFICATION
Expected non-
AND SECURITY 165,065.90 165,065.90 167,864.95 167,864.95 100.00%
recoverable
TECHNOLOGY
COMPANY LIMITED
Wanqiao Information Expected non-
165,900.00 165,900.00 165,900.00 165,900.00 100.00%
Technology Co.,Ltd. recoverable
Baoneng Urban
Development and Expected non-
155,292.00 155,292.00 155,292.00 155,292.00 100.00%
Construction Group recoverable
Co., Ltd.
Expected non-
Logile 105,108.97 105,108.97 100.00%
recoverable
PONTO RHJ EIRELI - Expected non-
98,393.15 98,393.15 100,061.62 100,061.62 100.00%
ME recoverable
SE DASSAULT
241,994.64 241,994.64
SYSTEMES
Green Electricity
Renewable Energy Co., 98,024.64 98,024.64
Ltd., of Nanhai, Foshan
SECUZAA SECURITY
Expected non-
SOLUTIONS LAB 96,587.02 96,587.02 98,224.87 98,224.87 100.00%
recoverable
PRIVATE LIMITED
Qianxinan Mengku 74,672.00 74,672.00 74,672.00 74,672.00 100.00% Expected non-
246
ZKTeco 2023 Annual Report
Business Service Co., recoverable
Ltd.
INTELLISMART Expected non-
73,253.66 73,253.66 74,495.84 74,495.84 100.00%
TECHNOLOGY INC. recoverable
RBB Technologies Expected non-
61,422.97 61,422.97 62,167.12 62,167.12 100.00%
Private Limited recoverable
Yichang Anlian
Expected non-
Intelligent Technology 56,085.00 56,085.00 56,085.00 56,085.00 100.00%
recoverable
Development Co., Ltd.
Dongguan Yukong
Expected non-
Security Technology 53,703.00 53,703.00 53,703.00 53,703.00 100.00%
recoverable
Co., Ltd.
Expected non-
Others 467,338.75 467,338.75 206,589.76 206,589.76 100.00%
recoverable
Total 5,430,619.60 5,430,619.60 7,025,009.31 6,009,009.31
Bad debt reserve made by portfolio: 28,427,904.25
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Within 1 year 465,109,048.30 23,255,452.65 5.00%
1-2 years 39,314,648.70 3,931,464.87 10.00%
2-3 years 2,215,048.83 664,514.65 30.00%
Over 3 years 576,472.08 576,472.08 100.00%
Total 507,215,217.91 28,427,904.25
Explanations on the basis for determining the portfolio:
Provision for bad debts by combination:
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Aging portfolio 507,215,217.91 28,427,904.25 5.60%
Total 507,215,217.91 28,427,904.25
Explanations on the basis for determining the portfolio:
If the bad debt reserve of accounts receivable is made according to the general model of expected credit losses:
□ Applicable Not applicable
(3) Bad debt reserves withdrawn, recovered or reversed in the current period
Provision for bad debt reserves in current period:
Unit: RMB
Current period change amount
Beginning
Category Return or Redeem/redem Ending Balance
Balance Provision Others
reversal ption
Accounts
receivable with 5,430,619.60 1,115,424.44 213,475.99 477,491.31 -153,932.57 6,009,009.31
insignificant
247
ZKTeco 2023 Annual Report
single amount
and bad debt
reserve
withdrawn
separately
Aging portfolio 22,675,158.48 5,499,770.96 47,308.74 -300,283.55 28,427,904.25
Total 28,105,778.08 6,615,195.40 213,475.99 524,800.05 -454,216.12 34,436,913.56
The amount of bad debt reserves recovered or reversed in the current period is significant:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
(4) Actual verification of accounts receivable in the current period
Unit: RMB
Item Write-off amount
Accounts receivable actually written off 524,800.05
Important accounts receivable verification status:
Unit: RMB
Whether the
Verification and
payment is
Nature of accounts cancellation
Company name Write-off amount Write-off reason incurred due to
receivable programs that have
related
been performed
transactions
Explanations on accounts receivable verification:
(5) Accounts receivable and contract assets from top five borrowers classified based on the ending
balance
Unit: RMB
Ending balance of
Proportion in the
bad debt reserves
Ending balance of total ending
Ending balance of for accounts
Ending balance of accounts balance of
Company name accounts receivable and
contract assets receivable and accounts
receivable impairment
contract assets receivable and
provision for
contract assets
contract assets
Customer 1 39,268,877.47 39,268,877.47 7.63% 1,963,443.92
Customer 2 30,641,091.96 30,641,091.96 5.95% 1,543,793.44
Customer 3 15,485,450.49 15,485,450.49 3.01% 859,347.75
Customer 4 14,478,991.27 14,478,991.27 2.81% 976,184.42
Customer 5 13,980,571.77 13,980,571.77 2.72% 982,553.50
Total 113,854,982.96 113,854,982.96 22.12% 6,325,323.03
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ZKTeco 2023 Annual Report
4. Contract assets
(1) Contract asset situation
Unit: RMB
Ending Balance Beginning Balance
Item Bad debt Bad debt
Book balance Book value Book balance Book value
reserve reserve
Quality
guarantee
321,793.78 39,607.47 282,186.31 329,942.12 23,142.18 306,799.94
deposit
receivable
Total 321,793.78 39,607.47 282,186.31 329,942.12 23,142.18 306,799.94
(2) Disclosure by bad debt accrual method
Unit: RMB
Ending Balance Beginning Balance
Book balance Bad debt reserve Book balance Bad debt reserve
Categor Accru
y Accrual Book value Book value
al
Amount Proportion Amount proporti Amount Proportion Amount
propor
on
tion
Withdra
wing
bad debt
reserves 0.00 0.00% 0.00 0.00% 0.00 0.00 0.00% 0.00 0.00% 0.00
by
individu
al item
Includin
g:
Bad
debt
reserve
321,793.78 100.00% 39,607.47 12.31% 282,186.31 329,942.12 100.00% 23,142.18 7.01% 306,799.94
withdra
wn by
portfolio
Includin
g:
Aging
321,793.78 100.00% 39,607.47 12.31% 282,186.31 329,942.12 100.00% 23,142.18 7.01% 306,799.94
portfolio
Total 321,793.78 100.00% 39,607.47 12.31% 282,186.31 329,942.12 100.00% 23,142.18 7.01% 306,799.94
Provision for bad debt reserve based on a general model of expected credit losses
□ Applicable Not applicable
(3) Bad debt reserves withdrawn, recovered or reversed in the current period
Unit: RMB
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ZKTeco 2023 Annual Report
Provision in current Recovery or reversal in Charged or written off
Item Reasons
period the current period in current period
Provision of bad debts
Aging portfolio 16,465.29 0.00 0.00
by aging portfolio
Total 16,465.29 0.00 0.00 ——
The amount of bad debt reserves recovered or reversed in the current period is significant:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
Other explanations:
5. Other receivables
Unit: RMB
Item Ending Balance Beginning Balance
Other receivables 32,744,574.20 34,207,287.53
Total 32,744,574.20 34,207,287.53
(1) Other receivables
1) Classification of other receivables based on nature of payment
Unit: RMB
Payment nature Closing book balance Opening book balance
Current account 14,563,843.76 11,109,121.37
Guarantee deposit 14,264,601.52 14,623,016.19
Reserve funds and loans 5,408,335.70 8,156,672.47
Collection and payment on behalf of
3,604,884.91 826,216.46
others
Withholding and paying social security
1,784,200.95 1,664,032.00
and capital reserve on behalf of others
Export tax refund 3,537,610.99 9,631,295.37
Others 1,840,576.77 694,798.92
Total 45,004,054.60 46,705,152.78
2) Disclosure by aging
Unit: RMB
Aging Closing book balance Opening book balance
Within 1 year (including 1 year) 19,030,462.60 19,689,275.63
1-2 years 1,949,905.24 4,470,977.43
2-3 years 3,010,293.84 1,529,919.42
250
ZKTeco 2023 Annual Report
Over 3 years 21,013,392.92 21,014,980.30
3-4 years 1,467,967.79 9,890,703.33
4-5 years 9,492,724.32 9,786,089.34
Over 5 years 10,052,700.81 1,338,187.63
Total 45,004,054.60 46,705,152.78
3) Disclosure by bad debt accrual method
Applicable □ Not applicable
Unit: RMB
Ending Balance Beginning Balance
Book balance Bad debt reserve Book balance Bad debt reserve
Category Accrual Accrual Book
Proporti Book value Proporti
Amount Amount proporti Amount Amount proporti value
on on
on on
Withdrawin
g bad debt
reserves by 12,384,636.67 27.52% 10,624,147.18 85.78% 1,760,489.49 12,737,453.08 27.27% 10,976,963.59 86.18% 1,760,489.49
individual
item
Including:
Bad debt
reserve 32,446,798.0
32,619,417.93 72.48% 1,635,333.22 5.01% 30,984,084.71 33,967,699.70 72.73% 1,520,901.66 4.48%
withdrawn 4
by portfolio
Including:
Aging
2,920,550.05 6.49% 1,635,333.22 55.99% 1,285,216.83 1,997,242.12 4.28% 1,520,901.66 76.15% 476,340.46
portfolio
Portfolio of
deposits,
security 31,970,457.5
29,698,867.88 65.99% 29,698,867.88 31,970,457.58 68.45%
deposits, 8
employee
loans, etc.
34,207,287.5
Total 45,004,054.60 100.00% 12,259,480.40 27.24% 32,744,574.20 46,705,152.78 100.00% 12,497,865.25 26.76%
3
Bad debt reserve made individually: 10,624,147.18
Unit: RMB
Beginning Balance Ending Balance
Name Bad debt Accrual Reasons for
Book balance Book balance Bad debt reserve
reserve proportion provision
Shenzhen
Zhongan
Intelligent Risk in payment
7,772,552.26 6,012,062.77 7,772,552.26 6,012,062.77 77.35%
Control collection
Technology Co.,
Ltd.
Shenzhen
Zhikongtaike
Expected non-
Biometric 2,500,000.00 2,500,000.00 2,500,000.00 2,500,000.00 100.00%
recoverable
Technology Co.,
Ltd.
CNB Expected non-
1,268,009.09 1,268,009.09 1,289,511.78 1,289,511.78 100.00%
TECHNOLOGY recoverable
251
ZKTeco 2023 Annual Report
INC.
Guizhou
Zhongjiang
Expected non-
Intelligent 397,428.70 397,428.70 397,428.70 397,428.70 100.00%
recoverable
Technology Co.,
Ltd.
Green Electricity
Renewable
Energy Co., Ltd., 125,565.41 125,565.41
of Nanhai,
Foshan
Expected non-
New bio 339,221.01 339,221.01 375,838.74 375,838.74 100.00%
recoverable
ZKTeco Africa R
260,575.01 260,575.01
& D Ltd
Expected non-
Others 74,101.60 74,101.60 49,305.19 49,305.19 100.00%
recoverable
Total 12,737,453.08 10,976,963.59 12,384,636.67 10,624,147.18
Bad debt reserve made by portfolio: aging portfolio
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Within 1 year 1,281,287.17 64,064.26 5.00%
1-2 years 42,496.20 4,249.62 10.00%
2-3 years 42,496.20 12,748.86 30.00%
Over 3 years 1,554,270.48 1,554,270.48 100.00%
Total 2,920,550.05 1,635,333.22
Explanations on the basis for determining the portfolio:
Bad debt reserve made by portfolio: deposits, security deposits, employee loans, etc.
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Within 1 year 17,703,793.42
1-2 years 1,907,409.04
2-3 years 2,644,528.72
Over 3 years 7,443,136.70
Total 29,698,867.88
Explanations on the basis for determining the portfolio:
Provision for bad debt reserve based on a general model of expected credit losses:
Unit: RMB
Stage 1 Stage 2 Stage 3
Expected credit loss Expected credit loss
Bad debt reserve Expected credit loss in within whole duration within whole duration Total
the future 12 months (no credit impairment (credit impairment has
occur) occurred)
Balance as of January
1,520,901.66 10,976,963.59 12,497,865.25
1, 2023
Balance as of January
252
ZKTeco 2023 Annual Report
1, 2023 in the current
period
Provision in current
5,076.30 45,382.01 50,458.31
period
Reversals in the current
25,913.69 25,913.69
period
Canceled after
verification in the 170,677.68 170,677.68
current period
Other changes -109,355.26 201,607.05 92,251.79
Balance as of
1,635,333.22 10,624,147.18 12,259,480.40
December 31, 2023
Classification basis and bad debt reserve provision ratio for each stage
Changes in book balance with major changes in loss reserves during the current period
□ Applicable Not applicable
4) Bad debt reserves withdrawn, recovered or reversed in the current period
Provision for bad debt reserves in current period:
Unit: RMB
Current period change amount
Beginning
Category Return or Write-off or Ending Balance
Balance Provision Others
reversal cancellation
Withdrawing
bad debt
10,976,963.59 45,382.01 25,913.69 170,677.68 201,607.05 10,624,147.18
reserves by
individual item
Bad debt
reserve made
1,520,901.66 5,076.30 -109,355.26 1,635,333.22
by aging
portfolio
Total 12,497,865.25 50,458.31 25,913.69 170,677.68 92,251.79 12,259,480.40
The significant amount of bad debt reserves reversed or recovered in the current period:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
5) Other accounts receivable actually written off in the current period
Unit: RMB
253
ZKTeco 2023 Annual Report
Item Write-off amount
Other receivables actually written off 170,677.68
Other major receivable written off:
Unit: RMB
Whether the
Verification and
Nature of other payment is
cancellation
Company name accounts Write-off amount Write-off reason incurred due to
programs that have
receivable related
been performed
transactions
Explanations on writing off other receivables:
6) Other accounts receivable with the top five ending balances collected by the debtor
Unit: RMB
Proportion to the
total ending
Ending balance of
Company name Nature of payment Ending Balance Aging balance of other
bad debt reserve
accounts
receivable
No. 1 Current account 7,772,552.26 Over 3 years 17.27% 6,012,062.77
No. 2 Guarantee deposit 4,800,000.00 Over 3 years 10.67%
No. 3 Export tax refund 3,537,610.99 Within 1 year 7.86%
No. 4 Current account 2,500,000.00 Over 3 years 5.56% 2,500,000.00
Within 1 year, 1-2
No. 5 Current account 1,628,759.08 years, 2-3 years, 3.62% 1,520,393.77
more than 3 years
Total 20,238,922.33 44.98% 10,032,456.54
6. Prepayments
(1) Prepayments listed by aging
Unit: RMB
Ending Balance Beginning Balance
Aging
Amount Proportion Amount Proportion
Within 1 year 22,706,163.01 96.80% 30,444,433.08 98.35%
1-2 years 580,816.58 2.48% 343,416.74 1.11%
2-3 years 20,400.64 0.09% 135,428.00 0.44%
Over 3 years 150,527.01 0.63% 31,407.76 0.10%
Total 23,457,907.24 30,954,685.58
Explanations on the reasons why prepayments with an aging of over 1 year and significant amounts were not settled in a timely
manner:
None
254
ZKTeco 2023 Annual Report
(2) Prepayments of the top five ending balances collected by prepayment object
Proportion to total Reasons for
Company name Ending Balance Prepayment time
prepayment (%) unsettlement
Supplier 1 3,262,764.60 13.91 2023 Project unsettled
Supplier 2 2023 Project unsettled
3,087,787.60 13.16
Supplier 3 2023 Project unsettled
2,578,545.23 10.99
Supplier 4 2023 Project unsettled
1,149,601.61 4.90
Supplier 5 2023 Project unsettled
900,000.00 3.84
Total 10,978,699.04 46.80 --- ---
Other explanations:
7. Inventory
Whether the Company needs to comply with disclosure requirements in the real estate industry
No
(1) Inventory classification
Unit: RMB
Ending Balance Beginning Balance
Inventory Inventory
depreciation depreciation
reserves or reserves or
Item contract contract
Book balance Book value Book balance Book value
performance performance
cost cost
impairment impairment
reserves reserves
Raw materials 131,431,792.72 2,989,549.95 128,442,242.77 95,807,941.08 2,700,265.89 93,107,675.19
Products in
8,583,812.25 8,583,812.25 22,655,606.68 22,655,606.68
process
Inventory
238,881,580.26 12,576,970.86 226,304,609.40 233,342,447.37 11,987,915.23 221,354,532.14
goods
Contract
performance 240,067.45 240,067.45
cost
Sending goods 9,129,100.21 174,341.27 8,954,758.94 9,566,960.12 80,028.51 9,486,931.61
Consigned
processing 429,360.95 429,360.95 1,435,828.52 1,435,828.52
materials
Total 388,455,646.39 15,740,862.08 372,714,784.31 363,048,851.22 14,768,209.63 348,280,641.59
(2) Inventory depreciation reserves and contract performance cost impairment reserves
Unit: RMB
Beginning Increase in current period Decrease in current period
Item Ending Balance
Balance Provision Others Reversal or Others
255
ZKTeco 2023 Annual Report
reselling
Raw materials 2,700,265.89 280,194.91 9,347.35 258.20 2,989,549.95
Inventory
11,987,915.23 2,433,168.46 301,614.42 2,145,727.25 12,576,970.86
goods
Sending goods 80,028.51 152,305.40 57,992.64 174,341.27
Total 14,768,209.63 2,865,668.77 310,961.77 2,203,978.09 15,740,862.08
Provision for inventory depreciation made by portfolio
Unit: RMB
End of the period Opening
Portfolio Name Provision ratio Provision ratio
Revaluation Beginning Revaluation
Ending Balance for inventory for inventory
reserve Balance reserve
depreciation depreciation
Provision standards for inventory depreciation reserves made by portfolio
(3) Explanations on the capitalized amount of borrowing costs included in the ending balance of
inventory
(4) Explanations on the current amortization amount of contract performance cost
8. Non-current assets due within one year
Unit: RMB
Item Ending Balance Beginning Balance
Debt investment due within one year 16,902,617.83 10,025,638.89
Other creditor's right investment due
0.00 0.00
within one yea
Long-term receivables due within one
354,996.91 0.00
year
Total 17,257,614.74 10,025,638.89
(1) Debt investment due within one year
Applicable □ Not applicable
1) Information on debt investment due within one year
Unit: RMB
Ending Balance Beginning Balance
Portfolio Name Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Certificates of
Deposit 11,060,888.54 11,060,888.54 10,025,638.89 10,025,638.89
（CD）
Term deposits 5,841,729.29 5,841,729.29
Total 16,902,617.83 16,902,617.83 10,025,638.89 10,025,638.89
Changes in provision for depreciation of debt investments due within one year in the current period
256
ZKTeco 2023 Annual Report
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
2) Important debt investments due within one year at the end of the period
Unit: RMB
Effective interest rate Overdue principal
Coupon
Item Face value Due Date Ending Beginning Ending Beginning
rate
Balance Balance Balance Balance
CD of Bank
10,000,000.00 3.85% April 7, 2024
of China
Total 10,000,000.00
Other explanations: On April 20, 2022, the Company signed a transfer confirmation letter with Jiangmen Haoxin New Energy Co.,
Ltd. for a CD issued by the Bank of China on April 7, 2021, with the CD number CD003210407143640620, the CD amount of
RMB 10,000,000.00, the YTM of 3.85%, and the maturity date of April 7, 2024, as a time deposit product from 2022 to 2024. The
principal of the Company corresponds to the face value of the CD of RMB 10,000,000.00 and the interest paid from April 7, 2021
to April 19, 2022 of RMB 397,833.00.
9. Other current assets
Unit: RMB
Item Ending Balance Beginning Balance
Income tax prepaid amount presented as
6,221,029.24 10,774,743.22
net amount after offsetting
Value added tax deduction amount 19,249,699.10 5,880,824.30
Other prepaid taxes 395,080.94 1,205,787.29
Total 25,865,809.28 17,861,354.81
Other explanations:
10. Debt investment
(1) Information on debt investment
Unit: RMB
Ending Balance Beginning Balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Bank CD -
57,795,333.29 57,795,333.29 22,022,831.83 22,022,831.83
Principal
Bank CD -
1,391,881.44 1,391,881.44 333,967.35 333,967.35
Interest
Debt
investment due -16,902,617.83 -16,902,617.83 -10,025,638.89 -10,025,638.89
within one year
Total 42,284,596.90 42,284,596.90 12,331,160.29 12,331,160.29
Changes in provision for depreciation of debt investments in the current period
Unit: RMB
257
ZKTeco 2023 Annual Report
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
(2) Important debt investments at the end of the period
Unit: RMB
Ending Balance Beginning Balance
Debt Effective Effective
items Face Coupon Due Overdue Face Coupon Due Overdue
interest interest
value rate Date principal value rate Date principal
rate rate
(3) Actual verification of debt investments in the current period
Unit: RMB
Item Write-off amount
Information on important debt investment verification
Explanations on debt investment verification:
Changes in book balance with major changes in loss reserves during the current period
□ Applicable Not applicable
Other explanations:
11. Long-term receivables
(1) Information on long-term receivables
Unit: RMB
Ending Balance Beginning Balance
Discount rate
Item Bad debt Bad debt
Book balance Book value Book balance Book value range
reserve reserve
Employee
2,802,225.14 2,802,225.14 4.2%-4.3%
housing loan
Long-term
receivables
-354,996.91 -354,996.91
due within
one year
Total 2,447,228.23 2,447,228.23
(2) Disclosure by bad debt accrual method
Unit: RMB
Ending Balance Beginning Balance
Categor Book balance Bad debt reserve Book balance Bad debt reserve
y Book Book
Proporti Accrual value Proporti Accrual value
Amount Amount Amount Amount
on proporti on proporti
258
ZKTeco 2023 Annual Report
on on
Including:
Including:
Provision for bad debt reserve based on a general model of expected credit losses
Unit: RMB
Stage 1 Stage 2 Stage 3
Expected credit loss Expected credit loss
Bad debt reserve Expected credit loss in within whole duration within whole duration Total
the future 12 months (no credit impairment (credit impairment has
occur) occurred)
Balance as of January
1, 2023 in the current
period
Classification basis and bad debt reserve provision ratio for each stage
(3) Bad debt reserves withdrawn, recovered or reversed in the current period
Unit: RMB
Current period change amount
Beginning
Category Return or Write-off or Ending Balance
Balance Provision Others
reversal cancellation
The significant amount of bad debt reserves reversed or recovered in the current period:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
Other explanations:
(4) Long-term receivables actually written off in the current period
Unit: RMB
Item Write-off amount
Information on important long-term receivable verification:
Unit: RMB
Whether the
Verification and
payment is
cancellation
Company name Payment nature Write-off amount Write-off reason incurred due to
programs that have
related
been performed
transactions
Explanations on long-term receivable verification:
259
ZKTeco 2023 Annual Report
12. Long-term equity investment
Unit: RMB
Increase or decrease in the current period
Beginni
Investm Ending
ng Cash
ent Other balance
Beginnin balance dividen Ending
profit or comprehen Impairm of
g balance of Reduced Changes ds or balance
Investee Additional loss sive ent impairm
(book impairm investm in other profits Others (book
investment recogniz income provisio ent
value) ent ent equities declare value)
ed under adjustment n provisio
provisio d to
equity s n
n pay
method
I. Joint ventures
Subtotal
II. Joint venture
Silk ID - - - -
1,557,356 20,139. 274,331.8 281,599.
SystemsIn 422,927. 175,710 422,927. 281,599.
.71 61 8 25
c. 54 .11 54 25
CV -
3,689,002 62,507. 3,741,608.
Squared,In 9,901.7
.99 46 66
c. 9
PT.
ZKTECO
-
SECURIT 1,108.8
91,727.34 92,836.
Y 5
19
INDONES
IA
ZKTECO
SMART
-
CITY 1,813,245 30,373. 1,765,948.
77,671.
(THAILA .66 91 08
49
ND) CO.,
LTD.
Xiamen
Xingniu
Yunyu
Venture
Capital 24,000,00 24,000,00
Partnership 0.00 0.00
Enterprise
(Limited
Partnership
)
- - - -
7,151,332 24,000,00 114,129. 29,781,88 281,599.
Subtotal 422,927. 356,119. 422,927. 281,599.
.70 0.00 83 8.62 25
54 58 54 25
- - - -
7,151,332 24,000,00 114,129. 29,781,88 281,599.
Total 422,927. 356,119. 422,927. 281,599.
.70 0.00 83 8.62 25
54 58 54 25
The recoverable amount is determined based on the net amount after deducting disposal expenses from fair value
□ Applicable Not applicable
The recoverable amount is determined based on the present value of expected future cash flows
□ Applicable Not applicable
Reasons for significant discrepancies between the above information and the information or external information used in
impairment tests of previous years
Reasons for significant discrepancies between the information used in the Company's impairment tests of previous year and the
actual situation of that year
Other explanations: The Company, professional investment institutions, and related parties registered and established Xiamen
Xingniu Yunyu Venture Capital Partnership Enterprise (Limited Partnership) for Ecological Innovation Fund in August 2023, and
invested RMB 24 million in September 2023.
260
ZKTeco 2023 Annual Report
13. Investment real estate
(1) Investment real estate adopting cost measurement model
Applicable □ Not applicable
Unit: RMB
Construction in
Item Houses and buildings Land use rights Total
progress
I. Original book value
1. Beginning
Balance
2. Increase in
34,416,026.15 34,416,026.15
current period
(1)
Outsourcing
(2)
Transferred from
inventory, fixed assets, 34,416,026.15 34,416,026.15
and construction in
progress
(3) Increase
in business merger
3. Decrease in
current period
(1) Disposal
(2) Other
transfers out
4. Ending balance 34,416,026.15 34,416,026.15
II. Accumulated
depreciation and
accumulated
amortization
1. Beginning
Balance
2. Increase in
11,270,537.30 11,270,537.30
current period
(1) Provision
547,057.36 547,057.36
or amortization
(2) Fixed assets
10,723,479.94 10,723,479.94
transfer-in
3. Decrease in
current period
(1) Disposal
(2) Other
transfers out
4. Ending balance 11,270,537.30 11,270,537.30
261
ZKTeco 2023 Annual Report
III. Provision for
impairment
1. Beginning
Balance
2. Increase in
current period
(1) Provision
3. Decrease in
current period
(1) Disposal
(2) Other
transfers out
4. Ending balance
IV. Book value
1. Ending book
23,145,488.85 23,145,488.85
value
2. Beginning book
0.00
value
The recoverable amount is determined based on the net amount after deducting disposal expenses from fair value
□ Applicable Not applicable
The recoverable amount is determined based on the present value of expected future cash flows
□ Applicable Not applicable
Reasons for significant discrepancies between the above information and the information or external information used in
impairment tests of previous years
Reasons for significant discrepancies between the information used in the Company's impairment tests of previous year and the
actual situation of that year
Other explanations:
(2) Investment real estate adopting fair value measurement model
□ Applicable Not applicable
(3) Investment real estate without completed property ownership certificate
Unit: RMB
Reasons for not completing the property
Item Book value
ownership certificate
Other explanations:
262
ZKTeco 2023 Annual Report
14. Fixed assets
Unit: RMB
Item Ending Balance Beginning Balance
Fixed assets 470,167,242.89 446,391,810.26
Disposal of fixed assets -45,451.60 465,698.80
Total 470,121,791.29 446,857,509.06
(1) Status of fixed assets
Unit: RMB
Electronic
Houses and Machinery Transportation
Item equipment and Total
buildings equipment vehicles
others
I. Original book
value:
1. Beginning
419,672,406.02 49,603,033.57 9,813,482.95 92,362,437.18 571,451,359.72
Balance
2. Increase in
52,760,047.40 5,395,577.34 3,470,613.24 15,999,436.04 77,625,674.02
current period
(1) Purchase 8,419,129.20 5,312,676.21 3,336,016.78 18,198,128.89 35,265,951.08
(2) Transferred
from construction 42,880,907.16 42,880,907.16
in progress
(3) Increase in
business merger
(4) Differences in
foreign currency
1,460,011.04 82,901.13 134,596.46 -2,198,692.85 -521,184.22
statement
translation
3. Decrease in
36,130,404.94 1,073,852.87 314,621.04 3,319,008.36 40,837,887.21
current period
(1) Disposal or
1,073,852.87 314,621.04 3,319,008.36 4,707,482.27
retirement
(2) Transferred to
investment real 34,416,026.15 34,416,026.15
estate
(3) Other
1,714,378.79 1,714,378.79
decreases
4. Ending balance 436,302,048.48 53,924,758.04 12,969,475.15 105,042,864.86 608,239,146.53
II. Accumulated
depreciation
1. Beginning
37,089,625.89 22,647,760.07 7,317,412.32 58,004,751.18 125,059,549.46
Balance
2. Increase in
12,919,001.09 4,740,652.18 971,248.49 9,348,544.61 27,979,446.37
current period
(1) Provision 12,818,509.34 5,071,111.33 944,660.60 12,176,171.76 31,010,453.03
(2) Differences in
foreign currency 100,491.75 -330,459.15 26,587.89 -2,827,627.15 -3,031,006.66
statement
263
ZKTeco 2023 Annual Report
translation
3. Decrease in
10,723,479.94 867,126.72 297,107.62 3,079,377.91 14,967,092.19
current period
(1) Disposal or
867,126.72 297,107.62 3,079,377.91 4,243,612.25
retirement
(2) Transferred to
investment real 10,723,479.94 10,723,479.94
estate
4. Ending balance 39,285,147.04 26,521,285.53 7,991,553.19 64,273,917.88 138,071,903.64
III. Provision for
impairment
1. Beginning
Balance
2. Increase in
current period
(1) Provision
3. Decrease in
current period
(1) Disposal or
retirement
4. Ending balance
IV. Book value
1. Ending book
397,016,901.44 27,403,472.51 4,977,921.96 40,768,946.98 470,167,242.89
value
2. Beginning book
382,582,780.13 26,955,273.50 2,496,070.63 34,357,686.00 446,391,810.26
value
(2) Temporarily idle fixed assets
Unit: RMB
Original book Accumulated Impairment
Item Book value Remarks
value depreciation provision
(3) Fixed assets leased out through operating leases
Unit: RMB
Item Ending book value
(4) Fixed assets without completed property ownership certificate
Unit: RMB
Reasons for not completing the property
Item Book value
rights certificate
Houses and buildings of Hybrid
Biometrics IoT Intelligent Industrial 199,029,492.12 In progress
Base Project
Other explanations:
264
ZKTeco 2023 Annual Report
(5) Impairment test of fixed assets
□ Applicable Not applicable
(6) Disposal of fixed assets
Unit: RMB
Item Ending Balance Beginning Balance
Machinery equipment 461,708.97
Electronic equipment 2,457.35
Transportation vehicles -45,451.60
Other equipment 1,532.48
Total -45,451.60 465,698.80
Other explanations:
15. Project under construction
Unit: RMB
Item Ending Balance Beginning Balance
Construction in progress 138,986,483.73 57,041,298.90
Engineering materials 0.00 0.00
Total 138,986,483.73 57,041,298.90
(1) Construction in progress
Unit: RMB
Ending Balance Beginning Balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Hybrid
Biometrics IoT
Intelligent 22,612,110.24 0.00 22,612,110.24 48,448,261.38 0.00 48,448,261.38
Industrial Base
Project
Multimodal
Biometrics
Digitalization
87,417,407.70 0.00 87,417,407.70 2,982,941.95 0.00 2,982,941.95
Industrial Base
Construction
Project
Equipment 0.00 0.00 0.00 5,610,095.57 0.00 5,610,095.57
American
Manufacturing
Factory 2,746,178.39 0.00 2,746,178.39 0.00 0.00 0.00
Construction
Project
Thai factory
26,210,787.40 0.00 26,210,787.40 0.00 0.00 0.00
construction
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ZKTeco 2023 Annual Report
and office
buildings
Total 138,986,483.73 0.00 138,986,483.73 57,041,298.90 0.00 57,041,298.90
(2) Current changes in important construction in progress
Unit: RMB
Proportio
n of
Amount Other Including Sou
accumula Accumulated Current
transferred to decreases Engineeri : current rce
Beginning Increase in current ted amount of interest
Project Name Budget amount fixed assets in in the Ending Balance ng interest of
Balance period project interest capitaliza
the current current progress capitalize Fun
investme capitalization tion rate
period period d amount ds
nt to
budget
Hybrid
Biometrics IoT Under
1
Intelligent 214,042,000.00 48,448,261.38 17,044,756.02 42,880,907.16 0.00 22,612,110.24 110.15% constructi 2,359,113.42 0.00 0.00%
Industrial Base on
Project
Multimodal
Biometrics
Under
Digitalization
2
284,566,264.91 2,982,941.95 84,434,465.75 0.00 0.00 87,417,407.70 30.72% constructi 0.00 0.00%
Industrial Base
on
Construction
Project
Thai factory
Under
construction Oth
109,095,400.00 0.00 26,210,787.40 0.00 0.00 26,210,787.40 24.03% constructi 0.00 0.00 0.00%
and office er 3
on
buildings
Total 607,703,664.91 51,431,203.33 127,690,009.17 42,880,907.16 0.00 136,240,305.34 2,359,113.42 0.00 0.00%
Note: 1. Source of funds for the Hybrid Biometrics IoT Intelligent Industrial Base Project: fundraising, self owned funds, and bank
loans
2. Source of funds for the Multimodal Biometrics Digitalization Industrial Base Construction Project: fundraising and self owned
funds
3. Source of funds for Thai factory construction and office buildings: self owned funds
(3) Current provision for impairment of construction in progress
Unit: RMB
Increase in the Decrease in the Reason for
Item Beginning Balance Ending Balance
current period current period provision
Other explanations:
(4) Impairment test of construction in progress
□ Applicable Not applicable
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ZKTeco 2023 Annual Report
16. Right-of-use assets
(1) Information on right-of-use assets
Unit: RMB
Electronic equipment
Item Houses and buildings Transportation vehicles Total
and others
I. Original book value
1. Beginning
95,533,396.63 1,487,226.07 23,200.93 97,043,823.63
Balance
2. Increase in
16,890,130.66 1,264,992.26 18,155,122.92
current period
Lease 15,186,402.14 1,502,834.73 16,689,236.87
Exchange differences
arising from foreign 1,703,728.52 -237,842.47 1,465,886.05
currency transactions
3. Decrease in
8,255,079.27 139,191.23 8,394,270.50
current period
Lease expiration 7,744,905.95 139,191.23 7,884,097.18
Lease change 510,173.32 510,173.32
4. Ending balance 104,168,448.02 2,613,027.10 23,200.93 106,804,676.05
II. Accumulated
depreciation
1. Beginning
45,566,705.77 827,935.30 8,506.97 46,403,148.04
Balance
2. Increase in
28,820,827.45 638,299.34 4,640.20 29,463,766.99
current period
(1) Provision 27,814,896.48 827,863.74 4,640.20 28,647,400.42
Exchange differences
arising from foreign 1,005,930.97 -189,564.40 816,366.57
currency transactions
3. Decrease in
7,592,766.61 139,191.23 7,731,957.84
current period
(1) Disposal
Lease expiration 7,289,043.34 139,191.23 7,428,234.57
Lease change 303,723.27 303,723.27
4. Ending balance 66,794,766.61 1,327,043.41 13,147.17 68,134,957.19
III. Provision for
impairment
1. Beginning
Balance
2. Increase in
current period
(1) Provision
3. Decrease in
current period
(1) Disposal
4. Ending balance
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ZKTeco 2023 Annual Report
IV. Book value
1. Ending book
37,373,681.41 1,285,983.69 10,053.76 38,669,718.86
value
2. Beginning book
49,966,690.86 659,290.77 14,693.96 50,640,675.59
value
(2) Impairment test of right-of-use assets
□ Applicable Not applicable
Other explanations:
17. Intangible assets
(1) Intangible assets
Unit: RMB
Non-patent
Item Land use rights Patent rights Software Others Total
technology
I. Original book
value
1. Beginning
72,034,013.37 12,835,073.96 104,614.54 84,973,701.87
Balance
2. Increase in
-44,544.08 1,027,040.56 11,418.31 993,914.79
current period
(1) Purchase 290,677.81 13,539.81 304,217.62
(2) Internal
R&D
(3) Increase in
business
merger
(4) Differences
in foreign
currency -44,544.08 736,362.75 -2,121.50 689,697.17
statement
translation
3. Decrease in
559,828.44 559,828.44
current period
(1) Disposal 559,828.44 559,828.44
4. Ending
71,989,469.29 13,302,286.08 116,032.85 85,407,788.22
balance
II. Accumulated
amortisation
1. Beginning
10,102,827.54 6,719,776.65 40,584.89 16,863,189.08
Balance
2. Increase in
1,242,153.91 1,817,058.15 10,160.32 3,069,372.38
current period
(1) Provision 1,242,153.91 1,680,592.82 11,435.33 2,934,182.06
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ZKTeco 2023 Annual Report
(2) Differences
in foreign
currency 136,465.33 -1,275.01 135,190.32
statement
translation
3. Decrease in
541,144.92 541,144.92
current period
(1) Disposal 541,144.92 541,144.92
4. Ending
11,344,981.45 7,995,689.88 50,745.21 19,391,416.54
balance
III. Provision
for impairment
1. Beginning
Balance
2. Increase in
current period
(1) Provision
3. Decrease in
current period
(1) Disposal
4. Ending
balance
IV. Book value
1. Ending book
60,644,487.84 5,306,596.20 65,287.64 66,016,371.68
value
2. Beginning
61,931,185.83 6,115,297.31 64,029.65 68,110,512.79
book value
The proportion of intangible assets formed through internal R&D of the company to the balance of intangible assets at the end of
this period is 0.00%.
18. Goodwill
(1) Original book value of goodwill
Unit: RMB
Name of Increase in the current period Decrease in the current period
invested entity
Beginning Formed by
or matters Exchange rate Exchange rate Ending Balance
Balance business Disposals
forming fluctuations fluctuations
goodwill merger
ZKTECO (M)
170,261.90 2,887.17 173,149.07
SDN. BHD.
ZK
INVESTIMEN
TOS DO 326,124.50 5,530.15 331,654.65
BRASIL
LTDA.
Total 496,386.40 8,417.32 504,803.72
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ZKTeco 2023 Annual Report
(2) Provision for impairment of goodwill
Unit: RMB
Name of Increase in the current period Decrease in the current period
invested entity
Beginning
or matters Ending Balance
Balance Provision Disposals
forming
goodwill
Total
(3) Information related to the asset group or portfolio of asset groups where goodwill is located
Composition and basis of the
Is it consistent with previous
Name asset group or portfolio to Operating segments and basis
years
which it belongs
It can bring independent cash
ZKTECO (M) SDN.BHD flow and can be recognized as Not applicable Yes
a separate asset group
It can bring independent cash
ZK INVESTIMENTOS DO
flow and can be recognized as Not applicable Yes
BRASIL LTDA
a separate asset group
Changes in asset group or asset portfolio
Objective facts and basis that
Name Composition before change Composition after change
lead to changes
Other explanations:
Asset group or portfolio of asset groups
Book Has there been
value of any change in
Main components Book value Determination method
goodwill the current
period
An asset group or portfolio of asset groups
that can independently generate cash flow,
Conversion rate
taking into account the synergistic effects of
173,149.07 ZKTECO（M）SDN.BHD. 828,719.06 changes, no
business mergers and the management's
other changes
management or monitoring of production and
operating activities
An asset group or portfolio of asset groups
that can independently generate cash flow,
Conversion rate
ZK INVESTIMENTOS DO BRASIL taking into account the synergistic effects of
331,654.65 changes, no
LTDA. 2,940,003.92 business mergers and the management's
other changes
management or monitoring of production and
operating activities
(4) Specific method for determining the recoverable amount
The recoverable amount is determined based on the net amount after deducting disposal expenses from fair value
□ Applicable Not applicable
The recoverable amount is determined based on the present value of expected future cash flows
□ Applicable Not applicable
270
ZKTeco 2023 Annual Report
Reasons for significant discrepancies between the above information and the information or external information used in
impairment tests of previous years
Reasons for significant discrepancies between the information used in the Company's impairment tests of previous year and the
actual situation of that year
(5) Completion of performance commitments and corresponding impairment of goodwill
When goodwill is formed, there is a performance commitment and the reporting period or the previous period in the reporting
period is within the performance commitment period
□ Applicable Not applicable
Other explanations:
19. Long-term deferred expenses
Unit: RMB
Amortization
Increase in current Other reduced
Item Beginning Balance amount for the Ending Balance
period amounts
current period
Decoration works 2,528,270.50 1,040,682.53 1,075,331.52 -19,425.99 2,513,047.50
Employee housing
loan deferred 708,393.52 66,735.92 641,657.60
interest
Others 528,039.84 389,670.55 301,485.07 2,082.61 614,142.71
Total 3,056,310.34 2,138,746.60 1,443,552.51 -17,343.38 3,768,847.81
Other explanations:
20. Deferred income tax assets/deferred income tax liabilities
(1) Deferred income tax assets not offset
Unit: RMB
Ending Balance Beginning Balance
Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax
difference assets difference assets
Provision for
36,366,162.24 5,804,206.98 32,373,054.68 5,178,158.90
impairment of assets
Unrealized profits from
98,721,713.02 17,452,699.91 75,228,978.61 14,665,616.31
internal transactions
Deductible losses 207,081,168.58 31,091,802.32 144,679,629.19 21,701,944.38
Withholding rebates 15,007,767.78 2,143,716.17 19,110,934.94 2,746,709.94
Estimated liabilities 600,000.00 90,000.00 600,000.00 90,000.00
Share-based payments 7,866,303.64 1,177,039.86 2,925,355.23 438,714.49
Provision for inventory
11,003,159.27 1,906,570.77 9,624,621.36 1,622,622.89
write-down
271
ZKTeco 2023 Annual Report
Deferred income 1,853,549.62 278,032.44 2,039,702.49 305,955.37
Lease liabilities 35,689,297.38 7,313,490.56 47,124,132.02 8,719,450.85
Total 414,189,121.53 67,257,559.01 333,706,408.52 55,469,173.13
(2) Non-offsetting deferred income tax liabilities
Unit: RMB
Ending Balance Beginning Balance
Item Taxable temporary Taxable temporary
Deferred tax liability Deferred tax liability
difference difference
Changes in fair value
of trading financial 755,429.17 113,314.37 21,836.71 3,275.51
instruments
Accelerated
depreciation of fixed 22,133,567.26 3,320,431.55 23,697,128.76 3,554,569.32
assets
Right-of-use asset 34,457,850.98 6,895,307.56 35,399,341.50 8,491,060.14
Total 57,346,847.41 10,329,053.48 59,118,306.97 12,048,904.97
(3) Deferred income tax assets or liabilities listed at net amount after offset
Unit: RMB
Amount of mutual Amount of mutual
Ending balance of Beginning balance of
offset between deferred offset between deferred
deferred income tax deferred income tax
Item income tax assets and income tax assets and
assets and liabilities assets and liabilities
liabilities at the end of liabilities at the
after offset after offset
period beginning of period
Deferred income tax
67,257,559.00 55,469,173.13
assets
Deferred tax liability 10,329,053.48 12,048,904.97
(4) Details of unconfirmed deferred income tax assets
Unit: RMB
Item Ending Balance Beginning Balance
Deductible temporary difference 12,690,171.04 17,753,649.06
Deductible losses 67,373,596.51 78,251,101.86
Total 80,063,767.55 96,004,750.92
(5) The deductible losses of unrecognized deferred income tax assets will expire in the following years
Unit: RMB
Year Closing amount Opening amount Remarks
2023 22,728,613.61
2024 15,985,752.57 19,643,972.43
2025 6,481,611.28 8,690,163.50
2026 3,921,974.11 6,092,224.82
2027 10,275,824.68 11,597,031.35
2028 14,889,082.61
2029 2,887,686.36
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ZKTeco 2023 Annual Report
2030 2,282,920.00
2031 1,251,676.88 604,137.52
2032 2,515,226.48 427,900.39
2033 245,967.32
2037 2,388,691.10
2038 6,482,774.72
Infinite carry forward 153,099.50 6,078,367.14
Total 67,373,596.51 78,251,101.86
Other explanations:
21. Other non-current assets
Unit: RMB
Ending Balance Beginning Balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Prepayment for
787,973.04 0.00 787,973.04 563,981.71 0.00 563,981.71
decoration
Prepaid
equipment 370,641.60 0.00 370,641.60 563,795.61 0.00 563,795.61
payment
Prepayment for
15,725,991.21 0.00 15,725,991.21 0.00 0.00 0.00
software
Total 16,884,605.85 0.00 16,884,605.85 1,127,777.32 0.00 1,127,777.32
Other explanations:
None
22. Assets with restricted ownership or use right
Unit: RMB
End of the period Opening
Item Restricted Restricted Restricted
Book balance Book value Restricted type Book balance Book value
situation type situation
The bill deposit is
RMB
30,551,118.11, the
funds in transit are
Bank acceptance
RMB 557,108.80,
bill margin of
the frozen
RMB
Deposit, litigation funds are
46,693,268.67,
Deposit, funds funds in RMB 18.71, the
funds in transit of
Monetary funds 54,954,670.48 54,954,670.48 in transit, 31,118,488.94 31,118,488.94 transit, restricted funds of
RMB
frozen funds frozen e-commerce
7,461,401.81,
funds, etc. platform stores are
frozen litigation
RMB 8,000.00,
funds of RMB
and bank
800,000.00
guarantees are
provided to
customers. A
pledge right of
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ZKTeco 2023 Annual Report
RMB 2,243.32 is
established for
short-term time
deposits;
See other
Fixed assets 204,397,423.28 199,029,492.12 Mortgage 161,516,516.12 159,995,332.53 Mortgage Loan mortgage
explanations
Intangible See other
49,453,695.00 43,848,942.89 Mortgage 49,453,695.00 44,838,016.80 Mortgage Loan mortgage
assets explanations
Construction in See other
110,185,544.37 110,185,544.37 Mortgage 51,431,203.33 51,431,203.33 Mortgage Loan mortgage
progress explanations
Provide bank
guarantees to
Bond Guarantee customers and
67,092.75 67,092.75
investment pledge establish pledge
rights for long-
term time deposits
Total 418,991,333.13 408,018,649.86 293,586,996.14 287,450,134.35
Other explanations:
On December 16, 2019, the subsidiary of the Company, ZKTECO (GUANGDONG) CO., LTD, signed a "Fixed
Asset Loan Contract" with the number of DY (3100) 2019 GD Zi No. 013346 and a maximum mortgage contract
with the number of DY (3100) 2019 GD Zi No. 024957 with the Dongguan Branch of Bank of Dongguan Co., Ltd.,
agreeing to a loan amount of RMB 206 million and a loan term from December 16, 2019 to December 15, 2029, and
agree that the land with the number Y (2018) DGBDCQ No. 0259880 is used as collateral, and the Company has
signed a contract with Dongguan Branch of Bank of Dongguan Co., Ltd. with the number DY (3100) 2019 ZGB Zi
No. 024956, with a maximum guarantee amount of RMB 250 million. Considering that the land area of the
Company's collateral has changed and a new real estate certificate has been obtained for the collateral, on October 19,
2020, the subsidiary of the Company, ZKTECO (GUANGDONG) CO., LTD, has signed a supplementary agreement
with the number 20201013001 with Dongguan Branch of Bank of Dongguan Co., Ltd., which stipulates to change the
collateral to Y (2020) DGBDCQ No. 0248681 land.
23. Short-term loan
(1) Classification of short-term loans
Unit: RMB
Item Ending Balance Beginning Balance
Discounted domestic letters of credit that
0.00 9,855,000.00
cannot be derecognized before expiration
Total 0.00 9,855,000.00
Explanations on short-term loan classification:
(2) Information of overdue and unpaid short-term loans
The total amount of overdue and unpaid short-term loans at the end of this period is RMB , among which the important overdue
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ZKTeco 2023 Annual Report
and unpaid short-term loans are as follows:
Unit: RMB
Borrower Ending Balance Loan interest rate Overdue time Overdue interest rate
Other explanations:
24. Notes payable
Unit: RMB
Category Ending Balance Beginning Balance
Bank acceptance bill 122,573,544.09 68,293,818.22
Total 122,573,544.09 68,293,818.22
The total amount of unpaid notes payable at the end of this period is RMB 0.00.
25. Accounts payable
(1) Listing of accounts payable
Unit: RMB
Item Ending Balance Beginning Balance
Material payment 217,082,802.45 210,894,468.56
Equipment payment 932,731.16 3,130,476.79
Service fee 4,834,986.05 742,705.27
Project payment 18,294,116.38 10,886,449.82
Others 3,939,546.28 346,376.52
Total 245,084,182.32 226,000,476.96
(2) Important accounts payable with aging over 1 year or overdue
Unit: RMB
Reasons for non-repayment or carry-
Item Ending Balance
forward
Other explanations:
None
26. Other payables
Unit: RMB
Item Ending Balance Beginning Balance
Other payables 36,735,314.36 31,429,478.43
Total 36,735,314.36 31,429,478.43
1) List of other payables by nature of money
Unit: RMB
Item Ending Balance Beginning Balance
Employee reimbursement 5,222,956.92 6,747,819.07
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ZKTeco 2023 Annual Report
Payment to be settled 3,980,996.11 9,597,128.66
Withholding and paying social security
331,708.81 66,013.83
and capital reserve on behalf of others
Current account 7,424,919.78 3,561,040.08
Collection and payment on behalf of
328,337.90 208,657.13
others
Guarantee deposit 3,653,667.64 3,321,927.78
Others 15,792,727.20 7,926,891.88
Total 36,735,314.36 31,429,478.43
2) Other payables of the top five ending balances collected by counterparties
Other explanations:
27. Contract liabilities
Unit: RMB
Item Ending Balance Beginning Balance
Advances on sales 65,331,106.17 58,838,840.39
Total 65,331,106.17 58,838,840.39
Significant contract liabilities with an aging of over 1 year
Unit: RMB
Reasons for non-repayment or carry-
Item Ending Balance
forward
Amount and reasons for significant changes in book value during the reporting period
Unit: RMB
Item Change amount Reasons for changes
28. Payroll payable
(1) List of payroll payable
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
I. Short-term
58,505,505.72 534,528,539.80 536,626,145.97 56,407,899.55
compensation
II. Post-employment
welfare - defined 325,697.88 31,875,263.60 31,978,759.05 222,202.43
contribution plan
III. Dismissal benefit 109,649.20 12,000.00 121,649.20
Total 58,940,852.80 566,415,803.40 568,726,554.22 56,630,101.98
(2) List of short-term compensation
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
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ZKTeco 2023 Annual Report
1.Salary, bonus,
56,728,600.85 501,465,425.86 503,678,474.52 54,515,552.19
allowance and subsidy
2. Employee benefits 155,656.42 9,624,996.84 9,317,452.06 463,201.20
3.Social insurance 344,455.53 17,285,117.18 17,433,202.63 196,370.08
Including: medical
308,232.54 15,799,702.29 15,912,120.15 195,814.68
insurance premium
Work-related injury
1,888.88 648,863.62 650,197.10 555.40
insurance premium
Birth insurance
34,334.11 836,551.27 870,885.38
premium
4. Housing fund 80,431.85 5,536,580.15 5,562,772.91 54,239.09
5. Labor union
expenditure and
1,196,361.07 615,642.08 633,466.16 1,178,536.99
personnel education
fund
6. Others 777.69 777.69
Total 58,505,505.72 534,528,539.80 536,626,145.97 56,407,899.55
(3) List of defined contribution plan
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
1. Basic endowment
322,188.36 30,882,474.72 30,990,489.47 214,173.61
insurance expenses
2.Unemployment
3,509.52 992,788.88 988,269.58 8,028.82
insurance
Total 325,697.88 31,875,263.60 31,978,759.05 222,202.43
Other explanations:
29. Taxes and dues payable
Unit: RMB
Item Ending Balance Beginning Balance
VAT 7,538,983.47 6,423,184.92
Consumption tax 34,079.54
Enterprise income tax 15,364,635.19 12,861,731.77
Individual income tax 3,712,496.39 1,582,183.19
Urban maintenance and construction tax 243,439.39 423,601.95
Property tax 496,029.92 499,264.69
Land use tax 7,368.53 8,200.43
Stamp duty 499,102.75 195,980.34
Education surcharge 234,127.14 449,094.47
Others 761,967.12 178,563.28
Total 28,892,229.44 22,621,805.04
Other explanations:
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ZKTeco 2023 Annual Report
30. Non-current liabilities due within one year
Unit: RMB
Item Ending Balance Beginning Balance
Long-term loans due within one year 957,265.72 54,873.94
Long-term payables due within one year
Lease liabilities due within one year 20,137,416.64 23,663,351.45
Total 21,094,682.36 23,718,225.39
Other explanations:
31. Other current liabilities
Unit: RMB
Item Ending Balance Beginning Balance
Sales rebates payable 15,007,767.78 19,110,934.94
Tax to be transferred to output tax 1,456,166.57 2,062,685.85
Total 16,463,934.35 21,173,620.79
Changes in short-term bonds payable:
Unit: RMB
Amort Whet
Accru
izatio her it
Begin ing Curre Endin
Coup Bond Issue Curre n of is a
Bond Face Issue ning intere nt g
on durati amou nt excess breac
name value Date Balan st at repay Balan
rate on nt issue and h of
ce face ment ce
discou contra
value
nt ct
Total
Other explanations:
32. Long-term loan
(1) Classification of long-term loans
Unit: RMB
Item Ending Balance Beginning Balance
Credit borrowings 8,758,524.27 162,002.06
Unexpired interest payable 9,146.49 34,629.42
Long-term loans due within one year -957,265.72 -54,873.94
Total 7,810,405.04 141,757.54
Explanations on long-term loan classification:
Other explanations, including interest rate range:
The increase in credit loans for long-term loans in this period is mainly due to the technology innovation fund
syndicated loan obtained by XIAMEN ZKTECO CO., LTD., a subsidiary of the Company. The contract
278
ZKTeco 2023 Annual Report
stipulates that the borrower shall use each fund withdrawn for the Company's R&D investment, with a loan term
of 36 months. The interest shall be paid on a quarterly basis. The ending balance of loan principal is RMB 8.315
million.
33. Lease liabilities
Unit: RMB
Item Ending Balance Beginning Balance
Lease payment amount 43,637,253.89 59,266,343.29
Unrecognized financing charges -3,786,551.04 -7,346,274.40
Lease liabilities due within one year -20,137,416.64 -23,663,351.45
Total 19,713,286.21 28,256,717.44
Other explanations:
34. Estimated liabilities
Unit: RMB
Item Ending Balance Beginning Balance Cause of formation
The main reason for the
pending litigation is the
estimated liabilities provided
from the trademark
Pending litigation 600,000.00 600,000.00
infringement dispute between
the Company and Shenzhen
Zokon Industry Development
Co., Ltd.
Total 600,000.00 600,000.00
Other explanations, including important assumptions and estimation explanations related to important estimated liabilities:
35. Deferred income
Unit: RMB
Increase in the Decrease in the
Item Beginning Balance Ending Balance Cause of formation
current period current period
Government Financial
2,039,702.49 186,152.87 1,853,549.62
subsidies allocation
Total 2,039,702.49 186,152.87 1,853,549.62
Other explanations:
Deferred income related to government subsidies
The government subsidies of the Company are detailed in Note XI Government subsidies 2. Liability items
involving government subsidies.
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36. Share capital
Unit: RMB
Increase/decrease in this change (+, -)
Beginning Share Ending
Balance Issue new transferred Balance
Bonus Others Subtotal
shares from capital
reserve
Total Shares 148,492,051.00 1,639,842.00 44,547,615.00 46,187,457.00 194,679,508.00
Other explanations:
Explanations on changes in share capital:
1. The Company converts 3 shares of capital reserve to all shareholders for every 10 shares, increasing the total
share capital by RMB 44,547,615.00 and reducing the capital reserve - share premium by RMB 44,547,615.00;
2. In 2023, the Company's stock equity incentive increased the share capital by RMB 1,639,842.00 due to the
eligible exercise of the incentive objects, and increased the capital reserve - share premium by RMB 21,514,727.04.
The above-mentioned changes in share capital have been verified by a Capital Verification Report issued by Baker
Tilly China Certified Public Accountants (Special General Partnership) (TZYZ [2023] No. 49775).
37. Capital reserve
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
Capital premium (share
1,988,225,327.93 55,275,747.76 44,547,615.00 1,998,953,460.69
capital premium)
Other capital reserves 72,947,584.35 36,929,284.99 33,350,954.90 76,525,914.44
Total 2,061,172,912.28 92,205,032.75 77,898,569.90 2,075,479,375.13
Other explanations, including changes in current period and reasons for changes:
1. The increase in the capital reserve - share premium in the current period is due to: ① In 2023, Class II
restricted share equity incentive of the Company increased the share premium by RMB 21,514,727.04 due to the
eligible exercise of the incentive object; ② Due to the exercise of Class II restricted share equity incentive, the
premium transferred from other capital reserves to share capital increased by RMB 32,928,027.36; ③ Subsidiary
ZKTECO CO., LIMITED acquired a minority equity to increase its share premium by RMB 832,993.36. The
decrease in the current period is due to the conversion of capital reserves into share capital, resulting in a decrease in
share premium of RMB 44,547,615.00;
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ZKTeco 2023 Annual Report
2. The increase in the capital reserve - other capital reserves in the current period is due to the confirmation of
share-based payments for Class II restricted shares of RMB 36,929,284.99, while the decrease in the current period is
due to the exercise adjustment of RMB 32,928,027.36 and changes in other equity of associates of RMB 422,927.54.
38. Treasury stock
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
Reduce registered
784,700.00 784,700.00
capital repurchase
Total 0.00 784,700.00 784,700.00
Other explanations, including changes in current period and reasons for changes:
According to the "Proposal on Repurchasing Company Shares through Centralized Bidding Trading" approved
by the Board of Directors, the Company uses its own funds to repurchase the issued RMB denominated ordinary
shares of the Company through centralized bidding trading, for employee stock ownership plans or equity incentives,
with a total increase of RMB 784,700.00 in treasury shares.
39. Other comprehensive income
Unit: RMB
Amount incurred in the current period
Less: the
Less:
net amount
Profit
that is
and loss
included in
included
other
in other
comprehen
Amount compreh Attributabl
Beginning sive profits Less: Attributable Ending
Item incurred ensive e to
Balance of prior income to parent Balance
before income income minority
period and tax company after
tax in the at early shareholder
retained expenses tax
current period stage after tax
earnings
and
transferred
transferr
into the
ed in the
current
current
profits and
period
loss
I. Other
comprehensiv
e income to be
5,250,890.36 23,353,274.19 22,750,068.83 595,666.33 28,000,959.19
reclassified
into profits
and losses
Translati
on difference 5,250,890.36 23,353,274.19 22,750,068.83 595,666.33 28,000,959.19
of foreign
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ZKTeco 2023 Annual Report
currency
financial
statements
Total of other
comprehensiv 5,250,890.36 23,353,274.19 22,750,068.83 595,666.33 28,000,959.19
e income
Other explanations, including adjusting the effective portion of cash flow hedging gains and losses to the initial recognition
amount of the hedged item:
40. Surplus reserves
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
Legal surplus reserve 53,978,004.94 6,477,417.56 60,455,422.50
Total 53,978,004.94 6,477,417.56 60,455,422.50
Explanations on surplus reserves, including changes in current period and reasons for changes: The increased surplus reserves in
the current period are statutory surplus reserve funds provisioned by the parent company based on 10% of net profit.
41. Undistributed profit
Unit: RMB
Item Current period Previous period
Undistributed profits before adjustment
788,571,917.98 607,725,356.63
at end of the previous period
Total undistributed profits in the
adjustment beginning period (increase in 197,066.66 -55,548.96
"+", decrease in "–")
Undistributed profit at the end of the
788,768,984.64 607,669,807.67
adjustment period
Plus: Net profits attributable to parent
177,263,675.15 192,502,163.93
company in this period
Less: withdrawal of legal surplus
6,477,417.56 11,402,986.96
reserves
Dividends payable on ordinary
51,972,217.85
shares
Undistributed profit at the end of the
907,583,024.38 788,768,984.64
period
Details of undistributed profits at the beginning of the adjustment period:
1) Due to the retrospective adjustment of the "Accounting Standards for Enterprises" and related new regulations, the undistributed
profit at the beginning of the period was affected by RMB 197,066.66.
2) Due to changes in accounting policies, the undistributed profit at the beginning of the period was RMB 197,066.66.
3) Due to significant accounting error correction, the undistributed profit at the beginning of the period was RMB 0.00.
4) Due to changes in the scope of consolidation caused by the same control, the undistributed profit at the beginning of the period
was RMB 0.00.
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ZKTeco 2023 Annual Report
5) The total impact of other adjustments on the undistributed profit at the beginning of the period was RMB 0.00.
42. Operating revenue and operating cost
Unit: RMB
Amount incurred in the current period Amount incurred in the previous period
Item
Revenue Cost Revenue Cost
Main business 1,961,508,304.59 1,000,868,184.91 1,913,553,132.72 1,065,639,119.43
Other businesses 8,675,377.75 5,006,059.04
Total 1,970,183,682.34 1,000,868,184.91 1,918,559,191.76 1,065,639,119.43
Is the lower of net profit before and after deducting non-recurring profits and losses audited negative
□ Yes No
Breakdown information of operating revenue and operating costs:
Unit: RMB
Division 1 Division 2 Operating revenue Total
Contract
Operating Operating
classification Operating cost Operating cost Operating revenue Operating cost Operating revenue Operating cost
revenue revenue
Business type
Including:
Smart office
368,124,957.10 151,678,099.49 368,124,957.10 151,678,099.49
products
Smart entrance
and exit
1,437,554,773.20 753,156,799.23 1,437,554,773.20 753,156,799.23
management
products
Smart identity
verification 155,828,574.29 96,033,286.19 155,828,574.29 96,033,286.19
products
Others 8,675,377.75 8,675,377.75
Classification
by region of
operation
Including:
Domestic sales 643,710,059.42 438,877,805.00 643,710,059.42 438,877,805.00
Overseas sales 1,326,473,622.92 561,990,379.91 1,326,473,622.92 561,990,379.91
Market or
customer type
Including:
Distribution 1,347,955,344.48 744,098,760.98 1,347,955,344.48 744,098,760.98
Direct sales 613,552,960.11 256,769,423.93 613,552,960.11 256,769,423.93
Others 8,675,377.75 8,675,377.75
Type of
contract
Including:
Classification
by time of
transfer of
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ZKTeco 2023 Annual Report
goods
Including:
Classification
by contract
term
Including:
Classification
by sales
channel
Including:
Total 1,970,183,682.34 1,000,868,184.91 1,970,183,682.34 1,000,868,184.91
Information related to performance obligations:
Types of
Nature of goods Expected quality
Time for
that the Is it the main refunds to assurance
fulfilling Important
Item Company responsible customers provided by the
performance payment terms
promises to person borne by the Company and
obligations
transfer Company related
obligations
Other explanations:
The Company, as the main responsible person in accordance with the contract, timely fulfills the supply obligations
according to the customer's requirements for the category, standards and time. The Company provides a certain credit period of
30-90 days based on the customer's industry status, financial strength, credit status and cooperation history. For overseas
customers, the Company will also refer to the credit report issued by Sinosure to the customer.
Information related to the transaction price allocated to the remaining performance obligations:
The corresponding income amount for performance obligations that have been signed but have not yet been fulfilled or completed
at the end of this reporting period is RMB 0.00.
Information related to variable consideration in the contract:
Significant contract changes or significant transaction price adjustments
Unit: RMB
Item Accounting treatment method Amount of impact on income
Other explanations:
43. Tax and surcharges
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Urban maintenance and construction tax 3,184,784.34 3,193,940.53
Education surcharge 2,042,493.50 2,128,701.68
Property tax 3,074,798.73 2,846,813.65
Land use tax 298,326.75 106,384.86
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ZKTeco 2023 Annual Report
Stamp duty 1,304,334.77 964,342.89
Local education surcharges 1,083,514.29 1,415,907.22
Other taxes and fees for overseas
14,630,968.49 8,365,735.32
companies
Others 26,008.41 24,738.72
Total 25,645,229.28 19,046,564.87
Other explanations:
44. Administrative expenses
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Employee remuneration 55,985,922.45 56,013,706.43
Taxes 1,516,305.36 1,454,391.49
Office allowance 3,732,967.28 3,796,088.25
Depreciation and amortization 9,563,920.79 9,165,472.53
Business entertainment expenses 2,181,639.95 1,656,274.22
Repair fee 623,935.88 521,617.42
Travel expenses 2,294,921.81 1,681,329.66
Rent and utilities 3,343,577.95 3,913,363.05
Car expenses 1,153,626.56 1,648,594.21
Low-value consumables 485,661.27 198,337.81
Agency fees 9,725,385.60 7,357,020.27
Communications fee 1,435,143.82 1,496,049.38
Depreciation and amortization of right-
8,215,349.26 8,134,347.68
of-use assets
Share-based payments 5,796,156.11 763,691.57
Others 16,638,987.87 8,948,648.35
Total 122,693,501.96 106,748,932.32
Other explanations:
45. Selling expenses
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Employee remuneration 263,649,628.44 236,617,683.30
Depreciation and amortization 7,353,199.36 5,743,382.82
Exhibition and conference fees 8,906,402.84 6,391,411.66
Transport cost 1,635,613.27 1,662,004.78
Maintenance and testing fees 5,696,784.10 5,077,448.63
Service fees and commissions 18,394,250.49 14,982,316.55
Rental expenses 5,218,203.19 4,453,303.67
Business entertainment expenses 3,350,710.92 2,225,867.93
Travel expenses 25,614,976.83 18,980,805.21
Office allowance 7,861,715.27 6,169,710.05
Insurance premium 5,627,042.24 5,209,135.96
Agency fees 9,444,573.03 8,428,564.29
Advertising expenses 21,164,669.10 15,590,300.37
Depreciation and amortization of right-
15,232,460.82 13,459,130.31
of-use assets
Share-based payments 14,025,913.22 1,633,697.55
Others 32,237,922.81 14,639,418.09
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ZKTeco 2023 Annual Report
Total 445,414,065.93 361,264,181.17
Other explanations:
46. R&D expenses
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Employee remuneration 158,052,507.71 150,553,917.43
Depreciation and amortization 4,429,001.99 4,252,503.03
Office allowance 735,318.39 584,001.49
Travel expenses 5,013,751.62 2,717,699.76
Business entertainment expenses 79,446.35 32,132.91
Rental fees and utilities 1,136,494.86 949,867.41
R&D material costs 5,516,851.51 8,240,298.32
Software and technical service fees 10,305,794.57 8,945,903.92
Testing and certification fees 1,844,771.63 1,817,748.28
Depreciation and amortization of right-
1,914,549.28 2,477,285.95
of-use assets
Share-based payments 14,172,736.25 1,288,530.21
Others 10,412,190.40 6,123,958.71
Total 213,613,414.56 187,983,847.42
Other explanations:
47. Financial expenses
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Interest expenses 4,114,078.22 3,101,947.12
Less: interest income 59,489,145.42 28,810,088.84
Exchange profits and losses -1,409,799.93 -16,566,918.67
Bank charge 2,397,607.32 1,346,372.88
Others 56,392.08 -147.45
Total -54,330,867.73 -40,928,834.96
Other explanations:
48. Other income
Unit: RMB
Sources of other income generation Amount incurred in the current period Amount incurred in the previous period
Government subsidies related to daily
13,164,367.42 17,703,715.35
activities of the enterprise
Other items related to daily activities 218,383.71 145,303.33
Including: refund of individual income
218,383.71 145,303.33
tax handling fee
Total 13,382,751.13 17,849,018.68
49. Gains from changes in fair value
Unit: RMB
286
ZKTeco 2023 Annual Report
Sources of gains from changes in fair
Amount incurred in the current period Amount incurred in the previous period
value
Trading financial asset 755,429.17 -701,013.10
Including: gains from changes in
fair value generated by derivative 92,617.82 -802,315.17
financial instruments
Total 755,429.17 -701,013.10
Other explanations:
50. Investment income
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Long-term equity investment income
2,800,122.30 2,660,914.13
accounted by equity method
Investment income obtained from
5,290,557.19 1,398,296.69
financial products
Forward foreign exchange settlement and
-8,690,555.00 -6,488,400.00
sales contract
Total -599,875.51 -2,429,189.18
Other explanations:
51. Credit impairment loss
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Bad debt losses on accounts receivable -6,401,719.41 -9,854,307.18
Bad debt losses on other receivables -24,544.62 -1,099,803.64
Total -6,426,264.03 -10,954,110.82
Other explanations:
52. Losses from impairment of assets
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
I. Inventory depreciation loss and
contract performance cost impairment -2,865,668.77 -6,322,267.18
loss
II. Loss from long-term equity
-281,599.25
investment impairment
III. Impairment loss from contract assets -16,465.29 27,512.26
Total -3,163,733.31 -6,294,754.92
Other explanations:
53. Gains from disposal of assets
Unit: RMB
287
ZKTeco 2023 Annual Report
Source of gains from disposal of assets Amount incurred in the current period Amount incurred in the previous period
Income from disposal of non-current
-162,260.89 6,255.32
assets - fixed assets
Income from disposal of non-current
32,408.27 81,878.03
assets - right-of-use assets
Total -129,852.62 88,133.35
54. Non-operating revenue
Unit: RMB
Amount incurred in the Amount incurred in the Amount included in current
Item
current period previous period non-recurring profit and loss
Gains from scrapping and
453.17 850.14 453.17
damaging non-current assets
Payment not required 249,822.34 0.00 249,822.34
Penalty income 10,861.12 1,100.00 10,861.12
Others 573,622.63 857,569.35 573,622.63
Total 834,759.26 859,519.49 834,759.26
Other explanations:
55. Non-operating expenditure
Unit: RMB
Amount incurred in the Amount incurred in the Amount included in current
Item
current period previous period non-recurring profit and loss
External donations 205,000.00 229,024.07 205,000.00
Extraordinary losses 4,603,052.11 2,234,814.59 4,603,052.11
Inventory loss 21,554.46 33.77 21,554.46
Non-current assets damage
497,027.01 442,894.77 497,027.01
and retirement loss
Penalty expenses 49,041.71 42,440.26 49,041.71
Others 384,741.57 1,185,704.29 384,741.57
Total 5,760,416.86 4,134,911.75 5,760,416.86
Other explanations:
56. Income tax expenses
(1) Income tax expenses statement
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Current income tax expenses 31,675,881.56 17,540,609.91
Deferred income tax expenses -13,346,935.47 -8,786,294.99
Total 18,328,946.09 8,754,314.92
(2) Accounting profit and income tax expenses adjustment process
Unit: RMB
Item Amount incurred in the current period
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ZKTeco 2023 Annual Report
Total profits 215,172,950.66
Income tax expenses calculated based on statutory/applicable
22,722,294.22
tax rates
The impact of different tax rates applicable to subsidiaries 10,455,338.01
The impact of adjusting previous period income tax 4,366,794.60
The impact of non-taxable income -473,436.28
The impact of non-deductible costs, expenses, and losses 2,928,245.21
The impact of deductible losses on unrecognized deferred
-800,989.72
income tax assets in the prior period of use
The impact of deductible temporary differences or deductible
losses on unrecognized deferred income tax assets in the 2,531,876.60
current period
Deduction of technology development expenses -23,361,880.97
Salary paid for the placement of disabled individuals with
-47,287.23
additional deductions
The impact of tax rate changes on the beginning deferred
7,991.65
income tax
Income tax expenses 18,328,946.09
Other explanations:
57. Other comprehensive income
Please refer to Note 39. Other comprehensive income for details.
58. Cash flow statement items
(1) Cash relating to operating activities
Other cash received related to operating activities
Unit: RMB
Amount incurred in the current Amount incurred in the previous
Item
period period
Interest income 44,383,418.08 23,512,457.10
Received government subsidies 5,931,157.43 14,002,267.31
Current account 19,620,625.50 11,104,272.06
Restricted funds such as restricted
27,155,933.36
guarantee deposit and funds in transit
Others 1,226,225.97 748,702.48
Total 71,161,426.98 76,523,632.31
Explanations of other cash received relating to operating activities:
Other cash paid relating to operating activities
Unit: RMB
Amount incurred in the current Amount incurred in the previous
Item
period period
Expenses payment 203,811,342.55 167,491,966.00
Current account 28,942,938.49 30,365,380.88
Restricted funds such as restricted 6,565,746.56 1,870,861.48
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ZKTeco 2023 Annual Report
guarantee deposit and funds in transit
Others 2,690,158.07 2,239,832.81
Total 242,010,185.67 201,968,041.17
Explanations on other cash paid relating to operating activities:
(2) Cash relating to investing activities
Other cash received related to investment activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Significant cash received relating to investing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Time deposit and wealth management 783,138,035.71 100,302,919.28
Total 783,138,035.71 100,302,919.28
Explanations on other cash received relating to investing activities:
Other cash paid relating to investment activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Investment losses on forward foreign
8,690,555.00 6,488,400.00
exchange settlement and sales
Total 8,690,555.00 6,488,400.00
Significant cash paid relating to investing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Time deposit and wealth management 492,027,131.11 1,034,748,807.59
Purchase minority equity 12,124,365.79
Foreign investment in partnership
24,000,000.00
enterprises
Total 528,151,496.90 1,034,748,807.59
Explanations on other cash paid relating to investing activities:
(3) Cash relating to financing activities
Other cash received related to financing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Bill deposit 137,765,650.54 0.00
Total 137,765,650.54 0.00
Explanations on other cash received relating to financing activities:
Other cash paid in connection with financing activities
Unit: RMB
290
ZKTeco 2023 Annual Report
Item Amount incurred in the current period Amount incurred in the previous period
Lease liability payment amount 31,230,265.90 29,105,104.03
IPO issuance expenses 24,960,127.54
Bill deposit 115,683,494.14
Share repurchase 784,700.00
Total 147,698,460.04 54,065,231.57
Explanations on other cash paid relating to financing activities:
Information on changes in liabilities arising from financing activities
Applicable □ Not applicable
Unit: RMB
Increase in the current period Decrease in the current period
Beginning
Item Non cash Non cash Ending Balance
Balance Cash changes Cash changes
changes changes
Short-term loan 9,855,000.00 145,000.00 10,000,000.00
Non-current
liabilities due 23,718,225.39 21,290,192.94 23,443,687.06 470,048.91 21,094,682.36
within one year
Long-term loan 141,757.54 8,643,835.19 140,500.99 79,810.85 1,035,877.83 7,810,405.04
Lease liabilities 28,256,717.44 18,698,763.37 7,786,578.84 19,455,615.76 19,713,286.21
Total 61,971,700.37 8,643,835.19 40,274,457.30 41,310,076.75 20,961,542.50 48,618,373.61
(4) Explanations on cash flows presented as net amount
Basis for reporting net
Item Related facts Financial impact
amount
(5) Significant activities and financial impacts that do not involve current cash inflows and outflows but
affect the financial position of the enterprise or may affect the cash flow of the enterprise in the future
59. Supplementary information of cash flow statement
(1) Supplementary information of cash flow statement
Unit: RMB
Supplementary information Amount in current period Amount of previous period
1. Reconciliation of net profit to cash
flows from operating activities
Net profit 196,844,004.57 204,333,758.34
Plus: provision for losses from
9,589,997.34 17,248,865.74
impairment of assets
Depreciation of fixed assets,
consumption of oil and gas assets and 31,557,510.39 25,015,873.26
productive biological assets
Depreciation of right of use assets 28,647,400.42 27,141,695.03
Amortization of intangible assets 1,945,108.15 2,074,371.52
Long-term unamortized expenses 1,443,552.51 2,671,892.05
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ZKTeco 2023 Annual Report
Loss from disposal of fixed
assets, intangible assets and other long- 129,852.62 -88,133.35
term assets (gains expressed with "-")
Loss on retirement of fixed assets
496,573.84 442,044.63
(gains expressed with "-")
Loss from changes in fair value
-755,429.17 701,013.10
(gains expressed with "-")
Financial expenses (gains
-12,383,912.51 -1,587,290.64
expressed with "-")
Investment loss (gains expressed
3,399,997.81 6,223,097.99
with "-")
Decrease of deferred income tax
-11,788,385.88 -17,684,830.66
assets (increase expressed with "-")
Increases of deferred income tax
-1,719,851.49 8,898,535.67
liabilities (decrease expressed with "-")
Decrease of inventory (increase
-28,429,295.27 73,754,064.85
expressed with "-")
Decreases of operational
-130,159,538.85 -71,663,669.41
receivables (increase expressed with "-")
Increases of operating payables
109,897,948.82 -157,595,144.12
(decrease expressed with "-")
Others 37,285,356.91 4,633,889.18
Net cash flows from operating
236,000,890.21 124,520,033.18
activities
2. Major investment and financing
activities not relating to cash deposit and
withdrawal
Conversion of debt into capital
Convertible corporate bonds due
within one year
Fixed assets under financing lease 16,689,236.87 35,417,269.99
3. Net change of cash and cash
equivalents:
Ending balance of cash 1,317,020,553.02 1,077,608,258.10
Less: beginning balance of cash 1,077,608,258.10 516,288,425.76
Plus: ending balance of cash
equivalents
Less: beginning balance of cash
equivalents
Net increase in cash and cash
239,412,294.92 561,319,832.34
equivalents
(2) Net cash paid for acquiring subsidiaries in the current period
Unit: RMB
Amount
Including:
Including:
292
ZKTeco 2023 Annual Report
Including:
Other explanations:
(3) Net cash received from disposal of subsidiaries in the current period
Unit: RMB
Amount
Including:
Including:
Including:
Other explanations:
(4) Composition of cash and cash equivalents
Unit: RMB
Item Ending Balance Beginning Balance
I. Cash 1,317,020,553.02 1,077,608,258.10
Including: Cash on hand 1,401,947.05 2,646,715.85
Bank deposit available for payment at
1,302,024,477.33 1,072,431,575.41
any time
Other monetary funds available for
13,594,128.64 2,529,966.84
payment at any time
III. Ending balance of cash and cash
1,317,020,553.02 1,077,608,258.10
equivalents
(5) Information on reporting assets with limited scope of use but still classified as cash and cash
equivalents
Unit: RMB
Reasons for still being
Item Amount in current period Amount of previous period classified as cash and cash
equivalents
(6) Monetary funds that do not belong to cash and cash equivalents
Unit: RMB
Amount of previous Reasons for still being classified as cash
Item Amount in current period
period and cash equivalents
Principal of time deposits and
Not meeting the standards for cash and
outstanding interest 618,949,731.28 804,218,284.93
cash equivalents
receivable
Margin of bank acceptance Not meeting the standards for cash and
46,693,268.67 30,551,118.11
draft cash equivalents
Non withdrawable funds on Not meeting the standards for cash and
8,000.00
e-commerce platforms cash equivalents
Pledged guarantee time Not meeting the standards for cash and
2,243.32
deposits cash equivalents
Not meeting the standards for cash and
Frozen litigation funds 800,000.00 18.71
cash equivalents
Not meeting the standards for cash and
Funds in transit 7,461,401.81 557,108.80
cash equivalents
293
ZKTeco 2023 Annual Report
Total 673,904,401.76 835,336,773.87
Other explanations:
(7) Other significant activity explanations
60. Notes to items in the statement of changes in owner's equity
Explain the names and adjusted amounts of "other" items that have been adjusted to the ending balance of the previous year:
None
61. Foreign currency monetary items
(1) Foreign currency monetary items
Unit: RMB
Ending foreign currency Ending equivalent RMB
Item Conversion rate
balance Balance
Monetary funds 399,960,359.63
Including: USD 40,329,619.94 7.0827 285,642,599.05
EUR 6,208,474.76 7.8592 48,793,636.61
HKD 1,046,481.71 0.9062 948,350.20
ARS 43,744,180.19 0.0088 383,461.00
AUD 6,566.89 4.8484 31,838.86
BRL 517,584.34 1.4596 755,488.50
DNS 14,545,788.90 1.9326 28,110,520.63
DZD 11,400.00 0.0531 605.68
RUB 8,542,424.59 0.0803 685,686.90
COP 506,540,967.87 0.0018 926,091.30
KRW 104,571,958.00 0.0055 576,598.80
CAD 439,472.24 5.3673 2,358,778.78
KES 831,104.14 0.0451 37,493.38
MYR 554,686.22 1.5415 855,073.56
PEN 11,743.09 1.918 22,523.26
MAD 395,233.00 0.7145 282,394.15
MXN 5,524,369.79 0.4181 2,310,002.31
ZAR 19,647,399.23 0.3819 7,503,876.27
NGN 3,033,885.37 0.0079 23,942.17
JPY 43,927,044.00 0.0502 2,205,767.39
THB 18,028,790.00 0.2074 3,738,473.81
TRL 1,803,922.79 0.2405 433,859.50
SGD 154,866.38 5.3772 832,748.52
INR 53,632,136.91 0.0851 4,566,562.11
IDR 5,492,227,206.92 0.0005 2,530,607.10
GBP 188,358.41 9.0411 1,702,967.42
VND 3,853,877,740.00 0.0003 1,125,602.47
CLP 321,733,756.20 0.008 2,574,182.61
UYU 200.00 0.18 36.00
PYG 602,000.00 0.001 591.29
Accounts receivable 458,189,580.61
Including: USD 46,272,183.77 7.0827 327,731,995.97
EUR 2,838,850.10 7.8592 22,311,090.71
HKD
VND 170,503,278.06 0.0003 49,798.91
294
ZKTeco 2023 Annual Report
KRW 1,934,583,654.44 0.0055 10,667,090.93
CLP 207,234,697.65 0.008 1,658,078.91
ZAR 8,319,987.48 0.3819 3,177,629.56
MXN 36,428,435.08 0.4181 15,232,496.10
MYR 1,240,463.97 1.5415 1,912,230.57
ARS 859,532.14 0.0088 7,534.65
NGN 253,121,921.17 0.0079 1,997,533.85
INR 117,164,693.77 0.0851 9,976,105.41
BRL 2,224,655.45 1.4596 3,247,203.35
JPY 10,356,821.24 0.0502 520,081.67
PEN 1,247,466.34 1.918 2,392,642.29
DNS 22,058,699.95 1.9326 42,630,643.53
THB 54,436,878.09 0.2074 11,288,031.04
TRL 2,850,360.47 0.2405 685,537.08
COP 880,699,280.29 0.0018 1,610,151.99
IDR 1,050,147,703.26 0.0005 483,867.68
SGD 113,411.82 5.3772 609,836.41
Other receivables 15,578,879.11
Including: VND 200,877,218.79 0.0003 58,670.23
USD 761,454.47 7.0827 5,393,153.57
KRW 82,190,007.04 0.0055 453,187.06
CLP 72,948,891.28 0.008 583,662.00
ZAR 102,353.73 0.3819 39,091.67
MXN 4,519,915.78 0.4181 1,889,996.08
MYR 56,786.90 1.5415 87,539.54
ARS 4,314,391.17 0.0088 37,819.91
NGN 17,168,222.03 0.0079 135,484.53
INR 12,752,847.31 0.0851 1,085,853.98
EUR 77,759.70 7.8592 611,129.03
BRL 385,151.71 1.4596 562,184.10
JPY 6,766,959.34 0.0502 339,811.94
PEN 446,298.41 1.918 856,001.02
DNS 603,023.45 1.9326 1,165,403.11
THB 7,016,675.44 0.2074 1,454,977.82
TRL 111,370.67 0.2405 26,785.64
COP 199,686,583.71 0.0018 365,080.06
IDR 30,000,072.92 0.0005 13,822.88
SGD 54,233.93 5.3772 291,625.92
RUB 938,399.96 0.0803 75,323.88
CAD 5,050.00 5.3673 27,104.86
KES 553,924.18 0.0451 24,989.04
HK$ 200.00 0.9062 181.24
Accounts payable 8,202,657.82
Including: USD 183,094.68 7.0827 1,296,804.69
CLP 55,286,237.25 0.008 442,343.61
ZAR 597,965.41 0.3819 228,379.26
MXN 3,378,887.22 0.4181 1,412,876.68
MYR 45,689.06 1.5415 70,431.72
ARS 668,414.78 0.0088 5,859.32
NGN 11,418,541.52 0.0079 90,110.42
INR 8,400,282.71 0.0851 715,250.50
EUR 73,346.75 7.8592 576,446.78
BRL 243,692.26 1.4596 355,703.77
PEN 135,948.17 1.918 260,748.79
DNS 1,076,293.99 1.9326 2,080,045.77
THB 3,018,647.86 0.2074 625,946.82
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ZKTeco 2023 Annual Report
COP 5,026,792.00 0.0018 9,190.31
IDR 65,560,725.41 0.0005 30,207.86
RUB 3,010.15 0.0803 241.62
KES 45,882.93 0.0451 2,069.90
Other payables 6,520,975.76
Including: VND 2,160,097.84 0.0003 630.90
USD 485,575.36 7.0827 3,439,184.60
EUR 127,098.20 7.8592 998,890.17
KRW 47,486,902.66 0.0055 261,837.79
CLP 12,690,101.05 0.008 101,533.14
ZAR 20.03 0.3819 7.65
MXN 587,442.45 0.4181 245,638.19
MYR 22,149.99 1.5415 34,145.20
ARS 3,951,482.37 0.0088 34,638.65
NGN 4,388,030.08 0.0079 34,628.52
INR 1,114,778.69 0.0851 94,918.95
BRL 136,069.24 1.4596 198,612.55
JPY 7,017,651.84 0.0502 352,400.80
PEN 4,205.97 1.918 8,067.05
DNS 21,077.35 1.9326 40,734.09
THB 1,900,373.89 0.2074 394,061.53
TRL 49,478.40 0.2405 11,900.00
IDR 299,999,974.26 0.0005 138,228.45
SGD 16,361.22 5.3772 87,977.33
MAD 60,098.21 0.7145 42,940.20
Long-term loan 336,258.52
Including: ZAR 506,120.51 0.3819 193,301.19
MYR 92,736.42 1.5415 142,957.33
Other explanations:
(2) Explanations on overseas operating entities, including for important overseas operating entities,
disclosure of their main overseas operating location, recording currency, and selection basis. Reasons for
changes in the recording currency should also be disclosed.
Applicable □ Not applicable
Subsidiaries Registered Recording currency Basis for adopting recording
place of currency
business
ZKTECO CO.,LIMITED Hong Kong USD Sales and procurement are mainly
priced in USD
Armatura Tech Co.,Ltd. Thailand THB Currency used in the place of
operation
ZKTECO SECURITY L.L.C Dubai DNS Currency used in the place of
operation
ZKTECO EUROPE SL Spain EUR Currency used in the place of
operation
ZK TECHNOLOGY LLC America USD Currency used in the place of
operation
ZKTECO USA LLC America USD Currency used in the place of
operation
ZKTECO BIOMETRICS INDIA PRIVATE LIMITED India INR Currency used in the place of
operation
ZKTECO PANAMA ,S.A. Panama USD Sales and procurement are mainly
priced in USD
296
ZKTeco 2023 Annual Report
ZKTECO LATAM, S.A DE C.V. Mexico MXN Currency used in the place of
operation
ZK INTELLIGENT SOLUTIONS (PTY) LTD South Africa ZAR Currency used in the place of
operation
NGTECO CO.,LIMITED Hong Kong USD Sales and procurement are mainly
priced in USD
Note: Starting from 2023, ZKTECO SECURITY L.L.C. will replace its recording currency from USD to dirhams. The main
reason is that dirham is a commonly used settlement currency in the local area, and the proportion of dirhams in sales settlement is
higher.
VIII. R&D expenditures
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Employee remuneration 158,052,507.71 150,553,917.43
Depreciation and amortization 4,429,001.99 4,252,503.03
Office allowance 735,318.39 584,001.49
Travel expenses 5,013,751.62 2,717,699.76
Business entertainment expenses 79,446.35 32,132.91
Rental fees and utilities 1,136,494.86 949,867.41
R&D material costs 5,516,851.51 8,240,298.32
Software and technical service fees 10,305,794.57 8,945,903.92
Testing and certification fees 1,844,771.63 1,817,748.28
Depreciation and amortization of right-
1,914,549.28 2,477,285.95
of-use assets
Share-based payments 14,172,736.25 1,288,530.21
Others 10,412,190.40 6,123,958.71
Total 213,613,414.56 187,983,847.42
Including: Expensed R&D expenditures 213,613,414.56 187,983,847.42
IX. Changes to the scope of consolidation
1. Changes in the scope of consolidation due to other reasons
Explanations on changes in the scope of consolidation caused by other reasons (for example, establishing new subsidiaries,
liquidating subsidiaries, etc.) and their related situations:
Percentage
Reason for
S/N Company Name Establishment Date Registered Capital of Shares
Change
(%)
New
1 RALVIE AI INC. August 22, 2023 USD 10,000 100.00
establishment
New
2 ZKDIGIMAX PTE. LTD. March 7, 2023 USD 20 million 80.00
establishment
New
3 ZKDIGIMAX PANAMA, S.A. April 11, 2023 USD 10,000 80.00
establishment
New
4 ZKDIGIMAX COLOMBIA SAS April 26, 2023 COP 10 million 80.00
establishment
New
5 ZKDIGIMAX (PTY) LTD March 14, 2023 --- 80.00
establishment
PT. ZKDIGIMAX EXCEL New
6 May 25, 2023 IDR 10.01 billion 56.00
NOBLE establishment
297
ZKTeco 2023 Annual Report
ZKDIGIMAX CHINA CO., New
7 May 18, 2023 USD 300,000 80.00
LTD. establishment
ZK TECHNOLOGY New
8 October 17, 2023 MAD 100,000 100.00
MOROCCO establishment
Note: ZKDIGIMAX (PTY) LTD uses the paid up capital as its registered capital, which has not been paid as of the
end of the period; on August 7, 2023, Xiamen ZKTeco Cloud Valley Design and Development Co., Ltd. was
deregistered, and at the end of the period, the subsidiary was no longer included in the consolidation scope.
2. Others
None
X. Equity in other entities
1. Equity in subsidiaries
(1) Composition of the enterprise group
Unit: RMB
Main Percentage of shares
Name of Registration Nature of Acquisition
Registered Capital business
Subsidiaries place business Direct Indirect method
place
1. Xiamen
ZKTeco
Biometric Software
38,500,000.00 Xiamen Xiamen 100.00% 0.00% Acquisition
Identification development
Technology Co.,
Ltd.
2. Shenzhen
ZKTeco
Biometric Sales of
1,000,000.00 Shenzhen Shenzhen 100.00% 0.00% Acquisition
Identification goods
Technology Co.,
Ltd.
2.1.ZK
by
INVESTMENT USD 300,000.00 America America Established 0.00% 100.00%
investment
S INC.
2.1.1.ZK
Sales of by
TECHNOLOG USD 300,000.00 America America 0.00% 76.92%
goods investment
Y LLC
3. ZKTeco Sales Sales of by
50,000,000.00 Dongguan Dongguan 100.00% 0.00%
Co., Ltd. goods investment
4. Hangzhou
ZKTeco Hanlian by
2,000,000.00 Hangzhou Hangzhou E-commerce 100.00% 0.00%
E-commerce investment
Co., Ltd.
5. ZKCserv
Technology Software by
1,000,000.00 Shenzhen Shenzhen 51.00% 0.00%
Limited Co., development investment
Ltd.
6. Dalian Software by
3,000,000.00 Dalian Dalian 100.00% 0.00%
ZKTeo CO., development investment
298
ZKTeco 2023 Annual Report
Ltd. and sales
7. XIAMEN Software
by
ZKTECO CO., 100,000,000.00 Xiamen Xiamen development 100.00% 0.00%
investment
LTD. and sales
7.1 ZKTECO
Huayun
Software by
(Xiamen) 10,000,000.00 Xiamen Xiamen 0.00% 51.00%
development investment
Integrated
Circuit Co., Ltd.
7.2.ZKTECO
VIETNAM
Sales of by
TECHNOLOG USD 200,000.00 Vietnam Vietnam 0.00% 100.00%
goods investment
Y COMPANY
LIMITED
8. ZKTECO Production
by
(GUANGDON 800,000,000.00 Dongguan Dongguan and sales of 100.00% 0.00%
investment
G) CO., LTD goods
9. Xi'an ZKTeco Sales of
1,060,000.00 Xi'an Xi'an 100.00% 0.00% Acquisition
Co., Ltd. goods
10. Shenzhen
Zhongjiang Project
by
Intelligent 10,000,000.00 Shenzhen Shenzhen construction 51.00% 0.00%
investment
Technology Co., and sales
Ltd.
Hong
11. ZKTECO USD Hong Kong, Sales of by
Kong, 100.00% 0.00%
CO., LIMITED 15,000,000.00 China goods investment
China
11.1.ZKTECO
TURKEY
ELEKTRONIK
Sales of by
SANAYI VE TRL 1,200,000.00 Turkey Turkey 0.00% 88.09%
goods investment
TICARET
LIMITED
SIRKETI.
11.2.ZKTECO
MXN Sales by
LATAM, S.A. Mexico Mexico 0.00% 100.00%
44,260,000.00 services investment
DE C.V.
11.3.ZK Capital
SOFTWARE MXN R&D increase and
Mexico Mexico 0.00% 100.00%
DE MEXICO, 3,748,688.33 services equity
S.A. DE C.V. investment
11.4.ZKTECO
Sales by
COLOMBIA USD 525,000.00 Columbia Columbia 0.00% 100.00%
services investment
SAS
11.5.ZKTECO
Sales of
（M） SDN. MYR 646,000.00 Malaysia Malaysia 0.00% 51.00% Acquisition
goods
BHD.
11.6.ZKTECO
Capital
BIOMETRICS
IDR Sales of increase and
INDIA India India 0.00% 99.15%
132,765,240.00 goods equity
PRIVATE
investment
LIMITED
11.7.ZKTECO Sales of
EUR 538,500.00 Spain Spain 0.00% 75.69% Acquisition
EUROPE SL goods
11.7.1.ZKTECO
Sales by
IRELAND EUR 60,000.00 Ireland Ireland 0.00% 75.69%
services investment
LIMITED
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ZKTeco 2023 Annual Report
11.7.2.ZKTeco
Sales of by
Deutschland EUR 100,000.00 Germany Germany 0.00% 75.69%
goods investment
GmbH
11.7.3.ZKTECO Sales of by
EUR 350,000.00 Italy Italy 0.00% 71.37%
ITALIA S.R.L. goods investment
11.7.4.ZKTECO Sales of by
GBP 500,000.00 UK UK 0.00% 75.69%
UK LTD goods investment
11.8.ZKTECO
PERU
Sales
SOCIEDAD USD 503,900.48 Peru Peru 0.00% 100.00% Acquisition
services
ANONIMA
CERRADA
11.9.ZKTECO
THB Sales of
THAI CO., Thailand Thailand 0.00% 99.80% Acquisition
10,000,000.00 goods
LTD.
11.10.ZKTeco Sales by
USD 225,000.00 Chile Chile 0.00% 100.00%
Chile SpA services investment
11.10.1.SOLUC
IONES
CLP Sales by
INTEGRALES Chile Chile 0.00% 100.00%
60,000,000.00 services investment
Y SISTEMAS
SpA
11.11.ZKTECO
Sales of
SECURITY AED 147,000.00 Dubai Dubai 0.00% 100.00% Acquisition
goods
L.L.C
11.12.ZKTECO
Sales of
ARGENTINA USD 247,756.00 Argentina Argentina 0.00% 60.00% Acquisition
goods
S.A.
11.13.Limited
Liability
Company RUB Sales of by
Russia Russia 0.00% 100.00%
"ZKTeco 17,850,554.80 goods investment
biometrics and
security"
11.14.ZKTeco by
USD 7,084,934.7 America America Established 0.00% 100.00%
Investment Inc. investment
11.14.1.ZKTEC Sales of by
USD 250,000.00 America America 0.00% 80.00%
O USA LLC goods investment
11.14.2.Armatur Sales of
USD 100,000.00 Korea Korea 0.00% 90.00% Acquisition
a Co., Ltd. goods
11.14.3.ZKTeco Sales of by
USD 784,611.82 Japan Japan 0.00% 100.00%
Japan Co., Ltd. goods investment
11.14.4.ARMA USD Sales of by
America America 0.00% 100.00%
TURA LLC. 1,000,000.00 goods investment
11.14.5.RALVI Sales of by
USD 10,000.00 Canada Canada 0.00% 100.00%
E AI INC. goods investment
11.15.PT.
ZKTECO Sales of by
USD 200,000.00 Indonesia Indonesia 0.00% 95.00%
BIOMETRICS goods investment
INDONESIA
11.16.ZK
INVESTIMEN
BRL 4,131,712.79 Brazil Brazil Established 0.00% 99.68% Acquisition
TOS DO
BRASIL LTDA.
11.16.1.ZKTEC
Sales of
O DO BRASIL BRL 4,605,675.86 Brazil Brazil 0.00% 74.76% Acquisition
goods
S.A.
300
ZKTeco 2023 Annual Report
11.17.ZKTeco
Sales of by
Latam R&D USD 73,514.00 Argentina Argentina 0.00% 99.20%
goods investment
S.A.
Hong
11.18.NGTECO Hong Kong, Sales of by
HKD 10,000.00 Kong, 0.00% 100.00%
CO., LIMITED China goods investment
China
11.19.ZKTECO
NGN Sales of by
BIOMETRIC Nigeria Nigeria 0.00% 60.00%
102,029,950.71 goods investment
LIMITED
11.20.ZKTECO Sales of by
USD 323,500.00 Panama Panama 0.00% 99.86%
PANAMA, S.A. goods investment
11.21.ZK
INTELLIGENT ZAR South Sales of by
South Africa 0.00% 100.00%
SOLUTIONS 3,097,057.33 Africa goods investment
(PTY) LTD
11.22.ZKTECO
BIOMETRICS KES Sales of by
Kenya Kenya 0.00% 100.00%
KENYA 10,910,000.00 goods investment
LIMITED
11.23.ZKTECO
Sales of by
ROMANIA RON 250.00 Romania Romania 0.00% 100.00%
goods investment
S.R.L
12. Hubei
Sales of by
ZKTeco Co., 10,000,000.00 Wuhan Wuhan 100.00% 0.00%
goods investment
Ltd.
13. Wuhan
ZKTeco
Sales of by
Perception 1,000,000.00 Wuhan Wuhan 0.00% 51.00%
goods investment
Technology Co.,
Ltd.
14.ZKTECO
SG Sales of by
USD 100,000.00 Singapore Singapore 100.00% 0.00%
INVESTMENT goods investment
PTE. LTD.
14.1.ZKTECO
Sales of by
SINGAPORE USD 365,000.00 Singapore Singapore 0.00% 100.00%
goods investment
PTE. LTD.
Production
14.2.Armatura THB
Thailand Thailand and sales of 0.00% 99.99% Acquisition
Tech Co., Ltd. 337,223,776.99
goods
14.3.ZKDIGIM Sales of by
USD 20,000,000 Singapore Singapore 0.00% 80.00%
AX PTE. LTD. goods investment
14.3.1.ZKDIGI
Sales of by
MAX USD 10,000.00 Panama Panama 0.00% 80.00%
goods investment
PANAMA, S.A.
14.3.2.ZKDIGI
MAX COP Sales of by
Columbia Columbia 0.00% 80.00%
COLOMBIA 10,000,000.00 goods investment
SAS
14.3.3.ZKDIGI
South Sales of by
MAX (PTY) South Africa 0.00% 80.00%
Africa goods investment
LTD
14.3.4.PT.
ZKDIGIMAX IDR Sales of by
Indonesia Indonesia 0.00% 56.00%
EXCEL 10,010,000,00.00 goods investment
NOBLE
14.3.5 USD 300,000.00 Xiamen Xiamen Sales of 0.00% 80.00% by
301
ZKTeco 2023 Annual Report
ZKDIGIMAX goods investment
CHINA CO.,
LTD.
14.3.6.ZK
Sales of by
TECHNOLOG MAD 100,000.00 Morocco Morocco 0.00% 100.00%
goods investment
Y MOROCCO
Explanations on the fact that shareholding percentage is different from the proportion of voting rights in the subsidiaries:
Basis for holding half or less of the voting rights but still controlling the investee, and holding more than half of the voting rights
but not controlling the investee:
For important structured entities included in the consolidation scope, the basis for control is:
Basis for determining whether the Company is an agent or principal:
Other explanations: The Russian subsidiary of the Company, Limited Liability Company "ZKTeco biometrics and security", is
currently undergoing liquidation and cancellation; ZKDIGIMAX (PTY) LTD uses the paid up capital as its registered capital,
which has not been paid as of the end of the period.
(2) Important partly-owned subsidiaries
Unit: RMB
Profit and loss Dividends declared for
Minority
attributable to minority distribution to minority Closing balance of
Name of Subsidiaries shareholding
shareholders in current shareholders in the minority interest
percentage
period current period
ZK TECHNOLOGY LLC 23.08% 21,738,055.07 27,490,290.00 6,851,418.40
ZKTECO USA LLC 20.00% -108,837.65 35,243.96 5,062,572.63
Explanations on the fact that shareholding percentage is different from the proportion of voting rights for minority shareholders in
the subsidiaries:
Other explanations:
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ZKTeco 2023 Annual Report
(3) Main financial information of important partly-owned subsidiaries
Unit: RMB
Ending Balance Beginning Balance
Name of Non- Non- Non- Non-
Subsidiaries Current Total Current Current Total
Current assets current Total assets current current Total assets current
liabilities liabilities assets liabilities liabilities
assets liabilities assets liabilities
ZK
TECHNOL 61,698,439.58 440,329.48 62,138,769.06 36,590,588.71 36,590,588.71 71,976,229.04 1,110,736.14 73,086,965.18 28,686,703.92 475,387.16 29,162,091.08
OGY LLC
ZKTECO
34,544,702.45 845,428.04 35,390,130.49 9,526,303.95 116,606.17 9,642,910.12 40,257,368.66 1,147,107.78 41,404,476.44 15,808,239.19 272,710.13 16,080,949.32
USA LLC
Unit: RMB
Amount incurred in the current period Amount incurred in the previous period
Name of Subsidiaries Total Total
Cash flow from Operating Cash flow from
Operating revenue Net profit comprehensive Net profit comprehensiv
operating activities revenue operating activities
income e income
ZK TECHNOLOGY LLC 150,842,020.31 71,852,073.38 73,257,606.25 75,770,624.11 105,152,101.01 40,799,217.21 43,681,037.32 45,981,089.51
ZKTECO USA LLC 51,841,360.16 -544,188.18 -150,043.83 2,621,831.23 82,261,486.98 5,833,234.64 7,950,859.05 2,703,493.03
Other explanations:
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ZKTeco 2023 Annual Report
(4) Significant restrictions on the use of enterprise group assets and the repayment of enterprise group debts
(5) Financial or other support provided to structured entities included in the scope of consolidated financial statements
Other explanations:
2. Transactions resulting in change of owners' equity in subsidiaries and the subsidiaries still being under
control
(1) Change of owners' equity in subsidiaries
1) Our subsidiary ZKTECO CO., LIMITED will acquire 17.07% of the shares (700 shares) held by the foreign
shareholder FERNANDO DUCAY REAL in the sub-subsidiary of the Company ZKTECO EUROPE SL at a price of
EUR 2,149.71 per share. After the acquisition is completed, ZKTECO CO., LIMITED held 68% of the equity in
ZKTECO EUROPE SL, while the foreign shareholder FERNANDO DUCAY REAL held 32% of the equity. In
December 2023, ZKTECO CO., LIMITED made a new investment of USD 3.02889952 million in ZKTECO
EUROPE SL. After the capital increase was completed, ZKTECO CO., LIMITED made a cumulative investment of
USD 11.60667706 million in ZKTECO EUROPE SL, and the shareholding percentage increased from 68% to
75.69%.
2) Our subsidiary ZKTECO CO.,LIMITED and the sub-subsidiary of the Company ZKTECO LATAM, S.A DE
C.V. signed an agreement with the foreign shareholder SARAHZIGA RUIZ to acquire 49% of the shares
(1,836,858 shares) of the sub-subsidiary of the Company ZK SOFTWARE DE MEXICO, S.A. DE C.V. held by the
foreign shareholder at a price of MXN 1 per share. After the acquisition is completed, ZKTECO CO., LIMITED held
99% equity in ZK SOFTWARE DE MEXICO, S.A. DE C.V., and ZKTECO LATAM, S.A DE C.V. held 1% of the
equity in ZK SOFTWARE DE MEXICO, S.A. DE C.V.
3) Our subsidiary ZKTECO CO.,LIMITED and the sub-subsidiary of the Company ZKTeco Investment Inc.
signed an agreement with the foreign shareholder LEE KYU WHAN to acquire 100% of the shares (23,792 shares) of
the sub-subsidiary of the Company Armatura Co., Ltd. held by the sub-subsidiary of the Company ZKTeco
Investment Inc. at a price of KRW 3,819 per share. After the acquisition was completed, ZKTECO CO., LIMITED
held 90% of the equity in Armatura Co., Ltd.; LEE KYU WHAN held 10% of the equity in Armatura Co., Ltd.
4) ZKTECO EUROPE SL, a sub-subsidiary of the Company, has increased its capital by EUR 250,000 to
ZKTECO ITALIA S.R.L., a sub-subsidiary of the Company, based on its own profits (with no increase from foreign
shareholders); after the capital increase was completed, ZKTECO EUROPE SL held 94.28% of the equity of
ZKTECO ITALIA S.R.L., while the foreign shareholders TERRANOVA ROBERTO, ALPINI LUCA, DELLA
CHIESA STEFANO, and CALBOLI ROBERTO each held 1.43% of the equity of ZKTECO ITALIA S.R.L.
304
ZKTeco 2023 Annual Report
(2) Effect of transactions on minority equity and owners' equity attributable to the parent company
Unit: RMB
ZK SOFTWARE DE
ZKTECO EUROPE SL
MEXICO, S.A. DE C.V.
Acquisition cost/disposal consideration
--Cash 32,704,983.17 769,466.26
-- Fair value of non-cash assets
Total cost/disposal consideration 32,704,983.17 769,466.26
Less: Net assets of the subsidiaries calculated based on the
33,334,979.15 972,463.65
proportion of assets acquired/disposed
Difference 629,995.98 202,997.39
Including: Adjustment to the capital reserves 629,995.98 202,997.39
Adjustment to surplus reserve
Adjustment to undistributed profit
Other explanations:
3. Equity in joint arrangements or associates
(1) Important joint ventures or associates
Percentage of shares Accounting
treatment
Name of joint
Main business Registration Nature of methods for
venture or
place place business Direct Indirect investments in
associate
joint ventures
or associates
Xinhuaxin Software and
(Xi'an) information Long-term
Information Xi'an Xi'an technology 19.89% equity
Technology services investment
Co., Ltd. industry
Explanations on the fact that shareholding percentage is different from the proportion of voting rights in the joint ventures or
associates:
Basis for holding less than 20% of voting rights but having significant impact, or holding 20% or more of voting rights but not
having significant impact:
(2) Main financial information of important joint ventures
Unit: RMB
Beginning balance/amount incurred in
Ending balance/current amount incurred
the previous period
Current assets
Including: Cash and cash equivalents
305
ZKTeco 2023 Annual Report
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Minority interests
Shareholders' equity attributable to the
parent company
Net asset share calculated based on
shareholding percentage
Adjustment matters
--Goodwill
--Unrealized profits from internal
transactions
--Others
Book value of equity investment in joint
ventures
Fair value of equity investment in joint
ventures with public offer
Operating revenue
Financial expenses
Income tax expenses
Net profit
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income
Dividends received from joint ventures
of current year
Other explanations:
(3) Main financial information of important associates
Unit: RMB
Beginning balance/amount incurred in
Ending balance/current amount incurred
the previous period
Current assets 7,510,080.96 9,875,903.92
Non-current assets 307,582.52 2,116,980.59
Total assets 7,817,663.48 11,992,884.51
Current liabilities 20,381,375.86 19,966,606.53
Non-current liabilities 337,468.89
Total liabilities 20,381,375.86 20,304,075.42
Minority interests
Shareholders' equity attributable to the -12,563,712.38 -8,311,190.91
306
ZKTeco 2023 Annual Report
parent company
Net asset share calculated based on
-2,498,470.10 -1,652,796.67
shareholding percentage
Adjustment matters
--Goodwill
--Unrealized profits from internal
transactions
--Others
Book value of equity investment in
associates
Fair value of equity investments in
associates with public offers
Operating revenue 13,220,558.96 15,177,322.02
Net profit -4,282,521.88 -9,790,310.97
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income
Dividends received from associates this
year
Other explanations:
(4) Excess losses incurred by joint ventures or associates
Unit: RMB
Accumulated unrecognized Unrecognized losses in the
Name of joint venture or Accumulated unrecognized
losses accumulated in the current period (or net profit
associate losses at the end of this period
previous period shared in the current period)
Xinhuaxin (Xi'an)
Information Technology Co., -12,164,220.89 -851,639.43 -13,015,860.32
Ltd.
ZKTECO SOLUTIONS INC. -538,127.48 -178,340.92 -716,468.40
PT. ZKTECO SECURITY
-14,844.38 -412,645.80 -427,490.18
INDONESIA
Other explanations:
4. Others
XI. Government Subsidies
1. Government subsidies recognized by accounts receivable at the end of the reporting period
□ Applicable Not applicable
Reasons for not receiving the expected amount of government subsidies at the expected time point
□ Applicable Not applicable
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ZKTeco 2023 Annual Report
2. Liability items involving government subsidies
Applicable □ Not applicable
Unit: RMB
Amount
Newly added included in Amount of
Other
subsidy non- other income
Accounting Beginning changes in Ending Assets/Incom
amount in operating transferred in
Subject Balance the current Balance e-related
current revenue for the current
period
period the current period
period
Deferred Assets-
2,039,702.49 186,152.87 1,853,549.62
income related
Total 2,039,702.49 186,152.87 1,853,549.62
3. Government subsidies included in current profits and losses
Applicable □ Not applicable
Unit: RMB
Accounting Subject Amount incurred in the current period Amount incurred in the previous period
Value added tax is collected and
4,905,473.02 5,143,783.97
refunded immediately
Value added tax credit 2,139,085.95
Dongguan Economic and Information
Technology Bureau "Human 58,999.10 58,999.06
Replacement by Machine" Fund
Automation Project Subsidy of
Dongguan Bureau of Industry and 60,596.75 60,596.78
Information Technology
Industrial Support and Transformation
and Upgrading Special Fund (Integration
of Informatization and Industrialization) 22,650.22 25,330.17
of Dongguan Bureau of Industry and
Information Technology
Subsidy for Residency and Decoration of
Management Committee of Xiamen
27,848.40 9,282.80
Torch High-Tech Industry Development
Zone
Subsidy for Exhibition Hall Decoration
of Management Committee of Xiamen
16,058.40 2,676.40
Torch High-Tech Industry Development
Zone
Stabilization allowance 146,679.07 337,478.73
Value added tax deduction 2,498.15 20,596.19
Employment value-added tax reduction 41,600.00
Rewards for high-tech enterprise
310,000.00 50,000.00
recognition
Economic Development Bureau of
Zhangmutou Town, Dongguan City -
Issuing rewards, publicity subsidies, and 50,000.00
verification of electronic consumption
vouchers on behalf of others
2022 Innovation Enterprise R&D
1,000,000.00
Investment Subsidy of Dongguan
308
ZKTeco 2023 Annual Report
Science and Technology Bureau
Dongguan Enterprise Vocational Skill
50,000.00
Level Recognition Award and Subsidy
One-time job expansion subsidy 45,000.00 109,500.00
The 23rd China Patent Award and the 9th
Guangdong Patent Award (China Patent 500,000.00
Excellence Award)
2022 Dongguan "Double Growth Plan"
Service Package Award of Dongguan
663,500.00
Finance Bureau Treasury Payment
Center
Subsidy Funds from Dongguan
489,906.38
Administration for Market Regulation
Fujian Province Patent Award Bonus
200,000.00
(National Patent Award Part)
Subsidies for enterprise R&D expenses 760,800.00
Development Award of Management
Committee of Xiamen Torch High-Tech 100,000.00
Industry Development Zone
Special Subsidy for Encouraging
Enterprise Application of the
Management Committee of Xiamen 70,000.00
Torch High-Tech Industry Development
Zone
Support Fund for Increasing R&D
Investment of the Management
1,727,200.00
Committee of Xiamen Torch High-Tech
Industry Development Zone
Contribution Award of Two Zones from
the Management Committee of Xiamen
740,317.00
Torch High-Tech Industry Development
Zone
Supporting Expenses for the China
Patent Award of Xiamen Municipal 100,000.00
Market Supervision Bureau
Singapore Employment Support Scheme 258,163.62
One-time Training Subsidy for Retention
149,500.00 1,202,550.00
of Workers of Social Security Bureau
2022 Employment Support Scheme 163,331.30
Government subsidies 97,648.46
Policy Funding for Software and
177,800.00
Emerging Digital Industries
The 8th Guangdong Patent Award City
Fund Supporting Award of Dongguan 200,000.00
Administration for Market Regulation
2022 Provincial Special Fund for
Promoting High Quality Economic
955,805.29
Development of Bureau of Commerce of
Dongguan City
2022 Dongguan Municipal Special Fund
for Promoting High Quality
1,977,600.00
Development of Open Economy of
Bureau of Commerce of Dongguan City
Funds for the Second Batch of High-tech
Enterprise Recognition and Support 100,000.00
Projects in Shenzhen in 2020
Reduction and Exemption of Value- 1,043.10
309
ZKTeco 2023 Annual Report
added Tax for Small-scale Enterprises
Graduates' Social Security Subsidies 75,634.19 14,048.70
The government encourages enterprises
7,500.00
to recruit workers
Subsidy from the Social Security Bureau
6,000.00 15,540.00
to replace work with training
National High-tech Subsidies of
Management Committee of Xiamen
250,000.00
Torch High-Tech Industry Development
Zone
Dongguan Administration for Market
Regulation - Special Fund for Promoting
125,000.00
High-quality Development in 2023 to
Support Enterprise Standard Projects.
Bureau of Commerce of Dongguan City
- Special Fund for New Round of
Economic Stability and Enterprise Relief
510,863.00
of Bureau of Commerce of Dongguan
City (Third Batch of Export Credit
Insurance in 2023.
Received the Industrial Design Award
bonus from Dongguan Bureau of 200,000.00
Industry and Information Technology
2023 High Value Patent Cultivation
300,000.00
Layout Center Construction Project
Special Fund for Promoting High Quality
Development of Economy in 2023
1,101,719.86
(Promoting the Development of Foreign
Trade)
Special Fund for 2023 Central Foreign
Economic and Trade Development of
Guangdong Province (Promoting Foreign 46,993.00
Investment Cooperation) - Policy Credit
Insurance Subsidy
2023 Innovation Enterprise R&D
669,543.00
Investment Subsidy
2022 Dongguan International Trademark
34,439.59
Registration Project
2022 Dongguan Invention Patent
24,000.00
Funding Project
Provincial Funds for Ensuring Stability
in Foreign Trade (the Second Batch of
15,361.00
Projects Supporting Enterprises to Grab
Orders in 2022)
2023 Dongguan Special Fund for
Promoting High Quality Economic
Development - Intellectual Property
10,000.00
Protection - Enterprise and Individual
Intellectual Property Rights Protection
Assistance Project
Notice on the Second Batch of Funds for
Promoting High Quality Development of
Open Economy in Dongguan City
11,519.00
(Business Service Special Fund -
External Investment Cooperation
Matters) for the Year 2023 (2023 Project)
Economic Development Bureau's RMB 362,069.00
310
ZKTeco 2023 Annual Report
100 Billion Enterprise Cultivation Fund
Funding from Zhangmutou Town
30,000.00
Economic Development Bureau
The Second Batch of Enterprise R&D
Expenses Subsidies from Xiamen 400,000.00
Science and Technology Bureau in 2022
2022 National Intellectual Property
Advantage Enterprise Award of Xiamen 200,000.00
Municipal Market Supervision Bureau
2023 Provincial Special Fund for
Promoting High Quality Economic
Development (Consumer Hub
Construction Project) - Reward for 500,000.00
Supporting Stable Growth of Retail
Industry/Bureau of Commerce of
Dongguan City
Employment Subsidies for Poverty
55,200.00
Alleviation Population
Subsidies for a Growth of over 20% in
50,000.00
Output Value in 2023 Q1
Social Security Subsidies for Individuals
Facing Employment Difficulties of 29,052.21
Dongguan Social Security Bureau
Employment Post Subsidy of Dongguan
Human Resources and Social Security 26,172.95
Bureau Tangxia Branch
Others 246,411.56 221,117.40
Total 13,164,367.42 17,703,715.35
Other explanations:
XII. Risks Related to Financial Instruments
1. Various risks arising from financial instruments
1. Credit risk
Credit risk refers to the risk of financial losses incurred by the Company due to the counterparty's failure to
fulfill contract obligations. The management has established appropriate credit policies and continuously monitors the
exposure to credit risk.
The Company has adopted a policy of only trading with reputable counterparties. In addition, the Company
evaluates the credit qualifications of customers based on their financial position, the possibility of obtaining
guarantees from third parties, credit records, and other factors such as current market conditions, and sets
corresponding credit periods. The Company continuously monitors the notes receivable, accounts receivable balance,
and collection. For customers with poor credit records, the Company will use written reminders, shorten or cancel
credit periods, etc. to ensure that the Company does not face significant credit losses. In addition, the Company
reviews the recovery of financial assets on each balance sheet date to ensure that sufficient provisions for expected
credit losses have been made for the relevant financial assets.
311
ZKTeco 2023 Annual Report
The credit risk of other financial assets of the Company, including monetary funds, other receivables, debt
investments, etc., arises from counterparty defaults, and the maximum credit risk exposure is the carrying amount of
each financial asset on the balance sheet. The Company has not provided any other guarantee that may expose the
Company to credit risk.
The monetary funds held by the Company are mainly deposited in state-owned holding banks and other large
and medium-sized commercial banks and other financial institutions. The management believes that these
commercial banks have a high reputation and good asset status, there is no significant credit risk, and there will be no
significant losses caused by the default of the counterparty. The Company's policy is to control the amount of
deposits held in deposits based on the market reputation, business scale, and financial background of well-known
financial institutions, in order to limit the credit risk amount to any individual financial institution.
As part of the Company's credit risk asset management, the Company uses aging to assess impairment losses on
accounts receivable and other receivables. The Company's accounts receivable and other receivables involve a large
number of customers, and the aging information can reflect the solvency and bad debt risk of these customers for
accounts receivable and other receivables. The Company calculates the historical actual bad debt rate for different
aging periods based on historical data, and takes into account current and future economic forecasts, such as forward-
looking information like national GDP growth rate, total infrastructure investment, and national monetary policy, to
adjust the expected loss rate. For long-term receivables, the Company takes into account the settlement period,
payment period stipulated in the contract, the financial position of the debtor, and the economic situation of the
debtor's industry, and adjusts the expected credit loss based on the forward-looking information mentioned above.
As of December 31, 2023, the book balances and expected credit impairment losses of related assets are as
follows:
Item Book balance Impairment provision
Accounts receivable 514,240,227.22 34,436,913.56
Other receivables 45,004,054.60 12,259,480.40
Debt investment 42,284,596.90 0.00
Long-term receivables (including payments due within one year) 2,802,225.14 0.00
Total 604,331,103.86 46,696,393.96
Due to the fact that the Company's receivable risk points are distributed among multiple partners and customers,
as of December 31, 2023, 22.14% (December 31, 2022: 25.08%) of the Company's receivables came from the top
five customers with outstanding balances, and the Company did not have significant credit concentration risks.
The Company's maximum credit risk exposure is the book value of each financial asset in the balance sheet.
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ZKTeco 2023 Annual Report
For the bank financial products invested by the Company, the counterparty must have a credit rating higher than
or equal to that of the Company. Given the good credit rating of the counterparty, the Company's management does
not anticipate that the counterparty will be unable to fulfill its obligations.
2. Liquidity risk
The liquidity risk refers to the risk of capital shortage of the Company taking place in the course of cash
payment or settlement via other financial assets. The policy of the Company is to ensure that there is sufficient cash
for the payment of the matured debts. Each member enterprise of the Company is responsible for its cash flow
forecast. The Finance Department under the Company continuously monitors the Company's short-term and long-
term funding needs at the company level based on the cash flow forecast results of each member enterprise, to ensure
the maintenance of sufficient cash reserves; simultaneously, the Finance Department continuously monitors whether
it complies with the provisions of the loan agreement and obtain commitments from major financial institutions to
provide sufficient reserve funds to meet short-term and long-term funding needs. In addition, the Company has
entered into financing and credit agreements with major correspondent banks to provide support for the Company's
obligations related to commercial bills. As of December 31, 2023, the Company has obtained credit lines from
multiple domestic banks, with a total amount of RMB 962.9158 million, of which RMB 134.4149 million has been
used.
As of December 31, 2023, the Company's financial liabilities and off balance sheet guarantee items are
presented as undiscounted contract cash flows over the remaining term of the contract as follows:
Ending Balance
Item
Within 1 year 1-5 years Over 5 years Total
Notes payable 122,573,544.09 --- --- 122,573,544.09
Accounts payable 245,084,182.32 --- --- 245,084,182.32
Other payables 36,735,314.36 --- --- 36,735,314.36
Non-current liabilities due
21,094,682.36 --- --- 21,094,682.36
within one year
Other current liabilities 15,007,767.78 --- --- 15,007,767.78
Lease liabilities --- 19,713,286.21 --- 19,713,286.21
Long-term loan --- 7,810,405.04 --- 7,810,405.04
Total 440,495,490.91 27,523,691.25 --- 468,019,182.16
3. Market risk
(1) Exchange rate risk
The main business of the Company is operated within the territory of China, which is settled in RMB. However,
there are still exchange risks in the foreign currency assets and liabilities recognized and future foreign currency
313
ZKTeco 2023 Annual Report
transactions of the Company (the valuation currency for foreign currency assets and liabilities, as well as foreign
currency transactions, is mainly USD). The Finance Department of the Company is responsible for monitoring the
scale of foreign currency transactions and foreign currency assets and liabilities to minimize the exchange rate risk
faced.
The foreign currency financial assets and foreign currency financial liabilities of the Company at the end of the
period are presented in Note V Note 61. Foreign currency monetary items.
(2) Interest rate risk
The Company's interest rate risk mainly arises from bank loans, etc. Floating-rate financial liabilities expose the
Company to cash flow interest rate risk while fixed-rate financial liabilities expose the Company to fair value interest
rate risk. The Company determines the relative proportion of contracts with fixed interest rate and contracts with
floating interest rate according to the current market environment.
The Finance Department of the Company continuously monitors the Company's interest rate level. The increases
in interest rate will increase the costs of the new interest-bearing debts and the interest expenses of interest-bearing
debts failing to be paid up by the Company and subject to the interest calculation at floating interest rate, and will,
significantly and adversely, affect the Company's financial results; the management will make an adjustment
according to the latest market conditions to reduce the interest rate risks.
XIII. Disclosure of Fair Value
1. Ending fair value of assets and liabilities measured at fair value
Unit: RMB
Fair value at the end of the period
Item Third level fair
First level fair value Second level fair
value Total
measurement value measurement
measurement
I. Continuous fair value
-- -- -- --
measurement
(I) Trading financial
80,980,203.63 80,980,203.63
assets
1. Financial assets
measured at fair value and
whose changes are 80,980,203.63 80,980,203.63
included in the current
profits and losses
(1) Debt instrument
80,887,585.81 80,887,585.81
investment
(2) Equity instrument
investment
(3) Derivative financial
92,617.82 92,617.82
assets
(III) Other equity
instrument investments
Total assets continuously
80,980,203.63 80,980,203.63
measured at fair value
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ZKTeco 2023 Annual Report
II. Continuous fair value
-- -- -- --
measurement
2. Basis for determining the market value of continuous and non-continuous first level fair value
measurement items
None
3. Qualitative and quantitative information on valuation techniques and important parameters used for
continuous and non-continuous second level fair value measurement items
The Company divides its bank financial products into financial assets measured at fair value and whose changes
are included in the current profits and losses, and subsequently measures them at fair value. At the end of the period,
the expected income is calculated based on the expected return rate of the bank financial products, and it is used as
the fair value with the principal at the end of the period.
4. Qualitative and quantitative information on valuation techniques and important parameters used for
continuous and non-continuous third level fair value measurement items
The third level fair value measurement items of the Company include other non-current financial assets. Other
non-current financial assets are "three no equity investments" held by the Company without control, joint control, and
significant impact. The determination of fair value is based on the input value of the third level. Where there is
insufficient recent information to determine fair value, or where there is a wide range of estimates of fair value, and
the cost represents the best estimate of fair value within that range, the cost may represent an appropriate estimate of
fair value within that range.
5. Information on adjustment between beginning book value and ending book value of items subject to
Level 3 on a going fair value measurement and sensitivity analysis of non-observable parameters
None
6. Continuous fair value measurement items that undergo conversion between different levels during the
current period, the reasons for conversion, and the policy for determining the conversion time point
None
7. Changes in valuation techniques and reasons for such changes during the current period
None
315
ZKTeco 2023 Annual Report
8. Fair value of financial assets and liabilities not measured at fair value
Financial assets and liabilities not measured at fair value mainly include accounts receivable, short-term loans,
payables, non-current liabilities due within one year, and long-term loans. The difference between the carrying
amounts of financial assets and liabilities not measured at fair value and fair value is very small.
9. Other
None
XIV. Related Parties and Related Party Transactions
1. Information of the parent company of the enterprise
Share proportion Proportion of
Name of the parent held by parent voting rights of the
Registration place Nature of business Registered Capital
company company in the parent company to
enterprise the Company
Shenzhen ZKTeco
Times Investment Shenzhen Established RMB 9 million 30.05% 30.05%
Co., Ltd.
Explanations on the parent company of the enterprise
The ultimate controller of this enterprise is Che Quanhong.
Other explanations:
2. Subsidiaries of the enterprise
The situation of the Company's subsidiaries is detailed in Note X 1. Equity in subsidiaries.
3. Information of joint ventures and associates of the enterprise
For important joint ventures or associates of the enterprise, please refer to Note X 3. Equity in joint venture arrangements or
associates.
Related party transactions with the Company occurred in the current period, the information of other joint ventures or associates
that have formed balances through related party transactions with the Company in the early stage is as follows:
Name of joint venture or associate Relationship with the enterprise
ZKTECO SMART CITY (THAILAND) CO., LTD. Joint venture
PT. ZKTECO SECURITY INDONESIA Joint venture
ZKTECO SOLUTIONS INC. Joint venture
CV Squared, Inc. Joint venture
Guizhou Zhongjiang Intelligent Technology Co., Ltd. Joint venture
Xinhuaxin (Xi'an) Information Technology Co., Ltd. Joint venture
Xiamen Xingniu Yunyu Venture Capital Partnership
Joint venture
Enterprise (Limited Partnership)
Silk ID Systems Inc. Joint venture
Other explanations:
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ZKTeco 2023 Annual Report
4. Conditions of other affiliated parties
Names of other related parties Relationship between other related parties and the enterprise
An enterprise controlled by minority shareholders of subsidiary
TVCENLINEA.COM SA DE CV
ZK SOFTWARE DE MEXICO, S.A. DE C.V.
An enterprise controlled by the minority shareholder Fernando
Ducay Real of subsidiary ZKTECO EUROPE SL; Fernando
PSD SECURITY, S.L. Ducay Real also holds 27.38% of the capital contribution share
of JYLX, which holds 2.42% of the Company's shares (as of
December 31, 2023)
Liu Jiajia Former supervisor
A shareholder holding 49.00% equity in subsidiary Shenzhen
Shenzhen Huijiang Industrial Group Co., Ltd.
Zhongjiang
Wu Xinke Former supervisor
Yang Xianfeng Supervisor
Wu Xiongxiong Supervisor of the controlling shareholder ZKTeco Times
Other explanations:
Acquired all the minority shareholders' equity of subsidiary ZK SOFTWARE DE MEXICO, S.A. DE C.V. in the
period. At the end of the period, TVCENLINEA.COM SA DE CV was not a related party.
5. Related party transactions
(1) Related party transactions for purchasing and selling goods, providing and receiving labor services
Table of Purchasing Goods/Accepting Labor Services
Unit: RMB
Amount incurred Amount incurred
Content of related Approved Does it exceed the
Related party in the current in the previous
party transaction transaction limit transaction limit
period period
TVCENLINEA.C
Purchasing goods 2,666,620.76 3,300,000.00 No 3,188,128.36
OM SA DE CV
PSD SECURITY,
Purchasing goods 9,065.71 5,000.00 Yes 2,338.21
S.L.
ZKTECO SMART
CITY
Purchasing goods 109,591.55 Yes 56,390.11
(THAILAND)
CO., LTD.
Silk ID Systems Technology
0.00 0.00 No 201,308.93
Inc. license fee
Xinhuaxin (Xi'an)
Information
Service fee 1,240,186.51 8,100,000.00 No 268,419.29
Technology Co.,
Ltd.
PT. ZKTECO
Marketing
SECURITY 511,976.96 500,000.00 Yes 426,544.55
expenses
INDONESIA
Total 4,537,441.49 11,905,000.00 4,143,129.45
Selling goods/rendering labor service
Unit: RMB
Related party Content of related party Amount incurred in the Amount incurred in the
317
ZKTeco 2023 Annual Report
transaction current period previous period
Xinhuaxin (Xi'an)
Information Technology Co., Selling goods 24,333.04 0.00
Ltd.
PT. ZKTECO SECURITY
Selling goods 1,316,828.08 1,444,138.35
INDONESIA
ZKTECO SMART CITY
Selling goods 1,964,067.81 1,755,587.44
(THAILAND) CO., LTD.
TVCENLINEA.COM SA DE
Selling goods 69,479,326.72 33,887,845.85
CV
PSD SECURITY, S.L. Selling goods 3,505,729.15 7,351,670.43
ZKTECO SOLUTIONS INC. Selling goods 7,940,059.21 11,418,513.01
Total 84,230,344.01 55,857,755.08
Explanations on related party transactions for purchasing and selling goods, providing and receiving labor services
Note: The expected daily related party transaction limit of the Company is the maximum amount that both
parties may sign a contract, and the actual amount incurred is determined based on the business development of both
parties, resulting in a certain difference between the actual amount incurred and the expected amount. The difference
in amount is relatively small and does not meet the criteria for review by the Board of Directors. The daily related
party transactions of the Company in 2023 were based on the normal production and operation needs of the Company.
The related party transactions comply with the principles of fairness, openness, and impartiality, and there is a certain
difference between the actual amount incurred and the expected amount. This is mainly due to the Company's
appropriate adjustments based on business conditions, and there is no situation that damages the Company and
shareholders' rights and interests, which will not affect the independence of the Company.
(2) Related entrusted management/contracting and entrusted management/outsourcing situation
Table of entrusted management/contracting situation of the Company:
Unit: RMB
Custody
Termination Pricing Basis
Name of Name of Type of Start Date of Income/Contrac
Date of for Custody
Principal/Outso Trustee/Contrac Entrusted/Contr Entrusting/Cont ting Income
Entrusting/Cont Income/Contrac
urcer tor acted Assets racting Recognized in
racting ting Income
Current Period
Explanations on related custody/contracting situation
The Company's Entrusted Management/Outsourcing Situation:
Unit: RMB
Custody
Termination Pricing Basis
Name of Name of Entrusted/Outs Start Date of Fee/Contracting
Date of for Custody
Principal/Outso Trustee/Contrac ourced Asset Entrusting/Outs Fee Recognized
Entrusting/Outs Fee/Outsourcin
urcer tor Type ourcing in Current
ourcing g Fee
Period
Explanations on related management/outsourcing situation
318
ZKTeco 2023 Annual Report
(3) Related leasing
The Company as lessor:
Unit: RMB
Confirmed rental income in Rental income recognized in
Name of leasee Types of leased assets
the current period the previous period
PT. ZKTECO SECURITY
Houses and buildings 278,516.50 178,667.91
INDONESIA
The Company as lessee:
Unit: RMB
Variable lease
Simplified rental fees payments not
for short-term leases included in the Interest expenses on lease
Rent paid Increased right-of-use assets
and low value asset measurement of liabilities assumed
Types of leases (if applicable) lease liabilities (if
Name of
leased applicable)
lessor
assets Amount Amount Amount Amount Amount
Amount
incurred incurred in incurred incurred Amount Amount incurred in Amount Amount
incurred in
in the the in the in the incurred in the incurred in the the incurred in the incurred in the
the current
current previous current previous current period previous period previous current period previous period
period
period period period period period
Houses
Che and
17,500.00 1,282,566.12 1,039,994.86 71,065.13 7,890.96 2,481,817.75 2,676,066.19
Quanzhong building
s
Xinhuaxin
Houses
(Xi'an)
and
Information 168,256.20 109,000.00 2,461.24 10,310.19 -189,265.21 257,801.80
building
Technology
s
Co., Ltd.
Total 17,500.00 1,450,822.32 1,148,994.86 73,526.37 18,201.15 2,292,552.54 2,933,867.99
Information of related leasing situation
(4) Related guarantee
As the guarantor, the Company
Unit: RMB
Guarantee expiration Has the guarantee been
Guaranteed party Guarantee amount Guarantee start date
date fulfilled
As the guarantor, the Company
Unit: RMB
Guarantee expiration Has the guarantee been
Guarantor Guarantee amount Guarantee start date
date fulfilled
Explanations on related party guarantees
319
ZKTeco 2023 Annual Report
(5) Related party fund borrowing and lending
Unit: RMB
Lending
Related party Start Date Due Date Remarks
amount
Borrowing
Lending
The subsidiary of the Company, ZKTECO CO.,
LIMITED, signed a loan agreement
with ZKTECO SOLUTIONS INC. on March
29, 2021, agreeing to provide a maximum loan
of USD 240,000.00; on March 31, 2021, the
amount of the loan remitted was USD
50,000.00, with an exchange rate of 6.5713 for
ZKTECO March 28,
December 31, 2024 the loan on the same day, which was converted
SOLUTIONS INC. 2021
into RMB 328,565.00. Both parties agreed to
repay the loan within 12 months after its
expiration, with an interest rate of 3.00%. After
the expiration, both parties will negotiate to
extend until December 31, 2024, and as of
December 31, 2023, ZKTeco
SOLUTIONS INC. has repaid the loan.
(6) Asset transfer and debt restructuring of related parties
Unit: RMB
Content of related party Amount incurred in the Amount incurred in the
Related party
transaction current period previous period
(7) Compensation for key management personnel
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Remuneration of key management
7,509,402.65 6,078,614.43
personnel
(8) Other related party transactions
Transaction Amount incurred in Amount incurred in
Names of affiliated parties Remarks
type the current period the previous period
Equity Xiamen Xingniu Yunyu Venture Capital Partnership
24,000,000.00 --- Note 1
investment Enterprise (Limited Partnership)
Total 24,000,000.00
Note 1: On June 21, 2023, the Company held the Third Session of the Third Board Meeting and the Third
Session of the Third Supervisory Board Meeting, and deliberated and approved the "Proposal on Establishing
Ecological Innovation Fund and Related Party Transactions through Cooperation with Professional Investment
Institutions". It was agreed that the Company and related parties would invest in the establishment of an ecological
innovation fund. The Company planned to contribute RMB 48 million, the related party Mr. Che Quanhong planned
to contribute RMB 12 million, and other investors planned to contribute a total of RMB 60 million, with a total
320
ZKTeco 2023 Annual Report
investment of RMB 120 million, to establish an ecological innovation fund, namely Xiamen Xingniu Yunyu Venture
Capital Partnership Enterprise (Limited Partnership). As of December 31, 2023, the Company has actually
contributed RMB 24 million.
6. Accounts receivable and payable to related parties
(1) Accounts receivable
Unit: RMB
Project Ending Balance Beginning Balance
Related party
Name Book balance Bad debt reserve Book balance Bad debt reserve
Accounts PT. ZKTECO SECURITY
4,972,664.59 499,062.11 4,038,062.35 287,436.39
receivable INDONESIA
Accounts TVCENLINEA.COM SA
18,800,631.46 940,031.57
receivable DE CV
Accounts ZKTECO SMART CITY
1,377,973.61 68,898.68 453,023.76 22,651.19
receivable (THAILAND) CO., LTD.
Accounts ZKTECO SOLUTIONS
15,485,450.49 859,347.75 14,290,503.53 714,525.18
receivable INC.
Guizhou Zhongjiang
Accounts
Intelligent Technology Co., 334,800.21 334,800.21 334,800.21 334,800.21
receivable
Ltd.
PSD SECURITY, S.L.
(formerly
Accounts
PROFESSIONAL 1,196,725.73 59,836.29 2,833,385.37 141,669.27
receivable
SOFTWARE
DEVELOPMENT,S.L.)
Other
Che Quanhong 131,771.27
receivables
Guizhou Zhongjiang
Other
Intelligent Technology Co., 397,428.70 397,428.70 397,428.70 397,428.70
receivables
Ltd.
Xinhuaxin (Xi'an)
Other
Information Technology 31,395.00
receivables
Co., Ltd.
Other
Yang Xianfeng 28,208.34
receivables
Other ZKTECO SOLUTIONS
366,547.87 36,132.41
receivables INC.
Other
Liu Jiajia 20,893.80
receivables
(2) Accounts payable
Unit: RMB
Closing book
Project Name Related party Opening book balance
balance
Accounts payable TVCENLINEA.COM SA DE CV 428,030.88
Accounts payable ZKTECO SMART CITY (THAILAND) CO., LTD. 26,708.72 1,379.34
Xinhuaxin (Xi'an) Information Technology Co.,
Accounts payable 268,420.07
Ltd.
Other payables PSD SECURITY, S.L. 8,079.96
Other payables Shenzhen Huijiang Industrial Group Co., Ltd. 1,800,000.00 1,800,000.00
321
ZKTeco 2023 Annual Report
Other payables Wu Xinke 61,071.16 18,525.84
Other payables Wu Xiongxiong 62,109.13
Other payables PT. ZKTECO SECURITY INDONESIA 295,856.20
Contract liabilities CV Squared,Inc. 1,275,140.00 1,275,140.00
Contract liabilities Silk ID Systems Inc. 53,387.06 52,496.86
7. Commitments of related parties
None.
8. Others
None.
XV. Share-based Payment
1. Overall information of share-based payment
Applicable □ Not applicable
Unit: RMB
Grant object Current grant Current exercise Unlocked in current period Expired in current period
category Quantity Amount Quantity Amount Quantity Amount Quantity Amount
Directors, senior
managers, middle
managers and core
technology
(business)
backbone 273,036.00 7,012,900.00 1,639,842.00 32,928,027.36 1,639,842.00 32,928,027.36 136,608.00 2,760,866.69
employees of the
Company
(including
branches and
subsidiaries)
Total 273,036.00 7,012,900.00 1,639,842.00 32,928,027.36 1,639,842.00 32,928,027.36 136,608.00 2,760,866.69
Outstanding stock options or other equity instruments at the end of the period
Applicable □ Not applicable
Outstanding other equity instruments at the end of
Outstanding stock options at the end of the period
the period
Grant object category
Remaining term of the Remaining term of the
Range of exercise price Range of exercise price
contract contract
The exercise price for The remaining term of
Directors, senior
the first grant of stock the share option
managers, middle
options issued by the contracts issued by the
managers and core
Company in 2022 is Company for the first
technology (business)
RMB 14.12 per share, time in 2022 is from
backbone employees of
while the exercise price January 1, 2024 to
the Company
for the reserved grant November 16, 2024.
(including branches
of stock options issued The remaining term of
and subsidiaries)
by the Company in the share option
322
ZKTeco 2023 Annual Report
2022 is RMB 14.12 per contracts issued by the
share. Company for the
reserved grant in 2022
is from January 1, 2024
to June 21, 2025.
Other explanations:
According to the authorization of the second extraordinary general meeting of shareholders in 2022, the
Company held the Third Session of the Third Board Meeting on June 21, 2023, and deliberated and approved the
"Proposal on Adjusting the Granting Price and Quantity of 2022 Restricted Share Incentive Plan", "Proposal on
Cancelling Some Granted but Not Affiliated Restricted Shares", and "Proposal on Granting Reserved Restricted
Shares to the Incentive Objects of 2022 Restricted Share Incentive Plan". Considering that the Company has
announced the implementation of the 2022 annual equity distribution, corresponding adjustments have been made to
the grant price and number of restricted shares in the 2022 restricted share incentive plan. The initial and reserved
grant prices have been adjusted from RMB 18.70 per share to RMB 14.12 per share, and the number of restricted
shares granted for the first time has been adjusted from 2.6559 million shares to 3.45267 million shares. The number
of reserved restricted shares that are granted has been adjusted from 210,028 shares to 273,036 shares. At the same
time, the reserved grant conditions stipulated in the 2022 restricted share incentive plan of the Company have been
met. The Board of Directors has agreed to determine June 21, 2023 as the reserved grant date, and has agreed to grant
273,036 restricted shares to 46 incentive objects who meet the grant conditions.
On November 10, 2023, the Company held the 7th Session of the Third Board Meeting and the 7th Session of
the Third Supervisory Board Meeting, and deliberated and approved the "Proposal on the Achievement of the
Attribution Conditions for the First Attribution Period of the 2022 Restricted Share Incentive Plan". To handle the
attribution related matters for 466 eligible incentive objects, 1,639,842 restricted shares can be attributed.
Whereas ① Yang Xianfeng, the incentive object, was elected as the Supervisor of the Company on April 7,
2023, and according to relevant regulations, the Supervisor cannot be the incentive object, the total number of 7,020
Class II restricted shares granted to him but not yet attributed shall not be attributed and shall be invalidated by the
Company; ② Among the incentive objects, 29 of them do not meet the incentive qualifications due to resignation.
The corresponding 124,670 shares of Class II restricted shares that have been granted but have not yet been attributed
cannot be attributed and will be invalidated by the Company; ③ In the 2023 individual level performance assessment,
6 incentive objects were evaluated as "D-unqualified", and their corresponding total of 1,170 restricted shares for the
year were not attributable and were invalidated by the Company; ④ For the first grant of incentive objects, 10
incentive objects voluntarily relinquish part or all of the restricted share rights granted by the Company during the
first attribution period due to personal reasons. All 3,748 restricted shares that have been granted but have not yet
been attributed shall not be attributed and shall be invalidated by the Company. (Note: The number of invalidated
shares as mentioned above is the number of shares adjusted according to the Company's 2023 equity distribution
proposal.)
2. Equity settled share-based payments
Applicable □ Not applicable
323
ZKTeco 2023 Annual Report
Unit: RMB
Method for determining the fair value of equity instruments on
Determination of Fair Value Based on the Black Scholes Model
the grant date
On each balance sheet date during the waiting period, the
Basis for Determining the Number of Exercisable Equity Company predicts based on the latest number of exercisable
Instruments rights, completion of performance indicators, personal
assessment status, and other subsequent information
Reasons for significant differences between the current
None
estimate and the previous estimate
Accumulated amount of equity settled share-based payments
41,919,246.09
recognized in capital reserve
The total amount of expenses recognized for equity settled
37,285,356.91
share-based payments in this period
Other explanations:
On November 16, 2022, the Company held the 21st Session of the Second Board Meeting, and deliberated and approved the
"Proposal on Granting Restricted Share to Incentive Objects of 2022 Restricted Share Incentive Plan for the First Time". The
independent directors of the Company expressed relevant opinions on this matter, and believed that the conditions for granting
stipulated in the Company's incentive plan had been met, the determined grant date was in line with relevant regulations, the scope
of incentive objects stipulated in the Company's restricted share incentive plan, and its subject qualification as the incentive object
of the Company's restricted share incentive plan was legal and effective. The Board of Supervisors verified the list of incentive
objects granted on the grant date and issued verification opinions.
On June 21, 2023, the Company held the Third Session of the Third Board Meeting, and deliberated and approved the
"Proposal on Adjusting the Granting Price and Quantity of 2022 Restricted Share Incentive Plan", "Proposal on Cancelling Some
Granted but Not Affiliated Restricted Shares", and "Proposal on Granting Reserved Restricted Shares to the Incentive Objects of
2022 Restricted Share Incentive Plan". The independent directors of the Company have expressed relevant opinions on this matter,
believing that the grant date complies with the relevant provisions of the "Management Measures" and the Company's restricted
share incentive plan on the grant date. The Company and the incentive objects of reserved grant have not experienced any
circumstances where rights and interests cannot be granted, and the grant conditions stipulated in the Company's incentive plan
have been met. The Board of Supervisors verified the list of incentive objects granted on the grant date and issued verification
opinions.
3. Cash settled share-based payments
□ Applicable Not applicable
4. Share-based payment fees in the current period
Applicable □ Not applicable
Unit: RMB
Grant object category Equity settled share-based payment fees Cash settled share-based payment fees
Directors, senior managers, middle 37,285,356.91
324
ZKTeco 2023 Annual Report
managers and core technology (business)
backbone employees of the Company
(including branches and subsidiaries)
Total 37,285,356.91
Other explanations:
5. Modification and termination of share-based payment
Considering that the Company has announced the implementation of the 2022 annual equity distribution,
corresponding adjustments have been made to the grant price and number of restricted shares in the 2022 restricted
share incentive plan. The initial and reserved grant prices have been adjusted from RMB 18.70 per share to RMB
14.12 per share, and the number of restricted shares granted for the first time has been adjusted from 2.6559 million
shares to 3.45267 million shares. The number of reserved restricted shares that are granted has been adjusted from
210,028 shares to 273,036 shares.
6. Others
None.
XVI. Commitments and Contingencies
1. Significant commitments
Significant commitments on the balance sheet date
There are no significant commitments that need to be disclosed by the Company.
2. Contingencies
(1) Significant contingencies on the balance sheet date
Contingencies arising from pending litigation or arbitration and their financial impact
1) Lease contract dispute with Guizhou Yiyun Big Data Service Co., Ltd.
The associate of the Company, Guizhou Zhongjiang Intelligent Technology Co., Ltd., has been sued for a
leasing dispute with Guizhou Yiyun Big Data Service Co., Ltd. As of the date of approval for the financial statements,
this case has been adjudicated in the second instance and is currently in the application for compulsory enforcement.
The controlling subsidiary of the Company, Shenzhen Zhongjiang Intelligent Technology Co., Ltd. and He
Siting, as a shareholder of Guizhou Zhongjiang Intelligent Technology Co., Ltd., bear joint and several liability, with
a litigation amount of ① RMB 501,307.00 and the penalty for overdue payment (based on unpaid rent and calculated
325
ZKTeco 2023 Annual Report
at an annual interest rate of 3.85%, from April 23, 2020 to the date when the rent is fully paid); ② Pay a rent free
period loss of RMB 100,000.00.
As of the date of approval for these financial statements, the controlling subsidiary of the Company, Shenzhen
Zhongjiang Intelligent Technology Co., Ltd., has become insolvent and the Company is currently applying for
compulsory liquidation.
Except for the above contingencies, as of December 31, 2023, the Company does not have other important contingencies that
should be disclosed but not disclosed.
(2) The Company shall also provide a description if there are no important contingencies that need to be
disclosed
There are no significant contingencies that need to be disclosed by the Company.
3. Others
XVII. Events after the Balance Sheet Date
1. Important non adjustment matters
Unit: RMB
Number of impacts on The reason for the inability to
Item Content financial position and estimate the number of
operating results impacts
2. Profit distribution
Proposed distribution of dividends per 10 shares (RMB) 4.50
Proposed distribution of bonus shares per 10 shares (share) 0
Proposed distribution of additional shares converted from
0
capital reserves per 10 shares (share)
The Company plans to distribute cash dividends of RMB 4.5
(including tax) per 10 shares to all shareholders based on the
total share capital deducted from the repurchased shares in the
Company's repurchase special account on the registration date
of equity distribution. No bonus shares will be given, and no
capital reserve will be converted into share capital. The
remaining undistributed profits will be carried forward to future
years. As of April 22, 2024, the total share capital of the
Profit distribution proposal
Company is 194,679,508 shares. 2,230,000 shares have been
repurchased in the Company's repurchase account, and the total
amount of cash dividends planned to be distributed for 2023 is
RMB 86,602,278.60 (including tax).
The proposal still needs to be reviewed and approved by the
Board of Shareholders. If there is a change in the total amount
of the Company's share capital or shares in the repurchase
special account from the approval of the profit distribution
326
ZKTeco 2023 Annual Report
proposal by the Board of Directors and the Board of
Shareholders to the implementation, the Company will adjust
the distribution proposal accordingly according to the principle
of "fixed total cash dividends".
3. Explanations on other events after the balance sheet date
XVIII. Other Important Events
1. Other important transactions and matters that have an impact on investors' decisions
(1) ZKTeco filed a lawsuit against Zhongan Intelligent Control, Liu Yuntian, Yan Pingjin, Zhang Peng, and
Wang Gen on a loan contract dispute
On July 31, 2019, the Company filed a lawsuit against Shenzhen Zhongan Intelligent Control Technology Co.,
Ltd. (hereafter referred to as "Zhongan Intelligent Control"), Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen
in the Third People's Court of Dongguan City, Guangdong Province on a loan contract dispute, requesting judgment
that Zhongan Intelligent Control repay the loan of RMB 7,757,380.00 and pay interest of RMB 262,560.75
(calculated from April 1, 2019 at an annual interest rate of 8.70% and temporarily recorded until July 31, 2019);
request judgment that Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen bear joint and several payment
responsibilities for the loan and interest; request that Zhongan Intelligent Control, Liu Yuntian, Yan Pingjin, Zhang
Peng, and Wang Gen pay an attorney fee of RMB 240,000.00, a guarantee fee of RMB 8,200.00, and all legal costs in
this case in the judgment.
The cause of action was in December 2017. Zhongan Intelligent Control borrowed RMB 7,000,000.00 from the
Company for business development reasons, with a repayment deadline of May 9, 2018. Afterwards, Zhongan
Intelligent Control was unable to repay the aforementioned loan, and after negotiation, the repayment date was
changed to January 10, 2019. In October 2018, due to a shortage of working capital, Zhongan Intelligent Control
proposed to advance the mold opening fee of RMB 757,380.00 to the Company, and the Company once again
provided a loan of RMB 757,380.00 to Zhongan Intelligent Control. In April 2019, the Company signed a
supplementary agreement with Zhongan Intelligent Control, stipulating that the loan and interest would be repaid on a
monthly basis starting from April 2019. Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen would bear unlimited
joint and several guarantee liability. After the contract was signed, Zhongan Intelligent Control did not repay on time.
The case has been accepted by the Third People's Court of Dongguan City, Guangdong Province. The case
number is (2019) Y 1973 MC No. 12578. On October 31, 2020, Zhongan Intelligent Control was sentenced to repay
the loan of RMB 7,757,380.00 and interest (with RMB 7,757,380.00 as the principal, calculated at an annual interest
rate of 8.70% from April 1, 2019 to the actual payment date). Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen
327
ZKTeco 2023 Annual Report
bear joint and several liability for the repayment of the above-mentioned debt scope. At the same time, Zhongan
Intelligent Control shall bear the actual attorney fee of RMB 240,000.00 and preservation and guarantee service fees
of RMB 8,200.00 in this lawsuit.
On October 29, 2020, the People's Court of Longgang District, Shenzhen City, Guangdong Province accepted
the bankruptcy liquidation case of Zhongan Intelligent Control, with case number (2020) Y 0307 PS No. 33, and
designated the bankruptcy administrator for the case. According to the (2020) Y 0307 P No. 30-1 "Civil Ruling"
issued by the People's Court of Longgang District, Shenzhen on May 14, 2021, it was determined to confirm the
creditor's rights recorded in the "Debt Statement of Shenzhen Zhongan Intelligent Control Technology Co., Ltd.", and
the amount of the Company's ordinary creditor's rights was RMB 9,150,710.78. On July 2, 2021, the People's Court
of Longgang District, Shenzhen City issued the (2020) Y 0307 P No. 30-4 "Civil Ruling", declaring Zhongan
Intelligent Control's bankrupcy; on July 14, 2021, the People's Court of Longgang District, Shenzhen City issued the
(2020) Y 0307 P No. 30-5 "Civil Ruling", approving the bankruptcy property distribution proposal of Zhongan
Intelligent Control. After the completion of the bankruptcy property distribution proposal, the assets under the name
of Zhongan Intelligent Control were insufficient to repay all of its debts, and the Company did not receive repayment.
On July 20, 2021, the People's Court of Longgang District, Shenzhen City, Guangdong Province issued the
(2020) Y 0307 P No. 30-8 "Civil Ruling", ruling to terminate the bankruptcy proceedings of Zhongan Intelligent
Control. As of the date of approval of the financial report, Zhongan Intelligent Control has not yet been deregistered.
(2) ZKTeco filed a lawsuit against Zhikongtaike, Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen in the
case on equity transfer dispute
On July 31, 2019, the Company filed a lawsuit against Shenzhen Zhikongtaike Biometric Technology Co., Ltd.
(hereinafter referred to as "Zhikongtaike"), Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen in a dispute over
equity transfer with the Third People's Court of Dongguan City, Guangdong Province, requesting that Zhikongtaike
pay the remaining equity transfer fee of RMB 2,500,000.00 and interest of RMB 84,616.44 (calculated from April 1,
2019 at an annual interest rate of 8.70% and temporarily recorded until July 31, 2019), as well as liquidated damages
of RMB 1,020,000.00 for non fulfillment of the agreement; request a judgment that Liu Yuntian, Yan Pingjin, Zhang
Peng, and Wang Gen bear joint and several payment responsibilities for the loan, interest, and liquidated damages;
request the judgment that Zhikongtaike, Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen pay the attorney fee
of RMB 110,000.00, the guarantee fee of RMB 3,600.00, and all legal costs in this case in the judgment.
The cause of action was in August 2016, when the Company and Zhikongtaike jointly invested to establish
Shenzhen Zhongan Intelligent Control Technology Co., Ltd. with a registered capital of RMB 10,000,000.00, the
Company contributed RMB 5,100,000.00, holding 51.00% of the shares, and Zhikongtaike contributed RMB
328
ZKTeco 2023 Annual Report
4,900,000.00, holding 49.00% of the shares. After the establishment of Shenzhen Zhongan Intelligent Control
Technology Co., Ltd., due to conflicts between the Company's and Zhongan Intelligent Control's business philosophy,
after mutual consultation, the Company withdrew from Shenzhen Zhongan Intelligent Control Technology Co., Ltd.
and transferred its equity to Zhikongtaike. On April 22, 2019, both parties signed an "Equity Transfer Agreement"
and a "Guarantee Contract" on the transfer of equity. It was agreed that the Company would transfer its 51% equity to
Zhikongtaike for RMB 5,100,000.00, and Zhikongtaike would pay RMB 2,600,000.00 in advance. The remaining
RMB 2,500,000.00 would be paid and interest calculated over 21 months, and Liu Yuntian, Yan Pingjin, Zhang Peng,
and Wang Gen would bear unlimited joint and several guarantee liability for the payable amount. After the contract
was signed, both parties completed the equity transfer procedures as agreed, but Zhikongtaike did not make the
remaining equity transfer payment as agreed.
The case has been accepted by the Third People's Court of Dongguan City, Guangdong Province, with case
number (2019) Y 1973 MC No. 12579. On October 13, 2020, the court ruled that Zhikongtaike should pay the
Company an equity transfer fee of RMB 2,500,000.00 and interest, as well as liquidated damages of RMB 1,020,000.
Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen shall be jointly and severally liable for the above-mentioned
debt scope. At the same time, Zhikongtaike, Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen shall bear the
attorney fee of RMB 110,000.00 in this lawsuit.
On January 8, 2021, the Company submitted an application for compulsory execution to the Third People's
Court of Dongguan City, requesting the enforcement of the (2019) Y 1973 MC No. 12579 judgment against
Zhikongtaike, Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen. They shall repay the loan of RMB
2,500,000.00 and interest to the Company (with RMB 2,500,000.00 as the principal, calculated at an annual interest
rate of 8.70% from April 1, 2019 to the actual repayment date), and pay liquidated damages of RMB 1,020,000.00,
the attorney fee of RMB 110,000.00, and the guarantee fee of RMB 3,600.00 to the Company, and double the debt
interest during the delayed performance period.
On June 24, 2021, the Company reached an "Implementation Settlement Agreement" (hereinafter referred to as
the "Original Agreement") with Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen, agreeing that Liu Yuntian,
Yan Pingjin, Zhang Peng, and Wang Gen shall bear joint and several liability for the equity transfer payment of RMB
2,500,000.00 and interest (with RMB 2,500,000.00 as the principal, and calculated at an annual interest rate of 8.7%
from April 1, 2019) and liquidated damages of RMB 1,020,000 for Zhikongtaike to the Company within one year
from the date of signing the settlement agreement. At the same time, they shall pay the attorney fee of RMB
110,000.00 and the guarantee fee of RMB 3,600.00.
329
ZKTeco 2023 Annual Report
The Company submitted an Implementation Settlement Agreement for compulsory measures against Liu
Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen to the Third People's Court of Dongguan City, Guangdong
Province. On July 21, 2021, the Company applied to withdraw the enforcement application against Liu Yuntian, Yan
Pingjin, Zhang Peng, and Wang Gen. On the same day, the Third People's Court of Dongguan City, Guangdong
Province issued an enforcement notice (2021) Y 1973 Z No. 3006 to the Company, informing that the Company had
not yet discovered any other property available for enforcement in Zhikongtaike, Liu Yuntian, Yan Pingjin, Zhang
Peng, and Wang Gen. The court requested the Company to provide it with property clues available for enforcement
within three days after receiving the enforcement notice, and if it failed to provide them within the time limit and did
not provide other opinions in writing, the execution procedure would be terminated.
On September 9, 2021, the Company received the (2021) Y 1973 Z No. 3006-1 document of ruling issued by
the Third People's Court of Dongguan City, Guangdong Province on July 22, 2021, ruling to terminate this execution
procedure.
On June 24, 2022, the Company signed a settlement extension agreement with Liu Yuntian, Yan Pingjin, Zhang
Peng, and Wang Gen, agreeing to extend the payment term by 6 months on the basis of the Original Agreement.
Before December 24, 2022, Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen shall pay all the payable amounts
to the Company. The debt interest during the delayed performance period shall be subject to the Original Agreement.
If Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen fail to fulfill their payment obligations on time, the
Company has the right to apply to the court to resume compulsory enforcement measures against them.
On December 24, 2022, the Company signed a settlement extension agreement with Liu Yuntian, Yan Pingjin,
Zhang Peng, and Wang Gen, agreeing to extend the payment term by 1 year on the basis of the Original Agreement.
Before December 24, 2023, Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen shall pay all the payable amounts
to the Company. The debt interest during the delayed performance period shall be subject to the Original Agreement.
If Liu Yuntian, Yan Pingjin, Zhang Peng, and Wang Gen fail to fulfill their payment obligations on time, the
Company has the right to apply to the court to resume compulsory enforcement measures against them.
2. Others
XIX. Notes to Main Items in the Financial Statements of the Parent Company
1. Accounts receivable
(1) Disclosure by aging
Unit: RMB
Aging Closing book balance Opening book balance
330
ZKTeco 2023 Annual Report
Within 1 year (including 1 year) 561,799,833.99 584,084,680.04
1-2 years 119,294,578.24 7,182,125.21
2-3 years 2,319,840.33 987,195.33
Over 3 years 2,226,726.86 1,397,263.74
3-4 years 919,305.45 70,004.12
4-5 years 59,185.72 700,525.86
Over 5 years 1,248,235.69 626,733.76
Total 685,640,979.42 593,651,264.32
(2) Disclosure by bad debt accrual method
Unit: RMB
Ending Balance Beginning Balance
Book balance Bad debt reserve Book balance Bad debt reserve
Category
Accrual
Book value Accrual Book value
Amount Proportion Amount proporti Amount Proportion Amount
proportion
on
Accounts
receivable with
individual 5,262,403.88 0.77% 4,246,403.88 80.69% 1,016,000.00 3,224,671.15 0.54% 3,224,671.15 100.00%
provision for
bad debts
Including:
Accounts
receivable with
insignificant
single amount
5,262,403.88 0.77% 4,246,403.88 80.69% 1,016,000.00 3,224,671.15 0.54% 3,224,671.15 100.00%
and bad debt
reserve
withdrawn
separately
Receivable with
combined
680,378,575.54 99.23% 6,625,955.69 0.97% 673,752,619.85 590,426,593.17 99.46% 5,532,259.48 0.94% 584,894,333.69
provision for
bad debt reserve
Including:
Related party
566,000,672.05 82.55% 566,000,672.05 492,232,071.11 82.92% 492,232,071.11
portfolio
Aging portfolio 114,377,903.49 16.68% 6,625,955.69 5.79% 107,751,947.80 98,194,522.06 16.54% 5,532,259.48 5.63% 92,662,262.58
Total 685,640,979.42 100.00% 10,872,359.57 1.59% 674,768,619.85 593,651,264.32 100.00% 8,756,930.63 1.48% 584,894,333.69
Bad debt reserve made individually: 4,246,403.88
Unit: RMB
Beginning Balance Ending Balance
Name Bad debt Accrual Reasons for
Book balance Book balance Bad debt reserve
reserve proportion provision
Hainan Jialing Digital Expected non-
0.00 0.00 2,032,000.00 1,016,000.00 50.00%
Technology Co., Ltd. recoverable
Shanghai Leqi
Expected non-
Automation 490,186.63 490,186.63 521,950.00 521,950.00 100.00%
recoverable
Technology Co., Ltd.
Noble IT Solutions Co., Expected non-
408,557.71 408,557.71 415,485.70 415,485.70 100.00%
Ltd recoverable
331
ZKTeco 2023 Annual Report
Zicom Electronic Expected non-
365,258.45 365,258.45 371,452.20 371,452.20 100.00%
Securit recoverable
Shenzhen Xuhui
Expected non-
Information 326,350.00 326,350.00 326,350.00 326,350.00 100.00%
recoverable
Technology Co., Ltd.
Gansu Fourth
Expected non-
Construction Group 224,676.00 224,676.00 224,676.00 224,676.00 100.00%
recoverable
Co., Ltd.
VENDEMMIA
COMERCIO Expected non-
197,665.93 197,665.93 201,017.79 201,017.79 100.00%
INTERNACIONAL recoverable
LTDA
Tianjin Eagle Eye
Expected non-
Biotechnology Co., 193,330.00 193,330.00 178,130.00 178,130.00 100.00%
recoverable
Ltd.
Hainan Zhongkong
Expected non-
IOT Technology Co., 176,179.00 176,179.00 176,689.00 176,689.00 100.00%
recoverable
Ltd.
Wanqiao Information Expected non-
165,900.00 165,900.00 165,900.00 165,900.00 100.00%
Technology Co.,Ltd. recoverable
Baoneng Urban
Development and Expected non-
155,292.00 155,292.00 155,292.00 155,292.00 100.00%
Construction Group recoverable
Co., Ltd.
PONTO RHJ EIRELI - Expected non-
98,393.15 98,393.15 100,061.62 100,061.62 100.00%
ME recoverable
Guizhou Zhongjiang
Expected non-
Intelligent Technology 77,919.46 77,919.46 77,919.46 77,919.46 100.00%
recoverable
Co., Ltd.
Qianxinan Mengku
Expected non-
Business Service Co., 74,672.00 74,672.00 74,672.00 74,672.00 100.00%
recoverable
Ltd.
INTELLISMART Expected non-
73,253.66 73,253.66 74,495.84 74,495.84 100.00%
TECHNOLOGY INC. recoverable
Dongguan Yukong
Expected non-
Security Technology 53,703.00 53,703.00 53,703.00 53,703.00 100.00%
recoverable
Co., Ltd.
KWK CELLPHONE Expected non-
36,880.41 36,880.41 37,505.80 37,505.80 100.00%
AND ACCESSORIES recoverable
Iss Facility Services Expected non-
28,152.00 28,152.00 28,152.00 28,152.00 100.00%
(Shanghai) Ltd. recoverable
ELECTRONICA Expected non-
0.00 0.00 22,911.47 22,911.47 100.00%
GHANA LIMITED recoverable
Nanjing Xianji Expected non-
31,850.00 31,850.00 15,570.00 15,570.00 100.00%
Technology Co., Ltd. recoverable
Gansu Liujiaxia
Construction and
Expected non-
Installation 0.00 0.00 6,490.00 6,490.00 100.00%
recoverable
Engineering Co., Ltd.
Linxia Branch
Guangdong Pinjun Expected non-
0.00 0.00 1,980.00 1,980.00 100.00%
Express Co., Ltd. recoverable
Entropy Electronic
Technology Yangzhou 31,122.66 31,122.66
Co., Ltd.
Others 15,329.09 15,329.09
Total 3,224,671.15 3,224,671.15 5,262,403.88 4,246,403.88
Bad debt reserve made by portfolio: 6,625,955.69
Unit: RMB
Name Ending Balance
332
ZKTeco 2023 Annual Report
Book balance Bad debt reserve Accrual proportion
Within 1 year 105,382,270.69 5,269,113.54 5.00%
1-2 years 7,936,199.83 793,619.99 10.00%
2-3 years 708,872.59 212,661.78 30.00%
Over 3 years 350,560.38 350,560.38 100.00%
Total 114,377,903.49 6,625,955.69
Explanations on the basis for determining the portfolio:
Provision for bad debts by combination:
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Related party portfolio 566,000,672.05
Aging portfolio 114,377,903.49 6,625,955.69 5.79%
Total 680,378,575.54 6,625,955.69
Explanations on the basis for determining the portfolio:
If the bad debt reserve of accounts receivable is made according to the general model of expected credit losses:
□ Applicable Not applicable
(3) Bad debt reserves withdrawn, recovered or reversed in the current period
Provision for bad debt reserves in current period:
Unit: RMB
Current period change amount
Beginning
Category Return or Redeem/redem Ending Balance
Balance Provision Others
reversal ption
Accounts
receivable with
insignificant
single amount
3,224,671.15 964,160.39 30,685.86 31,916.80 -120,175.00 4,246,403.88
and bad debt
reserve
withdrawn
separately
Accounts
receivable with
significant
individual
amounts and
separate
provision for
bad debt
reserves
Accounts
receivable with
consolidated 5,532,259.48 1,275,680.76 61,809.55 120,175.00 6,625,955.69
provision for
bad debt
333
ZKTeco 2023 Annual Report
reserves
according to the
credit risk
characteristics
Total 8,756,930.63 2,239,841.15 92,495.41 31,916.80 10,872,359.57
The amount of bad debt reserves recovered or reversed in the current period is significant:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
(4) Actual verification of accounts receivable in the current period
Unit: RMB
Item Write-off amount
Accounts receivable actually written off 31,916.80
Important accounts receivable verification status:
Unit: RMB
Whether the
Verification and
payment is
Nature of accounts cancellation
Company name Write-off amount Write-off reason incurred due to
receivable programs that have
related
been performed
transactions
Entropy Electronic
Technology
Goods payment 31,916.80 Nonrecoverable No
Yangzhou Co.,
Ltd.
Total 31,916.80
Explanations on accounts receivable verification:
(5) Accounts receivable and contract assets from top five borrowers classified based on the ending
balance
Unit: RMB
Ending balance of
Proportion in the
bad debt reserves
Ending balance of total ending
Ending balance of for accounts
Ending balance of accounts balance of
Company name accounts receivable and
contract assets receivable and accounts
receivable impairment
contract assets receivable and
provision for
contract assets
contract assets
Customer 1 322,103,055.77 322,103,055.77 46.96%
Customer 2 91,299,909.04 91,299,909.04 13.31%
Customer 3 28,398,539.91 28,398,539.91 4.14%
Customer 4 21,903,309.82 21,903,309.82 3.19%
Customer 5 19,494,312.74 19,494,312.74 2.84%
334
ZKTeco 2023 Annual Report
Total 483,199,127.28 483,199,127.28 70.44%
2. Other receivables
Unit: RMB
Item Ending Balance Beginning Balance
Interest receivable 192,033.24 122,433.25
Other receivables 58,943,385.98 33,858,122.01
Total 59,135,419.22 33,980,555.26
(1) Interest receivable
1) Classification of interest receivable
Unit: RMB
Item Ending Balance Beginning Balance
Interest on related party loans 192,033.24 122,433.25
Total 192,033.24 122,433.25
2) Significant overdue interest
Unit: RMB
Whether impairment
Borrower Ending Balance Overdue time Overdue reason occurred and its
judgment basis
Other explanations:
3) Bad debt reserves withdrawn, recovered or reversed in the current period
Unit: RMB
Current period change amount
Beginning
Category Return or Write-off or Ending Balance
Balance Provision Other changes
reversal cancellation
The amount of bad debt reserves recovered or reversed in the current period is significant:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
Other explanations:
335
ZKTeco 2023 Annual Report
4) Interests receivable actually written off in the current period
Unit: RMB
Item Write-off amount
Information on important interests receivable verification
Unit: RMB
Whether the
Verification and
payment is
cancellation
Company name Payment nature Write-off amount Write-off reason incurred due to
programs that have
related
been performed
transactions
Explanations on writing off:
Other explanations:
(2) Other receivables
1) Classification of other receivables based on nature of payment
Unit: RMB
Payment nature Closing book balance Opening book balance
Current account 55,874,629.32 26,728,933.46
Guarantee deposit 1,865,135.74 1,910,792.36
Reserve funds and loans 3,250,242.13 3,231,834.22
Collection and payment on behalf of
1,863,217.32 286,952.43
others
Withholding and paying social security
1,032,014.38 960,569.04
and capital reserve on behalf of others
Export tax refund 3,537,610.99 9,631,295.37
Others 477,297.03
Total 67,900,146.91 42,750,376.88
2) Disclosure by aging
Unit: RMB
Aging Closing book balance Opening book balance
Within 1 year (including 1 year) 41,743,089.72 15,916,616.20
1-2 years 13,945,238.29 14,792,826.76
2-3 years 715,606.32 409,311.13
Over 3 years 11,496,212.58 11,631,622.79
3-4 years 257,284.30 2,747,578.23
4-5 years 2,637,357.00 8,133,140.36
Over 5 years 8,601,571.28 750,904.20
Total 67,900,146.91 42,750,376.88
3) Disclosure by bad debt accrual method
Unit: RMB
336
ZKTeco 2023 Annual Report
Ending Balance Beginning Balance
Categor Book balance Bad debt reserve Book balance Bad debt reserve
y Book value Book value
Accrual Accrual
Amount Proportion Amount Amount Proportion Amount
proportion proportion
Withdra
wing
bad debt
reserves 10,645,126.37 15.68% 8,884,636.88 83.46% 1,760,489.49 10,599,744.36 24.79% 8,839,254.87 83.39% 1,760,489.49
by
individu
al item
Including:
Bad
debt
reserve
57,255,020.54 84.32% 72,124.05 0.13% 57,182,896.49 32,150,632.52 75.21% 53,000.00 0.16% 32,097,632.52
withdra
wn by
portfolio
Including:
Related
party 45,178,889.61 66.54% 45,178,889.61 16,080,112.28 37.62% 16,080,112.28
portfolio
Portfoli
o of
deposits,
security
11,640,649.93 17.14% 11,640,649.93 16,017,520.24 37.47% 16,017,520.24
deposits,
employe
e loans,
etc.
Aging
435,481.00 0.64% 72,124.05 16.56% 363,356.95 53,000.00 0.12% 53,000.00 100.00%
portfolio
Total 67,900,146.91 100.00% 8,956,760.93 13.19% 58,943,385.98 42,750,376.88 100.00% 8,892,254.87 20.80% 33,858,122.01
Bad debt reserve made individually: 8,884,636.88
Unit: RMB
Beginning Balance Ending Balance
Name Bad debt Bad debt Accrual Reasons for
Book balance Book balance
reserve reserve proportion provision
Shenzhen Zhongan
Expected non-
Intelligent Control 7,772,552.26 6,012,062.77 7,772,552.26 6,012,062.77 77.35%
recoverable
Technology Co., Ltd.
Shenzhen
Zhikongtaike Expected non-
2,500,000.00 2,500,000.00 2,500,000.00 2,500,000.00 100.00%
Biometric Technology recoverable
Co., Ltd.
Guizhou Zhongjiang
Expected non-
Intelligent 323,268.92 323,268.92 323,268.92 323,268.92 100.00%
recoverable
Technology Co., Ltd.
Dongguan Zhenyu
Expected non-
Hardware Products 42,305.46 42,305.46 100.00%
recoverable
Co., Ltd.
Shenzhen
Expected non-
Xinyuantong 3,500.00 3,500.00 3,500.00 3,500.00 100.00%
recoverable
Electronics Co., Ltd.
Shenzhen Shanjing Expected non-
1,839.60 1,839.60 100.00%
Optics Co., Ltd. recoverable
337
ZKTeco 2023 Annual Report
Shenzhen Great-
Expected non-
island Technology 456.00 456.00 100.00%
recoverable
Co., Ltd.
Expected non-
Wang Jinpeng 403.18 403.18 403.18 403.18 100.00%
recoverable
Guilin Boyou
Expected non-
Electronic 400.95 400.95 100.00%
recoverable
Technology Co., Ltd.
Shenzhen Mercedes Expected non-
380.00 380.00 100.00%
Technology Co., Ltd. recoverable
Expected non-
Liu Mingyang 20.00 20.00 20.00 20.00 100.00%
recoverable
Total 10,599,744.36 8,839,254.87 10,645,126.37 8,884,636.88
Bad debt reserve made by portfolio: 72,124.05
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Related party portfolio 45,178,889.61
Portfolio of deposits, security
11,640,649.93
deposits, employee loans, etc.
Aging portfolio 435,481.00 72,124.05 16.56%
Total 57,255,020.54 72,124.05
Explanations on the basis for determining the portfolio:
Provision for bad debt reserve based on a general model of expected credit losses:
Unit: RMB
Stage 1 Stage 2 Stage 3
Expected credit loss Expected credit loss
Bad debt reserve Expected credit loss in within whole duration within whole duration Total
the future 12 months (no credit impairment (credit impairment has
occur) occurred)
Balance as of January
53,000.00 8,839,254.87 8,892,254.87
1, 2023
Balance as of January
1, 2023 in the current
period
Provision in current
19,124.05 45,382.01 64,506.06
period
Balance as of
72,124.05 8,884,636.88 8,956,760.93
December 31, 2023
Classification basis and bad debt reserve provision ratio for each stage
Changes in book balance with major changes in loss reserves during the current period
□ Applicable Not applicable
4) Bad debt reserves withdrawn, recovered or reversed in the current period
Provision for bad debt reserves in current period:
338
ZKTeco 2023 Annual Report
Unit: RMB
Current period change amount
Beginning
Category Return or Write-off or Ending Balance
Balance Provision Others
reversal cancellation
Other
receivables
with significant
individual
amounts and 6,012,062.77 6,012,062.77
separate
provision for
bad debt
reserves
Other
receivables
with provision
for bad debt
reserves based 53,000.00 19,124.05 72,124.05
on a
combination of
credit risk
characteristics
Other
receivables
with
insignificant
individual
2,827,192.10 45,382.01 2,872,574.11
amounts but
separate
provision for
bad debt
reserves
Total 8,892,254.87 64,506.06 8,956,760.93
The significant amount of bad debt reserves reversed or recovered in the current period:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
5) Other accounts receivable actually written off in the current period
Unit: RMB
Item Write-off amount
Other major receivable written off:
Unit: RMB
Nature of other Verification and Whether the
Company name Write-off amount Write-off reason
accounts cancellation payment is
339
ZKTeco 2023 Annual Report
receivable programs that have incurred due to
been performed related
transactions
Explanations on writing off other receivables:
No other accounts receivable actually written off in the current period.
6) Other accounts receivable with the top five ending balances collected by the debtor
Unit: RMB
Proportion to the
total ending
Nature of Ending balance of
Company name Ending Balance Aging balance of other
payment bad debt reserve
accounts
receivable
No. 1 Current account 31,256,738.98 Within 1 year 46.03%
No. 2 Current account 7,772,552.26 Over 3 years 11.45% 6,012,062.77
No. 3 Current account 6,580,000.00 1-2 years 9.69%
No. 4
Export tax refund 3,537,610.99 Within 1 year 5.21%
No. 5 Current account 2,500,000.00 Over 3 years 3.68% 2,500,000.00
Total 51,646,902.23 76.06% 8,512,062.77
3. Long-term equity investment
Unit: RMB
Ending Balance Beginning Balance
Item Impairme
Impairmen
Book balance Book value Book balance nt Book value
t provision
provision
Investment in
1,249,046,481.87 1,249,046,481.87 781,906,396.17 781,906,396.17
subsidiaries
Investment in affiliated
24,000,000.00 24,000,000.00
and joint ventures
Total 1,273,046,481.87 1,273,046,481.87 781,906,396.17 781,906,396.17
(1) Investment in subsidiaries
Unit: RMB
Beginnin Increase or decrease in the current period
Ending
g balance
Beginning Reduc Impairm balance of
of Ending balance
Investee balance (book Additional ed ent impairme
impairme Others (book value)
value) investment invest provisio nt
nt
ment n provision
provision
Shenzhen
ZKTeco
Biometric
12,608,518.14 0.00 12,608,518.14
Identification
Technology Co.,
Ltd.
Hangzhou 2,011,694.58 67,603.34 2,079,297.92
340
ZKTeco 2023 Annual Report
ZKTeco Hanlian
E-commerce
Co., Ltd.
ZKTeco CO.,
133,541,486.20 35,568,322.82 688,835.33 169,798,644.35
LIMITED
XIAMEN
ZKTeco CO., 100,650,998.35 4,903,988.85 105,554,987.20
LTD.
ZKTeco
(GUANGDON 436,416,752.35 364,000,000.00 3,240,281.37 803,657,033.72
G) CO., LTD
ZKTeco Sales
133,778.92 20,000,000.00 1,040,141.34 21,173,920.26
Co., Ltd.
Xiamen ZKTeco
Biometric
Identification 38,986,734.80 0.00 38,986,734.80
Technology Co.,
Ltd.
ZKCserv
Technology
510,000.00 0.00 510,000.00
Limited Co.,
Ltd.
Dalian ZKTeo
3,075,306.01 933,681.31 4,008,987.32
CO., Ltd.
Xi'an ZKTeco
78,563.62 327,885.62 406,449.24
Co., Ltd.
Shenzhen
Zhongjiang
Intelligent 5,100,000.00 0.00 5,100,000.00
Technology Co.,
Ltd.
Hubei ZKTeco
3,510,708.76 5,510.68 3,516,219.44
Co., Ltd.
ZKTECO SG
INVESTMENT 45,281,854.44 36,363,835.04 0.00 81,645,689.48
PTE. LTD.
Total 781,906,396.17 455,932,157.86 11,207,927.84 1,249,046,481.87
(2) Investment in affiliated and joint ventures
Unit: RMB
Increase or decrease in the current period
Beginni Invest
Ending
Begin ng ment Cash
Other balance
ning balance profit Chan divide Ending
Addition Reduce comprehe Impair of
balanc of or loss ges in nds or balance
Investee al d nsive ment Oth impair
e impair recogni other profits (book
investme invest income provisi ers ment
(book ment zed equiti declar value)
nt ment adjustmen on provisi
value) provisi under es ed to
ts on
on equity pay
method
I. Joint ventures
II. Joint venture
Xiamen
Xingniu
24,000,0 24,000,0
Yunyu
00.00 00.00
Venture
Capital
341
ZKTeco 2023 Annual Report
Partners
hip
Enterpri
se
(Limite
d
Partners
hip)
24,000,0 24,000,0
Subtotal
00.00 00.00
24,000,0 24,000,0
Total
00.00 00.00
The recoverable amount is determined based on the net amount after deducting disposal expenses from fair value
□ Applicable Not applicable
The recoverable amount is determined based on the present value of expected future cash flows
□ Applicable Not applicable
Reasons for significant discrepancies between the above information and the information or external information used in
impairment tests of previous years
Reasons for significant discrepancies between the information used in the Company's impairment tests of previous year and the
actual situation of that year
(3) Other explanations
In the current period, a capital increase of RMB 35,568,322.82 was made to its subsidiary ZKTECO CO.,
LIMITED, RMB 364,000,000.00 was made to its subsidiary ZKTeco (Guangdong) Co., LTD, RMB 20,000,000.00
was made to its subsidiary ZKTeco Sales Co., Ltd., and RMB 36,363,835.04 was made to its subsidiary ZKTECO SG
INVESTMENT PTE. LTD. Class II restricted share equity incentive amount of RMB 11,207,927.84 was granted to
the incentive objects of the subsidiary.
4. Operating revenue and operating cost
Unit: RMB
Amount incurred in the current period Amount incurred in the previous period
Item
Revenue Cost Revenue Cost
Main business 1,432,704,035.86 1,036,126,707.81 1,540,809,415.40 1,144,810,483.95
Other businesses 1,332,035.05 1,729,304.31
Total 1,434,036,070.91 1,036,126,707.81 1,542,538,719.71 1,144,810,483.95
Breakdown information of operating revenue and operating costs:
Unit: RMB
Division 1 Division 2 Operating revenue Total
Contract Oper Operat
classificati Operat Operat
ating ing
on ing ing Operating revenue Operating cost Operating revenue Operating cost
reven revenu
cost cost
ue e
Business
type
Including:
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ZKTeco 2023 Annual Report
Smart
office 211,069,861.57 153,388,927.14 211,069,861.57 153,388,927.14
products
Smart
entrance
and exit 1,094,668,407.94 780,220,971.41 1,094,668,407.94 780,220,971.41
manageme
nt products
Smart
identity
126,965,766.35 102,516,809.26 126,965,766.35 102,516,809.26
verification
products
Others 1,332,035.05 1,332,035.05
Classificati
on by
region of
operation
Including:
Domestic
623,936,577.02 541,185,608.25 623,936,577.02 541,185,608.25
sales
Overseas
810,099,493.89 494,941,099.56 810,099,493.89 494,941,099.56
sales
Market or
customer
type
Including:
Distributio
1,289,163,287.35 936,468,996.90 1,289,163,287.35 936,468,996.90
n
Direct sales 143,540,748.51 99,657,710.91 143,540,748.51 99,657,710.91
Others 1,332,035.05 1,332,035.05
Type of
contract
Including:
Classificati
on by time
of transfer
of goods
Including:
Classificati
on by
contract
term
Including:
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ZKTeco 2023 Annual Report
Classificati
on by sales
channel
Including:
Total 1,434,036,070.91 1,036,126,707.81 1,434,036,070.91 1,036,126,707.81
Information related to performance obligations:
Types of
Nature of goods Expected quality
Time for
that the Is it the main refunds to assurance
fulfilling Important
Item Company responsible customers provided by the
performance payment terms
promises to person borne by the Company and
obligations
transfer Company related
obligations
Other explanations:
Information related to the transaction price allocated to the remaining performance obligations:
The corresponding income amount for performance obligations that have been signed but have not yet been fulfilled or completed
at the end of this reporting period is RMB 0.00.
Significant contract changes or significant transaction price adjustments
Unit: RMB
Item Accounting treatment method Amount of impact on income
Other explanations:
5. Investment income
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Income from long-term equity
24,000,000.00 40,000,000.00
investment accounted with cost method
Investment income from financial
1,274,435.30 801,770.27
products
Forward foreign exchange settlement and
-8,690,555.00 -6,488,400.00
sales contract
Total 16,583,880.30 34,313,370.27
6. Others
XX. Supplementary Information
1. Detailed statement of non-recurring profits and losses in the current period
Applicable □ Not applicable
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ZKTeco 2023 Annual Report
Unit: RMB
Item Amount Remarks
Losses and gains from disposal of non-current
-626,426.46
assets
Government subsidies included in current
profits and losses (except those closely related
to the normal business of the Company, which
are in line with national policies and 6,119,808.45
regulations, enjoyed according to determined
standards, and have a continuous impact on the
Company's profits and losses)
Profits and losses from fair value changes
arising from the holding of financial assets and Mainly due to investment gains and
financial liabilities by non-financial enterprises, losses and changes in fair value
as well as the gains and losses arising from the -2,644,568.64 generated by partial forward exchange
disposal of financial assets and financial settlement to hedge against exchange rate
liabilities except for effective hedging business fluctuations risk
related to the normal operation of the Company
Capital occupancy fees charged to non-
financial enterprises included in current profits 50,222.65
and losses
Reversal of the provision on receivables with
impairment test conducted on an individual 239,389.68
basis
Other non-operating revenue and expenses Mainly due to material losses and other
-4,210,700.05
other than the above items extraordinary losses
Less: income tax impact -281,003.45
Minority interest impact (after tax) 67,892.57
Total -859,163.49 --
Details of other profit and loss items that meet the definition of non-recurring profits and losses:
□ Applicable Not applicable
The Company does not have other specific conditions of profit and loss items that meet the definition of non-recurring profits and
losses.
Explanations on classifying any non-recurring gain/loss item mentioned in the "Explanatory Announcement for Information
Disclosure by Companies that Issue Securities to the Public No. 1 - Non-recurring Gains and Losses" as recurring gain/loss item
□ Applicable Not applicable
2. Net return on assets and EPS
Profit during the reporting Weighted average return on EPS
period net assets Basic EPS (RMB/share) Diluted EPS (RMB/share)
Net profit attributable to
common shareholders of the 5.63% 0.9176 0.9133
Company
Net profit attributable to
common shareholders of the
Company after deducting 5.66% 0.9221 0.9178
non-recurring profits and
losses
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ZKTeco 2023 Annual Report
3. Differences in accounting data under domestic and foreign accounting standards
(1) Differences in net profit and net assets in financial reports disclosed in accordance with international
accounting standards and Chinese accounting standards
□ Applicable Not applicable
(2) Differences in net profit and net assets in financial reports disclosed in accordance with foreign
accounting standards and Chinese accounting standards
□ Applicable Not applicable
(3) Explanations on the reasons for differences in accounting data between domestic and foreign
accounting standards. If differences in data audited by an overseas audit institution have already been
adjusted, the name of the overseas institution shall be indicated
□ Applicable Not applicable
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