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熵基科技:熵基科技股份有限公司2023年年度报告英文版2024-05-23  

                             ZKTeco 2023 Annual Report




ZKTECO CO., LTD.


 2023 Annual Report


Announcement No.: 2024-011




      April 2024




             1
                                                                                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

                                                     2
                                                                              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
                                                 3
                                                                                 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




                                                   4
                                                                 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

                                         5
                                                             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.




                                      6
                                                                                                                                 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




                                                                                  7
                                                                                                         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




                                                                  8
                                                                                              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.)


                                                       9
                                                                                                      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


                                                               10
                                                                                                           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.




                                                                   11
                                                                                                         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


                                                                 12
                                                                                                              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)



                                                                         13
                                                                                                               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


                                                                        14
                                                                                                       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


                                                                 15
                                                                         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


                                             16
                                                                                                         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.




                                                                    17
                                                                                                            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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                                                                                                         ZKTeco 2023 Annual Report


     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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                                                                                                           ZKTeco 2023 Annual Report


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


                                                                   20
                                                                                                         ZKTeco 2023 Annual Report


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


                                                                  21
                                                                                                           ZKTeco 2023 Annual Report


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


                                                                    22
                                                                                                            ZKTeco 2023 Annual Report


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.

                                                                    23
                                                                                                           ZKTeco 2023 Annual Report


        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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                                                                ZKTeco 2023 Annual Report




              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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                                                                              ZKTeco 2023 Annual Report


                           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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                                                                             ZKTeco 2023 Annual Report


                        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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                                                                             ZKTeco 2023 Annual Report


                          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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                                                                                                            ZKTeco 2023 Annual Report




                              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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                                                                                                            ZKTeco 2023 Annual Report


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-


                                                             32
                                                                                                         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:




                                                                  33
                                                                                                                                                                                                                                                                                                   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:




                                                                                                                                                                                                               34
                                                                                                                                               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

                                                                   36
                                                                                                         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

                                                                   37
                                                                                                         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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   (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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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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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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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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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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     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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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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     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


                                                                  46
                                                                                                       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


                                                                   47
                                                                                                             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


                                                                    48
                                                                                                        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

                                                                  49
                                                                                                          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


                                                                     50
                                                                                                         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




                                                                  66
                                                                                                                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          --                    --                                                --               --
                                                                                                68
                                                                                                                                                                          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


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                                                                                                           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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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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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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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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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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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


                                                                   93
                                                                                                         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


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                                                                                                        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

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                                                                                                            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




                                                 116
                                                                                                                                                                  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

                                                                                  118
                                                                                                                                                       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

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                                                                                                                                                               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.

                                                                                     124
                                                                                                                                                             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


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                                                                                                         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.




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                                                                                                       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



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                                                                                                     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.




                                                                155
                                                  ZKTeco 2023 Annual Report




                               Section IX Bonds

□ Applicable Not applicable




                                      156
                                                                                                       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




                                                 171
                                                                                                                                                                                                                      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
                                                                                                                                  172
                                                                                                               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

                                                        177
                                                                                            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

                                                 178
                                                                                                            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
                                                            179
                                                                                                                                                           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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                                                                                             ZKTeco 2023 Annual Report



"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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                                                                                              ZKTeco 2023 Annual Report


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




                                                           185
                                                                                                 ZKTeco 2023 Annual Report



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.




                                                            186
                                                                                                   ZKTeco 2023 Annual Report



     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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                                                                                                 ZKTeco 2023 Annual Report



     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%

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                                                                                                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),


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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


                                                                   248
                                                                                                                   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



                                                                           249
                                                                                                        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


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              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

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                                                                                                                    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


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 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



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                               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




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                                                                                                                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


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                                                                                                          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



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                                                                                                             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



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                                                                                                              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



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                                                                                                            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:


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                                                                                                                                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.




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                                                                                         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


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 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:




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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


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 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:


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(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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                   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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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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 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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(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

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                                                                                                      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

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 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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         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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                                                                                                          ZKTeco 2023 Annual Report


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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 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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 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


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   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


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  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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      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


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                                                                                                              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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          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:


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 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


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   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


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                                                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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          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


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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

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            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


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                                                                                              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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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.


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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


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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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    (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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(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.

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(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


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                                                                                                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


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                                                                 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.




                                                                 312
                                                                                                       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




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                                                                                                          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


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                                                                                                        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



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                                                                                                                                                   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




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                                                                                                     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

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                                                                                                       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

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                                                                                                                  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


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                                                                                               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



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                                                                                               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%


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                                                                                                        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:




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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

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                                                 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

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                                                                                                            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:


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                                                                                                           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


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                                                                                                                   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


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                                                                                                                    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

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                                                                                                           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




                                                     346